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spk07: Ladies and gentlemen, welcome to the Badger Meter second quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you would like to withdraw your question, press the pound key. As a reminder, today's conference is being recorded. It is now my pleasure to turn the conference over to Karen Bauer, Vice President of Investor Relations, Corporate Strategy and Treasurer. Please go ahead, Ms. Bauer.
spk06: Good morning, and thank you for joining the Badger Meter Second Quarter 2021 Earnings Conference Call. On the call with me today are Ken Bockhorst, Chairman, President, and Chief Executive Officer, and Bob Rockledge, Chief Financial Officer. The earnings release and related slide presentation are available on our website. Quickly, I will cover the safe harbor, reminding you that any forward-looking statements made during this call are subject to various risks and uncertainties, the most important of which are outlined in our press release and SEC filings. On today's call, we will refer to certain non-GAAP financial metrics. Our earnings slides provide a reconciliation of the GAAP to non-GAAP financial metrics used. Finally, during this call, we will refer to core results for various financial metrics, for example, core utility water sales. Core means a designated financial metric excluding the impact of the recent FCAN and ATI acquisitions. We believe this reference point is important for year-over-year comparability. With that, I'll turn the call over to Ken.
spk05: Thanks, Karen. And thank you for joining our second quarter earnings call. I couldn't be more pleased with the dedication and execution demonstrated by our team supporting our customers and delivering record sales in the face of widespread supply chain, inflation and logistics challenges. Our strong order momentum from the first quarter continued into the second. And even with that strong execution, our backlog reached another record high as we exited the second quarter. Our two water quality acquisitions, SCAN and ATI, delivered strong top-line performance above our expectations with solid EPS secretion. Overall, it was a great quarter, due in large part to the activity in the trenches day in and day out. I'll talk about the current environment and our outlook later in the call, but for now, let me turn the call over to Bob to go through the details of the quarter.
spk04: Thanks, Ken, and good morning, everyone. As you can see on slide four, total sales for the second quarter were $122.9 million compared to the coronavirus impacted trough of $91.1 million in the same period last year, an increase of 35%. Overall, utility water sales increased 38%. Excluding the approximately $12 million of sales from SCAN and ATI acquisitions, core utility water revenues increased 22% year over year. Comparing back to the pre-COVID impacted second quarter of 2019, core utility water sales increased 11%. As Ken noted, we continue to experience robust orders. However, supplier allocations of certain electronics and other components, along with logistics challenges, again, limited manufacturing output and deliveries. We did experience growth in overall meter sales and beacon software as a service revenue, and we benefited from strategic value-based pricing actions. We exited the quarter with another record high backlog, which bodes well for our sales expectations moving forward. As anticipated, the flow instrumentation product line sales rate of change returned to growth with a 22% year-over-year improvement. Stabilizing demand trends across the majority of global end markets and applications, as well as an easier comp, influenced the increase. We were pleased with the operating profit margins generated in the quarter in light of the significant and varied inflationary forces. The quarter's operating margin was 15.2%, an increase of 130 basis points year over year. Gross margin for the quarter was 40.8%, an increase of 150 basis points year over year. Margins benefited from favorable acquisition mix, as well as the higher volumes and positive product sales mix, namely higher SAS revenues, along with favorable value-based pricing realization. Combined, these drivers tempered the cost headwinds from higher brass and other component and logistics inflation. Taking a closer look at copper, prices have settled back down into the $4.30 range after escalating to about $4.80 earlier in the quarter. This is generally in line with our most recent year-over-year headwind estimate, which was approximately $7 to $8 million on a full-year basis, unmitigated. As our margins demonstrate, we have executed well in implementing appropriate pricing mechanisms to offset this inflation, and we will continue to actively monitor pricing in light of the inflationary pressures. Turning to SEA expenses, second quarter spend of $31.4 million was sequentially in line with the $31.6 million from Q1 2021 and represents an increase of $8.2 million from the prior year. You may recall the prior year included the benefit of various cost reduction actions taken at the onset of COVID-19, including temporary furloughs. The SEA run rate includes both the SCAN and ATI, along with the higher level of acquired intangible asset amortization, and is in line with our ongoing expectations of normalized SEA leverage in 25 to 26% range over time. The income tax provision in the second quarter of 2021 was 25%, slightly higher than the prior year's 24.3% rate. In summary, EPS was 48 cents in the second quarter of 2021, an increase of 45% from the prior year's EPS of 33 cents. Working capital as a percent of sales was 24.3%, on par with the prior quarter end. Inventory increased due to the manufacturing output constraints as well as commodity inflation as described earlier. Free cash flow of $11.9 million was lower than the prior year, the result of higher cash tax payments and the increase in inventory. On a year-to-date basis, free cash flow conversion of net earnings is sitting at 147%. As we noted in the press release and in our 8K a few weeks back, we entered into a new five-year credit facility in advance of the September 30th expiration of the prior facility. We took the opportunity to upsize the facility to $150 million and to add additional flexibility in the form of leverage covenants and an accordion feature, among others. Our strong cash flow, combined with our borrowing capacity, provides us with ample liquidity to fund our ongoing capital allocation priorities. With that, I'll turn the call back over to Ken.
