Good day! And thank you for standing by. Welcome to the Q2 2023 TransDigm Group Incorporated Earnings Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation there will be a question-and-answer session [Operator Instructions]. Please be advised that today’s conference is being recoded. I would now like to hand the conference over to your first speaker for today, Jaimie Stemen, the Director of Investor Relations for TransDigm. Please go ahead.

Thank you, and welcome to TransDigm's Fiscal 2023 Second Quarter Earnings Conference Call. Presenting on the call this morning are TransDigm's President and Chief Executive Officer, Kevin Stein; Chief Operating Officer, Jorge Valladares; and Chief Financial Officer, Mike Lisman. Please visit our website at transdigm.com to obtain a supplemental slide deck and call replay information. Before we begin, the company would like to remind you that statements made during this call, which are not historical in fact, are forward-looking statements. For further information about important factors that could cause actual results to differ materially from those expressed or implied in the forward-looking statements, please refer to the company's latest filings with the SEC available through the Investors section of our website or at sec.gov. The company would also like to advise you that during the course of the call we will be referring to EBITDA, specifically EBITDA as defined, adjusted net income and adjusted earnings per share, all of which are non-GAAP financial measures. Please see the tables and related footnotes in the earnings release for a presentation of the most directly comparable GAAP measures and applicable reconciliations. I will now turn the call over to Kevin.

Good morning. Thanks for calling in today. First I'll start off with the usual quick overview of our strategy, a few comments about the quarter and discuss our fiscal ‘23 outlook. Then Jorge and Mike will give additional color on the quarter. To reiterate, we believe we are unique in the industry in both the consistency of our strategy in good times and bad, as well as our steady focus on intrinsic shareholder value creation through all phases of the aerospace cycle. To summarize, here are some of the reasons why we believe this: About 90% of our net sales are generated by unique proprietary products. Most of our EBITDA comes from aftermarket revenues, which generally have significantly higher margins and over any extended period have typically provided relative stability in the downturns. We follow a consistent long-term strategy specifically. First, we own and operate proprietary aerospace businesses with significant aftermarket content. Second, we utilize a simple well-proven value-based operating method. Third, we have a decentralized organizational structure and unique compensation system closely aligned with shareholders. Fourth, we acquire businesses that fit this strategy where we see a clear path to PE-like returns. And lastly, our capital structure and allocations are a key part of our value creation methodology. Our long-standing goal is to give our shareholders private equity-like returns with the liquidity of a public market. To do this, we stay focused on both the details of value creation, as well as careful allocation of our capital. As you saw from our earnings release, we had another strong quarter. Our Q2 results ran ahead of our expectations, and we once again raised our guidance for the year. We continue to see recovery in the commercial aerospace market and trends are still favorable as demand for travel remains robust. Global…

Thanks, Kevin and good morning everyone. I'll start with our typical review of results by key market category. For the balance of the call, I'll provide commentary on a pro forma basis compared to the prior year period in 2022. That is assuming we own the same mix of businesses in both periods. The market discussion includes the May 2022 acquisition of DART Aerospace in both periods. DART has been included in this market discussion since the third quarter of fiscal ‘22. The recent May 2023 acquisition of Calspan Corporation is excluded from this market discussion. In the commercial market, which typically makes up close to 65% of our revenue, we'll split our discussion into OEM and aftermarket. Our total commercial OEM revenue increased approximately 25% in Q2 compared with the prior year period. Sequentially, total commercial OEM revenues grew by 17% and bookings improved over 15% compared to Q1. Bookings in the quarter were robust compared to the same prior year period and significantly outpaced sales. We're encouraged by the increasing commercial OEM production rates, while risks remain towards achieving the ramp up across the broader aerospace sector. We are cautiously optimistic that our operating units are well positioned to support the higher production targets. Now, moving on to our commercial aftermarket business discussion. Total commercial aftermarket revenue increased by approximately 38% in Q2 when compared with the prior year period. Growth in commercial aftermarket revenue was primarily driven by the continued strength in our passenger sub-market, which is our largest sub-market, although all of our commercial aftermarket sub-markets were up significantly compared to prior year Q2. Sequentially, total commercial aftermarket revenues increased by approximately 14%. Commercial aftermarket bookings were strong this quarter compared to the same prior year period, and Q2 bookings outpaced sales. Turning to broader market…

