H&E Equipment Services Inc

NASDAQ:HEES

Earnings Call Transcript 2019-Q3

[Operator]

Good morning, and welcome to the H&E Equipment Services Third Quarter 2019 Earnings Conference Call. Today's call is being recorded. At this time, I'd like to turn the call over to Mr. Kevin Inda, Vice President of Investor Relations. Please go ahead, sir.

[Kevin Inda, VP, IR]

Thank you, Cody, and welcome to the H&E Equipment Services conference call to review the company's results for the third quarter ended September 30, 2019, which were released earlier this morning. The format for today's call includes a slide presentation, which is posted on our website at www.he-equipment.com.

Please proceed to Slide 2. Conducting the call today will be John Engquist, Executive Chairman of the Board of Directors; Brad Barber, Chief Executive Officer and President; and Leslie Magee, Chief Financial Officer and Secretary. Please proceed to Slide 3. During today's call, we will refer to certain non-GAAP financial measures, and we reconciled these measures to GAAP figures in our earnings release and in the appendix to this presentation, each of which is available on our website.

Before we start, let me offer the cautionary note that this call contains forward-looking statements within the meaning of the federal securities laws. Statements about our beliefs and expectations and statements containing words, such as may, could, believe, expect, anticipate and similar expressions constitute forward-looking statements. Forward-looking statements involve known and unknown risks and uncertainties, which could cause actual results to differ materially from those contained in any forward-looking statements.

A summary of these uncertainties is included in the safe harbor statement contained in the company's slide presentation for today's call and also includes the risks described in the Risk Factors in the company's most recent annual report on Form 10-K and other periodic reports. Investors, potential investors and other listeners are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The company does not undertake to publicly update or revise any forward-looking statements after the date of this conference call.

With that stated, I'll now turn the call over to Brad Barber.

[Bradley Barber, CEO, President & Director]

Thank you, Kevin, and good morning, everyone. Welcome to H&E Equipment Services Third Quarter 2019 Earnings Call. On the call with me today are John Engquist, Executive Chairman; Leslie Magee, Chief Financial Officer; and Kevin Inda, our Vice President of Investor Relations.

Slide 4, please. My comments this morning will focus on our third quarter results, our business and overall market conditions. And then Leslie will review our financial results for the quarter. When Leslie finishes, I'll close with a few brief comments after we will take your questions.

Slide 6, please. Our performance during the third quarter produced strong results. For the quarter, total revenues increased by 9.6% to $353 million. The momentum in our rental business continued with revenues up 18.4% from a year ago. Our key rental metrics were positive over prior year quarter as well. Our total gross margin increased to 37.4% from 35.6% a year ago. Adjusted EBITDA grew 17.9% to $127.5 million, and margins improved to 36.1% from 33.6% a year ago.

Our net income was $28.4 million or $0.79 per diluted share compared to $21.3 million or $0.59 per diluted share a year ago, on an effective tax rate of 26.7% in the third quarter of 2019 versus 26.4% a year ago.

Slide 7, please. We remain pleased with the execution of our rental business. In the third quarter, we achieved a 2.4% increase in rental rates from a year ago and physical utilization of 71.4% on a significantly larger fleet. In addition, dollar utilization increased 160 basis points to 37.5% compared to 35.9% a year ago.

Slide 8, please. This slide illustrates a geographic footprint, which encompasses 96 locations in 23 states. Rental demand remained broad-base across the regions we serve, include a wide variety of project types. We remain focused on our growth plan, which involves increasing our density in existing markets through both acquisition and organic expansion.

Slide 9, please. This slide illustrates our mix of revenues and fleet composition, both of which we believe are significant advantages for our business. Demand is solid in all of our end markets, especially nonresidential construction, which drives over 60% of our revenues. The crane rental fleet is now less than 5% of our overall investment, while earthmoving has continued to grow at a slightly faster pace than the other product types. We remain focused on improving the return of our rental fleet investment while we look for opportunities to better serve our customers.

Our fleet remains one of the youngest fleets in the industry at 34.9 months compared to an industry average of 45.6 months.

Slide 10, please. We see stable construction activity in the markets we serve. While there have been some mixed indicators of the health and vitality of the construction markets, we continue to see similar healthy activity levels. Our customers continue to indicate solid project activity, significant pipelines of projects breaking ground, and backlogs of future projects appear to be unchanged.

