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spk06: Greetings and welcome to the Methode Electronics first quarter fiscal 2024 results call. At this time all participants are on a listen only mode and a 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. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Robert Cherry, VP of Investor Relations. Sir, you may begin.
spk01: Thank you, Operator. Good morning, and welcome to Meta Electronics Fiscal 2024 First Quarter Earnings Conference Call. For this call, we have prepared a presentation entitled Fiscal 2024 First Quarter Financial Results, which can be viewed on the webcast of this call or found at metho.com on the Investors page. This conference call contains certain forward-looking statements, which reflect management's expectations regarding future events and operating performance and speak only as of the date hereof. These forward-looking statements are subject to the safe harbor protection provided under the securities laws. Method owner takes no duty to update any forward-looking statement to conform the statement 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 could cause actual results to differ materially from our expectations are detailed and methods filings with the Securities and Exchange Commission, such as our 10-K and 10-Q reports. At this time, I'd like to turn the call over to Mr. Don Duda, President and Chief Executive Officer.
spk03: Thank you, Rob, and good morning, everyone. Thank you for joining us for a fiscal 2024 first quarter earnings conference call. I'm joined today by Ron Zumis, our Chief Financial Officer. Both Ron and I will have opening comments, and then we will take your questions. Let's begin on slide four. Our sales for the quarter were a solid $290 million. They were up 3% compared to the prior year, mainly due to $21 million in sales from the acquisition of Nordic Lights. Excluding Nordic Lights, foreign exchange, and a significant drop in customer reimbursed materials bought by and premium freight cost recovery, sales were down 2%. The decrease was mainly due to lower sales in our auto segment, which was partially offset by higher sales in the industrial segment, driven by lighting solutions for commercial vehicles. With the addition of working lights from Nordic and the ongoing contribution from our existing interior and exterior lighting solutions for commercial vehicles and automotive, Method is clearly building a lighting solutions franchise that complements our growing business and power distribution solutions. In the quarter, we experienced very unmethod-like operational challenges. Operational inefficiencies in our North American auto operations caused mainly by salary personnel turnover, poor operational decisions, and vendor issues, which led to subsequent production planning deficiencies. This in turn had a domino effect, leading to inventory shortages, unreimbursed spot purchases and premium freight, and some delayed shipments. While the full picture is nuanced, I can share with you the essence of what occurred. Our Monterey operation has historically manufactured with a low mix and a high volume of product. Recently, the operation has transitioned into a mode of higher mix and lower volume. This transition, combined with the aforementioned issues, led to exposure of latent operating inefficiencies that our early warning system detected, but we failed to mitigate, also very unmethoed. In a lean manufacturing environment, a delay in visibility of a problem can ultimately generate significant costs in the form of premium freight and spot buying, both necessary to immediately address material shortages and maintain customer delivery integrity. In auto, delivery in addition to quality is absolutely paramount to both maintaining and obtaining new business. These operational challenges had approximately 15 cent impact on our first quarter earnings relative to our expectations. We also had accelerated expenses related to the numerous program launches. I can confidently tell you these operational challenges have been identified and corrective action plans are already in place, including the hiring of former seasoned planners in the U.S. However, the residual effects are expected to impact our second quarter to approximately the same degree, and along with a significant weakening in the e-bike market, are the primary drivers to our lowering earnings guidance for the full year. As I said, this was very unmethoed, and I have been and will continue to be personally involved with the efforts to correct the situation. On that, you have my personal commitment as the CEO and as a shareholder, we will fix this. Moving to orders. We had a solid quarter with over $70 million in annual program awards. These programs are once again led by electric vehicle programs. turning to medical. After pursuing multiple strategic avenues for DeBeer, including everything from a formal sales process to the continued operation of the business, it became abundantly clear that a discontinuation was the best financial path forward. I want to thank the DeBeer and Method employees associated with the business for all their efforts, as well as the customers who provided the opportunity to market the DeBeer product. Turning back to EV