SPX Technologies, Inc. (SPXC) Q1 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the First Quarter 2017 SPX Corporation's Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to introduce your host for today's conference, Mr. Paul Clegg, VP, Finance and Investor Relations. Sir, go ahead.

Thank you, Bruce, and good afternoon, everyone. Thanks for joining us. With me on the call today are Gene Lowe, our President and Chief Executive Officer; and Scott Sproule, our Chief Financial Officer. A press release containing our first quarter 2017 results was issued just after the market close. You can find the release and our earnings slide presentation as well as a link to a live webcast of this call in the Investor Relations section of our website at spx.com. I encourage you to follow along with the slide presentation during our prepared remarks. A replay of the webcast will be available on our website until May 11. As a reminder, portions of our presentation and comments are forward-looking, and subject to Safe Harbor provisions. Please also note the risk factors in our most recent SEC filings. Our comments today will largely focus on adjusted financial results. Specifically, we will focus on adjusted core operating results, which exclude the results of the South African projects, and we will separately provide an update on those projects. Other adjustments to our GAAP results this quarter include an adjustment for non-service pension items. You can find reconciliations of all adjusted figures to the respective GAAP measures in the appendix to today's presentation. Finally, we plan to be on the road this month meeting with investors. On May 10, we will participate in Oppenheimer's Industrial Growth Conference in New York. And on June 1, we will participate in KeyBanc's Industrial, Automotive & Transportation Conference in Boston. And with that, I'll turn the call over to Gene.

Things, Paul. Good afternoon, everyone. Thanks for joining us. On the call today, we'll provide you a brief update on our overall results, segment performances and end-market conditions before going into Q&A. Now, let's touch on some of the highlights from the first quarter. Overall, we had a good start to the year and we're tracking as anticipated. During the first quarter, we experienced strong margin expansion with improvement across all three of our segments, reflecting our successful efforts to optimize our business portfolio. Our consistent focus on cash flows and the actions we've been taking to improve working capital continued to show in the first quarter. Core free cash flow generation in Q1 was greater than 100% of adjusted income from continuing operation. We are pleased with this conversion rate during what is typically a cash-use quarter. With respect to the strategic initiatives that we have been implementing since the spinoff, they are progressing well with many successes, positioning us nicely for growth. And we are maintaining our full-year guidance for 2017. Turning to our results for the first quarter. We reported adjusted EPS of $0.38. Adjusted operating income increased almost 30% with a margin increase of 190 basis points from the prior-year period. The most significant driver of the improvement was a change in the operating model of our Engineered Solutions segment, which we began implementing last year. This change, which included the sale of the Dry Cooling business was also the main driver of a 5% reduction in core revenues from the prior year. In the HVAC segment, we saw a favorable margin performance despite muted winter demand for heating products. And in Detection & Measurement, we achieved solid margin performance and strong bookings, particularly in transportation-related market. I'd like to give you a quick update on progress we made during Q1 on the initiatives and our value-creation framework. This framework is the foundation we will use to drive double-digit earnings growth by building on our market leadership, strong brands and niche growth market. During Q1, we continued to strengthen our position in each of the fundamental areas of our roadmap. I'm particularly proud of our organic growth initiatives, including new product introductions and expansions into new market. In HVAC cooling, we've been awarded $7 million worth of projects with our new NC Everest cooling tower and recently completed our first installation with results that exceeded expectations. We are seeing interest globally for this product, including as a field-erected cooling tower replacement. The Everest delivers 50% more capacity than any other single-cell factory-assembled tower, while offering up to 35% energy savings and as much as 30% lower installation cost. Within our Detection & Measurement segment, our cable and pipe locators business is seeing good initial customer traction from our new GPS surveying equipment, which significantly enhances customer productivity. And in our obstruction lighting business, the initial customer reaction to our Vanguard Red LED entry-level lighting solution has been very favorable. In process cooling within the Engineered Solutions segment, we are making solid progress in our strategy of expanding our components and aftermarket sales, which offer solid growth opportunities and attractive margins. And with that, I'll turn the call over to Scott to review our results for the quarter in more detail.

