Itron Inc

NASDAQ:ITRI

Earnings Call Transcript 2023-Q2

[Operator]

Good day and welcome to the Itron Second Quarter 2023 Earnings release. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. Instructions will be given at that time. As reminder, this call is being recorded.

I would like to turn the call over to Paul Vincent, Senior Vice President of Investor Relations. You may begin.

[Paul Vincent, Vice President, Investor Relations]

Good morning, and welcome to Itron second quarter of 2023 earnings conference call. Tom Deitrich, Itron's President and Chief Executive Officer and Joan Hooper, Senior Vice President and Chief Financial Officer will review Itron second quarter results and provide a general business update and outlook.

Earlier today, the company issued a press release announcing its results. This release also includes details related to the conference call, and webcast replay information. Accompanying today's call is a presentation that is available through the webcast and on our corporate website under the Investor Relations tab. Following prepared remarks, the call will be open for questions using the process the operator describe.

Before Tom begins, a reminder that our earnings release and financial presentation include non-GAAP financial information that we believe enhances the overall understanding of our current and future performance. Reconciliations of differences between GAAP and non-GAAP financial measures are available in our earnings release, and on our Investor Relations website. We will be making statements during this call that are forward-looking. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could differ materially from these expectations because of factors that were presented in today's earnings release and comments made during the conference call, as well as those presented in the risk factor section of our form 10-K and other reports and filings with the Securities and Exchange Commission. All company comments, estimates, or forward-looking statements are made in a good faith attempt to provide appropriate insight to our current and future operating and financial environment. Materials discussed today, August 3, 2023 may materially change and we do not undertake any duty to update any of our forward-looking statements.

Now please turn to Page 4 of our presentation, as our CEO Tom Dietrich begins his remarks.

[Tom Deitrich, President and Chief Executive Officer]

Thank you, Paul. Good morning, everyone. Thanks for joining. I will review our second quarter results and Joan will discuss our financial results as well as provide an update on the outlook for 2023. Our second quarter revenue increased 25% year-over-year and 9% sequentially to $541 million. Adjusted EBITDA was $49 million, a year-over-year increase of 182%. Non-GAAP earnings per share was $0.65, a $0.58 improvement over the second quarter of 2022. And free cash flow was $36 million, a $26 million improvement year-over-year.

The pace of our operations has accelerated for three consecutive quarters, project mix and the ability to scale activity efficiently, supported margins and profitability ahead of expectations. We believe our results demonstrate the urgency from our customers for technology deployment and the breadth of the market opportunity that provides intelligence and accelerates the digitalization at the Edge and the Grid. Itron is clearly established as a leading technology provider for utilities and cities with agile multi-application, multi-commodity, multi-tenant solutions that address many of the most pressing challenges facing utilities and cities.

During the second quarter, each of our operating segments performed well. The team executed and improved asset utilization that propelled our Networked segment to notable year-over-year growth. The adoption of distributed intelligence offerings supported the growth of our Outcomes segment, which set a new quarterly record for revenue. Our Device Solution segment achieved its highest gross margin since 2018, buoyed by the strong demand in the water vertical with underpinning from accretive portfolio adjustments.

Turning to Slide 5, bookings were $475 million in line with our expectations. We continue to expect bookings of approximately $2 billion for the year. We require that all bookings registered includes not only a customer award, but a signed customer contract and finalized regulatory approval. And as such, the regulatory approval process could impact the period when an award is booked. We are pleased with the pace of awards year-to-date.

Our total backlog continues near record levels at $4.5 billion, and is comprised of projects primarily with our Networked and Outcomes segments. During the second quarter, there are a few commercial highlights that are worthy of mention. After a successful deployment of a multipurpose network consisting of nearly 5 million endpoints, Consolidated Edison of New York will continue to utilize Itron SAS for operations and analytics for the decade to come. This agreement demonstrates the long term recurring value creation for Itron and the customer.

We are pleased with the recent bookings we have seen in the gas vertical targeted to increase operational efficiency and improved safety. We are seeing strong bookings traction in Networked Solutions for next generation endpoints that incorporate cellular based transport verticals.

Now turning to Slide 6, I will cover some operational insights from around the business. A stabilized operating environment and improved component availability coupled with strong execution facilitated improved results across the business. Our customers are under sustained pressure to improve the breadth and quality of services they offer to create value through enhanced digital capabilities, which an acceleration in demand for technology to increase operational productivity and sustainability.

