MGP Ingredients, Inc. (MGPI) Q3 2022 Earnings Report, Transcript and Summary

Good day, and welcome to the MGP Ingredients Third Quarter 2022 Financial Results. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions and please note that this event is being recorded. I would now like to turn the conference over to Mike Houston with Investor Relations. Please go ahead, sir.

Thank you. I'm Mike Houston with Lambert, MGP's Investor Relations firm. And joining me today are members of their management team, including Dave Colo, President and Chief Executive Officer; and Brandon Gall, Vice President of Finance and Chief Financial Officer. We will begin the call with management's prepared remarks, and then open the call up to questions. However, before we begin today's call, it is my responsibility to inform you that this call may involve certain forward-looking statements such as projections of sales, operating income, gross margin and effective tax rate as well as statements on the plans and objectives of the Company's business and overall consumer and industry trend. The Company's actual results could differ materially from any forward-looking statements made today due to a number of factors, including the risk factors described in the Company's most recent annual and quarterly reports filed with the Securities and Exchange Commission. The Company assumes no obligation to update any forward-looking statements made during the call. Additionally, this call will contain reference to certain non-GAAP measures, which we believe are useful in evaluating the Company's performance. A reconciliation of these measures to the most directly comparable GAAP measures are included in today's earnings release and supplemental information furnished to the SEC under Form 8-K. If anyone does not already have a copy of the press release issued by MGP today, you can access it at the Company's website, www.mgpingredients.com. At this time, I would like to turn the call over to MGP's President and Chief Executive Officer, Dave Colo. Dave?

Thank you, Mike, and thanks, everyone, for joining the call today. On this call, we will begin with an overview of our performance for the quarter ended September 30, 2022, provide updates on key financial performance metrics and discuss the progress we have made against our strategy. At the end of the call, we will open the line for Q&A. Our team delivered another strong performance during the third quarter as we continue to experience momentum from favorable consumer trends that support each of our business segments. Consolidated sales for the quarter increased 14% to $201.2 million, while gross profit increased 3% to $59.1 million, representing 29.4% of sales. Reported operating income increased 3% to $33.9 million. In our Distilling Solutions segment, we continue to benefit from strong demand for new distillate and aged whiskey. These favorable trends continue to support overall growth for this segment. For our Branded Spirits segment, we continue to experience solid consumer demand trends in our premium plus brands, which includes premium, super premium and ultra-premium spirits brands. Our premium plus American whiskey and tequila offerings continue to be the primary drivers of top line growth as well as gross margin expansion for the segment. As for our Ingredient Solutions segment, our team continues to execute at a high level. The team has done an exceptional job optimizing the product mix to benefit from the shift in consumer behavior toward adding plant-based foods in their diet. These continued efforts contributed to record segment sales in the third quarter. Looking at each segment in greater detail. We achieved a record third quarter sales within our Distilling Solutions segment. Sales increased 19% to $108.6 million. Gross profit for the quarter decreased from $27 million to $25.9 million or 23.9% of segment sales. The decline in gross profit can be primarily attributed to the negative impact of increased commodity and natural gas costs as well as excess supply in the markets for our industrial and white goods offerings. These factors were consistent with our expectations for the quarter. Sales of premium beverage alcohol increased 22%, while brown goods sales increased 34% from last year due to higher new distillate and aged whiskey sales. Demand from each of our customer categories within brown goods remained strong and contributed to the meaningful sales growth versus the prior year. We remain confident that our significant share, scale advantage and our aging whiskey inventory position will further support ongoing consumer demand for the American whiskey category. We believe these trends will remain favorable through the balance of the year and into 2023. Moving to white goods. Sales decreased 3% versus the prior year quarter. The decline was primarily due to lower volumes for our white goods premium beverage products. Sales of our industrial alcohol products decreased 27%, also due to lower volumes. With the additional supply that has entered the market as well as the impact of increased input costs, primarily corn and natural gas costs, we continue to believe that margins for both industrial alcohol and white goods products will remain at or below historical levels. During the quarter, industrial alcohol and white goods incurred negative gross margins as a result of these dynamics. We expect these headwinds to continue into the fourth quarter as well. Previously, we expected to see an approximate 1,100 basis point decline in year-over-year gross margin percent for our white goods and industrial alcohol products on a combined basis in 2022. Given these market dynamics, we now believe this decline could approach 1,500 basis points for the full year for a total year-over-year impact of $20 million, which is $5 million more than what we estimated last quarter. That said, we remain committed to pricing through these commodity increases where possible, and our full year consolidated guidance, which I will discuss in my closing comments, contemplates these inflationary and industry headwinds. Moving to Branded Spirits. Segment sales for the third quarter increased 2% versus the prior year period to $62.8 million. We benefited from sustained strength in our premium plus brands, which grew revenue by 17% from the prior year period, primarily reflecting higher case volume and higher average selling prices. Gross profit for this segment increased to a record $25.1 million or 39.9% of segment sales. The increase can be attributed to increased distribution of premium plus brands and improved pricing on our brands as well as product mix. Since the Luxco acquisition, this was a record quarter for both sales and gross profit dollars for our Branded Spirits segment. We remain committed to successfully executing our premiumization strategy, and we'll continue to invest in marketing support to achieve sustainable and profitable growth as we continue to focus on brands that are positioned amongst growing spirit categories and price tiers. We continue to be encouraged by the top line growth and margin expansion we have achieved for our premium plus brands since closing the Luxco transaction last April. Turning to Ingredient Solutions. Sales for the quarter increased 24% to a record $29.7 million. Consistent with the segment's recent performance, the increase in sales was primarily driven by higher average selling prices and increased volumes. Our experienced sales, innovation and R&D teams continue to execute at a high level, collaborating with our customers to meet specific needs. We believe the continued momentum we have realized across our products will enable long-term sustainable growth for the segment. We have also begun to receive initial orders from colleges and universities for our recently launched ProTerra brand of ready-to-use texturized pea-based proteins targeted against the foodservice channel. Before I turn the call over to Brandon, I want to thank our team for their continued execution. Their ability to build on the momentum we have generated throughout the year and the continued alignment of our product offerings to meet consumer trends enabled us to achieve strong results for the third quarter. This concludes my initial remarks. Let me now turn things over to Brandon Gall for a review of the key metrics and numbers. Brandon?

