Douglas Dynamics, Inc. (PLOW) Q1 2020 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Douglas Dynamics First Quarter 2020 Earnings Conference Call. [Operator Instructions]. I would now like to turn the call over to Sarah Lauber, Chief Financial Officer of Douglas Dynamics. Please go ahead.

Thank you. Welcome, everyone, and thank you for joining us on today's call. Before we begin, I would like to remind you that some of the comments that will be made during this conference call, including answers to your questions, will constitute forward-looking statements. These forward-looking statements are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters that we have described in yesterday's press release and in our filings with the SEC. Joining me on the call today is Bob McCormick, our President and Chief Executive Officer. In a moment, Bob will provide an overview of our performance. Then I'll review our financial results and our thoughts around guidance. After that, we'll open the call for your questions. With that, I'll hand the call over to Bob.

Thanks, Sarah. Good morning, everyone. Before we begin, I'd just like to note that today marks the 10-year anniversary of our IPO. Our company has evolved significantly over the past 10 years and we are proud of the changes we've implemented and the growth we've produced over that time. Outside of the stock price increases, we're proud of the diversity of our business, the exciting new markets we now serve and the long-term prospects for growth. We've made a lot of progress in the past 10 years, but there's a lot more to do. I'm confident that we are aligned and focused on expanding our leadership position in the truck equipment market, ultimately driving the long-term plans we outlined last year. Our strategy is sound, our balance is strong and our talent is second to none. While the pandemic will undoubtedly impact our timeline, it won't sway us from our task and we have the right team in place to achieve our goals. Now turning to the near term. Everyone is going to remember this quarter, which presented both familiar challenges and unique challenges that no one could have predicted to start the year. These challenges impacted our financial results and the ability to operate effectively in the first quarter. For the quarter, we generated sales and earnings lower than our internal expectations due to 3 main factors: significantly below average snowfall, chassis supply constraints for Class 4 through 6 trucks and, like everyone else, the operational and economic impact of the COVID-19 pandemic starting in March. Let's start with the topic that is top of mind for everyone, the pandemic. Our business model is built on dealing with and adapting to significant business drivers outside of our control; namely, snowfall. So while the coronavirus pandemic is a unique and challenging situation, our teams have been able to respond in a measured, thoughtful and disciplined fashion. In early March when it was clear that the U.S. would be impacted by the pandemic, our senior leadership team met and quickly established 3 priorities that would serve as guideposts: protect the health, safety and financial security of employees, provide seamless service to our customers and exit this situation stronger than when we entered. As you probably saw, we temporarily closed all of our U.S. facilities on March 18 to protect the health and safety of employees, partners and the surrounding communities. Knowing that it would take time for government assistance programs to reach our employees, we provided them financial security by paying all full-time employees through the end of March. Additionally, we paid the employee portion of health insurance premiums through April to ensure employees and their families would utilize the healthcare system while waiting to return to work. We did this because it was the right thing to do and because people matter at Douglas Dynamics. Trust me, decisions like these will strengthen our culture and further enhance the already strong relationship we have with our employees. As soon as the shutdown was complete, we began preparing for a safe return to the work environment for all 20 facilities. Over the past weeks our team put in countless hours planning and adapting our facilities to the new reality to create a safe and productive workplace for everyone. To provide seamless service to our customers we began bringing people back to the facilities and ramping up production levels in mid-April. We have several hundred people back at work in our facilities today, meeting the essential service needs of our customers. At this point, we are confident we will be fully staffed and 100% operational by the end of May. We will also remain focused on our development projects and making the necessary investments in the business that are critical to delivering our long-term profitable growth plans. When coupled with the DD mantra of "getting better every day," we fully expect to emerge from this situation stronger than when we entered. Now let's look at each segment. First, the Attachments segment. Sales were down year-over-year, as we expected them to be given the poor snowfall in Q1. In fact, the 2020 snow season marked the second lowest snowfall in the past 10 years and was the second consecutive year of below-average snowfall. As we've stated before, low snowfall 2 years in a row usually has a multiplier effect and increases the negative impact on our preseason. Our preseason started 2 weeks later than normal, and with the overall economic disruption from the pandemic our dealers will be capital constrained and probably more conservative when placing their preseason orders, delaying some purchases until Q4 when the snow season begins. On a positive note, our new product launches are being well received in the market; specifically, our half-ton V-plow offering. Orders for these products are exceeding expectations, and this bodes well for driving incremental growth in the Attachments segment over the long term. Reacting to the poor snowfall, our Attachments team was already flexing its business model down and putting short-term cost-cutting measures in place in March before the coronavirus pandemic hit. Remember, the mindset and business model for Attachments is built to change rapidly every year, responding to factors outside of their control. This year, we will be doing so because of the pandemic as well as snowfall. While 2019 was a banner year for Attachments, clearly 2020 will not be. But that can happen when navigating two significant headwinds, snowfall and coronavirus. Long term, our Attachments segment will rebound, protecting and growing our market-leading [indiscernible], improving our already robust levels of profit through DDMS. In Work Truck Solutions, as we mentioned last quarter, Class 4 through 6 chassis supply has been increasingly constrained recently due to tight supply lines and component shortages at most of the truck OEMs. These issues will only be compounded by the pandemic. And at the current time, all the OEMs remain shut down, and the ability to effectively source equipment and components for upfits is also unknown. While more than 50% of the dealerships we work with on the East Coast and in the Mid-Atlantic regions are open for business today, most of them are operating with skeleton crews well below their usual capacity while they wait to see when and where demand will return. In our Class 7- and 8-focused operations at Henderson, our order book, backlog and demand was strong going into the pandemic and, so far, the long-term contracts we have in place are not being canceled. If we are able to procure the supply of chassis, equipment and components we need, we anticipate performance for the second half of the year will be solid, over all. As the world waits to return to work, there will undoubtedly be delays at OEMs and component suppliers which we cannot accurately foresee today. That will have an impact on our ability to meet customer demand. However, that will be true of all companies. And the good news is that going into mid-March the Solutions segment was in good shape, giving us confidence in the long-term prospects for these operations. With that complete, I'd like to turn to our cash usage priorities. We announced an increase in our dividend on our last earnings call, the 12th increase in the past 10 years. The dividend has always been a top priority for capital deployment, and I want to take this opportunity to firmly reiterate our commitment today. We also remain committed to make the necessary investments in the business that position us for sustained success and are critical to delivering long-term profitable growth. While the pandemic may impact the timing of some of these projects, it won't change the approach and long-term direction. Finally, we have the financial flexibility to pursue strategic acquisitions that will add important products and services to our portfolio in the years ahead, and we'll continue to carefully explore the market for attractive opportunities at logical valuations. Our team is more than capable of navigating through this adversity, and while we can't accurately predict how this will play out, we have full confidence in our ability to overcome this unique combination of external headwinds. We believe that we are better positioned than many companies to thrive during a downturn. Most companies simply batten down the hatches and try to weather the storm. That's not our mindset. To be certain, we have pulled out our short-term cost cutting playbook and in fairly short order have pulled levers to maximize cash flow. But our DDMS mindset means we quickly embark on finding creative solutions to the unique problems that confront us. It's simply part of our DNA. At the same time, we focus on expanding our competitive advantages, doubling down on driving continuous improvement initiatives which improve quality and shorten lead times. In conclusion, I am proud of our team and the leadership they have demonstrated in responding to this unique set of challenges. While navigating this situation, we remain laser-focused on serving our customers and getting better every day. Bottom line, we'll exit stronger and be positioned to drive long-term profitable growth. With that, I'll hand the call to Sarah.

