Curtiss-Wright Corporation (CW) Q2 2022 Earnings Report, Transcript and Summary

Welcome to the Curtiss-Wright Second Quarter 2022 Financial Results Conference Call. My name is Daryl, and I will be your operator for today's call. [Operator Instructions] As a reminder, this conference is being recorded. I will now turn the call over to Jim Ryan, Vice President, Investor Relations. Jim, please proceed.

Thank you, Daryl, and good morning, everyone. Welcome to Curtiss-Wright Second Quarter 2022 Earnings Conference Call. Joining me on the call today are Chair and Chief Executive Officer, Lynn Bamford; and Vice President and Chief Financial Officer, Chris Farkas. Our call today is being webcast, and the press release as well as a copy of today's financial presentation is available for download through the Investor Relations section of our company website at www.curtisswright.com. A replay of this webcast also can be found on the website. Please note, today's discussion will include certain projections and statements that are forward-looking as defined in the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance. We detail those risks and uncertainties associated with our forward-looking statements in our public filings with the SEC. As a reminder, the company's results include an adjusted non-GAAP view that excludes certain costs in order to provide greater transparency into Curtiss-Wright's ongoing operating and financial performance. Any references to organic growth are on an adjusted basis and exclude foreign currency translation, acquisitions and divestitures unless otherwise noted. GAAP to non-GAAP reconciliations for current and prior year periods are available in the earnings release and on our website. Now I'd like to turn the call over to Lynn to get things started. Lynn?

Thank you, Jim, and good morning, everyone. I'll begin our remarks by covering the key highlights of our second quarter 2022 performance and some recent events that are influencing our business. Then I'll turn the call over to Chris to provide a more detailed review of our financial results and updates to our 2022 guidance. Finally, I'll wrap up our prepared remarks before we move to Q&A. Starting with our second quarter 2022 performance. Overall sales of $609 million was in line with our expectations for high single-digit sequential growth. Our results highlighted the strength of our combined portfolio driven by strong demand within our commercial aerospace, Nuclear Aftermarket, process and industrial end markets. Outside of those areas, our performance was once again impacted by the timing of revenues in our defense markets, particularly for Defense Electronics, due to the ongoing global supply chain disruption. Regarding our second quarter operational performance, the team has done a commendable job of mitigating the supply chain challenges and combating rising inflation and pricing pressures to ensure that we remain on a path to provide long-term profitable growth. We demonstrated solid operating margin expansion in the second quarter, mainly driven by a better-than-anticipated mix in Naval & Power and continued operational excellence. Based on that performance, adjusted diluted EPS increased 18% to $1.83 and exceeded our expectations. New orders were strong, up 13% year-over-year, reflecting increases in Naval Defense and commercial aerospace within our A&D markets and in Nuclear and Process within our commercial markets. Book-to-bill was 1.27x in the second quarter, building upon our already strong backlog, which is now up 9% year-to-date. This backlog provides additional comfort and visibility as we manage through the ongoing supply chain constraints, which are likely to continue into 2023. Next, I'd like to provide a few updates on some recent events. First, on the financing front, we have made recent moves that provide us greater efficiency and flexibility in capital allocation. In May, we announced a new and expanded revolving credit facility, and this past week, we priced $300 million in senior notes to reinforce our strong and healthy balance sheet. These actions strengthen our ability to execute on our pivot to growth strategy. Chris will provide additional color later on in the call. We're also excited to announce that on June 30, we completed the acquisition of Safran aerospace arresting systems business, or SAA, which is a leading supplier of fixed wing military aircraft arresting systems. In 2021, SAA generated approximately $70 million in sales, and we are projecting that it will contribute approximately $40 million in the second half of 2022. As a reminder, 25% of its sales are based in the U.S. with 75% in rest of world. In addition, SAA's revenues are fairly evenly split between OEM and Aftermarket business, providing a steady recurring stream of revenue for its strong global installed base of more than 5,000 systems worldwide. We believe this is an exceptional strategic and financial fit, and we expect this business to align with our long-term organic sales growth rate of 3% to 5% for the foreseeable future. Further, in addition to steady top line growth, SAA supports our corporate-wide financial objectives to achieve continued operating margin expansion and greater than 110% free cash flow conversion. Next, to our full year 2022 adjusted guidance, where we raised our sales, operating income and diluted earnings per share. We are maintaining our outlook for organic growth of 3% to 5%, driven by increases in the majority of our end markets, and we now expect total sales growth of 4% to 6%, including the contribution from SAA. As we'll discuss this morning, our updated guidance reflects higher sales and profitability within our A&I and Naval & Power segments, offset by a more conservative outlook within our Defense Electronics segment in the second half of the year. I'd like to provide a couple of additional notes about timing of revenues in Defense Electronics as lead times and the availability of key electronic components continued to be delayed due to supply chain disruption. Additionally, following the signing of the FY '22 DoD budget late in the first quarter, we saw an immediate acceleration in defense orders that were delayed by the continuing resolution. This activity continued early in the second quarter, providing greater optimism for a stronger second half recovery. The speed of Defense Electronics orders, however, has since returned to a more normal cadence as our customers manage their inventory levels in response to the ongoing challenges in the supply chain. Together, this is impacting the timing of about $25 million in Defense Electronic revenues that have now pushed out of 2022. As we've experienced historically and despite the push out, we expect a strong increase across all our A&D markets during the second half of the year and the continued solid growth of commercial markets. Our operating income guidance has been increased to a new range of 5% to 7% growth, and we are driving solid operating margin expansion while continuing to invest in the business. We also remain on track to achieve double-digit growth in diluted EPS and generate strong free cash flow. In summary, we are well positioned to deliver strong results in 2022. Now I would like to turn the call over to Chris to provide a more thorough review of our second quarter 2022 performance and our outlook for the remainder of the year. Chris?