Thanks, Dave. For the quarter 2022, consolidated sales increased 14% to $201.2 million as a result of record third quarter sales across all three business segments. Gross profit increased 3% to $59.1 million, representing 29.4% of sales. Advertising and promotion expenses for the third quarter of 2022 increased $1.6 million or 29% to $7.3 million as compared to the third quarter of 2021. This increase reflects continued marketing investments as part of our premiumization strategy, primarily in the premium plus price tier products within our Branded Spirits segment. Our A&P spend this quarter was the highest of any since the merger. And as we discussed on the call last quarter and as Dave will share in a moment, we look to continue to increase our investment here during the fourth quarter. Corporate selling, general and administrative expenses for the third quarter 2022 decreased $600,000 to $17.9 million as compared to the third quarter of 2021, primarily due to lower incentive compensation expense and the onetime acquisition cost in 2021 related to the Luxco acquisition that did not recur in 2022. Operating income for the third quarter increased 3% to $33.9 million, primarily due to the previously mentioned increase in gross profit and reduction in SG&A. Adjusted operating income increased 2% from $33.2 million in the prior year period, which was adjusted for the aforementioned acquisition costs. Our corporate effective tax rate for the third quarter of 2022 was 24.2% compared with 24.5% from the year ago period. The decrease was attributed to favorable tax benefits concerning our capital spend. Net income for the third quarter of 2022 decreased slightly from the year ago period to $23.6 million, while adjusted net income decreased 1% from $23.9 million. For the third quarter of 2022 and compared to the year ago period, basic earnings per common share decreased to $1.07 per share from $1.08 per share. Adjusted basic EPS decreased to $1.07 per share from $1.09 per share. Diluted EPS decreased to $1.06 per share from $1.08 per share. Adjusted diluted EPS decreased from $1.09 per share to $1.06 per share. Adjusted EBITDA for the quarter was $38.7 million, a 1% increase from the year ago period. Corn, wheat flour and natural gas are our three largest commodity expenses and each continued to experience elevated prices throughout the quarter. Relative to the prior year quarter, our input cost for corn increased 56%, wheat flour increased 20% and natural gas increased 73%. Although the average selling price for white goods and industrial alcohol increased for the quarter, it was not enough to offset the higher input cost, as Dave discussed in his opening comments. Year-to-date cash flow from operations totaled $72.3 million, reflecting the consistent and strong cash-generating capability of our business. Strong cash flows further highlight the value and execution of our long-term strategy, providing MGP with adequate support for M&A and expansionary projects. MGP's balance sheet also remains strong, allowing us to continue to invest to grow. We remain well capitalized with debt totaling $231.1 million and a strong cash position of $50.7 million. Additionally, our previously announced expansionary projects remain on track from a timing and cost perspective, and we continue to project $47.2 million in total capital expenditures this year. The Board authorized a quarterly dividend in the amount of $0.12 per share, which is payable on December 2 to stockholders of record as of November 18. The Board continues to view dividends as an important way to share the success of the Company with shareholders. We believe the capital allocation strategy focused on organic and acquisitive growth aligns well with our long-term strategy as well as the underlying consumer trends our business is well positioned to leverage. We will continue to pursue M&A and conduct expansionary projects to accelerate growth and increase our capabilities and product offerings. And now let me turn things back over to Dave for concluding remarks.

