Welcome to the Flowserve 2019 Second Quarter Earnings Conference Call. My name is Paulette, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session [Operator Instructions]. Please note that this conference is being recorded. I will now turn the call over to Jay Roueche, Vice President of Investor Relations and Treasurer. You may begin.

Thank you, Paulette, and good morning everyone. We appreciate you participating in our conference call today to discuss Flowserve's 2019 second quarter financial results. Joining me this morning are Scott Rowe, Flowserve's President and Chief Executive Officer and Lee Eckert, Senior Vice President and Chief Financial Officer. Following our prepared comments, we will open the call for questions. And as a reminder, this event is being webcast and an audio replay will be available. Please also note that our earnings materials do and this call will include non-GAAP measures and contain forward-looking statements. These statements are based upon forecasts, expectations and other information available to management as of August 01, 2019, and they involve risks and uncertainties, many of which are beyond the company's control. We encourage you to fully review our Safe Harbor disclosures, as well as the reconciliation of our non-GAAP measures to our reported results, both of which are included in our press release and earnings presentation and are available on our Web site at flowserve.com in the Investor Relations section. I'd now like to turn the call over to Scott Rowe, Flowserve's President and Chief Executive Officer, for his prepared comments.

Thanks, Jay, and good morning everyone. Flowserve delivered solid second quarter financial results building on the momentum of the first quarter. We continue to make progress on our Flowserve 2.0 transformation journey, and we're seeing good results from each of the different work streams in the program. Our associates' engagement remains high and they have fully embraced our strategic program to drive growth, lower cost and deliver operational improvement throughout the company. Flowserve 2.0 is becoming the way that we operate our company each and every day. Let me begin with some highlights of the quarter before turning to our segments and markets in detail. We delivered second quarter revenue growth of 1.7% or 6.2%, excluding currency and divestiture impacts and drove adjusted growth and operating margin improvement of 16 basis points and 200 basis points respectively. Adjusted EPS of $0.54 increased 32%, both sequentially and year-over-year. Reported EPS of $0.44 included transformation and realignment costs of $0.08 and below the line foreign exchange impact of $0.02. With our solid first half results, including the bookings and backlog growth combined with our expectations to continue to drive further operational and productivity improvements, we increased our full year adjusted EPS guidance range to $205 million to $220 million. Turning now to our segment. FPD's first half performance continued to validate our decision to combine our pump platform and leverage its scale and better serve our customers. FPD's bookings increased 5.7% in the second quarter or 10.8%, excluding the impact of currency and divestitures and are up 14% for the first half of 2019. Operating improvement and leverage drove 230 basis points and 210 basis points improvement in adjusted growth and operating margins respectively. With the multiyear realignment program now largely complete, we are optimistic about the opportunities ahead for this segment.…

Thanks, Scott and good morning everyone. As previously mentioned, we are pleased with our strong performance in the second quarter. We delivered adjusted earnings per share of $0.54, in line with our expectations and keeping us on pace to deliver another year of substantial adjusted EPS growth. On a reported basis, second quarter EPS was $0.44, which included $0.08 of realignment and transformation charges and $0.02 of negative below the line currency impact. For the first six months of 2019, our adjusted EPS of $0.95 is 40% above the prior year. In addition, our reported EPS was approximately 93% of our adjusted EPS, a meaningful improvement from 32% last year as we continue to improve Flowserve's quality of earnings to reduce realignment and transformation expense. Second quarter revenues were $990 million, an increase of 1.7% versus prior year and up 11.2% sequentially, in line with normal seasonality. On a constant currency basis and excluding the divestiture headwinds, organic revenues grew over 6% year-over-year. Second quarter aftermarket sales increased 2% or 5.4% on a constant currency basis to $498 million, or 50% of our sales mix similar to prior year. Turning to our margins. Second quarter adjusted gross margin increased 60 basis points to 32.5%, driven by FCD's 230 basis points improvement to 33.6%, which included continual operational improvement, cost control and leverage from our pumps combination. Partially offsetting FPD's strong performance was 190 basis point decline in FCD's adjusted gross margin to 31.4%, primarily due to higher sales mix of lower margin project work, as well as lower percentage of MRO and aftermarket sales. Reported gross margin increased 270 basis points to 32.1% on improved operational execution, decreased realignment items and the impact of 2018's loss on an asset sale. Second quarter adjusted SG&A declined $7.6 million to approximately $240…