activity, sales in the quarter were 22 percent of our consolidated total. In new awards, we won over $30 million in annual EV programs. For fiscal 2024, activity will be strong, but we'll still be very dependent on OEM take rates as well as the timing of program roll-offs. In the quarter, we had an increase in debt, which was driven by an investment in working capital to support our sales and program launches. While our debt and consequently our leverage has increased, it is still relatively low. As such, we are very comfortable with our flexibility for capital deployment, whether it is for internal investments, share buybacks, or additional acquisitions. As is typical in our first quarter, due to payments for year-end items, we had negative cash flow in the quarter. However, we fully expect to return to positive free cash flow in the second quarter and have meaningful positive free cash flow for a full year. Moving to slide five. The awards identified here represent some of the key wins in the quarter and represent $70 million in annual sales at full production. As a reminder, the launch timing of most of these programs could be anywhere in the range of one to three years from now. The awards were mainly for power products associated with the EV skateboard architecture, The awards also continue to be weighted towards the United States, where EV quoting activity continues to be strong. In other areas, we're awarded programs for lighting solutions in auto and sensor solutions in e-bike, although not launching until fiscal 2026. Turning to slide six. In summary, sales in the quarter continue to be solid, including for EV applications. The Nordic Lights integration is progressing well. and we expect to own 100 percent of the shares by the end of the second quarter. The program-aware pipeline continues to be healthy, especially in EB. Lastly, the quarter included an unacceptable lapse in operational efficiency. My immediate focus, as well as the entire management team's focus, is on correcting those inefficiencies. As I have stated, the operational issues have been identified, and corrective actions are underway. We will also continue to have a heavy focus on executing our new program launches. Turning to our outlook, due to program roll-offs and the expected weakness in key markets, especially e-bikes, we continue to expect low organic sales in fiscal 2024. In addition, we will be making significant investments and launching over 20 new programs. These investments include significant tooling and increased staffing to ensure a successful 2025. This activity, along with multiple years of strong awards, is expected to enable us to not only replace the sunsetting programs, but to organically grow the business 12 percent from fiscal 2024 to fiscal 2025. Our view on fiscal 2025 has not changed. This guidance demonstrates that our business model is healthy and is positioned to prosper from the strategic direction that we have taken into lighting and power solutions to grow the business. Before I conclude, I would like to address the recent announcement of my retirement. Leading Method has been a tremendous personal and professional journey for me, and I am incredibly proud of all our team has achieved to grow the company. Having served 19 years as CEO, it is simply time for me to step down and enable the next successful stage of the Meflo journey to begin. I am extremely confident that the company will continue to flourish given the exceptional team in place and a solid strategy that is positioned for growth. I truly believe that Meflo's brightest days are still ahead. Meanwhile, I will continue to actively lead the company until the successor has been named And then we'll work with the new CEO through an extended transition period, which is expected to conclude sometime in fiscal 2025. At this point, I'll turn the call over to Ron, who will provide more detail on our first quarter financial results, as well as more details on our outlook.
spk02: Ron? Thank you, Don. And good morning, everyone. Please turn to slide eight. First quarter net sales were $289.7 million. compared to $282.4 million in fiscal 23, an increase of 2.6 percent. This quarter sales included $21.2 million from the Nordic Lights acquisition and one-half a million from favorable currency translation. Partially offsetting those positive impacts was $10.4 million lower in Spotify and premium freight cost recovery, excluding Nordic Lights, foreign currency, In their year-over-year cost recovery impacts, sales decreased by 1.5 percent. In addition to Nordic Lights, this quarter saw ongoing strength in lighting solutions for commercial vehicles, but it also saw the continuation of a large program roll-off in North America. First quarter, income from operations decreased 82.6 percent to 3.8 million from $21.8 million in fiscal 23, mainly due to operational inefficiencies, higher S&A expenses, and unfavorable product sales mix. Adjusting for net acquisition costs of $0.8 million related to Nordic Lights and restructuring costs related to the exit from Dabira of $0.7 million, our non-GAAP adjusted income from operations decreased 75.7 percent to $5.3 million, from $21.8 million in fiscal 23. Please turn to slide nine. First quarter diluted earnings per share