Thank you, Lynn, and good morning, everyone. I'll begin with the key drivers of our second quarter 2022 results by segment. Starting in Aerospace & Industrial, where we delivered another strong performance as sales and operating income increased 8% and 7%, respectively. Within the segment's commercial aerospace market, sales grew more than 20%, reflecting strong demand on both narrowbody and widebody platforms. On a related note, we recently announced that we won a significant award on the future Airbus A350 F aircraft to provide custom electric actuation technology for the main deck cargo door and also secured demonstrator technology on the Airbus UpNext program. We've been stating that we've been working with Airbus to strengthen our relationship and content, and we're really pleased to share these first-of-a-kind wins for our actuation technology with Airbus. Within the segment's industrial markets, our results principally reflected increased sales of industrial vehicle products, most notably serving off-highway and specialty vehicle platforms. Turning to the segment's operating performance. Our results reflected favorable absorption on strong sales as well as the benefits of our operational excellence initiatives, which more than offset any supply chain and inflationary pressures on margin. It's also worth noting that the segment's results included an incremental $1 million in R&D investments where we'd otherwise demonstrated 40 basis points in year-over-year operating margin expansion. Next, in Defense Electronics. Our performance again reflected the timing of defense revenues based upon the supply chain challenges impacting the industry. As a result, we experienced lower-embedded computing revenues in Aerospace Defense supporting various fighter jet and helicopter programs as well as reduced sales of tactical communications equipment in Ground Defense. Within the segment's commercial aerospace market, due to the timing of orders, results reflected forward instrumentation sales normalized in the second half of the year. To the second half, our second quarter results [Audio Gap] A&D revenues, which we expect positive based on increased volumes in the second half. Next, in the Naval & Power segment. Our results reflected lower Naval Defense revenues, mainly due to the timing of production on the CVN-80 aircraft carrier and Virginia-class submarine programs. Those offset -- those impacts were offset by higher CVN-81 carrier and Columbia-class submarine revenues as these 2 programs continue to ramp up. In the Power & Process market, our results reflected double-digit sales growth in both Nuclear Aftermarket and process, where we continue to experience very strong demand. And these increases more than offset the wind-down of production on the CAP1000 program. Regarding the segment's profitability, we delivered 270 basis points in year-over-year margin expansion, reflecting improved mix in the Naval Defense and process markets as well as the benefits of our operational excellence initiatives. To sum up the second quarter results, overall, Curtiss-Wright operating margin was slightly above expectations at 16.1%, up 50 basis points year-over-year and up 340 basis points sequentially. Next, turning to our full year 2022 guidance. I'll begin on Slide 5 with our end market sales outlook. As Lynn mentioned earlier, our overall guidance now reflects a $40 million contribution from the SAA acquisition, and we now expect total Curtiss-Wright sales growth of 4% to 6%. We continue to expect organic sales growth of 3% to 5%, unchanged from our prior guide, but we updated the growth rates in several of our end markets. I'll begin in our A&D markets. In Aerospace & Defense, we now expect sales growth of 9% to 11%, which principally reflects the contribution from the SAA acquisition. In addition, we now expect a more favorable outlook for our actuation sales within the A&I segment and a slightly lower but positive growth rate within the Defense Electronics segment. Turning to Ground Defense. Our tactical communications equipment remains a high priority for the U.S. Army to support its modernization efforts. However, the business is sensitive to both ongoing supply chain delays and funding delays caused by the continuing resolution, and our updated guidance reflects a push in sales out of 2022. As a result and despite a strong second half forecast, we now project our Ground Defense market to be slightly down on the year before recovering in 2023. Wrapping up our A&D sales. Our guidance remains unchanged in both Naval Defense and Commercial Aerospace, though it's worth noting that both of these end markets continue to experience very strong order activity, which bodes well for our performance in 2022 and long-term outlook. Outside of our A&D markets, we raised our growth outlook for the Power & Process market to a new range of 4% to 6% based on the strong year-to-date performance and increased demand for both our Nuclear Aftermarket and industrial valve products. As a result, we've raised our growth outlook for our overall commercial markets to a new range of 5% to 7%. Continuing with our outlook by segment on Slide 6. I'll begin in Aerospace & Industrial, where we continue to project strong growth in both commercial aerospace and general industrial market sales. Our updated top line guidance now reflects growth of 6% to 8% due to improved demand within our Aerospace Defense market, supporting the F-35 fighter jet and higher electromechanical actuation sales in Ground Defense. The segment's operating performance continues to reflect strong growth in operating income and margin driven by improved sales and the benefits of our operational excellence initiatives. Next, in the Defense Electronics segment. We've revised our current year sales growth expectations to reflect the supply chain challenges impacting our aerospace and ground defense