AZZ Inc
NYSE:AZZ
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AZZ Inc
Earnings Call Analysis
Q3-2024 Analysis
AZZ Inc
AZZ, a North American leader in galvanizing and coil coated solutions, reported a commendable performance in the third quarter. The company emphasized its effective strategies and operational excellence contributing to a rise in sales to $382 million, marking a 2.2% increase. Their focus on market shares was reinforced with disciplined value pricing, resulting in organic growth and improved profitability.
The company's profitability substantially increased, with adjusted earnings per share skyrocketing by 53% to $1.19 and adjusted EBITDA surging 23% to $86 million compared to the prior year. Metal Coatings showed a robust EBITDA margin of 30%, and Precoat Metals, 18.4%, both within their target ranges. These figures are a reflection of their dedication to excellent customer service and operational enhancements.
AZZ's investment in operational technologies like the digital galvanizing system (DGS) connects their facilities and offers real-time order tracking, setting them apart from competitors. These advancements, along with effective capital deployment strategies and emphasis on leveraging differentiated value propositions, aim to sustain long-term shareholder value.
The company improved its gross margin by 350 basis points to 23.1% primarily due to lower zinc and overhead costs, against a backdrop of increased labor costs. Their effective capital management allowed for a significant decrease in net debt to leverage ratio to 3.1x, edging closer to the target of 3.0x or lower.
AZZ plans to continue its investment momentum with a fiscal year 2024 capital expenditure forecast of $119 million, including $70 million for a new manufacturing plant. The investment is expected to extend into the first quarter of fiscal 2025 as they proceed with installation and testing of the plant.
Despite a strong quarter, AZZ remains conservative about near-term earnings, not expecting to maintain such high levels into the fourth quarter or fiscal year 2025. They plan to unveil their fiscal year 2025 guidance shortly, providing investors with insights into the company's future expectations as the new fiscal year commences on March 1.
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Good morning, and welcome to the AZZ Inc., Third Quarter 2024 Earnings Conference Call. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Sandy Martin of Three Part Advisors. Please go ahead.
Thank you, operator. Good morning, and thank you for joining us today to review AZZ's financial results for the fiscal 2024 third quarter, which ended November 30, 2023. Joining the call today are Tom Ferguson, President and Chief Executive Officer; Philip Schlom, Chief Financial Officer; and David Nark, Senior Vice President of Marketing, Communications and Investor Relations. After today's prepared remarks, we will open the call for questions. Please note the live webcast for today's call, which can be found at www.azz.com/investor- events. Before we begin, I want to remind everyone that our discussion today will include forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements, by their nature, are uncertain and outside of the company's control. Except for actual results, our comments containing forward-looking statements may involve risks and uncertainties, some of which are detailed from time to time in documents filed by AZZ with the Securities and Exchange Commission, including the annual report on Form 10-K for the fiscal year. These statements are not guarantees of future performance. Therefore, undue reliance should not be placed upon them. Actual results could differ materially from these expectations. In addition, today's call will discuss non-GAAP financial measures. Non-GAAP financial measures should be considered a supplement to and not a substitute for GAAP financial measures. We refer you to the reconciliation from GAAP to non-GAAP measures included in today's earnings press release. I would now like to turn the call over to Tom Ferguson. Tom?