Great, thank you, Lee. As I wrap up, I'd like to spend a few minutes on our outlook and the progress of our transformational efforts. We are well into the Flowserve 2.0 transformation program that commenced in early 2018. I am very pleased with the momentum that we are building on the multiyear journey to drive the cultural and operational improvements necessary to better serve our customers, our employees and our shareholders. Over the last two months, I've spent significant time meeting with our associates and leaders from around the globe. I couldn't be more pleased with the progress that we are making and their willingness to take on the challenges of this transformation. They are informed, engaged and empowered to drive the changes at all levels of Flowserve. The engagement level of our workforce has improved dramatically in the past two years, and the overall health of Flowserve is significantly better than where it was in the past. We're spending a lot of time investing in our leaders and creating a performance based closer. Today, our transformational program is largely internally led, and is being executed by our frontline leaders from around the globe. We are encouraged by the results that we are starting to deliver in the areas of our business, including strong bookings and backlog growth, consistent margin improvement, increased manufacturing productivity, reduced working capital and lower path to backlog. Even more encouraging, there is still significant opportunity ahead for Flowserve. Much work remains on the path to our 2022 targets that we presented last year, but we are instilling the culture, developing the processes and changing the operational model to create sustainable long-term value. As we approach the middle innings of our transformation, I am confident that we'll build on the momentum that we have created and continue to drive further improvements at Flowserve. Operator, we have now concluded our prepared comments. And we'd like to open the call for questions. Paulette?

Thank you. We will now begin the question-and-answer session [Operator Instructions]. And our first question comes from Andrew Kaplowitz from Citi. Please go ahead.

Scott, can you step back and talk about the cycle as you see it. You have been recorded $1.1 billion in bookings since early 2015, but yet many of your peers have been talking about project delays and so we have seen a short cycle slowdown that you're feeling in your general industrial business. So can you give us some perspective on the booking cycle as Flowserve sees it? Do you think there's good enough pipeline out there that you could sustain or grow from this level of bookings for the next few quarters? And how much on a higher level of bookings is actually coming or could come from self help with the initiatives that you have for the strike zone and commercial intensity?

So our project outlook still remains really positive, and so I've talked about that now for probably two quarters. We still feel very good about the health of the project pipeline and the project portfolio. The LNG markets are robust. And I'd say that's got at least another year or two of activity, our midstream oil and gas markets are very active and we've had some great awards this quarter. And we expect further awards here in the next 12 months there. And in petrochemical is strong as well. And so I think from a project standpoint, we're still seeing a lot of activity and we expect project work in the second half of the year to be pretty robust for us. The concern and its very similar to what I talked about at the end of the first quarter would be more of that North American MRO business. And so this is primarily the distribution network that services some of the -- more the upstream markets, but also some of the midstream, and that's where we're seeing a slowdown. And you can see that in our general industries category where our bookings were down 12% year-over-year. But I'd say that's where we are putting the most focus on transformation. So our commercial intensity is meant to attack and really address that MRO type business. And I would say that we are trying to offset the negative market sentiment there with the internal actions. But overall, I feel reasonably positive with the markets. And again, I think the projects will continue here for at least another year and our outlook for Q3 and Q4 remains solid.

And just on following up on that. Scott, can you give us more color into your margin progression in FCD? You mentioned short cycle slowdown impacting margin segment. But you just said general industrial business was week last quarter also. So what changed this quarter and should we still see FCD on a generally upward margin trajectory for the second half of '19?

I would say, certainly, we never want to go backwards in margins. And for the first time, FCD took a big step back. It's really being impacted by the mix within our OE business and that's the slower MRO work that comes through the North American distribution. And so it's not shown in after work, it is more in that OE side. And the OE is pivoted to project. And the differential in margins between projects and MRO is pretty significant. And so we've looked at it in a great detail. We know which product it is which facilities. And unfortunately, with North American distribution, there was just a lot of products on the shelf from a lot of activity last year and that inventories got to bleed off over the next quarter or two before we start to see active bookings there. I don't expect that situation to get worse. But I also don't expect significant improvement to probably 2020 as the inventory levels start to get down.

Our next question comes from Deane Dray from RBC Capital Markets. Please go ahead.