decreased 96.6 percent to two cents per share from 58 cents per diluted share in the same period last fiscal year. The EPS was negatively impacted from the operational inefficiencies, unfavorable product sales mix, higher professional fees, the absence of government assistance, and higher net interest expense. Adjusting for net acquisition costs of 0.6 million and restructuring costs of 0.5 million, our non-GAAP adjusted diluted EPS decreased 89.7 percent to six cents from 58 cents per share in fiscal 23. Shifting to EBITDA, a non-GAAP financial measure, first quarter EBITDA was 17.8 million versus $38.2 million in the same period last fiscal year, a 53.4 percent decrease. EBITDA was negatively impacted by the higher operational costs, unfavorable sales mix, higher SG&A expenses, and the absence of government assistance. The contribution from Nordic Light helped to partially offset the decrease. Adjusting for acquisition costs of $0.8 million and restructuring costs of 0.7 million are adjusted even though decreased 49.5 percent to 19.3 million from 38.2 million in fiscal 2020. Please turn to slide 10. We increased gross debt by 32.2 million in the quarter, mainly due to working capital investments and higher CapEx, both to support sales and new program launches. We ended the quarter with $147.9 million in cash, down $9.1 million from the end of last fiscal year. Net debt, a non-financial measure, increased by $41.3 million to $191.1 million for the quarter, from $149.8 million at the end of fiscal 23. Again, the main driver of the increase was working capital and CapEx. to trailing 12-month EBITDA ratio was approximately 2.7. Our net debt to trailing 12-month EBITDA ratio was approximately 1.5. Please turn to slide 11. First quarter net cash from operating activities was an outflow of 5.6 million as compared to 12.7 million in fiscal 23. The decrease of $18.3 million was primarily due to lower net income in the quarter. First quarter capital expenditure was $13.8 million as compared to $9.6 million in fiscal 23, an increase of $4.2 million. The increase was mainly a function of investments to support new product launches and was keeping with our guidance. First quarter free cash flow, a non-GAAP financial measure, was a negative 19.4 million as compared to a positive 3.1 million in fiscal 23, a decrease of 22.5 million. This decrease, again, was primarily due to reduced net income and increased CapEx. Please turn to slide 12. Regarding forward-looking guidance, it is based on management's best estimates and subject to change through a variety of factors as noted on this slide. The operational inefficiencies experienced in the first quarter will carry over to the second quarter. The impact to EPS in the first quarter was approximately 15 cents, and we expect a similar impact to EPS in the second quarter. In addition, we expect to experience a decrease in sales volume relative to our original expectation and increased legal and professional fees. Given this short headwind, we are providing guidance for the second quarter. The expected net sales range for fiscal 24 second quarter is $285 million to $295 million. The expected diluted earnings per share range is $0.08 to $0.13. Adjusting for $0.04 of costs related to the De Beers exit, the expected adjusted diluted earnings per share is $0.12 to $0.17. Turning to the full year, the expected net sales range for fiscal 24 is $1,140,000,000 to $1,180,000,000. Four-year sales guidance was decreased by $15 million at the midpoint, mainly due to the softening of sensor sales in the second half of the fiscal year. The expected diluted earnings per share range is $0.80 to $1, down from previous range of $1.55 to $1.75. The drop is predominantly related to the operation inefficiencies in North American auto being experienced in the first and second quarters and a significant slowdown in our sensor business in the second half of the fiscal year. Our sensor business enjoys gross margins well above the consolidated level. Adjusting for $0.06 of costs related to the beer exit and $0.02 related to the Nordic Lights acquisition, the expected adjusted diluted earnings per share range is $0.88 to $1.08. The Fiscal 24 guidance assumes an income tax rate of 14% to 16% with no discrete tax benefits or expenses. It assumes CapEx of $60 to $70 million. and assumes depreciation and amortization of between 55 and 60 million. Looking ahead to fiscal 25, the expected net sales remains unchanged at 1,250,000,000 to 1,350,000,000. The midpoint of that range represents 12 cents organic sales growth from the midpoint of the fiscal year 24 net sales guidance range. The expected range of income from operations as a percentage of net sales in fiscal 25 is also unchanged at 11 to 12%. The fiscal year 25 income tax rate is expected to be between 20 and 22% with no discrete tax benefits or expenses. Don, that concludes my comments.
spk03: Ron, thank you very much. Operator, we are prepared to take questions now.
spk06: Thank you. At this time, we will 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, and 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. One moment, please, while we poll for questions. Thank you. Our first question is coming from Luke Yunk with Baird. Your line is live.