Thanks, Gene. I'll start with our net results for the quarter. Our GAAP EPS for the quarter was $0.24. And on an adjusted basis, our earnings per share was $0.38, a significant improvement from $0.23 earned during the first quarter of 2016. As we typically do, our adjusted earnings per share excluded the result associated with our South African projects and non-service pension expense. Overall, we are pleased with our Q1 results. This reflects solid operational improvements that were largely in line with our internal expectation and a more favorable effective tax rate than in the prior year. While Q1 2016 results include a higher-than-typical tax rate, Q1 2017 results include some favorable tax items that drove the effective rate lower than our expected full-year rate of about 30%, including approximately $0.02 per share of benefit related to a required accounting change for stock-based compensation. For the full year, we continue to expect to be within our stated guidance range for adjusted EPS of $1.55 to $1.70. We would expect the cadence of earnings to be similar to last year, when a little more than 40% of segment income fell into the first-half and less than 60% into the second-half. Moving on to Core segment results for the quarter. As Gene noted, the reduction in revenues during the quarter was primarily due to the business model changes we are implementing in our Engineered Solutions segment, which was also the key driver of improved profitability in the quarter. These changes included the sale of our Dry Cooling business, which was in a loss position in Q1 of 2016; the restructuring of our U.S. heat exchangers business, which also incurred a loss last year; and continued focus on operational efficiencies across the segment. Core segment income margin for the quarter increased to 12% compared with 9.8% in the prior year, and we experienced both income growth and margin expansion in all three of our segments. Now, I'll walk you through the details of our results by segment, starting with HVAC. Revenues for the quarter declined 1.3% compared with the prior year. This included a negative currency effect of 80 basis points and an organic revenue decline of 50 basis points. Sales of cooling products showed solid year-over-year growth. But as we noted in February, we anticipated above-average winter temperatures to result in lower demand for heating products. Based on industry data, the total demand for residential and commercial boiler volumes was down low single-digits from the first quarter. Overall, we experienced lower sales across our heating products, offsetting the growth in cooling. In spite of the lower revenue, segment margin improved 80 basis points in Q1, primarily driven by lower spend in the quarter. Overall, we remain very pleased with our team's continued focus on operational improvements in both the heating and cooling businesses, which have helped balance the margin effect of lower heating sales. In Detection & Measurement, revenues decreased 3.2% during Q1 compared with the prior year, primarily due to a negative currency effect of 2.7%. Organically, revenues decreased 0.5% during the quarter. Year over year, sales of bus fare collection systems increased significantly. We have developed a healthy backlog and have good visibility around future orders in this market. We expect shipments to accelerate during 2017. This growth was offset by lower sales of communication technologies product. Current market demand remains steady, albeit at low levels. That said we are seeing some encouraging signs of orders in our front log. Segment income margins were 20.9% or an increase of 100 basis points compared with the prior year. This increase was primarily due to a higher profit contribution from increased sales of bus fare collection systems and lower SG&A costs, partially offset by lower profit contribution from a decline in the communication technologies project. In our Engineered Solutions segment, excluding the result of the South African projects, revenues were approximately $159 million during the first quarter, down 8.3%, including a small favorable currency effect. The sale of our Dry Cooling business at the end of Q1 2016 was responsible for 3.8% of the decline, with the remainder due to lower sales of process cooling products, all of which are linked to the operating model changes we have been making. When compared with the prior year, segment income increased $4.7 million and margins improved more than 300 basis points to 6.9%, due primarily to the changes in our process cooling operating model, the loss experienced from the Dry Cooling business last year and higher margin performance from our Transformers business. Regarding South African projects, our overall Q1 results were largely in line with our expectations. You can refer to the appendix for more detail. Turning now to our financial position, our balance sheet remained solid. We ended the quarter with cash and equivalents of around $93 million. Our net leverage was 2.2 times at the end of Q1, which is consistent with where we ended 2016. And we remain well within our target range of 1.5 to 2.5 times. Based on our current leverage and available capacity, we feel confident in our ability to deploy capital for actions to drive incremental shareholder value, including acquisitions in the growth focus areas of our company. Looking at our cash flows, I'm very pleased with our Q1 performance. The typical seasonality in our business usually drives us to be a net user of cash in the first quarter. However, in Q1 2017, we generated core free cash flow of $16.5 million, which excludes approximately $13 million of cash used for the South African project. As we discussed at our Investor Day, we are targeting at least 100% cash flow conversion of our adjusted net income and expect to have capacity of roughly $400 million of capital available for deployment over the next 4 years. And with that, I'll turn the call back to Gene.

