Eagle Materials Inc

NYSE:EXP

Earnings Call Analysis

Eagle Materials Reports Record Q2 Financials

Eagle Materials showcased a strong performance in Q2 of fiscal 2024 with a 3% rise in revenue to $622 million and a 15% growth in net earnings per share at $4.26. The Heavy Materials sector saw a 10% revenue increase, driven by robust demand across their markets and strategic price hikes in cement, alongside advancements in sustainable Portland Limestone Cement, now over 60% of their production. The outlook remains positive due to significant infrastructure spending and no foreseeable increase in supply capacity, ensuring continued demand. However, the Gypsum Wallboard business experienced a 6% volume dip, with flat net sales prices. The housing market's current challenges are acknowledged, but the long-term view is upbeat, citing structural underbuilding and the unlikeliness of new industry capacity as advantageous for future growth.

Eagle Materials Delivers Record Results Amid Industry Challenges

Eagle Materials announced its financial results for the second quarter of fiscal year 2024 with noteworthy achievements in a challenging environment. The company generated record revenue of $622 million, a 3% increase from the previous year, largely attributable to higher cement sales prices and contributions from its newly acquired cement import terminal in California. Net earnings per diluted share reached a remarkable $4.26, representing a 15% surge. A strategic share buyback program led to a 5% reduction in fully diluted shares, further boosting earnings per share.

Strong Performance in Heavy Materials Offset by Declines in Light Materials

Eagle Materials' Heavy Materials sector experienced a revenue boost of 10% from the prior-year quarter due to a robust pipeline of public infrastructure and private industrial projects. Notably, the company has begun implementation of further cement price increases scheduled for January 2024, after having already raised prices in July across half of its markets. However, the Light Materials sector witnessed an 8% decrease in revenue, reflecting lower wallboard and recycled paperboard sales volume despite stable wallboard sales prices. Operating earnings in this sector dipped slightly by 2% to $93 million.

Capital Allocation Strategies Demonstrate Financial Prudence

Eagle Materials has exercised disciplined capital allocation underscored by a 4% hike in operating cash flow, reaching $313 million, and strategic acquisitions like the cement import terminal in Stockton, California. The company also continued its shareholder-friendly approach by repurchasing shares worth $151 million, and it maintains a robust repurchase authorization for additional 6.8 million shares. As of the end of the quarter, Eagle Materials boasted a solid balance sheet with a net debt-to-cap ratio of 45% and a leverage ratio of 1.3x, evidencing its financial resilience and flexibility.

Challenges and Prospects for the Wallboard Business

In light of rising interest rates and its potential impact on consumer spending, Eagle Materials acknowledges some short-term uncertainty in its Gypsum Wallboard business. However, this sector is supported by stable activity in the South and Sunbelt regions, which may cushion the effects of a broader housing slowdown. The company anticipates a supply shortage, driven by scarce raw materials, to maintain high prices and margins in the medium to long term despite the current headwinds.

Future Outlook and Strategic Priorities

Looking ahead, Eagle Materials is optimistic about the robust demand for cement and aggregates, driven by strong infrastructure spending and large industrial projects. The company has announced cement price increases of $10 to $15 per ton across most markets effective January 2024. Eagle Materials remains focused on maintaining financial flexibility, seeking growth opportunities through acquisitions that align with their stringent criteria, and further returning value to shareholders through its share repurchase program.

Earnings Call Transcript 2024-Q2

[Operator]

Good day, everyone, and welcome to Eagle Materials Second Quarter of Fiscal 2024 Earnings Conference Call. This call is being recorded.

At this time, I would like to turn the call over to Eagle's President and Chief Executive Officer, Mr. Michael Haack. Mr. Haack, please go ahead, sir.

[Michael Haack, executive]

Thank you, MJ. Good morning. Welcome to Eagle Materials conference call for our second quarter of fiscal year 2024. This is Michael Haack. Joining me today are Craig Kesler, our Chief Financial Officer; and Alex Haddock, Vice President of Investor Relations, Strategy and Corporate Development. There will be a slide presentation made in connection with this call. To access it, please go to eaglematerials.com and click on the link to the webcast.

