Arrow Electronics Inc
NYSE:ARW
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Arrow Electronics Inc
Earnings Call Analysis
Q2-2024 Analysis
Arrow Electronics Inc
The company's second-quarter performance in an evolving market environment showed robust resilience and strategic focus, underlining its ability to navigate the prolonged inventory correction in the electronic supply chain and mixed enterprise IT spending. This period saw improvements across various segments and regions, despite general industrial market softness.
The company generated a total revenue of $6.9 billion and non-GAAP earnings per share of $2.78, both surpassing the high end of guidance. The Global Components segment achieved solid results, indicating incremental improvement and relative stability in market segments. The segment's operating margin was 4.3%, reflecting strong structural margin health.
Across regions, there were mixed trends. Asia experienced sequential revenue growth in semiconductor and IP&E product lines, with notable progress in China. The Americas saw modest declines, with healthy aerospace, defense sectors, and growth in IP&E. In EMEA, industrial and transportation markets remained in decline, though Europe showed typical lagging recovery patterns.
The company's focus on value-added offerings such as supply chain management, design, and engineering services enhanced supplier and customer engagement. Operating expenses decreased sequentially by $31 million to $586 million, reflecting ongoing cost structure optimization.
For Q3, the company expects sales between $6.37 billion and $6.77 billion, with component sales between $4.7 billion and $5.1 billion. Revenue from Enterprise Computing Solutions is projected to be $1.67 billion to $1.87 billion. Non-GAAP diluted earnings per share are expected to range from $2.10 to $2.30. Margins are anticipated to be stable despite regional differences and normalizing cancellation activity.
Bookings have improved across all regions, with backlogs stabilizing and inventory conditions indicating a return to growth. The company focuses on managing cost structure and working capital while remaining invested in strategic priorities, particularly in AI and supply chain services.
The company is cautiously optimistic about approaching a turning point in core markets, driven by better secular and cyclical trends. Continued investment in robotics, AI, and cloud infrastructure highlights long-term growth prospects. The market transition to IT-as-a-service and multiyear subscriptions are expected to drive future revenue.
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Good day, and welcome to the Arrow Electronics Second Quarter 2024 Earnings Call. Today's conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to Brad Windbigler, Arrow's Treasurer and Vice President of Investor Relations. Please go ahead.
Thank you, operator. I'd like to welcome everyone to the Arrow Electronics Second Quarter 2024 Earnings Conference Call.
Joining me on the call today is our President and Chief Executive Officer, Sean Kerins, our Chief Financial Officer, Raj Agrawal; our President of Global Components, Rick Marano; and our President of Global Enterprise Computing Solutions; Eric Nowak. During this call, we'll make forward-looking statements, including statements about our business outlook, strategies and future financial results, which are based on our predictions and expectations as of today. Our actual results could differ materially due to a number of risks and uncertainties, including the risk factors described in our most recent filings with the SEC. We undertake no obligation to update publicly or revise any of the forward-looking statements as a result of new information or future events.
As a reminder, some of the figures we will discuss on today's call are non-GAAP measures, which are not intended to be a substitute for our GAAP results. We've reconciled these non-GAAP measures to the most directly comparable GAAP financial measures in this quarter's associated earnings release or Form 10-Q. You can access our earnings release at investor.arrow.com, along with a replay of this call.
We've also posted a slide presentation to accompany our prepared remarks. I encourage you to reference these slides during the webcast. Following our prepared remarks today, Sean and Raj will be available to take your questions.
I'll now hand the call over to our President and CEO, Sean Kerins.
Thanks, Brad, and thank you all for joining us. Today, I'd like to discuss our second quarter results, provide some commentary on the markets in which we compete and then close with some thoughts as to how we're lining up for the future. I'll then turn things over to Raj for more detail on our financials as well as our outlook for the third quarter.
In the second quarter, we once again executed well in an evolving market environment as we continue to navigate the later innings of a prolonged inventory correction throughout the electronic supply chain in a very mixed spending environment in enterprise IT. I'm pleased to announce that we delivered total revenue of $6.9 billion and generated non-GAAP earnings per share of $2.78. Both numbers exceeded the high end of our guidance.
