Kadant Inc. (KAI) Q1 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by and welcome to the Q1 2020 Kadant Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker for today, Michael McKenney, Executive Vice President and CFO. Sir, you may begin.

Thank you, Towanda. Good morning everyone and welcome to Kadant's first quarter earnings call. With me on the call today is Jeff Powell, our President and Chief Executive Officer. Before we begin, let me read our Safe Harbor statement. Various remarks that we may make today about Kadant's future plans and expectations, financial and operating results and prospects are forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to known and unknown risks and uncertainties that may cause our actual results to differ materially from these forward-looking statements as a result of various important factors, including those outlined at the beginning of our slide presentation and those discussed under the heading Risk Factors in our annual report on Form 10-K for the fiscal year ended December 28th, 2019, and subsequent filings with the Securities and Exchange Commission. In addition, any forward-looking statements we make during this webcast represent our views and estimates only as of today. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views or estimates change. During this webcast, we will refer to some non-GAAP financial measures. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the non-GAAP financial measures to the most directly comparable GAAP measures is contained in our first quarter earnings press release and slides presented on the webcast and discussed in the conference call, which are available in the Investors section of our website at www.kadant.com. Finally, I wanted to note that when we refer to GAAP earnings per share or EPS and adjusted EPS on this call, we are referring to each of these measures as calculated on a diluted basis. With that, I'll turn the call over to Jeff Powell who will give you an update on Kadant's business and future prospects. Following Jeff's remarks, I will give an overview of our financial results for the quarter, and we will then have a Q&A session. Jeff?

