JBT Marel Corporation (JBTM) Q1 2020 Earnings Report, Transcript and Summary

Good morning, and welcome to JBT Corporation's First Quarter 2020 Earnings Conference Call. My name is Cheryl, and I will be your conference operator today. I will now turn the call over to JBT's VP of Investor Relations, Megan Rattigan, to begin today's conference.

Thank you, Cheryl. Good morning, everyone, and welcome to our first quarter 2020 conference call. With me on the call are Chairman, President, and CEO, Tom Giacomini; and our Executive Vice President and CFO, Brian Deck. In today's call, we will use forward-looking statements that are subject to the safe harbor language in yesterday's press release and 8-K filing. JBT's periodic SEC filings also contain information regarding risk factors that may have an impact on our results. These documents are available in the investor relations section of our website. Also, our discussion today includes references to certain non-GAAP measures. A reconciliation of these measures to the most comparable GAAP measure can be found in the investor relations section of our website.

Thanks, Megan, and good morning. There has been a tremendous impact on the world, our communities and workplaces since our last call as a result of the COVID-19 pandemic. With the unprecedented challenges created by the pandemic, I am incredibly thankful for our team members at JBT at all levels of the organization who have managed our way through these difficulties to maintain our global operations as a critical supplier to the essential food and air transport industries. Never has it been clear that JBT is a very important mission support in food production and their transport of critical goods around the world. Since the crisis began, we have received many communications from our customers requesting that we continue to operate and support them in their essential activities. And as we navigate this difficult time, we have four priorities at JBT. One, taking all steps to best protect the health and safety of our employees; two, an unrelenting commitment to the care of our customers; three, sustaining the long-term health of our company, and four, maximizing opportunities created by the changes in our end markets. As Brian will discuss, our solid balance sheet and liquidity positions are reassuring, positions we will protect through disciplined capital allocation now prioritized by debt reduction. JBT benefits from an experienced and capable leadership team. Our executives and general managers have responded very quickly to the pandemic, communicating frequently with our employees and instituting policies reflecting the best practices issued by the CDC and WHO including distance work parameters, extensive work-from-home requirements, travel restrictions and policies guiding employees on how to return to work safely post-quarantine. We also moved quickly in the first quarter to align our cost structure with market demand. I'll turn the call over to Brian. He will talk briefly about our first quarter, discuss what we are doing to address the financial impacts of the pandemic and will provide additional color on 2020.

Thanks, Tom, and good morning, everyone. Our first quarter outperformed guidance. First quarter revenue of $458 million was ahead 10% year-over-year, primarily driven by a 20% expansion at AeroTech. FoodTech revenue grew 5% year-over-year on contribution from acquisitions. And FoodTech recurring revenue increased to 50% of revenue in the first quarter led by the strength of the aftermarket parts demand. Orders for the quarter were a respectable $470 million, up 2% year-over-year at FoodTech and 1% at AeroTech, but were light compared to recent trends and our expectations. Segment margins expanded more than originally expected on contribution from strong revenue as well as the initial benefits of cost actions, which I will discuss shortly. Additionally, we generated year-over-year savings from our restructuring program of about $5 million, as expected. With additional help, the corporate expense line and favorable interest and tax expense, partially offset by higher than forecasted M&A costs, we posted earnings per share of $0.90 in the first quarter of 2020 compared with $0.62 in the year ago period.

Thanks, Brian. In the absence of full-year 2020 guidance, we recognize your need to better understand developments in our end markets and how JBT is operating through this time. I'm going to start with AeroTech, where business prospects very greatly by end market. Looking at the revenue breakdown for AeroTech. About 45% of our sales are to airport authorities and related contractors for infrastructure. Direct sales to airlines and ground handlers represent about 40% of sales. The remaining 15% is a combination of defense and cargo markets. The impact of the pandemic on our AeroTech business has occurred quickly.

And we'll begin with our first question, Allison Poliniak from Wells Fargo. Your line is now open.

Hi guys, good morning. First on that aftermarket cadence, I suspect that's holding up better than the OEM side particularly with FoodTech. But obviously, there's been some operational disruptions. Could you may be give us a little bit more color on what you're seeing in the aftermarket? are we assuming it's going to be down sequentially like in line with the overall FoodTech or faring a little bit better here?