Taking a closer look at our Global Components segment, we delivered solid financial results nicely ahead of our original expectations. Broadly speaking, we're seeing signs of incremental improvement across several of the market segments in which we compete, leading to relative stability as we look to the future. Although conditions have not fully normalized, and the broader industrial markets remain soft, our bookings improved sequentially and the overall tone from suppliers and customers throughout the market has generally improved since our time together last quarter.
Our focus on value-added offerings, including supply chain management, design, engineering and integration services, along with demand creation, continue to foster deeper engagement with suppliers and customers. These capabilities continue to contribute to our structural margin health. In fact, although impacted by regional mix, our second quarter operating margin of 4.3% was well above levels experienced at the low point of previous cyclical corrections.
From a regional perspective, we experienced modestly improving conditions with mixed geographic trends. In Asia, revenue grew sequentially in both our semiconductor and IP&E product lines, led by a mild improvement in both the industrial and compute verticals. We were specifically encouraged by sequential growth in China, and fairly stable transactional pricing across the region. In the Americas, while the region declined slightly, aerospace and defense remained healthy. And in addition, we saw sequential sales growth in IP&E, along with growth in design wins overall.
And in EMEA, the broader industrial and transportation markets remained in decline. Although it's worth noting, as is typical across most cycles, that Europe was the last region to enter correction territory. As we navigate the late stages of this cycle, several of the leading indicators we highlighted last quarter continued to reflect progress. Our book-to-bill ratios advanced across all 3 regions, progressing closer to parity. Backlog in our core regional businesses has stabilized and cancellation activity has fully normalized.
As mentioned, bookings accelerated across all regions, which we believe indicates a further step down in ecosystem inventory levels as well as improved visibility to forward-looking production requirements. And as for our own working capital, we again reduced inventory, reflecting market conditions but at a reduced rate versus prior quarters as we look to position the business for future growth.
We believe these signals point to an eventual return to growth and as the cycle fully corrects, we remain focused on diligently managing our cost structure and working capital while remaining invested in our strategic priorities. Our Q3 outlook reflects our view that conditions are generally beginning to level out, albeit with regional differences at play. As we progress through the third quarter, we're expecting more typical seasonality in the Americas and Asia, while still declining in Europe but less so than in the second quarter. And we do expect operating margins to be relatively stable in Q3.
Now turning to our Global ECS business. In the second quarter, we exceeded our original expectations for both sales and operating income while delivering year-over-year billings growth. Globally speaking, cloud and AI-related solutions, along with better server demand contributed to our results while also adding to our future backlog.
On a regional basis, in EMEA, we achieved year-over-year billings and gross profit dollar growth based on continued strength in hybrid cloud adoption. During the quarter, we also expanded our line card to enhance our offerings for our channel partners. And in North America, relative strength in the public sector and for cloud-related solutions was partially offset by softness in data storage. We continue to reshape our go-to-market model in this region to 1 that better approximates our selling motion in EMEA.
In general, as we continue to capitalize on the market's transition to IT-as-a-service. We are growing our mix of multiyear subscriptions and recurring revenue streams. This is leading to a growing backlog, stickier relationships and accretive attribution margins. Our Q3 outlook indicates typical seasonal patterns in our ECS business as we anticipate a modest sequential decline, and we do believe market conditions will continue to improve throughout the balance of the year.
In closing, given the market backdrop, I'm pleased with our solid second quarter performance, and I'm confident in our future. As I mentioned, we're seeing mild improvement across several market segments, and so we do expect stronger performance in the second half of the year, reflecting both improving stability in components and a benefit from ECS seasonality later in the year.
And as I look beyond the next couple of quarters, I think we're well positioned for the next growth cycle and well equipped to shepherd the next generation of technology, specifically artificial intelligence to the broader market. Although still in the earlier phases of broad industry adoption, we're building upon our capabilities for the future with some notable areas of focus, including our supply chain services offering, where we enable cloud and platform players to deploy and scale their next-generation AI infrastructure. Given our substantial field application engineering and embedded integration offerings were well suited to help design and deploy AI-related solutions at the Intelligent Edge.
And through investments like our robotics center of excellence, we're actively engaged in solution design from the GPU to the image sensor for a variety of industries, applications and use cases. We're obviously excited by these and other longer-term prospects. And in the meantime, we're cautiously optimistic that we're approaching a turning point in our core markets.