Thanks Mike. Hello, everyone. Thank you for joining us this morning to review our first quarter results and discuss our business outlook for 2020. We had a strong start to the first quarter, but as the global pandemic took hold, we saw a deterioration in the general economic environment. Before getting into the details of our Q1 performance, I'd like to take a few minutes to update you on our operational response to COVID-19. The rapid spread of COVID from Asia to Europe and then to North America led to an incredible change in our operating environment and the global economy. We, like everyone else, have been affected in many ways by this pandemic. Like other critical infrastructure industry partners, we worked first to provide a safe work environment for our employees and then adapted our operations to continue serving our customers who are making life-sustaining goods available to people around the world. We are grateful for all of the essential workers who continue to perform their duties to help get us through this pandemic. Specifically, I'm grateful for our committed and resilient workforce of 2,800 employees who have performed exceptionally well under extremely challenging circumstances. Thank you all for the work you have done and you continue to do. We have only had one employee who has tested positive for COVID virus, and I am pleased to report that person has now recovered. As of today, no other employees in any of our locations have tested positive for the virus, and all 20 of our manufacturing locations around the world are fully operational. Our strong footing in China gave us an early insight of this outbreak, allowing us to better prepare our manufacturing facilities and supply chains in other regions. We continue to take precautions to not only protect the health and safety of our employees and their families but also to continue to meet the needs of our customers and other business partners. Most of our customers have continued their operations and many of our packaging, tissue and food processing customers have experienced a surge in demand for their products. We have continued to supply parts and other consumables as well as provide emergency services to keep our customers' critical machines running. We are very proud of the role we are playing during this time to help our communities in the world get through this difficult period. As part of our regular contact with our key suppliers, we routinely assess potential for supply chain disruptions or material shortages that may affect us. At this time, we believe any disruptions will be minimal. We procured additional raw materials and components with longer lead-times to ensure we can respond quickly to our customers' needs. Based on feedback from our customers and our internal KPIs, we are meeting this challenge. As a company with market-leading brands and businesses going back well over 150 years, we take the long view. We believe we are well-positioned for potential long-term socioeconomic shifts that may result from this pandemic. Our balance sheet remains healthy and our liquidity position is solid. Strong cash flows have always been a strength of Kadant, and we expect this will continue as economies begin to reopen around the world. Mike will discuss this in more detail in his remarks. Our first quarter financial performance came in as forecasted but was impacted by our customers' requests to delay projects and service work due to COVID. We experienced declines in revenue and bookings as expected compared to the record set in Q1 of 2019. Our book-to-bill ratio was a solid 1.1 in the first quarter, and our backlog remains solid at $183 million at the end of Q1. Our Parts & Consumables revenue made up 66% of total revenue, which is the same percentage as the prior year period. Growth in our Parts & Consumables business continues to be a key strategic initiative, and the relative stability of this revenue stream is reflected in our strong cash flows. Many of our customers have been running at near-100% capacity since early March with little or no stoppage for repairs or maintenance. It's our belief that as the travel restrictions ease, repairs, maintenance and upgrades that have been postponed will proceed. Our cash flow from operation was $6 million in the first quarter, which is typically impacted by the payments of our annual incentive program, and this year was also impacted by settlement costs associated with ending of the supplemental benefit plan related to our recently terminated pension program. Overall, our financial performance was good in the first quarter despite the progressive deterioration of global business conditions towards the end of the quarter. Next, I would like to comment on our new reportable operating segments that we announced last week. Over the last several years, we have grown -- significantly grown our business and seen a transition from a heavy concentration in pulp and paper to broader industrial markets. This shift has been strategic as we pursued aggressive organic growth initiatives into certain process industries and made acquisitions to expand our product portfolio and the markets we serve. We realigned our operating segments to better reflect our strategic focus and to aid in communicating our strategy and growth story. The three new segments