Ladies and gentlemen, good morning. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Gates Industrial Corporation Third Quarter 2023 Earnings Call. [Operator Instructions]. And I will now turn the conference over to Rich Kwas, Vice President of Investor Relations. You may begin.

Good morning, and thank you for joining us on our third quarter 2023 earnings call. I'll briefly cover our non-GAAP and forward-looking language before passing the call over to our CEO, Ivo Jurek, who will be followed by Brooks Mallard, our CFO. Before the market opened today, we published our third quarter 2023 results. A copy of the release is available on our website at investors gates.com. Our call this morning is being webcast and is accompanied by a slide presentation. On this call, we will refer to certain non-GAAP financial measures that we believe are useful in evaluating our performance. Reconciliations of historical non-GAAP financial measures are included in our earnings release and the slide presentation, each of which is available in the Investor Relations section of our website. Please refer now to Slide 2 of the presentation, which provides a reminder that our remarks will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks that could cause actual results to be materially different from those expressed in or implied by such forward-looking statements. These risks include, among others, matters that we have described in our most recent annual report on Form 10-K and in our other filings we make with the SEC. We disclaim any obligation to update these forward-looking statements. During the balance of the quarter, we will be attending the Baird Global Industrial Conference in Chicago, and visiting investors in California, as well as internationally. We look forward to meeting with many of you. With that out of the way, I'll turn the call over to Ivo.

Thank you, Rich. Good morning, and thank you for joining us today. Let's begin on Slide 3 of the presentation. Our global teams executed well, delivering strong operating results, which translated to record revenues and adjusted earnings per share, for a third quarter. Core revenue performance year-over-year was consistent with our Q3 guidance midpoint, as automotive outperformed the industrial end markets. Our replacement channels posted positive growth year-over-year and largely offset declines in our first-fit channels. Regionally, EMEA and East Asia and India generated the strongest core growth. Demand in China was softer relative to our expectations when we last updated our outlook after the second quarter. Globally, our focus on replacement markets is providing top line growth support and mitigating the impact of spotty OEM demand trends. Our book-to-bill remained at 1 in the quarter, and we continue to make progress reducing our past due backlog, and improving service levels to our global customers. Our adjusted EBITDA margin was 21.7% in the quarter, an increase of 110 basis points year-over-year despite less favorable channel and end market revenue mix. The expansion was fueled by a 330 basis point increase in our gross margin compared to the prior year period, partially offset by higher variable compensation costs. The supply chain environment was more stable relative to last year and benefited our performance, but several enterprise-wide initiatives involving supply chain and productivity, as well as our continued implementation of 80-20 best practices across the organization contributed to the gross margin expansion. We are pleased with the improvement to our profitability, but are not satisfied, and intend to advance our various initiatives to drive incremental performance in the future. Q3 free cash flow was approximately $90 million and represented about 96% conversion of our adjusted net income. Our higher margin performance, coupled…

Thank you, Ivo. Starting on Slide 6, let's review our core revenue details by region. Our core revenue performance in the third quarter was led by EMEA, which increased about 4%. In EMEA, automotive grew double digits, led by mid-teens growth in replacement. Our energy business grew more than 30%. Construction and on-highway were also solidly positive, delivering high single-digit core growth. These were offset by declines in Mobility, Diversified Industrial and Ag. North America core revenues decreased approximately 2% versus the prior year period. Automotive increased low single digits, and was accompanied by similar growth trends in On-Highway and Diversified Industrial. However, we experienced year-over-year headwinds in other verticals, most notably, in Personal Mobility and Agriculture, both of which declined double digits, consistent with our expectations. Overall, the revenues from our replacement channels delivered stronger performance than the OEM-based channels. In China, overall demand was softer than expected. We realized positive contributions in the automotive replacement channel and the On-Highway end market, but experienced pressure in multiple industrial verticals. Industrial replacement revenues declined more than 20% year-over-year on a core basis. Industrial demand in China continues to be relatively weak, and we now expect our core revenues to be about flat with 2022. East Asia and India and South America core growth rates were nicely positive, both supported by good growth in automotive. Overall, our global replacement business delivered growth and helped mitigate slower demand trends in our industrial first-fit channels. Turning to Slide 7. We bridge our year-over-year adjusted earnings per share performance. Improved operating performance driven by stronger gross margins benefited our results by approximately $0.04 per share. Net interest expense headwinds of $0.02 per share, were offset by reduced share count benefits of approximately the same amount. Overall, we were pleased with our ability to deliver…

