Construction Partners, Inc. (ROAD) Q2 2022 Earnings Report, Transcript and Summary

Greetings and welcome to the Construction Partners, Inc. Second Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rick Black with Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. We appreciate you joining us for the Construction Partners' conference call to review second quarter fiscal 2022 results. This call is also being webcast and can be accessed through the audio link on the Events and Presentations page of the Investor Relations section of constructionpartners.net. Information recorded on this call speaks only as of today, February 4, 2022, so please be advised that any time-sensitive information may no longer be accurate at the time of any replay or reading of the transcript. I would also like to remind you that the statements made in today’s discussion that are not historical facts, including statements of expectations or future events or future financial performance are forward-looking statements made pursuant to the Safe Harbor’s provision of the Private Securities Litigation Reform Act of 1995. We will be making forward-looking statements as part of today’s call that by their nature are uncertain and outside of the company’s control. Actual results may differ materially. Please refer to the earnings press release that was issued today for our discussions on forward-looking statements. These factors and other risks and uncertainties are described in detail in the company’s filings with the Securities and Exchange Commission. Management will also refer to non-GAAP measures, including the adjusted EBITDA and reconciliation to the nearest GAAP measures can be found at the end of our earnings press release. Construction Partners assumes no obligation to publicly update or revise any forward-looking statements. Now, I would like to turn the conference call over to Construction Partners’ CEO, Jule Smith. Jule?

Thank you, Rick, and good morning, everyone. With me on the call today are Alan Palmer, our Chief Financial Officer; and Ned Fleming, our Executive Chairman; as well as other members of our senior management team. I'd like to start by recognizing the more than 3,500 CPI employees throughout the Southeast and thanking them for their continued focus on safety at our job sites, managing record growth in our operations, and perseverance in dealing with the continued supply and labor challenges in the economy. Because of their hard work, CPI is having a successful current year and laying the groundwork for future growth and success. In this second quarter, our year-over-year revenue grew 36%, of which 17% was from acquisitions and 19% was organic growth. We also ended the second quarter with a record project backlog of nearly $1.3 billion. More importantly, our backlog margins continue to grow and we anticipate that this healthy backlog margin expansion will mean higher future profit margins as backlog is converted. Taken together, this strong topline performance, record backlog, and higher backlog margins are evidence of the continued robust demand for our infrastructure services throughout our five states and 57 markets and in multiple sectors. We continue to see healthy growth in the Southeast economy and strong private market bidding activity. On the public side, each of our five states continues to have healthy funding for their transportation and infrastructure programs, boosted this current year by the COVID Relief bills. We continue to expect that the federal infrastructure bill will begin to flow into state budgets later in our fiscal year and become a contributor to our fiscal 2023, providing opportunities on numerous types of projects. These include not only highways and bridges, but also airports and railroads. CPI is actively preparing to have the workforce and equipment to participate in this generational investment in our nation's infrastructure. Turning now to the current cost environment. Continued inflation and accelerated costs led to an adjusted EBITDA of $7.8 million compared to $11 million in the same quarter last year. To begin with an update, the supply chain and labor shortages that began in the spring of 2021 are still very much a fact of life throughout the construction industry. But as we predicted for the last few quarters, CPI has learned to manage through these challenges and to acquire the workforce and resources needed to create top line revenue as evidenced by our growth. To protect the bottom line, for the last nine months, we have been managing through the inflationary effects of these resource shortages by building contingencies and cost escalations into our newer bids to deal with the unprecedented and sharp inflation that began to accelerate last summer and continues today. This process is ongoing, and the results will begin to show as this more resilient and higher-margin backlog is converted to revenue. An additional new challenge this quarter was the rapid rise in energy costs, driven largely by the invasion of Ukraine. This sharply escalated the cost of all energy commodities, the most impactful to CPI being the price of diesel fuel, which had an approximate 43% increase in the span of just over 60 days. While most of our internal operation is powered by diesel fuel, so also is the fleet of our subcontractors and suppliers. Gasoline, liquid asphalt and natural gas also experienced significant increased costs in the quarter, and we have taken immediate actions in response. We raised our fleet rates using bids to reflect the new market prices of diesel and other fuels, we are incorporating additional contingencies into project bids, and we have begun implementing diesel fuel index mechanisms with our customers and suppliers where possible. We are assured that our competitors have experienced similar cost increases by the fact that we're still able to win bids and to book record project backlog with expanding margins. So, even as we deal with this new inflation caused by geopolitical events, CPI is adapting to succeed in an inflationary environment and remain steadfast on the pathway to higher margins. To illustrate this path and the value of CPI's business model of shorter duration projects, remember, we entered into our new fiscal year on October 1, with approximately $1 billion on backlog. And in the first two quarters of our fiscal year, we've completed approximately half of that beginning backlog. Most of this completed backlog was the older half, with lower margins and fewer contingencies that was booked prior to the summer of 2021. Most of the remaining backlog from the first of the year will be converted into higher margin revenue during the second half of our fiscal year. We expect this trend of steady growth in margins to continue in FY 2023 as well, as our new backlog being added in FY 2022, reflects approximately 250 to 300 basis points higher margin compared to the previous year. Just as aggregate suppliers are raising prices in this demand environment, CPI is essentially doing the same thing in the contracting space. Turning now to acquisitions. We made two strategic acquisitions in March. In Florida, we acquired GAC Contractors, which included one hot mix asphalt plant, as well as experienced asphalt, grading and site work crews and the related fleet of equipment. GAC has historically been a large presence in the rapidly growing Florida Panhandle region in both the private and public markets. In North Carolina, we acquired an asphalt paving contractor, Southern Asphalt, located in the coastal city of Wilmington. Both of these acquisitions give CPI an opportunity for future organic growth and higher relative market share in those two dynamic regions in the Southeast. Our acquisition pipeline continues to be full, as we see great companies that strategically fit CPI's business model. While we are a consolidator in a very fragmented industry segment, we remain patient and focused on finding acquisitions that expand our footprint and increase both our manufacturing and construction services vertical integration. Our goal continues to be growing relative market share, while also capturing more margin along the value chain of services. The strong revenue and demand environment in both the public and private sectors across our 57 markets, provides tremendous growth potential for the future of CPI. We are also well positioned to capitalize on future infrastructure demand that the $1.2 trillion federal bill will create over the next decade. We began the third quarter with the highest backlog in the company's history and expanding backlog margins. We are adjusting our full year expectations based on high revenue and the cost impact on profitability in the first half of our fiscal year. This revised outlook reflects revenue and profitability for the second half of the year, which is largely in line with our original expectations. We anticipate a strong second half of fiscal 2022, with both higher revenue and margins and caring that momentum into fiscal 2023. I'd now like to turn the call over to Alan to discuss our financial results and revised outlook in greater detail.

