Ducommun Incorporated (DCO) Q1 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to Ducommun First Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. As a reminder, this call is being recorded. I'd now like to introduce your host for today's conference, Chris Witty with Investor Relations. Sir, please begin.

Thank you, and welcome to Ducommun's 2019 first quarter conference call. With me today are Steve Oswald, Chairman, President and CEO; and Doug Groves, Vice President, Chief Financial Officer, and Treasurer. I'm going to discuss certain limitations to any forward-looking statements regarding future events, projections, or performance that we may make during the prepared remarks or the question-and-answer session that follows. Certain statements today that are not historical facts, including any statements as to future market conditions, results of operations, our restructuring plans, and financial projections, are forward-looking statements under the Federal Private Securities Litigation Reform Act of 1995 and therefore prospective. These forward-looking statements are subject to risks, uncertainties, and other factors which could cause actual results to differ materially from the future results expressed or implied by such forward-looking statements. Although we believe that the expectations reflected in our forward-looking statements are reasonable, we can give no assurances that such expectations will prove to have been correct. In addition, estimates of future operating results are based on the company's current business, which is subject to change. Particular risks facing Ducommun include, among others, the cyclicality of our end-use markets, the level of U.S. government defense spending, legal and regulatory risks, management changes, the cost of expansion and acquisitions, and competition. These risks and others are described in our Annual Report on Form 10-K filed with the SEC, and our forward-looking statements are subject to those risks. Statements made during this call are only as of the time made, and we do not intend to update any statements made in this presentation except if and as required by regulatory authorities. This call also includes non-GAAP financial measures. Please refer to our filings with the SEC for a reconciliation of the non-GAAP measures referenced on this call to the most similar GAAP measures. We filed our Form 10-Q with the SEC today, and you will find a link to all our filings on the company's website under the Investor Relations tab. I would now like to turn the call over to Mr. Steve Oswald for a review of the operating results. Steve?

Okay, thanks, Chris, and thank you everyone for joining us today for our 2019 first quarter conference call. As usual I'll begin by providing an update on recent developments of the company, after which Doug will review our financial results in detail. I'm very pleased to announce that we posted a strong start to fiscal 2019 with overall performance surpassing expectations across the board. First quarter revenue grew roughly 15% year-over-year to $172.6 million driven by continued strong demand across a number of key commercial platforms, particularly the Boeing 737 where revenue grew sharply versus 2018. 737 is a very important program for us as well as our industry. And we're committed to serving Boeing as it deals with the current serious situation. As reported, Boeing is actively engaged in fixing the issues and working with all involved including many regulators to get its plane back in the air as soon as possible. For Ducommun, let me remind everyone that roughly 40% of our content on the 737 platform goes through Spirit Aerosystems based in Wichita, Kansas, which is not cutting current production rates as previously announced. For Boeing direct, we're working closely with them and balancing support of their current rate requirements while also ensuring readiness, risk mitigation, and alignment to the planned forward rates. In addition, our team is actively engaged with Boeing and adjusting current purchase orders as required. Due to our diverse customer base across Ducommun and a broader array of platforms served, we continue to anticipate 5% to 7% revenue growth across our commercial aerospace programs for the next three to four quarters. The longer-term outlook after that is dependent on the timing of the 737 MAX returning to service and Boeing's new production schedule. We ended the quarter with another record backlog of $884 million and a book-to-bill of 111% again underscoring the strength of our customer relationships, the value we provide, and the technology offerings. In addition, our work to improve profitability continue. Overall gross margins rose an impressive 290 basis points year-over-year to 20.7% and our Op margin reached 7.4% while we posted $21.7 million of adjusted EBITDA. Results were particularly strong within our structures segment; where operating margins reached 11.9% to the many actions taken in 2018 to streamline the business. The segment also benefited from higher overall production rates, additional content, lower scrap rates, and the associated economies of scale. In Q1, the company continued to build our innovation processes and the company culture based on lean principles. We've identified additional future operational improvements and ways to reduce working capital, particularly with regards to scrap and inventory; we're underway to significantly improve those areas. Assessing the business and optimizing all our resources is something done continuously at Ducommun. Even as we invest in our technology, operations, and most importantly, our people, become world-class at everything we do at the company. Our two recent acquisitions are also adding value to the organization and helping our growth trajectory. We continue to look at additional opportunities that can leverage our applications and strengthen our proprietary technologies offerings to the industry. I think we have also demonstrated to investors in the marketplace, a strong track record of integration and driving value once acquired and look forward to more activity in the future. Now let me provide some additional color on our end-markets, products, and programs. Beginning with our military and space sector, we posted first quarter revenue of $76.7 million, up 21% from last year primarily reflecting stronger sales across a variety of missile applications. Aside from significant growth across such programs is the Patriot. We also noted positive trends with certain military helicopter platforms and the very important F-35 Joint Strike Fighter. Other areas of our defense business were impacted by order timing and transfer production to Huntsville from our Phoenix facility. But we anticipate higher shipments in the coming quarter. The overall market for our military applications looks bright, given our proposed budget that includes increased spending from various missile programs along with solid demand for the F-15, F-18, and F-35 as well as certain helicopter platforms. We ended the quarter with a military and space backlog of around $347 million near record levels. Within our commercial aerospace operations, first quarter sales rose approximately 16% year-over-year to $85.5 million. As I mentioned a moment ago, growth was primarily fueled by large fixed-wing, narrow-body aircraft such as the Boeing 737 and Airbus 320 family. We also saw some nice double-digit growth on the Boeing 787 platform driven by an increase in build rate from 12 to 14 airplanes per month. In total, our large fixed-wing business grew 25% year-over-year. In addition, we experienced an uptick in our regional, business jet business driven by Gulfstream and other OEMs where we expect further room for content expansion. I do want to provide an update on our VersaCore composite technology as well. The team remains on track with our 10-year $200 million contract to supply missile components and are preparing our Guaymas, Mexico facility to begin full production in 2020. Wins such as this, and contributions from our recent acquisitions, strengthen the outlook for Ducommun, while diversifying our base of business. The backlog within our commercial aerospace grew to just under $500 million at the end of the quarter representing another new record for the company. We remain upbeat about the outlook for Ducommun's commercial business this year given the platforms we serve, our customer relationships, and the value provided through our technology and breadth of product offerings. With that, I'll have Doug review our financial results in detail. Doug?

