Watsco, Inc. (WSO) Q1 2023 Earnings Report, Transcript and Summary

Good day, and welcome to the Watsco First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode for the duration of the call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to the Chief Executive Officer, Albert Nahmad. Please go ahead, sir.

Good morning, everyone. I hope you all got to see the space ship Starlink launch few minutes ago, biggest space ship in the history of country or probably in the history of the world. Disclaimer for my error or [inaudible]. In any event, welcome to our first quarter earnings call. This is Al Nahmad, Chairman and CEO; and with me is A.J. Nahmad, President; Paul Johnston, Barry Logan and Rick Gomez. Now before we start, the cautionary statement. This conference call has forward-looking statements as defined by SEC laws and regulations that are made pursuant to the safe harbor provisions of these various laws, ultimate results may differ materially from the forward-looking statement. Now Watsco delivered an exceptional first quarter especially in light of last year’s impressive first quarter. Last year same store scale sales were up 25% and EPS was up 109%. Let me say that again. This quarter compares to last year and last year’s sales were up 25% and earnings per share was up 109%. This quarter sales grew 2% to record $1.55 billion, gross margins up 28.9% reflect our mindset around price and continued progress in our investments and pricing technology to help our leaders in the field optimize margins. You will recall that last year's first quarter gross margins also benefited from OEM pricing actions in response to unprecedented inflation. We are happy with the quarter's result given the reduced level of OEM pricing actions during this first quarter of this year compared to last year. SG&A increased 1%, reflecting early progress with cost containment and gains in operating efficiency that builds on what we achieved, started to achieve last quarter. Operating income was $165 million, operating margins remain in double digits at 10.6% and earnings per sale was $2.83 for the quarter. As per cash flow, this is the time of the year when we build inventory for the upcoming selling season and we are seeing supply chains ease in certain product segments versus last year. I must say not all OEMs are over the supply chain problem yet, but they're improving. Cash flow during the quarter improved $54 million year-over-year despite an unprecedented shift in inventory to new higher cost systems as a result of the change in efficiency standards that took place January 1. We expect further progress in terms of improved inventory terms and cash flow as the year goes on. All-in-all, our balance sheet remains strong with almost no debt. This provides us the flexibility to invest in virtually any opportunity As we continue to build scale in a very fragmented $50 billion plus North American market. We continue to look for acquisitions, as Watsco is a great home for family businesses. We sustain cultures, invest in people, and provide technology to secure and build on their great legacies. That's something we love doing building great legacies of companies that we acquire. Looking beyond the Short term, our press release today provides critical details that support Watsco's long term growth trajectory. We have an immense technology advantage, and we are investing to grow that advantage. These technologies are increasing customer engagement, reducing attrition, creating market share gains, and supporting margin. Watsco's broad array of products and brands is a competitive I should say, a competitive advantage that allows us to serve contractors in most environments. We also have a leading market share position in some bell markets to provide stability and higher growth rates. In addition, there are several important regulatory and industry catalysts for growth that will play out in the next few years. 2023 saw the introduction of federally mandated high efficiency standards for HVAC equipment, which will deliver price benefits in 2023 and beyond. 2025 will also mark the introduction of new refrigerant standards, which historically has made it harder to repair existing systems and favors more demand for replacements. We also see continued movement towards electrification and greater adoption of heat pumps which generally come at higher prices and higher margins. Sales of heat pumps grew 7% in our company during the first quarter, outpacing overall growth rates. Finally, we also expect new Inflation Reduction Act to provide enhanced tax credits and incentives for efficiency upgrades and electrification in the years ahead. All of these catalysts would benefit the industry in the coming years, and we certainly believe our scale, technology and financial strength position us to capture the new market share opportunities. With that let's go on to questions and answers.

[Operator Instructions] Our first question here will come from Ryan Merkel with William Blair.

Hey, guys. Good morning. Thanks for taking the question. I guess, first off, can you comment on trends so far in April? Just trying to figure out if things are continuing at this pretty healthy pace.

Well, that's just a few days start, but I'll let Barry provide some -- an answer to that.

I think, really, the first four months of the year all pretty consistent in a very – is not volatility, there's not a lot of change. It's been pretty consistent all four months as we start the year. But I would very critically and importantly say that May and June and the rest of the third quarter is where the big seasonal increase is for the quarter. For example, May and June would probably be 80% of the earnings of the quarter. So an early read in April, I'll give you some inference, but it's not representative of what the rest of the season looks like yet. But so far, so good. If I say it more simply.

