MasterCraft Boat Holdings, Inc. (MCFT) Q4 2019 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Q4 2019 MasterCraft Boat Holdings Earnings Conference Call. At this time all participants are in a listen-only mode. [Operator Instructions] As a reminder, this call is being recorded.I would now like to turn the call over to Tim Oxley, Chief Financial Officer. You may begin.

Thank you operator, and welcome everyone. Today's call is being webcast live and will also be archived on our website for future listening. Joining me on today's call is Terry McNew, MasterCraft Boat Holdings President and Chief Executive Officer. Our agenda includes a strategic overview by Terry, followed by my analysis of the financials. And Terry will discuss our expectations for fiscal 2020, followed by the Q&A session.Before we begin, we'd like to remind participants that the information contained in this call is current only as of today, September 12, 2019. The Company assumes no obligation to update any statements including forward-looking statements. Statements that are not historical facts are forward-looking statements and subject to the Safe Harbor disclaimer in today's press release.Additionally, on this conference call, we would discuss non-GAAP measures that include or exclude special or one-time items not indicative of our ongoing operations. For each non-GAAP measure, we also provide the most directly comparable GAAP measure in our fiscal 2019 fourth quarter earnings release, which includes a reconciliation of these non-GAAP measures to our GAAP results.Before turning the call over to Terry, I'd like to remind listeners that there is a slide deck summarizing our financial results in the Investors section of our website.With that, I’ll now turn the call over to Terry.

Thanks, Tim. I'd also like to thank everyone for joining us today. As you saw from today's press release, MasterCraft Boat Holdings delivered strong operational results in the fourth quarter closing out our fiscal 2019 on a strong note.For the year, net sales increased more than 40% to $466.4 million, adjusted EBITDA increased nearly 24% to $79.3 million, and fully diluted adjusted net income per share grew nearly 31% to $2.81 per share.Despite many headwinds faced throughout the year including import tariffs, adverse weather, throughout the country during the selling season, especially in June, and the macroeconomic uncertainty, our team once again generated record levels of net sales and adjusted earnings. Moreover, our strong cash management practices enabled us to significantly reduce our total debt with pro forma net leverage at 1.3 times adjusted EBITDA at year end versus 2.1 times when we acquired Crest in October 2018.Our MasterCraft brand gained market share in the towboat segment over the last 12 months driven in large part with several highly successful product launches over the course of the past year including the X24 and X22.MasterCraft continued its run as the undisputed industry innovator in the towboat category according to the National Marine Manufacturers Association, and Boating Riders International receiving its sixth consecutive innovation award in a row and eight in the last 10 years. This is a remarkable achievement when you consider no other towboat manufacturers received the innovation award more than once.Our continued investments and tireless dedication towards innovation have created a legacy that's unrivaled in the industry. As we transition to model year 2020, MasterCraft’s entry level series, the NXT was completely redesigned with the NXT20 and the NXT22, offering our customers even more value, performance, and features, including an upgraded base engine, a new helm experience, an enhanced seating layout, and an optional cool feel interior.Our NXT series has been a breakthrough success for the company since it was introduced in 2015 and continues to be a growth avenue for the brand. A third product launch at MasterCraft will be announced later this month in September rounding out our model year 2020 introductions and complementing our balanced product portfolio. Fresh models and new innovations are the lifeblood of the MasterCraft brand, and we are excited about this year's model lineup.Turning to Crest, since we acquired the business in October of 2018, the brand has continued its market share gains finishing the fiscal year with number eight market share in the highly fragmented Pontoon segment. As we develop a similar product development and innovation process at Crest that we have at MasterCraft, we believe we can drive Crest to a top five market share spot in the Pontoons segment over the course of the next two years.The past nine months, we've been focused on rationalizing Crest’s current product portfolio and anticipate bringing new models to market in the near future. In addition, we've made significant progress on several operational initiatives begun after acquisition having increased production capacity with minimal capital expenditures required. While still early, we believe Crest can grow its gross margin profile from the mid-teen percentage at the time of acquisition to the low 20% range over the next few years, driven by volume gains and the implementation of our operational excellence playbook.NauticStar continues to be a top six market share player in the highly fragmented saltwater fish and deck boat segments despite a contraction in the overall saltwater fish market. We remain committed to the growth strategy we developed at the time of the acquisition, which consisted of dealer growth, new product development, and operational improvements.However, NauticStar has continued to experience market wide challenges that have impacted the business’ ability to grow at the rate that was originally estimated when it was acquired in 2017. Specifically, NauticStar’s core market, the saltwater fish boat market has seen slowing retail demand, especially for boats less than 25 feet in length. These models represent a significant percentage of the brand's current model mix. In response, we’ve pulled back production on smaller boats to ensure wholesale shipments align with retail demand, which has impacted operating margins.These company and market specific headwinds, combined with lower valuation multiples of peer group companies contributed to the company recording a goodwill and other intangible asset impairment charge of $31 million in fiscal fourth quarter.To be clear, we continue to be bullish about the NauticStar brand and its long-term prospects. Our dealer pipeline at NauticStar ended the year at healthy levels, given our prudent decision to pull back on wholesale production earlier in the year in both the 251 Hybrid and 32 foot XS center console will help mitigate the declines in the smaller boat market.In the near term, this market slowdown has delayed the initial growth projections developed at the time of the acquisition, but NauticStar remains a leading brand in the market it serves, combined with a new product development strategies we're deploying, including the introduction of larger in-demand models and the early stages of several operating initiatives in progress, we believe the brand will be positioned better than ever to take advantage of the market recovery leading to greater operating efficiencies and long-term profitable growth.Looking at our newest brand Aviara, beginning in fiscal 2020, we began shipping the AV32 to MarineMax dealers across the country. We are extremely excited about the response the brand has received from MarineMax, consumers and industry experts alike. After years of consumer insight study, design and engineering and product validation work, Aviara is truly a modern luxury Day Boat unlike anything else on the water.The AV32 model began shipping in July of 2019 and the new AV36 and AV40 models are scheduled to begin shipping in the second half of fiscal 2020.Now I'd like to turn the call back over to Tim to go over our financial results.

