Ferguson plc (FERG) Q1 2026 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen. My name is Harry, and I will be your conference operator today. At this time, I would like to welcome you to the Ferguson Results Quarter Ended October 31, 2025, Conference Call. All lines have been placed on mute to prevent any interference with the presentation. At the end of prepared remarks, there will be a question and answer session. Please press star followed by the number two. Thank you. I would now like to turn the call over to Mr. Brian Lantz, Ferguson's VP of Investor Relations and Communications. You may begin your conference call.

Good morning, everyone. And welcome to Ferguson's quarterly earnings conference call and webcast. Hopefully, you've had a chance to review the earnings announcement we issued this morning. The announcement is available in the Investors section of our corporate website and on our SEC filings webpage. A recording of this call will be made available later today. I want to remind everyone that some of our statements today may be forward-looking and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected, including the various risks and uncertainties discussed in our Form 10-Ks available on the SEC's website. Also, any forward-looking statements represent the company's expectations only as of today, and we disclaim any obligation to update these statements. In addition, on today's call, we will also discuss certain non-GAAP financial measures. Therefore, all references to operating profit, operating margin, diluted earnings per share, effective tax rate, and earnings before interest, taxes, depreciation, and amortization reflect certain non-GAAP adjustments. Please refer to our earnings presentation and announcement on our website for additional information regarding those non-GAAP measures, including reconciliations to their most directly comparable GAAP financial measures. With me on the call today are Kevin Murphy, our CEO, and Bill Brundage, our CFO. I will now turn the call over to Kevin.

Thank you, Brian. Welcome everyone to Ferguson's quarterly results conference call. On today's call, we'll cover highlights of our quarterly performance. I'll also provide a more detailed view of our performance by end market and customer group. I'll turn the call over to Bill to review financials and our updated guidance before I wrap up with a few final comments. We'll have time to take your questions at the end. During the quarter, once again, our expert associates delivered strong results continuing to execute our growth strategy in a challenging market environment. Sales of $8.2 billion increased 5% over the prior year driven by organic growth of 4% and acquisition growth of 1%. Gross margin of 30.7% increased 60 basis points over the prior year. We remain disciplined on cost and generated $808 million of operating profit, which grew 14% over last year. Diluted earnings per share increased nearly 16% over the prior year to $2.84. We continued to execute our capital priorities, deploying $511 million this quarter. We declared a 7% increase to our quarterly dividend to 89¢ per share. And we acquired Moore Supply Company, HVAC equipment and supplies business in the Chicago Metro Area. We also returned $372 million to shareholders via share repurchases and dividends. Our balance sheet remains strong, with net debt to EBITDA of 1.1 times. While we continue to operate in a challenging environment, we remain confident in our markets over the medium term. And we'll stay focused on leveraging multiyear tailwinds in both residential and nonresidential end markets as we support the complex project needs of the water and air specialized professional. Turning to our performance by end markets in The United States. Net sales grew by 5.3%. Residential end markets representing approximately half of US revenue remain challenged. New residential housing starts and permit activity have been weak, Repair, maintenance, and improvement work has also remained soft. We continue to outperform the markets with residential revenue down 1% in the quarter. Nonresidential end markets performed better than residential. Our scale, expertise, multi-customer group approach, and value-added services drove continued share gains with nonresidential revenue up 12% during the quarter. Strength in large capital project activity has continued, and we've seen solid shipments, with growth in open order volumes and bidding activity. Our intentional balanced approach to end markets continues to position us well. Moving next to revenue performance across our customer groups in The United States. We grew Waterworks revenues by 14% as our highly diversified customer group saw strength in large capital projects public works, general municipal, and meters and metering technology, offsetting weakness in residential. Ferguson Home, which brings together our best-in-class showroom and digital experience, grew 1% in a challenging new construction and remodel market. Our ability to present a unified experience and cater to higher-end projects drove outperformance against the broader market. Residential trade plumbing declined by 4%, due to headwinds in both new and RMI construction. HVAC declined by 6%, against a strong 9% comparable and weaker markets impacted by the industry's transition to new efficiency standards and weak new residential construction activity as well as a pressured consumer. We remain pleased with our execution our counter build-out for the dual trade and M&A opportunities. Commercial mechanical customer group grew 21% on top of a 1% prior year comparable. Driven by large capital projects such as data centers, partially offset by weaker activity in traditional nonresidential projects. For fire and fabrication, facility supply, and industrial customer groups all saw growth during the quarter as we continued to take share and leverage our unique multi-customer group approach. Our customer groups are better together, sharing expertise to provide end-to-end solutions that help simplify complex projects and maximize contractor productivity. Now let me pass the call over to Bill for the financial results in more detail.