Thank you, Joel, and good morning, everyone. I will begin with a review of our key performance metrics in the second quarter of fiscal 2022. Revenue was $243.4 million, up 35.9% compared to the prior year. Acquisitions completed subsequent to March 31, 2021, contributed $29.9 million of revenue, and we had an increase of $34.4 million of revenue in our existing markets. Gross profit was $12.5 million compared to $18.1 million in the same quarter last year. General and administrative expenses were $25 million or 10.3% of total revenue compared to $24.5 million or 13.7% of total revenue in the prior year. In fiscal year 2022, we expect general and administrative expenses as a percentage of revenue to remain in the range of 8.5% to 9%. Net loss was $9.4 million for the second quarter compared to a net loss of $4.9 million for the same quarter last year. Adjusted EBITDA for the second fiscal quarter of 2022 was $7.8 million compared to $11 million in the second quarter last year. You can find GAAP to non-GAAP reconciliations of adjusted EBITDA financial measures at the end of today's press release. Turning now to the balance sheet. At March 31, 2022, we had $29.6 million of cash and $77.7 million of availability under our revolving credit facility to the reduction for outstanding letters of credit. As of the end of the quarter, our debt to trailing 12-months EBITDA ratio was 2.74. This liquidity provides flexibility and capital capacity for potential near-term acquisitions, allowing us to respond to growth opportunities when they arise. Capital expenditures for the second quarter of fiscal 2022 were $19.6 million. We expect capital expenditures for the fiscal year to be in the range of $60 million to $65 million. We are reporting a record project backlog at March 31, 2022, of $1.28 billion compared to $1.09 billion at December 31, 2021, and $773.3 million at March 31, 2021. And finally, as was noted in today's earnings release, we are revising our fiscal year 2020 outlook for the year with regard to revenue, net income and adjusted EBITDA. We now expect revenue in the range of $1.15 billion to $1.2 billion compared to the prior range of $1.075 billion to $1.15 billion. Net income in the range of $14.5 million to $25.3 million compared to the prior range of $34.7 million to $41.8 million. Adjusted EBITDA in the range of $105 million to $120.3 million compared to the prior range of $122 million to $132 million. In summary, we are pleased with the demand for our infrastructure services driving top line growth as well as our record project backlog with growing margins. I'll now turn the call over to the operator.