Thanks, Terry. Net sales for the fourth quarter were $122.8 million, reflecting an increase of 28.7% compared to $95.4 million for the prior year period. The increase was primarily due to an increase in MasterCraft unit sales volume, favorable product mix and price increases, the inclusion of Crest, and was partially offset by a reduction in NauticStar volume as Terry discussed.Gross profit increased 12.9% to $31.5 million compared to $27.9 million for the prior year period. The increase was primarily due to the inclusion of Crest, along with increases in MasterCraft unit volume, price, and favorable product mix. This growth was partially offset by year-over-year increase in warranty expense resulting from the favorable one-time warranty adjustment taken in the fourth quarter of 2018 as well as the NauticStar volume declines.Our gross margin decreased to 25.6% for the fourth quarter, compared to 29.2% for the prior year period, principally driven by the inclusion of Crest. As Terry mentioned, our goal is to grow Crest gross margin profile from the mid-teens to low 20% range over the next few years.Operating expenses increased $34.1 million to $43 million for the fourth quarter compared to $8.9 million for the prior year period. This increase resulted mainly from the NauticStar impairment charge and the inclusion of Crest.Excluding the non-cash impairment charge, acquisition related and integration cost and startup costs for the company's new Aviara brand, operating expenses as a percentage of sales decreased 20 basis points to 9% for the fourth quarter compared to 9.2% for the prior year period.Adjusted net income for the fourth quarter grew 25.9% to $16.1 million or $0.85 per share on a fully diluted weighted average share count of 18.9 million shares, computed using the company's estimated annual effective tax rate were approximately 22.5%. This compares to adjusted net income of $12.9 million or $0.68 per fully diluted share in the prior year period.Adjusted EBITDA was $23.8 million for the fourth quarter, up 19.9% compared to $19.8 million in the prior year period. Adjusted EBITDA margin was 19.4% down from 20.8% in the prior year period, principally due to the dilutive effect of Crest.Lastly, given our ability to generate strong free cash flow, we've been able to reduce our pro forma net leverage to 1.3 times adjusted EBITDA. Recall that at the time of the Crest acquisition October 2018, we had a pro forma net leverage ratio of 2.1 adjusted EBITDA.While we believe we have a healthy balance sheet, we will continue to emphasize the payment of debt in the near term. Please see the non-GAAP measures section of our press release and 10-K for reconciliation of adjusted EBITDA, adjusted EBITDA margin and adjusted net income to the most directly comparable financial measures presented in accordance with GAAP.In the interest of time, I won't cover our full year results. Those were detailed on the press release we issued this morning.With that, I’ll now turn it back over to Terry for our view on current industry and economic environment, and our outlook for fiscal 2020.