Before I turn things over to Raj, I'd like to acknowledge the resilience of the Arrow team across the globe and thank them for their ongoing dedication to our suppliers and customers. And with that, over to Raj.
Thanks, Sean. Consolidated sales for the second quarter were $6.9 billion, above the high end of our guidance range and down 19% versus prior year. Global Components sales were $5 billion, down 3% versus prior quarter, better than we had expected. Enterprise Computing Solutions sales were $1.9 billion or 2% higher versus prior year due to favorable product mix.
Moving to other financial metrics for the quarter. Second quarter consolidated gross margin of 12.3% was down approximately 20 basis points, both sequentially and versus prior year driven primarily by the overall mix of business within our 2 segments. Non-GAAP operating expenses declined $31 million sequentially to $586 million and included a $20 million benefit in our ECS business for a positive recovery of a previously recognized bad debt charge related to 1 customer.
Beyond the effect of the collections recovery, our core operating expenses declined quarter-over-quarter, resulting from our continuing efforts to optimize our cost structure. We expect to see further benefits in reduced expenses the rest of this year. In the second quarter, we generated non-GAAP operating income of $262 million, which was 3.8% of sales, with Global components operating margin at 4.3%, and Enterprise Computing Solutions at 5.6%, both on a non-GAAP basis.
The impact of the UCS collections recovery was 110 basis points within the ECS segment and 30 basis points on consolidated Arrow operating margin. Interest and other expense was $67 million in the second quarter as we benefited from lower working capital levels. Our non-GAAP effective tax rate was 22.4%, which benefited from favorable geographic income mix. And finally, non-GAAP diluted EPS for the second quarter was $2.78, which was substantially higher than our guided range, benefiting from better-than-expected revenue performance and a $0.29 contribution from the previously mentioned ECS recovery and expense reductions.
Moving over to working capital. We reduced net working capital in the second quarter by approximately $150 million compared to Q1, ending the quarter at $6.8 billion. This is the fourth consecutive quarter of lower net working capital. Accounts receivable and accounts payable both decreased in the second quarter and were nearly offsetting.
Inventory at the end of the second quarter was $4.7 billion, decreasing approximately $140 million from Q1. Over the last 9 months, we have reduced our inventory levels by $1.2 billion, yet we remain focused on investing for future growth and expansion. Our cash conversion cycle finished the quarter at 79 days. Our cash flow from operations was $320 million in the second quarter. And over the last 12 months, we have generated over $1.3 billion of operating cash flow.
Net debt at the end of the second quarter was lower compared to Q1 at $3.1 billion. We repurchased $50 million of shares in the second quarter and our remaining repurchase authorization stands at approximately $425 million.
In the last 12 months, we have repurchased nearly $400 million of stock. In the near term, we will continue to balance capital return priorities with managing our debt ratios. Now turning to Q3 guidance. We expect sales for the third quarter to be between $6.37 billion [indiscernible] component sales to be between $4.7 billion and $5.1 billion, which at the midpoint is down approximately 3% from prior quarter. We expect Enterprise Computing Solutions sales to be between $1.67 billion and $1.87 billion, which is unchanged at the midpoint year-on-year.
We're assuming a tax rate in the range of approximately 23% to 25%, and interest expense of approximately $70 million, and our non-GAAP diluted earnings per share is expected to be between $2.10 and $2.30. And finally, we estimate changes in foreign currencies to have an immaterial effect on our Q3 guidance. The details of foreign currency impact can be found in our press release.
With that, Sean and I are now ready to take your questions. Operator, please open the line.
[Operator Instructions] Our first question comes from the line of Melissa Fairbanks with Raymond James.
Great quarter, obviously, good to see that things are starting to stabilize. That's what we always want to hear from you guys. I had a quick question about the comments that you're anticipating a stronger second half. I'm wondering if that means that you're expecting revenue growth in back half over front half. I know you don't typically guide beyond 1 quarter, but just looking for some clarification there.
Thanks, Melissa. Sure thing. In general, we are expecting a better second half than first half. I think that's a function of 2 things. We do see things continuing to improve in our Components business across the second half. But even more importantly, we're going to see a benefit from typical ECS seasonality later in the year, but all of that should add up to more revenue in 2H than 1H for sure.
Excellent. Love to hear that. Maybe just 1 quick follow-up then. The commentary regarding the inventory of investing ahead of future growth. I was just wondering if there were any specific areas that you're targeting with these investments. I assume IP&E might be one of those areas. But if you can give any additional color?
