Matthews International Corp

NASDAQ:MATW

Earnings Call Transcript 2024-Q2

[Operator]

Greetings, and welcome to the Matthews International Second Quarter Fiscal 2024 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Bill Wilson, Senior Director of Corporate Development. Thank you, sir. You may begin.

[William Wilson, executive]

Thank you, Christine. Good morning, everyone, and welcome to the Matthews International Second Quarter Fiscal Year 2024 Conference Call. This is Bill Wilson, Senior Director of Corporate Development. With me today are Joe Bartolacci, President and Chief Executive Officer; and Steve Nicola, our Chief Financial Officer.

Before we start, I'd like to remind you that our earnings release was posted on our website, www.matw.com, in the Investors section last night. The presentation for our call can also be accessed in the Investors section of the website.

Any forward-looking statements in connection with this discussion are being made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Factors that could cause the company's results to differ from those discussed today are set forth in the company's annual report on Form 10-K and other periodic filings with the SEC.

In addition, we will be discussing non-GAAP financial metrics and encourage you to read our disclosures and reconciliation tables carefully as you consider these metrics. In connection with any forward-looking statements and non-GAAP financial information, please read the disclaimer included in today's presentation materials located on our website.

And now I'll turn the call over to Joe.

[Joseph Bartolacci, executive]

Thank you, Bill. Good morning. We are generally pleased with our fiscal '24 second quarter results given the transitory challenges that we faced in several of our businesses. Sales and adjusted EBITDA were relatively consistent, declining only slightly during the quarter due to macro trends impacting several of our businesses, while other businesses performed very well.

Memorialization continues to maintain strong sales and EBITDA post-COVID, while SGK's digital initiatives and restructuring efforts are showing promise. As for our Industrial Technologies segment, energy solutions sales were higher, but we continue to see delays in customer installations.

Additionally, the warehouse automation business reported lower sales, consistent with the overall market, which has seen a moderation in new warehouse development recently. Despite these near-term events, however, we see both businesses continuing to offer strong long-term growth opportunities.

Sales for the Memorialization business remained relatively consistent with the prior year despite lower death rates. We're pleased with the trends in this business as the segment continues to outperform with sales and adjusted EBITDA run rates significantly exceeding pre-COVID levels.

In addition, I'm pleased to add that we recently won another significant cemetery account, which we hope will afford us continued opportunity for growth as we offer our extensive portfolio of solutions.

We continue to be encouraged by the performance of SGK as the segment reported sales growth in the second quarter despite continued challenges in the European market. Thanks to pricing and cost actions taken over the past 12 months, we also saw a significant increase in the segment's adjusted EBITDA and margin improvement.

The team at SGK continue to outperform and win new accounts despite the challenges they have faced over the last year. They also continue to execute on the e-commerce digital initiative we mentioned last quarter. We expect this program to hit the $40 million sales target we set for the current year as our clients look for ways to consolidate their e-marketing spend more efficiently.

With respect to our Industrial Technologies segment, total sales were lower for the quarter, primarily driven by market conditions that impacted our warehouse automation business, but offset by higher energy storage sales. As I mentioned on our earlier calls, we and other industry peers experienced a pullback dating back to the mid last year as customers evaluated the prevailing economic conditions, highlighted by continued high interest rates and concerns about consumer confidence.

We still see some softness in larger warehouse projects, but continue to be brought in on customer upgrades, and we have seen a pickup in quoting activity. Our confidence in the growth opportunity for this business is supported by our recently published industry research -- excuse me, is supported by recently published industry research that indicated more than 75% of respondents expected an increase in their investment in robotic systems in the next few years.

We believe that advances warehouse automation like autonomous robots, which we manage, will drive demand for our warehouse execution systems software as we continue to enhance the platform through cloud and AI technology improvements.

Turning to our new printhead solution, we made significant progress during the quarter. All milestones related to launching the product were met, and we remain on schedule to launch the solution by calendar year-end, as previously stated. We will continue to update you on our progress for this product.

As for our energy solutions business, we reported sequential growth, reflecting the benefit of orders from multiple customers, though we continued to experience the previously discussed and anticipated customer installation delays from our largest customer, which are out of our control.