spk00: Good morning. Thanks for taking the questions. I want to start this morning with the labor and vineyard issues in auto that you saw. What I'm just wondering is to what extent you had a line of sight or not when you last gave guidance in late June and more specifically, How that lines up with what you're now anticipating in the business, especially your confidence that the corrective actions you've taken will be a sufficient offset in the second half. What would be the risk that that is not the case or that the actions don't have the expected benefit? Thank you.
spk03: Okay. Through the first two months of the quarter, we were pretty much on track. When we go back and do a postmortem on it, were there issues? Yes. The magnitude of the inbound and outbound freight really didn't become apparent until July. And once you start to air freight product, the costs go up dramatically. And that's really, when I look at the MIS, that's the main driver of it. Confidence? We know this will go into the second quarter. We've dropped the inventory levels. We need to replenish some of that. So we're going to still have some premium freight, more inbound than outbound this time. What's my confidence level? High. I wouldn't have said what I said in my prepared remarks if I didn't feel confident we could fix that. It's very unmethod. disturbing to me, but we're a pretty seasoned management team. The plant, let's call it a transition. They're going from high-volume, low-mix center councils, which they did very well producing, to a high-mix, lower-volume, and they had some issues with that. That coupled with the employee turnover, some voluntary, some involuntary, and some poor decision-making that we're correcting. I am confident of that. We're known for our operational excellence. This one is a little red-faced for me, but we will correct it. That I'm confident. We've had some corporate people down there that are seasoned ops guys, and we know what the fix is.
spk00: Thanks for that, Don. Second, hoping you could comment on where price cost is in the business today. Some incremental inflation was mentioned in the release. And just the status or tone of your conversations with customers, recovery is fairly modest here in the first quarter. Should we expect that to accelerate as we go through the balance of the fiscal year?
spk03: That's always a double-edged sword for us. We've had some very difficult situations stressful discussions with our customers. And some of this is not with us, but some of this has been in the press where the automakers have been getting even tougher on price concessions. So that is going to be a struggle going forward. Now, where we've turned our attention to is our PPV or purchase price variance, which for the last couple of years has been negative. We feel that with our growth, we can put pressure on our suppliers or get other suppliers, although I'll tell you one of the issues we had in our Monterey plant was we did change the supplier and they had an issue. So that has to be done carefully. We'll continue to pressure customers for price increases, but I'm not going to destroy the relationship. You know, we're We're in auto, and while we've diversified, there's only so many automakers, and so we tread lightly there, although, again, I think our team has done a good job of pushing it. But I think our attention, in terms of gross margin, will be in factory efficiencies, improving that and with putting more pressure on our vendors. I see that as a better avenue than taking a customer relation to the brink and being put on new product cold. I don't think that long term, I don't think that will help. And we will get, as we launch these programs, particularly in Monterey, we're going to get more overhead coverage. That will also help us going forward.
spk02: I think from the procurement side, we're going to even though we've had some supply and have to do premium, that was more of our missteps than anything. I think you're going to see a pivot of an emphasis on procuring supply, which was challenging over the past couple of years. That's stabilized, and now I think you're going to see us pivot more towards getting that positive PPV and getting that back to more historical standards.
spk03: And while we didn't build it into this year's we've had all of our teams look at the areas that we can economize on purchasing, and we put one of our season VPs on it. And so what I've seen on paper has to come to fruition, but that gives me confidence as we go into 25, we're going to see some, we'll definitely will see improvement, not just from the overhead coverage, but from PPV. And again, we're going to be a little more cautious on vendor changes because that did cause us a problem.
spk00: And then for my last question, just bigger picture, hoping you could expand on the implications of the decision to wind down the beer business, specifically if you have any interest in medical going forward overall and to what extent there might be any straining costs in the P&L. Thank you.