Good morning, everyone. I'm going to quickly hit on a few additional financial matters for the quarter and expectations for the full fiscal year. First, on organic growth and liquidity. In the second quarter, our organic growth rate was 17.6%, driven by the continued rebound in our commercial OEM and aftermarket end markets. On cash and liquidity, free cash flow, which we traditionally define at TransDigm as EBITDA, less cash interest payments, CapEx and cash taxes was roughly $350 million for the quarter. Below that free cash flow line, we saw networking capital consume just over $220 million of cash during the quarter, as we built both accounts receivable and inventory to support the ongoing and continuing sales ramp-up on both the OEM and aftermarket sides of the business. We ended the quarter with approximately $3.4 billion of cash on the balance sheet, and our net debt to EBITDA ratio was 5.6x, down from 6x at the end of last quarter. Pro forma for the Calspan acquisition which just completed yesterday, we have $2.7 billion of cash and a net debt to EBITDA ratio of about 5.7x. On a net debt to EBITDA basis, that puts us below the five year pre-COVID average level of 6x. Additionally, our cash interest coverage ratios such as EBITDA to interest expense, are currently in line with where we've historically operated and been comfortable operating the business. As always, we continue to watch the rising interest rate environment and the current state of the debt markets very closely. During the second quarter, we completed refi’s of two of our nearest maturity term loans, E&F as well as the $1.1 billion Senior Secured 8% rate note that we took on at the outset of COVID out of an abundance of caution. The net effect is…

Thank you. [Operator Instructions]. Our first question comes from the line of Robert Spingarn of Melius Research. Your line is now open.

Hey! Good morning.

Good morning.

Good morning.

Kevin, I noticed you said something that seemed a little different this time about the M&A pipeline and that it's perhaps a little bit better than it's been. And I'm wondering, is that because more properties are for sale or there's fewer competitors out there bidding against you because of the financing environment? What's going on there?

Yeah, I think there's more properties available, more coming available, things that have long been rumored, have come to market or we now know are definitively coming. So that certainly sets up favorably for us.

And how about the pricing environment within that?

I've not noted any difference in pricing. Maybe things have come down ever so slightly, but they are still going for high multiples. People remember what they can command or what they could and are still expecting that.

Okay. Thanks so much, Kevin.

Yeah.

Please stand by for our next question. Our next question comes from the line of Myles Walton of Wolfe Research. Your line is now open.

Thanks. Good morning.

Good morning.

I was wondering, Kevin, if you can comment on the source of the OEM upside and the guidance being raised. I can follow the aftermarket, but what's getting better on the OEM side?

I'll give you my thoughts and Jorge can chime in. But the build rates are improving, deliveries are improving, and we're finally starting to see the order book build on the OEM side. So that's really the genesis of it.

Yeah, I'd echo Kevin's comments. Generally, there's some level of offset from the OE production rate increases to when the sub-tiers in our business sees that demand. So, we're cautiously optimistic that they are moving the rates up and will continue to produce more aircraft as we go forward in the future.

Okay. And then one for Mike. Working capital consumption, $220 million in the quarter, I think it was a slight source in the first quarter. What's the expectation for the full year at this point?

It's hard to say exactly how it plays out over the course of the year. From peak to trough during COVID, about $400 million came out. If you look at the math around that, we're close to all of that having gone back in. Not quite there, but pretty close. Though it's hard to give exact guidance by quarter, but I think we're getting closer to the max amount that should be back in there. So we don't expect to see a sizable uptick of the type we saw this past quarter and future quarters.

Okay. Thank you.

Thank you. Please stand by for our next question. Our next question comes from the line of David Strauss of Barclays. Your line is now open.

Thanks. Good morning.

Good morning.

Kevin, so it looks like, if we just look on revenue that the, your aftermarket revenues are now back to 120 – 20%, 25% above pre-pandemic levels. Where do you think volumes are at this point on the aftermarket side relative to pre-pandemic levels?

Yeah, I think you're right in what you're saying about the percentage up. But I still think we're 10% to 15% volume light in our numbers. That still has the potential to come in as people fly more and that gets us back to really where we were pre-COVID.

Okay. And any comments on supply chain? I know you've pointed out some issues in the past. How would you characterize your supply chain, three months further on now?