Scott, I would love to follow-up on Andy's questions and this whole industrial short cycle pressure is been happening to everyone. So there's no surprise that it manifested your business. And you gave really good color in terms of what you're seeing and the expectations for the channel. What might be helpful is how did it progressed during the quarter, and then any commentary about July? And if I could start there, thanks.

Sure. I'd say it progressed not as well as we would have expected in Q2. We knew we had a concern with the bookings in Q1. And then I'd say in Q2, it did not improved at rate that we were expecting. I don't want to give any color on July or the third quarter yet. But what would I say is our guidance has this level of activity in it for the back half of the year. And so that's already baked in and we don't have any uplift in that guidance. So I would say as the North American markets start to improve, which I think we saw a little bit of improvement in June. If they continue to move forward in the back half of the year then we start to move up from where we are. I'd say the other thing I'd just add is just this is -- it's something that's happening to everybody. As you said, it's that short cycle industrial and it's the North American upstream business that's pulled back now since December. It won't stay down forever. There's a lot of activity that has to happen. There's things that are going to have to move forward with. And so it comes back and it's just more a question of timing. And for us probably the biggest single thing is just inventory on the distributor shelf. And so we did good visibility with our partners and their inventory levels. And as we start to see that come down, our bookings will increase here and we'll start to generate revenue pretty quickly, because it's very short cycle work.

And given that bookings were one of the positives here in your results, I'd love to hear more color on this large LNG project, because it does sound like the perfect win here. You had pumps, valves, seals and services. So, what was different about the selling proposition for this win versus what Flowserve 1.0 was doing? Is it maybe a little bit on pricing? And what does it say for a project like this about the aftermarket opportunity?

So, unfortunately, I can't speak to the details because our customers haven't allowed us to do that yet. And hopefully, we'll get a press release out on this shortly. But what I would say is it's absolutely flagship award for Flowserve. And it's the first time where really we put the efforts of strike zone across all of our products in the whole portfolio to bare. And what we saw is when we do that early in the process, so pre-FID and in the concept phase. And we can start to partner with our customers about how we can bring better efficiencies in the pump; the right isolation in flow of control with our valve; making sure we have the proper barrier and safety with our seals business; and then assuring them that our aftermarket will be present and help them with reliability and uptime. When we do all that and when we do that early then we can have incredible opportunities to get a bigger share of these projects, and then a bigger share of partnering with them throughout start up, commissioning and through the operations. And so we're super excited. It's definitely a flagship award. It exemplifies what we've been talking about on power of the pure play. And it also just validates the efforts in the transformation office. And so like we've talked about on the midstream pipeline, LNG is also a strike zone market for us. And so this is one we've been focusing on. We've been making sure that we have the right portfolio. We've been enhancing our technology to better the serve the market. And this is just a great win for us in a pretty big and growing market.

So congrats for the team on that one, and just a clarification and then last one for me is. Could you explain in a bit more detail the aftermarket discussion that you have? You hinted at it that there is some assurances that you'll be participating in the aftermarket. Is that a formal process? Is there -- -how does it defer from project-to-project in terms of how realistic the aftermarket opportunity is?

So ideally we would love to sign, like on a Greenfield facility. Ideally, we would love to sign the long-term lifecycle agreement while we're in the process of negotiating the frontend valve. We haven't done this on this award. But what I'd say is I've got about 90% confidence rate that we will get the long-term service agreement for pumps, valves and field here. And just it's because we've got -- we'll have the install base and all the original equipment. We are taking up the installation and commissioning work, and so we will get aftermarket on that. But I highly anticipate that we will have a long annuity on the aftermarket sides on both pumps and services in this facility.

Out next question comes from Nathan Jones from Stifel. Please go ahead.

Good morning. This is Adam Farley on for Nathan. So you sound pretty confident in this late cycle project work. Could you just provide a little bit more color along the lines of the late cycle projects? We have heard from some companies that projects are starting to slip to the right, really there is a little bit of a pause given the macro uncertainty. I mean are you seeing this anywhere in any end markets?