are Flow Control, Industrial Processing, and Material Handling. The Flow Control segment includes our fluid handling and DCF product lines and is our most diverse in terms of industries served. While its key markets include packaging, tissue, food and metals, we are also active in a variety of general industry sectors. This operating segment had approximately $250 million in revenue in 2019 and has numerous growth opportunities, be it market penetration, new market entry and acquisitions. Industrial Processes segment includes our stock preparation and wood processing product lines. This segment is most closely linked to the forest products industry with a large installed base in recycled and virgin paper mills, OSB plants and sawmills. Its primary end markets include packaging, tissue, wood products, and alternative fuels. This operating segment had revenue of approximately $300 million in 2019. Then our third operating segment is Material Handling. This segment includes our conveying, screening, billing and fiber-based products. Like the Flow Control segment, the Material Handling segment serves a diverse set of industrial and commercial sectors, including aggregates, mining, food processing, pharma, waste management recycling, agriculture, and others where bulk and discrete material handling is required. This segment had revenue of approximately $150 million in 2019. Slide eight shown here illustrates our 2019 revenue as reported by product line and as recast based on the three new reporting segments. You can see Flow Control made up approximately one-third of total revenue, while Industrial Processing and Material Handling made up 42% and 22%, respectively. We believe this simplified and streamlined segmentation will better serve the investment community and our business leaders as we seek to clearly communicate our strategic growth initiatives and performance across our business. With that introduction of our new operating segments, I'd like to begin our Q1 business review with our Flow Control segment. As shown on slide nine, our Flow Control segment saw a decline in first quarter revenue of 7% to $57 million. While demand for aftermarket parts was solid and made up 69% of total revenue in the quarter, customer-requested delays in capital project execution and service work due to COVID outbreak put downward pressure on our revenue performance. On the other hand, adjusted EBITDA increased 2% to $15 million, and we saw a nice improvement in EBITDA margin to 26%. Most customers we serve in this segment are designated as critical industry manufacturers and have continued their operations with enhanced safety protocols and limited supplier access. Capital project activity slowed from the pace seen in the early part of Q1, but we are still seeing projects move through the pipeline. Looking ahead, we expect Q2 to be soft on the service and capital project side but expect our parts business to be relatively stable as customers continue to operate. Our Industrial Processing segment faced steady headwinds in Q1, with protracted shutdowns in China negatively impacting revenue and bookings during the quarter. In addition, the historical record demand for capital equipment we experienced in 2018 and 2019 for our wood processing products also makes for tough comparisons in 2020. As a result, revenue in this segment was down 10% to $65 million in Q1 and bookings were down 17%. Our Parts & Consumables bookings were solid and made up 72% of total bookings in the first quarter. While capital project activity is moving forward, we are expecting some delays and uncertainty in the timing as a result of COVID-19. Nearly all of our customers are designated as critical infrastructure manufacturers, and our packaging and tissue customers, in particular, are seeing a surge in demand. Turning now to our Material Handling segment. While revenue and income were down slightly, bookings were at an all-time high of $42 million. This was driven by increased demand for underground conveying systems used in various mining applications. Adjusted EBITDA declined 4% to $7 million, and our adjusted EBITDA margin was down modestly to just under 19% for the quarter. Looking ahead, we believe this segment has an upside potential in its aggregates market if there's an increased infrastructure and spending. In addition, we are seeing some evidence of stronger demand for our fiber-based products used in lawn and garden products as more homeowners are under stay-at-home orders. While the last six weeks have proven to be extremely challenging to navigate with many unknowns, we remain confident in our ability to manage through these unprecedented times, and we will continue to be there for our customers. As we look ahead to Q2 and the remainder of 2020, the uncertainty and rapidly evolving environment limit our visibility to accurately forecast the timing of orders and the speed of the economic recovery. Therefore, we have decided not to provide guidance for the second quarter and are withdrawing our full year guidance for 2020. Kadant has had a long and tested history of strong cash flow generation and resilience. We will continue to focus on our strategic initiatives and are well positioned in the future. I'd like to pass the call over to Mike for a review of our Q1 performance now. Mike?