Well, good morning, Allison, thanks for joining us. You are correct. These operational disruptions I mentioned in my prepared comments, our ability to access the sites, work more with our customers is certainly in the short-term here impacting our ability to maximize the opportunity on aftermarket. And as a result, it is a bit of a headwind. I'd say longer term, there's going to be some pent-up demand which we should be able to take advantage as the pandemic effects start to moderate and our access facilities improve. But as we think about it, generally for FoodTech, we expect the recurring and aftermarket revenue to hold up better. We expect the equipment to slow more as a result of all our customer interruptions, and there are disruptions managing their facilities. And as a result, you should expect the mix of aftermarket to remain higher, at least as we think about the color heading into Q2?

Great. And then, just on that pent-up demand, Asia is starting to come out of this. Any color in terms of how those markets are recovering for you? Are you seeing some of that come forward? Any more interest in the automation, particularly from that region?

So far, it's in the press. And for a number of our customers, obviously, a lot of their mind share has been on managing their operations, dealing with pandemic impacts, and we're very focused on making sure we're supporting our customers and making sure that JBT is there for them during these difficult times. And over time, as that starts to settle a bit, and our customers start to find their ways through that, Allison, I would expect that those discussions and conversation around automation, food production and safety, extended shelf life, all the technologies that JBT brings will become much more important. And it's our hope as the effects of the pandemic start to moderate, we'll be able to take advantage of those.

Great. And then, just last on the M&A transaction you walked away from. Was that just the effect of the pandemic going on that it might be something you revisit? Or is it just something that you just permanently walked away from? Any color there?

Sure. So as you know, Allison, and as we have talked about on the call, we have a very disciplined M&A process, which includes a robust due diligence process and a lot of financial thresholds that we look to occur. And as the effects of the pandemic started to become more apparent, it was clear to us that financial objectives would be more challenged. And for that reason, we should pause that activity. Certainly, it was a very strategic deal and one that we fit our portfolio very well. And it's certainly something that we could revisit as the markets start to return to a more normal level, and we get a better understanding of how the world moves forward.

Right. Thank you.

Thank you. And our next question comes from Larry De Maria from William Blair. Your line is open.

Thanks. Good morning, everybody.

Good morning, Larry.

First question. I have a few. Obviously, a lot of talk of the protein processing issues. Obviously, Tyson has made some announcements. I guess for the sake of everybody here, do you actually expect that there will be some food shortages? And most of the issues, correct us if we're wrong, they're in the primary, not further in secondary processing. So how is that playing out with you, guys? And have you seen any cancellations yet?

Sure. So the areas as we've talked about. And our customers, particularly on the protein side, are having significant challenges with managing their way through this pandemic situation. And our absolute focus, as we've talked about, is on making sure JBT is providing the best support we can. During this time, from our perspective, we haven't seen any cancellations, but we have seen projects delayed. And aftermarket services, we talked about being delayed because our customers are so vigilant and focused on running their facilities and supporting the production of food. And we've seen those impacts a bit in the first quarter; we expect to see more of those impacts in Q2. And our hope would be as the industry starts to work its way through those, we'll start to be able to reengage and have the conversations around completing the projects and stepping up our aftermarket in support of this equipment that, quite frankly, we're having difficulty maintaining the level that we would like our customers would like as they restricted access because of the effects of the pandemic.

Okay, thank you. And point of clarification, Brian, you've talked about priorities in capital allocation, paying down debt. What would be kind of a range of outcomes that you'd be looking for in terms of debt pay down?

Right. Thanks, Larry. Well, we've run a lot of scenarios, obviously, with various levels assumptions regarding revenue contribution margins. And generally speaking, we would expect the balance sheet to start to contract along with some of the income statement. That said, there's a lot of challenges particularly around the customer deposits which will hurt cash flow. But all in all, we do expect to be cash flow positive this year and pay down debt, but it's just a little early to be able to quantify the exact size of that. But generally, we do expect it to be in a lower debt position at the end of the year.

Okay, thanks. And last question, you guys obviously, you got proactive with some of the discretionary spending reductions, but you also have been working on the other restructuring, right? So I think you got $5 million out of $20 million expected this year, but that $20 million was also continuing to some degree in volume. So what's the current expectation around the other ongoing restructuring that you already had in place for this year?