So I think we're always concerned. And there is a lot of negativity in the back drop. But I'd say for us in Q3 and Q4, the project work should absolutely continue. And so these are projects that are already through FID or nearing FID. And I would say the Middle East is incredibly active, North America is active and Asia Pacific is active. And so we feel really good about our Q3 bookings. We feel pretty good about Q4. And I would say as we get further out and the confidence starts to go down. Certainly, the back drop with oil and some of the other commodity pricing provides concern here, and will potentially delay some of the larger awards. But I think overall, for us we have got reasonable visibility in the projects in Q3 and into Q4.

And then just turning to free cash flow and working capital, you've made some improvements there. Maybe just provide a little more color on how you view working capital performance and maybe where are you in terms of implementing structural processes and technology into working capital management.

Yes, I'll start and then I'll let Lee do some details on the receivable side, and may be inventory. But this is an area that we've been focused on since I've been here. What I would say is I am very pleased with the progress we made. I'm also a little frustrated that it's taking this long to get to where we are. I think from the systemic standpoint that we're putting the process in place certainly on inventory and inventory planning that will sustain this momentum and continue to move inventory down even further. In fact, feel really good about that. On the receivable side, Lee is leading that and we're seeing good progress there. What I would say, both at inventory receivables, is just the fragmented nature of Flowserve and just the disparate locations that we have has made this incredibly challenging. But we're starting to make good progress and our leaders very much understand the importance of driving working capital. And I'm very pleased to start to see the movement here on the year-over-year numbers.

I think the key thing that Scott ended with was awareness. I recently spent time in India at three of our facilities, and they are talking about receivable improvement and they're talking about inventory improvement and that didn't exist a few years ago. So awareness is, I'd say very high across the company, which was a start. One of the major strategies we have at Flowserve is try to consolidate our collections work. I'd say beginning of the year we have roughly about 30% of our collections work at our shared service operation. Our goal is to get around 60% of the year. By doing that, we got a lot more transparency and insight of what's growing on in our receivable performance and what's wrong with our customers. We also buildup tools to get better insight across looking at our invoices and understanding what is pass due and which ones are not been being paid, and are in process of building a much better power BI tools around understanding what is late, providing that information for our sales organizations, which we didn't have in the past say. Let's say, now here are the customers that are delinquent or have issues with us that are preventing them from paying. So we're solely building up the process. But the awareness is clearly there. We're trying to catch up with the tools and the ownership. And as we shift our collections with the shared services, we expect to also improve that performance.

Our next question comes from John Walsh from Credit Suisse. Please go ahead.

I guess just a question around pricing. You've been talking about positive momentum on the aftermarket side the last couple of quarters. One of your European competitors actually mentioned some capacity tightening. So just wanted to get your view on the pricing landscape, and your view is on if we're actually starting to see industry capacity tighten a little bit?

So, it's really not a lot of different than my commentary in Q1. And so we had our pricing very early in the year. So we actually started in December and we did a second price increase late Q1. And so for the work that is a priceless work, so that would be our MRO, valves, our spare parts, some of our services and service contracts and then some of the smaller pump, very confident that we're ahead of that price cost curve, and that we're doing really well. Unfortunately, a lot of that through that distribution channel, which we talked about that is now off and lower than we expected. So if that's comes back then we start to see more margin and mix on the higher prices side. What I'd say is I am very happy to hear our peers starting to talk about price, that's the first time I've seen that since I've been talking about now for three quarters. And what I'd say is we're starting to see a little progress on pricing for our bigger projects, but they still remain highly competitive. And so, I do believe though as capacity begins to feel across the peer group in both pumps and valves, I think we're going to see more people get more disciplined in that project pricing. But honestly in Q2, I think it was still pretty competitive on the larger projects. And so for whatever reason, the bigger the project, the more excited people get and more discounts seem to be provided. And so that's an area of concern. What I would say is we're incredibly focused on our pricing. It's part of our commercialization work stream. And it's an area of intense focus. And so we'll remain very selective on our project. And we're going to make sure that they provide the margins that Flowserve and our shareholders deserve. And we'll continue to focus on this as we move through the back half of the year, or through the transformational work stream.

And then maybe a follow on for Lee around free cash flow. Last couple of quarters, you've been talking about this 75% loss conversation. Is that still the right bogie? And anything to call out in terms of cadence in the back half?