Thanks, Tim. We remain bullish on the long term prospects of both the markets we serve and the brands we own, irrespective of any near-term fluctuations. We firmly believe our long tenured industry veteran leadership team, and seasoned and dedicated employees together with our low fixed cost, highly variable cost structure, best-in-class networking capital management, and strong balance sheet position the company to perform in all economic environments.At MasterCraft, retail trends throughout the first eleven months of our fiscal 2019 are running ahead of plan. With the year-to-date internal warranty registrations up significantly year-over-year however, adverse weather conditions across the country late in our fiscal fourth quarter along with eroding dealer sentiment driven by macroeconomic and political uncertainty, resulted in a significant decline in retail activity.As such, our fiscal 2020 outlook factors in lower wholesale shipments, at MasterCraft compared to the prior year particularly in the first half of our fiscal year. We believe, it's prudent to pull back wholesale production to allow for healthy dealer pipelines at MasterCraft heading into calendar 2020 selling season, in anticipation of continued growth in the overall performance sport boat segment.That said, we will vigilantly monitor dealer activity and macroeconomic trends and adjust accordingly as needed. Similarly, our Crest brand was impacted by the adverse weather conditions in decline and dealer sentiment, offsetting the strong retail performance Crest experienced during our first six months of ownership.Accordingly, we are tempering our wholesale production at Crest for fiscal 2020 to allow for healthy dealer pipeline levels, entering the calendar 2020 selling season. Recall, Crest was acquired during our fiscal second quarter last year and we're very optimistic on Crest and the Pontoon segment overall and we anticipate that the dealer expansion, product development and operational initiatives we are driving will contribute to long term market share and profitability gains.At NauticStar, a quick reaction to the retail declines in the saltwater fishing market led to a pullback in wholesale production, resulting in healthy dealer pipeline levels in fiscal 2019 year end. We will continue to be disciplined at NauticStar’s dealer pipeline, while beginning to realize the AUSP benefits from new, larger models introduced late last year.Regarding Aviara, as previously disclosed, our preliminary expectation is for net sales contribution in the $10 million to $15 million range as we ramp up production in the first year Aviara whose financial results will be reported in our MasterCraft reporting segment is expected to be slightly accretive to MasterCraft’s gross margin profile.It's important to note that due to the start of Aviara shipments in our fiscal 2020, we will recognize incremental operating expenses and depreciation this fiscal year that did not occur in fiscal 2019. When we achieve full production run rate in fiscal 2021, we expect to realize increased operating leverage contributing to increased profitability. Based on those factors, the company's consolidated fiscal 2020 outlook consists of net sales being down low, single digit percent, adjusted EBITDA margin being down in the 50 to 100 basis point range, and adjusted earnings per share being down high single digit percent.We strongly believe in the long term value of the full breadth of our brands and capabilities provide, despite any near-term market uncertainties, maintaining our focus on developing best-in-class innovative products across our portfolio and driving continued operational excellence, that all of our businesses will drive meaningful value for consumers while improving our bottom line and generating attractive returns for shareholders over the long term.Now I'd like to turn it over to the operator for questions.

[Operator Instructions] Our first question comes from Michael Swartz of SunTrust. Your line is open.

Hey good morning, guys. How are you'll?

Good Michael.

Maybe start off with just some of the commentary with I guess recent trends, and I think Terry you had said that retail was pretty strong, I guess through May and then you saw some softness in June, which we've all seen the in the SSI numbers, but maybe talk about what you've seen July through here in mid-September?

Right. Michael, to give you a little more detail, our global retailers registered or tracked by internal retail registrations by our dealers was up in the mid-teens through May. In July, it certainly returned. We saw that the June data on the SSI was consistent with weather issues that we've talked about. The July SSI retail was up significantly driven up by some pent up demand of course, and specifically we saw the ski wake segment was up more than 17%, but MasterCraft was up even more than that during the month. And we also saw a good August, but remember both July and August are much less in general retail demand than June. That's the all-important month for the year.