spk03: That decision was one of the tougher ones that I've made in my career. The amount of orders that we received from customers when we knew it was going to be discontinued is an indication that it was well received. It was just very difficult for us to scale. It definitely helps people. It saves money. But it was difficult to... to scale, expensive to scale. And we did look at maybe we should look to the outside for funding. But when I look at that, that's probably not where we should be spending our time now. We had three areas that we concentrated on, medical, EV, and sensors. And two of the three have done very well. Medical didn't. Management team-wise, time to concentrate on those two other areas, and we continue to book business in those areas. We did a formal sales process, Luke. I don't want to go into too much detail, but I think there were teasers sent out to 70 companies, and I think we had 30 returns on it, and there were no... In the end, no one was interested in the business. And some of that, I think, is the scale. And hospitals are struggling. So, bottom line, it was time to discontinue the business.
spk00: Got it. That's all helpful. Thank you, all the way through.
spk03: Yeah, I think, Luke, if I could have seen our way to break even, we would have taken a different approach, but Literally, it would take us another five years. And again, I don't think that's where Method should be placing its effort.
spk06: Thank you. Our next question is coming from John Franzreb with Sudoti and Company. Your line is live.
spk07: Good morning, guys, and thanks for taking the questions. I want to go back to the EPS revision question. You pulled it down more than the implied 15 cents last quarter and expected this quarter from the production and labor disruptions. What is the balance of you pulling down that number?
spk02: The lower APS gains, operational inefficiencies and product mix are the two main
spk05: So are you talking about full year or quarter? Full year. Okay.
spk03: Yeah.
spk05: Yeah.
spk02: So the operational and efficiencies, you know, looking at 30 cents, right? Product mix largely due to sensors and data centers and lower organic volume in total. Those are the main drivers.
spk03: Yeah. Those three areas are by far our most profitable products. The e-bike market, our customer, maybe a week ago, at best two weeks ago, said that they're still going to be over-inventory for the duration of the year and then going into next year as well. And then we've studied the e-bike market and we concluded that. And at that point, with the change in their forecast, we had no choice but to bring down... and that, again, very profitable, and that affected EPS. Now, do we expect that to return? Yes. I mean, the e-bikes are very popular, but there was a spike during COVID, and every shortage is always followed by a surplus, and that's what our customers are seeing, and we had to react to that.
spk07: Okay. Just a couple things based on your answers. Can you give us context of how much revenue e-bikes contributed on a quarterly peak and what they're contributing today? We've got quarter over quarter. Just in general, at its height, what was the e-bike revenue quarterly contribution?
spk05: From its peak. So that's significant. Okay. In the second half. In the second half.
spk07: And you think a sustainable revenue in 2025 would be about what for e-bikes?
spk05: 40-ish. Okay. All right. I'm just trying to bracket that all, you know. I'm sorry.
spk07: Say that again, please. I'm just trying to... get the context of that business and how it's impacting everything. And you also mentioned data centers is one of the reasons just you're pulling down the guidance. Has data centers weakened from you from last quarter? Because most of the companies I follow in the data center market are actually posting relatively good results. And actually the guidance for the next year or so is actually fairly positive. It's It seems to be disconnected with what you're saying in data centers and what other companies are saying.
spk03: Our major customer there, John, has told us that they are over-inventoried.
spk05: So it's not the market.
spk03: And we've got one very major customer that has told us they are over-inventoried. OK.
spk07: OK. All right. And switching off that, on the SG&A expenses, I know you said there's other fees in there. What would be a normalized SG&A run rate for the second half of the fiscal year would you expect it to be like?
spk02: We would expect it to be, you know, less than the $17.3 well, leave out amortization 15.4% experienced in the quarter, but it will be higher the second half of the year as compared to prior years being in, without amortization in 11 to 12% range. So somewhere in between there, depending.
spk07: Okay, and that reflects Nordic, I'm assuming, right?
spk02: Pardon me? Yeah, the first quarter numbers of, 17.3% and 15.4% without amortization at all of these Nordic lights, correct?
spk07: Right, right, right. Okay, okay. You know what? After all that, I'm going to jump back into Q and let somebody else ask the question. Thank you, guys.
spk05: Thank you.
spk06: Thank you. Once again, if you have any questions or comments, please press star 1 on your telephone keypad. Our next question is coming from Gary Prestapino with Barrington Research. Your line is live.
spk04: Hi, good morning, everyone. Good morning. I want to drill down on what you were talking about in your Monterey, Mexico facility. You were basically producing center consoles there, right? That was one of the bigger products. And I think that business has gone away because the model's going away. Is that correct, Don?