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Your first question comes from Andy Wittmann with Baird. Please go ahead.

Hi. Good morning, gentlemen. Thank you for taking some time with us this morning.

Good morning, Andy.

Hey. I mean, obviously, the story and the questions are going to revolve around the margins and your ability to kind of get back to historical levels. So I'm going to start by asking questions around that this way. When I do the calculations on what the guidance for the second half of your fiscal year implies, it suggests that your margins should be up about 160 basis points over the second half of last year. And this is obviously against a highly inflationary environment. So Alan, maybe could you talk maybe about the confidence that you have in expanding margins by that much in the second half based on what's in your backlog today? Maybe discuss how much of the backlog that's going to be burned in the second half is new backlog that recognizes this would be kind of one way to frame that answer, but other things that you could add would be helpful, I think. Thanks.

Yeah, Andy, this is Jule. Good morning. I'll start and Alan can weigh in, but I know those calculations would be asked. So we understand, as we look in our guidance that the margins were going to be a question. And here's, sort of, how we see it. When we ended our third quarter in 2021, we had an $823 million backlog before inflation really was on our minds. That was booked. And once we realized the inflation was really going to be a large part of the economy and our operations, we started bidding with contingencies and trying to get ahead of inflation. The reality is, in the fourth quarter, we burned some of that backlog, but we brought about $575 million of that pre-inflationary mindset backlog into this fiscal year. In the first two quarters of this year, we burned about $445 million of that off. So what gives us confidence is a lot of that's behind us. And most of the backlog we have moving forward, we knew inflation was going to be a factor. And so it is going to be at higher margins. We feel like that about -- in the second half of our year, about 20% of our project revenue is going to be completing that backlog. And about 60% of the revenue is going to be work that we did both in the fourth quarter of last year and the first quarter of this year. But as you know, in the spring time in summer, we do a lot of book and burn work that we were able to book in the winter and the pricing acceleration that we've seen this fiscal year and this winter, we think is going to really help our second half of the year and start to show up in the results. So I'll let Alan give some color to that, but that's really where we get our guidance from.

Yeah. Andy, kind of, looking at a quarter this year and quarter last year; first half this year, first half last year versus second half. To Jule's point, last year, we started off the first two quarter is pretty good, but we kind of faded in the last two quarters, last year because we were beginning to hit those inflationary costs, and they were beginning to impact what should have been the best half of our year and muted that a lot. This year, we're really having the reverse of that. We got really hammered for reasons Jule just talked about in the first half, but our second half compared to last year is an improving second half this year over the first half compared to a declining second half last year. So that's what gives that 150 basis point difference in margin. But really, our second half this year is just returning more to the normal of what we've seen in regular years. And a big part of that improvement is that change between the timing of when those jobs were bid and what margins and what cushions we've got in those.

That makes a lot of sense. Thanks for the thorough answer to that. For my follow-up question, I wanted to ask about the backlog. And, obviously, it's a big number. It's up a lot sequentially, and so that's all fine well and good. In the pre-inflationary environment, we wouldn't have had to ask a question about how inflation has affected that backlog, but clearly, you're increasing prices to get this margin back. So I guess maybe if you could talk about what like the actual like volume increase is maybe on a sequential basis since last quarter? And how much of the increased backlog is just price increases? Maybe another way to answer that question would be to talk about the level of price increase that you need today versus maybe six months ago even to earn the same profit margin?

Yes. Andy, our quarter-over-quarter backlog, I think, grew just around $200 million, even as we burned off. We had a good revenue quarter. So clearly, pricing is going up, and that's reflected in our bid and in our revenue. We also -- our hot mixed asphalt tons are up. They're up 35% year-over-year. Our FOB up 57% and that drives a lot of revenue. So that's -- does that answer your question as far as the backlog?