spk05: Thanks, Bob. Turning to slide five, we updated the chart we introduced last quarter with actual second quarter data. Given the number of different variables at play in both the current year and prior year comparables, we think this chart can be helpful in understanding the uneven results we have and will continue to see in our sales. The robust growth rate we experienced this quarter, excluding the acquisitions, was the result of continued strong order rates as well as the record high backlog with which we started the quarter. Not surprisingly, it was also due in part to the easier comp from the most significantly COVID-19 impacted second quarter last year. As we enter the back half of the year, the strong order momentum and record high backlog will be supportive of our growth outlook. The third quarter will see a difficult comp, both in terms of sales and profitability, based on the post-COVID lockdown recovery in both manufacturing output and orders last year. Our supply chain team continues to work tirelessly at playing whack-a-mole with the varied electronic and other component shortages. While we don't expect to be back to normal, we do expect further backlog conversion as the year moves ahead. We are very pleased with the results from the last two water quality acquisitions this quarter, contributing just over $12 million of revenue in the quarter, a pro forma growth rate in the double digits. Their underlying performance, along with the integration work underway to establish and cross-train sales resources and harmonize product offerings within water quality, validates our confidence in the underlying strategy of combining water quantity with quality in order to accelerate our customers' digital transformations. In summary, here on flight six the step change in order rates of the past several quarters confirms the fundamental market demand for intelligent water solutions to monitor manage and support operational efficiencies throughout the water distribution system. We are uniquely positioned with a full line of smart water offerings encompassing both water quantity and quality to serve utility and industrial customers alike. A record backlog is one of those good problems to have, and the challenge we expect will persist for some time as we migrate through the second half of the year and beyond. Electronic and other component suppliers are making good progress in restoring and building capacity. However, the rate of recovery is fluid and will continue to be uneven until inventory levels are able to fully meet demand. Despite the component availability, inflation, and logistics challenges, our teams are working hard to build supply chain resiliency and actively communicate to suppliers and customers to proactively manage expectations. Our effective sourcing strategies, market-driven innovation, and operational agility are supporting Badger Meter's profitable business growth and delivering value for shareholders. Finally, I want to highlight several additional ESG-related disclosures that we've added to our website. One is an outline of how Badger Meter works to align our ESG efforts with the United Nations Sustainable Development Goals, notably Goals 6, 3, and 11 that focus on water, health and safety, and sustainable cities. The second is a standalone SASB-focused report providing annual metrics and other information for 2020, which is cross-referenced to GRI. Badger Meter continues to advance its ESG journey as we work to understand and mitigate the most material and impactful risks of climate change and preserve and protect the world's most precious resource. To close out our prepared remarks, I want to welcome back to the office many of our remote work employees who returned this month, adding to the teams of dedicated employees in production and in our support staff who never left. I want to thank all of our colleagues for their agility and consistent and dedicated efforts to serve our customers. With that, operator, please open the line for questions.
spk07: Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Again, that is star, then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. We have a first question coming from the line of Nathan Jones. Your line is open.
spk02: Good morning, everyone. Hi, Nathan. Morning, Nathan. I guess I'll start off by digging a bit further into the supply chain and logistics challenges. I think you guys commented that it deferred some sales out of this quarter that's sitting in backlog. Now, can you talk about just how much revenue you think got deferred out of the second quarter into the back half, what your expectations are for catching that up completely?