Okay, well, I'll take that and appreciate that. Yes, we're not in the season yet. And then turning to gross margin, was the quarter hurt by inventory profits rolling off year-over-year? And I guess, really my question is, are inventory profits out of your gross margin at this point?

That's a great accounting question, Mr. Logan.

Yes, I mean, it's funny for my 30 year career, it's always been a first quarter question and never a question beyond the first quarter because that's generally the timing of pricing. But I'll take a shot at it, Ryan, because it's been anything but normal the last couple of years. So a year ago, OEMs had near double digit price actions effective January 1. This year they did not. This year, the pricing action is in on March 1 and it's less than double digit. So there's clearly a cost, as to use your term, which is really I wouldn't call it a cost. I would say there's clearly an impact in the short term margin this quarter could be 150 - 200 basis points in the quarter because of that algebra in the equation. And obviously our margins didn't go down by that amount because there is everything we've been saying now for a year about the entrepreneurial culture, the team, the technology, the culture. Working with our OEMs, all the heavy lifting going into the margin and pricing development the last two years, you can see offset some of that short term cost and margin. So that's the difference between short term and long term. In the short term, yes, there's an algebraic impact in the quarter. Long term, the benefits you can see, and you've been seeing it now for the last two or three quarters in a pretty significant way.

And our next question here will come from Dave Manthey with Baird.

Hey. Good morning, Al. I was wondering if you could talk about the OpEx a little bit here. Is it true to say that your increased investment and driving sales for key OEMs via selling and marketing expenses is being offset by tight cost control at the business operating unit level? Any color you can provide on those offsetting OpEx factors?

Well, we certainly hope so, but let me have Barry explain that.

Hey, Dave. Well, again, I like to look at things over a longer timeline just to tell the story conceptually more than just short term. So the last two years, it's pretty remarkable. I think that headcount is up about 15%. That's 800 people, say $60 million -$70 million in cost added to our network to serve customers, to deal with the environment we're in, to sell more products, to bring more technology, whatever it might be. And it's a remarkable number. And that's part of the investment that we talk about in growing the market, growing the business, the two way street of economics that we've been looking for to grow the business long term. And that's in the numbers. And if I dial into the quarter and be again more surgical about it for example, we saw fixed costs increase this quarter high single digits. And that goes with the people and the investments that are made where variable cost, some of the variable selling costs went down double digits in a quarter. So that's a little bit of what we expected, right? We're not going to shut off investments, we're going to keep investing, some of the variable or transitory costs of what's been going on the last two years if that eases and as those eases, we would expect cost reduction. So everything I've just said is playing out in 673 locations in very different ways. But culturally you can see over the last six months there's a big impact going on in SG&A, not just the quarter.

Yes. Okay. And second, at a recent investor conference, Carrier said that they believe they're underrepresented in their aftermarket. Do you have any idea what they mean by that?

No, that's news to me. I've never heard that.

I think this OEM is now has been looking for an increase in their aftermarket share and it's something that all OEMs are after. And so, yes, as time goes on, we'll find out how we can motivate the contractor to do more repair parts than they've done in the past. But there's a tradeoff to that, obviously. Do you want replacement units and parts? I don't think the two necessarily go hand in hand.

Dave. I think I don't know the answer, but I'll add my editorial to it. There's a commercial element to that discussion probably that's pretty significant. I don't know market share in the commercial applied aftermarket parts business, but I have a feeling it's a pretty complex machine, and my guess is that some of this long term development can come there. And as Paul said, it's been elusive, I think, for all the OEMs in that sector.

Our next question here will come from Jeffrey Sprague with Vertical Research Partners.

Hey, thank you. Good morning, everyone. You sound a little under the weather, Al. Hope you're feeling okay.

It's my spring cold. Every spring I have to weather the cold. It's just a simple cold, but thank you for asking.

Yes. Obviously, a lot of cross currents going on the revenue line. I just wondering if you could unpack that a little bit for us, right. We got carryover price, we got new price, we got the SEER change. I mean it's clear volumes are down, right. But can you give us a little bit of granular detail on the interplay of volume, price and mix?