This is why despite some macroeconomic uncertainty, demand for our offerings remains strong. Our customers must enhance Grid, Edge capabilities as they address a wide range of challenges impacting reliability, resiliency and agility of their assets. While modernizing utility assets is a daunting challenge, our customer behavior supports our commitment to innovation and developing the next generation solutions that will improve the quality of their services, reduce costs, and ultimately generate greater returns.

As a proof point, our Distributed Intelligence offerings are in high demand and deployment continues to accelerate. As at the end of the quarter, we delivered 7.2 million DI capable endpoints, which is approximately a 13% growth sequentially and 140% growth since the end of 2020. Our number of licensed DI applications operating commercially now exceeds 9.2 million, a roughly 24% increase over the first quarter of the year.

DI capabilities differentiate Itron from our competitors, and are increasingly a focus of existing and prospective customers facing a volatile and rapidly evolving world. With each passing month, the market opportunity for Distributed Intelligence expands.

Now I ask Joan to provide a financial update for the second quarter and full-year 2023.

[Joan Hooper]

Thank you, Tom. I will cover the second quarter results and then provide our latest outlook for the third quarter and the full-year. Please turn to Slide 7 for a summary of consolidated GAAP results. Second quarter revenue of $541 million increased 25%, year-over-year due to improving supply conditions and strong operational execution, across all three segments. The availability of components was better than anticipated enabling higher shipments.

Gross margin for the quarter was 32.1%, 290 basis points higher than last year due to favorable mix and operational efficiencies. Our GAAP net income of $24 million or $0.53 per diluted share, compared to a net loss of $37 million or $0.82 per share in the prior year. The increase was due to higher operating income.

Regarding non-GAAP metrics on Slide 8, non-GAAP operating income was $41 million, up $32 million from the prior year. Adjusted EBITDA of $49 million was also up $32 million. Non-GAAP net income for the quarter was $30 million or $0.65 per diluted share. This compares to $0.07 the year ago.

Year-over-year revenue comparisons by business segments are on Slide 9. Device Solutions revenue was $113 million, 7 million or 7% year-over-year increase on a constant currency basis. Growth in the water vertical was the main driver. Networked Solutions revenue was $361 million, a $92 million or 34% increase versus last year. The year-over-year growth was due to improving component availability which enabled higher shipments.

Outcomes revenue of $67 million, increased $10 million or 17% in constant currency and was a new quarterly record. The growth was primarily due to higher Distributed Intelligence software license sales and recurring services.

Moving to the non-GAAP year-over-year EPS bridge on Slide 10, our Q2 non-GAAP EPS was $0.65 per diluted share, up $0.58 from the prior year. Pretax operating performance had a positive $0.74 per share impact due to the foster of higher gross profit partially offset by higher OpEx. Tax had a negative impact of $0.15 per share. FX and share count had a negative year-over-year impact of $0.01 per share.

Turning to Slide 11 through 13, I'll review the Q2 segment results compared with the prior year. Device Solutions revenue was $113 million with gross margin at 21.8% and operating margin of 12.4%. Gross margin was up 860 basis points, it was the highest level since Q3 of 2018. We're very pleased with the ongoing efforts to improve profitability in this segment.

Devices operating margin increased 720 basis points due to the fall through of the higher gross profit partially offset by higher OpEx. Networked Solutions revenue was $361 million and gross margin was 33.8%. Gross margin increased 40 basis points year-over-year due to favorable product mix and improved operational efficiencies. Operating margin of 24.5% increased 140 basis points due to higher gross profit and operating leverage.

Outcomes revenue was $67 million with gross margin of 40.8%. Gross margin increased 210 basis points due to higher software license sales and favorable services mix. Operating margin of 18.9% increased 310 basis points due to higher gross profit and operating leverage.

Turning to Slide 14, I'll cover liquidity and debt at the end of the second quarter. Total debt remained flat at $460 million and net debt was $227 million. Net leverage was 1.6 times at the end of Q2, down from 3.9 times a year ago. Cash and equivalents at the end of the second quarter was $233 million. Free cash flow was $36 million in Q2, up $26 million year-over-year, driven by higher profitability.

Now please turn to Slide 15 for our third quarter outlook. We anticipate third quarter revenue to be between $535 million and $545 million. The midpoint of this range represents 28% year-over-year growth. For non-GAAP EPS in Q3, we expect to be in a range of $0.44 to $0.56 per diluted share. At the midpoint, this is up 117% versus Q3 of last year.