Yeah, I think our supply chain has done a nice job recovering and trying to support the ramp up. I think in general terms we've seen more stable and predictable performance out of the suppliers. Electronic components as I mentioned, continue to be a little bit of a minor pain point. But I'd say generally, that's getting better as well.

Okay, and what about your ability to hire and retain relative to maybe three, six months ago?

Sure. Yeah, I don't think we've really run into any significant retention issues through this process. Definitely we've seen the overall labor market improve at most of our locations in terms of the production labor. Still a little bit tight on the higher technical and engineering expertise. But again, a little bit of signs of improvement there as well.

All right. Thanks very much, guys.

Sure.

Thank you. Please hold for our next question. Our next question comes from the line of Robert Stallard of Vertical Research. Your line is now open.

Thanks so much. Good morning.

Good morning.

Kevin, I'll start with you. First of all, on the aftermarket, clearly very strong growth here, and in the most recent quarters. But just looking forward, how sustainable do you think this is, particularly as you start to lap that price increase towards the end of the year and also given these very low rates of old aircraft retirement?

Well, I guess we'll have to see how the order book continues to evolve. Of course as we – it all depends on takeoff and landings and if the flight activity continues to increase, then we'll see continued strength. I think we're just seeing the opening innings really of China coming back and it's good to see that in the numbers. But hard to put any parameters on it from here, except we do expect things to continue to improve for the year. But it will have to slow down at some point as OEMs start to ship more, but we'll have to see how that unfolds.

Okay, and then a follow-up from Mike on the interest rates. On the debt market, there's been some what might be optimistic chat about interest rates actually coming down going forward from here. I was wondering what your thoughts might be on that and what sort of flexibility TransDigm to adjust interest rates if that does occur.

Yeah, generally with regards to the capital structure and interest rates, we don't take a strong position on where they're going to go. As we've said before, we're in the business of focusing on keeping on time delivery and quality of our parts as high as we can, rather than trying to predict where rates might go. That said, this past quarter we did take a bit of a different approach. And when we did the new hedges, we did collars rather than swaps, so that if rates do float down a bit, we'll get some of that benefit down to about a 2% SOFR rate. So you'll see some of that detail in the 10-Q when it's filed later this week. And then as always, I mean we can if they – overall market rates did step back by two to three percentage points, you can go in and refi, right. We can re-price our bank debt of which we've still got $6 billion or so and bring down the rate on that and we can also, if it makes sense take out some of the fixed notes. There's a breakage cost on the latter, but it's just math and if the rates come down enough, you could take out those notes earlier, pay the prepayment penalty, so that you get the benefit of lower rates going forward.

That's great. Thanks so much.

Thank you. Please stand by for our next question. Our next question comes from the line of Ron Epstein with Bank of America. Your line is now open.

Hey! Good morning. This is Jordan Levine on to Ron. I just had a question on Calspan. I know you guys said that the financial profile fits the M&A targets that you guys pursue, but the company being services-based, should we view it as a departure in your strategy or a shift? And also, should we expect more services to be in your pipeline?

I don't think we expect any change in our approach. Our approach is always to deliver private equity-like returns to our shareholders. When we find businesses that are highly proprietary, highly engineered, and produce a highly engineered product, in this case a testing report, I think it absolutely lends itself to our products and we'll see how successful we are with this acquisition and it certainly opens us up to other markets we might explore within aerospace and defense, but you shouldn't interpret this as any new direction for us. We find that this business should produce the same types of returns as we've come to expect from our components businesses. Jorge, do you have anything to comment on that?

Yeah. I would add, as we were very excited about the acquisition, I'd first say, excited that we closed it yesterday. But as we evaluated the opportunity, we saw many of the characteristics and attributes that we've seen in other businesses that we've acquired. They do very highly engineered proprietary testing. They are a great partner with their customer-based, primarily aerospace and defense, which we like as well. And there was no fudging the numbers or changing any type of criteria. We evaluated it. We expected to perform as other acquisitions, past acquisitions have performed and generate the typical returns that we did expect, so we're very excited about it.

Awesome! Thank you so much.

Sure.

Please stand by for our next question. Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Your line is now open.

Good morning, guys. It's Sheila. On the last…

Good morning.

Good morning. Usually people mess up my last name, but…

I thought She was great, so I have to tell you.