spk03: Right. Center consoles are really not used in the vehicles anymore, at least the vehicles that were on pickup trucks and SUVs. There's more discreet touchscreens. So that product went end of life, not only from us, but this is not used in auto products. okay they also produce a lead frame for transmissions that was very high volume for them as well and that also has I don't know that has gone totally in the life but that is significantly down the those products have been replaced by a number of smaller volume, and when I say smaller volume, it's still three, four hundred thousand units, it's not a million. That's why I was talking about the transition. Your systems have to be, when you have that number of products going through a plant, your systems need to be quite good.
spk04: Okay. This is Monterey, Mexico. Was there a Mexican national running that plant, or did you have someone from the U.S. doing that?
spk03: What we've done, because of the launches and the transition, we brought in probably our most seasoned operations leader to oversee the plant, and then he will train the other individuals to run the plant. So he's a Maltese, not U.S., but he's essentially an expat. I'm sorry. That also gives me confidence that these issues will be behind us.
spk04: Well, I guess the question I would have is that out of the plant, can you replace the sales that you've lost from these programs that are going into life or slowing down to the point where you get some kind of equilibrium or even growth by the products or whatever you're producing on smaller volumes?
spk03: A lot of the EV business that has been won is launching out of Monterey. And the individual, as I said, who's overseeing the plant now has made those products in the past. So I'm very confident that they're going to see an uptick in their business. And I know I'm not happy with what happened, obviously, but I'd much rather have it happen now than when we're cranking up production in 25. So that plant is... will have more volume through it than it had even in the center council days.
spk04: Okay.
spk03: But a lot of the ... And the other thing I would add, I don't like the pain here, but one of the concerns I had even from day one when we booked the center council business that we were going to be dependent upon one large automaker And we saw that in our Qs and Ks through the years. And would I like that program to continue? Of course. But it didn't. And we're transitioning again to a lower volume, higher mix. I think that gives us better diversification. And yes, we've had a blip. I'll deal with that. But I'll sleep better knowing that we're dependent upon a number of customers, not just one major one. Again, if that customer came and gave us $100 million worth of business, I'd take it. But there's some pain here. But I do like the fact that we'll be diversified. I think that makes us more secure.
spk04: Right. But I guess the last question I would have in that regard is that most of what happened there was really an operational issue in terms of just the efficiencies at the plant caused by the shift from high volume to low volume mix? I mean, that's kind of the sense that I have. It wasn't the biggest issue was that. It wasn't the fact that the sales weren't where you thought they were going to be.
spk03: No, not at all. I mean, I take a little comfort in that we had good sales. It cost us a lot to ship those. But ours is not a sales issue. Ours is an execution issue. That is internal. We did it to ourselves. That we can fix. I can't, you know, e-bike. Would I like to sell more sensors than e-bike? Of course. But I can't do anything about that. But I can do something about the factory. So I do take, I don't think comfort is the right word, John, but only when it comes to mind. All right. Thank you very much.
spk06: Thank you. Thank you. Our next question is coming from John Fransrab with Sedoti and Company. Your line is live.
spk07: Yeah, I think we kind of avoid touching on the Class A truck market today. It seems that ACT has been narrowing their expectations of the depth and duration of the potential downturn in the Class A trucks. What are your thoughts about that market? Are you more bullish or bearish than its current ACT trends? Please talk to that a little bit.
spk03: We've, I can't say we've seen an increase, but it hasn't decreased more than bottom as ACT had predicted.
spk05: I'm not comfortable saying that it's not going to go down.
spk03: I think they said like 1% now, something like that. So in our view, it'll dip below the average line, but maybe recover faster, which gives me additional comfort for 25. So I'm not quite there yet, but I'm less concerned than I was a quarter ago, if that helps.
spk07: No, it actually does because it makes sense to me. Okay. All right. Thank you. Thanks for taking my question.
spk03: And Gary, I need to apologize. I called you John at the close of your question. I apologize.
spk06: It's okay. Thank you. We have reached the end of our question and answer session, so I will now hand it back to Mr. Duda for any closing remarks.
spk03: Thank you, operator, and we'll thank everyone for joining us today. Good day.
spk06: Thank you. This concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.
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