Thanks, Bob. Near term, we're clearly facing a significant financial impact. However, our financial strength will allow us to continue to invest for the long term and emerge from this situation stronger than we went in. The first quarter was a tough quarter for three main reasons: the headwinds we predicted as we exited a record year in 2019, the conclusion of a very low snow season and then the COVID-19 pandemic. The decision to shut our facilities in March created a significant financial impact, but the long-term well-being of employees far outweighs the short-term financial implications. We maintained partial shutdown status through April and into May. At this time, from a financial perspective our focus is balanced. On one end, we're maintaining our strong balance sheet, preserving cash through our income protection plan, which has evolved from the low snowfall playbook to cover all of our businesses. On the other end, we're committed to maintaining our dividend and investing in our long-term growth projects. Now let me walk through the first quarter and our plans related to guidance. For the first quarter of 2020 we generated net sales of $68.2 million and gross profit of $11.7 million. Our gross profit margin for the quarter was 17.1%. Compared to the first quarter of 2019, net sales decreased 27% and gross profit decreased 49%. As we had predicted in February, our sales and margins were impacted by the significantly below average snowfall in Attachments and Class 4 through 6 chassis availability in Solutions. And then, layer on the late-March impact of the temporary shutdown across all facilities as a result of the COVID-19 pandemic. Volumes were negatively impacted in Solutions, as shipments were minimal during this time, and both of the segments' margins were significantly impacted by the shutdown. During the quarter we also received a $1.2 million benefit from the CARES Act. As we paid our employees during the March shutdown, we were eligible for an employee retention credit, which favorably impacted our cost of sales. SG&A expenses were $19.9 million, compared to the $19.4 million recorded during the first quarter of last year. The increase reflects the investments we've been making in talent and resourcing our long-term growth plans. As a result of the aforementioned lower volumes across both segments, plus the additional cost associated with the shutdown, adjusted EBITDA for the first quarter was negative $1.7 million, compared to $9 million for the first quarter of last year. This leads us to a GAAP net loss of $10.1 million, or negative $0.44 per diluted share, for the first quarter of 2020, compared to a net loss of $300,000, or negative $0.01 per diluted share, in the same period of 2019. On an adjusted basis, net income was negative $7.8 million, or negative $0.34 per diluted share, compared to adjusted net income of $300,000, or $0.01 per diluted share, for the first quarter of 2019. For context, we estimate the impact of the pandemic in the first quarter was approximately $0.15 to $0.20 in adjusted earnings per share for the last 2 weeks of March, including both shutdown costs and related lost volume. Another notable and unusual item in the quarter was that our interest rate swaps became ineffective due to the unprecedented drop in the forward LIBOR curve. Interest expense was $5 million for the quarter, which was slightly higher than the $4.2 million incurred in the same period in the prior year, as it included a $1.4 million mark-to-market noncash expense. This masks the interest savings due to the reduction to the principal balance of our term loan credit agreement based on the $20 million voluntary prepayment we made in January. We have excluded the mark-to-market noncash expense in our adjusted earnings per share. The effective tax benefit was negative 24.4%, compared to negative 60.9% for the first quarter of 2019. The effective tax benefit decreased due to lower excess tax benefits related to stock compensation. Let me briefly comment on each of the segments. For the first quarter, Attachments recorded revenue of $19.1 million and adjusted EBITDA of negative $2.1 million. In the same period last year, the segment's revenue and adjusted EBITDA were $25.8 million and $2.3 million, respectively. The decreases are primarily attributable to lower volumes resulting from significantly below average snowfall during the 2020 snow season and the COVID-19 pandemic. To provide context, this year's snowfall was not only the second consecutive below-average snowfall season; there was particularly low snowfall again in the northeast region, which is an important region for us. In fact, the season snowfall total was approximately 25% below the 10-year average across North America and the lowest snowfall we've seen since 2012, which you may remember was the lowest total in 50 years. Turning to Work Truck Solutions, which reported net sales of $49.1 million and adjusted EBITDA of $400,000 for the first quarter. In the same period last year, the