Well, I would say that all the things that you mentioned are positive for us. I don't see anything in front of us other than good things, and we have the scale to take advantage of that. But let's get a little more granular with you, Barry and Paul than anybody else. Rick, if you want to jump in as well.

Sure. Good morning, Jeff. Yes, I mean, first units are down in the quarter. We expected that, the industry expected that. It's mid-single digits in terms of decline. Pricing was up very high single digits, which is just more of a mix benefit this quarter. Again, the OEM pricing came later and we'll actually have some carryover benefit into the second quarter. But this quarter pricing is largely mixed and near double digits. And as far as commercial and that type of thing, commercial is up well into double digit territory, which is probably two and a half years now of trend. And to give you some sense of that, I think if we look out into the season, you still have a lag in the full market converting to the new higher tier systems. You have the northern part of the market catching up to the Sun Belt with new systems at higher prices. The manufacturers will all be asked further pricing actions this year, but as a group, most were effective March 1, which carries into the second third quarter. And what Al is referencing is 2023 has really three things going on that are remarkable too, which is the refrigerant change, the heat pump growth and tax credits and so on that could play a role and influence this. If I add a fourth one that I think is somewhat unique to Watsco, our ductless business, which is a big business for us, it's not centric, so to speak, to the US OEMs, but it's a growing part of the market. There's a lot of growth, a lot of investment, a lot of new territories for us in that market. So I think, all-in-all, once we get past some of this early comparable difficulty that we have, that's Al's frame of mind is we're pretty optimistic about the rest of the year.

If I can add on to that a little bit the impact of 25C with the tax credits coming in for the high efficiency product really wasn't in our mix in the first quarter. We really didn't see a lot of evidence of, a lot of tailwinds coming from the tax credit. So we're looking forward to that second and third quarter as we start seeing more of that. And then exactly what Barry is saying the sell-through of the existing heat pumps is still going through. And we really haven't seen the benefit of the high efficiency heat pumps have not yet flowed through into the marketplace. So we've got some good upsides that we're looking at for Q2 and Q3.

And maybe just a clarification on refrigeration. Are you saying you think the refrigeration change that happens in 2025 will already have some kind of positive impact on ‘23 in terms of pre buy or things like that? Or were you kind of referring to something else?

No, we're preparing to when the rule comes in. We are not interested in that.

That’s not going to impact us until late ‘24.

And our next question will come from Nigel Coe with Wolfe Research.

Good morning, Al. Sorry, I was on mute there. Hope you feel better soon. Quick question on inventory. So a much bigger build in inventory than certainly what we'd expected. So I'm just wondering, was that magnitude of inventory build intentional? Are there any other factors you need to bear in mind?

Well, part of it, as I suggested in previous calls, is the supply chain issue is that we would get in a system, just part of one system, and we got the inventory at so we get the rest of the system. And that still lingers. We still have inventory of that sort. It's good inventory eventually would get into the pipeline and into the market. And I do believe we have more inventory at the moment than I'd like to see. But we're going into the season, so it's not a bad problem to have. As I said earlier, some OEMs are still having issues with supply, the product that we need. But it's good inventory, and eventually, I think we'll get it right size and pre turns, and that improves cash flow even beyond where we are today. As you know, our cash flow has performed very well to date. Any commentary from the team?

This is AJ. I'll just add that while year-over-year inventory looks up in dollars, there are inflation. There is inflation in those numbers. And if you look at units, they’re actually down. So there are supply chain issues that keep us, if you will, at a higher inventory position than ideal. But it certainly weighs on those numbers. But I agree with what was just said is that here comes a season and we should be in pretty good shape to sell through what we got.

Yes. Okay. That's helpful. And then maybe Barry, could I just go back to your comments on the gross margin. Obviously, the price increase came through later in the quarter than normal. So as we then trip into 2Q, does that mean that 2Q gross margin should be maybe a little bit higher than we would expect to see normally? Any color on how we should expect gross margin to kind of, I guess, trend through the balance of the year will be helpful. Thanks.

Yes. Again, we're speaking in basis points here, not percentages, so don't get carried away with it. But, yes, there is a benefit that will flow into the end of the second quarter that can benefit gross profit because of the timing of the price increases. But it's in basis points. I wouldn't get carried away with the analysis.

Please go ahead.

