Granite Construction Incorporated (GVA) Q2 2012 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Granite Construction's Second Quarter 2012 Earnings Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Jacque Fourchy. You may begin.

Good morning, and welcome to Granite's second quarter earnings call. I am here today with President and CEO, Jim Roberts; and Vice President and CFO, Laurel Krzeminski. This morning, Jim will provide a high level summary of our second quarter results and outlook for the year. Laurel will provide more detail on our second quarter financial performance, along with our updated guidance for the full year of 2012. Following Laurel's remarks, we'll open the call up for a question-and-answer session. Following this call, we will be available throughout the day to answer any follow-up questions you may have. Also, as a reminder, any forward-looking statements that are made this morning are subject to risks and uncertainties that could cause actual results to differ materially from these statements and which are further described in our most recent SEC filings. Granite assumes no obligation to update any of these forward-looking statements or other information. With that, I will turn the call over to Jim.

Thank you, Jacque, and good morning, everyone. As Jacque noted, I would first like to spend a few minutes discussing some of the key factors that impacted our quarter, as well as share my thoughts on our outlook for the remainder of the year. So let me first start with the quarter. Overall, our Large Project portfolio is performing very well. Notably, our team has recently completed the fourth and final tunnel for the Queens Bored Tunnel project. The Western Wake Freeway project in North Carolina and the Mountain View Corridor project in Utah continue to meet or exceed expectations, and the Houston Metrorail project is well underway will all major civil and system installations in progress. As we previously stated and as our guidance reflects, our gross margin expectations for our Large Project segment continue to be in the mid-teens. Our Construction and Construction Materials businesses in the West continue to be impacted by a weak residential market and highly competitive public sector environment. In addition, we wrote-down 2 of our Construction projects in California as a result of poor execution. Our teams are committed to completing these projects without additional impact to our bottom line. Let me now share some thoughts on our outlook. Although some of our markets are stronger than others, our vertically integrated businesses in the West are navigating through one of the most competitive public sector bidding environments we have faced in recent times. As we have discussed, funding uncertainties and a lack of private sector work has forced traditional private sector contractors to bid for work in the public sector, creating pressure on margins. In terms of the private sector, our short-term outlook remains cautious as any improvement in the macro environment continues to be slow and uneven. We are encouraged by some…

Thank you, Jim, and good morning, everyone. Let me begin with a review of the results of the total company. Second quarter revenue was $540 million, up 11% from a year ago. This was driven by a 41% increase in Large Project segment revenue. Gross profit increased $7 million to $52 million. As a percent of revenue, the second quarter gross profit margin was 9.6% compared with 9.3% reported last year. Selling, general and administrative expenses were $41 million for the quarter, up $2 million, reflecting an increase in salaries, benefits and costs associated with our pursuit of larger projects. We've made a lot of progress over the past 2 years to reduce our overall cost structure, and we continue to aggressively work to identify cost savings opportunities throughout the company. As we stated last quarter, SG&A expenses for 2012 are expected to be in the range of $170 million to $180 million. We reported operating income of $14 million in the second quarter, a $5 million increase over the prior year. Earnings per share were $0.05 compared with $0.13 last year. The decline was driven in part by a $7 million increase in other expense year-over-year, which includes a noncash impairment charge associated with our cost method investment in a manufacturer of solar power systems. Looking at the segment detail, Construction revenue for the quarter was $245 million compared with $261 million due to the competitive marketplace in the West. Gross profit margin was 7.3%, down from 9% a year ago. Large Project Construction revenues increased 41% to $229 million, our Large Project teams are executing at a very high level. Gross profit margins increase in the quarter to 12.3% compared with 7.8% a year ago, reflecting an increase in projects that have reached our profit recognition threshold. Finally,…

[Operator Instructions] Our first question comes from John Rogers of D.A. Davidson.

Jim, as it relates to the Branch or small Construction business, the reduction in margin expectations, is that a function of just having to cut pricing as you went into the bid season? And I guess I'm wondering -- the implications for how long we can expect these lower margins to last in the sense that presumably you burn through that workable a bit quicker or is this a permanent change?

Well, John, I believe it is not a permanent change, but a couple of items added to the reduction. First of all, Laurel mentioned that we have the 2 or I think I mentioned it actually that we had the 2 project reductions in -- so that will affect us for the year as well. So it affected us in the quarter, that will carry forward to a overall lowering in the overall year. Now we don't expect those projects to continue to reduce themselves, but the effect of the quarter will carry throughout the year.