Thus our outlook remains consistent with our stated view throughout this year that nonresidential construction markets we serve remain positive. I'll now turn the call over to Leslie to discuss our financial results in more detail. Leslie?

[Leslie Magee, CFO & Secretary]

Good morning, everyone. Thank you, Brad. I'll begin on Slide 12. Our business produced strong results for the third quarter. Our total revenues increased 9.6% or $30.9 million compared to the same period a year ago to $353 million, largely driven by the strength in our rental business. As Brad mentioned, rental revenues, as previously reported, increased 18.4% to $184.8 million. Our physical utilization was solid with average time utilization based on OEC of 71.4% for the quarter compared to 71% a year ago. We expanded our fleet by approximately 12.3% or $216 million versus a year ago. Our rental rates improved, again, this quarter, up 2.4% year-over-year, and rates improved in all product lines. Rates also increased 1% sequentially, increasing in all product lines except for cranes. With strong utilization and rate expansion, our dollar returns rose 160 basis points to 37.5% versus last year.

New equipment sales decreased 4.7% or $3.2 million to $65 million compared to $68.2 million last year. The decrease was primarily driven by lower crane sales, which were down 15.6% or $5.7 million. Our used equipment sales increased 2.9% or $0.9 million to $31.2 million, largely as a result of higher used earthmoving sales. Sales from our rental fleet comprised 88% of total used equipment sales this quarter, which were the same a year ago. Our parts and service segments generated $49.6 million in revenue on a combined basis, up 3.5% from a year ago.

Now let's move onto gross profit and margins. Our gross profit increased 15.2% to $132.1 million from a year ago. And consolidated margins were 37.4% compared to 35.6% a year ago, an increase of 180 basis points, primarily as a result of a positive mix shift to higher-margin rentals, combined with improved rental gross margins.

For gross margin detail by segment, our rental gross margins, as previously reported, were 50.8% during the quarter compared to 50% for the period -- year ago period. Margins on new equipment sales were 11.6% for the third quarter compared to 11.5% a year ago. Used equipment sales gross margins decreased to 31.3% compared to 32.3% last year, largely due to the change of the mix of equipment sold. Margins on pure rental fleet only sales were 34.8% compared with 36% a year ago. Now parts and service gross margins on a combined basis were 41.4% compared to 40% a year ago.

Slide 13, please. Income from operations for the third quarter of 2019 increased 22.5% to $55.5 million or 15.7% of revenues compared to $45.3 million or 14.1% of revenues in the year ago quarter. The net change in margins, a 160 basis point increase, was primarily a result of shift in revenue mix to higher-margin rentals, combined with improved rental gross margins.

Proceed to Slide 14, please. Our net income was $28.4 million or $0.79 per diluted share in the third quarter of 2019 compared to net income of $21.3 million or $0.59 per diluted share in the third quarter of 2018. Our effective income tax rate was 26.7% in the third quarter of 2019 versus 26.4% a year ago.

Adjusted EBITDA was $127.5 million in the third quarter compared to $108.2 million a year ago, an increase of 17.9%. EBITDA margins expanded 250 basis points to 36.1% this quarter compared to a year ago, primarily due to the shift in revenues to higher margin rentals.

Next on Slide 16. SG&A expenses for the third quarter of 2019 were $77.3 million compared with $70.3 million for the prior year, a $7 million or 9.9% increase. And SG&A expenses in the third quarter of 2019 as a percentage of total revenues were 21.9% compared to 21.8% a year ago. Employee salaries, wages, payroll taxes and related employee benefit costs and other employee-related expenses increased $3.1 million, largely due to our acquisitions since September 30, 2018, a larger workforce and higher incentive compensation related to improved profitability.

Facility related expenses, primarily rent expense, increased $1 million. Insurance-related expenses increased $0.7 million, and depreciation and amortization increased $0.6 million. Expenses related to greenfield branch expansion costs increased $0.8 million compared to a year ago.

Next on Slide 17. Our gross fleet capital expenditures during the third quarter were $99.1 million, including noncash transfers from inventory. Net rental fleet capital expenditures for the quarter were $71.7 million. Gross PP&E CapEx for the quarter was $12.9 million and net was $12 million. Our average fleet age as of September 30 was 34.9 months.