Thanks, Scott. Turning to an update of our end-market. Overall, SPX is positioned to perform well over the remainder of 2017. In HVAC cooling, we continue to experience a healthy order pipeline and are pleased with the operational performance of the business. In HVAC heating, average heating degree days remained below historical norms for the first quarter, affecting demand for heating products. Our earnings guidance assumes warmer-than-average winter temperatures for the 2017, 2018 heating season. In Detection & Measurement, fare collection demand remains healthy. And we are seeing early positive movement in our front log for our communication technologies products. We continue to expect Detection & Measurement sales to be a significant incremental profit driver during 2017. The market for Transformers has displayed consistent demand in medium power. Lead times continue to average 30 to 40 weeks, while the pricing environment remains stable. Within the Engineered Solutions segment, our strategy to expand component and aftermarket sales and to selectively pursue projects with attractive value propositions is going well and we expect to continue seeing positive results over the course of the year. Turning to our 2017 guidance, we are pleased with our Q1 results and are well positioned to achieve our annual targets. Our full year 2017 guidance is $1.3 billion to $1.4 billion of Core revenues and adjusted EPS in a range of $1.55 to $1.70. We continue to expect Core segment income margin of 12% to 13%, and adjusted operating income margin in a range of 8% to 9%. Our segment guidance expectations remained consistent with our March update. And as Scott mentioned, we expect the first half to second half weighting of segment income to be similar to last year's result. As you model the second quarter, please remember that our HVAC segment had a very strong result in Q2 of 2016, primarily driven by a number of large commercial HVAC cooling projects. Our backlog and order outlook supports our forecast of solid full-year growth, with the timing of similar large cooling projects more evenly distributed across the second-half of the year. In summary, compared to the first quarter of 2016, we continued to expand margins in each segment and we had solid free cash flow performance. We are particularly pleased that our Engineered Solutions segment nearly doubled its margins. While we have more work to do, we are excited about the potential growth in front of us as we continue to execute on the plans we outlined at our Investor Day to drive sustainable double-digit earnings growth. As a reminder, our midpoint adjusted EPS guidance for 2017 is $1.63. At our investor event in March, we gave an adjusted EPS target range for the year 2020 of $2.25 to $2.50. We intend to reach this target by using our substantial liquidity for prudent growth investments aligned with our capabilities, strategic goals and valuation criteria. We expect approximately 70% of this targeted earnings growth to result from organic initiatives. Our existing growth plans remain on track with new product growth across our businesses, and we plan to leverage our already strong brand portfolio to open up new channels and enter adjacent markets. We are also pursuing inorganic growth opportunities, focusing primarily on bolt-on acquisitions, where we have an attractive target pipeline and we will weigh these prospects opportunistically against other capital allocation actions. All in all, I'm very pleased with our strong start to the year and feel good about our path forward. Now, I'll turn the call back over to Paul.

Thanks, Gene. Bruce, I think we're ready to open up the line for questions now.

[Operator Instructions] And our first question comes from Ronnie Weiss from Credit Suisse. Your line is now open.

Hey, good afternoon, guys.

Hey, Ronnie.

Looking at the HVAC margins, up 80 bps in the first quarter, the guide is only up 30. As I think about the rest of the year, what should I think about as kind of why that margin shouldn't stay as strong as it was in the first quarter? Was there some mix issues, is it raw mats, just anything to think about that as the cadence through the rest of the year?

Ronnie, it's Scott. It's more around some of the projects that we had, more really around the cooling side of the business last year, so really getting to the flat margin this year. It's not about a materials issue. It's more around some of that business mix as you indicated.

Okay. And then, touching on the capital deployment, no incremental news on M&A, can you talk about kind of what you're seeing in the pipeline? Is the reason there hasn't been any announcement to-date valuation is too high? Is it just you're not finding the right kind of mix of businesses you want? And, I guess, what would have to change for you to change your thinking about what you wanted to do with that excess capital down the line?