Thank you, Sandy. Good morning, and thank you for joining us to review our fiscal 2024 third quarter results. Today, I'll start by covering the company highlights for the quarter before passing it over to Philip to discuss AZZ's detailed financial results and our balance sheet. Then Dave will provide industry commentary on our end markets, and I will conclude our presentation by covering our sustainability efforts and AZZ's full year outlook before opening the line for questions. AZZ is North America's market leader in galvanizing and coil coated solutions, leveraging our scale and strategic footprint to better serve customers with excellence and expertise. Our leadership has been focused on strong execution this year, and I am pleased to report that the segments have performed exceptionally well through the third quarter. These results are a testament to the strength of our company, talented teams, effective strategic plan and ongoing commitment to operational excellence. Collectively, these attributes contribute to our ability to provide valuable, differentiated solutions and services to our customers. Turning to our results. Total sales for the quarter were $382 million, up 2.2%. Momentum continued for Metal Coatings with third quarter sales of $163 million, up 3.1% versus last year's quarter. Precoat Metals also grew during the quarter to $218 million, up 1.6% from a year ago. We grew sales organically and improved profitability in the quarter, and I am pleased to report that we continue to effectively secure market share without sacrificing our value pricing discipline. We increased adjusted earnings per share for the quarter by 53% to $1.19 and grew adjusted EBITDA by 23% to $86 million versus prior year. This led to strong cash from operations for the quarter of $63 million. As a result, EBITDA margins were 30% for Metal Coatings and 18.4% for Precoat Metals during the quarter, both within the stated targeted ranges for each segment. In short, our dedication to delivering best-in-class customer service and ongoing enhancements and operations led to increased sales, improved profitability and significant cash flow this quarter. We continue to develop and enhance our operational technologies, which sets us apart from the competition. Our digital galvanizing system, or DGS, is AZZ's proprietary technology that connects our 41 galvanizing facilities to the company's ERP system. It provides real-time visibility and order tracking to allow superior customer service. Similarly, in Precoat’s 13 facilities, close and tracks customers' inventory provides real-time access to project scheduling. These advanced platforms along with our outstanding teams focused on providing excellent service, position AZZ as a highly differentiated Metal Coatings provider to customers throughout North America. As Philip will discuss more in a moment, we are strengthening the balance sheet and plan to continue to deploy capital carefully. We have worked diligently to reduce debt, improve our leverage ratio and re-price our term loan and revolver to lower interest costs, which continues to reinforce our decision to self-fund the greenfield Precoat Metals facility in Washington, Missouri, instead of going with a sale leaseback. We are highly focused on long-term value creation through our sustainable solutions. We believe that by continually investing in our people and relentlessly executing our strategy, we will accelerate AZZ's value creation and ensure sustainability. Our strategic transformation over the last 18 months has been a catalyst for generating significantly higher run rate EBITDA and cash flow. We will continue to scale our business through both organic and inorganic growth, leveraging our highly differentiated value proposition to customers as we create long-term value for our shareholders. With that, I'll turn it over to Philip.
Thanks, Tom. Good morning, and thank you for participating in our third quarter update. All numbers referenced today are results from our continuing operations. As Tom mentioned, we reported fiscal year 2024 third quarter sales of $381.6 million compared to $373.3 million in last year's third quarter. Total sales increased by 2.2% and from a year ago on higher Metal Coating sales of 3.1% and Precoat sales up 1.6%. Third quarter gross profit was $88.1 million or 23.1% of sales compared to $73.1 million or 19.6% of sales in the prior year same quarter. The 350-basis point improvement in gross margin was a result of lower zinc and overhead costs and an accounting reclassification to corporate of intangible assets amortization, partially offset by increased labor costs. Selling, general and administrative expenses were $35.3 million in the third quarter, which included a $4.5 million legal accrual related to a long outstanding commercial dispute with a Metal Coatings customer. Excluding the third quarter legal accrual, SG&A expenses for the fiscal 2024 third quarter would have been $30.8 million or 8.1% of sales compared to $27.7 million or 7.4% of sales in the prior year. We reported third quarter adjusted EBITDA of $86.4 million or 22.6% of sales compared with $68.9 million or 18.5% of sales last year. This 410-basis point improvement in adjusted EBITDA margin was primarily driven by favorable mix and improved operational efficiencies in both of our segments. Interest expense for the third quarter was $26 million compared to $26 million in the prior year, mostly due to lower outstanding debt and the effect of our repricing of the term loan in August. In a moment, I will discuss the recent repricing of our revolver. Income tax expense was $8.8 million, which reflects an effective tax rate of 24.6% in the quarter compared to 11.7% in the third quarter of the prior year. The prior year was favorably impacted by recognizing tax basis differences related to the AVAIL joint venture that were not repeated in the current quarter. We expect full year fiscal 2024 effective tax rate to be around 23%, with the longer-term tax rate expected to remain in the 24% range. Adjusted net income for the third quarter was $34.8 million compared to $19.5 million in the prior year, up 78.3%. As Tom mentioned, our adjusted diluted earnings per share of $1.19 was 52.6% above the adjusted diluted earnings of $0.78 reported in the prior year same quarter. Since the preferred convertible shares are dilutive in the current quarter, the preferred dividends are added back to the earnings for the company's computation of EPS. Under a full conversion assumption for the preferred convertible shares, weighted average shares outstanding in the quarter and for the 9 months are approximately 29.3 million shares. Turning to our financial