Yes. I guess, just the question I had on what's the price increase that your customers are seeing basically to cover the inflation that we've seen in the last three months?

Okay.

Is that a 10% increase, or what -- how much is that? Just to kind of get back to level set, how much you need to get your margin?

Yes, Andy, our new work that we're selling now, we're seeing a 250 to 300 basis point increase year-over-year in margins. And so that's a 20% to 30% increase in some cases. So part of that is to cover inflation and part of that is, frankly, just pricing acceleration that we're seeing. The big backlog, on one hand, we have to convert it. And so inflation -- in inflationary environment, especially when you get a surprise like we did in the -- this quarter with the energy costs, you have to absorb that. But the positive of having a really strong backlog is it allows us to be patient. It allows us to bid with higher margins, and we're seeing that. Having a healthy record backlog is allowing us to drive pricing acceleration faster than we had anticipated.

Thanks guys.

I think, at least in this quarter, with the two acquisitions we made, part of that backlog increase was related to that. So that was probably 35% to 40% of this quarter's increase. It wasn't just totally price increases or booking more quantity of work to do. That was a pretty good factor in this particular quarter.

That's helpful. Thanks.

Thank you, Andy.

Next question, Stanley Elliott with Stifel. Please go ahead.

Hey, good morning everybody. Thank you all for taking the question. In terms of the new guide, could you help us in terms of expectations for organic versus acquisitions given some of the deals that have been recently completed?

Yes. Good morning, Stanley. We had originally said our organic growth was going to be in the 7% to 10% range. Obviously, with the first two quarters we've had, we feel like that's going to be at the high end of that range. And we're very pleased with the organic growth we've had that we focused on that and building relative market share in the markets we're in and vertically integrating in our construction services. So -- we're pleased with the organic growth, and we think it will be in the high end of that range. We had originally said acquisitive growth was going to be 13% to 16%. And obviously, with these two acquisitions, it's going to be higher. We envision that being around 19% to 20% now.

And can you talk a little bit about some of the mechanisms you have in place kind of intra-quarter to protect the bids, right? Because it's not only diesel cost, but also, I'm assuming, repair and maintenance costs are higher, labor costs are increasingly more challenged. Just, holistically, a little help on how you guys are addressing the cost side of the equation?

Stanley, this past year, we've talked about how inflation is normally and historically been a pass-through cost for CPI. But what we realized is, inflation was pretty slow moving for a decade. And so, it was a pass-through cost, but as it's sped up, we've had to speed up. And so, in our bids now, we look at wage rates. We look at repairs and maintenance costs. We look at the price of energy. And we try to get ahead of it. We can't -- someone told me inflation -- managing inflations like throwing a football to a speedy wide receiver. And so, we've had to learn to lead and to get ahead of inflation. So it's a little bit of all that.

And -- but within that context, I mean, if you're bidding things 250, 300 basis points higher, in all likelihood, you're probably going to be realizing something less in terms of the margin because of inflation in some of these other buckets, or is that statement not correct?

Well, we -- when we say 250 to 300 basis points higher, Stanley, that's our margin. What we hope to do is cover the impacts of inflation by looking at as we estimate a job, we look at it piece by piece, our fleet, our plants, our labor, our subcontracts. So we hope to cover all that in the cost impacts. Clearly, surprises can impact margins. But what we've tried to do for the last nine months, is to really start bidding and putting those contingencies and escalators into the cost side of our bids.

And lastly, are you guys anticipating any sort of mid-year price increases in terms of like plain stone and things like that, that would be part of the project?

Yes. We have seen price increases from suppliers that can -- they pass along cost increases. We tried to anticipate that in our guidance. But, yes, we -- plain stone is a significant part of the inflation in the construction industry now.

Yes. And I'd just say, historically, we have anticipated those items other than the petroleum-based ones, going up once a year. Now, we've seen that, not only is the price increase we've seen since June or since September, we've got in there, but we've anticipated that there will be at least a second price increase in those types of items, aggregate and things like that and, of course, obviously, liquid, but other things. So we've not assumed that, hey, the price increase we've gotten so far, is it for the year; there's going to be continuing rounds of price increases on different matters. And that's part of what everyone was talking about. When we estimate our cost, we don't say it's just -- even though it's a six or nine-month contract for us, that those costs are going to be the same throughout that 6 to 9 months, which is what we would historically assume. We're now putting escalators within even a 6 to 9-month contract that says, we anticipate all the types of prices that go into that cost are going to go up month-by-month some, and we're putting in a contingency for the ones that are not item-by-item. And that's what will get eroded first before the margin starts getting eroded.