So, Ronnie, what I would say is we actually do have an attractive pipeline as with - and we've clearly articulated our strategy of where we see opportunities. And it's really going to be around bolt-ons really on top of our existing HVAC businesses and some areas of our Detection & Measurement. Yes, I wouldn't say that things aren't moving there. There's actually a lot of activity behind the scenes. But as you know, there's always the timing issue of when attractive opportunities do present themselves and then valuation. We're going to be very prudent in our capital deployment, and we're going to make sure that there is attractive cash ROIC returns to our shareholders there. But I actually do think that there are some attractive opportunities out there. And this is going to be a real focus of what we're looking at going forward. Now, as we laid out in the Investor Day, we actually see a lot of organic growth initiatives, too. This is almost complementary to our real focus, which is organic growth. But as I characterized the front log, I actually think there are some very interesting opportunities that we are working on. And that's something to keep an eye on for 2017.

Awesome. Thanks, guys.

Thanks, Ron.

And our next question comes from Damian Karas from UBS. Your line is now open.

Good evening, gentlemen.

Hey, Damian.

I wanted to ask you guys about Detection & Measurement. Still haven't quite been able to turn the organic growth positive there, sounds like the communication technologies is offsetting some of the growth that you're experiencing on the transportation side. Was just curious if you could maybe give us a little bit more color on Genfare? You had talked about the two - or I guess in the segment overall, two large project wins that sort of happened late last year. I'm wondering, have those started translating to sales yet? Or is that something that's still to come? And I guess second part to the question, I'm just curious on the - on communication technologies. Oil prices, obviously, are a bit weaker since the last time we spoke. Do you foresee any additional risk to that business, just given the fact that you have exposure to some of those developing oil-based economies and whether that is going to have any further risk in 2017?

Damian, this is Gene. When I look at it - so as a reminder, when you break down our Detection & Measurement segment, the way we typically think about it is about two-thirds of it is run rate business across our four different product lines, and we feel good about that. That's been healthy, and that's been steady. And then there's really two primary project businesses which would comprise the last or - and that would really be communication technology as well as transportation products. As we've talked about over last and this year, transportation has been very strong. And you'll see in our backlog, it's up significantly in this segment, and we're feeling very positive about the transportation business. There are some nice large orders we have booked. And then on the communications technologies business, this is where last year, we did see some extended decision making. And that was exactly as you said, Damian, a lot of countries that predominantly have oil as a big part of their GDP and with the price of oil caused some budget cuts and so forth. But as I look at that business today, we're actually feeling more optimistic about that business, and we're starting to see some projects progress. And so as I look at Detection & Measurement, I'm feeling positive. I know, we've basically said we're going to grow this business in the midpoint of our range, and we fully stand behind that. So I don't see that risk. There always could be something that happens, but we feel pretty good about where we stand. And as I said, we have a much stronger backlog position going into Q2. And Scott, I don't know if you have anything else you'd like to add.

Just to add a couple of things. So Damian asked about the kind of organic growth there in the segment. In part what you're seeing in Q1 is a tough comp on the communications side. And really, where we started seeing the impact of the lower orders because of some of the things we talked about with the oil-based economies and such. There are customers really started seeing kind of that order hitting Q1 of last year and really started what we're seeing now as a continuation of that. But there was some backlog being executed that impacted the Q1 revenues of last year, so a tougher comp there. But on the other side, you're seeing the growth on the bus fare collection. And so it normalizes here for the balance of the year in the communications side. And as we said, we start - we think we'll start seeing acceleration of shipments on the bus fare side throughout the balance of the year. Somewhat - some of that is attributed to those orders that we talked about, which don't all ship at once. They ship over the course of the year. That's really what you're seeing here in Q2. And as Gene said, I think we're starting to feel - we're seeing some early signs of positive movement on front log that we've been tracking around the communications side. So we're cautiously optimistic there that, that will start turning into orders.

Okay, great. That's really helpful. And then on the free cash flow, I mean, it's fantastic you guys were able to sort of buck your usual seasonality and actually generate some positive free cash flow as opposed to sort of having usage on the first quarter. I was hoping maybe you could provide a little bit more color around what sort of drove that and what your sort of internal expectations had been for free cash flow in the quarter? And I guess just kind of thinking about the balance of the year, I mean, should we expect that sort of to offset at some point? Or should we kind of look at it as you get your net leverage down a little bit quicker than maybe you had previously anticipated?