On the last call you pointed out volumes were 85% below 2019 levels implying price is about 25% since 2019, Kevin. So I think in response to Strauss's question, you implied prices another 10 to 15 points of plus-up this quarter. Is that just rounding or is the shortage of new planes…

That's not exactly I think what I was referring to and I apologize if I confused. I was simply saying there's still 10% to 15% of missing volume if you look back to the pre-COVID levels. We don't comment on price to that extent, so I'm just looking at from a volume point of view. We still – there is still flight activity that has not returned that we anticipate will over the coming year or so, but we don't anticipate all the volume to return in ‘23. Some of it will fall in to ’24 we fully anticipate.

Okay, that's helpful. And then maybe just post ‘23 and as you think about ‘24 and ‘25, what's like the normalized after market outlook you guys were thinking about on a volume basis and then opportunities beyond that?

Go ahead Mike.

I think Sheila on that point, we'll give the guidance when we give it. We're just getting started with our detailed bottoms-up opportunity forecast year for the next 12 months this coming month or so, and I think we don't want to get out over our skis in terms of predict and where commercial aftermarket volumes could go from here. Things are still changing quickly and as we've said all along, the recovery could be lumpy here.

Okay.

And again Sheila, as you know we do a bottoms-up forecasting, so we don't give our teams expectations. We allow them to tell us and I think that has proven to be more accurate than announcements from on high.

Yep, sure. Thank you.

Thank you, Sheila. Please hold for our next question. Our next question comes from the line of Ken Herbert of RBCCM. Your line is now open.

Yeah, hi! Good morning.

Good morning.

Hey Kevin, when you look at the sort of the update in the increase to the full year aftermarket guide for fiscal ‘23, it sounds like it's pretty broad-based in China and some other tailwinds there. But is it possible as you look at that increase to maybe rank order or prioritize for us, maybe what drove the increase or where you're seeing the greatest impact?

I want Jorge to take that one.

Yeah, I think as you guys know, we have no visibility into the inventory or specific trends in a particular region per se. Our largest sub-market, which is the passenger sub-market is seeing that bounce back in that growth and we're seeing it across multiple operating units. While cargo is down, we are seeing some improvement in terms of the belly cargo on some of those businesses as well. So I would say generally all of our operating units that support the commercial aftermarket are seeing the rebound in the recovery.

Great. And within that, are you seeing anything in particular on the interior side? When I think of some of the businesses there and I think about maybe retrofit opportunities on wide-body aircraft? Is that just out of doing better than the passenger trend or how is that looking?

I would say interiors are following a similar trend. We're seeing a nice recovery there. We've probably seen that over last few quarters generally, but obviously as they continue to utilize the existing fleet, that's beneficial for potential down the road modifications and refurbish, etc.

Great. Thank you.

Sure.

Thank you. Please stand by for our next question. Our next question comes from the line of Gautam Khanna of TD Cowen. Your line is now open.

Hey! Good morning, guys.

Good morning.

Just to follow up on the last couple of questions on – are you seeing any – any differences in aftermarket demand across, kind of traditionally discretionary product versus flight critical or any submarkets, whether it be kilos or what have you that are weaker or stronger than others. Any sort of flavor you can give us?

No, I think in general the majority across the operating units are participating in the recovery. There could be some puts and takes across any given quarter, but we're not seeing any significant differences in the commercial aftermarket there.

Okay. I think maybe…

To add to that, commercial transport is stronger than the business jet and helicopter, but business jet and helicopter aftermarket is very strong as well and a small portion of the overall aftermarket revenue as you know.

Yeah. And maybe Kevin, could you speak to your comfort with leverage in this environment? Like how much – to the right deal, how much would you be willing to take up a debt to EBITDA ratio?

I think we're comfortable operating in the same range as we have historically. As Mike said, we don't get into forecasting, we run our business, we make sure we have enough available cash and for any available opportunity that we see on the horizon and that we can go after it. So I don't see any limitations. I think we're comfortable operating within the same range as we historically have, five to seven times. We're right in that sweet spot. I think this is where we would like to continue to operate and as you heard, there's probably some forecasts that rates will start to go down in the not too distant future. This is good. We have successfully navigated this so far and we will continue to come out the other side stronger. So I feel like we're comfortable where we are. Mike, do you have anything you want to add to that?

I think that's right. As we said many times before, we feel comfortable in sort of a six time area, and then it's always dependent on not just the leverage level, right? But how far out to the right can you kick the maturities? That's as important a part of the equation as just what the overall leverage level is and we always try to manage that.