Our free cash flow for the third quarter was a use of $6.4 million. This compares to a use of free cash flow of $79.6 million a year ago, which the third quarter of 2019 was positively impacted by lower working capital and lower rental fleet CapEx, and we have included the GAAP reconciliations to net cash provided by operating activities to free cash flow for the periods presented on this slide in the appendix at the end of this presentation.

And next on Slide 18. At the end of the third quarter, the size of our rental fleet based on OEC was $2 billion, a 12.3% or $216.2 million increase from a year ago. And our average dollar utilization was 37.5% compared to 35.9%. Proceed to Slide 19, please. At the end of the third quarter, the outstanding balance under the amended ABL facility was $304.1 million. We had $438.1 million of cash borrowing availability at quarter end, which was net of $7.7 million of outstanding letters of credit. And at this time, I'll turn the call back to Brad.

[Bradley Barber, CEO, President & Director]

Thank you, Leslie. And please proceed to Slide 21. To conclude, our third quarter and year-to-date performance has been solid, and I'm pleased with the execution from my team. We are successfully growing our rental business, and we continue to do so through organic growth, acquisition and more store openings. Lastly, we continued our quarterly cash dividend payment of $0.275 on September 13. As always, future dividend payments are subject to the Board review and approval each quarter. We'll now take your questions. Operator, please provide instructions for Q&A.

[Operator]

[Operator Instructions]. We'll take our first question from Steven Ramsey with Thompson Research Group.

[Steven Ramsey, Thompson Research Group]

I guess I wanted to start with kind of looking forward. If 2020 market levels are similar to this year or even slightly down, you've got a younger and larger fleet, how would your growth algorithm change? Would you need to sell much fleet in this scenario? And do you feel like a flat to slightly down market still supports improving rates?

[Bradley Barber, CEO, President & Director]

So Steven, let me say first. I don't -- we are in the middle of forecasting for 2020, but we are not in a position to -- my view is not that it's going to be flat to slightly down. If there were or when there is a decline at some point in time into the future, it certainly would pressure rental rates. Utilization generally can pressure rental rates; you can do things with your mix and geographies. So I mean very hypothetical, but yes, I mean, the fundamentals of the rental business are if utilization declines, demand declines, then rates generally decline at some level. And then to speculate on what percent of fleet someone would want to decline, there is just not enough -- there's a lot of variables there in that question.

[Steven Ramsey, Thompson Research Group]

Excellent. And then I know this was in the slide and talked about. With the Gulf Coast expansion, can you maybe talk to if the visibility is as good as it has been and maybe the demand both from the new construction side and the maintenance side? Do you still feel like the pipeline of activity there supports strong results going forward?

[Bradley Barber, CEO, President & Director]

I do. Maintenance has been pretty consistent. Most of these petrochem facilities require maintenance that does not really let up with their view of what's going on at a particular point in time. So it's planned well in advance. That stuff continues. As far as the pipeline, we've continued to see new work announced, and we believe that the geography you are speaking about is likely to continue to improve and continue to grow. So both.

[Steven Ramsey, Thompson Research Group]

Excellent. And then can you maybe talk to just, I guess, lastly, the energy markets. Are you seeing disruption there? And I know exposure has been reduced over time. But just kind of any fleet imbalance there? Does it feel like the fleet balance supports good results going forward?

[Bradley Barber, CEO, President & Director]

As it pertains to our rental fleet, no imbalance whatsoever. Our exposure is really heavily weighted to the Eagle Ford and to a less degree the Permian. Our most exposed market is approximately 80% physically utilized with their rental fleet today. So that kind of speaks to how we view those markets.

[Operator]

We'll now move on to our next question from Seth Weber, RBC Capital Markets.

[Seth Weber, RBC Capital Markets]

I wanted to kind of ask you a similar question and just about visibility, Brad. When you're talking to the folks on the field, on the construction side, I mean, do you sense that the project visibility on the non-res construction side is sort of at a typical level? Or do you think it is kind of closer in than usual? Everybody is just trying to handicap. Everything seems okay now, but everybody is trying to handicap how much visibility really exists in the industry. So I'm just -- if you have anything you could share there from your discussions with customers or the sales folks or what not?