Thank you, Kevin, and good morning, everyone. Net sales of $8.2 billion were 5.1% ahead of last year. Driven by organic revenue growth of 4.2% and acquisition growth of 1%. Partially offset by 0.1% from the adverse impact of foreign exchange rates and from a divestment in Canada. Price inflation was approximately 3%. Modest sequential improvement in finished goods pricing, offset by commodity-related categories being down low single digits. Gross margin of 30.7% increased 60 basis points over last year, driven by our associates' disciplined execution. Operating costs grew slower than revenue, delivering 20 basis points of operating leverage. And operating profit of $808 million was up 14.4% delivering a 9.9% operating margin with 80 basis points of expansion over the prior year. Diluted earnings per share of $2.84 was 15.9% above last year, driven by operating profit growth and the impact of share repurchases. And our balance sheet remains strong at 1.1 times net debt to EBITDA. Moving to our segment results, net sales in The U.S. grew 5.3%, with organic growth of 4.4% and a further 0.9% contribution from acquisitions. Operating profit of $806 million increased $109 million over the prior year, delivering an operating margin of 10.4%. In Canada, net sales were 2.2% ahead of last year. With organic growth of 0.7% and a 4.6% contribution from acquisitions partially offset by a 1.6% adverse impact from foreign exchange rates as well as 1.5% from a noncore business divestment. Markets have remained subdued in Canada, particularly in residential. Operating profit of $16 million was $7 million below last year. Moving next to our cash flow performance for the quarter. EBITDA of $867 million was $109 million ahead of last year. Working capital investments of $440 million during the quarter was up slightly from $376 million in the prior year. Principally driven by timing. Operating cash flow, was $430 million compared to $345 million in the prior year. We have continued to invest in organic growth through CapEx, investing $118 million in the quarter, resulting in free cash flow of $325 million compared to $274 million in the prior year. Turning to capital allocation. As previously mentioned, we invested $440 million in working capital. And another $118 million in CapEx. To further build on our competitive advantages and drive above-market organic growth. We paid $164 million of dividends during the quarter, and our board declared an $0.89 per share quarterly dividend. Representing a 7% increase on the prior year. And reflecting our confidence in the business. We continue to consolidate our fragmented markets through bolt-on geographic and capability acquisitions. As Kevin mentioned, we completed the acquisition of Moore Supply Company during the quarter. A great addition to our HVAC presence in the Chicago area. Our markets remain very highly fragmented, and our acquisition pipeline is healthy. And finally, we are committed to returning surplus capital to shareholders when we are below the low end of our target leverage range of one to two times net debt to EBITDA. We returned $208 million to shareholders via share repurchases during the quarter. Reducing the share count by nearly 1,000,000. And we have approximately $800 million outstanding under the current share repurchase program. Now turning to our updated calendar 2025 guidance. We are pleased with our continued market outperformance and solid growth in the quarter. We are well positioned to deliver a strong calendar year 2025 performance and remain confident in our markets over the medium term despite near-term uncertainties. We now expect approximately 5% revenue growth for the year. And we expect an operating margin range of between 9.4% to 9.6% up from our prior expectation of between 9.2% to 9.6%. Interest expense is expected to be approximately $190 million for the year. We estimate CapEx of approximately $350 million the upper end of our previous guide. We continue to expect our effective tax rate to land at approximately 26%. We believe we are well positioned as we finish the year head into the new calendar year. Thank you, and I'll now pass back to Kevin.