Now please turn to Slide 16 for an update to our annual 2023 outlook. We now anticipate full year 2023 revenue to be in a range of $2.11 billion to $2.14 billion versus the $1.85 billion to $1.9 5 billion we provided in February. At the midpoint, this represents a $225 million or 12% increase from our prior guidance. A faster recovery from the component shortages is driving the higher revenue expectations. Earnings will also be positively impacted by the fall through the higher revenue.

Our non-GAAP EPS full year outlook ranges $2.03 to $2.28 per diluted share, versus previous guidance of $0.70 to $1.10 per share. At the midpoint, the non-GAAP EPS estimate is up $1.26 per share or 140% versus the prior guidance. At the midpoint of the updated annual guidance, the year-over-year revenue and earnings growth will be approximately 18% and 91% respectively. The high growth rates reflect a very low 2022 comparison, a faster than anticipated improvement in the supply chain environment, and strong operational execution.

Now I'll turn the call back to Tom.

[Tom Deitrich, President and Chief Executive Officer]

Thank you, Joan. Second quarter was a strong quarter of execution and a down payment towards our potential. I am proud of the effort our teams put forth every day and appreciate the trust of our customers, which resulted in growth in revenue, gross margin, profitability and cash flow. We have high expectations for performance and are just scratching the surface.

Additional to the financial objectives and operational fundamentals, we hold a core belief that access to clean, safe and reliable energy and water form the foundation of a thriving society. During the quarter, we published our 2022 ESG Report, which details our goals and measures we've taken to preserve energy and water, and to enable cities and utilities to manage these resources more efficiently and with less waste.

Our strategy is centered around our four pillars of operating with integrity, providing sustainable solutions, improving our environmental impact, and supporting our people and communities that focus on meeting the company's objectives, including utilities and cities to follow similar commitments. Itron takes pride in knowing that our solutions contributed to customers avoiding over 4.9 million tons of greenhouse gas emissions last year alone.

Thank you for joining us today. Operator, please open the line for some questions.

[Operator]

Thank you. [Operator Instructions] Our first question comes from Marty Malloy with Johnson Rice. Your line is open.

[Marty Malloy, Johnson Rice & Company]

Good morning, congratulations on the strong quarter and nice to see the increase in the outlook here. I was wondering if you could maybe talk about the Outcomes segment and, you know, pretty remarkable growth in terms of the DI capable endpoints. Could you talk about that and how that relates to your expectations regarding outcomes going forward in terms of revenue and margins?

[Tom Deitrich, President and Chief Executive Officer]

Sure, thanks, Marty. This is Tom. The growth that we've seen in Outcomes over the last quarter was based on more DI applications getting into the field. So I quoted the numbers in my prepared remarks, we really jumped up nicely. Those applications are targeted towards grid efficiency types of applications. So think of safety, reliability type of grid side impacts, that we certainly have a very large number of DI capable endpoints from a hardware perspective still in backlog left to come. We see more and more customer adoption, whether it is in new bookings, or whether it's existing customers converting part of their fleet over so that the hardware growth absolutely gives us a right Greenfield for us to continue to expand the breadth of applications and the value that they actually create.

We've recently launched a capability for detection of things like EVs or rooftop solar. We also have the capability for a location awareness type of application to help a utility map, a meter to a distribution transformer and transformer back to a feeder that gives the utility a very, very good understanding of what's happening in the distribution system, which is helpful for optimization of performance, outage management, resiliency and reliability. So a lot of grid side benefits as well as consumer side benefits are in the pipeline and yet to come.

[Marty Malloy, Johnson Rice & Company]

Great. And my follow up question, I just wanted to talk maybe a little bit more about EV infrastructure and as it gets rolled out and at your event last fall, you got to see some of your solutions that you have for that area in helping utility companies and customers manage that additional demand for EVs. Could you maybe talk about the outlook there and customer conversations related to deploying some of those solutions?

[Tom Deitrich, President and Chief Executive Officer]

Sure, happy to. The utilities certainly have a lot of pressure on them from the growth in EVs, and EV is really almost the equivalent of a small house that randomly roams around the town and occasionally plugs in and turns on. So the load is much more unpredictable and it's difficult to manage, as well as just understanding how to plan your supply and demand. So we’ve launched capabilities for EV detection, whether it's at the analytics level or at the endpoint level that allows the utility to understand where EVs are located.