And I'm sorry, and those projects finish this year though?

Yes, they'll be done in the third quarter as far as I know by now. That's the intent. They'll be done in the third quarter, and we've only written them down, and we don't expect to write them down any further. So that part of it is complete. But that has an effect not only for the quarter, but it will carry forward in the year as well obviously.

Right.

And then on the other side, yes, the market has been very difficult. There is a reduction of margin at bid time, but I don't think it's long term. I think what we need is a little private sector resurrection. And as I mentioned, John, there's a little light at the end of the tunnel here. The private sector, we're starting to see some residential work. We're starting to see a little more commercial. And we're starting to move on our strategic plan of diversifying into some of the power and water work. We're also seeing -- which is a real nice sign especially in the Western markets, the regional transportation associations are starting to gear up and put larger projects out to bid. Some of them would be in the Large Projects segment, some of them would be in the Construction segment. So I don't believe it's long-term. I think it is something that will hopefully move upward after 2012, but I think for the remainder of the year, we're being cautious relative to what our expectations are on the construction work.

Okay. And if I could just follow up on the Large Projects side of the business. The higher margin assumptions, I mean, you noted better execution, but how much of it, if any, has to do with hitting those 25% hurdles earlier, or is it just overall the project, the portfolio of margins got better?

John, the answer is, we are executing very, very well. Our Large Project teams, I cannot commend them enough. And it really is not from hitting the 25% threshold, it is from executing at a high level in the field.

Okay. So that would imply that, that's a little -- I mean, depending on marketing projects, but that's a little -- that's sustainable?

Well, we've always said that the mid-teen margins is our expectation for Large Projects, and that's where our guidance is leading us to for 2012 as well.

Where that would be impacted, John, is if we had a large number of projects or a lot of revenue without any profit in it yet, it would drag on margin for a period of time.

So quarter-to-quarter.

That's going to fluctuate based on, yes, the mix of work.

Right. And so, like last year we had -- for the quarter, we had $110 million of revenue that didn't have any profit on it compared to $30 million this year. So we just -- it's the mix of and the progression on the projects in our portfolio.

But to answer your question, John, it is not because we hit the 25% threshold and got a big boost, it is because the projects are executing at a high level.

And I'm trying to just think about the longer-term implications for margins for that segment.

Our next question comes from Jack Kasprzak of BB&T.

Did you or can you quantify the write-downs on the 2 projects in the quarter?

Yes. The net -- in our 10-Q, which will be out either later today or Monday at the latest, the net decrease in the Construction segment is $1.6 million. The write-downs were close to $3 million in total for the quarter.

Okay. And I'm just curious because that's not that big a number, and I think you guys have always said that some quarters, some projects do better and some do worse, and over time hopefully it doesn't net out to that big a change and you're more or less on target with where you bid. Why select or why choose to highlight what I think is a relatively small number in terms of the $3 million.

Jack, I think the key ingredient there is that when you're -- when you've got margin expectations in the Construction business that are still in the single digit range and you do have losses, then it does make a larger impact on the overall gross margin for the business. So you're right. When the market was in the mid-teens or low teen range, that probably would not have been as much of an issue. But for us, the way we operate today, is our expectation is to make the budget on every job. And so with lower margins in the sector and a couple of loser jobs, we do believe that they're something that is unusual for us, and that needs to be rectified and taken care of immediately.

And Jack, just to add one more thing to that. Last year in this quarter, we had a net increase of $1.4 million. So period-to-period, the comparison is significant, relative to that.

Right. And I guess in the context of altering your guidance for that segment, that helps provide some color. You didn't -- you maintained your SG&A guidance for the year, I guess at $170 million to $180 million. The quarter was lower than what we were estimating, and there's always an estimate bias, I guess. But is that, would it be toward the lower end of that range? And is that quarterly run rate closer to the right run rate now?

Jack, the key ingredient for that is really going to be the amount of monies expended on the Large Project pursuits in the back half of the year. So as we have noted earlier in the year, when we pushed a lot of these Large Project bids to the third and fourth quarter, that's when our, the S part of our SG&A will increase as we spend more money with engineering firms and our own estimating. So I think you'll see somewhat of an increase on the selling end on the back half of the year. And that's why I still believe our guidance is within line.