segment's net sales and adjusted EBITDA were $67.4 million and $6.7 million, respectively. Both net sales and adjusted EBITDA in Work Truck Solutions were negatively impacted by increased chassis supply constraint for Class 4 to 6 work trucks, coupled with the COVID-19 pandemic and the related shutdown of our facilities. Next, let's discuss the balance sheet and liquidity figures. We exited 2019 with strong free cash flow, allowing us to pay down more debt in the first quarter, and our leverage of 2.5x is well within our targeted range. I say all that, as in times like these cash is king. We recognize that and we are comfortable that we have a clear path to manage through these unusual circumstances that will also impact our balance sheet, leverage and liquidity. In the first quarter, cash used in operations increased $3.5 million, negatively impacted by operating results of $9.9 million, driven by the lower volumes from COVID-19, snowfall and chassis supply, but was somewhat offset by favorable changes in working capital of $6.5 million. The favorable change in working capital was higher collection on accounts receivable, of $12.9 million, offset by growing inventory, of $5.2 million. As a result of this, plus an increase in capital expenditures of $1.5 million, free cash flow for the first 3 months of 2020 declined $5.1 million, to negative $11.4 million, versus last year. Total liquidity of $86.3 million at the end of the first quarter compares to liquidity of $54.9 million at the end of the first quarter of last year. Liquidity increased due to our strong free cash flow from 2019, a lower voluntary payment on our debt plus higher collection of accounts receivable. Capital expenditures for the first quarter of 2020 totaled $2.3 million, higher when compared to $800,000 during the first quarter of 2019. The increase relates to the ongoing investments in the business. We are finding the right balance between methodically determining which expenditures are essential in the near term while still remaining committed to our long-term projects. Following the additional $20 million payment that we made on our debt during the first quarter, we ended the quarter with net debt of $255.3 million. As it stands today, we maintain net debt leverage ratio of 2.5x and believe we are in a much better position than most companies to manage through a recession. It's also worth mentioning that our term loan is covenant-light and we're not at risk of violating any of the terms of our obligations in the foreseeable future. Our revolving borrowings are due to mature on June 30, 2021, while our term loan credit agreement is set to mature on December 31, 2021. Now I'd like to outline our thoughts regarding guidance. Like many companies at the moment, we are withdrawing our 2020 financial outlook because of the pandemic. Internally, we have adjusted our budgets and created various scenarios and contingency plans using our income protection plan playbook across the company. While we are used to creating budgets for recession-like conditions on a regular basis for our Attachments business, until we have a better idea of how the overall economy is reacting to this unprecedented situation there are too many unknown variables for us to provide projections with any amount of confidence. In addition, it is good news that 95% of our customer base qualifies as an essential service and can operate today. But many are also located in densely populated areas heavily impacted by the pandemic, which may mean that they're not able to operate effectively in the near term. For Attachments, demand is being impacted by low snowfall and the pandemic. But on a positive note, our end user landscapers are still able to work in most states. We delayed the start of preseason by 2 weeks and as dealers are likely cash constrained at the moment, we expect the fourth quarter to be much more important this year. At this stage, while the supply chain for Attachments will be impacted by the pandemic, it's important to remember we have a lean, well-established supply chain with longstanding partnerships, which means Douglas will be at the front of the line. For Solutions, demand is obviously being impacted by the pandemic, especially as many of our locations are in the hard-hit East Coast region. Our municipal-focused business should see less of an impact, given we have long-term contracts at Henderson. Between the chassis OEMs and the hundreds of component suppliers we rely on for upfits, the supply side of the equation in Solutions is probably the biggest unknown at this point. For now what we can say is we expect to be in varying states of shutdown for 6 to 8 weeks during April and May, which will have a very significant impact on our second quarter earnings. Finally, I want to close with this. As Bob stated, we remain committed to funding the dividend. As we sit here today, we do expect to generate the earnings and free cash flow in 2020 to fully fund our dividend. Now we'd like to open the call for Q&A.