Thank you, Steve, and good day everyone. As a reminder, please see the company's filings in today's press release for further description of matters under discussion during the call. I'll begin with details of our overall results. Revenue for the first quarter of 2019 was $172.6 million versus $150.5 million in the first quarter of 2018. This performance includes $13.1 million of greater sales to the military and space sector primarily reflecting strong demand for various missile programs and $11.9 million of higher revenue with commercial aerospace customers due to increased shipments for key narrow-body platforms such as the Boeing 737 and Airbus 320. Ducommun's overall backlog was approximately $884 million as of March 30, up slightly from the start of the year-end, and as Steve mentioned, a new record for the company. As a reminder, the company defines backlog as potential revenue and is based on customer placed purchase orders and long-term agreements with firm fixed prices and expected delivery dates of 24 months or less. Moving to gross profit. Our gross margin was 20.7% in the first quarter versus 17.8% in the prior-year's comparable period. The increase of 290 basis points year-over-year was primarily due to higher production volumes and favorable product mix along with the many streamlining measures taken last year as Steve discussed. SG&A was $22.8 million in the first quarter versus $19.3 million in 2018 with the increase primarily reflecting higher compensation and benefit costs. The company reported operating income for the first quarter of $12.8 million or 7.4% of revenue compared to $5.3 million or 3.5% of revenue in the prior-year period. The year-over-year improvement was due to higher revenue and gross profit as well as the impact of $2.2 million in lower restructuring charges partially offset by higher SG&A. On an adjusted basis, operating income was $7.4 million or 4.9% of sales in the first quarter of 2018. Interest expense was $4.4 million in the first quarter of 2019 versus $2.9 million last year. And this was due to the greater utilization of our credit facility for the Certified Thermoplastics acquisition in April 2018 along with higher interest rates. The company reported net income for the first quarter of $7.5 million or $0.64 per diluted share compared to net income of $2.6 million or $0.22 per diluted share for the first quarter of 2018. The year-over-year increase was primarily driven by $8.9 million of higher gross profit. Restructuring charges were also lower year-over-year by $2.2 million offset by a $3.5 million increase in SG&A, $1.5 million of increased interest expense, and greater income taxes of $1.3 million. Adjusted net income was $4.4 million or $0.38 per diluted share in the first quarter of 2018. Adjusted EBITDA for the first quarter of 2019 was $21.7 million or 12.6% of revenue compared to $14.5 million or 9.6% of revenue for the comparable period in 2018, an increase of 50%. Now let me turn to the segment results. Turning to Electronic Systems segment, our Electronic Systems segment posted revenue of $84.2 million in the first quarter of 2019 versus $82.4 million in the prior-year period. These results reflect an $8.5 million increase in sales to our military and space customers, $3.8 million of lower shipments within the commercial aerospace market reflecting order timing, and $2.9 million of lower sales in the industrial end-use market as expected. Electronic Systems posted operating income for the first quarter of $9.2 million or 10.9% of revenue versus $5.7 million or 7% of revenue in the prior-year period. Excluding the restructuring charges last year, electronics adjusted operating margin was 7.6% for the 2018 first quarter. The year-over-year margin improvement was due to manufacturing efficiencies and product mix. Our Structural Systems segment posted revenue of $88.4 million in the first quarter of 2019 versus $68 million last year. This year-over-year increase was due to $15.7 million of higher sales across our commercial aerospace applications particularly large airfare and single-aisle platforms and $4.6 million of increased revenue within the company's military and space markets. Structural Systems posted operating income for the quarter of $10.5 million or 11.9% of revenue compared to $4.4 million or 6.5% of revenue last year. Excluding the restructuring charges, structures adjusted operating margin was 8.7% for the 2018 first quarter. The year-over-year margin improvement reflects higher operating leverage, manufacturing efficiencies, and product mix. CG&A, corporate, general and administrative expense for the first quarter was $6.9 million or 4% of revenue versus $4.9 million or 3.2% of revenue last year. The year-over-year increase was primarily due to higher compensation and benefit costs of $1.6 million. Now turning to liquidity and capital resources. We used $1.7 million of cash from operations in the first quarter of 2019 compared with generating $10.3 million of operating cash during the first quarter of 2018. The change year-over-year was due to a decrease in accrued and other liabilities for incentive compensation payments that were substantially larger in the current quarter compared to 2018 Q1 and this was partially offset by higher net income. We expect more typical cash flow patterns for the remainder of 2019 and excluding any unforeseen acquisitions anticipate using operating cash flow to further reduce the company's leverage this year. In terms of capital expenditures, we spent $3.2 million during the first quarter and expect to spend approximately $15 million to $17 million in 2019 to support our new program wins. We're very proud of the first quarter performance which puts us on track for a very solid year ahead. With that, I'll now turn it back over to Steve for his closing remarks. Steve?