Let me reiterate our strategic focus in this business segment as we believe that we have a unique opportunity. We've had no shortage of interest in our dry battery electrode solutions, and we hope to have significant announcements to share before our fiscal year-end. Interest in dry battery electrode across the globe remains very high.

In the second quarter, we had good order entry, including 2 battery OEMs. But as we mentioned before, however, the battery -- dry battery electrode development cycle within the industry can be lengthy. Therefore, we are laser-focused on leveraging our technology advantage and assisting our customers in their development process.

With that in mind, our hope is to accelerate adoption of dry battery electrode as the definitive solution for battery production. We intend to build a production scale system, which would allow our clients to run their formulation at speed, thus significantly shortening the adoption cycle. Our total addressable market of over $8 billion remains unchanged, but our time line has extended due to the current EV market cooldown.

Demand remains in place, and we expect the market to move toward our dry battery electrode solution given the inherent advantages it offers, including lower required investment, lower OpEx, faster buildout and improved battery performance and a solvent-free process. In the end, it offers a cheaper and better battery.

Secondly, on the hydrogen fuel cell side, we are focused on creating a solution that significantly reduces the cost for components of the fuel cell stack via throughput increases utilizing our proprietary know-how. We hope to announce a significant partnership for this development as well by our year-end.

Finally, with respect to our balance sheet, we will continue to emphasize debt reduction in our capital allocation and expect to further improve our leverage ratio by the end of the fiscal year. As we progress through fiscal '24, we anticipate continued demand in our energy storage solutions business, as evidenced by the recent flow of orders from multiple customers in the second quarter.

We caution that customer delays within the energy business outside of our control have and may continue to impact our forecasted results. With that said, we expect to start deliveries of some of the orders soon. We expect further reduction in working capital in the latter half of the fiscal year and well into next year as those orders are delivered. As a result, we project adjusted EBITDA for fiscal '24 to be around $220 million.

I'll now turn it over to Steve for more insight on our financial results. Steve?

[Steven Nicola, executive]

Thank you, Joe. Good morning.

Let's begin with Slide 7. For the fiscal 2024 second quarter, net income attributable to the company was $9 million or $0.29 per share compared to $9.1 million or $0.29 per share a year ago. On a non-GAAP adjusted basis, earnings for the current quarter were $0.69 per share compared to $0.65 per share last year. Income tax benefits for the current quarter generally offset the impact of slightly lower consolidated adjusted EBITDA and higher interest expense.

Consolidated sales for the quarter ended March 31, 2024, were $471.2 million compared to $479.6 million a year ago. Sales for the SGK Brand Solutions segment increased for the current quarter, and Memorialization sales remained relatively stable compared to last year.

The Industrial Technologies segment reported lower sales than the same quarter a year ago with energy storage solutions sales offset by lower warehouse automation sales. Changes in currency rates were estimated to have a favorable impact of $4.8 million on fiscal 2024 consolidated sales compared to a year ago.

Consolidated adjusted EBITDA for the fiscal 2024 second quarter was $56.8 million compared to $58.4 million a year ago. The SGK Brand Solutions segment reported higher adjusted EBITDA for the current quarter, which was offset by lower adjusted EBITDA in the Memorialization and Industrial Technologies segments. Please see the reconciliations of adjusted EBITDA and non-GAAP adjusted earnings per share provided in our earnings release.

Please move to Slide 8 to review our segment results. Sales for the Memorialization segment for the fiscal 2024 second quarter were $222.2 million, which was relatively consistent with sales of $222.9 million for the same quarter a year ago. The recent acquisitions of a granite business in February 2023 and a casket distributor in January 2024, combined with the benefit of improved price realization, generally offset declines in sales volumes for cemetery memorials and caskets resulting from lower U.S. deaths post-COVID.

Memorialization segment adjusted EBITDA for the current quarter was $46.6 million compared to $48 million for the same quarter last year. The increase primarily resulted from the impact of lower memorial sales volumes and increased labor and material costs. These increases were partially offset by the favorable impact of recent acquisitions, improved pricing and benefits from cost-savings initiatives.

Please move to Slide 9. Sales for the Industrial Technologies segment for the fiscal 2024 second quarter were $116.1 million compared to $125.5 million a year ago. The decline primarily resulted from lower sales for the segment's warehouse automation and automotive engineering businesses. These decreases were partially offset by higher sales for the energy storage solutions business. Currency rate changes had a favorable impact of $944,000 on the segment's current quarter sales compared to a year ago.