Thanks, Brandon. We are very pleased with the strong results delivered year-to-date despite increased commodity and energy costs. Demand for our products remain strong, and we believe our business continues to be well positioned to mitigate these challenges through the balance of the year. While we continue to further our premiumization strategy within the Branded Spirits segment, we expect increased investment in advertising and promotion to support continued growth in our premium plus tier spirits brands. We also anticipate inflationary pressures to persist in commodity and natural gas costs for the balance of the year. Taking into account these factors and in combination with the strength of the underlying business, we are again revising our financial outlook upward for the fiscal year ended December 31, 2022. Our increased guidance for the full fiscal 2022 year assumes the following: sales projected to be in the range of $765 million to $780 million, adjusted EBITDA to be in the range of $162 million to $167 million and adjusted basic earnings per common share in the range of $4.62 to $4.80 per share. We are confident that each of our business segments remains aligned with strong macro consumer trends, and we continue to believe that our strategy will drive long-term sustainable growth. We continue to make progress on our ESG initiatives. As you may recall, during the first quarter, we disclosed our environmental and sustainability policy statement and began disclosing our waste information. Then during the second quarter, we began providing disclosures on our energy management and greenhouse gas emissions. This quarter, we began disclosing our water management information. These disclosures can be found on our company website under the Social Responsibilities section. We plan to release our environmental sustainability report for calendar year 2022 in early 2023. We will continue to leverage the strong foundation we have established as we execute against our long-term strategy with the objective to deliver sustainable long-term value for our shareholders. That concludes our prepared remarks. Operator, we are ready to begin the question-and-answer portion of the call.

[Operator Instructions] And our first question today will come from Marc Torrente with Wells Fargo.

First, I wanted to ask about margins. Could you maybe provide some additional detail on puts and takes into Q4? And then maybe specifically on branded spirits, margins increased nicely here and that appears driven by improved mix. In the past, you've commented about how this segment contributes to gross profit. Any updated color on this and how mix can contribute going forward?

Yes. I'll go first, and then I'll let Dave fill in any blanks that I may miss. But on the branded spirits side, the gross margin in the quarter was about 39.9%. It was a record gross profit dollar quarter for the segment since the merger on April 1 of last year. And as we look forward for this business, that is part of our overall strategy. So premium plus sales in the quarter were up 17% in Q3 over last year. And it's going to be the performance of those higher-priced, higher-margin brands that are in on-trend categories that are going to continue to drive the improvement in performance in this segment. As far as the overall company, to the first part of your question, we expect gross margins to be in line with Q2 on a consolidated basis for the overall company. But one thing to note, and Dave mentioned this in his opening remarks, is we do anticipate higher A&P spend over the back half of the year.

Okay. Great. And then, secondly, on momentum, you're seeing -- trends on the spirit side were strong in the quarter. I'm wondering if you've seen any change in demand trend or consumer behavior over the last month or so, perhaps within branded spirits, where you have greater visibility on the end market?