Okay, great. And then just on guidance, I guess we're all trying to back into this down, low-single digit revenue, what that means for unit volume, what that means for particularly core unit volume, i.e. excluding maybe Aviara and I think you have one quarter benefit of Crest. If I'm doing the math correctly, it looks like something caught down low double digits to mid-teens, is that the right way to think about the volume for fiscal year 2020?

Yes, I think, I think you're looking at it correctly. Michael, we think you know Tim and I have a combined 60 years’ experience in the industry, so we know how to manage in the upside, the downside. You know, we'll certainly take advantage of that real world experience. We think it's proper to get the pipelines correct as we enter into the 2020 selling season. I would suggest that the pipelines at NauticStar are very healthy. They are up a little bit at MasterCraft and Crest. And should we see retail respond quicker than we anticipate, as you know we have a very flexible manufacturing capability and we can respond quickly, but we think it's prudent to do so and take it down. Our year will be more back-end loaded of course.

Okay, that's helpful. And then just one follow up and then sticking with guidance, in light of unit volume down, let’s just call it, 10% to 15% for the year, and that's again organic. I think you said EBITDA margins down 50 basis points to 100 basis points, but at least part of that is just the dilutive nature of Crest in the first quarter, so if you take that out, I mean, it looks like something EBITDA margin down maybe 20 basis points to 70 basis points on a double-digit unit volume decline. I guess that doesn't seem as negative as I would have assumed it to be in light of that kind of volume decline, so do you have some positive offsets that are going into other operating costs or gross margin this year that we should think about?

Well you know it's really you've been here; you've talked to Tim and I as most of you on the phone, many of you have. We are all about a low-cost business model, high variable cost. You know 90 plus percent of our COGS on a consolidated basis is variable in nature. We have talked about that many times. This is where it starts to show up. It's in any kind of a slowdown. Again, we've been doing this combined 60 years, and we've been through four recessions and slowdowns in our career.So, I would really attribute most of it in our ability to protect our gross margins as our variable cost basis. We can remain breakeven on an adjusted EBITDA basis with unit declines much higher than we would experience in a typical recession. We don't anticipate a macroeconomic recession at this time, but as we look forward and the drop across the industry in retail in June contributed to the inventory levels that we have today.And so, we are able to adjust rapidly for that. As we look out into the future, we've got the China trade war and some economic uncertainty. But I was in Canada last month -- or last week, and I was out west at several dealers. Canada not only experienced the bad weather that we saw in the upper Midwest of the United States, but their national election is next month.So, you look out what happens next summer. That's right before the 2020 U.S. elections. And so right now, our view is that that could cause some pause among consumers. So if that doesn't happen as we anticipate and again we're drawing from our years of experience, but we've seen this algorithm before, we can pivot rapidly, but to answer your question, I think this demonstrates and we've said that it would happen, this demonstrates our highly variable cost structure.

Great. That's it for me. Thanks guys.

You bet.

Our next question comes from Craig Kennison of Baird. Your line is open.

Good morning. Thank you for taking my questions as well. Following up on what Mike had to say on the retail front, what is the retail outlook embedded in your 2020 fiscal guidance?

Well, we still anticipate retail growth in 2020 across all of our markets, albeit, more modest growth than in prior years given current dealer and consumer sentiment Craig. You know the risk of a protracted, global slowdown, trade war concerns the 2020 election as I said, in my response to Mike also are contributing factors in our view. So as you know we hesitate. We hedge a little to the conservative side. But I think we have that ability given A, our highly variable cost structure and B, our flexible, highly flexible manufacturing system.We always see that as a benefit and we wake up every day whether it's good times or not. And we kind of resist that desire to have more bricks and mortar or higher fixed costs from you know certain activities. We just really try to focus on the variable. So, in terms of our outlook, those are the -- those are the factors that we look at and evaluate in our view.

Thank you. And then what -- how would you describe the promotional environment today, that maybe clean out some of that excess inventory?

We're seeing some retail elevated competitor promotions across all both segments and we believe everyone's trying to clear the channel. Our goal is to always and again this is good times or bad. We always evaluate dealer pipeline you know we do it every Monday and we'll continue to help in any area we see that might be elevated pipeline, but other than that, you know we -- our goal is to be right sized in time for the 2020 selling season.