Adjusted EBITDA for the Industrial Technologies segment for the current quarter was $10 million compared to $15.6 million a year ago. The decrease primarily reflected the impact of lower warehouse automation sales, higher labor costs and lower margins for the engineering business compared to a year ago.

The reduction in engineering margins primarily reflected project timing as the prior period reflected higher-margin engineering design work. The declines were partially offset by higher margins and improved pricing for the product identification business. Changes in currency exchange rates had a favorable impact of $103,000 on the segment's current quarter adjusted EBITDA compared to a year ago.

Please move to Slide 10. Sales for the SGK Brand Solutions segment increased to $132.9 million for the quarter ended March 31, 2024, compared to $131.2 million a year ago. The increase primarily reflected higher sales in the U.S. brand market and for the European packaging and private-label businesses. The segment also continued to benefit from improved pricing. Currency rates had an unfavorable impact of $1.3 million on current quarter sales compared to a year ago.

Adjusted EBITDA for the SGK Brand Solutions segment was $15.4 million for the current quarter compared to $11 million a year ago. The increase primarily reflected the benefits of higher sales, improved pricing and the segment's recent cost-reduction actions, offset partially by the impacts of higher labor-related costs and bonus expense.

Please move to Slide 11. The company's consolidated cash flow from operations for the quarter ended March 31, 2024, was $57.1 million compared to $80.9 million a year ago. Operating cash flow for the current quarter primarily reflected the benefits of the company's consolidated adjusted EBITDA and working capital reduction. Operating cash flow last year reflected the benefits of the new U.K. receivables financing facility and cash received from the settlement of several interest rate swaps in addition to working capital reductions.

Outstanding debt was $843 million at March 31, 2024, compared to $862 million at December 31, 2023, representing a reduction of $19.6 million during the second quarter. Net debt, which represents outstanding debt less cash, was $797 million at March 31, 2024, compared to $824 million at December 31, 2023, representing a reduction of $27.2 million during the second quarter.

At March 31, 2024, the company's leverage ratio, based on net debt and trailing 12-months adjusted EBITDA, was reduced to 3.62 compared to 3.71 at the end of last quarter. Additionally, we renewed our $750 million domestic revolving credit facility during the fiscal 2024 second quarter and are now focused on refinancing of our bonds, which do not mature until December 2025. We fully expect this refinancing to be completed before the end of this fiscal year.

For the fiscal 2024 second quarter, the company purchased only 1,029 shares under its stock repurchase program, primarily reflecting our focus on debt reduction. While we will remain focused on debt reduction through the end of the fiscal year, we may also increase repurchase activity in light of current stock price levels and forecasted cash flow. Approximately 30.7 million shares were outstanding at the end of the fiscal 2024 second quarter.

Finally, the Board, last week, declared a quarterly dividend of $0.24 per share on the company's common stock. The dividend is payable May 20, 2024, to stockholders of record, May 6, 2024.

This concludes the financial review, and we will now open the call for any questions. Christine?

[Operator]

[Operator Instructions] Our first question comes from the line of Daniel Moore with CJS Securities.

[Dan Moore, analyst]

Let me start with energy storage. Yes, obviously, the end market slowdown in EV is very well documented, so absolutely no surprise there. Just looking beyond the next few quarters, you talked about it in your prepared remarks, Joe, but elaborate on what you're seeing and hearing from your customers as it relates to the longer-term transition to dry battery, to DBE production. Do you still expect that transition and the opportunity to be on par with what you would have thought maybe 4 to 6 quarters ago?

[Joseph Bartolacci, executive]

I would tell you the transition is in place. I think the issue is timing. I will -- as you mentioned, Dan, it is slowing a little, but our interest level has never been higher. The reality is the cost benefits, the efficiency, the productivity that comes out of our system and the better battery will ultimately be the winner, we believe. And it just slowed in the timing of when that it will occur. So we hope to have more discussion about this over the coming quarters, but nothing has changed from our perspective.

[Dan Moore, analyst]

All right. And in the prepared remarks, you mentioned that the -- platform is not the right word. I wasn't typing fast enough, but you plan to build out a platform to enable faster production. Just elaborate on that, and is there any incremental expense or CapEx associated with it?