spk05: Yeah, Nathan, as you know, the supply chain situation and logistics are certainly not confined to just us, pretty dynamic all the way across. And, you know, we don't typically size backlog. Obviously, we've talked about it the last couple of quarters because we find it – significant enough that we should mention it, but we're not going to size that out. The bottom line is supply chain challenges are going to continue to persist. Our team is doing a great job. We think this will continue to be a challenge throughout the year, but we do expect that we will perform very well throughout the cycle.
spk02: So do you think that you'll have caught up with all of this backlog by the end of the year, or do you think this is something that's going to carry over into next year?
spk05: I think it's possible that it's going to carry over into next year. Every day you're seeing companies larger than us like GM shutting down production for two weeks and certain things, and we're certainly not in that situation. But, yeah, I'd like to be more optimistic, but I think I'm being more realistic to say that it's likely to drag into next year.
spk02: Always better to plan for the worst than hope for the best, right? What are the biggest pain points? Is it the electronic part of it here? Is it truck availability, shipping? What are the biggest pain points for Badger with all of this supply chain tightness that's going on at the moment?
spk05: Yeah, well, it can depend on the day. So sometimes it's logistics because, you know, COVID is still an issue in several parts of the world and trying to move products and manufacturing challenges. At times, it's been plastics when you have the deep freeze in Texas. At times, it's semiconductor chips. At times, it's electronics. So that's why we're being, you know, somewhat cautious with the commentary. This isn't one specific supply chain or logistics challenge. It's pretty wide-ranging.
spk02: Okay, fair enough. I'll pass it on that. Thanks.
spk07: We have our next question coming from the line of Andrew Voskalia. Your line is open.
spk03: Hey, guys. Thanks for taking my question. You bet. Can you talk about – actually, as you mentioned in the quarter with the supply chain challenges, would your revenue have been higher otherwise and by how much exactly, if so?
spk05: Yeah, so certainly not going to say how much, but the fact that we had sequentially strong growth year over year, strong growth, and we went out of our way to tell you that we built on top of an already record backlog, I think is pretty clear to indicate we could have done more without the supply chain challenges, but we're not going to size it.
spk04: I think the story coming out of Q2 is very similar to the story coming out of Q1, which is Very much record order intake, but supply chain challenges impacting that backlog. We didn't size kind of the carryover from Q1 to Q2 or Q1 into later years, but you guys did a pretty darn good job predicting where we'd come in at from a consensus standpoint. So, yeah, we're not going to size it, but, yeah, your conclusion is accurate. We could have done better were it not for those things. And really the dynamics are very similar where we sit at June as where we sat at the end of March.
spk03: Yeah, it still exceeded what I was estimating. And I think that, well, going forward, is the issue more that, you know, having to leave sales on the table sort of, or is it more navigating these costs as they come back? Or I guess what is your bigger problem here? Or both? I didn't hear. Okay.
spk04: I mean, I think realistically, it's both. But I would put the priority on navigating the supply chain challenges that are evolving by the day. So while, you know, I think if you ask me, do I feel more comfortable now sitting here on, you know, in the middle of July than where we were when we talked in April? I think so. But that literally is evolving by the day and week, given the varied contributing factors here. It's not just one supply component. It's not just one supplier or one element, it runs the full gamut. So I think that the next six months is going to be all about navigating that. Now, obviously, with that comes the challenge of cost. Certainly, we've seen it from the copper perspective, given what I've talked to, but it's other cost categories as well. including, you know, residents and logistical costs. And we're doing everything we can in the trenches every day to offset that. And I think the last two quarters of margin performance speak to that. But we, you know, we haven't absorbed through the P&L. the full high-cost aspects of the copper peak or the recent increase in resin. So I think while we're very optimistic about what the second half looks like, I think we're just being realistically cautious in this inflationary environment when we haven't absorbed the peak through the P&L to just suggest that it's not all sunshine and roses.
spk03: Yeah, okay. Maybe just one last broad line, given the difficult environment and everything you've talked about. Well, now that you're working through, you know, the M&A seems to be going well. It actually came in a little bit higher than I was expecting in terms of revenue contribution. And you got your arms around this M&A. Are you still willing to move forward with more M&A and maybe even add some leverage given where rates are for the time being to do a larger deal here? Or is this environment going to kind of put a lid on that for the time being?