Yes. Thanks, Larry. So as you said, we did have about $5 million savings in the quarter from the original restructuring plan. During the course of the quarter, we started to see some fair amount of inefficiencies in terms of things like service tech utilization, productivity on engineering. And all those are effectively going to delay those savings until the revenue recovers. As you know, about 2/3 of the savings associated with the restructuring program were associated with volume. And we're predicated on about $2 billion of revenue for the year. With revenue being a good amount below that this year as things unfold, we would expect the savings to return back into the future periods, 2021. And in the meantime, we've taken, as you mentioned, the temporary cost actions. And in the case of FoodTech, certainly in the short-term, as we mentioned on the prepared remarks, the margins have a pretty good chance of holding up in FoodTech but not quite an AeroTech given the larger decline from the revenue impact.

Okay. If I could sneak one more and that was very helpful. So margins declined, you said 300-basis-points-plus sequentially in AeroTech. And then the business flattens out, so we should imply that the second quarter is the bottom in margins, all things being equal, moving forward, right?

Hi Larry, I know simply from my perspective, we gave some color. But for us in JBT, it's very difficult to look in the long run on how these businesses will develop until we better understand the environment and how the world starts to recover from the pandemic. And to be clear, it was color. I certainly don't want anyone to think we are calling a bottom or declaring that until better understand. And then particularly as you look to AeroTech, we talked about the revenue streams and where we would be more comfortable and start to think we're understanding the bottom would be when we start to see a return to some more normal levels of air travel and we better understand the environment for infrastructure investment in 2021. And our intention is as this information becomes more clear to us, and we understand the results of the pandemic and how the world begins to recover to clarify and provide more information as we go forward. But at this point, it's certainly too early for JBT to be calling a bottom or to say there's a big move to recovery in any of our businesses. And we're looking forward very much to the day when things return to more normal, and we understand how the markets are going to play out.

Okay, fair enough. Thanks and good luck.

And our next question comes from Walter Liptak from Seaport. Please go ahead. Your line is open.

Good morning, guys. Thanks for the guidance on second quarter even with all the uncertainty. That's really helpful for us for trying to get our numbers right. I wondered if I could ask about the customers a little bit. The working capital, those numbers looked okay. I wonder if your balance sheet is in good shape, but I wonder if you've had a chance to review your customers' financial liquidity and if there might be some financing-related push out of jobs.

Right. Thanks, Walt. So this is Brian. Yes, I am particularly looking closely at the at receivables, the credit quality. I've spent more time than I normally would in conversations with our divisional CFOs just making sure they're on top of the credit quality and taking additional reviews before they take on large projects. I would say the two areas that we are more keenly focused on would be anything regarding the airlines and ground handlers, as well as on the foodservice side, so we do spend more time looking at that. I've spent some time personally looking at some of the credit quality before we make some of these decisions on projects. And generally speaking, in this environment, you typically would see some slowdown of receivables. That is why we did mention that we're putting incremental resources on the collection efforts to stay ahead of that.

And I'd add a little color, Walt. I think as it relates to go forward investments. We would expect some pressure on capital investment with our customers in this period of uncertainty. And as we talked about sequential slowdowns in food, and that's really more to do with equipment orders being delayed and projects being pushed out in aero side. And as a result, we do expect further there to be some challenges on capital investment on equipment. And we're working our way through that. And we'd expect the world starts to return to a more normal level, that we'll start to see some improvement in that.

Okay, great. Yes just a couple more that might be a little bit quicker. One was the cost that you are taking out that are incremental, are those structural costs? Or are those costs that will come back when you return to more normal operations in 2021? And then the second one was on corporate expenses. What level of corporate expenses are expecting for the rest of the year, either as percentage of sales or dollar amount?

Yes. Well, so the way we think about it, we've been very thoughtful, but also broaden our approach to cost adjustments for the business. We've looked at our working to reduce our spending, certainly, adjusting our labor as best we can. But at the same time, I use the word thoughtful because we want to make sure that JBT is positioned to have a strong recovery and to the extent that we can protect our critical resources, our people who are involved in key initiatives like our aftermarket, our service techs, engineering and support of these new opportunities that we have talked about. To the extent that we can sustain that, we are trying to thoughtfully do that because we believe that making those investments will generate value going forward. And certainly, we want to protect the long-term health of the company. That said, the majority of the cost actions thus far have been temporary. And as we understand how the markets sort themselves and kind of as we start to understand ourselves getting a new normal, we'll make sure that JBT is in the best position to be strong moving forward. Brian, you might want to add a little color around the corporate expenses?