[Operator Instructions]. Your first question comes from the line of Ryan Sigdahl with Craig-Hallum.

I want to start with Work Truck Attachments. How are you guys feeling about channel inventory? And then what are you hearing from kind of dealer and then also end customer sentiment? I know you talked about delaying more orders probably to Q4, but what are you hearing from the channel?

The last dealer inventory that we took was at the end of January, and we were quite pleased with the results. In this environment of 2 low-snowfall years in a row, you would expect plow inventories to be accelerated or increased, but they were relatively flat. So that was a good sign. When it comes to dealer sentiment, as I mentioned before, most of our dealers, while they're the cream of the crop in terms of truck equipment, they're the best and biggest in most of the MSAs that we operate in, they're still considered a small business by normal standards. And so this pandemic and this shutdown certainly has them capital constrained. And our early take is that it is wise for them to be more mindful of the size of preseason order that they place and also when they will take shipment of those orders. So not only is the reduced snowfall 2 years in a row going to have a negative impact over all on the preseason, we expect that dealers will probably tick that down even a level further and wait until the fourth quarter snow season to start showing itself and then place some accelerated increased orders at that point in time. The other point that I would make is that while it's still early in the ordering process we would expect to see more of our preseason ship in Q3 versus Q2. Again, we just kind of see this thing lengthening out a little bit as the calendar year progresses.