markets. Despite a growing backlog, we now expect overall segment sales to be flat year-over-year. And as a result, we lowered our guidance for operating income to reflect reduced sales volumes. However, we raised our margin assumptions slightly for lower R&D spending. Regarding the R&D spending, it's important to note that we shifted $2 million to development contracts as we were able to secure an increase in customer-funded programs. We view this reimbursement as a positive development, and it's important to note that the segment continues to receive the highest levels of annual investment to ensure that we remain aligned to the DoD's top priorities, including cyber, encryption and hypersonics, to name just a few. And lastly, in the Naval & Power segment, we now expect strong sales growth of 7% to 8%, of which 3% to 4% is organic. This increase is driven by an improved order book underlying our Power & Process markets and the contribution from the SAA acquisition. Full year segment operating income is now projected to grow 6% to 8%, while segment operating margin remains a strong 18% to 18.2%. I would note that while SAA increases our operating income guidance, it will be dilutive to overall Curtiss-Wright margin in year 1 and particularly during the first 6 months of integration as is typical for a new acquisition. So to summarize our outlook, we expect total Curtiss-Wright operating income to 5% to 7% overall on a 4% to 6% increase in sales. We continue to expect operating margin to improve 10 to 30 basis points, ranging from 17.1% to 17.3%, including a $6 million increase in R&D investments, the CAP1000 wind-down headwinds and first year margin solution on the SAA acquisition. Continuing with our financial outlook on Slide 7. We raised our full year 2022 adjusted diluted EPS guidance by $0.05 to a new range of $8.10 to $8.30, which represents 10% to 13% growth year-over-year. Our updated EPS guidance reflects both higher organic operating income and some accretion from SAA, partially offset by a $4 million increase in interest expense due to higher rates, use of our revolver for the SAA transaction and some new financing, which I'll address shortly. Overall, I'm pleased to say that our updated 2022 outlook aligns with our May 2021 Investor Day projections for continued profitable growth as we expect to deliver operating income growth and excess of sales growth while also generating double-digit EPS growth. To aid in your quarterly modeling and based on the timing of defense sales, including SAA, we now expect third quarter sales to grow by mid- to high single digits sequentially compared with the second quarter 2022 adjusted results and diluted EPS to grow by high single digits sequentially, followed by a very strong fourth quarter performance. Turning to our full year free cash flow outlook. Our guidance remains unchanged for the range of $345 million to $365 million, including a contribution from SAA. Thus far in 2022, the timing of revenues, advanced payments on naval contracts and higher inventory levels have resulted in lower-than-expected first half free cash flow performance. Looking forward to our expectations for a strong second half, I wanted to provide some color on a few underlying drivers. First, we're expecting a strong second half ramp in revenues, and this leads to both higher billings and collections and a substantial liquidation of inventory levels upon product shipment as we've seen historically. Second, we expect a significant amount of cash advances tied to the recent second quarter surge in naval orders. And third, we're expecting a large cash payment upon the final delivery of our CAP1000 reactor pooling pumps to China, which we expect in the fourth quarter. This milestone would mark the completion of our contract production in the substantive conclusion of the 7-year program of China. Beyond this, the management team is very focused on free cash flow generation. We're accelerating the frequency of collection calls and information flow on working capital and are aggressively working to mitigate any exposures on the full year. We remain on track and expect to exceed our long-term adjusted free cash flow conversion target of 110% again in 2022. Next, I'll expand on the recent financing actions that Lynn highlighted at the start of the call. And although we have more than sufficient liquidity and our leverage ratios remain in line with a strong investment-grade rating, given the current interest rate environment, we've taken several steps to get ahead of further potential rate hikes. In May of 2022, we amended and upsized our revolver. We entered into a new 5-year agreement with a syndicate of financial institutions, increasing the size of our revolving credit facility by $250 million up to $750 million while also expanding the accordion feature to $250 million both at very attractive rates. In July, we took the opportunity to further strengthen our balance sheet by taking advantage of the current pricing in the private placement market. On July 29, we circled $300 million in a note offering at competitive rates, consisting of $200 million and 4.49% 10-year notes and $100 million in 4.64% 12-year notes. We opted for a delayed draw feature for up to 3 months to provide us with some additional short-term flexibility. We intend to use the proceeds from these new notes and our upsized revolving credit facility to support our balanced capital allocation strategy and internal growth initiatives. And also, as a reminder, we have $200 million in notes coming due in the first quarter of 2023. Overall, we remain very pleased with the flexibility and conservative nature of our capital structure, which provides further confidence in our ability to drive strong financial performance and long-term value for our shareholders. Now I'd like to turn the call back over to Lynn to continue with our prepared remarks. Lynn?