[Bradley Barber, CEO, President & Director]

Yes. You bet. Seth, it's really more of the same from that perspective, right? The rental markets remain healthy, the job starts are consistent, customer feedback and sentiment remains very high. Talking to both our sales force, some of our senior managers as well as some customers directly, their biggest concern is still workforce. They can't get enough people to produce the work. They feel very good about 2020. I have not talked to a single person externally or internally who has a view that 2020 being other than as good as 2019. If there is a level of concern and I just think it's natural, is I feel like supply and demand are coming into balance. Stated differently, I think that supply is coming into balance and it could have a slight impact to utilization going forward. That being said, our view of consistent incremental rental rates, consistent incremental revenue growth, it remains steady. But I do believe that supply has come into balance with demand. And I also would say that on two other fronts, competitors, number one; and manufacturers, number two, both are acting in very rational disciplined ways. And I think that we'll continue to go forward with the healthy construction markets we see.

[Seth Weber, RBC Capital Markets]

Okay. That's helpful. And then just following up. In the slide deck, you talked about your increasing bias towards earthmoving equipment. Can you talk about how much exposure you feel like you might have to infrastructure projects, in particular? And is that an area where you might do an acquisition to just get more exposed to infrastructure, which seems like it's an area that has some good growth potential here going forward?

[Bradley Barber, CEO, President & Director]

Sure. You bet. So we could. When John and I are out looking for opportunities, we consider those types of construction rental companies as well as project types. And our view is the same, infrastructure would appear to be some level of pent-up demand. We're not turning H&E into an earthmoving specialty rental business, we just view it as a better balance for the markets that we happen to serve, and we like the return profile of the earthmoving business. So would we consider then and are we considering it? You bet, but it's not -- it's no more a focus on that particular area than it is the broader general construction companies.

[Operator]

We will move on to the next question from Steven Fisher with UBS.

[Steven Fisher, UBS Investment Bank]

Wondering if you could talk about mix this quarter and how that affected your rental rate growth? That 1% sequential rate growth was pretty impressive. Was there any particular mix that was driving that in terms of either customer or product or region, anything like that?

[Bradley Barber, CEO, President & Director]

No. It's really broad-based. I think Leslie said in prepared comments that we had one product line, cranes, that was not up sequentially. That 1%, we are very proud of that number. Our team is working hard, we're using a lot of good information in our outstanding systems. So geographically, now it's pretty well spread. The one product that we did not get the sequential growth was cranes that we have about 4%, 4.5% investment in. And everything else looked pretty good and typical.

[Steven Fisher, UBS Investment Bank]

Okay. And then touched upon a little bit earlier on the call, but there has been lots of rumblings amongst players in the industry about reductions to fleet CapEx plans this year. Have you changed your fleet CapEx plan since the first half of the year? And how do you think about kind of what the size of your fleet should be over the next year? I mean is the goal to kind of keep the fleet relatively steady and focus on utilization because you're still growing it obviously double digits year-over-year?

[Bradley Barber, CEO, President & Director]

Look, we don't give specific guidance typically on capital, but in general, we are going to end the year about where we thought we were going to start the year. And there are always tweaks we make as we go through and operate in shorter-term views. As we go forward, how much will we grow the business of the fleet, we are always going to look for improved returns, dollar utilization is a key indicator for our business as well as many other. As long as we continue to get incremental rate performance, solid utilization, then we are going to continue to grow our rental fleet. As I've said in my comment to Seth, I do believe that supply is catching up with demand. That does not mean that there is not opportunity for us to continue to grow, but I think it may be more muted going forward than it has been in the last few years.

[John Engquist, Executive Chairman]

Yes, Steven, this is John. What I would add to that, with our belief that supply is catching up to the demand, what I think you will see is, we'll probably have lower growth spending or growth capital. We'll moderate that. So we'll probably grow our fleet a little less than we have been going forward.

[Steven Fisher, UBS Investment Bank]

Okay. That's helpful, guys. And then maybe lastly here, on your new equipment sales, couple of quarters in a row it's down. Obviously, you stated primarily due to lower crane sales. Just curious what you're seeing outside of cranes in the new equipment sales?

[Bradley Barber, CEO, President & Director]

Yes, I mean, earthmoving and crane make up the vast majority of our gross new sales dollars. And earthmoving continues to be strong. And crane continues to really be where it has been for several years now bumping around. We always talk a couple cranes in a given quarter decide if we're up or down year-over-year or period-over-period. So it's really more of the same, but earthmoving remains strong.