spk05: Well, you know, financially, we're in great shape to be able to advance any of our M&A strategies. And organizationally, I couldn't be more pleased with how we've gone through the acquisitions of SCAN and ATI. I mean, obviously, our funneling process found two extremely great assets, great companies throughout the diligence process. Our Badger Meter employees, in combination with SCAN and ATI, have done a great job on integration. The performance is there. So from a financial point of view and from an organizational point of view, I feel really good about our opportunities to execute our M&A strategy. So I wouldn't say that we're paused, but at the same time, we've got a disciplined process and we'll make the right M&A decisions at the right time.
spk04: I think to the leverage question, no question the word on the street, and as we talk about it with investors, is we have a comfort level that's much higher than the leverage ratio that we sit at now. We always talk about a one and a half to two times type of leverage ratio comfort level. It's just more about timing and pacing. I think if you look at the debt agreement that we just signed recently, it signals all the right things in terms of expanding the facility, having a leveraged covenant that's a notch higher than where it was historically. And I think that that should signal, you know, realign and align with that philosophy.
spk03: All right. Thanks, guys.
spk07: We have our next question coming from the line of Connor Lino with Morgan Stanley. Your line is open.
spk01: Yeah, thanks. Um, something maybe you could provide a little bit more context on the on the orders. You're saying certainly sounds like pretty robust across the board, but I'm curious if you could frame if there were any you know, meaningful changes versus, say, pre-COVID or just, you know, versus history in general, but to just any sort of notable mix shift within your customer base, any sort of changes in customer sourcing strategies as a result of the pandemic?
spk05: You know, I wouldn't say that there have been any significant shifts. I mean, we're seeing a broad base across the portfolio. You know, it's... It's just a really strong environment. We're executing really well, and the profile is primarily the same.
spk01: Okay, that's helpful. And I guess just on the other side of it, you've certainly had some supply chain constraints that have affected shipments. Is that disproportionate to any type of product? And basically where I'm driving with this is, is there a mix effect that we should be thinking about for margins as supply chain eases up and you're able to ship across the board?
spk05: Yeah, without getting specific into which products, it was more impactful in the utility product line than it was in flow instrumentation.
spk01: Okay, fair. Maybe just one last one to pivot to the higher level a little bit here. There was some concern, more so I would say last year, around municipal budgets. Certainly you've had support from the government. Things are looking better, but I'm just curious if you think Give any high-level thoughts around customer sentiment and how you think budgets are likely to evolve over the next couple years here.
spk05: Yeah, so throughout this entire process, I really couldn't be more proud of our sales and marketing teams and how close they stayed to customers to understand how budgets were going to develop. We were a little bit more optimistic than I think others in the market that we would get through the budget cycles and that spending would still be, would not be dropping, if you will, would be strong. And we saw that as we crossed. July of 2020, the budgets remained intact. We saw it as we got through January when the new budgets came through. And we're optimistic that as we hit another key budget cycle here in July of 2021, that's going to be fine as well. So from a budget point of view, we were always on the more optimistic side. And I think we've been right from the outset on that.
spk04: I think the other encouraging factor is the order rate or the demand environment that we saw last in Q1 and we're certainly happy with and then now in Q2 even stronger. That's happening in an environment with a rumored infrastructure plan on the sideline. And so, you know, I think we're very encouraged by the fact that that to us is a signal that budgets are healthier than maybe some expected a year ago. And even with the rumor of, you know, money falling from the sky, people are still spending money. So that's encouraging as well.
spk05: Yeah, and if I could add to that, it also speaks to the point that we talk about often on how, you know, smart metering is so critical to the water distribution that our customers spend on that throughout cycles.
spk01: Yeah, makes sense. Thanks for all the color.
spk07: We have our next question coming from the line of Hassan Doza, Wakewater Asset Management. Your line is open.
spk00: Good morning, gentlemen. A couple of questions. I wanted to start with on the inventory. Can you give an update as much as possible as to what is causing the buildup of inventories? Is it like in a finished goods? Is it work in progress? Is it raw materials? Just want to get a color on the inventory side.