You know, I would add Craig, this is Tim. We're monitoring the competitive landscape and we're dealing with some pockets of higher inventory, but keep in mind that any discounts we deploy will not be on 2020, but more of your product will be on non-current product.And one thing to add to that Craig is, you know again most dealers carry other types of products beyond the brands that we have. So even if our inventory levels improve, if the inventory levels have competitive product or other product that they carry, and those dealerships does not improve, that that really is something to keep in mind, because that can cause a dealer to pause and it soaks up a good chunk of their credit capacity.

Thank you. And then, finally just maybe talk about your capital priorities and to what extent with your stock trading where it's at today, could you prioritize any share repurchase activity relative to other priorities?

You know we always are working with our board on capital allocation strategies, and you know as we mentioned in our prepared comments, we're going to deploy our cash to continue to pay down our debt. And those are our primary focus is right now, and again, you know we've got a very strong balance sheet and great cash flow and you know we'll continue to look out for any other M&A opportunities.We think in a downturn, certain M&A opportunities might come available. So those are kind of the three areas in particular that we're looking on and we've decided to focus on paying down debt to levels below or -- one time adjusted EBITDA or below. So we want to keep the balance sheet. We want to keep flexible and have dry powder available should there be any opportunities for M&A.

Just I’m sorry to follow up on the M&A front, but are there targets that would be as accretive as buying your own stock back. I mean, I think you're trading under six times earnings. It'd be hard pressed to imagine a company of your quality trading at that kind of value.

Yes. I mean. there you know certainly the stock repurchase acquisition or opportunities are there, but you know there are other organic growth opportunities that we could deploy and we're evaluating that could provide even a greater return. I'm not saying a share repurchases is not considered because it certainly is and you're right, our multiples are relatively low right now, but we're considering all of those and I think we have the ability to deploy cash and in each of those areas.

Great. Thank you.

You bet.

[Operator Instructions] Our next question comes from Brett Andress of KeyBanc Capital. Your line is open.

Hey, good morning.

Good morning, Brett.

Just a clarification on the cadence of your guidance, so you gave us expectations for a front half, back half split. But, just any more color there in terms of the cadence of either sales or EBITDA for the year, for the upcoming quarters, just to help us with our models, here.

Yes. There are two factors that are influencing this back end loaded plan. First of all, the ramp up of Aviara in the second half with the 36 and the 40 both coming online as well as you know our adjustments to the wholesale production to get the pipeline in good shape as soon as we can. You know and I think from a modeling perspective, you know maybe 45, 55 split between for net sales for next year with the first half, second half would be a reasonable way to look at it now.

Got it. Thank you. And then another one on -- just how many units do you think you have to pull out of the channel specifically on the MasterCraft side. So your guidance implies shipping something like 500 less units, at wholesale. I guess, where are you right now on the MasterCraft side on a week’s on hand basis, and where do you want to end up going into the 2020 season?

Well keep in mind that our guidance includes a combination of reduction in sales volume as well as you know mix impact with the popularity of our new NXT models, we’re likely to be mixing down a bit, so both those are baked into our guidance, and we've not previously provided you know unit guidance and we're going to stick with that.

Thank you.

Our next question comes from Joe Altobello of Raymond James. Your line is open.

Thanks. Hey guys. Good morning. Just a few questions to follow up on some of the questions from earlier. But, in terms of the inventory cleanup that you guys are expecting to do this here. I mean how confident are you that you can get that done in the first half of this fiscal year or is there a chance that some of that bleeds into the second half as well, given the overhaul?

Well Joe, you know July and August was good for us, September is starting off well also, but after that, the second quarter of our fiscal year that October through December is always the lightest quarter in terms of retail. So for the year. So, we'll keep an eye on it. We're pretty confident that we'll be in a very good position come the beginning of 2020 selling season if not, it's not a problem we know how to adjust for that, but we think that we've got a line of sight that we should be in pretty good shape. That's our goal for now, and that's what we're targeting, we think those are realistic.

Okay. And then, secondly on the promo environment, you mentioned that you are seeing a little bit of a step up, some of your competitors on the promo side. I assume that's baked into the EBITDA margin guidance is down 50 to 100 basis points at this point.

That's correct.

Okay. Okay. And then just one last one on Crest, you mentioned the gross margin. I guess the target there is low 20s and if I look at some of your competitors you know Bennington, for example, their gross margins, I believe, right now are in the high teens. So maybe kind of walk us through how you expect to get to that number when you know somebody who has got 25% of the market is already below that.