Thank you.

Thank you. Please stand by for our next question. Our next question comes from the line of Peter Arment of Baird. Your line is now open.

Yes, thanks. Good morning, everyone.

Good morning.

Good morning.

Good morning. Kevin, maybe just a quick one on just price, your ability to kind of feel and pass along price. Any changes that you've seen as kind of volumes and overall activity has picked up, just curious in this inflation environment.

This is still an inflationary environment. I don't see any changes. Our goal is to, as always, to pass along inflation. That's what we try to do. I think we've all seen reports from the airlines of ticket price increases in the likes. So I would say all of the market has been successful in passing this along as we have needed to perform.

Okay. And just a follow-up, quick follow-up. On China overall less than 10% or around 10% of your overall mix in terms of revenue.

Well, we don't give geographic splits. We don't actually know. We sell a lot of that through distribution and OEM, so we don't actually know. I think the way to model it is to look at what is missing from the flight activity, from pre-COVID to now. And that gives you an idea of what's still missing from our business. And there's still a – as Jorge alluded to in his remarks, there's still a chunk of China flying activity that has a materialized yet, but certainly looks like it will.

Yeah, the international obviously is still lagging considerably compared to the domestic, but it's moving in the right direction.

Thanks so much.

Thank you for your question. Please hold for our next question. Scott Deuschle with Crédit Suisse, your line is now open.

Hey, good morning.

Good morning.

Jorge, does your pricing model move at all in response to airline profitability given the value-based approach. Meaning, if airlines continue to become more profitable, kind of on their current course, could we see you exercise your pricing power in a manner that's perhaps greater than what you've historically done relative to inflation, but which is consistent with your value-based models and airlines are generating more profit per take off of mining cycle.

Yeah, I'd say airline profitability doesn't really come into play. As we've always stated our pricing objectives is to market based on the price and do better than inflation. So obviously with the higher inflationary environment, we're trying to get real price on top of the inflationary pressures that we're seeing in some of the costs that are flowing through the business. But we don't start looking at the profitability of the customer base or anything like that.

Okay. And then just following up on Calspan, do you have a sense for which of the three value drivers will have the most impact on driving accretion there? And then on the price side, is there an ability to achieve price to realization to Calspan quickly or does that company have a lot of backlog and you don't work there before you can start to get price.

Yeah, I would say, our view on value creation is it's a three-legged stool, right. We're trying to make sure that we're getting the price to reflect the value of the products that we see. We're always trying to make sure we're managing the cost structures and pulling costs out of the business and then we want to be able to provide innovative profitable solutions to the customer base and that's not going to change with Calspan and frankly, that's not going to change across any of the portfolio companies that we own. So, obviously we just closed on the acquisitions, but we're going to be looking to leverage all three in the process. It's a great business. It's been well managed and run and our hope is to be able to optimize it like we've been able to do with past acquisitions.

Okay. And last question to Kevin, just a clarification. You said the M&A pipeline is stronger than typical. As you define typical here, are you referring to the past few years as your reference period or are you saying the M&A pipeline is stronger than it's typically been across the longer term experience of transplant?

Yeah, I would take me at face value there. It's typical than we've traditionally experienced and more so than the last couple years. There's a lot in the pipeline right now, and the team is busy, but you cannot, that doesn't linearly protect closings of course, but we're very busy right now.

Right. Okay, thanks guys.

Thank you for your questions. Please hold for our next question. Our next question comes from the line of Seth Seifman of JPMorgan. Your line is now open.

Hey! Thanks very much. Good morning, everyone.

Good morning.

I wanted to ask about the, obviously very strong profitability in the quarter, and I believe not necessarily a guidance for any specific year, but as a framework the company has a philosophy that in a normal year it's possible to have roughly 100 basis points of margin expansion with the same set of businesses. Is there any reason to think that that shouldn't be the case for next year, off of wherever 2023 comes out?

I think that when things stabilize, when we get back to normality, whatever that looks like, I think 100 to 150 basis points expansion per year on margin, apples-to-apples is always what we have models and tried to achieve and I think that's a fantastic target.

Okay, okay, great. And then maybe just as a follow-up with regard to the M&A pipeline, we see some pretty solid valuations in the public markets these days. A lot of activity in the private market, obviously. To what extent do you see that being driven by valuation and does that kind of inhibit things at all or is there still kind of plenty value out there?