Okay, thanks, Doug. Before we turn it over the call for questions, just say a few words here. First, the quarter's performance really reflects a lot of the initiatives we implemented over the last two years. So I'm absolutely thrilled. I set out to streamline the organization, bringing new talent, focus the team by providing excellent customer service, while vastly improving the bottom-line results. Given the current outlook for the diverse array of platforms we serve both the defense and commercial aerospace sectors, we expect the company will continue expanding its market share, post solid margins, and drive solid top-line growth. In addition, Ducommun will also work as in the past to enhance and optimize our product portfolio to provide innovative, value-added applications that ensure repeat business, attractive results, and a solid return for our shareholders. So in closing, I think we're off to a great start in 2019. And as always, I want to thank our shareholders for their continued support. With that, operator let's now open up for questions.

Thank you. [Operator Instructions]. Our first question comes from Edward Marshall of Sidoti & Co. Your line is open.

So the start of the focus I'd like to start with this -- the commercial revenue within structures pretty good bounce back there on the revenue. I'm curious if we look at that 5% to 7% growth that you talk about for the next three or four quarters, it suggests a significant or material slowdown from the $72 million that you did in this quarter. I'm just trying to get a sense as to what you're trying to tell us kind of how the run rate works for the remainder of the year et cetera and this is specifically a commercial aero within aerostructures?

Sure, Ed. So we had a really strong quarter, really three things driving that. Of course we had the acquisition of CTP that wasn't in the first quarter of 2018 which added to that growth. And then you had the rates going from 47 to 52 on the 737, 12 to 14 on the 787, and that of course the A320 for us while a newer program, rates increasing significantly there. So the comparison in the second half get a little tougher just because we won't have that necessarily rate impact at least on that major platform, the 737 at least for now pending resolution with Boeing and the regulators. So I think we're trying to moderate that the compares get a little tougher in the second half in that part of the business.