So two things. One, I would say that our cash flow was good in the quarter as we're very pleased about, obviously, having positive. As you said, historically we've been a user of cash. And really, the benefit was we saw the performance across all the businesses, and it is a renewed focus on working capital management and just really doing some of the core fundamental things in managing our businesses. The other thing we are seeing is, as we've kind of reshaped the company and moved away from the more project-oriented nature of the business, there's less volatility in the cash flow associated with project execution. So that's part of what you're seeing as well, kind of the new SPX going forward, post those dispositions last year. And as far as on a go-forward basis, it's not necessarily going to be consistent every quarter. The seasonality aspect, particularly in the HVAC businesses, does create some timing differences in working capital throughout the year. So that will be a normal part of our segment.

Okay. Great. Thank you.

Thanks, Damian.

And our next question comes from Robert Barry from Susquehanna. Your line is now open.

Yes. Hey, guys. Good afternoon.

Hi, Robert.

Hi, Robert.

Actually just wanted to start by following up on the cash flow question. So just to clarify, are you tracking ahead of your plan or are things kind of going better with working capital management versus what you outlined or thought at the Analyst Day?

I would say we're on plan. But we're feeling confident about, at least, getting to 100% conversion of our adjusted net income.

Got you. Okay. And actually, can you just remind us or update us on what's the latest expectation for South Africa related cash flow this year?

We changed from what we talked about back in both February and March. We're saying - we're guiding to this year for up to $25 million of usage, and we're - and that's still our expectations for the year.

Okay, got you. And can you just update us on kind of what you're seeing in the non-res end market as they relate to your businesses?

Yes. Robert, what I can say, and as a reminder, our cooling business is almost all - the vast bulk of that is commercial. We're seeing steady demand. We think the cycle has more legs in it. We have a good front log, I'd say that's positive. The other portion where we have a good amount of commercial exposure is our electric heating business, so that's about approximately one-third of our heating portfolio. And I'd say, it's healthy as well. So what we're seeing in our front log and when we talk to our reps and customers is, I'd say remains positive.

Okay. But when you say steady, do you mean kind of not necessarily growing a lot but at a high level or it's actually the growth continuing?

I think for those markets, we're seeing in - we're expecting growth in the mid-single-digit range for those markets.

Okay. Got you. And maybe just lastly, from - just a housekeeping item on the tax. And so should we be modeling tax kind of at a higher rate in the next few quarters, kind of get back down to the average for the year? Is that what you're kind of messaging was there?

You're going to have some volatility on the quarterly taxes, but we're still saying around 30% for the full year. And we obviously told - we called out the one accounting change for this quarter, which was $0.02, so net effect around $1 million. But that doesn't really change full year impact.

Okay. All right. Thank you.

Thanks, Rob.

And our next question comes from Brett Linzey from Vertical Research. Your line is now open.

Hi, good evening all.

Hi, Brett. How are you?

Good, good. Just the first question on margins. I understand some of the positive mixed dynamics that helped decrementals in D&M. But you did call out lower SG&A in two of the three segments. Was this simply a function of good cost containment in reaction to maybe a little bit softer top line? Or are these structural reductions? And do you think you can maybe hold these levels, should volumes improve from here?

This is Scott. You have an element of both. But the majority of it is structural cost reductions that we're implementing across the business. Some from restructuring actions we took last year, mostly from just challenging business - or challenging cost spend across all the businesses on an ongoing basis. And we just challenge everybody to do more with less without hurting the business. And of course, in particular in our heating businesses, as we saw the lower demand, there's discretionary spend that's delayed.

And I would say in the Engineered Solutions, we really are reshaping that segment to get that help a lot more healthy. And I think that's - you're seeing that in the margins, and we're actually very pleased. We actually think that, that has the opportunity to be a very healthy, cash flow generating, shareholder driving value segment for us. And a lot of those cost actions are structural and how - what our operating model looks like in that segment.

And the cost actions as well in Detection & Measurement are structural in nature.

Okay, good to hear it. And then I guess with respect to the guide for the year, you kept top line assumptions unchanged. Your Q1 is running a little bit below those targets. I mean, is it order timing, front log visibility, customer schedules that gives you comfort you can get back to the full-year? And then I guess, just in the quarter, did revenue actually meet your internal expectations?

I would say on your last question, yes. The answer is yes. Our revenue came in around our internal expectations. As far as the full year, it's a combination of the backlog that we have. As well as, what we're seeing is steady order rates across the businesses - and our order rates are just developing as we're expecting them. So we are feeling good about where we're at. And obviously, Q1 is a small - relatively small portion of the year, and we'll know that much better when we report our Q2 result.