While you're accessing the slides, please note that the first slide covers our cautionary disclosure regarding forward-looking statements made during this call. These statements are subject to risks and uncertainties that could cause results to differ from those discussed during the call. For further information, please refer to this disclosure, which is also included at the end of our press release.

Let me start off by saying that I'm excited to highlight another quarter of record operating and financial performance for Eagle Materials. In the second quarter of fiscal 2024, Eagle generated record revenue of $622 million, up 3%. Eagle expanded gross margins to 33.6%, up 150 basis points, and we achieved record net earnings per diluted share of $4.26, up 15%.

A key reason for our superior margin performance is our commitment to our long-term sustainability of our plants, our businesses and our employees. On the employee front, I want to highlight an event that we conducted this past quarter, one that I always look forward to attending and participating in. Our Seventh Annual Health, Safety and Environment Conference. This conference brings together our operations and HSE leaders from across all of Eagle. We have an open and honest discussion about where Eagle is currently and where we will be going with regards to HSE.

From the focus and dedication of our people, Eagle has been able to continue to be an industry leader in keeping our employees safe as measured by our total recordable incident rate, reduce emissions through our focused implementation of PLC cement, reduce water usage through the redesign of our systems to ensure that they are closed loop and focus our efforts through best practice sharing and leading indicators to eliminate more serious injuries as demonstrated in our lost time injury rate.

I'll now turn to more specifics on our operational and financial performance for this quarter, starting with the Heavy Materials businesses. Revenue increased 10% versus the prior year second quarter. Within our footprint, public highway and infrastructure awards continue to outpace the national average.

Similarly, announced manufacturing construction projects of semiconductors, EV batteries, clean energy and heavy industrial projects have been benefiting the markets we serve. These announced projects totaled almost $500 billion nationwide since 2021.

On the supply side, U.S. manufactured cement supply continues to be outpaced by demand. Total capacity has fallen since 2010 when further regulations were enacted known as NESHAP, making new plant construction and capacity expansion challenging.

This creates the ingredients for a strong pricing environment. Thus, we implemented a second round of cement price increases in early July across half our markets and we have begun announcing the next round of increases for January of next year.

This quarter, we also made meaningful progress in our conversion to Portland Limestone Cement, or PLC, surpassing 60% across our system. PLC makes our clinker go further and it is an important lever at our disposal for lowering the carbon intensity of our footprint. So we are excited about the opportunities PLC provides us.

I'd be remiss if I did not add a little color around Texas Lehigh JV operation since it was mentioned in the last quarterly earnings call. I'm happy to say that we have made substantial progress on our kiln system and the plant is performing much better. We still recognize that there is some more work to do, but I'm very pleased with the progress to date.

In regards to the mid- and longer-term outlook for cement, concrete and aggregates, we have multiyear visibility into demand and the volume picture for cement remains robust across our end markets. Both public and private nonresidential construction, particularly within manufacturing projects continue to see strong spending.

With the layering of federal infrastructure dollars, there is a meaningful runway for construction projects for years to come. There is often a long tail of demand from these projects as well as communities and other local infrastructure must be built out.

Moving to the supply side outlook for the heavy side of our business. We have very stringent permitting requirements in our industry. Because of this, we do not perceive any significant new plant builds or expansions in our markets that would materially change the supply picture. Since we are so constrained on manufacturing capacity, the sold-out markets around the coastal areas will have to turn to imported cement in order to meet the demand.

To this extent, we have continued the integration of our recently acquired cement import terminal in Northern California to supplement our supply chain on the West Coast. Our manufactured cement footprint is made up of U.S. Heartland network that will remain largely insulated from imports given the high delivered cost to our markets. Because of these dynamics, we are optimistic about our short, mid- and long-term outlook for our heavy side businesses.

Now let me turn to our quarterly performance on the light side. For Gypsum Wallboard, sales volume declined 6%, while the average Gypsum Wallboard net sales price was flat with the prior year. It has been encouraging to see shipments, orders and pricing maintain their resiliency to date. Since housing is the most critical end market for us, we recognize the rise in interest rates and unclear path of consumer spending, may mean the environment sees choppy in the short term.