Thank you, Bill. As we conclude our remarks, let me first reiterate our thanks for the hard work and diligence of our expert associates. They continue to execute on our growth strategy, we work to drive construction productivity for our customers. We're particularly pleased with the double-digit nonresidential growth as our teams closely collaborate to simplify projects bring order to chaos, and deliver end-to-end solutions to help maximize customer success. We're poised to deliver a strong calendar 2025 performance and our strong balance sheet enables us to invest in organic growth consolidate our fragmented markets through acquisitions, and return capital to our shareholders. We'll continue to operate at the lower end of our target leverage range maintain flexibility and capitalizes on strategic opportunities as they arise. We remain confident in our markets over the medium term, and expect to continue to outperform our markets as we leverage multiyear structural tailwinds. Our size, scale, and strategy we believe we're well positioned to take advantage of opportunities in the underbuilt and aging US housing market nonresidential large capital projects, and the growing demand for water and air specialized professionals. Thank you for your time today. Bill and I are now happy to take your questions. Operator? I'll hand the call back over to you.

A. If you change your mind, please press star followed by 2 to exit the queue. And finally, I'm preparing to ask your question. Please ensure your device is unmuted locally. And our first question today will be from the line of Matthew Bouley with Barclays. Please go ahead. Your line is open.

Good morning, everyone. Thank you for taking the questions. Wanted to start on the data center and large capital projects. I'm wondering if at this point, given all the growth you've seen, you're able to quantify, perhaps what portion of the business, that is for you today, and maybe kinda where that can get to. But also, I'm curious if you can kind of know, give us a little bit of color on the timing of bidding and the momentum and if there's any risk of kind of lumpiness given how those projects work and how you ship to them or if we should kinda think that this is gonna be more of a, I don't know, smoother kinda outlook for that business. Thank you.

Yeah. Good morning, Matt. Thanks for the question. I'll start this is Bill. I'll start with that one. If you take a step back and look at overall large capital projects for us, we would estimate that that that is somewhere between mid to high single digits as a percentage of our total company revenue at this point. With data centers specifically being a bit over 50% of that a bit over half of that overall large capital project. Revenue. In terms of what we're seeing in the market, the pipeline does continue to grow. So we're seeing additional projects coming into planning. We're then seeing that continue to flow into additional bidding activity. And our open order volume on large capital projects does continue to grow. And you're seeing that, you saw it come through revenue this quarter. Principally in the commercial mechanical business, which was up 21% and then a portion of that waterworks business, which grew 14%. So we are continuing to see that activity grow. Certainly, the gestation period of these projects is much longer than maybe our traditional projects. And so, yes, there could be some lumpiness, in terms of of revenue rate as as we move into the future. But overall, we remain bullish that this is a continued growth area for us, and and will continue to be driving revenue as we as we exit '25 and step into '26. And, Matt, as Bill said, the lumpiness will likely be there in the gestation period for these projects. It's gonna be longer but that's part of the reason why we're reasonably pleased with our progress. As you look at our ability to deliver scale, a multi-customer group approach, a broad base of vendors that can bring product to the site on time and in full. The impact of modular construction on data center work, that's all serving us well in terms of what those share gains look like, especially against the backdrop where traditional nonres is in a pretty challenging spot.

Alright. That's perfect. Thanks for that, guys. And then secondly, kind of jumping into the outlook I guess, maybe this is since a bit of an unusual period here where you're guiding to just kind of the sub period. I guess I'm curious if you could kind of give us any color on the November or quarter to date results. But just given this is sort of a smaller and again, unusual guidance outlook here, If you're willing to kind of give any early twenty twenty-six thoughts, you know, across the end markets, kinda carryover inflation, etcetera, to sorta help us point us, directionally a little bit into next year. Thank you.

Sure. Yeah. Matt, as as we maybe as as we take a step back, if you recall when we set out our calendar '25 guidance at the end of our fiscal year in July, We had talked about the first half of the calendar year growth being about 5%. And our expectation that we believe that that growth was gonna get a bit more challenging as we work through the calendar year particularly towards the end of the calendar year. As we were expecting additional new res pressure, and HVAC pressure to step up. And that's what we've started to see play through, so very much in line with our expectations. Maybe I'll shift to the calendar quarter as we're gonna try to try to get to the calendar year reporting now. If you look at calendar Q4 to date, so October, November, and basically the first, you know, week, week and a half of December, our total growth is sitting at about 3% for that period. Again, very much in line with our expectations with with that additional pressure on new resi and HVAC. And so, clearly, now with about three weeks to go, I would expect our calendar Q4 growth rates to be somewhere in that that 3% range as we round out the year. And then as we look forward into '26, we will set out our calendar '26 guidance in February. We're back with you in a couple of months as we get onto that calendar year cycle. But but the early part of '26, we wouldn't expect much change from a market perspective or much difference. As we exit the year at about that 3% range and then step into the step into the new year. But, again, we'll set out our views on the market. And our views on our guidance in February.

