Methode Electronics, Inc.

Please stand by. Welcome to the Methode Electronics fiscal year 2020 second quarter conference call. For this quarterly conference call, the company has prepared a PowerPoint presentation entitled Fiscal 2020 Second Quarter Earnings, which can be found at Methode.com in the investor relations section. As a reminder, this conference is being recorded. This conference call does contain forward-looking statements which reflects management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are subject to a safe harbor protection provided under the securities laws. Method undertakes no duty to update any forward-looking statements to conform the statements to actual results or changes in Method's expectations on a quarterly basis or otherwise. Forward-looking statements in this conference call involve a number of risks and uncertainties. The factors that cause these actual results to differ materially from our expectations are detailed in methods filings with the Securities and Exchange Commission, such as our annual and quarterly reports. Such factors may include without limitation the following. Dependence on a small number of large customers, including two large automotive customers, Dependence on the automotive, appliance, commercial vehicle, computer, and communications industries International trade disputes resulting in tariffs and our ability to mitigate tariffs Timing, quality, and cost of new program launches Ability to withstand price pressure, including pricing reductions Ability to successfully market and sell the beer surfaces products Currency fluctuations Customary risks related to conducting global operations Ability to withstand business interruptions Recognition of goodwill impairment charges Ability to successfully benefit from acquisitions and divestitures Investment in programs prior to the recognition of revenue Dependence on the availability and price of materials Fluctuations in our gross margins Dependence on our supply chain Income tax rate fluctuations Ability to keep pace with rapid technological changes Breach of our information technology systems Ability to avoid design or manufacturing defects Ability to compete effectively Ability to protect our intellectual property Success of GRAECON and or our ability to implement and profit from new applications of the acquired technology significant adjustments to expense based on the probability of meeting certain performance levels in our long-term incentive plan, and costs and expenses due to regulations regarding conflict minerals. All lines have been placed on a listen-only mode, and the floor will be open for your questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero. At this time, it is my pleasure to turn the floor over to Mr. Don Dutta, President and CEO. Sir, the floor is yours.

Thank you, Cynthia, and good morning, everyone. Thank you for joining us today for our fiscal 2020 second quarter financial results conference call. I'm joined today by Ron Zumis, our chief financial officer. Both Ron and I have comments, and afterwards, we will take your questions. To start, please turn to slide four. Although our second quarter and six-month fiscal year-to-date results were adversely impacted by the 40-day UAW labor strike at General Motors, incremental sales from GRAECON, revenue from new product launches, benefits from our initiatives to improve profitability, and our continuous improvement actions to reduce costs improved Methods year-over-year results on a GAAP basis. Methods revenue increased 8.2%, our net income increased 36%, and our net income per share increased 35.3% for the six months ended October 26 of this fiscal year. Again, please refer to slide four for our adjusted net income and adjusted income per share results which exclude expenses for initiatives to reduce overall costs and improve operational profitability, acquisition related costs, including purchase accounting adjustments and long-term incentive plan accrual adjustments in the applicable periods. As you can see in slide five, our year-to-date performance, excluding the adverse effect of the UAW labor strike at GM, still saw headwinds tempering our growth. Weaker auto sales, lower industrial equipment purchases, and lower appliance sales, as well as the impact of weaker foreign currencies, affected growth. However, with the strike behind us, The opportunity we have going forward and our team's focus on our strategy, operational discipline, and managing the business allows us to reaffirm our pre-tax income and EBS guidance for the fiscal year as shown on slide six. Please note that we have reduced fiscal year 2020 revenue guidance largely due to the effect of the UAW labor strike. During the second quarter, new business wins and business development efforts in both the automotive and industrial segments continue to capitalize on important vehicle trends, including electrification, LED lighting and safety. Method has been awarded a custom complex insert molded product for European vehicle manufacturers, 48-volt powertrain system, launching mid-fiscal year 2023 with an annual average revenue of $10 million. We've also been awarded an injection molded bus bar and contact assembly for another European OEM's HEV 48-volt auxiliary battery pack for approximately $3 million per year, again starting in fiscal year 2023. For the first time, Method was awarded a digital cluster display and central display touchscreen with haptic feedback by a European premium luxury OEM for the next generation vehicle. This key strategic win will launch in our fiscal year 2023. It is expected that this HMI solution, while small in initial revenue, will over time be carried across the customer's other vehicle platforms, increasing revenue potential. Further, we believe the know-how and technology can be brought to other customers. Graycon and Pacific Insight continue to win several LED interior and exterior lighting programs for applications in automotive, commercial trucks, electric vehicles, buses, and rail cars, increasing their content per vehicle and per OEM customer with some of these launches starting in our fiscal 2022. As noted on slide seven, some of these wins are a result of cross-selling our technology. Specifically, Greycon is leveraging Pacific Insight's RGB LED light engine technology with commercial truck and electric vehicle OEMs. This technology was originally developed for the automotive market and provides Greycon customers with proven technology as a way to further advance their features and customer offerings. I want to extend to the Greycon team my appreciation for their integration efforts and their focus on growing the business with booking awards of over $83 million since being acquired by Method, which includes replacement and new business. Our magneto-elastic sensor business continues to grow, doubling the revenue on e-bikes this quarter versus last year. Also, our 80-current sensor technology has been chosen for a European transmission position sensor, starting the second quarter of fiscal year 2021 at approximately $2 million in average annual revenue. Moving to slide 8, our sensor group continues its development of a tow-load sensor system based on methods of magneto-elastic technology. Method offers a sensor that provides real-time tow load and tow force data to the user and vehicle systems, which should also improve drive stability. We are targeting light truck and commercial OEMs to implement the benefits that can be derived from the sensor when driving with trailers. In the second quarter at DeBeer, we added four new customers and completed nine hospital evaluations, have five evaluations in process with several scheduled in the coming months, The DeBeer development team is also in the human subject phase of testing of a new surface with two hospitals that are targeting DeBeer for use with pediatric patients. Successful testing and implementation will give DeBeer another revenue path in the acute space. Turning to slide 9, and in summary, I am very pleased the method worked diligently to minimize the financial impact of the strike and the effect on our workforce. I would like to thank our worldwide team for their efforts and their focus on operational performance despite the many business challenges they've faced. And at this point, I'll turn the call over to Ron who will provide more detail on our financial results.