Sure. On the corporate expenses, I could tell you, about 25%, 30% of the temporary cost actions are related to corporate, and that generally would suggest somewhere in the range of a year-over-year reduction in expense of about 25% or so, which would put quarterly expense at about $10 million per quarter, give or take.

Okay, great. Thank you.

Thank you. And our next question comes from Mick Dobre from Baird. Your line is now open.

Thank you. I'm glad to hear you are doing well during this time. I guess, my first sure. My first question, I want to go back to AeroTech. And I'm kind of scratching my head a little bit here because I understand your comment on the 30% sequential decline, but you obviously have a good amount of backlog coming into in Q2. So can we may be talk a little bit about what's happening here? Obviously, we all know that traffic is down and so on, but is it that some of this backlog is kind of getting pushed out in the way folks are accepting deliveries? Or is there may be some other ones here to kind of understand? And related to this, if we understand your comments on margin being down 300 basis points sequentially, that would actually imply very resilient decremental margins on the employed volume decline, which is great. But I'm sort of trying to understand if that's kind of the level of decrementals that we should be expecting in this segment, call it, in the 20% range on a go-forward basis?

Sure, Mig. So as we mentioned, the breakdown of the revenues, what you're essentially seeing and again, it's color. We're certainly not in a position to be providing a guidance as we go forward, as we've talked about. But when I look into the business, what we're seeing is a significant decline in the demand roughly 40%. That's tied to the airlines and ground handlers, and we said that we expect very little order activity. And that tends to be more of a book and ship business for us. A lot of those orders occur in the quarter and are shipped in the quarter, more standard equipment, and so we're seeing that, as we mentioned, declined quite quickly. As you think about the fixed business, and as we talked about it, there's more durable orders, they are infrastructure-related. And what you're really seeing as we kind of think about it is just the interplay between the two. So you have the mobile equipment getting quickly as a result of the decreased demand, and then you have the fixed holding up relatively well. The other piece we did mention in there, though, is that the recurring revenues, the aftermarket in particular because of the reduced utilization of the equipment because there's not a lot of activity with the airlines and the airports right now. That's also a headwind on the AeroTech side. Now as the markets begin to recover, I would expect that to come back quicker than the equipment, right. So, we'd expect that aftermarket recurring revenue to recover more quickly. But certainly, during this period of very limited activity, that's also a headwind in there, and that might be the piece that you're missing a little bit as you start to think your way through the revenues. Brian, you might talk a little bit about the margins?

Sure. I'll talk about the margins. Thanks, Mig. So you're right that all things considered a 300-basis-points-plus drop could have been worse. And the primary reason is the aggressive actions that AeroTech has taken in to protect its expense base. They've been aggressive and very quick to act particularly in the mobile business. So as a result, instead of what you would normally see kind of mid-20s decremental contribution margins, it is more like 20% or so. Going forward, I would expect we'll have to react. And it depends on volume, right. We could take incremental temporary actions if need be. Getting it all the way back down to 20%, if revenues decline from here would be a little bit tougher. So, I'm working off more of an assumption from here more mid-20s if it declined further from here.

And I would agree, Brian. If the revenues continue to be challenged, there'll be additional pressure there.

Appreciate that. That's great color. Then maybe I will ask a question on FoodTech as well. And what I'm wondering here, obviously, this is very, very unusual environment, operating environment, especially for the folks on the protein side. But based on your discussion with customers, how are they thinking about capital expenditures more broadly beyond, obviously, the sort of very near-term effect of operational effects in their plans. Is there a sense here that either CapEx might have to be deferred for a while as they're kind of reconsidering their operations and to some degree, trying to offset some of the challenges they've had this year? Or do you get the sense that there is sort of a renewed appreciation for investment in automation that can actually become tangible business for you over the next couple of years?