Great. Guys, thanks so much. Appreciate it. Best of luck.

Thanks, Stanley.

Next question Josh Wilson with Raymond James. Please go ahead.

Good morning. Thanks for taking my questions.

Good morning, Josh.

Maybe just to make sure we're all level set as far as the impact of acquisitions and how to figure out future impacts from changes in oil prices. Can you give us a sense of what the year-on-year impact was from diesel and asphalt in the quarter?

The impact of energy cost in the quarter, Josh, we feel like it was several million dollars, roughly half of sort of the shortfall was just from energy costs and a -- and just the other half roughly was just from the backlog that we completed that we had on backlog before sort of the new world hit us.

And what role is, your asphalt terminal playing and maybe leading some of the effects and pushing them out, or is it emptied out at this point?

I would say the asphalt terminal, number one, is having a great year. But number two it is helping us, in helping our operating companies smooth out some of those spikes in energy. And that's been a positive. They've been able to bid with confidence. We've been able to fill up our tanks, when we saw that prices were going up -- and so I would say all in all, the asphalt terminal on the Gulf Coast has been a real positive for CPI for this quarter.

Josh to kind of speak a little bit, on that typically, we're going to fill our tanks as full as we can, during the winter. and that gives us lower cost. Then as we progress like we are now beginning to go into the summer. We would hold less asphalt in those to kind of run out right at the end of the season and then buy -- fill back up with the prices escalating like they have been, we're keeping them fuller than we normally would have this year. So that instead of having a 30 or 45 days supply, that our operating companies know this is what my cost is going to be. We're trying to keep that, 60 to 90 days when the tanks are full for those markets. So it not only protects you on price, but it gives you a lot more clarity for a longer period of time because of that storage flexibility we have.

Okay. Thanks a lot.

Thanks, Josh.

Next question Adam Thalhimer with Thompson Davis. Please go ahead.

Hey good morning guys. Hey a question on …

Good morning, Adam.

On win rates. I'm curious if, as you've been, raising prices and putting in more contingencies if that's, affected the win rate at all?

No, Adam, we haven't really seen a real change in the last, I'd say, nine months on that. We clearly have been patient with our bids. And -- but we really haven't seen a lot of that. We're clearly booking a lot of backlog at higher margins. We really haven't seen that we're winning a higher percentage or a lower percentage. I think our -- I think the people are bidding against are also winning work. And so we see -- we really haven't seen a big change there.

And what it indicates to us, Adam, is that those competitors are facing the same cost increases and that they're getting those into the bid, because what can happen is if we're raising our prices that much and they're not that win rate goes down, and that means they're not yet aware of what's really happening in their cost. So, it really gives us good assurance, if you will, that they're seeing the same things we are, and they're having to get that into their bids.

Got it. Okay. That is good. And then, how does the current environment affect your M&A pipeline?

We really -- Adam, haven't seen that the current environment has really changed our M&A pipeline. The sellers that we're talking to, their priorities really haven't changed. They're looking at what's the best plan for their family. They're looking at how CPI is going to treat their employees. So, we really haven't seen a change there. But our M&A pipeline is full. It's robust. We're talking to a lot of folks, but we're able to be patient and be selective to find the best strategic fits. So -- and we're having some conversations with some really -- just some great people, some high-quality companies in some good markets. So -- but they clearly are experiencing the same current environment we are because I talk about it with them. So in that sense, but it really doesn't change their long-term planning.

Got it. Okay. Good color. Thanks guys.

Thanks, Adam.

Next question, Brent Thielman with D.A. Davidson. Please go ahead.

Hey guys. Good morning.

Good morning, Brent.

Most of my questions have been answered, Jule, but maybe just your perception and what you're seeing in the private sector markets, obviously, the market has its concerns, but feedback ground in the industry says it's great. So, what are you seeing in here and there?