Thank you, Don, and good morning, everybody. Please turn to slide 10. Second quarter sales declined 2.6% or $6.8 million to $257.2 million in fiscal 20 from $264 million in fiscal 19. Sales in the second quarter were negatively impacted from the UAW labor strike at GM, which reduced net sales by $32 million. Foreign currency exchange continued to be a headwind as the Euro and Renminbi exchange rates were weaker than the prior year, reducing net sales in the quarter by 3.9 million. This was partially offset by higher sales from Greycon of 32.3 million. Greycon was acquired in 2Q of fiscal 19 and was included for 1.5 months versus the entire quarter this fiscal year. On a GAAP basis, second quarter net income increased $9.2 million to $23.8 million, or $0.63 per share, from $14.6 million, or $0.39 per share, for the same period last year. Second quarter GAAP net income benefited from the results of GRACON, lower acquisition-related costs, Lower Stock Award Amortization Expense, and the Net Benefit we received from initiatives to reduce costs and improve profitability, which included lower expense for those actions in the current fiscal year versus last fiscal year. On a non-GAAP basis, second quarter adjusted net income decreased $7.7 million to $24.2 million, or $0.64 per share, from $31.9 million, or $0.85 for the same period last year. Negatively impacting second quarter GAAP and non-GAAP net income were the adverse impact of the UAW labor strike at GM of $9.6 million, higher expenses for net interest and tangible asset amortization, income taxes, and net tariffs, as well as the impact of foreign currency translations. China tariffs continue to be a headwind, although we're aggressively working to mitigate the impact on our results. In the second quarter, our net tariff expense was $600,000 and year-to-date net tariff expense was $900,000. This includes tariff revenue reimbursements related to fiscal 19, which were agreed to during the first quarter by some of our customers. Therefore, the amount recognized year-to-date does not represent a runway for the remainder of the year. We expect the net impact of tariffs to be higher for the remaining two quarters of fiscal 20, but lower than the 4.5 million to 5.5 million range we estimated during our first quarter fiscal 20 earnings call in August. Currently, we believe tariffs for the fiscal year will be in the range of 2.5 to 3.5 million at the current tariff rate. Moving to margins on slide 11. Second quarter GAAP gross margins were basically flat, but the non-GAAP adjusted gross margins declined 150 basis points year over year in fiscal 20. Current year gross margins were impacted by the UAW labor strike at GM, the negative impact of foreign currency translation, and lower radio remote control, bus bar, and appliance sales. This was partially offset by the benefit of GRAECON sales. Non-GAAP adjusted gross margins exclude expenses for initiatives to reduce costs and improve profitability and purchase accounting adjustments in the applicable periods. Second quarter GAAP selling and administrative expenses as a percentage of sales decreased 530 basis points year over year, favorably impacted by lower expense for operational improvements, the benefits of those operational improvements, Lower acquisition costs and lower stock-based compensation expense. However, non-GAAP selling and administrative expenses as a percentage of sale, which exclude acquisition-related costs, expense for operational improvements, and stock-based compensation accrual adjustments in the applicable periods, increased 100 basis points year-over-year in the second quarter of fiscal 20. The increase was mainly attributable to lower sales as a result of the UAW labor strike at GM. Moving to year-to-date margins on slide 12. Year-to-date GAAP gross margins improved 50 basis points, but the non-GAAP adjusted gross margins declined 30 basis points in the year-over-year and fiscal 20. Gross margins were impacted by the UAW labor strike at GM. The Negative Impact of Foreign Currency Translations, and Lower Radio Remote Control Bus Bar and Appliance Product Sales. This was partially offset by the benefit of increased gray count sales. Non-GAAP adjusted gross margins exclude expenses for initiatives to reduce costs and improve profitability and purchase accounting adjustments in the applicable periods. Year-to-date gap selling and administrative expenses as a percentage of sales decrease 350 basis points year-over-year, positively impacted by lower expense for operational improvements, the benefit of those operational improvements, lower acquisition costs, lower stock-based compensation expense, and by selling and administrative expense attributable to GRAECON, which is lower as a percentage of sales than Method as a whole. However, Non-GAAP selling and administrative expenses as a percentage of sales, which include acquisition-related costs, expense for operational improvements, and stock-based compensation, accrual adjustments in the applicable periods, slightly increased on a year-to-date basis. The increase was