Sorry, I was just going to add that, yes, it's true. The price increase came later than usual. It's also more moderate than usual, or at least than last year. And it's only on our equipment business, right? The price increases on all the other thousands of SKUs that we sell have tampered relative to the last two years.

That's fair. Sorry, just one more clarification. Do you think 20% plus is a good number to use for second quarter and beyond?

You mean gross margin?

Yes.

Oh, my goodness. It's, of course, we think. Hear a question, go ahead, Barry.

I didn’t hear.

I think you said, do you think we'll do 20% or better in the second quarter in gross margin? I think you said that.

28%.

Oh, 28%, I'm sorry. I didn't hear that right. I want to speculate on that. Barry? I mean –

Yes. I'm going to stick to what we've said now, about a year ago. What are you looking at for gross margin? We said 27% as a target, as a baseline. Obviously, we've been exceeding that the last six months especially. But, Nigel, I'm going to stick to that just until we can see the real seasonal impact of everything. We're 30%, 40% larger business 90 days from now just out of first seasonality. So let's be conservative and thoughtful, and we'll change our mind when we have more data.

Thanks, Barry. Last time, you set us up for 27 last time, Barry, and we did pretty well against that goal, so maybe you should raise the bar.

Our next question will come from Josh Pokrzywinski with Morgan Stanley.

Good morning, Al. Just want to follow up on the gross margin commentary. Obviously, when you see numbers that big, everyone's trying to figure out where that looks like going forward. But, Barry, you mentioned that the 150 -200 basis points, I think any other factors that we should keep in mind in there? You mentioned selling price, but anything on the freight side? And then I guess maybe just specifically on selling price. Do you think of that as more doing better on the buying side or doing better on kind of the customer selling side? Obviously, both have the impact.

You brought a good point on trade. Barry, you go ahead and answer that.

Yes, well, first the parts of cost of sales that don't relate to the cost of the product. Like freight in shrinkage, inner branch freight, things that are costs within cost of sales over the last six months again, no great variation as a basis point impact. We would hope at some point actually freight would be a contributor to gross profit, as it's been a higher cost over the last couple of years. But as a trend, those line items have had no impact on what you've seen. And the results the last months, result comes from again, taking 100,000 -200,000 SKUs and going through a pricing margin optimization program. It also goes to the branch level leadership incentivizing them or culturally giving them tools they didn't have two years ago. And it is also, as I said, more generically working with OEMs over the last two or three years. So I think, Josh, that there's not much to report or volatility or one big impact items. It's all been pretty consistent, I think, for the last several quarters now, the only variable that changes has been the level of pricing actions like we're articulating carefully today. And yes, it had a cost, but the other things had a benefit. And to the extent that levels out the OEM pricing actions levels out, the benefits will be there and that's how we look at it. Hope that makes sense.

Got it, certainly does. And then I know 2025 is kind of a long way off, especially with a little more macro uncertainty. But just trying to put in context that higher cost of repair that I think you guys mentioned earlier, I mean did we see sort of a step function change, I guess, entering COVID? I know with the higher replacement rates and just the market strength over the past two, three years, a lot of kind of Monday morning quarterbacking on, or was it supply chain, was it people operating units more which probably doesn't make a ton of sense, but all sorts of factors that people are trying to figure out as to why replacement has been better. But is repair just getting a lot more expensive even today before we get to 2025 that this is just kind of the new normal on that front.

If I can take a cut at that. And it's not scientific and we don't have any data yet on being able to answer or that quantifiably. But yes, repair probably is going up. The cost of labor has gone up. And as you know, labor is not included in a warranty calculation. So consumers are being hit with a higher price to do warranty than they were in the past. And then the other side of it is obviously things like refrigerant and some of the commodities that aren't covered by a warranty also are adding to the cost of being able to do a warranty. Warranty is not free in our world. Warranty has a definite cost to it and it also has a timing to it that it takes longer to do a repair or replacement of a compressor than it does to replace the entire system. So there's a lot of very subjective things that go into the repair versus replace that I think we've tried to explain away in the past with some fairly simplistic concepts that now I think we need to dig deeper and find out more detail as far as what really does drive that.

And our next question will come from Tommy Moll with Stephens.

Good morning. Appreciate you taking the questions. Al, you mentioned that the OEMs moved a little bit later this year on their pricing initiatives. But vis-à-vis your distributor competitors, are you seeing any emerging signs of price based competition? And if not on a like for like basis, do you think pricing could actually be up again this year across the industry?