Looking at the mid- and long-term demand outlook for Gypsum Wallboard business, we operate in markets in the Sunbelt in the South. In this market, single-family housing starts have held up relatively well. Similarly, single-family permits in the South coincided with homebuilder orders, given the limited supply of existing homes for sale should translate in the wallboard consumption in 2024.

Looking longer term, we see the structural underbuilt of housing in the U.S. getting worse before it gets better as rate lock-ins keep people in their current homes for longer, creating a tailwind for our businesses as new homes are built for existing homes undergo repair and remodel projects.

With regard to the mid- and long-term supply outlook for our light side businesses, we have spoken many times of the effect of the lack of synthetic gypsum is having on the ability to add capacity to the industry.

Let me provide an example. Looking at the prior 2 cycles in 1995 through 2000 and 2000 through 2008, represented 2 significant housing demand cycles in the U.S. In both those periods, the wallboard industry added significant new capacity through the cycle and beyond the demand peak. This cycle has played out much differently. The industry has added no new capacity in over a decade even as pricing has reached record levels. This is indicative of the effect of raw material shortages are having on the broader industry.

It needs to be noted that about half the industry supply is designed to utilize synthetic gypsum, because of this, the effective economic viability of the industry capacity is likely lower than nameplate figures imply. Eagle Materials benefits from the surety of raw material supply for all of our wallboard plants insulating us from the cost curve and the capacity pressures facing much of the wallboard industry.

In fact, the demand-supply dynamics benefiting our Wallboard businesses resemble many of the qualities that make our cement and aggregates businesses so attractive as well.

Closing out on our business performance through the first half of our fiscal year, I'd like to mention how well we continue to execute our capital allocation playbook.

Eagle Materials cash flow generation is a key reason why the business is so attractive through cycles. Given our businesses are in a cyclical industries, we focus on cycle management, and on maintaining financial flexibility to create long-term value for our shareholders.

Our priorities remain the same, to continue to grow our businesses and improve our low-cost competitive positions through acquisitions and organic investments that meet our strict strategic and financial return criteria. And when those opportunities don't materialize, we use our share repurchase program to return cash to shareholders in a meaningful way. Last quarter, we returned $86 million of cash to shareholders through share repurchases and dividends. We also used our strong cash flow to strengthen our balance sheet, our leverage ratio ended the quarter at 1.3x.

With that, I'll turn it over to Craig to go through our financial results in more detail.

[D. Kesler, executive]

Thank you, Michael. Second quarter revenue was a record $622 million, an increase of 3% from the prior year. The increase reflects higher cement sales prices and contribution from the recently acquired cement import terminal in Stockton, California, partially offset by lower wallboard and paperboard sales volume.

Excluding the Stockton acquisition, revenue was up 1%. Again, this past quarter, we generated record earnings per share. Second quarter earnings per share was $4.26, a 15% increase from the prior year. The increase was driven by higher earnings at a 5% reduction in fully diluted shares due to our share buyback program.

Turning now to our segment performance, highlight on the next slide. In our Heavy Materials sector, which includes our Cement and Concrete and Aggregates segments, revenue increased 10%, driven primarily by the increase in cement sales prices implemented earlier this year, and the contribution from the recently acquired cement import terminal in Northern California.

Operating earnings were up 19%, primarily because of increased cement prices. Given the strong market conditions that Michael discussed, we implemented a second round of cement price increases in early July, and our average cement price increased approximately $5 per ton or 3% sequentially. We've also recently announced cement price increases in most of our markets effective January 1, 2024.

Moving to the Light Materials sector on the next slide. Revenue in our Light Materials sector decreased 8%, reflecting lower wallboard and recycled paperboard sales volume, while wallboard sales prices were flat. Operating earnings in the sector declined 2% to $93 million, reflecting lower wallboard sales volume, partially offset by reduced input costs, primarily for recycled fiber and energy.