And why you would want to do that is, clearly to perhaps enroll the owner in some type of, time of use charging application, or at least to understand how many are connected to the same distribution transformer from a resiliency and reliability perspective. And eventually, you can get to the point where you're starting to optimize charging, and being able to control the distributed energy resources much more effectively all the way up to grid -- I'm sorry, vehicle providing capability all the way back to the grid itself.

So a lot of good growth potential for us. This is just one segment of what I talked about, your first question around DI applications. It really gives us a lot of growth potential in the Outcomes segment where we're very bullish on the future.

[Marty Malloy, Johnson Rice & Company]

Thank you. I'll turn it back.

[Operator]

Thank you. Our next question comes from Jeff Osborne with Cowen. Your line is open.

[Jeffrey Osborne, Cowen & Co.]

Good morning, Tom and, Joan, couple questions on my side. I think in prior calls, you had mentioned roughly $400 million to $450 million of lost sales over the past year or so due to semiconductor crisis and shortage. So I'm trying to reconcile the prior lost sales relative to the upside you had in the first half, and then the, give or take $200 million or so of raised guidance. Is there still some of that past inefficiencies of lost revenue that will linger into next year? Or, are you still seeing some shortages that are plaguing the second half?

[Tom Deitrich, President and Chief Executive Officer]

Sure, Jeff, I can take that one as well. So first, really important to note that I view that revenue was deferred. It was -- it's absolutely still ahead of us, we haven't truly lost it. We didn't get it in the period that it was originally planned but it's yet to come. I think in terms of where we are in the first half of the year, we saw better components supply earlier than we had originally anticipated and that accounts for the upside in the revenue and part of the guidance. I still think we have the majority of that amount of deferred revenue still yet to come in front of us. And indeed, some of that will spill into to beyond this year. So it's still coming. We haven't lost it. We're anxious to deploy it as quickly as we can.

[Jeffrey Osborne, Cowen & Co.]

That's helpful. And then maybe just two quick ones, how would you characterize the quoting activity out there on the electric side? And then is there anything you can attribute the water strength too? Is it, broader municipal budgets improving or was there one large contract that came through?

[Tom Deitrich, President and Chief Executive Officer]

Sure. So pace of bids is and quotes out there, is very strong. The types of discussions we're having with customers in Asia Pacific, and in North America, is really driven around the complexity of the grid with more and more distributed energy resources showing up. So pace of quoting on the electricity side, very, very strong and we're optimistic about where that will head. Water strengths was something, again, it was a little bit better than we had anticipated through the first half of the year. And I really think it is the need to upgrade those systems that were somewhat left to their own devices over the last couple of years. That the strength in the Water segment is very broad based. It is not one customer and it could be large utilities, it could be small utilities, small towns, it's really been across the board. Specifically in Europe, we've seen a lot of investment in shoring up the water systems to reduce losses and to automate basic business practices to make the entire cost of the operation a little bit more effective for the community served.

[Jeffrey Osborne, Cowen & Co.]

Perfect. That's all I have. Thank you.

[Tom Deitrich, President and Chief Executive Officer]

Thank you.

[Operator]

Thank you. Our next question comes from Kashy Harrison with Piper Sandler. Your line is open.

[Kashy Harrison, Piper Sandler]

Good morning and thank you for taking my questions. So first one from me, just a housekeeping item, maybe for Joan. Why is 3Q EPS and implied 4Q EPS lower than 2Q EPS despite in line revenues?

[Joan Hooper]

Yeah, it's really a function of two things. One is the better than expected mix in Q2. Some of that is just timing. So we had a very strong product mix really across all the segments that we don't expect to repeat in the second half, and there's also some incremental OpEx between the first half and the second half. Some of it is variable compensation related, some of it is some investments we're making.

[Kashy Harrison, Piper Sandler]

That's helpful, thank you. And then I believe in the prepared remarks, Tom, correct me if I'm wrong, but I think you mentioned that you anticipate bookings of $2 billion this year, which would be down year-over-year. And so I was wondering if you just maybe walk us through that, you know, why would the bookings be down? And then can you remind me if the backlog is basically just Networked Solutions and Outcomes at this point, or if it also includes some Device Solutions as well?