[John Engquist, Executive Chairman]

Yes, let me just comment. On our second quarter call, I indicated that you guys should probably use our first quarter new equipment sales as a run rate, and our view on that has not changed. So our expectation is that our fourth quarter new equipment sales will not match last year's. That was an extraordinary quarter. And again, I would go back to the run rate from the first quarter for your modeling.

[Steven Fisher, UBS Investment Bank]

Okay. But your earthmoving sales are up year-over-year, it sounds like.

[Leslie Magee, CFO & Secretary]

They were for the quarter.

[John Engquist, Executive Chairman]

Yes, they were for the quarter.

[Bradley Barber, CEO, President & Director]

They are.

[John Engquist, Executive Chairman]

Yes, they are.

[Bradley Barber, CEO, President & Director]

Had a really strong first quarter as well.

[Steven Fisher, UBS Investment Bank]

And in that fourth quarter, what's your thought on what earthmoving sales will be year-over-year?

[Bradley Barber, CEO, President & Director]

They're going to remain good relatively speaking. I mean we've seen -- we have good visibility with that group. I'll tell you that we see earthmoving as a product that some of our traditional buyers are utilizing the rental process more and more. So to answer that question, yes, we're going to have another nice fourth quarter with earthmoving sales.

[John Engquist, Executive Chairman]

Steve, for your fourth quarter modeling, it's kind of our expectation that total revenue is going to be very similar to a year ago with our revenue mix being different, new equipment sales will be down, rental revenues will be up because of fleet size and rate and what not, but total revenue is going to look a lot like a year ago.

[Operator]

And we'll move on to our next question from Ross Gilardi with Bank of America.

[Ross Gilardi, Bank of America Merrill Lynch]

Obviously, the industry leaders talked about moving some fleet out of the oil pads. I mean based on your utilization, and I don't want to put words in your mouth, but it sounds like you're still running very, very tight. So I'm curious if they do that, does it actually make your markets even tighter into next year and/or -- I mean, do you feel the need to redeploy any more energy exposed fleet into other regions right now where demand might be healthier?

[John Engquist, Executive Chairman]

No. We are running high utilization levels.

[Bradley Barber, CEO, President & Director]

We always move some amount of fleet. Some of our large competitors and the one you're referring to, they operate in different markets than we do in some cases. So again, our more limited exposure -- I think oil and gas has been about 7% of our revenue for many quarters now. And it continues to be, but where we are with that rental fleet, we are doing well. From a broader concern, with utilization, it's just what I've stated a few times, in that supply is catching up with demand. When we look at where our physical utilization was in Q4 last year, that was the highest utilization that I can recall in memory us running in the fourth quarter. So we are going to be up against a very difficult comp as it pertains to our physical utilization year-over-year in Q4. Specific to oil and gas, we are continuing to run just like we have, 75% to 80% utilization, and I don't see that checking up on us.

[Ross Gilardi, Bank of America Merrill Lynch]

When you say supply catching up with demand, I mean, is demand growth still exceeding supply growth? Do you feel like supply growth is actually eclipsing demand growth? And does that rebalancing, is it, I mean, obviously you got nice pricing in the third quarter, but do you think it starts to make further price increases a bit more challenging?

[Bradley Barber, CEO, President & Director]

It could, but I don't believe it will. I believe that -- I can tell you, we are going to be disciplined in our business. I think our larger competitors are operating in a very disciplined way. And I don't see manufacturers doing anything other than running healthy levels of new inventory. They're not doing anything to stuff the channel to cause bad behavior. So when I say I think it's caught up, I think it's reached an equilibrium, we are in good balance. And we'll continue to watch. But at this point in time, I think we will be able to continually get incremental rate improvement.

[John Engquist, Executive Chairman]

Yes. For the last three years, supply has been running behind demand, and it's really allowed everyone to really push utilization hard. And unlike Brad, I think supply has just come into balance with demand. And we expect that could have some -- impact our utilization going forward, but nothing material and nothing that would prevent us from continuing to get rate.

[Ross Gilardi, Bank of America Merrill Lynch]

Got you. And you had a nice bump up in service growth. Was that due to some lumpier, like timing issues? Or has the service business really picked up and is that sustainable?