Yes. We continue to see strong demand in our premium plus brands. And we -- to date, we really haven't seen any trade down from premium plus into mid or value tier brands. And I think, again, that was reflected in 70% growth in revenue in premium plus brands for the quarter. So we get asked this question a lot. I think a common answer and one that we believe in as well is that premium plus brands are really viewed as an affordable luxury. I think the purchase frequency of some of these premium plus brands on a relative basis versus consumer food items, as an example, is relatively infrequent. I think the -- we've seen estimates that the annual spend on spirits for the average consumer is around $300 a year. So if you factor in the purchase frequency and the value the consumer is getting for what they're buying, I think that is what contributes to people continuing to buy these premium plus spirit brands.

Okay. And then just, lastly, on industry capacity on the selling side. Have you seen any sequential easing here, a change to this dynamic as it relates to your ability to supply ahead of the market?

Yes. I think the supply side dynamics remain pretty tight in the industry, both for new distillate as well as aged products. And we really haven't seen a significant change there, Marc, from the previous quarter. And we continue to see very strong demand profiles, both against new distillate and aged whiskey.

And our next question will come from Gerald Pascarelli with Wedbush Securities.

Mine is on branded spirits. You've been pretty clear on the priority for further M&A within this segment to round out your portfolio. So as it stands today, can you talk about any gaps within the current portfolio that are a priority to fill over time just on the margin? It seems like tequila and RTD cocktail or even incremental exposure to Bourbon kind of all represent white space opportunities for faster revenue growth. So just would love your thoughts there.

Yes. Yes, I think we like our American whiskey portfolio that we have today. However, definitely an area of focus would be additional American whiskey brands. We also like our tequila portfolio. But that's a high-growth category, so we're definitely interested in additional tequila brands. Another emerging category that we like is Mezcal. It's a small but high growth category. So we have interest there as well. And we also would like to have a more international presence in our spirits business. So we're always looking for opportunities internationally. Ideally, it would be a kind of a platform acquisition or a full company acquisition similar to the Luxco transaction. But those are some of the primary areas where we see opportunity.

And our next question will come from Bill Chappell with Truist Securities.

A few questions. I guess, first, on the thought that there's a kind of slowdown in demand of brown spirits or post-pandemic, have you seen any kind of pullback from your customers for new distillate orders in the second half?

No, Bill, we really haven't. We're pretty -- we continue to see strong demand both for new distillate as well as aged. And as I previously commented, capacity is tight on new distillate and demand remains very strong. So we haven't experienced any weakness there from the first half of the year into the back half of the year here.

And then on the aged, I mean, I know you have obviously a sizable amount of aged distillate. You had to make some kind of tougher decisions, I would think, as we come into the second half of whether you're going to monetize it or whether you're going to hold it for future years. Is that -- are those decisions been largely made and so you kind of have a better idea of how it works over the next few years? And did you leave -- do you possibly lose customers or lose business by not granting every order taken in these next few months?

Yes. We have much better visibility to both our new distillate and aged demand now than I'd say we've probably ever had in our history. And what we plan to sell both from a new distillate and aged perspective for the balance of the year is reflected in our -- the guidance that we just spoke to, Bill. And as we've discussed before, we -- we could sell more if we wanted to this year, but it doesn't make sense because we need to retain inventory to protect the growth in the future years. So that's exactly what we're doing. As part of that process, there's more demand than there is supply. We have had to rationalize some of our customers. But we feel like we're in a great position as we finish this year and head into next year in our brown goods business.

Okay. And then on the branded side, growing 2%, it's tougher for us to understand whether you're growing with the category because you have brown, you have white goods in there, you have popular priced, you have premium priced. I mean, can you give us a little more color? Are you kind of keeping up with the segments of the category or your brands? Are you gaining share in certain areas? Are you losing share in certain areas? Any more color on that kind of 2% growth will be helpful.

Yes. I think, Bill, the area that we focus on is really in, what we call, the premium plus price tiers. And that's for a reason, because that's where the majority of the brands that we're investing heavily in from an A&P perspective are positioned. That's where the growth overall in the industry is. And our American whiskey brands as well as tequila brands and a couple of others are in those categories. And that growth was 17%. Premium plus brands grew 17% in Q3. That followed growth of 12% in Q2 for premium plus brands. That's where we'd like you to focus. As we have stated in the past, the mid and value categories are declining, not only for ourselves, but for the spirits industry as a whole because the majority of the growth is in the premium plus sector. So that's where our focus is. That's where we put our attention, and that's also what drives margin expansion for our spirits -- or our branded spirits business.