So just to remind everybody. So free cash flow in the first half of the year was $24 million, which was up a $113 million versus prior year. Improving working capital, quality of earnings, free cash flow conversion is the high priority for the business. Now, as I mentioned on the last call, we had really strong first quarter cash flow but a benefit from some accrual timing that reversed out in the second quarter. But we were really pleased with $113 million improvement in the first half of the year. And we've got really good line of sight at 75% conversion.

And our next question comes from Joe Giordano from Cowen. Please go ahead.

I just want to clarify something you said on the FCD margin. You said like you're not expecting an improvement until 2020 and some of the distribution freeze up a little. But are you talking like from 2Q or are we talking year-on-year? Because obviously that's a business that dropped materially in the second half typically, and if we look at last year back half something like high 18s, lows 19s. So how should we think about second half in that business year-on-year?

So from the second quarter gross margins, we don't expect gross margins to go down from where we are right now. And so -- add the progression there really depends on how North America responds and if we're able to get more products through our distribution in that general industries category. And so right now we feel reasonably good that it stepped up in Q3 and Q4. But I think it is dependent on the activity that we see in North America.

And then the corporate line was one that was brought up by a couple of people, it's being pretty light in the quarter. Is that just timing or is that step-up to compensate in the back half? Or how should we think about that?

So as I -- in my prepared remarks, we are focused on driving SG&A down as a percentage of sales year-over-year. That corporate line that you see is really reflects the unallocated corporate cost. As I mentioned on previous calls, it's about $100 million of cost that's unallocated. They represent legal costs, some board costs and CEO costs. And that number does bounce around from quarter-to-quarter. But overall, we expect it to be roughly around $100 million for the year.

And then one maybe more higher level on the business. For LNG, I know we've talked in the past the leverage you have to that has historically been lower than something like a refinery, I guess certain product categories like valve, pumps and stuff like that that you don't have. Is there a ways for you given how you're having some success here at the market that seems to be doing pretty well? Is there a ways for you to raise your content on some of these projects?

Sure. I think through the power of the pure play that's absolutely how we raise the content. And so if we can get valves hold in and get seals locked in then we're doing good things there. The other thing is just expanding the portfolio through our R&D and new product development. And so the LNG focus is within our new product development, and we continue to add more cryogenic products, both on the pump side and the valve side to make sure that we've got a bigger entitlement on each of the LNG trains.

Our next question comes from Walter Liptak from Seaport Global. Please go ahead.

I wanted to ask an LNG question too. And it's good that you've got some LNG projects that are moving forward. And I wonder if you could maybe give us some insight onto your win rates, because there have been small number of projects that have moved forward. How do you think about the market share on those wins? And then the second half of the question is, there is a bunch of projects that look like they could go FID and provide visibility into 2020. And have you done the value added selling or the pre-FID selling on those LNG projects too?

I don't want to get into specific win rates on a category. But what I'd say is we have been doing reasonably well with LNG, but it's been a little bit under the radar, because we're getting around $10 million of awards. And we would get a pump award or just a valve award in that $8 million to $10 million range. And so we have been reasonably successful thus far. This quarter was the first time we've been able to really bring all of the assets and technology that Flowserve has together into a single award. And so that was roughly $30 million for us, and again a flagship award to talk about on power of the pure play. We are engaged in other of those type of discussion, but they're way upfront in that concept base. And at this point, I'd be reticent to commit when do we see another one of these type of award. But -- just because we don't know the timing for sure. But of the things that we're trying to do is to get more involved with operators, and our customers and licensors and really make sure that our technology is part of that package and part of the solution for providing a better service to our customers in the long run.

And then I guess just switching gears to the pipelines, the midstream. And is that what you were talking about in the third quarter, fourth quarter, you've got visibility but 2020, you're not so sure, because I think some of the pipeline spending comes to an end in the back half of this year? Do you have any visibility into 2020?

Let me just, I'll talk a little bit about Q2 and then I can go into the back half of the year. We received a really nice award here in North America on a crude oil pipeline. We're very excited about it. It's a big number for us. And it's a flagship award to really get us back into the interstate of the large pipeline work. So thus far, we launched this initiative about a year ago and we've booked $120 million over the last 12 months in midstream pipeline. We believe the outlook for the remainder of the year is reasonably healthy. We don't have another incredibly large award in the $20 million to $25 million range, but we've got a lot of activity in the $5 million to $10 million range. And our outlook for Q3 and Q4 remains robust in midstream. I do believe that starts to slowdown in 2020. But certainly, for the few quarters, we feel good about midstream and pipeline.