Yes, I think you nailed it, Melissa. IP&E, as you know, is one of our strategic growth priorities inside Components. And so we are looking at that inventory model a little bit differently than semi for the future. But otherwise, we're managing working capital carefully.
I could also tell you that units came down in the quarter, but less so than from Q4 to Q1. So we're partly preparing for a better future, but also still being careful as we do so.
Our next [indiscernible] comes from the line of Matt Sheerin with Stifel.
Just a follow-up on -- regarding the revenue in the back half. Specifically on Components, you're guiding Q3 down sequentially. And my thought is that Q4 should also be flat to down given seasonality in Europe and North America, unless there's a very big uptick in Asia. So how should we think about that? It looks like the second half should be down relative to the first half with the bookings improving?
So Matt, part of that is why we only guide 1 quarter at a time. So a little too early for us to guide Q4. But I would say all the key indicators that we track are showing progress. And so we're feeling better about the near term. It doesn't guarantee that we see sequential growth in Q4, but I would say we're more optimistic that we will now than we would have been 90 days ago based on what we see happening in the market.
Remember, just to reinforce, we are seeing modest recovery in Asia and North America. So implied in our outlook is a return to more normal seasonality for both. We know that the correction is still playing out to some degree in Europe, but that's normal. You have seen a number of suppliers in our universe guide for sequential improvement. And we think that's ultimately a good sign as we typically follow our suppliers out of a correction. So we'll guide Q4 the next time we talk, but we're feeling like we should see steady improvement across the second half in that business.
I would also say, Matt, that if you think about what happened in the first half of the year, we had Components declining at 8% in the first quarter and then down 3% in the second quarter. So that's also part of the commentary that we'll see likely better trends in the second half versus the first half?
Got it. And could you just remind me the seasonality in North America in Q3? Is it typically what flat to down slightly or flat to up slightly. Is that about right?
Yes, it's typically flat to up slightly, and we're right there with our outlook, given our own internal forecast.
Okay. That's helpful. And then regarding the margins or implied margin based on the EPS guide, it looks like your gross margin will be down sequentially, I don't know, call it, 12% or so. Correct me if I'm wrong there. It looks like that's just a function of mix with Asia Components up, in Europe down again. Or is there anything else going on there?
No. In fact, as you know, Matt, we typically don't guide for gross margins. But if you look at the EPS decline quarter-on-quarter it's really just a function of volume decline overall, 1 part in Components, as you just mentioned. And then 1 part, simply a function of typical seasonality in our ECS business, and we're actually offsetting both of those by a little bit with the benefit of our OpEx actions showing up in the P&L.
So mix is a factor in the Components business. And I would say it's regional mix more than anything else. But as we talked about in our prepared remarks, we do expect operating margins to be fairly stable in that business in the third quarter.
And you expect OpEx to be down sequentially on a dollar basis?
Yes, we do.
Our next question comes from the line of William Stein with Truist Securities.
Before I start, I want to offer congratulations. You guys did a great job in the quarter. I'd like to ask about the geo-mix first. Most of the semi companies I cover have talked about a pretty sharp inflection in China. I forget how much of your Asia revenue is there, but I suspect it's a significant amount in the Components business specifically.
I think in your prepared remarks, you talked about this showing some signs of recovery, but hopefully, you can talk a little bit about that, what's causing it, whether you're seeing it to the same sharp degree as your suppliers or if it's more moderated or delayed?
Yes. I would say it's certainly not V shaped, Will. But you're correct. We did see sequential growth in Asia and specifically in China, which is a big piece of our Asia business in the second quarter. That's obviously a good sign compared to prior trends. Most of that came from an uptick in industrial and to some degree, compute for us, which is great.
But we still saw a softness in a number of other verticals. But this outlook, as I said before, does call for more typical seasonality. So we're going to take this 1 quarter at a time. I think it's too early to call for a broader recovery. Remember, we play in some of the more mature pieces of the industry, given our focus on the broader industrial markets. So consistent with closer to an L than a V, but we're clearly encouraged by what we're seeing. We were certainly encouraged by the increase in bookings overall in that region as well. And I think steady as she goes at this point.