Got it. And then last one for me. Just -- on industrial alcohol, I know it's a smaller business, but I think this is the time of the year where you're kind of locking in contracts for next year and pricing and capacity. So would you expect -- I understand kind of alcoholic white goods are a different animal per se. But would you expect margins to continue to decline going into next year? Or is there a way to kind of shore that up as we look -- as the glut starts to ease per se?

Yes. I don't think the supply -- the oversupply situation is going to change any, Bill, as we finish this year and go into next year. There was a lot of capacity added as a result of the COVID, demand for industrial alcohol. So I think the oversupply is a long-term dynamic, at least that's how we view it today. So I don't really see any relief as we go into next year. We are in the early stages of contracting both industrial and GNS for next year, but it's too early to tell as far as how that's really going to play out. But overall, I don't see a significant change in the market dynamics next year versus what we're experiencing this year. I think it's going to continue to be a pretty tough category.

Got it. But I guess I was trying to -- could you walk away from business? Or is it really just you're looking at filling capacity first and then profitability somewhat second?

Yes. I think what we have done is we've tried to shift as much of our volume to gray neutral spirits and away from industrial alcohol, because we think that the profitability and the retention of customers is better on the GNS side than it is on industrial. We've done a pretty good job of that over the last few years. I think a couple of years ago, about 45% of our combined revenue between industrial and GNS was in GNS. And today, it's about 64%. So we've done a good job there shifting the mix, if you will. And when you're in this kind of environment, we obviously will look to see how much volume -- can we minimize volume, if you will, to minimize the impact of the P&L as well. But that's something we evaluate literally on a weekly basis in a business like this.

And our next question will come from Ben Klieve with Lake Street Capital Markets.

Congratulations on another really good quarter here. Two questions from me. First of all, Brandon, you commented on the expansion initiatives that are ongoing, that everything is on track, which is great and can't be taken for granted in this environment. I'm wondering if you can comment on kind of your expectations for those facilities next year in terms of timing of completion and the degree to which will be revenue contributors by the end of the year.

Yes. As you said and as I said earlier, all projects are on track. We are still targeting $47.2 million in CapEx spend this year. So just to highlight a few. We did accelerate the texture protein plant. That's going to come online during the second half of '23. So it's going to be Q3, Q4, but we do expect a little bit of contribution as we get that ramped up toward the end of the year. We have concluded the fermentation expansion in Lux Row. There's a distillation expansion going on there as well. That won't be online until the end of 2023. We've completed the third warehouse in Kentucky that we discussed on an earlier call, and we're now targeting an additional warehouse in Kentucky that should be ready by the fourth quarter of '23.

Okay. Okay. Great. And one other for me and I'll get back in queue on the ingredient side on the ProTerra expansion. You recently announced the hiring of a foodservice veteran here to really exclusively focus on this pretty new end market for you guys. That was a really interesting hiring to me. And I'm wondering if you can elaborate kind of on your expectations for how material of a revenue contributor the foodservice space can become over the next couple of years? And kind of what elements within the foodservice space you really see yourself gaining market share?

Yes, Ben. I think the reason we hired the person is we launched this new ProTerra product line. It's a ready-to-use texturized protein. And we're targeting it initially within colleges and universities kind of as a test market. And we do think that the foodservice channel is a huge opportunity for the ProTerra product line, but we also think it can expand beyond foodservice. But that was the reason for the hire. If you look at the texturized protein facility that we're building, I think we shared in the past that it can produce around 10 million pounds of product. And if you're selling this at a $3 to $4 price point, that should give you a feel that's a $30 million to $40 million potential additional revenue in that business over time. But we do think foodservice is one of many opportunities for the ProTerra product line, and we're pretty excited about the potential of that brand.

Got you. Very good with good reason it sounds like. Excellent. Well, again, congratulations on good quarter.

And our next question will come from Sean McGowan with ROTH Capital Partners.

My first question is a follow up on some of your margin comments in branded spirits. Would you say that margin improvement is being driven primarily by mix? Or is it more price relative to cost?

Yes. Great question. It's definitely mix driven because we are shifting more of our sales towards the higher end of our portfolio in the premium plus categories. But those are higher priced to begin with. And as time goes on, we expect that trend to continue as our average selling price increases, as does the volume in those product lines.

Right. But within, let's say, ultra-premium, are you also seeing an increase in margin? Or you're seeing flatness or a decline there? Mix is going to drive it higher, but you could still see changes within each of those segments.