mainly attributable to lower sales as a result of the UAW strike at GM. Shifting to EBITDA on slide 13, the company generated 43.6 million in the fiscal 22nd quarter versus 29.2 million in the same period last year. However, adjusting for expenses for initiatives to reduce overall costs and improve operational profitability, acquisition-related costs, and stock-based compensation accrual adjustments in the applicable periods, second quarter fiscal 19 adjusted EBITDA was 50 million compared to 44.1 in the current period. The great decrease is primarily attributable to the adverse effect from the UAW strike at GM, partially offset by higher EBITDA from Greycock. Moving to year-to-date EBITDA on slide 14, the company generated $93.9 million in fiscal 20 versus $66 million in the same period last year. However, adjusting for expenses for initiatives to reduce overall costs and improve operational profitability, Acquisition-related costs and stock-based compensation accrual adjustments in the applicable periods. Fiscal 2019 adjusted EBITDA was $88.2 million compared to $94.4 million in the current period. The improvement is primarily attributed to higher EBITDA from GRAECON, partially offset by the adverse impact from the UAW labor strike at GM. A few other financial items to review. Year-over-year, intangible asset amortization expense in fiscal 20 increased $3.9 million, or 69.6%, to $9.5 million, primarily due to amortization expense related to the Greycon acquisition. In fiscal 20, we invested approximately $27 million in CapEx, mainly to support programs and launches in North America and Europe, and our facility expansion in India. Year-to-date depreciation expense for fiscal 20 was $14.2 million. Our year-to-date tax rate of 19.3% was impacted by discrete items recorded during the period. Excluding the impact of the discrete items, our year-to-date tax rate would have been approximately 18%, which is higher than the prior year due to the level of mixed earnings among taxing jurisdictions. Our expected rate for the remainder of this fiscal year is expected to be lower than we experienced year to date. Therefore, in spite of a higher anticipated effective tax rate, we estimate our tax rate will be in the range of 18% to 21% in fiscal 20. Let's move to slide 15. Free cash flow for fiscal 20 was $49 million. As shown on slide 16, we have used some of our free cash flow to pay down debt. We delivered nearly $18 million in debt since the beginning of the fiscal year, and since purchasing Greycon, we've reduced our debt by $83 million. We ended the quarter with $96 million in cash. Our debt-to-EBITDA ratio, which is used for our bank covenants, is approximately 1.5, which lowers our incremental borrowing costs by 25 basis points and 10 basis points on the commitment fee. Please move to slide 17 to look at the key drivers to our anticipated EBITDA performance for fiscal 20. Looking at the EBITDA based on our 155 million of EBITDA in fiscal 19 and adding incremental EBITDA for a full year of GRAECON, which is about 24 million, adding EBITDA from new automotive and laundry program launches of about $17 million, adding back the one-time costs we incurred in fiscal 19 for initiatives to reduce costs and improve profitability of about $11 million, adding back the one-time costs we incurred in fiscal 19 for acquisitions and restructuring of about $29 million, increasing our anticipated international government grant income by $4 million, and subtracting the net impact from the UAW labor strike of GM of 5 million and subtracting the impact of the lost EBITDA from reduced passenger car production, which we estimate to be about 14 million. In conclusion, I'll finish up my remarks with guidance. Please turn back to slide six. As a reminder, the guidance ranges for Fiscal 20 are based upon management's expectations regarding a variety of factors and involve a number of risks and uncertainties, which have been detailed in this morning's release, Form 10-Q, and our Fiscal 19, Form 10-K. As we announced this morning, we reaffirmed Fiscal 20 pre-tax income in the range of $150.3 million to $164.3 million. and earnings per share in the range of $3.25 to $3.55. But we believe there are more headwinds than tailwinds in the second half of fiscal 20. However, primarily as a result of the UAW labor strike at GM, we are revising our sales guidance to $1.1 billion to $1.13 billion from the prior sales guidance in the range of $1.13 billion to $1.17 billion. For fiscal 20, we are estimating capital investment to be in the $48 to $54 million range and depreciation and amortization to be in the $51 to $54 million range. We expect fiscal 20 free cash flow, as defined as net income plus depreciation and amortization less CapEx, to be between $122 and $136 million. Finally, Methos' third quarter performance tends to not be as strong as its fourth quarter, largely due to the holiday seasons and other factors. We anticipate the same holding true this fiscal year, with the fourth quarter expected to be stronger than the third quarter. Don, that concludes my comments.