I got you. That makes sense. And the Tappan Zee Bridge project of Large Project, can you remind us -- I know you guys are shortlisted on that project, how many -- what's your share of that joint venture and what are we down to in terms of the shortlist?

Well, there's -- as we understand it, there were 3 bids turned in, Jack. And they were turned in on July 27. And we are teamed with 3 other players: Fluor, American Bridge and Traylor. And we basically have about, 1/4 of the job is ours. So we're feeling good. We won't know for 60 days. We've got a great team, our team, our overall group did a wonderful job assembling the bid. And now, it's time to sit and wait. And we will have some oral interviews most likely. A best and final offer discussion most likely, a standard process in the Large Project bidding environment.

And that's a -- that project is $5 billion or so in total, is that correct?

Well, it's published at $5 billion. I'm not sure what our final numbers were going in, but that was the published number.

Our next question comes from Nick Coppola of Thompson Research.

Apart from the Tappan Zee project, are there -- thinking about the $16 billion of Large Projects that you're tracking, is Q3 a big quarter for you? Or are there a number of projects that are potential wins here?

Oh, Nick, yes, yes. The third quarter is going to be significant in our bidding. We're going to bid a host of Large Projects, in fact, I could go down through a long list for you here. We've got work and more work in New York. We've got high-speed rail in California. We've got -- I mentioned the jobs, the Dallas Horseshoe, the I-35 East. All of those -- the I-35 might roll into the fourth quarter, but we've got some very Large Projects hitting in the third quarter. And then on the flip side, in addition to that, we've got some very Large Projects in the fourth quarter as well.

Okay. That's helpful. And then can you tell us more about how the highway bill impacts you, the Construction segment. Some of our contacts are telling us that 2 years isn't really enough, and something more like 5 is what they would need for visibility to commit to long-term projects. So in your conversation with the states, have you heard anything about how folks are approaching projects differently?

Well, Nick, look at it this way, it's pretty much relative to what we've had in the past couple of years, so it's a good sign, even 2 years gives the state agencies, which also passes monies back on to the counties and the cities as well. It gives them more visibility than they've had in quite a while. So the feedback I'm getting is that the state DOTs are actually fairly happy with what they got. They know what they can work with now, and now they can do some form of planning. Ideally, yes, they would like to have a long term 5 or 6 year bill. That's what we're going to work diligently on in the next 27 months to make sure that we get a longer-term bill with even more meat on the bone. But I think they're fairly happy right now, Nick, overall, that they were able to get what they got.

And I think you're going to see states, particularly like California, Florida and Texas really leverage the TIFIA program and take advantage of that.

As you mentioned, if you follow that, that TIFIA, the loan program has been expanded dramatically from basically $122 million this year to $2 billion in the next 2 years, which they can use as a leverage point as Ray LaHood mentioned to put on another, and you'll see a $20 billion, $30 billion, maybe even mid-$30s billion to high-$30 billion worth of work in the next several years. So that's additive to the program. So actually, I think from that perspective, Jacque brings up a really good point. If you were to work that properly, in addition to what the highway bill came out with, it could be a significant increase.

Our next question comes from Sameer Rathod of Macquarie.

You mentioned in your prepared remarks that traditional private guys are putting pressure on margins. Are they being more competitive than what you've seen in recent years compared to, let's say, even '08, '09?

No, I would say, it's very similar. I think that what we are seeing is that, there is a reduced number of bidders overall from '08, '09 and '10. But some of the private sector players are still in the segment -- in the public sector segment, which is continuing to keep the pricing level where it's been for a while.

Right. So -- I mean, the broader understanding is that non-res has been recovering, so I would have thought some of the competitor pressure has been going away, but I guess the competition remains. How much longer do you expect this to remain, the competitive environment?

Well, I think that, you nailed it. You said, it's really when that residential or private sector starts to really gain momentum and people move back into that segment where they're used to working. And I think I mentioned, there is some light at the end of the tunnel. We're seeing some things happening. So I'm hoping that at the end of this year, beginning of next year, we'll start seeing some movement, and our people out in the field in certain markets are starting to see some movement today, but it will take probably the remainder of the year to get a bigger push towards the private sector increasing.