Yes. We are seeing average selling price going up in all three of those premium plus product lines on average. Yes.

And then my other question was, are there any brands that you could call out within branded spirits that are kind of doing especially well?

Yes. We -- in our American whiskey category, our Yellowstone Bourbon brand is doing extremely well, as is our Remus brand of bourbons. We also have some really good innovation extensions off of both of those brands that are doing extremely well. And as well as in tequila, our El Mayor tequila brand and our new Dos Primos tequila brands are also doing well, and we continue to believe have very significant growth potential in the future.

And our next question will come from Vivien Azer with Cowen.

Just a follow up on the last question. Certainly encouraging that you guys are getting pricing up and down the branded spirits portfolio. That's also consistent with what we're hearing from your competitors. In order of magnitude, how are you thinking about rate increases between your price points? To put it another way, how are you thinking about price gap management within your portfolio?

Yes, Vivien. I think we have -- as Brandon said, we've experienced increases in our average selling price across a majority of our brands, certainly in the premium plus tiers. And the way we manage our price gaps is literally by brand. We look at the competitive set that our brands are going up against. We have particular ranges that we want to stay within. We give that guidance to our sales team, and then it's their job to execute and make sure that our pricing is staying competitive and relevant to our competitors. And as you mentioned, as a lot of companies are taking pricing up, we tend to follow suit. So that in a high-level summary is how we manage pricing and price gap management.

Okay. That's helpful. And then sticking with branded spirits, we are seeing a lot of new category entrants in the ready-to-drink and ready-to-pour canned cocktail subsegment, which does seem to be growing quite quickly. I'd love to hear your perspective on that segment and whether you view it as a competitive threat.

Yes, we see the same growth occurring there, Vivien. I think there's room for that category to grow without significant cannibalization, if you will, in the categories in which we compete. It's not an area that we compete in today in any significant manner. We do have ready-to-drink products, but they're more in the larger sizes versus the individual serving capacity. So we do participate in it in that regard. But I think -- we've seen what played out in the seltzer category. We're watching the ready-to-drink spirits category. And we'll just see what happens there over time. But so far, we haven't seen any significant threats to our branded spirits business.

And our next question will come from Mitch Pinheiro with Sturdivant & Company.

Most of my questions have been asked. I do have one on your barrel distillate that you've been inventorying. The growth rate is moderating. Does that sort of infer that you sort of like your balance of what you have laid down? Or does it -- is it hard to infer anything out of those numbers?

Yes. Mitch, I think, as we've discussed in the past, our objective here, our goal is to try to balance our inventory put away with our projected needs. And I think we've done a pretty good job of that over the last couple of years. We're continuing to lay down whiskey. I think what you see quarter-to-quarter is the fluctuation that occurs between selling our new distillate versus laying down new distillates. So we have to time the lay down sometimes in sequence to what we also need to sell. But overall, we have increased our put away this year. I think year-to-date, we're up close to $11 million or $12 million in increased put away. We'll continue to put away in the fourth quarter. But overall, I think we're in a pretty good position at this point.

And you've talked in the past about -- I mean, in years ago, obviously, you had very little visibility with your customers, would come in late in the quarter and it would surprise you and things like that. What percent -- or are you seeing a continued increase in sort of long-term contracts to give you visibility and what you need to lay down and the type of mash bills you need to have?

Yes. The short answer to that, Mitch, is yes. And I think that we've been able to benefit from history and understanding the correct mash bills to lay down and put away. And we've also benefited in the current -- the dynamics over the last 1.5 years or so about the tightness in supply and customers' willingness in that environment to contract more. So we've had much more success in contracting our new distillate volumes and even some success in contracting our aged business. So that's put us in a better position to have -- make better decisions on put away decisions and relative decisions on capacity around new distillate sales.

And I guess the last question in the same theme is, are you seeing -- are you accepting new customers for aged whiskey? Or are you sort of maxed out with what you have now?

Well, we always have aged whiskey available for uncontracted spot sales. So it's really just a matter of matching that aged inventory with customers' needs and pricing. So that's kind of the way we manage that on an ongoing basis.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to Dave Colo for any closing remarks.

Thank you for your interest in our company and for joining us today for our third quarter earnings call. We look forward to talking with you again after the fourth quarter.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.