Okay, okay. So this is kind of the run rate, you somewhat expect maybe not the growth rate but the run rate you kind of expect that's -- that's $70 million plus for the remainder of the year?

Correct.

Okay, good. You mentioned and you gave some good color on the MAX and talking about being your biggest platform. I'm curious I know there's been several comments from suppliers from Boeing. I guess the way; I'll ask is were you originally at the 52 rate, were you able to produce somewhere the Tier 1, Tier 2 suppliers above you, were they producing at the 52 run rate per month on the 737 MAX?

Yes, this is Steve. I mean as far as we can tell, we were pretty much running at 52, okay. I really can't speak for the first years or what else is going on up ahead of us but we were pretty much mini [ph] rate and that's we saw the revenue.

And when you think about your contingency plans maybe for the remainder of the year depending upon how Boeing kind of sends out what contingency plans, what kind of thoughts have gone through your head furloughs et cetera to kind of work with the cost structure here as we think about the MAX?

Ed, we are -- we're actively working of course with our supply chain as we get new information from Boeing and working through this. So again a reminder 40% of the platform revenue is going through Spirit with no rate impacts. So on the remaining 60%, we're running through several different scenarios with our supply chain, our workforce, and it's being managed accordingly based upon our biggest customers needs.

Got it. And then finally on the electronics piece, I just wanted to comment. Did I hear that you said that there was a timing -- a shipment timing that that caused the impact on the commercial side for electronics?

That's right. That revenue was down a little bit. But if you look at the backlog, it still remains strong. The industrial revenue was down but that was as expected. So it was purely timing on the electronics commercial work.

And if we look at the run rate for that business from second half of last year and we think about maybe that's $6 million, $7 million delta, does that come in 2Q or is that spread evenly throughout the remainder of the year?

It comes back throughout the remainder of the year.

Thank you. And our next question comes from Ken Herbert of Canaccord. Your line is open.

Well I just wanted to ask again on the 737, I mean it sounds like you're pretty clear that you're shipping at rate 52 to Spirit but it sounds like you're fairly ambiguous on what you want to comment on what your shipments are to directly to Boeing or other suppliers. Is it fair to say that for the other 60% you're probably somewhere shipping between 42 and 52 or you also at 52 on that other 60%?

Ken, I would say it's a dynamic situation. I mean we've got literally hundreds of different SKUs and part numbers that are being worked through with Boeing. So it's evolving as we work through this. It's not at the -- though at the either end of that spectrum.

We don't view it as material, right.

Yes. As we look at the whole year, we don't think it's going to have a material impact at 42 per month on the company as a whole.

Okay. That's helpful. And as you look at your supply chain on the MAX in particular, have you seen any changes in your suppliers, in any maybe incremental risk that when rates do go up that there should be something else we should be thinking about in terms of either your suppliers or what you've seen at sort of the lower level of the supply chain?

No nothing at this point. I mean, as a reminder, everybody was getting ready to go to 57 before this happened in mid-year. So I think this is just a matter of taking a deep breath and stepping back a little bit. But we don't see anything that we can't manage with the supply chain.

Okay, that's helpful. Thank you. And then if I could, you obviously had really nice growth, missile systems you called out and specifically your largest customer there. One of your largest customers Raytheon has set some execution issues and I know you're shifting work. It sounds like from Phoenix out to Huntsville but has that been at all an issue this quarter in terms of just your customers execution or is that a risk potentially here in the next few quarters that we should think about or how is that impacting you if at all?

No, I don't think that really has a big impact on us. I mean obviously we're very focused on being sure we execute for Raytheon as one of our biggest customers but we're low enough down in the supply chain that as long as we're getting our components in there, it's probably if there's a execution risk, it's probably higher up the assembly line and within Raytheon itself.

And Ken this is Steve. Part of that business in Huntsville is actually doesn't go to missile systems, missile systems division it goes to another division, so not our MS.

Okay.

Yes.

So some protection there, okay, great.

Yes.