Thank you, Jeff. I'll start with some key financial metrics from our first quarter. Slide 14 is a summary of some of the key financial metrics that I'll comment on over the next few slides. Our diluted EPS was $1.09 in the first quarter, up 14% compared to the first quarter of 2019, which included $0.28 of acquisition-related expenses. Diluted EPS of $1.09 in the first quarter exceeded the high end of our guidance range of $0.80 to $1.08. We provided this large guidance range in February due to uncertainties surrounding the impact of COVID-19 on our business. We did experience shipping delays and some operational inefficiencies during the quarter due to COVID-19, which started with the government-mandated shutdowns at our Chinese operations. Additionally, travel restrictions at times prevented us from connecting with customers and made servicing our customers challenging. Consolidated margins were 42.9% in the first quarter of 2020, up 170 basis points compared to 41.2% in the first quarter of 2019. 130 basis points of this increase was due to the negative effect from the amortization of acquired profit and inventory in the first quarter of 2019. Consolidated gross profit margin increased 200 basis points sequentially in the first quarter of 2020 due to a higher overall percentage of Parts & Consumables revenue, which represented 66% of revenue in the first quarter of 2020 compared to 60% last quarter. The increase was also driven by higher margins achieved on Parts & Consumables in the first quarter this year. SG&A expenses were $45.6 million or 28.7% of revenue in the first quarter of 2020 compared to $49.3 million or 28.8% of revenue in the first quarter of 2019. The decrease in SG&A expense included a $0.7 million decrease from a favorable foreign currency translation effect and a $1.8 million decrease due to acquisition-related SG&A expenses in the first quarter of 2019. Adjusted EBITDA decreased to $27.3 million or 17.1% of revenue compared to $30 million or 17.5% of revenue in the first quarter of 2019 as a result of lower revenue. Operating cash flows were $6.2 million in the first quarter of 2020 compared to $9.9 million in the first quarter of 2019. We used $15.5 million of cash for working capital, which included the payment of annual performance incentive compensation and $2.4 million to settle a supplemental retirement plan at one of our U.S. operations. As we have noted in the past, historically, the first quarter has been a weak quarter for operating cash flows, primarily due to the payment of annual performance incentive compensation. We had several notable non-operating uses of cash in the first quarter of 2020. We paid $2.7 million for capital expenditures, paid down debt by $2.6 million, paid a $2.6 million dividend on our common stock and paid $2.3 million in tax and withholding tax payments related to the vesting of stock awards. Free cash flow was $3.5 million in the first quarter of 2020 compared to $7.7 million in the first quarter of 2019. Let me next turn to our EPS results for the quarter. In the first quarter of 2020, both our GAAP and adjusted diluted EPS were $1.09. In the first quarter 2019, GAAP diluted EPS was $0.96, and our adjusted diluted EPS was $1.24. The $0.28 difference was due to acquisition-related expenses. As shown in the chart, the decrease of $0.15 in adjusted diluted EPS in the first quarter of 2020 compared to the first quarter of 2019 consists of the following: $0.34 due to lower revenue and $0.01 due to a higher effective tax rate. These decreases were partially offset by $0.09 due to lower operating costs, $0.07 due to lower interest expense and $0.04 due to higher gross margin percentages. And collectively, included in all the categories I just mentioned was an unfavorable foreign currency translation effect of $0.03 in the first quarter of 2020 compared to the first quarter of last year due to the strengthening of the U.S. dollar. Looking at our liquidity metrics on slide 17, our cash conversion days, which we calculate by taking days in receivables plus days in inventory and subtracting days in accounts payable, was 119 at the end of the first quarter of 2020 compared to 110 at the end of the first quarter 2019. This increase was driven by a higher number of days in inventory. Working capital as a percentage of revenue was 14.2% in the first quarter of 2020 compared to 12.2% in the fourth quarter of 2019 and 14.9% in the first quarter of 2019. Our net debt, that is debt less cash, decreased $70 million or 23% to $233 million at the end of the first quarter of 2020 compared to the first quarter of 2019. Our leverage ratio, calculated in accordance with our credit facility, decreased to 2.04 at the end of the first quarter 2020 compared to 2.33 in the first quarter of 2019 due to the significant pay-down of debt in the past 12 months. At the end of the first quarter of 2020, we had $141 million of borrowing capacity available under our revolving credit facility, which matures in December of 2023 and we have access to an additional $150 million of uncommitted borrowing capacity under this agreement. Under our current outstanding debt facilities, we have less than $300,000 of mandatory quarterly principal payments on our real estate loan. Other than that, we do not have any mandatory principal payments on our debt facilities until 2023. We also have access to $115 million of uncommitted borrowing capacity through the issuance of senior promissory notes under our note purchase agreement. We believe that our cash on hand, operating cash flows and access of available credit provide us with sufficient liquidity to meet our capital requirements and navigate this challenging environment. Even though we are in a position to repay additional debt and continue our deleveraging efforts, at the end of the first quarter, due to the uncertainty effects of COVID-19 on our business and out of caution, we chose to keep these funds in our bank accounts. We have been conserving cash by reducing operating expenses, reducing capital expenditures, managing our working capital, and suspending any voluntary principal payments for now on our long-term debt. We have continuously maintained a conservative financial profile as exhibited by the strength of our balance sheet and our bank leverage ratio, which was essentially consistent with the prior quarter at 2.04. Regarding guidance, the current environment has certainly made forecasting quite difficult. We are experiencing delays in anticipated bookings due to a reduction in capital expenditures by our customers and expect continued customer-requested delays related to certain capital projects in our backlog. Given the current uncertainty and our inability to accurately forecast the timing of orders, we will not be providing guidance for the second quarter and are withdrawing the guidance for full year 2020, which we provided on our February earnings call. We will reevaluate providing guidance next quarter. While we are not providing guidance, I would like to provide a few directional comments on our outlook for the year. We anticipate the second quarter will be a very challenging quarter and will likely be our weakest quarter of the year. Our revenue for the year could decrease roughly 6% to 10% from our original estimate that we gave on our February earnings call. I would like to note here that the recent strengthening of the U.S. dollar has had a meaningful role in this estimated decrease. Approximately a quarter of this expected decrease is attributed to the strengthening of the U.S. dollar. A few other directional notes. We would anticipate some pressure on gross margins as a result of the decrease in revenue and, similarly, an increase in SG&A as a percentage of revenue from our earlier guidance range. On a positive note, we would expect net interest expense to decrease to $9 million to $9.5 million, down $1 million from our previous guidance range. In addition, we may delay certain capital expenditures to future periods if weak market conditions persist. And as a result, capital expenditures could be in the $6 million to $8 million range, down from our previous guidance of $12 million to $14 million. We understand these are extremely uncertain times as every day our team seems to learn something new. Given the lack of visibility into what the future holds across our end markets and geographies, it's difficult to provide firm guidance at the moment. However, we believe our directional comments provide a deeper insight into the environment we are seeing today and how our healthy balance sheet, strong cash flows and recurring revenue streams help position our business to navigate these new realities. That concludes my review of the financials, and I will now turn the call back over to the operator for our Q&A session. Operator?