I think there's plenty of value out there. I don't - given our ability to generate value, I think we don't turn away when prices go up necessarily, as long as we remain convicted with the individual property products. So, the value, what we have to pay, doesn't factor in too much. So we're not concerned if prices stay high, go higher. When you find a business that matches the criteria that we look for, highly engineered products, you're going to have a successful run with those kinds of products over their lifetime.

Great. Thanks very much.

Thank you for your question. Please stand by for our next question. Our next question comes from the line of Michael Ciarmoli of Truist Securities. Your line is now open.

Hey! Good morning, guys. Thanks for taking a question.

Good morning.

Good morning.

Kevin, maybe just to go back to discuss a question on Calspan, I think you said the EBITDA margins were about half of what you're doing now. Just given that these are more services, is there a path do you think to get these margins up to kind of transplant historical levels or is there anything with the type of services and testing that they provide that would prevent you from driving that margin?

I think we're in the early innings here and difficult to comment too much. I don't know if this business gets to the average of TransDigm, but I guess our view that it doesn't have to, as long as we continue to find pathways to private equity like returns. I don't know if the business has to get to TransDigm average margins, but there's no reason to believe any business in the aerospace sector that is highly engineered produces a technical product like what we specialize in that it couldn't get there. But right now, we're not modeling it that it definitely will, but we'll have to see. There's lots of room for value generation.

Okay, perfect. And then just on the defense market, can you give any additional color there, maybe parse out OEM growth, after market growth, you might have some more of the consumable exposure there, but any noticeable or discernible trends within defense marketplace?

Yeah, I'll think that. As you know, we really don't separate out the defense OEM from the aftermarket. I think both are performing relatively equally in terms of how they are tracking. It's a difficult environment as the government continues to do its best to support Ukraine and figure out how they are going to spend funds. So I think our – the general commentary that I've provided in the opening in terms of we're seeing a slow but steady improvement in the outlays, but the fact remains the outlays are still a little bit slow in terms of solicitations closing into orders as we look at the historical timeframes.

Got it. And then just last one on that topic, are you able to get real pricing in your defense market or are you grappling with some of the same issues we're seeing and hearing about from fixed prices just not being able to pass through those costs until the contracts reopen or you get new task orders?

Yeah, I really don't want to comment or get into specific contract terms. As you know, each of our operating units independently to go shape the contracts with the government and I would be speaking out of turn.

Okay, fair enough. Thanks guys.

Thank you for your questions. Please stand by for our next question. Our next question comes from the line of Kristine Liwag of Morgan Stanley. Your line is now open.

Hello! Good morning.

Hey! How are you guys doing?

Great. How are you?

Wonderful to hear. So hearing from some of the MRO facilities, we're hearing that aircraft turnaround times that are extending from three months to maybe even as long as six months and part of that is still from some part shortages and then some from labor. Can you talk about how this environment is benefiting your pricing power and is that something – and if you are, is that something that you could sustain for longer?

Yeah, I don't know that we'd have any comments specific to that environment benefiting pricing. Again, as I've stated many times, our pricing philosophy remains unchanged. It's based on a market-based value for the products that we deliver and design and produce. And we look to realize real pricing on top of inflation. And I think that has been something that's been very consistent in the history of the company and that's how we continue to approach it.

Great! If I could just tack on a second question here. So when you think about available parts, when you think about the order activity that you have in the market, what percent of those orders are you able to deliver on and are there any specific shortages that you're facing in terms of providing to the market?

Yeah, each business and each operating unit has its own stated lead times that they provide to the end users and the airline customers when they come in for any particular demand and those lead times can vary based on operating units. In general, given the recovery that we've seen in the aftermarket and the commercial transport aftermarket specifically, we've tried to invest in some inventory to be able to support the customer base. And I'm – off hand, I'm not aware of any specific pain points in terms of supplying airlines or turning around spares activity. Again, as a general comment, electronic component availability is still a little bit tight, but the team's been doing a nice job managing through that.

Great. Thank you, guys.

Sure.

Sure.

Thank you for your question. At this time, I would now like to turn it back to Jaimie Stemen for closing remarks.

Thank you all for joining us today. This concludes the call. We appreciate your time and have a good rest of your day.

Thank you for your participation in today's conference. This concludes the program. You may now disconnect.