And just finally, Steve, you specifically called out some opportunities in scrap and inventory as you look to continue to sort of drive cost out of working capital. Can you provide any more detail on timing of some of that or maybe the magnitude of where you see the opportunity this year or next or how we could think about what you do with the opportunities specifically within working capital?

Yes, I think it's more second half, Ken, and 2020 we're -- we're just kind of getting started here. I really can't provide too much color right now because just putting the spade in the ground as we say. So, but I would say later 2019 but certainly 2020.

Okay, that's great. And just one final question. There's a consistent commentary on sort of the M&A outlook for you. Have you noticed or anything you could comment on and maybe the sort of the opportunities you're looking at in terms of the number of opportunities or how we should -- how you're thinking about that pipeline maybe relative to coming out of 2018 and maybe where you're seeing opportunities or not seeing opportunities or any other color around that Steve would be great?

I think what we see right now come out of 2018 now, it's fairly steady. So we're -- as we've talked about, we have our model, we have our discipline around that, and we continue to pursue things obviously. But I don't really have much more to comment on that other than we still see a decent number of acquisitions in the market.

Thank you. And our next question comes from Michael Ciarmoli of SunTrust. Your line is open.

Hey, good evening gentlemen. Thanks for taking the questions here, real nice quarter. Maybe Steve that's enough to harp on it but on the 737 MAX, I think you actually said so that 60% of business that goes to Boeing, it sounded like you were adjusting some of your POs. I was just wondering, what else -- any other contract provisions you guys might have for these rate changes, if they are going to step you down to 42%, are you protected there, is there any pricing, do you have any other provisions that might protect you from raw materials purchases that you may have made already?

No, I mean the framework on which we're working is really a set of agreements we've had in place for a few years with Boeing, so that there is flexibility for them to adjust rate up or down. And obviously with adequate notice then we can react to that with our supply chain. So we're not seeing a huge impact on the company this year as these individual POs get adjusted as needed to meet Boeing's needs.

Okay. And then nothing either on --so it sounds like this framework encompasses a range of 32 per month up to 57, so there is no flexing or shifting in pricing on product you're shipping directly to Boeing?

No.

Okay. Then just on I mean the margins were fantastic in this quarter. I think it was a record. Was there any drag on the margins from that timing of revenue that didn't hit in the Electronics Systems segment, I'm just trying to get a sense of could they have been better and should we expect this type of performance certainly with the operational improvement initiatives you have, should we expect this to continue going forward?

Well, I think on the electronics we've been pretty steady in posting 10% to 11% operating margins in that business, it moves around quarter-to-quarter depending upon product mix. I think we were -- structures has been the real story that you've heard us talk about the last several quarters in trying to move that business from a high-single-digit as we exited last year to a double-digit. And again I think with the volume we saw and the addition of CTP, there was a little bit of a tailwind for us. So we're moving in the right direction with that segment as well.

Got it. So there wasn't any drag from that timing at all that slipped out?

No.

Okay. Last one from me on the looking for content expansion. I think Ken mentioned Raytheon but the other big missile player out there, I know you've been trying to penetrate Lockheed a little bit more, their missile and fires control is just kind of hitting on all cylinders. Can you just maybe talk about what else is being done to penetrate that potential customer there?

Yes, sure. So look we have a relationship with Lockheed on the F-35, we do -- we certainly do work for them and we have I think some real good progress. We actually are -- we have marketing initiatives now around Lockheed where quite frankly in the past, we did not. So we're in Lockheed. We absolutely 100% agree with your point about the opportunities for the missile programs and we're hard at work.

Thank you. And our next question comes from Mike Crawford of B. Riley FBR. Your line is open.

Thank you. Just to continue along with the MAX discussion, is it fair to say that the difference to Ducommun of a shipment rate moving from 52 to 57 versus moving from 52, if it moved to 42 and stayed there for a while, will be about $20 million impact a year maybe?

For a full-year, it could be that large if it's stayed down there for that long because remember it's only 60% going direct to Boeing. And as you know, the Spirit has signed an agreement with Boeing to be at 52 through the end of April of next year. So it would probably be a little less than that, Mike, yes?

Okay. And then two kind of related questions. Well, I mean if for some reason Boeing did stay down then Spirit would stay at 52 until then but then there would be some adjustments like I guess that's more of a observation but also don't you supply some Boeing 737 or at least Boeing content to Triumph or is that -- is the 737 just Spirit or indirect?