position and balance sheet. For the first 9 months of the year, we generated strong cash from operations of $180.9 million and free cash flow of $114 million. Free cash flow is computed based on cash from operations less capital expenditures and was more than double from a year ago on improved segment performance with higher sales and improved EBITDA dollars and margins, and we benefited from our focus on working capital reduction. Capital expenditures for the first 9 months were $66.9 million, including typical safety, maintenance and gross spending as well as about $34 million related to the new greenfield coil coating plant under construction in Washington, Missouri. The building construction is near completion, and we are beginning to receive equipment scheduled to be installed in the upcoming months. Our construction progress remains on target, and we will continue to provide progress updates each quarter. Our full year forecast 2024 capital expenditure is approximately $119 million-- I'm sorry, our full year fiscal 2024 capital expenditure projection, including $70 million for our new plant are expected to be $119 million, and heavier spending will continue through the first quarter of fiscal year 2025 as we receive, install and ready the facility for operational testing later next year. During the third quarter, we further reduced our debt by $25 million. Through the first 3 quarters, we paid down $85 million of debt within our previously communicated targeted debt reduction estimate of $75 million to $100 million. As Tom noted, strong operational performance and focused working capital management allowed us to reduce our net debt to leverage ratio to 3.1x closer to achieving our target of 3.0x or lower. In addition to repricing our term loan B during our second quarter of the fiscal year, we also successfully repriced our $400 million senior secured revolver last month. The most recent repricing reduced our interest rate margin across all leveraged base pricing tiers from a fixed SOFR plus 425 to our current effective rate of SOFR plus 300 basis points, and we also were able to remove the existing credit spend adjustment of 10 basis points. We will see a benefit going forward of lower interest costs through the maturity of our facility and plan to balance borrowings between the term loan and revolving credit facility to minimize interest costs. We have no maturities of debt until 2027. We remain confident in our ability to generate positive cash flows and support our growth plans while continuing to strengthen our balance sheet and reduce debt and leverage. As a reminder, we are in a 3-year swap arrangement fixes roughly half of the variable rate debt, and that arrangement expires in September 2025. During the first 9 months of the fiscal year, we paid cash dividends to common shareholders of $12.8 million and also paid $10.8 million of dividends to our Series A preferred holders. We made no share repurchases during the quarter or year-to-date as debt reduction continues to be our top priority. Before turning it over to David, I want to provide an update on 2 matters. Number one, equity and earnings of our unconsolidated subsidiaries for the current quarter increased to $8.7 million compared to $1.0 million in the prior year quarter. The increase is primarily due to higher earnings from the AVAIL JV, a release of a reserve for liquidated damages on a large project they had and 3 months of equity and earnings in the current quarter compared to only 1 month in the prior year third quarter. We do not expect to see near-term earnings levels this high during our fourth quarter or into fiscal year 2025. Lastly, earlier this morning, the company filed a Form S-3 registration statement with the Securities and Exchange Commission as a universal shelf registration that will provide future funding options to the company. Coming out of our annual strategic planning sessions earlier this year, we determined that a universal self-registration is both prudent and good housekeeping for a business our size. With that, I'd like to turn the call over to Dave.
Thank you, Philip. Good morning, everyone. As Tom covered, our strategic growth plan includes a combination of organic and inorganic expansion throughout North America. We plan to utilize our large footprint to leverage market-leading positions in both segments. AZZ's trusted business partnership within our nationwide network is built on a growing base of over 3,000 customers, many of whom are long-standing blue-chip customers. Additionally, we continue to attract and retain customers based on our deep technical expertise, customer-centric technologies, superior customer service and highly specialized solutions and services. Metal Coatings benefited this quarter from continued strength in transmission and distribution as well as bridge and highway projects. Precoat Metals sales performance has recently trended better than the market, and our growing volumes continue to improve from intentional conversion selling, mix and value pricing. Secular growth trends, including plastics to aluminum conversions are important for Precoat coupled with the team's ability to convert captive paint lines inside other companies. Tom sometimes refers to this as our [ deverticalization ] sales strategy, which is a growth area for AZZ as companies decide to cut costs or outsource their role coding needs. We expect transmission and distribution to continue to be strong in the coming months and are seeing continued evidence of infrastructure spending, including work on data centers and Microchip plants. We continue to see long-term secular tailwinds associated with infrastructure projects tied to the AIIJA and CHIPS Acts, which we expect to positively impact our results in calendar 2024. Although solar and renewables end markets have recently weakened, we are seeing pockets of regional strength across the U.S. for these projects. Finally, although our business this year has seen softer demand in HVAC and transportation, Appliances and residential construction end markets are returning. Nonresidential construction continues to perform well with strength in warehousing, manufacturing and agriculture. We are also optimistic by the long-term expectations for manufacturing re-shoring and the positive transition to pre-painted steel and aluminum. And as I mentioned, we are seeing the gradual movement in the container category from plastics to aluminum throughout North America. Our Metal Coatings and Precoat Metals teams continue to make progress on market share gains and hot dip galvanizing as well as pre-painted coil projects with key customers. With that, I'd like to turn it back over to Tom.