And then you mentioned kind of financial constraints among some of your customers. Are you guys extending any greater payment terms than you historically do, to try and help them?

No.

No, we're not, Ryan. We have our typical preseason terms. And I'll tell you, I'm relatively pleased thus far that those that have opted for cash terms historically have remained with cash terms. So that's one good sign that we've seen.

Last question for me and then I'll turn it over. You talked about capital allocation, firmly reiterating the dividend. After the dividend, given the current environment, do you have any changes to kind of the temporary or near-term capital allocation between kind of investments in the company, hunkering down, stock buybacks, et cetera?

So the way we think about capital allocation has not changed in this environment, maybe a tweak here and there. We are focused on the dividend, fully committed to that. We expect that we will generate free cash flow to cover the dividend for the year. Secondly, we've been focused on paying down debt, of which we made a $20 million payment in Q1. We are at leverage that we're comfortable with today. And then, third, investing back into our business and then acquisitions. I'll make the comment on CapEx, in this environment I'd say we are committed to continuing to invest in our long-term growth projects. However, we are also going through each capital request again and re-approving it, I'll say, as we navigate through the year. I still expect that this will be an investment year, CapEx around 3% of sales, but we are just being very diligent on making sure we invest in the right areas.

Let me just add on to that, just for one moment. One of the things to remember about Douglas is we have a balance sheet that is almost always in great shape. It's a high free cash flow generation business model, even when things get tough. It is certainly better than most. So while we do pull levers to trim back CapEx, as Sarah suggests, we have the ability and we have the mindset to make sure that we're still making appropriate investments that will support the long-term growth initiatives we have. So it is a very balanced approach for short-term cuts, at the same time making sure we don't lose momentum against our long-term goals.

Your next question comes from the line of Tim Wojs, with Baird.

Maybe just a first question on maybe just kind of a normalized decremental margin. How would you think of kind of unit decrementals as you look at maybe the second quarter and into the third quarter, kind of recognizing this isn't kind of a normal situation? But how do you think the margins can flex or what can you flex, just given expectations of more sluggish volume?

Great question, Tim. When I think about our business and a typical decrement margin, we've always been around that 35% range. And that has evolved, obviously, from our commercial snow and ice, where we have a much more variable cost structure, to the additions of our acquisitions with a little bit more fixed costs. But from that standpoint, that's a good place to think about in normal times. Clearly, Q1 was higher than that. With the speed and severity that we saw this come at us in March, it takes a bit longer to react. And we have the overhead costs related to our shutdown for 2 weeks in Q1 and then when you look at Q2 were half the quarter. So when you think about Q1, I estimated the impact being $0.15 to $0.20 of adjusted earnings per share based on the COVID-19 impact. You can look to Q2, not two weeks, being more half a quarter, which is clearly going to have an increase to the decrement. But I see that improving then sequentially through the end of the year.

Okay. That was going to be my second question. It sounds like if we used kind of the $0.15 to $0.20 that you called out for Q1, it sounds like we could maybe triple that and kind of use that as a baseline for what the impact to Q2 might look like.

Absolutely. And I was just going to reiterate, those are shutdown impacts. We've been working hard on getting back to work and ramping back up during this period. So we'll start to come out of that here in May and into June.

Right. Okay. Okay. Understand there. On the Dejana side of things, how would you characterize the backlog there? It sounds like Henderson has held up pretty well and there haven't really been any contract cancellations. But is that the same in Dejana?

Well, I would say we haven't seen cancellations there, but as you can imagine, if you think of where Dejana's market-leading positions are it's on the East Coast and Mid-Atlantic. And so they're right in the middle of this thing. And so we've seen orders drop off, as we would expect. I made a comment earlier, the truck dealers that we work with in those areas, half of them are open, half of them are closed. The ones that are open are pretty well downsized at this point. And I guess, Tim, what I would leave you with is although we will certainly be first in line for chassis when the OEMs get back up and running, probably the biggest wildcard we have looking forward from a demand perspective is what's the economy look like and what's the end user sentiment look like in that region of the country when all the dust settles.

Okay. Okay. Understood. And then I guess just lastly, I guess, could you [indiscernible] us on how you're thinking about just kind of maybe extending the revolver or how you're kind of looking at that? Because I think, before, you had talked about maybe trying to refinance. And so any sort of kind of update on pushing out some of the maturity and getting into agreement there?