Thank you. On Slide 10, I'll wrap up with a brief summary before taking your questions. We are pleased with our operating performance year-to-date, and intend to finish the year with another quarter of strong gross margin improvement, while dealing with softer demand. Year-to-date, through the third quarter, we have generated a 240 basis point year-over-year increase in gross margin, while experiencing mild volume pressure. The normalization of the supply chain environment this year, and our improving performance have translated to stronger margins. Moving forward, we are advancing our enterprise-wide supply chain initiatives to enhance our service, productivity levels and working capital efficiencies. Furthermore, we continue to evaluate restructuring projects that would optimize our operational footprint and organizational structure. We intend to provide you with additional details on these opportunities in 2024. Second, we continue to reduce our net leverage ratio. We experienced a nice year-over-year decline in Q3 and are on track to further improve the ratio by year-end. Our year-end 2023 target of 2.5x represents a 0.3 turn reduction in our net leverage ratio relative to 2022, and includes the impact of returning $25 million to shareholders, via our share repurchase in May. We continue to generate surplus cash and see opportunities to reduce debt in near term. We believe we have multiple potential levers to create value for our shareholders over the next couple of years, and are highly focused on the opportunities available. Before moving to your questions, I want to take the opportunity to thank the 15,000 global Gates associates for their ongoing dedication and focus to serving our customers. With that, I will now turn the call back over to the operator to begin the Q&A.

[Operator Instructions] We will take our first question from Andy Kaplowitz with Citi.

Ivo, can you give us more color to how you're thinking about industrial markets as you start to turn to '24. I think you were early to call a destock this year in industrial. And maybe you could talk about where we are sort of in the channel. And I think you said that maybe destock can last in the first half of '24. But could you elaborate on your thinking there? And could industrial turn positive in '24?

Yes. Thank you for your question, Andy. Look, we anticipated that the industrial activities are going to weaken throughout the year. And I think that it's playing out the way that we've anticipated. I would say that what we didn't anticipate is, a little bit weaker China, that certainly is playing itself out, but I also believe that China may be stabilizing as we exit '23 after almost 2 years of underperformance. So our view is that the industrial markets, possibly should start seeing some degree of stability in the back half of '24. But look, Andy, we just finished a terrific Q3, we are focused on execution on Q4 of this year, and we'll certainly have a lot more to say about the markets and how we view those markets in '24 on our next earnings call.

Totally fair, Ivo. And to that point, maybe just a little more color in terms of Power Transmission margin and how you're thinking about price versus cost moving forward, but also this is the highest margin you've seen in that segment in a couple of years. So maybe you can talk about how much impact these programs? You mentioned 80-20 supply chain initiatives. Any more color on how it's helping you? I think you told us you'll tell us more in '24, but maybe a preview of that.

Andy, we don't get much into profitability by product line. But what we did say last year, if you remember, is that the Power Transmission product line was more impacted by some of the headwinds that we saw in the back half of 2022. And if you remember, we said we had about 200 to 250 basis points of headwinds that should correct themselves on the gross margin line as we move through 2023. And so if I break apart the gross margin side, and it's probably a little bit heavier on the power transmission versus FP, because they were more impacted. You have this -- at the midpoint of that 200, 250, about 225 bps of tailwinds from -- really supply chain normalization that we've seen in the back half of '23. Now that's offset by about 125 to 175 bps of headwind on volume and mix. So we've seen lower volumes, and we've seen lower mix, particularly on the industrial replacement side. And then I'd say offsetting that, the 80-20, some of the strategic pricing stuff that we've done, that's about 150 to 200 bps of tailwind. And then you have productivity initiatives that were really just starting to see get started because of the supply chain normalization. That's about 60 to 80 bps. And so you kind of roll all that up, and that gets you to the 300 to 350 bps of gross margin improvement that we're seeing in the second half of 2023. So hopefully that kind of frames it up for you.

We will take our next question from Michael Halloran with Baird.