[Joseph Bartolacci, executive]

Yes. So the reality is that the cycle for adoption in the auto industry is lengthy, especially when something was as innovative and new as our technology. The process of going through from development to full production could take multiple years. A lot of that has to do with the fact that the development cycle is currently being done in-house at a lot of these locations, whether it be battery manufacturers or other OEMs.

We believe that we have enough know-how and the ability to build a, what I would call, a production-like facility just for dry battery electrode, allowing our customers to come in-house with their formulation and accelerating the adoption. So they can basically produce their own batteries with their own formulations, do the testing that is necessary and already know what a production-like machine would look like.

So I would call it the serialization of manufacturing equipment and at least eliminating a lot of the customization and testing that is done in advance. That's going to require probably $40 million worth of CapEx over the next 12 to 18 months, but well within our ability to fund.

[Dan Moore, analyst]

Got it, very helpful. And then on the printhead solution product ID, just update us on the transition to the new chip provider and your confidence in ramping that product as we think about '25. Do you have orders in hand and it's just a matter of getting the technology buttoned up? Or do we need to kind of go out and test again as that new chip is implemented and integrated and functioning smoothly?

[Joseph Bartolacci, executive]

So we have -- we've had great success and very happy with our new provider out of Sweden that is helping us with the new chip. The current batch of wafers that have come in are exceptional. We've had, so far, no issues with respect to that. We expect -- as we described before, we are in line with our expectation to be in market early calendar '25. So by January, end of December, January, we should start to be out there.

Do we have customers? These are not multimillion-dollar projects, Dan. These are $10,000 to $15,000 each, but there's a lot of them are sold. With the people we've already spoken to about what's coming, there's a lot of interest. Obviously, we're not going to start with the largest CPGs that are out there day 1.

Just to make sure that what we believe is correct is -- and what we believe is a new and novel approach is functional and working well, so we don't burn it. But at the same time, we'll be in market here at the beginning of next year with a lot of upside to go. It's a very significant market out there that we don't participate in.

[Dan Moore, analyst]

Perfect. And then I guess just one more, I'll jump back in queue, on SGK Brand Solutions. How much of the improvement in revenue is kind of easier comps and how much is a more sustained commitment to spending that you're seeing or hearing from your customers?

[Joseph Bartolacci, executive]

I guess the best way to describe it is that you've heard us speak about it, and you've read about it in the newspapers over the last several quarters, as CPGs have exhausted their ability to raise prices, they're having to reinvest in their brands through innovation and new product development. We believe this is sustainable. Most of the increase in top line came from North America. So you can see where that -- what's driving the markets, and we hope to be the leader as an industry into that spend. So I would tell you, it's much more sustainable and more -- hopefully, more to come.

[Operator]

Our next question comes from the line of Liam Burke with B. Riley Securities.

[Liam Burke, analyst]

Joe, on Memorialization, cremation is still an important part of the business mix. How did that perform this quarter? And what's the outlook for the rest of the year?

[Joseph Bartolacci, executive]

So as we've said publicly before, we do about $125 million in product and services in the cremation segment. It performed well. I would tell you that the -- we still have some opportunities to improve performance out of our cremation equipment manufacturing business that the team is looking at right now, which should give us a good tailwind from that business going into next year, Liam.

[Liam Burke, analyst]

Okay, great. Getting back to SGK, you did on your prepared statements talk about Europe branding, I guess, being up. But generally, you said that Europe remains a challenge. Are you just looking at easy comps? Or are you looking at sort of a fragile recovery there?

[Joseph Bartolacci, executive]

I would say easy comps. I mean it's -- I wouldn't say we've seen a recovery in Europe. The performance of the business still remains North America and some help out of the APAC region. Europe has a while to go yet.

[Liam Burke, analyst]

And how did APAC do this year?

[Joseph Bartolacci, executive]

This quarter was okay and North America being the driver for the quarter.

[Operator]

Our next question comes from the line of Justin Bergner with Gabelli.

[Justin Bergner, analyst]

As you think about the revised EBITDA guidance for the current fiscal year, beyond the delays from your major energy storage customer, what are the other puts and takes to think about?