Thanks, Dave. One of the most rewarding aspects of being a part of AZZ is the opportunity to work with over 3,900 incredibly talented people who strive to do the right thing for our employees, customers, partners and communities where we live and work. We were recently recognized on these weeks 2024, America's most responsible companies list based on our company-wide sustainability and ESG efforts. We are grateful that this is the second year AZZ was named among this prestigious list of companies. Collectively, our business segments provide sustainable unmatched metal coating solutions that enhance the longevity and appearance of buildings products and infrastructure that are essential to everyday life. Our solutions and services are synonymous with sustainability. Regarding our business outlook in the fourth quarter, ending in February, our fabrication customers continue to site project backlogs in critical markets that Dave just discussed. Labor availability and employee turnover have both improved from a year ago. We continue to execute on our working capital initiatives and now are well positioned to adjust inventories of paint and zinc when demand shifts, whether due to our growth initiatives or other micro or macroeconomic impacts. As Philip mentioned, the construction of our greenfield aluminum coil coating facility in Missouri is progressing. The building is substantially completed and equipment has begun to arrive and be installed in the facility. We remain excited about the growth opportunity this investment creates. We continue to anticipate a stronger fourth quarter compared to Q4 last year. Our Metal Coatings and Precoat teams have demonstrated their ability to drive operational efficiencies and sustain margins with superior quality and service levels. We are narrowing and somewhat revising up our fiscal 2024 sales guidance of $1.45 billion to $1.55 million, adjusted EBITDA guidance of $315 million to $335 million and adjusted EPS guidance of $4.15 to $4.35. And our capital expenditures for fiscal 2024 are estimated to be $119 million, which includes about $70 million this year related to the Washington, Missouri greenfield plant. Although interest rates have increased this year and interest expense ran significantly higher than we planned, we were able to pay down debt, reprice our term and revolving debt and offset the EPS impact with incremental equity and earnings from our minority interest in the AVAIL joint venture and focused operating performance from our business groups. We plan to provide our fiscal year 2025 guidance in a few weeks for the New Year that begins March 1. As always, I want to thank our hard-working and highly talented team who execute AZZ's shared vision of growth, profitability and operational improvements every day. Our mission is to create value in a culture where people can grow and traits really matter. Traits is an acronym for trust respect, accountability, integrity, teamwork and sustainability. These are AZZ's core behavioral values that continue to shape our future successes. Now operator, please open up the call for questions.
[Operator Instructions]. Our first question comes from Lucas Pipes of B. Riley Securities.
My first question is on the leverage. You're within a stone's throw of your prior leverage target of 3x. Is there desire to reduce leverage beyond lower than 3x? Or do you think that what you had outlined previously still stands today?
I think 2.5x to 3x is our long-term target. So due to just great performance of our teams, focusing on working capital and some of the other initiatives we've had going, we've been able to pay down debt quicker than even we had hoped a little bit. We're going to stay focused on that through the first quarter or through the fourth quarter of this year. We do have a Board meeting coming up next week to get our budgets for next year approved, where we'll talk more about capital deployment strategies and get our CapEx approved and things like that. So right now, our focus is continuing to pay down debt this year. We still think we've got some that we can do. So I'd say, but artificially, we're not really trying to drive towards that 2.5x, 2.75x right now. We do not have any acquisitions in the pipeline. So we don't have that as a cash need at the moment. But as we look at some opportunities for investments next year, I'd like to delay that until we discuss it with our Board first.