The other question is as strong as the Q2 results were -- you're guiding fairly significantly below consensus for the out quarter and it's just a little bit surprising to me that when you're talking about problems becoming less bad and you're beating the quarter. I wonder the degree to which the outlook just has maybe a higher dose of conservatism? Or are you seeing something pause in terms of what was maybe in terms of -- are you seeing anything pause on that trail as we progress into Q3? Or how should we think about that?
I don't think we're taking a different posture relative to this guide than we've taken in any other prior quarter guide. As you know, there's always a certain element of this industry that's going to be a little bit unpredictable. We think we're calling this 1 fairly accurately just as we did last quarter. We were pleased by the uptick.
I'd like to say that we could count on the uptick more sharply going forward. But I think the reason you're not seeing a sharper recovery is really a function of the softness that we still see in the broader industrial and transportation markets. Remember, together, they're a pretty significant piece of our mix. And I think there's 2 things going on there, Will. I think one of them is macro in nature, which we can't control. And the other is related to elevated inventory levels that one, obviously, we have better line of sight to and we think for the most part, that situation continues to improve. And we do see that resolving itself very likely by the end of the year, but probably not a whole lot sooner.
Your next question comes from the line of Joe Quatrochi with Wells Fargo.
Curious as you think about your inventory levels for the Components side as we go forward, it seems like they kind of maybe at a better more normalized absolute level. But how do you think about the mix as we think about having to need to invest in some parts of the inventory as demand starts to improve when we look into next year?
So maybe if I understand your question correctly, it's more about are we confident in the mix of the inventory that we're carrying or planning to carry -- just want to make sure we understand what you're after here.
Exactly. And are there areas where there's still some inventory reductions to go that maybe demand is not going to step back as fast or areas where you need to invest more looking into next year as we see industrial and transportation kind of maybe improve.
Sure. Well, as I said before, we are managing inventory carefully. We are taking 90-day view, 1 quarter at a time, if you will. We do anticipate that things are getting better here in the near term. I'd say we're now bouncing along the bottom. As I said, it's hard to predict when things tick up more significantly given some of the macro. Inventory mix we talked about the lean on IP&E because of our interest in that market and our continued [Technical Difficulty] being at exposure to it.
Remember that the majority of our highly engineered, which supports our design-in and demand creation efforts across the globe. We certainly haven't changed that. But to give you kind of an absolute feel for where we think we are, you saw turns improve slightly quarter-to-quarter. We'd say we're within half a turn or less where we want to be with inventory overall as we manage this thing going forward.
And as and when we see sequential improvement in the business, we'll maintain those turn levels and I think we'll be in great shape going forward. Again, we still have the residual some excess inventory, mainly a function of some of the long-term supply agreements that we were engaged in. But that's abating, and we think the lion's share of that will resolve itself by the end of the year, and we would see inventory and inventory turns as fairly stable from there. But we're not bashful. We're going to lean in as we see the market firming because we want to make sure that we can help our suppliers grow.
That's helpful. As a follow-up, you talked about the demand you're seeing from cloud and AI solutions. Wondering if you could just kind of double click on that. What are these solutions that you guys are providing? Are you racking and stacking like full GPU server solutions? And then how do we think about like the margin on that business relative to, I think, a bit of a focus on driving higher margin dollars on the ECS business.
Yes. So we don't break out margins at that granular level. But what I can say is we're participating in the early days of the ramp of AI in both of our segments. In our Components business, our supply chain management offering is directly engaged in helping the right companies source stage and build their AI infrastructure.
And in our ECS segment, we're very involved. [Technical Difficulty] is a function of our focus on cloud and as is we're very engaged in helping the channel ramp up on things like CoPilot, for example -- and that activity level has really taken off nicely for us, and we expect that to continue.
So there's other pockets of the company in which we're now engaged in AI adoption as well, but those are 2 of the better examples, and I think there's more to come as this thing plays out.
Your next question comes from the line of Ruplu Bhattacharya with Bank of America.
Maybe Sean, I'll follow up on the AI question. Just asking you for a little bit more detail. What do you think is the revenue contribution in 2024 from AI? Or what was the revenue contribution in this quarter? And if you can tell us like what type of customers are buying AI equipment, are you seeing demand from hyperscalers? Or do you think enterprise AI demand is also picking up?