[Tom Deitrich, President and Chief Executive Officer]

Sure. So bookings for this year, always look to be a back-end loaded, so towards the second half of the year, just based on the timing. And indeed, that's what we see playing out, so first half was in line with expectations. The pace of the awards year-to-date that we have from customers is very much on track and it's very promising. It really comes down to the timing of contracts getting signed and regulatory approval coming through. And that really leads us to be thoughtful about exactly where we think bookings will land for the year.

I do not detect any sort of slowdown or concern in the marketplace. And in fact, the pace of discussions with customers around new applications, indeed, picks up very, very strong as the months go by. And that leads to the backlog that we have in place today, which is right around a record level. The majority of that backlog, let's think, 85%, 90% of it is Networked and Outcomes based backlog. There's a little bit of Devices in there, but a lot more of the Devices revenue tends to be operating on more of a turns basis, rather than flowing through the long term backlog that you can see.

[Kashy Harrison, Piper Sandler]

Got it, that's helpful. And then maybe just one more question for me, maybe follow up -- following up a little bit on Marty's question earlier. You know, how should I think about, now that the component supply situation has, you know, it seems like it's meaningfully improved? Should we think about growth in the Outcomes segment as outpacing the Network Solution segment moving forward? Or would you expect Networked to grow faster than Outcomes, just trying to think about the growth trajectory of the Outcomes business? Thank you.

[Tom Deitrich, President and Chief Executive Officer]

Sure. The long term targets that we set out, which does have Outcomes, eventually pacing -- outpacing Networked, in terms of long term growth, is still the right way to think about it as you model things out for the long term. When you look for, let's say the back half of this year, and maybe into next year, what we are still seeing is a fair amount of new deployments on the Networked side. So I do think that Networked and Outcomes growth probably are neck and neck over the shorter term before eventually, you get enough of the new infrastructure out there that layered on effective outcomes will eventually outpace it. So short term, meaning let's say the next couple of quarters plus, the growth for the entire company is very much neck and neck on the Outcomes and Networked side.

[Operator]

[Operator Instructions] Our next question comes from Pavel Molchanov with Raymond James. Your line is open.

[Pavel Molchanov, Raymond James]

Thanks for taking the question. You guys are back in -- generating free cash flow, have quite a bit of cash on the balance sheet. In terms of deploying that cash pile, what are the kind of the ranked priorities at this point?

[Joan Hooper]

Yeah, I would say, as you know Pavel, we've talked about in the last -- really the last year's call, we are open to the right M&A opportunity. Particularly for Outcomes, we've been very busy looking at potential companies that are basically software that expand our platform in Outcomes. Haven't found the right one yet, in terms of the technology is real and it has enough scale and it's going to move the needle. But I would say, we still certainly recognize that our balance sheet now is becoming more of a strategic asset, or debt levels are very manageable. And we are, as you say, generating free cash flow. So we'll continue to look at both organic investments, in particular in R&D to grow outcomes as well as M&A opportunities.

[Pavel Molchanov, Raymond James]

And maybe zooming in on the additional product sales that given the loosen supply chain, you're going to have this year, are there particular geographies, that those incremental meters are going to be going to?

[Tom Deitrich, President and Chief Executive Officer]

It is very much North American led in terms of the total size of the business that we would expect. That's true when in a normal sense, but certainly a lot of that deferred revenue that I mentioned earlier, is pent up demand in North America, our large largest market.

[Pavel Molchanov, Raymond James]

Got it, thanks very much.

[Tom Deitrich, President and Chief Executive Officer]

Sure.

[Operator]

Thank you. Our next question comes from Noah Kaye with Oppenheimer, your line is open. Noah, you may be muted.

[Noah Kaye, Oppenheimer & Co., Inc.]

Oh, sorry. Can you hear me now?

[Tom Deitrich, President and Chief Executive Officer]

Yes.

[Noah Kaye, Oppenheimer & Co., Inc.]

Great. Thanks so much. Yeah, I mean, first question really more about the broader sort of development environment? I mean, it certainly sounds like a lot of the interest, is really evolving around, you know, Grid, Edge optimization. And certainly focusing on EV integration and demand response and managing intermittent renewables. I'm just curious to know, how much that kind of takes up in terms of the scope of the new projects and rollout that you're bidding on now, right? I mean, is it still primarily focused on, the basic advanced metering and revenue management? Or are these really taking up a substantial part of the revenue stack for your project?