Looking now at our cash flow. We continue to generate strong cash flow and allocate capital in a disciplined way. During the first 6 months of our fiscal year, operating cash flow improved 4% to $313 million, while capital spending increased to $66 million, and we acquired the cement import terminal in Stockton for $55 million.

We also repurchased a total of 917,000 shares or 2.5% of our outstanding for $151 million in addition to paying our quarterly dividends, returning a total of $169 million to shareholders during the first half of our fiscal year. We have approximately 6.8 million shares remaining under our current repurchase authorization. Finally, we used our strong cash flow to strengthen our balance sheet.

Let's look at our capital structure. At September 30, 2023, our net debt-to-cap ratio was 45%, and our net debt-to-EBITDA leverage ratio was 1.3x. We ended the quarter with $47 million of cash on hand. Total committed liquidity at the end of the quarter was approximately $627 million and we have no meaningful near-term debt maturities, giving us substantial financial flexibility.

Thank you for attending today's call. MJ, we're ready to move to the question-and-answer session.

[Operator]

[Operator Instructions] Today's first question comes from Trey Grooms with Stephens.

[Trey Grooms, analyst]

So we've seen volume down in wallboard now for, I guess, the last 2 quarters and no surprise, and I think it's actually holding in better than most would have thought. And Michael, you gave a little color on the demand outlook there, but understandably with the backdrop of higher rates, this clearly creates more uncertainty, at least around the residential backdrop here.

But given what we've seen from starts and completions on the residential side. To the extent that you can talk about it, how are you thinking about the wallboard volume outlook in the near term? And then at what point do you expect that we could start to see some stabilization there?

[D. Kesler, executive]

Yes, Trey, you bring up a lot of interesting points. Look, the higher interest rate environment it will navigate through. And there's factors on the other side, most notably, a shortage of homes in many markets across the U.S. of existing homes which is a very different environment than we've seen in prior cycles.

It's also important to note where we operate in the southern part of the U.S. where activity has been more robust than other parts of the country. And I think that's our core market. And look, we continue to have homeowners requiring to live somewhere. So there are a lot of factors and -- we've seen homebuilder orders improved this quarter and again last quarter as well. So it's hard to predict right now, but we think we're positioned pretty well.

[Trey Grooms, analyst]

Okay. And I guess with that, just kind of sticking with the demand picture. On the cement side, granted, there's maybe some more -- or quite a bit more visibility there into the demand picture, which sounds like it's still pretty good.

But as we look into maybe the calendar '24, with this kind of increased uncertainty again that's created by the rate situation. Is it your expectation that we should continue to stay in what is kind of a sold-out position or at least nearly sold-out position as we kind of look over the foreseeable future?

[D. Kesler, executive]

Yes. As opposed to the wallboard industry, which is more residentially oriented, cement and aggregates demand is more driven by infrastructure spending. And obviously, with the multiyear highway bill that those funds are starting to really benefit of highway awards and that activity, that should more than offset the residential impact on the heavy side.

Not to mention, and Michael pointed to them out, several large kind of manufacturing/industrial type projects for battery plants, semiconductor facilities, that activity is at a multi-decade high. So that's what gives us some confidence around the outlook for the heavy side demand not just for '24, but beyond that, given those projects are multiyear in nature.

[Trey Grooms, analyst]

Okay. And I've got to sneak one more in here, if I could. You mentioned you went out with a cement pricing announcement for early January. Any additional color you could give us on maybe magnitude or maybe how widespread these announcements are?

[D. Kesler, executive]

Yes. It's across most of our markets, January 1, still evaluating all of our markets, but the announcements have ranged between $10 to $15 a ton.

[Trey Grooms, analyst]

Perfect. I'll turn it over.

[Operator]

The next question comes from Stanley Elliott with Stifel.

[Stanley Elliott, analyst]

And congratulations. I was just curious, when you talk about the wallboard pricing has been so resilient. Is there a way to quantify kind of the differences that you're seeing in the East and the West? And you spoke a little bit about some of the synthetic piece. I was curious as to what that might be having an impact on it.