So I'll start with your first question. You heard us talk about some of the focal points for us in our prepared remarks. What I would say about each of those is they're all real and tangible. Our intention today was simply to indicate our relevance in this part of the technology market as this piece of the industry starts to ramp up and evolve more completely.
It's a little too early for us to quantify these in great detail, but they are real, and we do believe they'll become more important to our future trajectory. The way we're thinking about AI is really on 2 fronts. Internally, we're getting after it because we think it can help us a great deal with our transactional workload, which can only help to create more sales capacity for our growth priorities. But at the same time, commercially, I think you're going to see full ecosystems emerge around AI technologies and their applications. You could think of it as a rising tide that's going to lift many boats. And we're going to want to be front and center and enabling those ecosystems to develop and get their offerings to market.
But I would say we're still in the early phases of broader AI adoption. We, again, want to signal our belief that we are relevant in it, and we'll be more relevant in it in the future. but this will be a long journey and nevertheless, a pretty compelling one.
Okay. Raj, I have a couple of questions for you. Just on ECS margins, you had good sequential growth of 140 basis points. Can you help us like what were the drivers for that sequential growth? Like how much was impacted because of netted down items versus product mix or regional mix?
And as we think about sequential decline of margins going from 2Q to 3Q, if you can help us understand that, what are some of the drivers for margins in the third quarter on the ECS side?
Yes. Ruplu, it's really just a function of the business mix. Billings is the best indicator of health of that overall business. And then depending on the overall mix of products that we're selling, it will net down to certain levels of revenue. But yes, it did uptick in the second quarter. In the third quarter, we're seeing more of the normal seasonality of that business. And that's why you're seeing it step down. So nothing unusual there just from a margin standpoint, and it really is just a function of what types of sales we have in the particular quarter that impact margins on a sales basis.
Okay. Understood. Maybe for the last 1 from me. When I think about free cash flow, I mean, it looks like you had pretty strong free cash flow versus the year ago quarter. I know you don't guide to free cash flow, but maybe I can ask the question in terms of investments in inventory. I think in response to your question, you said that you're going to invest in IP&E.
So how should we think about inventory, what is a normal level of inventory or a normal level of cash conversion cycle? And how should we think about the second half free cash flow or the second half inventory trend as we go forward?
Yes. Ruplu, it really comes down to our cash gen, which we're very pleased with. You saw in the second quarter, we generated about $320 million of operating cash flow -- that puts us at about $720 million year-to-date. And as I mentioned, $1.3 billion over the last 12 months. Our business just naturally generates cash. Obviously, working capital investments will impact that. And as we mentioned, also, inventories come down by about $1.2 billion in the last 9 months or so.
So we think we're at a good level of inventory. We'll keep investing wherever it's needed. IP&E is certainly one of the areas. And -- but we feel very good about the cash gen ability of this business.
Our next question comes from the line of Melissa Fairbanks with Raymond James.
I just had kind of a quick follow-up to Ruplu's question for Raj. Maybe building on the question about free cash flow and how much cash you're generating -- can you remind us what your priorities for cash use are beyond, obviously, investing in the business and investing in some of that inventory.
Share count has come down very significantly over the past couple of years, and the debt was -- came down pretty nicely in 2Q. Just wondering what you're thinking of going forward from there.
Thanks, Melissa. You kind of summarized it for me, but let me summarize it again. We're very pleased with the cash flow and -- and in order of priority, which really have not changed, we will continue to invest in our business organically, for organic growth. So working capital, CapEx, other needs like that. We'll look at M&A as well. It's got to be at the right price, at the right returns, and we did a small acquisition in the first quarter in the Engineering Services side.
And then as you said, we've bought back a lot of stock over the last 2 or 3 years. Last year, it was about $750 million. In the first half of this year, we're a little bit lighter at $150 million just to manage our debt ratios and we have paid down some debt. So that's exactly what we're doing, and I wouldn't see those priorities changing as we go forward.
Yes. Melissa, I would just reinforce our capital allocation priorities have not changed at all, as Raj just outlined. And I would say all else being equal, we're simply managing the balance of the trade-off between share repurchase and debt capacity. But again, all else being equal, we're certainly still intent on doing so.
There are no further questions at this time. I will hand things over to Brad Windbigler to close it.
Thank you all again for joining today's call. We look forward to meeting with you at upcoming investor events. Have a good day.