[Joseph Bartolacci, executive]

In terms of how comfortable we are? Justin, help me understand the question a little better.

[Justin Bergner, analyst]

Just parts of the business that are looking a little bit better than they were at the start of the fiscal year and parts of the business that were looking a little bit more challenged outside of the delays from the major energy storage customer.

[Joseph Bartolacci, executive]

I would tell you, and my summary comments are pretty consistent with that, Memorialization is performing much better than we had maybe initially expected for the year. There's a lot of unknowns when you start a year, especially on the demand side of that business. And we obviously think we picked up some market share, and that's performing well, and the new recent wins should help us as well.

SGK as well is performing well. We expect that to continue to be the case. You could have a quarter that's going to change. But at the end of the day, we think that, that is a sustainable business that this year will be a contributor to our results. Product identification is well, performing very well. That -- there's a new team in place over there, and they are performing very well. And getting ready for the new launch should only make that business a bigger contributor as we go forward.

Warehouse is challenged. I mean it's not -- I mean it's making money. This is not a question of whether it's profitable or not, it's a question of what we would have expected going into the year. If you look into the automated warehouse marketplace, you'll see our competitors, who are much more public about it, struggling as well. I mean these numbers could be off 20%, 30% on the top line. We're consistent with that.

But we think that turns. I think that's a large capital spend. We've seen a number of our clients pull back on contracts because of the size of the capital spend, and maybe the interest rate environment might be impacting that as well. So warehouse has been a little bit of a challenge in going forward. I think I've covered just about all the businesses other than energy at that point.

[Justin Bergner, analyst]

Okay. Great. That's very helpful. On the energy side, you mentioned in the press release a benefit of orders from multiple customers. As the broader set of potential customers are able to kind of order production equipment more flexibly looking into later 2024 and early 2025, is that kind of really opening up the spigot for orders? And is that driving this likely $40 million CapEx investment to standardize or serialize the manufacturing equipment?

[Joseph Bartolacci, executive]

Yes. So I would -- I mean as it relates to the development cycle, to help you understand, you go from what I would call preproduction machine to a production prototype to a production machine, that is a multi-quarter process at a minimum. So what we're doing is, with the investment, making -- taking one of those turns out, that prototype machine as well as a lot of the testing that is done from the product that comes off to manufacturing.

So right now, the orders that we're seeing, I would say, would be on the smaller side. They're beyond just a, what I would call, a lab machine. We're trying to take you from concept directly to production equipment with our investment, and that should shorten that cycle significantly.

[Justin Bergner, analyst]

Okay. Fantastic. But I guess the other part of my question was I think there was some intellectual property, I guess, issues that might have hindered the ability of some of your potential customers in the energy storage side to order production equipment that's probably rolling off. Has that accelerated the customer interest in the present time?

[Joseph Bartolacci, executive]

Yes. Now I understand your question. Yes, there is a -- there are patents that are held on dry battery electrode products that expires here in July. So the acceleration of interest and the, what I'd call, the interest in investing has accelerated because of that. No question about that. And we're trying to facilitate that with our investment.

[Operator]

Our next question comes from the line of Nick Ripostella with NR Management.

[Nick Ripostella, analyst]

This is more of a big-picture question. All the investments you've made in these other businesses outside of Memorialization, how have they really benefited shareholders? If you look at the stock price -- so at any point, would you change the strategy and split up the businesses? Because shareholders really have not benefited for a long time from these businesses being together.

[Joseph Bartolacci, executive]

Yes, I understand your question. We have had -- we've been fairly public with the commentary. Our hope is to continue to build these smaller businesses to a scale and then to begin to look at the strategy of what the business looks like going forward.

As they -- as a couple of these things come to market, whether it be the new printhead in the product identification and as energy starts to get some legs to it, I think it's fair to say that there will be an evaluation of what we're -- what the business looks like at that time. At this point, with these 3 businesses still being relatively nascent, I would say that we're probably not at that point just yet.

[Nick Ripostella, analyst]

Okay. Fair enough. Well, I'll just say this, and by the way, your Investor Relations contact, apparently because I'm not an institutional, but I'm still a shareholder, a long-time shareholder, you can't get through to anyone to speak to or ask questions. I find that a little troubling, but...

[Joseph Bartolacci, executive]

I'm sorry. I'm sorry to hear that.