My next question is the capacity to do these larger projects. You stated $16 billion. How do we think about that in terms of labor versus buying more equipment? What kind of road plan do you have ahead of you?

Well, first of all, the key ingredient for these jobs, number one, is to make sure you have the bids correct. And as I mentioned, we've got very disciplined bidding environment, very senior-level of estimating teams. So we have the capacity to bid the work in a very orderly fashion and quality fashion. The second most important thing then comes to project management and how you manage the work on-site. We actually have quite a few of our project executives and project managers that are -- have tremendous capacity to do a lot more work. So we have that waiting as well. When you have the labor and equipment, the equipment will not be an issue. On the labor side, it will depend on the market area in which you're working. Everyone of these markets are different, and we do bring local labor, we hire from the local -- a lot of times of local halls if we are in a union environment, but the local workforce will dictate how the labor on-site. And in today's environment, overall, fairly slow construction environment, labor should not be an issue for the next several years. So I don't think there is any capacity issues to do a lot more work, not only for the overall industry, but for Granite as well.

Right. I guess my last question is on this California High-Speed Rail. There seems to be a lot of controversy in terms of just watching the local news or what have you. I guess what are your thoughts on this actually happening, would be helpful.

Well, to begin with, the governor has made it, I think, a very strong play. That this is something that he wants in California, and the legislature passed the appropriations for it. So we're moving ahead. We believe it is going to happen. There is absolutely opposition out there today. But as our bidding teams are arranging themselves to complete their bids today, the first package for the first phase in the Central Valley is still slated to bid in mid-September, which is not very far away. So I think there's a very strong chance this is going to happen. Now we do understand that the physical work may not begin until sometime in 2013, but I think it's got some real momentum right now. And if the governor continues his strong beliefs for this program, I think it will happen.

Our next question comes from Jim Schwartz of Harvey Partners.

When I look at some of these shortlisted projects for this year and go down the list of Tappan Zee, the I-35 HE, Grand Parkway, California High-Speed Rail, Goethals and the Dallas Horseshoe. If I look at your share for those projects, it's around $3.5 billion, which is 1x -- almost 2x your current backlog. Is this the best bidding environment you've ever seen? I mean, going back in history, I can't -- I don't see a time like this for you guys.

I would say, Jim, it's as good as we've ever seen in the Large Project segment of our business. So I think you are right. And the other thing that we're seeing, Jim, is for that, it's continuing. These larger projects, these megaprojects, another term for them, are continuing to be put out there. And there are -- what I really like about it is the shortlisting. So that before you make the major effort, you know that you're competing in a reasonable environment. So we're very, very bullish on the Large Projects, the megaprojects and the environment we're in, so I think you're absolutely correct.

So we could see almost a doubling of your backlog in the near term if these things work out. And the economics on the Dallas Horseshoe, are you guys 50% on that project, is that correct?

Yes, that's correct.

And that when should we hear about that?

Well, that project is slated to bid in the end of September. So I would suggest that, that would be a job that we would hear by the end of the year.

Our next question comes from Brian Rafn of Morgan Dempsey.

Jim, give me a sense of -- and I can still see those graphs that you showed us out when we visited you guys out in Utah, your historic kind of 65%, 70%, 75% Branch and then heavy civil being the balance plus the material side. Relative to having a record run-up in the residential construction side, homebuilding from 1991 to 2006, how do you see the secular mix of kind of your old traditional Branch turn business and the heavy civil going forward? I mean history doesn't completely repeat itself. You've got such a huge side on the design, build and heavy civil stuff today. How do you see that kind of private sector resurrecting itself?

Yes, you really remember all those graphs. That's a great memory.

It was unique. It made your hair stand up on the back when you look back. I mean, that was pretty interesting. So I'm just trying to get a sense of -- you talked about light at the end of the tunnel.