[Bradley Barber, CEO, President & Director]

That growth level is a bigger growth level than we have been showing. I think we will continue to incrementally grow our service business. One of our larger challenges are sourcing quality technicians with the experience level to sell some of this growth. Keep in mind, much of our service revenue is driven by a distribution base business, both with earth and cranes. So we are proud of those guys, they have done a nice job. I think they will continue to grow. Will it be at the same level, probably not.

[Ross Gilardi, Bank of America Merrill Lynch]

And just lastly, Brad, any comments on used equipment market? I think your margins might have been down slightly, but can you talk about just recoveries for good quality equipment and how they compare to 3 to 6 months ago or a year ago?

[Bradley Barber, CEO, President & Director]

Sure. Very good. I mean, ours was a mix issue. We are not seeing any material degradation in pricing. I know there -- early in the year, there were some auction results on select larger earthmoving products that we don't really participate with and that kind of cast a shadow that people were concerned. And we've worked through and have shown that pricing was good. More recently, I think there were some auction results with some of the products that we participated in that were slightly lower. And I -- slightly, I want to emphasize slightly lower, but is still at very healthy levels. I do not anticipate there will be further decline. And our comment is and our findings are that our values are still very steady and where we need them to be. Our volume being down, we just don't -- with our fleet age, we just don't need to sell as much inventory periodically. So oftentimes that volume is driven by -- again, by a distribution business not only disposing of rental assets.

[Operator]

[Operator Instructions]. We'll hear now from Bill Mastoris with Baird.

[William Mastoris, Robert W. Baird & Co.]

From the sounds of it, with supply now coming into better alignment with demand, it would seem as though your CapEx would probably go down a little bit increasing your free cash flow, at least on an LTM basis. And I'm just wondering, on your capital allocation policy, would you prioritize at this point maybe some add-on acquisitions? Or would it be more along the lines of what you suggested on some earlier conference calls, and that is maybe paying down a little bit more debt. Any color you could provide there would be greatly appreciated. And then I have a follow-up question.

[John Engquist, Executive Chairman]

Well, look, acquisitions are definitely part of our strategy going forward, tuck-in acquisitions, and we are out looking. I can tell you we're being very disciplined and very selective and we'll continue to do so, but you can expect us to continue to do tuck-in acquisitions going forward. No question about that. I do believe with supply coming into balance, you're going to see our growth spending come down. We will continue to spend maintenance capital, and we will have fleet growth, but it's going to moderate somewhat. And then, as Brad said, we're just starting our budgeting process. So we'll go through that and make some more concrete decisions on our spending.

[William Mastoris, Robert W. Baird & Co.]

Okay. And John, within that priority list, where does debt reduction rank? I'm just curious.

[John Engquist, Executive Chairman]

Yes, look, we're definitely -- when we pull our growth capital down a little bit, we are going to generate more cash. I think we are going to have a solid fourth quarter in cash generation, and that will be used to pay down debt. No question.

[Bradley Barber, CEO, President & Director]

Yes, more broadly, we've stated and shown over periods of time that we stay in that -- typically in that 2.5 to 3x debt-to-EBITDA. And so that probably casts the broader umbrella over how we view these opportunities. And to the comments we're having now, if we grow the fleet less, then we are going to have more cash, and that will make us more acquisitive, it just allows us to pay down more debt or maybe capitalize should we be -- should we find more acquisition opportunities, but we're going to stay in that same range over time is our view.

[William Mastoris, Robert W. Baird & Co.]

Okay. That's very helpful. And a kind of unrelated follow-up would be, is there anything unusual developing with cranes acknowledging that certainly crane sales bounce around considerably? This just seemed to be an unusually steep decline. Is there anything unusual behind that? Or is this just a trend?

[Bradley Barber, CEO, President & Director]

No. I don't think there is anything unusual. I mean, if we would have sold 2 or 3 more cranes, that question wouldn't have been asked. I'm just making the point that a few units in a particular quarter can really move the needle on our volume. So I don't think there is anything unusual going on in the crane markets.

[Operator]

I would now like to turn the conference back over to Mr. Barber for any additional or closing remarks.

[Bradley Barber, CEO, President & Director]

Sure. We appreciate, everyone, taking time to get on our quarterly call, and we will look forward to talking to you at the next quarterly call. Thank you.

[Operator]

Thank you. That does conclude today's conference. Thank you all for your participation. You may now disconnect.