Excellent. Thanks, Bill. Good luck, guys.

Thanks, Matt. Next question today will be from the line of Ryan Merkel with William Blair. Please go ahead. Your line is open.

Want to follow-up on the last comment on 4Q. Just a little bit of a slowdown there to growth up 3%. Is there anything that stands out? Or is it just maybe just seasonally, it's just a bit softer at this at this point.

Yeah. It it it is that new res pressure continuing to play through, Ryan. If you go back, permits and starts, as everybody's well aware, had continued to weaken through the calendar year. Outside of our waterworks business, there's a little bit of a lag of those slower starts coming through the rest of our customer groups, to then then play through on revenue. I think we're just seeing that playing through on those weaker starts. And then, certainly, there's more HVAC pressure, which we talked about during our last quarterly conference call. Our HVAC business was down about 6% for our first quarter or for the quarter ended October. That growth got a little bit more challenging towards the end of the quarter as the market's in a pretty tough spot. So I think those two those are the two pressure points we would point to. Still, as you look through that, we're very bullish and optimistic on the HVAC market overall over the medium to long term. And and we would believe that residential at some point will will stabilize on on the new resi side.

Got it. That makes sense and pretty consistent with what we're hearing. Let me shift to pricing. Looks like it came in a little better than you thought. Maybe talk about that and then talk about how the commodities are trending and if you expect supplier price increases as we head into the New Year?

Yes. Overall, the quarter, inflation was about 3%. So to your point, it stepped up from about 2% in the previous quarter to 3% this quarter. Finished goods was up a little bit more than it was in the prior quarter. So I'd still consider that kind of at the high end of that low single digit range. And commodities were down in the low single digit range still. As a basket. If you look at commodities, three three main baskets within that that group, PVC, which is our largest commodity basket, is still in deflation. Down in the double digit range, kind of that low double digit range. Steel, is up. I would call that mild inflation, and then we're still seeing strong inflation on copper tube and fittings. So overall, pretty consistent with what we expected. As we as we round out the first quarter and and enter into the end of the calendar year. And if we look at entering the calendar '26, we would expect modest price increases that are in line with traditional behavior on the finished goods side of the world, and those announcements are coming through right now. Hard to say what's gonna happen with all of the different dynamics that are involved in the market right now, but our expectation is that it'll be a more normalized pricing environment knowing full well that we had six quarters of deflation before we got back to flat and then plus two in the previous quarter.

Alright. Good job. I'll pass it on. Thanks. Thanks, Ryan. Thanks, Ryan.

Next question today will be from the line of Dave Manthey with Baird. Please go ahead. Your line is open.

Yes. Thank you. Good morning, guys. Along the lines of the the pricing discussion here with price looking like it's going to represent a pretty positive factor year over year through the, the coming calendar year against what what appears to be pretty easy deflation affected comps last year. Should we continue to expect incremental margins to run ahead of that sort of targeted 11% to 13% rate given the contribution from positive pricing over the course of the next four quarters?

Maybe this is Seth. Back, Dave, we're very pleased with the operating margin in improvement that the business has delivered this calendar year. If you go back to calendar '24, we delivered a 9.1% operating margin. We've just given our updated guidance, which is nine four to nine six. So call that a nine five at the midpoint. So we're expecting a very solid progression on operating margins this year of somewhere in that 30 to 50 basis point range. Now I would remind you, we did have a bit of outsized gross margin gain during the during the middle part of this calendar year. Recall, we had a a quarter with 31% and then 31.7% gross margins, and we had flagged that there were some impact of the timing and extent of supplier price increases And then we expected that gross margin to to normalize and and you've seen that play through now in this last quarter. So we wouldn't expect that kind of outsized gain to next year. So probably actually a little bit of a headwind in the middle part of the of the calendar year versus versus the prior year, twenty-six to twenty-five. We'll set out our guidance for overall operating margins next year, and certainly, that will that will be dependent on what the market environment is like. Assuming that we have supportive market and we have decent growth, we would expect some modest progression on operating margins next year. But, again, we'll be back with you in February and give you a more clear view of what we expect at that point.