[D. Kesler, executive]

Yes, Stanley, look, and Michael mentioned it, it's such a different environment this cycle than what we've seen in prior cycles where not only were you facing demand pressures but there has been a significant amount of new supply being added and most of that was centered around the availability of synthetic gypsum as the source of gypsum has declined significantly as we've reduced the power generation vehicle that's reduced that raw material.

And it's more predominant in the eastern half of the U.S., no doubt. But again, the western and southern part of the country is where a lot of the construction activity has been more robust. So it's a balance. And I'd say pricing has kind of held in pretty well nationally and different factors across the country for sure.

[Stanley Elliott, analyst]

And you talked a little bit about the balance sheet kind of 1.3x. You should be generating a bunch of cash on a go-forward basis. Help us again with kind of what's happening with the M&A pipeline, you've been active buying shares. Just curious a little -- if we get a little more color on plans around that? Or should we see the leverage continue to tick down with the thought of maybe something larger coming down the pipe? Just really more curious than anything.

[D. Kesler, executive]

Yes. Stanley, it's a great question. The capital allocation is an area where we spend a lot of time and focus because we are generating a high level of free cash flow. And as we've always said, maintaining the assets is paramount and a bedrock function of Eagle as is the capital structure management, which we put ourselves in a good position in both of those fronts.

And so the next use is to continue to grow the enterprise. As you know, we have very high strict criteria, both financially and strategically for that investment. And when those investments don't meet that criteria, we're happy to continue to return cash to shareholders.

We obviously saw value in the shares this past quarter, and continue to balance that capital allocation between those 2 opportunities, and it's dependent upon the balance of whether the investment in front of us meets those criteria or not. And that's kind of the way we've operated for a long time.

[Operator]

The next question comes from Brent Thielman with D.A. Davidson.

[Brent Thielman, analyst]

I just wanted to come back to wallboard. I guess I'd just be curious if what you've seen sort of fiscal year-to-date considering your sort of conversations with customers, what you see around your regions and then we have these prevailing mortgage rates. I mean, does this still feel like sort of a down mid-single-digit environment for volume over the short term? Are you actually more optimistic than that?

[D. Kesler, executive]

Yes, Brent, as we said in our prepared comments, look, I think you got to recognize the recent increase in interest rates. And traditionally, what that -- how that would impact home building. There's just some other factors today that are in place that are very different than as we pointed them out, the shortage of homes, existing homes that are at very, very low levels across the country. And you have this idea where you've got a significant amount of the mortgages that are outstanding that are sub-4%.

And so folks just aren't moving like they once were and which just puts more pressure on the need to build new homes. And so it's hard to predict. We've kind of been running in this down mid-single digit. It would surprise me that you're in that range for a little while. But again, it's not -- it's very different than what we've seen in prior cycles.

[Brent Thielman, analyst]

Understood. And Craig, the wallboard margins, I mean, considering some top line pressure in the business, we're comparably strong or a little better than last year. I wonder if you could just sort of flesh out a few of the variables there that are allowing you to keep margins up.

[D. Kesler, executive]

Yes. Look, again, it's not a big volume oriented business. It's not a high fixed cost business. So down volumes doesn't hurt as much. And paper prices, which is a large input are down year-over-year. That continued to be a benefit, a nice tailwind as is energy.

So energy is down a couple of dollars a million versus where we were last year and seems to be continuing to track that direction. So what had been tailwind or headwinds a year ago have kind of turned around and help keep margins pretty flat.

[Operator]

The next question comes from Anthony Pettinari with Citi.

[Anthony Pettinari, analyst]

Can you talk a little bit more about the rationale for the Stockton terminal acquisition, what was attractive about that asset and how it supplements your system? And then just following up on Stanley's question on M&A. You had a lot of success with the Kosmos acquisition. Are there heavy-side assets out there that could potentially be attractive? Or are those just kind of so scarce to kind of once in a blue moon?

[Michael Haack, executive]

Yes. So this is Michael. I appreciate the question. Yes, when we look at -- first, I'll take your second question first. We're always involved if any acquisition work come to light. We evaluate a bunch of stuff. But as Craig and I both mentioned, we have some strict financial performance criteria that are there.