Okay. If I could just get one more in, just back to com tech. Could you just give a sense as to what regions are driving maybe better RFP activity? And was backlog up sequentially and/or year-over-year in that business?

Backlog is up. For the total D&M, up sequentially and year-over-year. And your question on com tech, most of that is - it's international. And that's really where most of the customer base is, international. And...

It's a very global business.

Right. So it's spread out through Asia, Africa and some Latin America.

North America.

And was the backlog up in com tech in the quarter?

It was not.

Okay. Great. Thanks, guys.

Thanks, Brett.

And we have a follow-up question coming from Damian Karas. Your line is now open.

Hey, guys. Long time.

Hey, Damian.

Hi, Damian.

I figured I'd make sure that Paul didn't have a chance to go home early today, so I figured I'd do you guys a favor there.

Conceded, thanks.

He is always 24/7, Damian.

So just kind of curious in Engineered, I know at this point, the non-transformer piece is predominantly an industrial-facing business with very little power gen in there. We're seeing sort of pretty positive industrial trends across the board for most of U.S. industrial-centric companies here in the first quarter. Just kind of curious how you guys see - what you're seeing in terms of maybe increased CapEx or customer confidence and sort of growth trajectory going forward. I know, obviously you're amid the project-selectivity process. But just curious, if you're sort of seeing any improving trends there? And if that could potentially leave your down mid-single digit revenue target for the year a little - looking a little conservative.

Yes. I think - let me take a crack at that. What I would say is if you look at our end markets, so you start at the top level for Engineered Solutions. And a big chunk of that business, the majority of that business is transformers, right. But that's at the side. That has its own growth profile, and I think you're aware of that. If you look in the process cooling piece, this is where we're spending some time focusing on profitability. And that's where we sell both projects, but we also sell a lot of aftermarket components and so forth. And our focus is really to grow our aftermarket, and we've had a lot of success there. When you look at the actual end markets, what we're seeing, the power market, we still see is very stressed, very challenged. We don't see a tremendous amount of activity there. I would say the past two years, we've said it's been pretty steady at very low levels, and I'd say that's still consistent in the power market. We haven't seen any pickup there. Having said that, our process cooling, the majority of that business is outside of power or more than half of that business outside of power. And I'd say there are some activity there, but I haven't seen any dramatic kick-up there. But there's a little bit of complexity, because we are changing our business model where we're focusing more on profitability than top line. But I would say, as your question pertains to the end markets, no real improvement in power from what we see, and I'd say steady in industrial. I haven't seen any real change there. So really, it's going to be what we're doing on our business model there, which we actually think there's a very attractive opportunity. And we think that's going very well. And that's why you've seen some - a much different margin profile than where we were at the time of spin where this is a really a breakeven business or 1% business. But we actually think we have an opportunity to create a very healthy business here. I don't know if that answered your question, Damian, but...

No, it did. It did. That was some helpful color there, Gene.

Power, as a reminder, for overall company, that used to be a material portion. But with all of the changes we've made, that's not even double-digits in our company's end markets. It's now a single-digit end market for us as you look across our portfolio, which, frankly, we view as a positive.

Great. And then sounded like from your opening commentary, the new product introductions are doing quite well. You're getting some pretty positive customer feedback. I'm just curious kind of going into 2017, when you were thinking about budgeting guidance, I mean, obviously you had a lot of confidence in your new boiler products and the NC Everest and some of the other introductions that you've made. Just if you could think relative to what your expectations were, I mean, would you say those are sort of kind of performing at the stage where you would expect it or would you say even exceeding your expectations?

Yes. This is Scott. I would say we're off to a good start, so we're on track with our expectations. And I'd say it's too early to kind of call the ball for the year on whether we're going to be able to exceed those expectations.

Okay, great. Well, I'll leave it there. Thanks again, guys.

Thanks. Thank you.

Thanks, Damian.

And at this time, I'm showing no further questions. I'd like to turn the call back over to Paul Clegg for any closing remarks.

Thanks, Bruce, and thanks to all of you for joining the call. We look forward to updating you next quarter. Have a good evening.

Ladies and gentlemen, thank you for your participation in today's conference, and this does conclude the program. You may all disconnect. Everyone, have a great day.