Makes sense. Thank you. And second, as it relates to the $2 billion ish in revenues from major projects that you discussed, It seems like you've been having a lot of success there because of the one Ferguson effort. Could you maybe I don't know if you could quantify or or bigger than a bread basket, tell us what percentage of those projects do you get more than one product and customer group via the one Ferguson effort. Versus not. Is that something you could share with us?

Yeah, Dave. Thank you. And and certainly, when we talk about large capital projects, we're talking about those projects north of $400 million in overall construction value. And so it's it's a varied group. Certainly, data center gets a lot of the attention today, but it's beyond that to pharma, biotechnology, onshoring, reshoring, manufacturing, and and others. And so the projects do vary. I will say, and people ask us quite a bit about what happens after large capital projects aren't the talk of the day. And the answer to that is really a new way of working for Ferguson. And so we are engaged early on in the construction process, early on with general contractors and owners around what specifications look like, how we can make sure that we have supply chains that stand up to timelines, And so doing that together with the contractors on the job we're engaging most of our nonresidential customer groups on these projects, whether that be industrial, fire and fabrication, waterworks, commercial mechanical, and they vary again depending on the kind of job. But that's the way we intend to work as we move forward. Never abandoning the local relationships that we have with our core contractor base, but also making sure that we can deliver on tight timelines make sure that we got the right product set for the job to deliver.

That's great, Kevin. Thanks.

Next question will be from the line of Keith Hughes with Truist. Please go ahead. Your line is open.

Hey, good morning. This is Julian on for Keith. Just in terms of HVAC, when do you think comps are going to start to ease from the pre shipments ahead of the standard change from last

Yeah. I'd I'd say to again, to build on what Bill has already said, the market's in a tough spot right now. We saw it get a bit worse. As we went through the quarter and exited October. It's a variety of factors, though. You've got a bit of the a two l transition. As you had pull forward. You certainly have equipment price increase playing in now. As the majority of the sell through is in that new equipment standard. And then you've got a pressured consumer that is moving a bit to repair versus replace environment. And then you had some degree of play through on multifamily new construction that is now, you know, passed. And so we're pleased with the overall execution. When does that start to get back to a replace environment? When do we start to see a bit of residential life? That's that's tough to to pinpoint. For us, we're bullish on what that market looks like over time. And we're gonna continue to build out convenient locations across The United States. Continue to build out our OEM brand representation, We're gonna continue to focus on M&A expansion as we capitalize on what we think is a growing trend with that dual trade contractor.

Got it. Thank you.

Next question will be from the line of Scott Schneeberger with Oppenheimer. Please go ahead. Your line is open.

Thanks very much. Good morning. The I want to touch on some SG and A topics. Last fiscal year, you made investments in trainees, HVAC counter expansion, large project teams. Just to could I get an update on on how these investments have been trending what you're looking for maybe going out over the coming year, and, and impacts of these, of these investments to date. Thanks.