Tom, it's a very good question and I'm going to go to my two guys, Paul and Barry.

Yes. Regionally and with certain customers, yes, there is still this price competition going on. There always will be price competition existing in our industry among the OEMs and among distribution. I think with the changeover in products and with a lot of the other aspects that we've been talking about, it probably hasn't been as significant as perhaps it's been in the past. But still, it's there. It's always going to be there. It's a very competitive industry.

Yes. Paul, I mean, one thing that sticks out, and I agree it's regionally and kind of noise, not the signal. But we heard from one of our northern businesses yesterday that they're later in the transition to the M1 product, the new products, that some of the old products are being moved in their region at lower prices. So that'd be an example of kind of a regional, if you will, but a temporary and not material, I think, in the end of the day.

Right. And hopefully transitory.

The whole offering of M1 is more expensive than what they're replacing. Right. And that's just new in the market now, beginning this first quarter. Yeah, that would be impact.

Right. That's the big story. The other stories are just noise, is my point.

Right. Maybe to put a finer point on it. Do any of these dynamics feel like they've accelerated or moderated this year in particular, just given that industry wide volumes may be pressured? Or do you still think that net-net across the industry pricing does, in fact move higher through this year?

Well, I hope, it's hard to predict, but we've had a pricing action that takes place now, just starting, and it's more moderate than it has been. But it's hard for us to advise you that we expect no changes in pricing. I just don't think that's something that we have, we would know that comes from the OEM. Paul, anything to add?

Yes, I think I agree with Al completely. I mean until we start seeing normal supply chain, until we start seeing where the weather goes and what the consumer dynamic is, making a prediction like that in April would be a wild guess on our part.

Just to add a layer to that. I think this is just important, educationally. We have a store in Miami here that sells more than $50 million of equipment. That's more than a Home Depot sells. Right. We're selling to a couple of thousand customers at different prices. Our pricing to the market, to our customers has variability. It has customization, it has competitive thinking to it. It has technology around it now. And what's really not well known is we're buying from our manufacturers at different prices to match and closely manage margin as we sell products in Miami. And now let's extrapolate that to 90,000 customers and 670 locations. It's a mammoth math and science equation where pricing is that granular across that many markets and customers. So two points to that is there's a lot of fluidity in how we can manage margin, no matter what a local market is doing or how another OEM might be behaving. It's an immense equation that is very fluid. And the good news is, and I'll say it again, third time in this call, there's now technology in place to look at all of that, to manage that, to prosecute that strategy in a way we didn't have it two or three years ago.

Appreciate the context. If I could ask one on market share again, just starting from the construct of industry volumes down, let's just say somewhere in the mid-single digits this year, in recent years, you've taken significant share. I presume you'll plan to repeat that again this year. But could that net to Watsco volumes flat or even up on the year, do you think?

You mean in units or in dollars?

In units.

I would certainly hope so. Given it’s always a good shot.

We've never set a goal to not increase market share in a year. That just isn't something that's in the Watsco DNA.

I think he's referring to the environment. And we're going to have the environment that grows here. The variables to that are if you get hot weather, it doesn't matter what we want to do, the demand is going to be there because heat creates demand. Hot weather grows demand.

Well, also, I think this year what we're looking at is spicing the market into different segments. Not just looking at market share in split systems, but looking at market share in heat pumps versus straight cool versus the mini splits for the ductless type product. So I think it's going to become a more complicated equation than we've looked at in the past. And it's also going to be probably more important that we're looking at markets here, in the markets that we think have got the longest legs and the longest future. That obviously is the ductless product and the heat pump product.

Appreciate the insight, I’ll turn it back.

Dimension, right, in terms of share, I think that's correct statement of those products.

And our next question here will come from Jeff Hammond with KeyBanc Capital Markets.

Hey, guys, good morning. This is Mitch Moore on for Jeff. It seems like the supply chain for residential equipment is pretty close to normal here, but I was just wondering if there's any areas where within resi where lead times are still an issue.

Yes. We're not going to identify it, but we have. We have an issue with the equipment still. And the issues are more serious in different places and different brands. Yes, we still are overcoming shortages of equipment itself. No question about it.

Okay, that's helpful. And then just on inventory, I was wondering maybe what's a realistic source of cash from inventory kind of this year?