Yes Mig, I would say those conversations vary greatly by customer and their particular situation. I would say, absolutely, when our customers do have time, given all that they're managing through on the FoodTech side, to think about the feature, and I mentioned in my comments, there is an appreciation for those investments and how they will enable their businesses, and there's enthusiasm for that. But in the current situation, that's being tempered significantly by not just the shutdowns, but just these tremendous shifts that are happening as we talked about and between many of our customers managing their way from providing for increased demand at retail to less demanded feed service, etcetera. And those are big shifts, and they happened extremely quickly and are consuming a significant portion of our customers' mind share. And when we have the ability to have conversations, there's enthusiasm, but we have to be frank in saying that our customers are absorbed by this right now and making sure they're keeping the food supply chain, working and performing. And the great thing about JBT is we have this ability to support them. We're committed. There's an appreciation for the fact that JBT is putting forth this support during this challenging time, and we are looking to maintain these relationships for the long run. And as the world returns to a more normal situation, we're also making sure we are as I talked about moving those kind of projects forward around automation, around food safety, extended shelf lives, things that are going to be important to our customers going forward as they start to bring their heads a little bit above water, so to speak, and work their way through these challenges, that should be a benefit to us as a company. And I would expect in the short-term that we'll continue to see pressures on the equipment orders because of our customers need to manage their business and having an inability to spend the time they'd like thinking about the future.

Yes. I mean, that makes sense. The opportunity is there, but perhaps the focus is not there immediately.

And secondly, just thinking about our ability to act, we work very closely with our customers, Mig. And when they're thinking about investment, we're in their facilities, we're thinking about throughput, value creation and increased yield, better utilization of labor. And that's a very coordinated process, and we create a lot of value for our customers in JBT by doing that. And that's interrupted right now at some level. And that's why we continue to do the things we need to do and support our customers. And my expectation is that as the as things return to more normal, we'll be able to participate rapidly in that and make that a benefit to the company. And certainly, as you look forward, our broad global footprint and a wide range of product offerings is certainly in support of that.

Understood. Last question for you, Brian. Just going back to free cash flow. I appreciate the comment that it's going to be positive for the year but hopefully so will your earnings. And I'm wondering, as far as your thinking free cash flow versus net income. Do you think based on how working capital works that you'd be able to invest your net income for the year and free cash flow? Thank you.

Certainly.

Yes. Again, because the net income number is going to be really tricky, that answer will be dependent upon the working capital performance. And with the deposits going down, I think there's a decent chance we could be below 1:1. Frankly, I'm planning for that. That said, the cash in dollars, I think, we have a good chance to put up a decent number for the year. Again, as the balance sheet, AR inventory contracts, and we do still intend to have scenario planning a decent amount of EBITDA that should flow through, but it's difficult to pin a number on it.

Understood. Thanks.

And our next question comes from Joel Tiss from BMO. Please go ahead. Your line is open.

Good morning. I have two questions. Two questions. One, I wonder sort of how do we think about the hangover from this the equipment being used a little bit less intensively and just how does that come through sort of in the middle of 2021 or the end of 2021? Like how do we think about that?

Yes. So for JBT, Joel, I believe we will benefit because of these challenges we're having accessing our customers and interacting. I would expect, particularly as it relates to our aftermarket business will benefit as the markets start to return to more normal because the first priority will be on catching up on that maintenance, making sure we're getting in there and making sure that equipment gets sorted out. The food demand remains essentially there. So our hope would be that, that would come back more quickly. And then I think there'll be some thoughts around. Okay, what do the flows of food and beverage look like? Where are the consumers at and then there'll be some thoughts around where the equipment investment needed in support of that consumer activity, and that will take longer as one would expect to start its way through. So if you look to our history, and it was to repeat itself similar to last slowdown, we would expect the aftermarket to be stronger and the equipment to lag more than what you would expect during a normal business level of business activity.

Okay. Is that 50% recurring revenues? Is that unusual just because of the situation we're in? Or is that some new normal run rate?

I would tell you that we've been running in the 40s. And what you are seeing is interestingly, a decline in the equipment activity that obviously buoying up that mix on the aftermarket. But I would also say that when you talk to our businesses, we're not able to realize the level of aftermarket activity that we feel is possible or what our customers would probably appreciate having us support them with because of the operational challenges right now.

Okay, that makes sense. And then last, can you just talk a little bit about some of the longer-term trends that you think might accelerate because of structural changes that happened because of this pandemic? Automation and sanitation and things like that?