Our next question comes from Brett Linzey from Vertical Research. Please go ahead.

Just want to come back to the sales guide, you mentioned some of the uncertainty from a micro standpoint, the weaker upstream and some of the de-stock, but you're holding the organic guide here. I guess in terms of that big ramp up in the back half. Is it -- just confident around backlog and deliverables? And I guess if so, what percent of backlog do you need to ship in the second half to hit the plan?

Yes, I'll let Lee walk through our revenue guidance here in the back half.

So just to answer your question directly, we're now expecting around between 60% and 65% of our backlog to convert. Our backlog is up 14% since year end and it's actually up 18% year-over-year. So based on what we've got line of sight, I would expect roughly between 60% and 65%. And then basically the book and burn is the balance and right now, it's pretty much flat year-over-year. So we feel good about our revenue guidance. If we can -- we should be able to convert the backlog and give the same amount of book and burn that we've had historically.

And then just thinking about the Q3 to Q4 progression, from a growth standpoint but also margins. Anything to be aware of from a modeling standpoint and the way OE versus aftermarket mix hits both those quarters?

Sure. I'm glad you brought that up. So just to remind everybody, we remain highly focusing on expanding our margins. Driving year-over-year margin expansion is important to us in order to drive shareholder value. We've seen great progress over the last five quarters. Four out of six of our Flowserve 2.0 initiatives are around margin expansion. Our growth initiatives that we talk -- that Scott talked about has resulted in OE bookings being up 17% in the first half, and our backlog and OE being up 20% year-over-year. So as I discussed in the first quarter call and discussed in my prepared remarks, we expect the sales mix for the rest of the half year to shift towards the OE in the project work with the strong bookings that we have. And so as a result of that we're going to see an increase in OE sales, which is going to help to drive earnings and obviously build our installed base. But there will be some downward pressure on margins versus what we've seen say in the first quarter where we had a heavy aftermarket mix.

And is that a Q3 comment or just the back half as a whole?

I would say it's the back half.

And then just one quick follow up. Could you just put a finer point on what the size and scope of the large projects were in the quarter? I think you mentioned a fewer in the $20 million range. Could you just quantify that and then just any visibility on the timing of when those led out?

LNG award was right at $30 million, our big midstream pipeline award was above $20 million and then we had a nice concentrated solar power award in the Middle East that was around $20 million as well. So that's when we talk about large projects, so that's the size that we like. And we can bring our technology and get the margin that we deserve in that range.

Our next question comes from Steven Fisher from UBS. Please go ahead.

I just wanted to follow up on your recent comment there a couple questions ago about the midstream. Where you said there is lots of activity, I think in the $10 million to $15 million range after this big $20 million to $25 million range, but they you said that would slowdown in 2020. What tells you that that will slow down on the smaller side in 2020? Is it your customers are already telling you this, or is it just assumption that, hey, it's going really going well this year, it's bound to slowdown?

Yes, that's a great point, because I probably didn't answer that as well as I should. The reason I think it slows down a bit is just we don't have visibility beyond this year on the pipeline work. And so typically, this is a little bit shorter cycle type work, and it gets built pretty fast. And we can ship within 12 months. And so for us, we have got visibility in Q3 and Q4. Our midstream work is all again that $10 million to $15 million work and we believe we will get our share of that. We just don't have great visibility to 2020. So when you look -- when you step back and look at the macro though, there still needs to be pipeline build out certainly in North America and in other parts of the world. And so I would expect international opportunities to start to come through in 2020, and probably some other big ones in 2020 that we just don't have visibility to right now. So I don't think -- I don't necessarily believe midstream comes down dramatically in 2020. We just don't have a lot of visibility right now in what we're chasing in and looking at in talking to our customers.

And then is there any connection on the MRO piece in North America tied to oil and gas directly or indirectly? And so is there any assumption that that would have to pick up in the fourth quarter to get your FCD margin back up?

Our distribution channel is largely oil and gas. Now there is others that -- there is refining, petrochemical and others, but a big portion of that is the oil and gas markets. And so we need oil and gas to pick up in the back half of the year, the more on the upstream side. And as that happens, we start to move up in our bookings and certainly in our revenue because it's such a short cycle business there.

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