Yes. Brent, I'm going to let Ned who's sitting here answer that. He obviously is in touch with a lot of different businesses. So I'm going to let him give that answer, and I may follow up. Ned?

What we see in the private sector is really strong, particularly in this part of the country. I mean I think you're seeing an economy that is, in many respects, regionally based. We happen to be in the fastest-growing regions in the country, whether you travel, when I'm traveling to a Roliderm [ph] or really any one of our 57 different plants, you're going to see growth. You're going to see public projects growth. You're also going to see a lot of private growth, particularly today around airports, ports, et cetera, which is part of the $1.2 trillion infrastructure build that hadn't even come through yet. So from our standpoint, we see the private sector as part of what is dynamic about this, really the organic growth. The organic growth is substantially higher than any price increases that we have made to-date. We see that continuing from the standpoint of acquisition growth. What does happen to acquisitions and a time like this is the same thing that happened to us in 2008, 2009 and 2010 is if people are on the edge and on the verge of selling or thinking about selling from the standpoint of generational planning, this pushes them over that point. And we've ended up being able to do some things structurally and contractually with the acquisitions that we did back in 2008 and 2009, which benefit us as we move forward. So I think as I look out into the future, although there's a lot of uncertainty around supply chain and inflation, and we have a European ore and political. What we see is a market that's dynamically growing there's lots more demand than supply, frankly. And when that happens, margins go up, they're going to continue to go up, we think for in the near future for the extended future, probably, which we think is positive. Acquisitions are going to come in at a pace. You know that acquisitions are coming at a different pace. We actually had one acquisition that we talked about that just came in off the website. I mean, I would have never thought that would be the case five years ago. So I think if I step back and look at it, I think this is one of those periods where we're learning things. This is a company that hadn't gone through the inflation market the last time that I thought was in 1982 and 1983. Al and I are on at the table old enough to remember those days. They've reacted quickly. Our systems allow us to be able to react as Jule said on a piece-by-piece basis. The integration of services as well as the vertical integration in the materials has helped us. We're really seeing a benefit to that as we move forward. So with the infrastructure bill, we're going to do roads, bridges, airports, ports, even railroad infrastructure, which is something that is part of the vertical integration into the services that we'll be able to benefit from. So as I look out there, I think margins are going to continue to go up. It's going to be probably a little bit of a choppy ride. It's never a smooth curve. Organic growth is as strong as we've seen it really in a long, long time, probably 15 years, 16 years. So from the private sector standpoint, we're in the best part of the country. If you travel happen to come to Raleigh-Durham or Birmingham or Pensacola or Tallahassee, make sure you pick a phone call us and we'll drive you around because it's the growth that we see as we travel the markets that we're in, is really terrific. And so the demand for our product is the best that I've ever seen it in 20 years.

Brent, this is Jule. Just to give you a little tactical perspective on the private market. It's going to be about 35% to 40% of our revenue this year, which is pretty much in line with historical norms, maybe up a tick. And as the federal bill really starts to work its way into the project lettings later this year, we anticipate that moderating down into the low 30s next year. That's our outlook on sort of our mix of private to public.

Really helpful. I appreciate all that. I guess the other question that oftentimes comes up from investors is just with all this inflation sort of across the board, potentially jobs having to be sort of reassessed in terms of costs and agencies having finite level of funds to deploy that some jobs could be cannibalized because things are getting more expensive. How would you -- I mean, how would you address that question and what you're seeing?

Yes, Brent, we already hear from our DOTs that the federal money coming to them is going to increase their spending. It is going to increase their list of projects to do, but some of that money is going to cover the higher cost of those projects. So that is the reality that the DOTs and all the states are dealing with. So we anticipate more work being left as a result of the federal bill and their healthy mechanisms in the states, but inflation is going to probably eat up a few of the projects at the end of the list.

Brent, the good news for us is that we're in states that have increased their gas taxes and therefore, they're going to have the capital to match the federal bill. So from our perspective, and we're doing shorter-term projects. I just think our strategy works in the environment that we have much better than any other strategy.

Yeah. I really appreciate the answers, very helpful. Thank you.

Thank you, Brett.

I will now turn the floor over to management for closing remarks.

Okay. It's good talking to everyone, and we look forward to talking next quarter. Thank you. Have a good day.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines at this time, and have a wonderful day.