Yes, so when you think about what we talked about in the guidance today, you're right, Brian. You've seen the Large Project move its way up to the equivalent revenue number as Construction, which is exciting because we believe that the Large Project business will continue to grow, as Jim was just mentioning in the earlier question. And the question, therefore, is, can the Construction business on the other side grow as fast as the Large Project side, and I think that will be -- the longer-term answer is, yes. I think it will balance itself out. That's always been our intent. But I also think, Brian, you're going to see another segment come into play in Granite, which we've been really discussing, which is this diversification segment, which getting into the federal water, power, oil and gas, which will fall outside of our current Large Project environment. It will fall outside of our vertically integrated business environment, and it will roll up as another type of a segment inside the company. So I do anticipate over the long run to see both Large Projects and the local Construction business grow. If you remember, we talked about geographic expansion on the vertically integrated side moving into new markets as well. I also think that we -- when you think about where our growth is going to come from, you need to continue to look at this diversification segment as well.

Yes, okay, that's fair. Just back on, again, on the old turn business. When you talk about private sector, if you look at -- certainly, residential subdivisions, industrial parks, how important is some of that local municipal, county highway, some of that faster turn business, which is not just specifically private sector, but there is a public-sector component, jobs under $20 million, something less than 6 months, how much of that local content will drive the resurrection of that private sector? Or are you really seeing all you're going to get right now?

Well, no. I think you're really -- you hit a good point there. The private sector will couple itself with the local public sector. They'll go hand-in-hand because you're going to have to build infrastructure as you grow the commercial and residential side of the business as well. So you are right on. The cities and counties with a smaller business growth will be in alignment with the residential and commercial growth, they go hand-in-hand. So as we see some light at the end of the tunnel with the residential and commercial side, well, specifically residential, commercial actually is -- got quite a few things going on, you will then see the local work start to increase as well.

Yes, okay. I think that, that's fair. Okay. From the standpoint of your other segment, you talked about solar and power and military, federal, water, oil and gas. Is that going to be organized under -- obviously, it's not a Branch division. Is that going to be organized similar to your design, build side or heavy civil or is it actually, to your comment, a third segment, a third kind of a structured segment relative to how you allocate people and assets and equipment?

Well, Brian, I think over time, as it grows, it will most likely be another segment. As we -- if we begin in some of those sectors in a very small fashion, you could see it roll up in one of our sectors today. The intention would be to roll -- pull it out and create another segment overall.

Okay. Is there any -- you talked, I think, historically, when you talked about having, especially on the Large Project side, the heavy civil side getting the profitability right on bid day, and that we've seen over the last, say, 4 or 5 years, that was really a focus, I think you've got that there. Are there any entrées in that, either solar or power or federal and gas, are there any specific type of early projects that you guys would focus on to kind of set up a beachhead? I mean, it's not an area you want to go in and have a meltdown, you want to kind of select where you have some core competencies. Is there any specific type of project in that area that you'd kind of start off with?

The answer is yes and no. The key ingredient there to get any substantial growth in any one of those environments most likely, Brian, will be some form of acquisition. So if we're going to -- if we do organic growth in some of those environments, which we're already incubating on some of them today in a smaller fashion, then, we will probably tie that organic growth in with some of our geographic beachheads today. But the larger growth, and let's talk about water, power, oil and gas, those kind of areas will most likely see a significant growth through an acquisition and then that will be a much more widespread type of work rather than just focused in an organic beachhead environment. Does that make sense?

Yes, okay, sure. I think that, that's a good point. Let me ask you, in the last couple of years, Jim, you've talked about -- especially in the Large Project area, we really have to focus on the mobility of our -- not so much being in labor, but certainly your design guys, your expediters, how is that kind of mobility played out relative to your culture and kind of as a new foray as to how you actually do construction?

You're right on Brian. The people today, what we've asked especially with our Large Project group, and historically, the Large Project group has been very good at mobilizing and moving from location to location, and I'll give you some examples. Jim was mentioning in the call before of this large work in Texas. So we've got people today that have mobilized from the Northwest and the Southeast and are all in Texas today to help us bid this large number of projects in Texas in the third and fourth quarter. And in addition to that, we have also got their commitment that if we get the work, they will help either to manage the work. So I want to really commend our people. They've done a wonderful job of suggesting to themselves and making them -- committing to Granite that they'll move where the work is. So we're getting more mobility than we have in the past, and that's a big plus because these Large Projects are spread out to the entire country, and we need to have our management and our higher level supervision people willing to move with the job.

Yes, okay, fair enough. Anything kind of on the old Granite Land as far as how many projects do you have left and kind of what are you liquidating? Obviously, that levered certainly to the residential Construction side, but what's going on at Granite Land?