Ron, thank you very much. Cynthia, we are ready to take questions.

Thank you. The floor is now open for your questions. If you do have a question, please press star 1 on your telephone keypad at this time. Questions will be taken in the order they were received. If you are using a speakerphone, we ask that while posing your question, you pick up your handset to provide favorable sound quality. If at any time your question has been answered, you can remove yourself from the queue by pressing 1. Again, ladies and gentlemen, if you do have a question or comment, please press star 1 on your telephone keypad at this time. Please hold while we poll for questions. Our first question comes from Chris Van Horn of B. Reilly FBR. Please state your question.

Good morning, everyone, and thanks for taking my call, and congrats on solid execution in a challenging environment. Thanks. I just want to touch on guidance really quickly. I mean, obviously, the labor strike had an effect here. But when you look at kind of the underlying, this is specifically for auto, when you look at kind of the underlying production estimates, are you changing anything from either IHS or LMC, whoever you use, in terms of your production expectations?

No, I mean, we look at both of those. We're more, certainly in the United States, we have more truck and SUVs, so we tend to analyze those much closer. And those have remained strong. Of course, take the strike out of it. We are anticipating some recovery from the UAW strike in orders from our customer. Not a lot, but that is in our thinking. And then in Europe, we monitor that really on a and many more. A number of launches in Europe, smaller but larger in number, and a few in Asia with the Great Wall. But I don't really see a geographic change.

Okay, got it. And, you know, margins are holding up really well. And I think, you know, correct me if I'm wrong, Greycon is a big part of that. You're certainly making a lot of initiatives on the cost side through operational efficiency and spending there. Where are we in that cost cutting or those initiatives to reduce costs? Is a bulk of it done? I know there's always stuff to be had, but it seems like you've really ramped it up over the past 12 months. I'm just curious if you see more low-hanging fruit as we look out next year and what that looks like.

First of all, I would say that we're ahead of where we thought we would be on the Graycon factory improvements. And kudos to the team in Asia, the Metho team and the Graycon team. That certainly helped us in the quarter and will help us for the balance of the year. But I would say we're probably about halfway. It gets harder. Initially, you're picking up dollar bills and Eventually, you're getting down to pennies, but we anticipate that we've got another year of, I think, solid improvement there. Okay. And then, of course, the method, that's what we do for a living. Right. And that's continuous improvement, but we knew going into it that there were certainly improvements we could make.