Absolutely. As you know, the credit markets have been challenged. We're very fortunate in our banking partnerships that we've had and we've been working closely with them. I still expect us to be able to refinance. It could be as early as Q2. We may opt to wait until the back half of the year. We're just staying close to the market. We have a lot of different approaches we could take. We're currently in a Term Loan B. There are other ways for us to refinance that would be open to us. So I'm not concerned about the ability to refinance. I think the expectation, though, is it's going to be a little more expensive than it was before this pandemic hit.

Okay. Okay. Well it's good that the ability is still there.

Your next question comes from the line of Chris McGinnis, with Sidoti & Company.

I just wanted to start maybe off with just in response to COVID, can you just maybe talk about some of the safety measures and maybe changes in manufacturing and any projected thoughts that that may hurt the margin, going forward? I know you've obviously spent a lot of time around DDMS, but just any issues around margins being hurt by measures to combat the pandemic?

I think Sarah speaks appropriately to the short-term financial hits that we'll take during shutdowns and ramp-ups. I'm going to speak to that element of it. I will say that, as I mentioned earlier, the Safe Return to Work teams that we put in place as soon as we shut down have been going through all of our facilities, whether it's a 400-person location for manufacturing or a 15-person location for upfitting. And we are putting all the logical safety measures in place, from a cleaning perspective, from a social distancing perspective. I would tell you that initially I had a concern that some of the long-term solutions that we may have to put in place might impact productivity because people might be spaced farther apart. But then again, you can't, you just can't imagine the work that these people do when they're faced with a crisis. And so some of the unique solutions people have found already are just nothing short of incredible. The other thing that I would suggest to you is you give an engineering and operations team a completely shut-down facility to stand there and look at and dream about what's possible, quite frankly, you never get an opportunity to shut a location down and look at a blank sheet of paper and say, what can we do differently if we've got 30 days to do it? And so some of the continuous improvement initiatives that have come out of this I think are really cool. I would expect, long answer, shorter, I would expect that long term, when we're back up and running 100% operational, that the safety measures we put in place should not have a negative impact on our long-term margins, at all. And in fact, we may see that some of the momentum that we've gained will actually accelerate some of those margin improvements.

Great. I appreciate that insight. And then maybe moving on to Henderson, I know you didn't own it in the past recession, but just as states and local budgets are starting to be impacted by COVID, any risks there on the Henderson backlog?

That's a terrific question. While we purchased Henderson on the other end of coming out of the last economic cycle, we were always very proud to say that even up through the acquisition Henderson continued to grow through the most significant economic downturn in our lifetimes. So I think that says all we need to know about the impact on municipal budgets. Do those budgets get cut back during downturns? Absolutely. But one of the last things to get cut is snow and ice control removal because of the significant impact it has on commerce and tax collections. So while every environment is a new situation unto itself, history says that Henderson should not be significantly impacted from that perspective.

Okay. Thanks for that. And then last question, just around the competitive environment in Solutions. You talked about the strength of your balance sheet. Can you maybe just talk about the opportunity of possibly the disruption it's causing across the country and opportunities for you to maybe flex a little bit and grow as competition maybe falls by the wayside?

Certainly, that's something that we're exploring. But I guess what I go back to is if you can think about your average size upfitter, your truck equipment dealer, it's probably a $5 million to $10 million operation. It is a small business. Okay? I think some of those businesses are going to be challenged longer term having to weather this environment. To a large degree, those businesses were not and are not on Douglas' short-term acquisition target list. Okay? So one of the things we will not do is make a modification to the acquisition strategy to accommodate a situation. We have a list of blue-chip targets out there. Most of them are medium- to larger-sized companies. We'll certainly be keeping our eyes open for opportunities that may present themselves coming out of this other end of it. I unfortunately think that if there's fallout it's likely to be in the smaller companies, which are not a large part of our go-forward strategy.

[Operator Instructions]. I am showing no further questions at this time. I would now like to turn the call back over to Bob McCormick, President and CEO.

Thank you. And thank you for your time today. We hope that you are all staying healthy throughout these difficult times. And as always, we are very appreciative of your ongoing interest in Douglas Dynamics, and we look forward to updating you on any new developments in the months ahead as we work through this situation together. Have a terrific day.

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