It's Penn [indiscernible], on for Mike. Following up on Andy's question there regarding some of the supply chain initiatives and regarding some of the relief from prior challenges, how much relief do you see ahead from the external environment on the supply chain? And then additionally, when we think about the internal actions, how much of this do you think about this being more typical course of business, ongoing productivity versus maybe more structural and proactive actions?

Look, we believe that as we exit '23, we have kind of been through the normalization of the supply chain. So, the second half of last year will be fully offset with the performance of kind of a normalized performance of the supply chain in 2023 exiting. So we believe that, that's normalized. Look, we've spoken about our targets of 24% EBITDA, and we've kind of delineated how we're going to get there through our own enterprise initiatives and 80-20 and kind of the ongoing productivity actions that we're delineating, then we certainly believe that we are starting to demonstrate the validity of that plan, and we still believe that we have lots of opportunity to be able to deploy self-health, both, frankly, on more of the structural items as well as more on the ongoing productivity-based items. So we'll continue to provide you with the updates. We are very proud of our teams, have executed in the second half of this year, and we believe that, that positions us quite well for 2024.

Yes. Super helpful. Maybe if we switch gears and think more philosophically, as we get back to kind of below that 2.5x leverage level, how do you view M&A coming back into play over time? And, obviously, longer term, the company targets M&A contributions as part of the longer-term growth algorithm. How do you think about restarting that engine over time and where you’ll be looking to maybe over allocate some of your time and resources in terms of markets?

Yes. Look, first and foremost, we are committed to get our leverage below 2x. We’ve made that commitment to all of our shareholders. We believe that we have a tremendous cash generation opportunities. The business is very, very capable of generating very robust cash flows that positions us well to reasonably quickly deliver to below 2x. Once we reach that level, we will have a very substantial capacity to deploy capital in a more strategic manner. We have a ton of opportunities in the pipeline. We are going to be extremely disciplined. We still have not seen a complete reality reset on valuations, and taking into account that we believe the biggest benefit that we can deliver for our shareholders is delivering the business, and potentially deploying capital to incremental share buybacks, we will be making all of those decisions. But M&A is definitely starting to come more to a frame. We are very excited about it. We believe that, that’s going to be a big driver of future opportunity to drive growth, as well as profitability improvements, but we’ll be very, very disciplined.

We'll take our next question from Damian Karas with UBS.

So I know you've called out the Mobility destocking. Just wondering if you're able to maybe quantify how much of an overall headwind the inventory destocking behaviors were in the third quarter, and thinking about your fourth quarter guidance. And really just -- if there's any way you could just give us a sense on kind of that sell-in activity versus kind of the sell-through demand, if you will.

Yes. Look, so the overall, let me start with the overall, right? So the overall, we've indicated that our book-to-bill remains at 1. And that book-to-bill is embedded in our guidance for Q4. We did see rather substantial destocking as we have discussed from -- about second quarter's earnings call in the mobility -- Personal Mobility space that continues to play itself out. There have been a very substantial overbuild of equipment that -- our view is it's going to take maybe to middle of next year to work itself out. But as you see, we are able to deliver a very strong performance despite some of the end market weaknesses in the very specific category. So we are very pleased with how our teams are delivering. We believe that we continue to outgrow the underlying market dynamics with our franchise, the products, the services that we deliver. And we are quite optimistic that we can continue to outperform the markets well into the future. And once the destocking plays itself out in Mobility, we have a tremendous backlog of new programs that we believe will continue to reaccelerate the growth in Personal Mobility, and still give us the opportunity to deliver on our mid-term targets.

Okay. And then thinking about fourth quarter here and going forward, is there still a positive price uplift that you're getting on the top line, or has that kind of faded and you basically have lapped most of the pricing initiatives that you've already taken?

No, we're still getting price. Part of it is carryover from last year. Part of it is 80-20. And look, we're going to continue, look, there's still inflation out there, right? So I would say that certainly, on the freight side, you've seen cost start to come down somewhat. Some of that for us is more, the supply chain headwinds and productivity that we saw, as opposed to just straight deflation. On the material side, we're still seeing inflation, albeit at a much lower rate than we were seeing when it was really ramping. So you're seeing a very moderating amount of inflation. And the other thing I would throw out there is, labor inflation has gotten, I think, significantly more pronounced here over the past couple of years, and you're seeing it kind of play out across the broader environment. And so if you kind of add all those things up, we're going to continue to price -- we're going to continue to go out with price increases, offset inflation, and we're going to continue to price for 80-20. So we think we've got good pricing dynamics as we head out into the future. And those are kind of all the pieces of it.