No, it's primarily what we supply to Triumph is very small it's minuscule, it's on the 747 platforms which as you know don't really have mothballed for the most part.

Okay. All right thanks for that color. And then just can you remind us the difference in the $3.2 million in CapEx you're showing in the Statement of Cash Flows versus the $4.5 million of CapEx you show on the segment breakdown on that schedule later in your 10-Q?

Sure. In the cash flow it's cash actually out the door. You'll see later in the 10-Q, the amount of PP&E that was not paid for in the quarter. So that's basically the difference, it's sitting in accounts payable as opposed to cash out the door for CapEx.

Thank you. [Operator Instructions]. Our next question comes from Christian Herbosa of NOBLE Capital Markets. Your line is open.

Hi, thanks for taking my call. Just one question for me. So on the last call, you mentioned that you had some success in growing your market share with Airbus and that you hoped to build on that in 2019. Can you give us an update on how your business development efforts with Airbus have progressed so far?

Yes, sure. So just for background, I mean until probably 2017 when I showed up maybe little bit before that we really didn't do much with Airbus, on the structure side or really any side of our business. So we continue to work with them, we're heavy in the A320 family and we continue to build that relationship and build that book of business. I would just say good report going into the middle of the year; we think we still have upside there as we go-forward for further penetration of structures products for Airbus. So more to come.

Thank you. And our next question comes from Becky Vincent [ph] of Vincent Enterprises. Your line is open.

Hi Steve, this is Becky Vincent. My question is really about the unmanned aircraft market. Everything that you talked about seemed to be more for manned aircraft. I wondered if Ducommun pursued the autonomous aircraft market like General Atomics, Northrop Grumman.

Yes, thanks for the question.

Yes, thank you, Becky. We continue to look at opportunities there although I will tell you that the vast majority of our business is on the large airframes just because of the type of materials that we're used to working with. We think there's some probably application with our new VersaCore composites technology as well as some of the things we do in our Electronics segment. But it's not a big part of our business today.

Yes, I mean we're not opposed to it. We're just -- we've got a lot going on right now and certainly we always have our eyes open for new things down the road. So if something develops, we'll let everybody know.

Thank you. And our next question is from Michael Ciarmoli of SunTrust. Your line is open.

Hey guys, thanks for taking this. Just wondering if you could comment, Steve, one thing you talked about looking for potential content expansion in the bizjet markets. So what kind you're seeing in that marketplace. And then I know you guys aren't going to look for any deals in the larger scale structure marketplace but it certainly looks like there's a lot of call it, turmoil there, Triumph announced strategic alternatives. I think Bombardier look at their structures business, does that create more opportunities for you guys on the types of structures smaller scale that you'd be looking for?

So let me handle the bizjet first. So a lot of activity with G-500, G-600. We also play on the 650. So we've got, I think more momentum there with Gulf Stream. And so I think that hopefully with these new programs coming out, we could get a little bit more content, a little bit more share. So that's the comment on that. Doug you want to handle the other side?

Sure, yes. So Mike over time we've seen our structures business evolve to where over half of that is now titanium-based and of course we've got our new diverse core composites coming on. So those larger big aerostructure franchises that are in the market are not something necessarily that we would be focused on. We like things that are little bit nichier than that. So we're not really looking too hard in that build to print space of aerostructures, we think we got better prospects with some of the more niche things that we're doing right now.

Got it, yes. And that's [indiscernible] some of that nichier stuff whether it was tough game or installation or flooring but it sounds like you will be looking at any of that stuff either?

No, we're happy -- this is Steve. We're happy where we are and we got our game plan. So we keep our eyes into that.

Thank you. And this concludes the Q&A portion. I'd like to turn the call back over to Mr. Steve Oswald for closing comments.

Thank you very much. Okay, just first thank you to everyone attending, we also thank you for your questions. As I mentioned in my remarks, I'm thrilled that we're really starting to see some benefits for all the hard work the last couple of years and showing in the numbers obviously, get a lot of confidence with this year and we look forward to connecting again soon, so again my thanks to everyone for their support. Have a great rest of the day and evening.

Ladies and gentlemen, thank you for your participation in today's conference. You may now disconnect. Everyone have a wonderful day.

Thank you, Nora.