And then I want to ask about the guidance for fiscal '24 you, on the sales side, increased the lower end of the range. But when I look at year-to-date performance versus your full year target, low end 279 for the fourth fiscal fourth quarter, up to like roughly flat at the high end, $379 million of sales. What would it take to come in at the low end? Is that a really conservative look here? Or how would you frame that up?
So I think that probably is very much so on the low end. We're going to track much better than that. We're not tracking to the high end either which I guess is why it's a range. I feel good. We're not chasing business over aggressively right now. There is some price sensitivity out there. So we're trying to keep our powder dry and let the folks focus on the business that's attractive to us, taking good care of our customers and keep from chasing business below price levels that we want to go after. So we're maintaining that discipline, which is why we set the range. But yes, 279 is definitely below what we would say we're going to have any shot at getting to.
And then a quick follow-up. I appreciate your issue guidance in a few weeks or so. But in terms of the big trends that you're seeing heading into your next fiscal year, would you anticipate a slowdown when it comes to chips and Science Act, for example, or infrastructure? Or do you think those key markets on the construction side will still be trending higher year-on-year? And then, of course, you have organic and inorganic growth opportunities that you outlined in your prepared remarks. So just trying to get a little bit of a flavor as to what would be potentially tracking positive versus where you might anticipate a little bit more softness in your next fiscal year?
Lucas, this is Dave. I think what you'll see there, we continue to see positive signs. Our Metal Coatings business in particular is galvanizing a lot of steel for new chip plants and utility T&D projects, bridge and highway and some solar for quite some time. So we think that's going to continue. We also think that the impact of government spending is going to result in multiyear demand for our solutions on both sides of the house, particularly those focused on critical infrastructure and energy transition initiatives. So we feel pretty good about the macro.
Well, and I'd add in that on the Precoat side, I think both their organic growth initiatives is in as well as I think residential construction has probably bottomed. So hopefully, that starts to trend up. Commercial construction is looking okay. And so I feel pretty good about the early part of the year. And as we get into it, the nice part is, particularly for Precoat Metals, once those volumes start to pick up, we get some really, really good flow through pretty quickly as we come off the bottom, so to speak, because as we said last time, we're down 10% to 12% on volume, depending on which market it happens to be, which is -- we're outperforming the market itself. But still, we're tracking to where we should have improvement next year. We have not built -- well, I shouldn't say that. We have of course, not put our guidance out. And these are all be good discussions about how aggressive we want to be next year and how we continue to maintain that focus on our value pricing and maintain that discipline. So I feel pretty good about the first part of the year and then the outlook, it just gets a little fuzzier as I look into fiscal '25.
The next question comes from John Franzreb of Sidoti & Company.
Congratulations on a very good quarter. I'd actually like to start with the guidance. I'm curious whether you've started to include JV income in the forward guidance for fiscal 2024? Are you still excluding that outlook?
On the guidance, as we go forward, we will include that in our 2025 guidance. For the Q4, we've included the realized results through the 3 quarters, but no fourth quarter guidance.
No, John, part of our issue is we're 1 month in arrears, and they're on a calendar year. So we actually have a board meeting with them coming up fairly soon, too, where we'll get a better feel for how the first part of their calendar year is looking.
No, just curious. I'm curious, I assume your renegotiations and negotiations with the zinc supplies for 2024 are now done. Can you update us with any changes in the pricing outlook, especially with the premiums being such a variable last year? And how does that look for the year ahead?
Yes, the premiums have come down. So yes, we've gone through the kick off the year negotiations and completed those. So we feel good. One, we feel supply is more secure, which is why we've been able to adjust some of the on yard inventories. So that's one good thing. Two is the premiums are down, I think, about $0.10. So that's upside as that starts to flow through our kettles, and of course, the rest is tied to LME.
And regarding Precoat, where do we stand on the pricing realization curve? You had some this quarter, you had some last quarter. Is the low-hanging fruit gone? Or is there still available pricing to be realized there?
Yes. I think when we're talking about value pricing, part of it is the mix we focus on and the opportunities that we pursue that tend to be both attractive in terms of long-standing customers and two, in terms of margin generated on some of those projects. So I'd say we're probably in the mid-innings compared to where we're at on the Metal Coatings side. So there's still some room. Coating team, they're highly focused on growing their business profitably, and we feel like we're having really, really good discussions on that topic now.