We will take our next question from David Raso with Evercore ISI.

I was curious, the comment you made about the fourth quarter so far tracking toward the low end of the revenue. Can you give us a sense of what is tracking so far a little bit below what you -- maybe have put in the guide? And even within the guide, I see the organic is implied or noted, is down $4 million, but total revenues are down less than that. So I'm just trying to get a sense, do you see the currency swinging back to a positive in the fourth quarter? Just trying to square that up.

Yes. Yes. So look, what we're really seeing is, and the reason we made that comment is, we're just seeing a return to more normalized seasonality, right? And so if you think back over the past couple of years, there's been significant puts and takes in terms of the seasonality and how it plays out by quarter. And so as we've moved through Q3 and Q4, what we've seen is just a more normalized return to seasonality. Now, what could uptick that? Does China start to recover a little bit more, is Industrial a little bit more robust. The normalized seasonality, we'll have to see how that plays out. But what we're implying there is just more normalized seasonality than anything. We have a 1.5% FX tailwind in Q4. I think that's the other piece you're probably looking at in terms of total sales.

And within the segments, the down 4, just so we get a sense of trying to think about how we enter the first half of '24. Are both segments with negative organic growth in the fourth quarter? And if you had to sort of handicap how you're thinking about the destocks into the first half of next year, where would you expect the bottom to be in those year-over-year organic sales declines?

So, I would say that in Q4, PT is more affected by weaker China in Q4, and Personal Mobility. SP, we are leveraging a little better capacity utilization and being able to keep up with the order flow reasonably well. So, I would say, I would think about maybe think about PT being more impacted in Q4. And we -- that's what we've embedded in guidance.

We will take our next question from Deane Dray with RBC Capital Markets.

I'll start with an observation in Brooks' answer to Andy's question. Brooks, I love how you phrase that we don't give a lot of specific detail by product line, and then you proceeded to give fabulous color on strategic pricing, restructuring, supply chain normalization. So I really appreciate you've got those details. And so now I want to ask, maybe you have the same level of precision on releasing your own buffer inventory, your own destocking, where and how might that play out in the fourth quarter because that would boost an already strong free cash flow quarter. Just -- and then just overall, how do you expect the release of your own buffer inventory?

Yes. So what we've seen so far, Deane, is we've seen the raw materials start to come down as we released our inventory. But on the flip side, what we found is we've worked our way through some of the supply chain issues we had last year. And as Ivo talked about the supply chain initiatives we're working on, we're working on making sure we optimized our finished goods inventory which is what's led to some of the improvement in past dues and the improvement in service levels that we've had. So, our cash flow has been strong this year, improved profitability, working capital management, capital relatively flat. And so we're making sure that we use a balanced approach to be able to drive additional volume when the when the cycle gets to the upturn, and that we're prepared for that. At the same time, we try to shrink how much of that buffer inventory as you called it, that we had during the downturn. We think we can take inventory out on a net-net basis, but we're going to manage it between raw material and finished goods to get the best outcome.

That's real helpful. And then for Ivo, I know you are limited on what you can say about future restructuring. And so my first reaction is why wouldn't you get started earlier with that and doing some in the fourth quarter, and maybe there's some timing limitations there. But if you could also just frame for us directionally, is this more restructuring that you've done recently previously? And what kind of payback are you looking for in these types of restructuring actions?

Yes. Thank you for your question, Deane. So I think we have announced that we are closing one of our facilities in China earlier this year. The project is nearly complete, and we anticipate that at the end of this quarter, we will have completed the China restructuring activity, and that's going to give us approximately $4 million annualized savings for next year. On some of the other restructuring, Deane, as you know, we firmly believe that we can nicely improve the efficiency of our franchise by further optimizing our footprint. We believe, and I've been pretty vocal about our desire to continue to improve the efficiency of our assets, position our business to sources of more available direct labor, better skill set mix, and that will require some incremental steps to drive some additional footprint reductions that we have in some less efficient areas where we operate. So while we haven't made any of these announcements, we are working feverishly to make these announcements in time, to be more able to discuss this publicly and after we have notified all of our employee infrastructure across the globe. So we do believe we have lots of opportunities, and that's going to become certainly a set of projects that we can execute over the midterm. That's incremental to simply running the business in an efficient and effective manner. So we are very committed to delivering our mid-term target of that mid-20s EBITDA margins. And we believe that we have put ourselves in a position to be able to deliver that over the midterm.