Well, we're still progressing. It's slower than we had hoped due to the current market environment, but we are making progress. About 1/3 of the portfolio is gone, and we're aggressively looking at options to divest of the rest.

It's a little slower with the market, but our teams are really doing a nice job, and we've got a lot of -- the product is on the market today, and we are getting some hits, so it will be just a matter of time.

Yes. And there's 12 projects. There's 7 that we consolidate and 5 that are unconsolidated.

Okay. And then just one just quick comment on the kind of the material side, the quarry side, what -- obviously, you have a lot of capacity there. What kind of -- I'm just curious, maybe West, East, what type of a -- kind of capacity utilization might you guys be running at given -- having civil certainly very strong, but the Branch business, the old turn is a little softer.

Our materials business is one of the segment probably that has been hurt the most with the private sector downturn, specifically in the Western part of the U.S. So we're probably running at less than half of what we have capacity for. So there is a lot of room for expansion in the materials business. And I think that as a private sector starts to come back, that's when you're going to really see the third-party sales move into a different level. Today, I will say -- one thing today is that, we have a larger shift of our material business today moving over into the -- into our own work. And that's why you see a reduction in the revenue side over the third party. We are busy relatively speaking, like you said, it may be half of capacity, but the majority of that is now shipped over into our Construction work.

Yes. What might be your internal usage today, Jim? Would you be 70% or 80% of that?

I don't think it's that high, Brian. But historically, it's been -- even a couple of years back, it was 60-40 on the third-party sales, and it's probably flipping of that today, more like 40-60.

[Operator Instructions] Our next question comes from John Rogers of D.A. Davidson.

I just want to follow up. I guess, in terms of the nonoperating charges in the quarter, when you highlighted the investment in the solar business, but there were some other, I don't know a couple of million dollars in there, anything of note or just collection of things?

It's just a collection of things, nothing really significant.

Okay. And then, Jim, relative to acquisitions, the way you mentioned it could -- it is likely or possible that we'd see something closed before or announced before year end?

It's possible. I would say that we have quite a few irons in the fire at different levels, and I think I mentioned in the last call that there's a possibility we would be able to get something done by the end of this year. And the expectation would be certainly, to get some things done in 2013.

Okay. And still the primary target or idea is something, you talked about the industrial projects or non-road projects?

Correct. It would be more in the power, the water, oil and gas, and in the federal market as well.

Our next question comes from Joe Ritchie of Goldman Sachs.

So the key question I have is really around guidance and your confidence around the guidance that it seems like it's implying a pretty significant ramp in the second half of the year. I know some of that is due to profit recognition. And so maybe if you can help talk us through what you plan to see in terms of profit opportunities in the next 2 quarters, just trying to think about how we should be modeling you guys for the second half?

Well, Joe, we believe -- we are comfortable with our guidance, and I do think that we're going to -- we're hitting on all cylinders in our business in the third quarter like we typically do. Large Projects is continuing to work at a very high level. We have a very good backlog for the third and fourth quarter in all of our segments. So we're comfortable with our guidance. And typically, the majority of our work is completed in the third quarter. And that the real comfort level or maybe the unknown portion of any guidance is to what happens in the fourth quarter. But I believe our guidance is, as always, our best understanding today, and we're very comfortable with it.

Okay. And then I guess you also mentioned on those 2 projects, it does seem like the charge was relatively small on those projects. Just a question regarding -- it seems like those projects are going to be completed in the third quarter. What type of revenue burn do you still have left in this project? I'm just trying to get an understanding for -- if these projects are going to go through with 0 profitability, how we should be speaking about that as well?

I don't have the details on the burn on those in the third quarter, Joe, we can certainly get that for you.

I'll circle back with you on that, Joe.

I'm showing no further questions in the queue at this time. I'll hand the call back to management for closing remarks.

Okay. Well, thank you, everybody. And as always, I want to thank you, all of our investors and everybody else on the call. But before we conclude today, I want to acknowledge our employees from coast-to-coast. On behalf of myself and our management teams around the country, I want you to know how much we appreciate the work you do and the commitments you make to Granite every single day. So thank you, all, for your time today. We appreciate your interest in our company. And if you have any additional questions, please do not hesitate to call us. Thank you.

Thank you. Ladies and gentlemen, this concludes the conference for today. You may all disconnect and have a wonderful day.