spk05: Yeah, so Hassan, first if it was finished goods, we would have shipped them. So we're more in the mode of As we're trying to play through, as I've referred to with the whack-a-mole analogy, is you get some buildup because you might have built up your components to build an assembly or a package of sorts, and then you don't get a component. So that inventory build is there. I'll let Bob talk more about the copper step-up. I think it's also an issue.
spk04: Yeah, I would look at the current quarter increases primarily being timing. And think of that as, you know, copper obviously has escalated significantly. And that's a high, you know, that's not a high, but it's a component, one of the larger components of our inventory, and that's just being at a higher cost is inflating inventory. And then to what Ken alluded to earlier, you know, we're obviously, you know, trying to stay ahead of the supply chain game. And if you have one component holding up other things, it doesn't mean you stop buying the other things. And that's why you've got basically in the quarter an increase in inventory. I think as we move forward... You know, we've got – we were going to have higher working capital to support, you know, this increased demand level that we've talked about in terms of the order trends that we've seen. And so I would expect, as we move forward in the second half, to have working capital, unfortunately, being a free cash flow headwind. But I think we've been signaling that for quite some time.
spk00: Okay. My next question is, Ken or Bob, you know, your primary – facility manufacturing wise is in Mexico and has that facility been impacted by any chance in terms of work interruptions or anything else from COVID? I just wanted to get an update on that factory in Mexico.
spk05: Well, so a year ago, right, we had several challenges as everyone did when COVID was really raging throughout the U.S. and Mexico. But I certainly, you know, we're not seeing any impacts currently at all on that front.
spk00: Okay. And when you guys talk about value-based pricing, you know, you already laid out very helpful the cost side. So when we think about the value-based pricing, can you – give some color as to how much price increases you have been able to pass through. And again, I don't need an exact number, but other companies have given, like, orders of magnitude. Like, is it, like, you know, mid-single digit, single digit, high single digit? Just wanted to understand from a top-line perspective how much price increases you have been able to pass through to customers so far this year, order of magnitude.
spk05: I appreciate the effort, but I'm sure you knew I wouldn't answer that. So from a pricing point of view, what I think you need to understand is this is not a pricing initiative. What we're talking about here is business excellence processes like anything else. So we're doing, I think, a very effective job at understanding the value that we provide for customers and getting the right amount of price for it. There's a second lever to getting business excellence around pricing, and it's also winning at least our fair share of new business. So for us, it's a two-factor, right? It's It's making sure that we both grow and grow profitably. So I'm really proud of the work that's been done. As we've said in other quarters, it's not a copper surcharge. It's anything else. It's just the way that we do business. So we're proud of what we've put through. But, no, I mean, we're not going to size it out in percents or anything because, frankly, it's not that simple. It's not like this is a price increase that you're spreading peanut butter across product lines.
spk07: We have our next question coming from the line of Robert Mason with Baird. Your line is open.
spk01: Yes, good morning. Bob, you've made the comment just in discussing some of the inflationary impacts. You've not yet absorbed or seen the peak yet in some of those. When might you expect to see that? Do you have a time frame in mind?
spk04: Yes, I would think of those very much. So when I say that, I'm not trying to predict forward. Look, I'm talking about what's occurred in the history and how that is realized in our P&L. So I think you can expect that. I'll use copper as an example. Copper hit $4.80, I think, in the May timeframe. So I would expect that to come flowing through the P&L in the third quarter. So when I make that statement, we haven't seen that peak. I'm primarily speaking to copper and resins, and that's more of a third-quarter event.
spk01: I see. Okay. And then I just had a question on the acquisition performance. I mean, we were pleased as well, a little bit above our expectations. And can you note those growing double digits? Is that kind of growth rate? I mean, can we hang our hat on that going forward? How comfortable are you around that kind of a double-digit growth rate, or is there some seasonality in that business as well that we need to be aware of as they drop into the P&L?
spk05: Well, I'll go first, but I can see Bob wants to get in on this one, too. But the first thing I'd caution you still is it is kind of the law of small numbers. I mean, it can move pretty quickly when you're talking about percents of growth. We're absolutely bullish that these businesses were growing high single digits before we acquired them. We believe in the synergy aspects of bringing them together. We're extremely pleased with the first six and eight months of having these two companies here, and we think they'll perform in that high single digits. Some quarters may be a little higher, some quarters may be a little lower, but through the cycle, we feel really good about it.