Right. So from JBT's perspective, we certainly see the need for increasing automation and also just rethinking the facility so that certainly, there's been commentary around how closely people have to work and some of the challenges around that. So one way to solve that is implementing more automation in the facilities, so there aren't quite so many people required, right? And that's what JBT does, and we'll look to do more of that. Also, we would expect the demand to reach an equilibrium over time as the pandemic eases. Overtime, we would expect more restaurant activity, quick service, convenience stores start to see a little bit of improvement, and that will help balance the flows for our customers. Food safety will be paramount, as you mentioned. JBT's an expert in that area. It's important for us to make our technologies available. And then, there's interesting technologies that we have available around extended shelf lives so that the food doesn't have the higher waste profile and the quality of the foods higher toll projects to increase capacity in our equipment, where there remains strong demand on packaged goods, which is the few prior years, as we've talked about, have been a little slower. Those will all start to realize as we start to see and hopefully experience in the world, some return to more normal activity. But it's too early for us to really be able to definitively speak to that in terms of a quantitative thought around it. And as we've discussed, we're just positioning JBT to take advantage of that as we transition through this and making sure that we're taking really, really good care of our customers during this time.

Okay, great. Thank you.

And our next question comes from Andrew Obin from Bank of America.

I hope everybody is staying safe for all the information. Just a question on the supply chain. Just sort of follow-up on Joel's question. I guess you highlighted that sort of, I guess, shutdowns led to some constraints. Are you rethinking the supply chain just generally in the aftermath of the trade war? And what we're seeing, the shutdowns? Are you thinking about consolidating, maybe consolidating in certain regions? Also, would love to hear which regions have held up better than others in terms of reliability of the supply chain under these circumstances.

Yes. So as it relates to the supply chain, for our operations, fortunately, given the critical nature of the industries we support, we have been able to stay operational primarily in the lion's share of our facilities through a lot of great work for our people, which I'm very appreciative of, but we have seen some intermittent challenges. Certainly, Mexico is concerning. There's been some reduction in flow from China. Not a huge issue for JBT, we don't source a lot in China currently, but there's been some concerns there. And then out of the European countries, particularly Italy has a pretty robust good equipment supply chain and a lot of technology comes out of there. And so far, overall, we've been able to manage our way through that, but we see some challenges going forward, both on availability and also costs, right? The logistics are a big part of supply chain. Transportation costs are increasing, air freight, if you need it because you have supply chain constraints are meaningful. And as we look forward, we've always thought of our supply chain as being regional, and you'll probably see us do more of that to better protect the company. So making sure that we have the flexibility to move between low-cost sources and regional sources that have higher levels of assurance, and we'll look to balance that. So there's work to be done there, it hasn't all been completed. And we've mentioned that there could be headwinds as we head forward, not just in terms of our margins, but also in terms of our revenues as a result of that. But I'd say materially, we've done a pretty good job so far, and we're working to make sure we continue on that trajectory.

And just to follow-up on free cash flow; one of the companies we cover also has had sort of an issue with deposits being delayed from a seasonal perspective, just second quarter ended up being quite a bit weaker because of that phenomenon than you otherwise would expect was cash flow shifted toward the second half. Can you just talk a little bit about seasonality of your free cash flow, given sort of the unusual nature of this year, anything we should be aware of in 2020?

Sure. Generally speaking, our back half is typically better than the front half. And frankly, typically, our first quarter is negative as you start to build inventory for the future quarters. And then as you pay off incentive compensation from the prior year. So actually, having a positive cash flow in Q1, while a little bit short of expectations was actually pretty good news, particularly under the circumstances. Q2 could be more pressured generally on the deposits as we get to, I'll call it, a new level of go flow of activity on the equipment. That said, I would still expect the back half to be a little bit better than the front half.

But what you are saying, it sounds like it's just going to be not that unusual from a normal annual pattern.

Not particularly. Obviously, with the caveat that things are moving around quite a bit and our visibility is limited. So I say that very much with some in surety is how things are going to unfold over the next quarter; so we'll have much better visibility this time next quarter.

No, I can appreciate that. Thank you so much.

Thank you.

Thank you. And that concludes the questions in the queue at this time. I'll turn the call back to Mr. Tom Giacomini for closing remarks.

As we end this call, I would like to thank our callers and most importantly, recognize the tremendous dedication and effort that has been put forth by our JBT team members to support our customers and company during this challenging time.

Thank you very much, ladies and gentlemen for joining us today. This concludes our call. You may now disconnect.