[Operator Instructions] Our first question comes from the line of Chris Howe with Barrington Research. Your line is open.

Good morning Jeff and good morning Mike.

Hi Chris.

Good morning Chris.

Good morning. Lots of areas of interest here based on your comments thus far, but I'll try to stick to a few key points here. First, starting with what you saw in Parts & Consumables in the first quarter, I know guidance was withdrawn on a quarterly and on a yearly basis, but perhaps there's a little bit greater visibility into the growth that you're seeing within Parts & Consumables. Perhaps you can speak to what your outlook is on this, generally speaking, and some different positive drivers that you're seeing within Parts & Consumables on a segment level basis.

Well, I think, as you might imagine, Chris, there are certain sectors that are experiencing a surge in demand and, therefore, are using more consumables and generating more need for replacement parts. In particular, our customers that are serving the tissue market, in particular, the at-home tissue market, which is quite different from the away-from-home tissue market, as well as our customers that are providing packaging that goes into the e-commerce sector and also in the food sector as people shift from eating out to eating at home, they buy food in small packages that are designed for home use, and so that demand is up where restaurants tend to get their products in bulk. So, we're seeing some customers that are having near-record demand for their products. And their consumables and parts are increasing for them. One of the issues you often have is they really can't take downtime as they normally would to do some maintenance work. So, there's always a little bit of a question on timing. But eventually, they will have to. They're consuming more of our parts and, at some point in time, will have to take some downtime to do some maintenance and repairs. And then we have other sectors that are going to experience a slowdown. So, of course, they will consume less in the parts side. So it really is very, very specific, I think, to our particular customers. And that's pretty much the case, I think, across all of our geographic markets. Everybody -- there's been a big, of course, kind of shift, right, in living as everybody's kind of stayed at home. And so the consumption has picked up for the at-home products and has declined for the away-from-home products.

Is it appropriate to think that once we, hopefully sooner than later, get on our path towards a recovery from this economic environment, with these customers running at full capacity for an extended period of time, that the recovery will be accelerated or led by perhaps a snapback in Parts & Consumables as they service these machines?

Yes, I mean I think -- we've always said that our Parts & Consumables pretty much are a function of operating rates. And all of our customers are operating now. So, to the extent they continue to operate, we think that will be the more stable of our business, of course. But there'll be two things that will probably happen. People who are delaying maintenance work and repair work right now will, well, at some point, have to perform that work. And then people who are just running at a lower production level as that economies recover and that production level increases, their consumption of parts will increase also. So, we would expect to see kind of two effects there: one being, as you said, kind of a snapback from the delays that are taking place now for the customers that are busy and then just an increased consumption as people start to ramp back up production.

Thank you. That's very helpful. And one last question here just as it relates to what Mike discussed about the different methods of cash preservation that are being implemented for this fiscal year, perhaps some color on that as it relates to how you might see that going into next year. A lot of that depends on the pace of the recovery but just thinking of that in light of your ongoing strategic objectives for potential candidates within the M&A opportunities.

Yes. So, as is prudent right now, we, like most others, have put measures in place to conserve capital. I would say assuming that things kind of, over time, start to open back up again, we'll probably start to increase our capital expenditures as they were originally planned for production increases and operations improvements. On the M&A side, that's an ongoing kind of a long-term, if you will, process. And we really haven't put, really, any constraints on our people as far as looking at opportunities. If we find the right opportunity and it's a good strategic fit for us, we will -- I think we will continue to pursue that. These tend to be a long-term process. And so we really are really kind of going to full speed right now in sourcing and discussing strategic fits within our company. And right now, I don't envision us changing that, unless this thing was to get substantially worse for a very, very long duration.

That's very helpful. Thank you. That's all I have for now and I'll hop back in queue.

Thank you. Our next question comes from the line of Walter Liptak with Seaport. Your line is open.

Hi, good morning guys.

Hi.

Good morning Walt.

I wanted to ask about the comments, Jeff, that you made about the deterioration that happened. And obviously, we're all trying to deal with the same thing. But just maybe trying to get a little bit better understanding of the backlog. What percentage of the backlog or the projects in backlog got delayed? And what are customers saying? Like, the problems are obvious, but are they saying, hey, hold off indefinitely or hold off until the third quarter, check back with us in a month? Like, what are the conversations like?

Yes. So, we had -- there was a little over $6 million, Walt, that was---

Revenue.