And one last question, I'll get back into queue. Regarding the Washington facility, should we anticipate start-up costs as we start thinking about the revenue recognition and the timing of everything in ‘25 or early '26? Or is that booked revenue that will be immaterial?
At this point, it will be booked revenue that's immaterial. We will continue to finish the plant on the schedule that we have laid out there. And then we have to get FDA testing. So as we finish the construction in calendar '24, we'll start testing the facility. There may be some low revenues associated with that, but it's immaterial at this point.
Congratulations again.
[Operator Instructions]. And our next question will come from Adam Thalhimer of Thompson Davis & Co.
Quick one on the AVAIL JV. Are we at the point where we should start baking in just a little bit of income every quarter, like maybe something in the $1 million range?
Yes, we're at that point. They're accounting and all that has stabilized as they've completed their opening books. And I think we will include and give more color, both quantitatively and qualitatively as we put out the fiscal 2025 guidance. It's coincidentally, but we've got our Board meeting and then their Board meeting. And then hopefully, we'll be able to put some guidance out and give some specific color around what to expect from AVAIL. We completed the transaction into September in '22. They went through a full year. I feel real good about it. They're performing well. And so I am looking forward to be able to have you I'll include some of that in each quarter.
And then Philip, you referenced a favorable mix in Q3, I think in both segments, I was just curious what that was and if that continues into Q4.
The mix is really related to the different products that we're servicing our customers with. And I think it will continue into the fourth quarter. When you look at our Q3 last year, we had production issues, supply chain issues, and we spent a lot of the fourth quarter into the first quarter last year, improving that. I think you'll see that in the Q4 over Q4 change that we've really improved the operational efficiencies of these businesses.
Lastly, are you guys anticipating additional debt pay down in Q4?
We should have some additional debt pay down in Q4. Although there will be a little—
But I think it’s a seasonally slower quarter for cash flow.
But I think it’s a seasonally slower quarter for cash flow.
Yes, it's seasonally slower, and then we've got the [indiscernible] project funding in Q4 and Q1 that were more of the equipment arriving. But we have done really well with $85 million in debt reduction through the first 3 quarters, and we are hopeful and focused on trying to reduce that further in Q4.
The next question comes from Jon Braatz of Kansas City Capital.
Tom, I guess, one of my questions is if you had the opportunity and at the right price, would you have any interest in selling your 40% interest in your venture?
Yes, I think that's -- first, I'd say I like the AVAIL team. But yes, it's an investment that -- and we sold it to investors, they've got some transaction date in their mind and as they continue to hopefully grow and improve the business. But yes, it's an investment for us. We like the people over there. But yes, if we get the opportunity to do that, absolutely. We consider it both strategically and tactically as we have these discussions with our Board.
And also, Tom, you mentioned that you're seeing in the Metal Coating business, some price sensitivity out there. Relative maybe to where it was last quarter, has there been any movement that sounds that price sensitivity getting worse, getting better? Any thoughts on that?
I think one of the things that happens to is we come in as winter months hit and the construction slows down and infrastructure projects slowed down, I think we always sense that there's more price sensitivity. Quite frankly, I'm not so sure that what we're just feeling is the normal volume fall off as we get into winter months and slower construction because it hasn't worsened and really hasn't changed much since our last comments. And a lot of it does boil down to what's the mix of activity. I don't necessarily want to call out which pieces of our business are more profitable and alienate customers. But let's just say when that mix shifts and we move off of some of the stuff that's a little lower priced -- not that we have bad business, by the way. We do see the price move with that. So I have to say we're holding our price points and our price multipliers very carefully and then following the mix. We have not seen any worsening of the signs, and we haven't really seen any worsening of volumes, but we're just coming through the holidays. Our folks actually had a few days off rechange which was probably nice for them. And hopefully, they're all rejuvenated as we hit the New Year.
OperatorThis concludes our question-and-answer session. I would like to turn the conference back over to Tom Ferguson for any closing remarks.
Thank you, operator. Thank you all for your time today. I really look forward to updating you on our fourth quarter and full year results in a few months and issuing fiscal 2025 guidance. So thank you for your time.
The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.