Okay. That makes sense. Last for me, congratulations on your Digital Cluster win. I'm not sure how much detail you can get into. I imagine you displaced the incumbent, and I'm just curious about any more detail. It seems like a new product line for you. There are many other players in the space that we can think of that are in the Digital Cluster arena. So any detail about what the award was or how it came about and maybe your competitive advantage in that win?

I have to be very careful here because I can't really say too much about the product and certainly not the customer. I can say that it's a customer that knows us well and that we developed the technology probably two, three years ago and we're deploying it for the first time, much as we deployed center councils on premium vehicles years ago before we landed some of the larger are all pieces of business. But I really, because I'd like to say more, we're excited about it, but I can't.

Okay. Well, hopefully, maybe in the coming months or quarters, we can get some more detail around it. Yes, absolutely. Okay. Thank you so much for the time, guys. Thank you.

Our next question comes from Steve Dyer of Craig Hallam. Please state your question.

Hey, guys. Congrats on the quarter. This is Ryan on for Steve. Just digging into guidance, I guess, a little more. So you reduced revenue guidance by $35 million at the midpoint, primarily for GM, but you maintain the profitability expectations. Where are those cost cuts or efficiencies coming from, I guess, that you weren't expecting a couple months ago when you last guided?

Well, as I was talking with Chris a little bit ago, Certainly from our Greycon cost improvement, that is ahead of schedule and that definitely helped. And Greycon sales were up. And we modeled Greycon sales both looking at what our customers are telling us plus what we're seeing from ACT, I always forget that. And we were modeling a slight decline, and in fact, it was better than we expected. We were still anticipating and we modeled into our guidance a decline, but that didn't happen as fast as we thought. And again, kudos to the team. They have done an excellent job on tariffs. We entered the year thinking around $8 million. And we're considerably below that. So all of that contributed to it.

Great. Then just switching over to DeBeer. So in early October, you know, it's a master product agreement with Trinity Health. But then subsequently there was a notice to disregard, I guess, just you know any way to clarify I guess what was going on with those press releases and then as well as just if you could talk about the opportunity with that health system and then what that could potentially mean for any other hospitals too.

Okay, very simply we shouldn't have used their name and they're obviously going to be a good customer and we wanted to quickly correct that which we did. But that is really our first system win Most of our wins have been, in fact, all of them have been discrete hospitals. Maybe they're part of the system, but they have been one-off wins. The exciting part of that is that that is a system win and DeBeer will be deployed throughout their hospitals. And that we found very exciting and is why we also wanted to announce that to the street. And I think that's probably all. I can't say that. I can't tell you the revenue amount, but it very quickly would become De Beers' largest customer.

And then maybe as one follow-up question, you said it'll be deployed throughout the hospitals. Will that be a hospital-by-hospital decision, or is this basically like a hunting license essentially? Or will it be automatically essentially deployed across all their hospitals?

Probably a little bit of a mixed bag. We'll have to go and train each hospital, but the system is adopting DeBeer. So I don't want to say that a hospital has to use it, but it is in their system and we will, it's a little bit more than a hunting license, but we have to go and train the staff and then it will be used routinely.

Great. One more for me and then I'll turn it over. So it looks like the Ottawa Laundry launches is a couple million worse than what you were expecting last quarter. Has there been another delay in that big product launch there or what's going on?

I would say that our auto launches are on time and on track. Laundry is still behind. And if I look at, you know, Going forward, what risk is there? I suppose there can be further decline in the European auto market, but we really look at the laundry program as the biggest risk to that category.

And these launches, more back-end loaded to the third and fourth quarter as well as they ramp up more towards full launch.

Okay. Thanks, guys. Good luck. Thank you.

Our next question comes from David Leiker of Baird. Please state your question.

Good morning, everyone. Good morning, David. I wanted to follow up on a question a bit earlier on the digital cluster. I don't know if I missed it or if you didn't say it. Did you put a dollar number on that?

No, we didn't. but I can't tell you it's in the million dollar range and then we expect it to be carried over to the other platforms.

Okay, great. On the GM strike, I guess first of all, where are you in terms of ramping up to full production on that post strike?

Let me answer this way. We are shipping everything the customer asks us to ship on time.

Okay. And then can you talk a little bit about the actions you took to mitigate the impact of the strike? What kind of mix of what was tactical for the moment versus structural changes that are going to stay around for a while?

There were a number of tactical things. which we took with our labor force in Mexico. We were very quick to, we were taking action within 12 hours of the strike.