Revenue, so within backlog, that was delayed, that we're aware that was delayed. And those delays are really -- have just been to -- largely been to quarters within 2020, so second quarter, third quarter. Some of them were delays caused by the COVID issue in terms of logistics and some were delays just on the ability of the company purchasing the goods to put them in place and utilize them currently. So, I think on the booking side, I think some of the customers, of course, just as we have started to be a little more cautious and prudent in capital expenditures, our customers have, too. So, I think on new capital projects, we are seeing some caution there. We've seen some announced reductions in planned capital expenditures for the year. And that will somewhat be a function of the particular market and the geography. So, we're seeing some stronger activity in some areas and weaker activity in others. So that will be probably based on the markets and the geography as to how quickly we see capital projects starting to spool back up.

Okay, great. And I didn't hear too much about any kind of special cost cutting or trying to reduce levels of spending. I wonder if you could just talk about that, what you're doing to mitigate this, the pause that's going on in the business.

Yes. Sure. So, obviously, Mike mentioned that we've reduced our planned capital expenditures by quite a bit. We also are trying to control costs. And as you might imagine, we are not spending a lot on traveling now, so that's down. Mike, I think you had a list of things that--

Yes, I would say on the, as Jeff mentioned, any discretionary, so nonessential travel, meetings, of course, we're pulling back on that. The other thing I would mention, Walt, is we try to staff our operations for kind of a -- I wouldn't say for the peak but more for an even flow. So, when we -- when demand increases, we outsource components, and we outsource some of the labor also. So, when things get soft, we pull components back in, we can manufacture in-house. And if you will, that outside labor that we've contracted, that's more of a flex labor pool that we can remove.

Yes, I mean as of right now, Walt, our business activity level is still strong enough that we don't envision mass furloughs or layoffs or anything like that. I mean most of our customers are operating. We're operating under -- albeit challenging circumstances in some areas, but we're still in full operation. And so as of today, we don't have plans for major personnel reductions. Those are -- our people are our most critical asset. As you know, they are very long tenured. Our people have been with us a long time. They're very hard to find. And the business conditions right now certainly would not warrant us having any significant layoffs.

Okay, that's great. Other companies that we follow are not in that boat, so that sounds great. Maybe as a last one for me, I wonder with the new segments, if you could just update us on the long-term growth rates for each one. Are they all about equal or do you expect that maybe one of the three new segments could grow faster? And then in terms of M&A opportunities within the three segments, which have the best opportunities?

One of the things that we like about our segments is that it gives us pretty broad diversity. And so you will notice that, right now, the industrial processing side was down a little more than the others. But of course, the prior couple of years, they were quite strong. In fact, the wood processing was very strong. And so we think we have some nice diversification, which -- actually, not only geographically but within the markets we serve, which we like. That was kind of -- that's by plan. As far as growth opportunities, again, they vary somewhat. I think the acquisition side; we're looking at acquisitions in all three segments. I would say we have opportunities we're following and discussions with companies in all three areas. The industrial side, of course, which consists of our stock prep and our wood processing, that's a side that has very, very high market share. And so by definition, there's probably less acquisition opportunities and growth opportunities there, not that there aren't any, there are, but it probably has lower -- has less opportunity because they have such very high market share to start with. The other two segments, Flow Control, which is a very, very broad industry, of course, and the Material Handling sector, I think, although we have nice market share, it's not quite as high. They're big industries. And so there's probably more growth opportunities in Flow Control than Material Handling just because of the size of the markets and our market share in those.

Okay, great. Thank you.

Thank you. [Operator Instructions] I'm not showing any further questions at this time. I would now like to turn the call over to Jeffrey Powell, CEO, for closing remarks.

Thank you, operator. Before wrapping up the call today, I just want to leave you with a few takeaways that give me comfort in these uncertain times. First, Kadant has a proven track record of cash flow generation. And even during the worst of times, we continue to meet the needs of our customers and employees, and we are prepared to meet this present challenge head on. Second, our Parts & Consumables business provides a relatively stable and profitable revenue stream that benefits from our large installed base around the world. And third, our liquidity position is solid and further enhanced by our strong cash flow generation. I want to thank you for joining the call today. We look forward to updating you next quarter and please stay safe.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.