spk04: Yeah, the only thing I would add is with respect to the second quarter results as a whole related to the acquisitions, I would just caution you there is a bit of backlog timing and, again, on a relatively small basis, but a discrete project. So I would expect that level, that absolute level of revenue dollars to moderate in quarters going forward, but still very little seasonality, and I would think of it as high single-digit growth that you could bake in going forward.
spk01: Okay, very good. Is it fair to assume that those businesses, relative to your other utility businesses, would be less exposed to some of the supply chain challenges as well, or is that a fair statement?
spk05: It's not a fair statement. I mean, we've seen challenges there as well. Again, I think it's pretty broad-based. I'd be surprised if other people you're following aren't talking about it too.
spk01: No, they definitely are. Yeah. It's a common issue for sure. Right. Right. Very good. Thank you.
spk05: Thanks for the question. Yep. Thanks.
spk07: Again, in order to ask a question, simply press star, then the number one on your telephone keypad. Again, that is star, then the number one on your telephone keypad. Our next question comes from the line of Ryan Connors. The voting is scatter go. Your line is open.
spk01: Hey, great. Thanks for taking my question, and congrats on a great result. Thanks, Ryan. You know, one thing that you didn't mention much in your prepared remarks and only briefly in the Q&A, which has been prominent in the last year, is this infrastructure stimulus package. And I suspect that's partly because this certainly doesn't sound like a market at this point that needs federal support. But what's your view there? I mean, what would – Bob, you mentioned money falling from the sky, and we might actually get that, it looks like, if you look at the news. What would that do to the market? I mean, would that – would we be looking at an overheated situation? Would – Would you and peers have to build new factories at that point? I mean, what's the view on stimulus, and do you even want it or need it at this point?
spk05: So I'll go first, and then I'm sure Bob will have some thoughts on this, too. So if you recall, it may have been end of Q2, early Q3. The things that I thought were really important were vaccination and were there, you know, for people to be able to actually go out and do the work, and low interest rates I thought would be really positive. stimulus for us can only be positive right and unless that condition we've talked about before where it's just rumored and it doesn't happen that that could sometimes be a delay but that wasn't even the case this time we've seen really robust order growth for the last three quarters while people knew there would be infrastructure so so for us you know we sit here and think about 55 billion dollars for water infrastructure and the bipartisan bill and Still, again, we believe in the fact that AMI is a really strong proposition for using those funds. Shovel-ready projects are usually priority with our infrastructure-free AMI, and we feel really strong about that. Water quality, delivering clean, safe drinking water is a big deal. That's why we wanted to get into it. We think we could see some positivity there. So it isn't that we don't want it. We wouldn't have to build factories. I mean, we've got a very strong manufacturing model. Supply chain challenges, I can't imagine, would get easier if we keep throwing money into the market. But in terms of manufacturing capacity, we're fine. Mm-hmm.
spk01: Okay. And then the other question, kind of big picture, because you've been very comprehensive so far on the call, so this is bigger picture, but this issue of price and price expectations in the market. I mean, a lot of the talk about inflation is consumers, and in this case, you know, businesses, kind of expecting and realizing that we're in an inflationary environment and expecting price increases and therefore maybe acquiescing to them
spk05: easier than they would have in the past is there any evidence of that that customer expectations uh customers are just a little easier about taking price than they used to be or no well so so two things on that i mean i i want to be clear when we're talking about value-based pricing we're not trying to go out and grab every nickel that we can affordability of water to us is still you know an important thing on our minds as we talk to our customers They are accepting. The market is still rational. So that's why I try to use the word value-based pricing rather than pricing initiative, because that's really what we're doing here. But the market is still rational and understanding of the challenges that are driving the costs up.
spk01: Got it. Thanks again for your time.
spk05: Thanks, Ryan.
spk07: Thank you. I will now turn the call back over to Karen Bauer.
spk06: Thanks, everyone, for joining our call today. For your planning purposes, our third quarter call is tentatively scheduled for Friday, October 15th. I'll be around all day to take any follow-up questions you have, and good luck to our Milwaukee Bucks tonight. Cheer the deer. Thank you.
spk07: This concludes today's conference call. Thank you for participating. You may now disconnect.
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