[Nick Ripostella, analyst]

Well, I left many messages. But anyway, here's the issue. We all want to be long-term investors and there are promising technologies. I just hope that if the stock ends up under 20 or 19, and you never know what will happen as there's more pushouts and things, I'd like to see insiders buying a lot of stock. I just -- I hope that's the case. Because you're levered, you have to pay down debt now. You're in a situation where you really can't take advantage in any dramatic way. But that's it, I just wanted to reflect my opinions, my feelings.

[Joseph Bartolacci, executive]

Nick, we will -- I'll see to it that somebody can try to reach out if we can get your information. I'm sorry about the investor contact.

[Operator]

Our next question is a follow-up question from Daniel Moore with CJS Securities.

[Dan Moore, analyst]

Just looking -- Steve, just kind of looking at the industrial tech, I think you called out some less engineering work. But just kind of looking at the decrementals this quarter to Q2 last year, EBITDA margin, the decremental is closer to 60% and a little bit higher than what you would normally think. So anything else going on or weighing on margins that might be unusual or temporary?

[Steven Nicola, executive]

Dan, no...

[Dan Moore, analyst]

Revenue decline?

[Steven Nicola, executive]

Yes. The 2 things to mention just to highlight with respect to the industrial margins are, one, it's the revenue decline, particularly on the warehouse side. And again, it's -- when we look at the engineering business, revenue was higher, but the stage of the phases of the work that we're working on now versus where we were comparable to a year ago, last year was more the higher-margin, design-related work, engineering design-related work. So that's -- those are the 2 major elements to the margin impact.

[Dan Moore, analyst]

Okay, helpful. And I appreciate the update on the debt. Just if you were to go to market today, any sense for what terms could look like on the refinancing bonds or wait and see given you have at least a reasonable amount of time between now and year-end?

[Steven Nicola, executive]

Yes, we're -- actually, we're working through that now and just starting to get and understand some of those market indications.

[Operator]

Our next question is a follow-up question from Justin Bergner with Gabelli.

[Justin Bergner, analyst]

Two quick follow-ups here. You mentioned that as you deliver more equipment on the energy storage side, that will release working capital. Is there any way for you to frame sort of how much working capital is tied up and can be sort of released in that business?

[Joseph Bartolacci, executive]

See, I mean I'm looking at Steve. Steve, why don't we give a perspective on it? I would tell you that it is a significant amount of working capital, but closer to $80 million to $90 million, I would say, Steve?

[Steven Nicola, executive]

Yes, Justin, I'd say the -- if -- when we release our 10-Q today, you'll see our balance sheet. But the areas -- the biggest area where you noticed the working capital and the opportunity is going to be in an area called -- the line item called contract assets, contract liabilities because those are the line items of working capital that really reflect the work that we've done based on, not necessarily what we've built because that would sit in accounts receivable, but the work that we've done and the difference between the revenue recognized versus when we've reached the milestones for billing purposes.

[Justin Bergner, analyst]

Got you. Okay. So it would be a contract asset or liability in this case?

[Steven Nicola, executive]

It would actually be -- it could be both depending on where we sit with milestone payments on a particular aspect of a project. So you should see both line items.

[Justin Bergner, analyst]

Got you. And then the other quick question was the auto engineering business, which I assume relates to the acquisitions from a couple of years ago. I realize that's more to support your energy storage business or at least the acquisitions were. But is that business now profitable on an EBITDA basis? Or does it still have a little ways to go?

[Joseph Bartolacci, executive]

So there's a couple of things that are happening in that business. We are incrementally better than prior year, modestly profitable at this point. But we're looking at a substantial change in that organization, starting hopefully here in the latter part of this fiscal year as we've been in negotiations with the unions over there for quite a while, trying to get an adjustment both in terms of compensation as well as headcount. That's fairly significant. So we hope to talk a little bit more about that, Justin, a little later in the fiscal year once we get confirmation.

[Operator]

Mr. Wilson, we have no further questions at this time. I would like to turn the floor back over to you for closing comments.

[William Wilson, executive]

Okay. Thank you, Christine. And again, thank you for joining us today and your interest in Matthews. For additional information about the company and our financial results, please contact me or visit our website. Enjoy the rest of your day.

[Operator]

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.