And we will take our next question from Julian Mitchell with Barclays.

And one thing I just wanted to circle back with on the top line. You've emphasized in China, the headwinds there broadly and then Personal Mobility, for example, in the Americas. I just wondered in the Fluid Power business, Ivo, what you were thinking about the outlook there for some of those large OEMs who maybe have not sounded super bullish on next year in construction equipment, for example, Volvo, Cat and so forth. And if you see them already, cutting orders to get inventories down when dealing with suppliers such as yourself, it seems a very kind of mixed picture when I look at your numbers, say, versus something like Helios and Hydraulics, or Parker yesterday. So it can be tricky to sort of piece it together. But yes, curious on that specific kind of Fluid Power into those large machine OEMs, any perspectives?

Yes. Thank you for your question, Julian. I mean we have -- I think that we have delineated during the call that we have seen weakness in Ag, we have seen Diversified Industrials that were reasonably weak, and we have seen the early signs of the weakness in construction equipment. So I mean, you're absolutely right. And we believe that, that is embedded not only in our guidance, but certainly for Q4, that purview. But we believe that in early stages of next year, this is going to be pretty persistent in the end markets performance. But that being said, we also have tremendous amount of other opportunities that we have been working through on taking incremental market share, we still -- while we are one of the top 5 players globally in hydraulics. We believe that we have a tremendous opportunity to take market share. And while the markets can compress, these opportunities become more pronounced and more important as you move forward into the future years. So look, we are being sober and realistic about the end markets, but we're also being reasonably -- we are being also reasonably optimistic about the more resilient aftermarket business that we have versus the OE applications, and over 65% of our revenue comes from the aftermarket. And those markets are, generally speaking, much more resilient as well, and opportunities out there as well to take more market share. So while we certainly are being realistic about what the markets look like, we're also reasonably optimistic that we can take more market share. We have positioned the business well. We got good capacity. We have built a capacity over the last 2 to 3 years. And frankly, that's paying really good dividends for us. And I think that the results speak for themselves.

That's good to hear. And then my second question, maybe following up on the sort of cost discussion just now. One, I guess, was your CapEx guide coming down for this year. I just wanted sort of context on that. Do we just dump that $15 million-plus back into next year? Or is next year also subdued CapEx? And I wanted to understand on the cost base. So are you saying that you can get to that kind of 24%-odd EBITDA margin in 2025, even without a big new restructuring? Or is that target just more of a question because of the top line dynamics?

Yes. So let me unpack that a little bit. So on the capital side, if you go back and look historically, I mean, where we guided is kind of right in the sweet spot of where we've been. Were there to be more big projects, more restructuring or something like that, it might creep up to more to that $100 million level. But even that is still kind of at our depreciation expense level. So we're comfortable with that kind of longer term, 2.5%, 2.5% to 3% CapEx, and that being well within the purview of ongoing capital, cost reduction, the targeted new capacity. And then if there's some new projects that come online or new things that we need to spend money on, but we think we can handle that as well. So as to your question, I don't think we pour that back necessarily into 2024. We'll cross that bridge when we get there. And then the second part of your question on --

The midterm.

The midterm. Yes, first of all, I wouldn't say, I would say that's probably more out towards '26 than '25, right? When you look at where the cycle is, and you have to get through the cycle first. Look, restructuring is part of how we get there. 80-20 is a part of how we get there. Productivity is part of how we get there. And then volume uptick is part of how we get there, right? And so, all those things really flow together, and I'll tell you, we go through and we look at where we stand and where it's going to take -- what it's going to take for us to get us there. We feel really good about where we've ended '23, relative to our EBITDA improvement over '22. And we feel good about those '26 targets of 24% EBITDA that we provided. And so hopefully, that answers your question, in terms of all the pieces that get us there.

We will take our next question from Jerry Revich with Goldman Sachs.