Thank you, Chris. I'd like to take a few minutes to provide some perspective on what's driving the confidence in our second half projections and how we're positioned to deliver solid operational performance in 2022 and beyond. The Curtiss-Wright team has continued to do an exceptional job in managing the business through challenging market conditions while remaining focused on executing our pivot-to-growth strategy to maximize revenue and operating income growth. In spite of recession fears and an uncertain macro backdrop, our guidance changes illustrate the agility of the business and our ability to react to market uncertainty, capitalizing on the full market breadth of our portfolio. The supply chain challenges, which are delaying defense market sales in our most profitable segment are being entirely offset by the strength in our commercial market recovery. This sales rebalancing, along with the benefits of our ongoing operational excellence programs, continue to keep us on track to achieve our initial 2022 guidance and Investor Day commitment prior to including any contribution from SAA. This builds on a long track record of resiliency for Curtiss-Wright, and I would like to provide 2 examples that support our optimism. Most recently, during the pandemic year in 2020 and also looking further back into 2015, we were faced with macro market conditions that drove significant and rapid decline in sales. With our company-wide focus on operational excellence, in both cases, we effectively mitigated the negative impact to total Curtiss-Wright operating margins. The situation today is slightly different given the supply chain constraints and some related order delays as customers enact a sharper focus on their inventories, but we feel strongly about our ability to remain agile through these disruptions and will continue to drive solid execution and return for our shareholders. Curtiss-Wright also maintains a healthy and balanced capital allocation strategy and a strong balance sheet to support our top and bottom line growth. The recently added SAA business is a prime example of our ability to add critical acquisitions in adjacent markets to drive our future growth. Though we continue to prioritize acquisitions as a strategic accelerator under our pivot-to-growth strategy, they will be supplemented by continued share repurchase and operational investments. Looking beyond this year, the long-term prospects for Curtiss-Wright in the markets we serve remain very healthy. We expect to enter 2023 with a strong backlog across the portfolio. Several of our key markets are positioned for an influx of funding. We expect they will continue to benefit from strong defense budgets, both domestic and international, as well as secular trends in modernization, electrification and the drive to carbon-free energy and, more broadly, in energy independence across the globe. In closing, I remain confident in our outlook to deliver strong profitable growth in 2022 and our ability to meet our Investor Day targets led by end market strength, the drive to improve profitability and our strong free cash flow generation. We remain committed to delivering long-term value for our shareholders. At this time, I would like to open up today's conference call for questions.