[Tom Deitrich, President and Chief Executive Officer]

It is, thanks, Noah. It is fully integrated into the system that we sell. So kind of difficult for me to break it out and sort of separated in a fundamental network or endpoint sense. Certainly, the reason that customers are selecting us is that the capabilities that you can add to the base technology that you provide, that future proofing that agility of the assets that you're buying is a great value to our customers. And that's where we see a lot of interest as utilities are struggling with the uncertainty of the future, who knows when the next storm will hit? Who knows how EV penetration will come? How do I buy assets that allow me to stay current and adapt my network with the changing times that are out there?

So when we deploy a network, it is a multi-purpose, multi-commodity, multi-application kind of network, and you can use it as you need and grow it as you need and add capability. So as such, it's kind of difficult to parse out it from a revenue or a dollar standpoint. I can assure you, though, that it's on all of our customers minds. And it is that the reason for that the growth that we see is the Networked and Outcomes business.

[Noah Kaye, Oppenheimer & Co., Inc.]

That's helpful. Thanks, Tom. And then I want to go back to the margins for the second half. I mean, we were -- end of this is, congratulations on the results. But I think we were anticipating based off of prior commentary that we'd see a step down in margins sequentially into Q2, it turned out that there was better mix and operating efficiencies. So what actually drives that step down in 3Q and 4Q? What was it exactly about the mix that was so favorable, that doesn't repeat in 2Q and kind of sequentially, where do we go to here? Just to help us understand.

[Joan Hooper]

Yeah, so in a couple of places. In Outcomes, I mentioned in the prepared remarks that the strength in both revenue and in margin was some software license sales and so those tend to be one-time, virtually 100% margin that we don't expect to repeat and but at the weighting that it was. In addition, on the Networked side, whether or not we're doing the beginning of a deployment or the end of the deployment, has different margin profiles. So when I talk mix and this is again primarily a networks issue, through the lifecycle of the deployment, the margins will be different based on where you are in that deployment. And so our expectation at this point is, Q2 was a pretty high margin quarter for Networked relative to our expectations, because the supply availability did recover faster than we anticipated. And Q3 looks to be more of what our normal expectations for networks in particular. So as a result of the very strong margins in Q2, right now, my view would be that second half margins will be slightly lower than the first half.

[Noah Kaye, Oppenheimer & Co., Inc.]

Right. And just so that I understand, did full year allocations of components supply increase? Supporting that --

[Joan Hooper]

Yeah.

[Noah Kaye, Oppenheimer & Co., Inc.]

Okay, all right,

[Joan Hooper]

Yeah. So if you remember, back in February, our expectation was that it would continue to get worse, meaning we would get more and more deferred revenue through the first half, even into the third quarter of the year and that we would really start the recovery late in the year, which would primarily benefit Q4 and then 2024, that we have got more components faster than we anticipated. So as a result, not only was first half higher, if you look at the midpoint of our annual guidance, we brought up ’23 by $225 million. I think that is really a pull ahead of what we would have thought ’24 was going to be, so we are seeing a faster recovery of component availability.

[Noah Kaye, Oppenheimer & Co., Inc.]

And I guess just, again, with crystal ball, always difficult but how close are we back to sort of your products, your component lead times and your own product lead times normalizing? Do you think we kind of are caught up here, as we exit the year?

[Tom Deitrich, President and Chief Executive Officer]

I don't think we will be caught up. Lead times for components are still long, are much longer than a pre-pandemic or pre-supply chain constrained environment. There are some components where you absolutely can buy them very readily but there are others, those constrained components that the lead times on those are still very, very long. We will still have deferred revenue as we enter 2024 but will be based on our expectations overall. So I think you certainly should be cutting into that deferred revenue as we progress forward, but some of it is absolutely going to spill out of this year and into the future.

[Noah Kaye, Oppenheimer & Co., Inc.]

Very helpful. Nice quarter, thank you.

[Tom Deitrich, President and Chief Executive Officer]

Thank you.

[Operator]

Thank you. There are no further questions. I'd like to turn the call over to Tom Dietrich for closing remarks.

[Tom Deitrich, President and Chief Executive Officer]

Thank you, Michelle. I thank everyone for joining and we look forward to updating you next quarter.

[Operator]

Thank you for your participation. This does conclude the program, you may now disconnect. Everyone, have a great day.