Can we just talk about the margin outlook for the fourth quarter? You had an outstanding third quarter margins improved sequentially. Normally, they're down sequentially. And so just the outlook implies a 2-point deterioration 4Q versus 3Q, I'm just wondering, are there any discrete drivers of that view? Or is that just to allow room to execute given the moving pieces from an end market standpoint?

No. I'm going to go back to what I said earlier, Jerry, it's normal seasonality. We've had ups and downs and puts and takes over the past 3 years, with COVID and inflation and then more pricing and then supply chain issues last year. And so what we're seeing now is a more normalized supply chain. And even though we've talked about some of the weaker demand outlook and we've been very transparent in that. What we're seeing is just normalized seasonality both from a top line perspective and from a gross margin perspective. Having said that, we're still looking at 250 to 300 basis points of gross margin improvement, offset by 175 to 225 bps of SG&A, some higher variable comp and things like that, as we move through the last part of the year. So still seeing good improvement. But when you look at it sequentially, it's just normalized seasonality.

Okay. I guess I was looking more from 2016 to '19-time frame where the third Q just tends to be your lowest margin quarter, but maybe we can touch base on that off-line. And then in terms of just operationally, it's interesting to see you folks posting the margin improvement that you're posting, with the end market volatility over the course of the year. Can you just touch on operationally where you folks stand now exiting this post-COVID supply chain environment in terms of operationally, what we're doing differently that's allowing us to deal with all of these ebbs and flows in the end markets, while eating under absorption in some areas and still putting up these types of results. Anything you're doing differently this cycle versus a couple of years ago?

I would say, first, it's hard to unpack kind of what we've done on 80-20 and pricing and some different things like that, from necessarily what's going on operationally. What I will say, though, is as we've worked through, and Ivo alluded to this in his comments on the call, as we work through some of the supply chain issues that we've had in the back half of the year, we've come up with some really good projects around supply chain optimization, around material optimization and cost out and different things like that. And some of that is starting to flow through to the bottom line. And some of it, we think, will flow through to the bottom line in the next 2 to 3 years. And so while it was painful to go through, as we're coming out of it, we have a robust set of projects that we think is really going to help drive productivity, both from a material perspective and a cost perspective.

And Jerry, let me also maybe put a little bit of a pitch on here for what the company did over the last 2 to 3 years, right? So we have evolved our mix, we have driven new product vitality up, we have added much higher efficiency asset base into our business over the last 3 years. And during the same time, we worked through an incredible amount of volatility both from a geopolitical perspective, economic perspective and cost perspective. So I just believe that we have put the business on much stronger footing. And as the macro starts working itself through, things start to stabilize. I think that we are much better positioned to be able to truly demonstrate the potential of this enterprise.

And we will take our final question from Jeff Hammond with KeyBanc Capital Markets.

I have a couple of quick ones. Just maybe speak to Europe. I'm surprisingly resilient. We are seeing kind of cracks for some peers. Maybe just speak to what you're seeing there? And then just I know your first-fit business has shrunk over time, but just how you've seen any impact from the auto strike.

Yes. So Jeff, on Europe, thank you for the question. Look, we continue to anticipate a better performance in the automotive business. So the trends in auto are better, both on the first-fit side, as well as on the replacement channels, much more stable, and we continue to see that stability certainly through the end of 2023. Look, energy is performing quite well for us in Europe. So that's also supporting a reasonably robust performance. And I spoke about choppiness and weakness in Europe, Diversified Industrial, probably for fourth quarters now. So we've kind of anticipated that and we've been pretty open and transparent about the weakness in Diversified Industrial, and that continues to be pretty choppy and pretty weak. So I don't think that, from that perspective, we are a little different than some of the peers, but we do have a very good portfolio of products, and we have business that's providing a little better stability through the replacement channels that we have built out over the decades here. So Europe is reasonably okay. And on the auto strike. Look, we have seen weakness in October. We anticipated recovery for the pre-strike output. So North America is such a small amount of auto OEM revenue for the company that it's really not that material for us, but there's been a small impact that we have taken into account, and that's all embedded in our guidance.

And ladies and gentlemen, I will now turn the call back to Mr. Rich Kwas, for closing remarks.

Thanks, everyone, for participating. If you have any follow-up questions that can be reached over the course of the day, or in the future weeks. Thanks again. Have a great weekend.

Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.