What would I like? Or what do we think is going to happen? I mentioned before I'd like to get another $200 million out of our inventory and cash flow, but, yes, we'll see what happens. But we're better prepared for that because of the various supply chain as it improves, we improve our churn because equipment that isn't matched right now will be matched, will be freer to sell it. And just our technology has got a lot better so that we can obviously improve the churn. That's what our goal is. So I gave you a number. It's a goal, it's not a projection.

Our next question here will come from Patrick Baumann with JPMorgan.

Good morning, Al. How's it going? I hope you feel better.

Yes, it's just a cold. Thank you, though.

Good. I had a quick one, a few, actually. In the press release, you mentioned that unit volumes are adjusting to more conventional run rates. But what was meant by that comment? Maybe that's a Barry question.

Barry and Paul. And Patrick, may I suggest that you come visit us. We always want to have you guys come visit. Are you going to, hope you'll be able to do that soon.

Yes, we are. We'll be coming down there soon. We will.

Thank you for that. Okay, guys. Well, answer that.

Yes, Patrick, I mean, if you look at 20-30 years of data, the growth rate of the industry is right around 3% unit growth. It's been closer to 7%-8% the last two or three years. And so the comment really is that some adjustment is going on, obviously, the last few quarters. And I think the realignment towards that longer term growth rate is probably what we'll see at some point. And so it's just a reset. It's not meant to tell you what we think unit growth will be short term, but it's part of the reset that obviously has been in the cards now for probably the last year kind of taking place.

Makes sense. And then switching gears on HVAC products sales. Can you talk through what you're seeing there? The decline in the first quarter was modest, but just kind of curious if you could parse that out a little bit, whether it's volume or price or however you want to talk about it. I know there's a lot of stuff within that subset of sales. Just kind of curious if you could talk about that subset.

Patrick, I didn't hear your question.

Yes. Just want to talk a little bit about HVAC product sales. Not the equipment side, the product subset of sales. So it was down 2% in the quarter. Anything you could talk about, whether it's volume or price or specific product categories. However, you can talk to what's going on in that segment.

It's about 1,000 vendors, about 80 different product lines, and anything from duct tape to refrigerant to replacement parts to copper tubing and so on. So no great inference on any one thing. It's a basket where a year ago again, 25% plus, I think, same store sales a year ago. So I think that's just a reality a year later of a very tough comparable.

Also, Patrick, remember what we do. We participate in a very stable market. We're not involved that much with new construction. It's about, I don't know, about 10%, maybe as much as 15% sometimes. We're in the business of helping air conditioning and heating continue operating 12- months a year. That's what we support. And that's not going to, it's just nice to be in that sort of the business where it's pretty stable. Sometimes it goes a little faster than others, but it's stable. And with the millions and millions of homes and businesses that are using HVAC products, it's just something that, shall we say, essential. You got to cool homes, you got to heat homes. And that's not going to be that effective with economic trends to a large extent. Now, where we think we can also help is financing if things get too expensive in terms of interest rates and inflation on the product. And so we are focused on helping the consumer with financing that we have designed probably industry leading technology to help the contractor help the consumer with financing these products.

Understood. Thanks for that color. And then the last one is just on the M&A pipeline. Maybe you could talk about how you guys are feeling about the M&A space these days, seller expectations. Maybe market uncertainty holds that back a bit. I don't know any color you could give on that.

Well, I want to say that I think our reputation for our culture is our best selling point. Private equity entered the industry. I don't know the impact of higher rates is going to have on private equity as competitors to make acquisitions. But we're a different kind of a buyer from private equity. We're for the long term, we like building the legacies of people that created a business. We're very unique in that position. And yes, we're always active in M&A. We think of that as a strategic way for us to expand our footprint throughout North America. And I don't think that's are going to change now. Will private equity come and go? We'll see. But doesn’t remember, there are over 1,000 distributors out there. It doesn't mean that we're not going to be active in it. We always will be active in it.

And that concludes our question-and-answer session. I would like to turn the conference back over to Albert Nahmad for any closing remarks.

Thanks, Joe, for a good job. And thank you all listeners for our interest in our company. And we look forward to having another one of these calls at the end of this quarter. Bye-bye now.

The conference has now concluded. Thank you very much for attending today's presentation. And you may now disconnect your lines.