Yes, well you know Crest has taken market share; they are number eight in that very crowded. I think there's 103 to 110 OEMs in that Pontoon aluminum pontoon segment. We bought them and it was gross margins were in the mid-teens. As I stated before, our goal is to get them into the low 20s over the next few years, and they are well on that trend. So we'll give you more specifics on our first quarter call in November, but we’re they're already on track to do that.And again, that's you think about it, this kind of goes back to Michael's first question. We have already within the first five months converted their manufacturing to synchronous flow. They've already taken advantage of the working capital procedures, and methods that we use and that that helps them improve their gross margin.

You know when you're building aluminum products like they are, you don't have tooling. And so, it's -- you can effect change more rapidly there, because you don't have any barriers as far as perhaps driving refurbished tooling or getting new tooling. So that gives us you know additional positive momentum there.

Great. Got it. Thank you guys.

You bet.

Our next question comes from Tim Conder of Wells Fargo. Your line is open.

Hey, good morning. This is actually Marc Torrente on for Tim. Just a few for us. Good morning. Any additional detail on the international markets, how are they performing relative to U.S. any areas of particular strength, weakness and how our channel inventory is around [ph]?

So you know that we gave tariff support during fiscal 2019, especially to Canada. Those tariffs were rescinded in late April. So Europe is still impacted by the import tariffs, a 25% level off tariff support to be determined on the market factors throughout the year. But we feel like dealer pipeline is good there. Canada weakness especially in the Western Canada was driven by elevated dealer inventory, given the adverse weather and political uncertainty there again. I was in Edmonton last year, and or last week, and that that's a big deal for them, as we believe it will be next summer in the U.S. elections.But Australia continues to perform real well for us. So in summary, we're very comfortable with pipeline especially in Europe and Australia. And you know where we feel pretty good about it. But overall, I think you know I'd summarize it. Europe is kind of flattish. Australia is really good. In Canada, once we get through the elections we'll be able to determine that a little bit better.

Okay, great. And then could you just update us on the operational issue that is going on with NauticStar and then the progress and timing towards rolling out the larger models.

Yes. So the 32 XS started production in Q4. The 251 Hybrid was introduced about mid-year. You know Jay Povlin took over the helm at NauticStar in March. Very excited about Jay, you know he's a very seasoned industry veteran, and Tim and I've worked with Jay for over 25 years. Not only is he focusing on product development and operational initiatives, but being seasoned sales and marketing guy, he’s focused on driving sales through growth in the dealer additions and in organic growth.We're getting traction at NauticStar you know our black belt, many of us -- our VP of business development and George Steinbarger and I are there at the divisions once a month and you know I've got a deep background on operations and engineering, and so we're very excited, we're seeing some positive results on the bottom line for NauticStar.

Okay. And then just lastly, it sounds like the initial reception at Aviara has been pretty good. What has surprised you either positively or negatively?

We're not surprised. We knew it was a tremendous product during testing to industry magazine editors, who I've known for a long time tested our products. The AV32 at that time both the stern drive and the outboard. I ran one of largest product development engineering groups in the marine world for six years, and so, I knew that our engineers had a great aspect ratio and we feel very confident that the ride and handling and performance of the product and not only is aesthetic value, but the ride and handling with superior those editors of those magazines confirmed that. In fact they told us, you probably ought to put a second production line in place, because this is some of the best product we've ever run in this size category.So, we're thrilled, the boats are going around a different MarineMax store, and we are just super happy to be partnered with them. You know Tim and I have had a long experience in relationship with them with our years at Brunswick. They're absolutely the right partner. They're very excited. We've retailed several of the boats already, so it is it is marching right along to plan, and our engineering and manufacturing team, sourcing teams have executed you know we have kind of a tagline here, we don't miss schedule and we don't miss budget we do everything right in between, and Aviara is marching right down the integration path consistent with our internal plan. So we're very happy about it.

All right. Thank you very much.

There are no further questions. I like to turn the call back over to Terry McNew, Chief Executive Officer for any closing remarks.

Thank you, operator. Once again, thanks to everyone for joining us this morning. We look forward to updating you on our first quarter results in November. Thank you.

Ladies and gentlemen. Thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.