[Operator Instructions] And our first question comes from Peter Arment.

On the modest push-out in Defense Electronics tied to supply chain, you also mentioned kind of the lingering aspect of the CR. I just wondered if your updated thoughts on if we get a CR in the fall, which everyone expects, if that would have any impact on your outlook and how you factored that in?

So I think, yes, general consensus is in spite of really then moving the House and Senate mark up through the -- at a nice reasonable pace, most people are predicting there will be a CR. I think most of the discussions I've listened into anticipated being in the nature of a 3-month CR, which historically, this year it was almost 180 days. The average CR is in the low-50s days, is what has happened over the past decade or so. I think that the strong book-to-bill we'll have this year in that segment will let us enter that year with strong backlogs that will give us the ability to buffet really up to like a 3-month CR and continue to drive the organic growth that we've experienced in the past in that segment. And so it's hard to say that it goes well beyond the 3 months and is something like it was this year. But we are -- we've definitely seen recovery in bookings, but it is that -- it's part of the $25 million push out during the year, combined for sure with the uncertainty in the supply chain.

Okay. And then you mentioned bookings. Your bookings were really strong, particularly in our commercial markets. Are they -- are all your commercial markets back above pre-pandemic levels? And have you seen any rate of change just when the recession kind of begins to take hold?

Chris can speak to that.

Yes. And not all of our markets, Peter, are back up to the 2019 levels this year. But what I will say is just starting off as a reminder, when we were at that May 2021 Investor Day, we thought that the industrial vehicle market would recover in 2022. And that actually recovered to pre-pandemic levels. Last year, we had that record backlog nearly doubled. This year, we're seeing some very, very strong signs within both our Nuclear Aftermarket and our process markets. And we're very, very close to having the process markets recover back to 2019 levels this year. I think our guidance range and what we provided there puts us right in the area of getting back to 2019. We're a little bit further off on Nuclear Aftermarket, but I would say that's probably the next closest to the full recovery to pre-pandemic levels. And then commercial aerospace is still fairly beneath those 2019 levels. We've said that, that market will fully recover somewhere in that '23 to '25 time frame, '24, split the difference. But we feel very comfortable about that. I mean, the order book that we had in the quarter for commercial aerospace was very strong. I mean, our orders were up 47% year-over-year in Q2, and we are now up 30% year-to-date year-over-year. So we feel very confident in the continued ramp and trajectory of that very fast-growing market for us this year. And you can see from some of the guidance changes that we've made to Power & Process that are more than offsetting the wind down of the CAP1000 program that those markets are benefiting from the recovery as well. So overall, very pleased with the order book and what we saw here in Q2 and Q1.

And our next question comes from Kristine Liwag.

Lynn, across the defense industry, we've seen tightness in the supply chain, particularly in Defense Electronics. When you look at your core competencies and the problem areas in the supply chain, are there areas that make sense for you to vertically integrate to either support your internal needs or be a trusted provider for the industry going forward?

So that's an interesting question and something that we have definitely debated internally. I don't know if I would call it completely vertically integrated that I don't see us becoming a component supplier. We've discussed that in the past and continue to stay open to decisions as the markets evolve and supply chains evolve. But at this point, we think we're finding ways to manage through it and would not see it. Now there are ways -- we are very focused on addressing the security needs from the DoD and enhancing our ability to provide trusted electronics to our customers. It's a significant area of investment for us and an area we are very focused on and have been on in for several years. That's not really a new thing. But we don't see that as becoming vertically integrated. There's a lot of different partnerships we've formed and ways that we develop our products that allow us to provide that trusted electronics capability without becoming a component supplier specifically.