Some other things in terms of longer-term structural, we did reduce some of the workforce and we incurred some costs in doing that that will be right-sized going forward and as Don mentioned, got creative with the workforce to mitigate as much as possible. which included building some products so that will avoid any future overtime in the event of a ramp-up and things of that nature. So we took all those things into account and mitigated a very delicate situation pretty well, all things considered.

Did you continue any production at all? I know you weren't shipping, but... Yeah, we did.

Yeah, I mean, we... It's a fine line. You certainly don't want to lay off your workforce since you're the only one being affected by it in that business park and you're going to drive everybody to your next-door neighbor. So we did a blend of vacation, running production. We have a very clean plant. A lot of things got painted. And to say this, we... We would have had, going into another week of the strike, our plan would have called up for us to take much more dramatic action, and thank goodness we didn't have to.

A key takeaway is how keen the competition is for good employees in that area. So that was part of our long-range thinking, too, was to make sure that we keep our well-trained employee base for the future. So all of those things were

And David, we did have the advantage that since the major product that we produce there goes on trucks and SUVs, building some additional inventory didn't cause as much of a concern and that we know we will ship the product. If it was, you know, mainly passenger car, you're not quite sure what platform this we could project out and use. do some, I would call them strategic bills. But again, we couldn't have gone much further.

Okay. And then on slide 17, you call out replenishment. I'm assuming that's revenue from volume that GM makes that they lost during the strike. Is that the way to read that?

Yeah, it's basically, David, it's about 20% of the revenue that we lost in the strike So we'll get some of that. We anticipate getting a modest amount of that back, and the EBITDA throw from that we're estimating to be about $2 million. So it's not a very aggressive replenishment model, but we are expecting maybe a little bit of recapture of the lost sales for that extended strike.

And then on the contribution of the revenue from Greycon, how much of that could you call is still kind of the revenue from the acquisition, just that wasn't in last year's numbers, versus growth you've had in Greycon since the purchase? Is there a way to characterize that?

That would be pretty tough. Yeah, right. In terms of That would be pretty tough, David, right now for us to do.

I think we can answer it. We'd have to do a little research.

Yeah, it's right now.

Okay.

I can tell you it's higher than we anticipated. Yeah, no, for sure. At acquisition.

Yeah, yeah. Well, and you've done a great job there with the revenue performance versus the profit performance there, certainly driving that profitability higher. We're starting to see the commercial vehicle off-highway markets roll over a little bit. It seems like you're somewhat insulated from that, or is that just being masked by the growth in other areas?

No, it's in our plan. I don't know. We're definitely not masked by it. In round numbers, we're about 80% on Class 8. Those have, let's say, flattened. They're not as... down as maybe the lower classes. But we have modeled pretty much in keeping with ACT. And again, we always overlay that with customer releases and our knowledge of the customer's needs and their inventory.

Okay, great. And then a couple last items here. If we look at the The appliance launches. It sounds like that started, but it's just been slow so far. Is that the right way to characterize that?

Correct. We are shipping, but at a very small rate at this point.

David, that's certainly a risk to the delayed and or reduced volumes, as we've noted, is a risk to our targets.

That's probably... I mean, we know they're going to launch or they're going to continue with the other product which we're on as well. But I think that'll be slower in the third quarter and ramp up the fourth quarter. Exactly how much at this point we can't say.

We can't say because we don't really know. So you don't have a lot of visibility from them in terms of what that ramp is going to look like at all, still, even though it started.

That's correct.

That's correct.

Appliance tends to be a little bit like auto, but they don't follow the auto launch rules.

And then on working capital, pretty significant contribution year over year in the quarter. Anything in particular behind that?

No, I think You know, Greycon's a great cash generating business and has really high margin, great cash generating business. So having all that with us now has certainly made a big difference. A lot of our, you know, and that's exacerbated, I think, by what Don had mentioned earlier about all of the operational excellence, all that has turned to cash. So we're doing a great job in terms of acclimating that business into our, and realizing the cash flows from that perspective.

Okay, great. I don't usually congratulate people publicly on the phone, but you did a fantastic job on the cost side in the quarter, so well done.

Thank you very much, David. That's very much appreciated. That's all I have. Thanks. All right. Thank you.

And there appear to be no further questions at this time. Mr. Duda, I'll turn the conference back over to you, sir.

Cynthia, thank you very much and we'll thank everybody for listening and wish you a very safe holiday and a good new year.

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time and have a great day.