Yes. Scott, thanks for the question. First off, from a trainee perspective, our trainee program something that's been really foundational to the success of this company over decades now. And it's a it's an area that we invest in in good markets and in bad markets. So we continue to add trainees year in, year out to fuel our pipeline of talent. This year, we added roughly 250 to 300 trainees in our in our classes throughout the year, and we would expect to continue that that program and expand that program as we step into calendar '26. In terms of additional investments, Kevin just talked about our HVAC expansion plans and the build out of convenient locations. We have now completed roughly 650 counter conversions So that is both taking HVAC counters and adding plumbing products as well as taking plumbing counters and adding HVAC products. And it's not just the products. It's also the expertise of and our associates that we train to ensure that we have experts serving experts. We believe that is yielding real fruit. So despite a very challenging eight HVAC environment, we believe we are outperforming that HVAC market. And have done so for the last several quarters. And we will continue, as Kevin said, to fuel that growth to to ensure that we expand that HVAC footprint. And and and maybe lastly, we're continuing to invest from a a technology and a digital standpoint. And so we continue to invest in new technology tool, digital tools, principally in the areas of HVAC. And for the repair, replace plumbing contractor. We're very pleased with the progress that we've made with with many of those investments. If you take a step back from an overall SG and A perspective, we've been able to continue to invest in those types of areas to fuel future growth while we've managed the cost base. And we did take some cost actions earlier in this in this calendar year that we talked about a couple of quarters ago. Those cost actions have played through where we've received the benefits of that. And so while even though we're operating in still a a bit of a challenging top line market environment, we're delivering good quality SG and A leverage. While we're continuing to invest in the business for the future. So we feel good about where the cost base sits as we exit calendar '25 and enter calendar '26. And maybe to just build on what Bill was saying. Certainly, the trainee aspect is a long-term investment in the business and making sure that we have a pipeline of talented associates to grow this. Business over time. He spoke about the HVAC business, so I won't be repetitive there. But when you look at what investments we've made in waterworks diversification, and making sure that we have a broad book of business from residential to public works to water wastewater treatment plant to geosynthetics and soil stabilization that is serving us well. And, certainly, we're pleased with a plus 14% growth rate We're pleased with the large capital project space. We talked about a multi-customer group approach and engaging early on in the project. But we're also investing in value-added services like fabrication. Valve actuation and automation, and virtual design. And so that's serving us well, obviously, with plus 21 in the commercial mechanical business. We're pleased. And then lastly, when you talk about Ferguson Home, and bringing together what is a best-in-class digital platform, with a showroom experience and a consultative approach and a builder outside Salesforce that's driving growth with the connected consumer to that builder, designer, and remodeler. And so we think all of those investments are proving to be successful as we move through a it's a challenging environment.

Great. Thanks, guys. And just a follow-up. Spoke a little bit earlier. You you were asked about, supplier pricing going into next year. I'm just curious that from a high level, how are you thinking about managing inventory as you enter 2026? Thanks.

Yeah. We think our inventories are in a good spot right now. Teams are doing a really nice job and have done so managing through a unique environment. With price increases coming through the system this year. So I wouldn't expect significant changes to the inventory profile as we exit calendar '25 and enter calendar '26. We think we have the right levels of inventory to take care of our customers and to support continued market outperformance.

Great. Thanks very much.

Thank you. Our final question will come from the line of Nigel Coe with Wolfe Research. Please go ahead. Your line is now open.

Thanks for the question, guys. Appreciate it. So you gave a bit of color on the calendar fourth quarter. I missed any gross margin commentary. Just wondering if there's any sense on how that's been trending year to date?

Yeah. I would I would think of it, Nigel, in a pretty similar range. To the quarter that we just reported. And as we had talked about coming out of the summer months that we had expected, to get back more into that normalized range of somewhere between 30-31%, So I think you can you can expect it in that in that range. As we exit the calendar year.

Great. And then a lot of helpful commentary on the larger project. Sites. In terms of I know this would probably be in quite a range, but any sense on what Stoixson's sort of opportunity would be on a typical large project? Again, I know there's no typical large project but any sense on what the kind of content might be for those?

Yeah. Well, I'll caveat it with it will vary significantly. Depending on the type of project. But and and as Kevin talked about, when we talk about large capital projects, we're talking about those projects that have construction value north of $400 million. As a general ballpark, you take that construction value and somewhere 2-4% of the construction value would generally make up our product set and our customer group set. But, again, that will vary pretty significantly. And that certainly doesn't include, you know, in the likes of the data center, that wouldn't include the cost of the servers chips and those types of interior pieces of equipment to run the data center. It's more just that construction value.

Right. Very helpful. Thank you.

Thank you, guys. Have a great This concludes today's Q and A session. I'll now hand over to Kevin Murphy for closing remarks.

Thank you, operator. And let's end the call in the way that we began with a strong thank you to our associates for their hard work and diligence in what is clearly a challenging market. As you heard today, we're pleased with the quarter. 5% revenue growth, expansion of growth in operating margin, 16% EPS growth, operating profit growth of 14%, continued investment in the business, and a strong balance sheet. We're pleased with the execution of the teams. And the continued investment in key growth areas that are yielding solid results we're sat here today. We'll continue to focus on driving construction productivity for the water and air specialized professional. We're gonna leverage scale with the best local relationships We're gonna continue investing in value-added services and digital tools. So thank you very much for your time today, Have a happy holidays, and we'll talk to you soon. Thank you.

That concludes Ferguson's results. For the quarter ended 10/31/2025 conference call. I'd like to thank you for your participation. You may now disconnect your lines.