And maybe switching gears to nuclear. Can you characterize the strong demand you're seeing in the Nuclear Aftermarket business? I mean, considering the disruptions in energy supply globally, how quickly are customers acting to extend the life of existing plants? Can you provide any color on the shape of the cycle, perhaps like the steepness and duration of demand?

So we've definitely seen the uptick. And truthfully, I think we are at the very beginning of what is going to be a long demand cycle in the commercial Nuclear Aftermarket that -- here in the U.S., we're really just beginning to see any revenues from the 60 to 80-year life extensions. It's getting started in Canada. South Korea will be next behind, and there's a lot of chatter across Europe of extending life -- nuclear power plants and bringing power plants back online. Japan has talked about changing their stance towards nuclear power. I think most notably, even Germany has started to talk about its stance on nuclear power, which has been the strongest antinuclear power -- kind of determination by a government. And so with that, I really believe we're at the beginning of that cycle. We're very focused on making sure we have a global reach for providing our products into these life extensions around the globe and are well positioned to have sales and distribution channels in the end markets that will be driving this. And that is setting aside all the exciting work in the nuclear arena around newbuild that we believe has a strong future, both in the Gen 3 plus AP1000 reactors and the continued support and acceleration of the Gen 4 reactors and some continued ongoing funding from our government, the 2 recent bills, the CHIPS Act and the Inflation Reduction Act. Even the CHIPS Act actually has funding in it for advanced nuclear development and then also the Inflation Reduction Act has strong funding that would be directed towards extending the life of reactors and newbuilds. So there's just a lot of momentum behind it here in the U.S., and I think we're seeing that globally. And I think we're just at the beginning of what's a really exciting period for that group.

Our next question comes from Michael Ciarmoli.

Just to stay on what Kristine was just asking. In that Nuclear Aftermarket, I mean, Lynn, you mentioned that global reach, making sure you're positioned. Is there anything you need to do to kind of expand your presence in Europe? Do you need to invest more? I mean, do you look at M&A opportunities in the Nuclear Aftermarket? Because you mentioned kind of U.S., Canada, Korea. But anything that has to be done to kind of shore up your position in Europe?

We have a reach globally into France, into the places where there is stated intent to drive the activity. But that doesn't mean that we're not looking to broaden that, and that is something that's a very active part of the discussions with the team right now. And again, whether that's direct staffing or partnerships, that's definitely an area we're exploring on strengthening that reach globally. But we're comfortable that we're well positioned to be making our capabilities known in those markets and working with them. Truthfully, when we -- if I think down the road for our nuclear business, as what we're feeling optimistic is going to happen around the new reactor build, I mean, I think that's -- if we win the business that we're optimistic we're going to win, that's going to drive a need for engineering, staffing and possibly some capital expansion, but all kind of within our normal business cycles and things that would be really fantastic for the business. But I think that's still a bit out as those developments get going. But it's an area that we feel confident enough in the growth that we're seeing, that as needed, we will make the investments needed to make sure we're there to maximize our ability to grow in those markets.

Got it. Just on that, what you just mentioned on the OEM side. Any update you can give us on kind of the status of pending sort of AP1000 orders or even the emerging SMR market? Do you have a thought as to kind of which potential orders might hit first?

Well, we're already engaged in working with a variety of the new SMR developers. And a little bit of that has been public. I hope that we'll be able to make some additional announcements here in the back half of this year about where our engagement is. But as we've said, we're very closely watching the new developers that are most likely to find wins. And if you read nuclear news, it's X Energy, TerraPower, GE Hitachi, just to name a couple, and I'm not picking winners or losers. We're working very broadly across those players to make sure we're positioned to have content with all of them. And so I think that work is ramping up as we speak, and they begin their work. And we continue not to change, but I feel optimistic about our timing of an AP1000 order that -- again, that timing was ironically put forward the day the Ukraine war began. And obviously, world politics has changed in the sense of urgency for energy independence has changed. And I think we just continue to see a really steady rate of activity of all the things that need to happen prior to us getting orders across a lot of those Eastern European countries. So I think both of those are progressing to provide great future for Curtiss-Wright in the middle of this decade.

And we have no more questions in the queue. I'll turn it back to Chair and Executive Officer, Lynn Bamford.

Well, thank you, everybody, who was able to join us today, and we look forward to speaking with you again during our third quarter 2022 earnings conference call, and have a great day.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.