But again, if anything were to come to light, we would be interested in it, one of our cash allocation criteria is to keep our existing assets and like new condition and grow through acquisition if something were to come available. We look at a lot of different businesses out there. And we only select the ones that really fit our network the best.

As for Stockton, if you look at the West Coast and everything where we stand, we have a business on that side. That import terminal really supports our business as we grow with our Nevada Cement opportunity. We were already bringing cement into California from Nevada.

And as Nevada continues to grow and some of the surrounding areas there continue to grow, we're finding -- we were a little light on supporting our customers. So we saw this as a great opportunity to bring in a product to support our customers and continue to grow in that market that supports one of our cement facilities there.

[Anthony Pettinari, analyst]

Okay. That's very helpful. I'll turn it over.

[Operator]

The next question comes from Jerry Revich with Goldman Sachs.

[Jatin Khanna, analyst]

This is Jatin Khanna on behalf of Jerry Revich. How are you thinking about cement pricing for 2024 in light of the extreme volatility in diesel prices and overall inflation?

[D. Kesler, executive]

Just to be clear, diesel prices don't have as much of an impact on us in our cement business. And -- so we have announced price increases in cement for early January, as we said earlier, kind of between $10 and $15 a ton depending upon the market. And that's our announced plans at this point.

[Operator]

The next question comes from Adam Thalhimer with Thompson, Davis.

[Adam Thalhimer, analyst]

Nice quarter. Craig, what was the exit price in Wallboard for Q2?

[D. Kesler, executive]

It was pretty consistent with the quarterly average.

[Adam Thalhimer, analyst]

Got it. And then cement volumes down 1% year-over-year, you cited weather. How are you thinking about the December quarter, you have an easy comp. You were down 13% last year. I don't remember what that was, probably weather. But how are you thinking about that comp and then kind of early 2024 cement volumes?

[D. Kesler, executive]

Brent, yes, look, there's always weather in different quarters. But look, the underlying fundamental demand for cement continue to go in the right direction, whether that's infrastructure, the highway awards that continue to grow these large industrial facilities.

It's hard to predict quarter-to-quarter depending upon when certain things happen or project delays or whatnot. But we continue to see an environment where utilization rates should remain high across our network, and there's a good demand backdrop for us.

[Adam Thalhimer, analyst]

Do you see any more variability than normal geographically?

[D. Kesler, executive]

No, I don't think so. There's -- again, for us, it's interesting if you were to think through the prior cycle, we're nearly 3x the size that we were back then. We got exposure from Northern California, East Ohio, South Texas. So we very much more represent a national average today versus where we were a decade or so ago, where we were kind of a very -- smallest regional player. So we just operate more markets today than we ever had before.

[Adam Thalhimer, analyst]

Got it. And then I'm trying to back into because the cement margins -- the cement margins remain exceptional. But I'm wondering, do you have any thoughts on cement cost per ton in the back half of the year?

[D. Kesler, executive]

Yes. So yes, as you pointed out, our margin profile continues to do very well in that business. And as we've said, what the tailwinds a year ago were around energy, specifically fuel, those have abated. Certainly here in FY '24 as you start looking beyond FY '24 certainly, in fuel costs, which for us is today predominantly solid fuels have trended lower. So you should see some benefit there.

Maintenance costs, we've seen inflation across parts and services, I would hope that, that might start to turn and go the other direction or at least become less inflationary. So it should be a reasonable environment for us.

[Operator]

The next question comes from Phil Ng with Jefferies.

[Unknown Analyst]

This is actually Colin on for Phil. I just wanted to touch on Stockton terminal really quickly. It was a nice contributor to the Cement segment this quarter. Can you just help us think about the volume contribution from that plant going forward? Does it have the ability to ramp up from its fiscal 2Q contribution? Or is it at capacity at this point? And then any color as to how those margins look versus your wholly owned margins?

[D. Kesler, executive]

Look, imported margins are going to be lower than your normal manufacturing margins. It's just a function of it's a distribution business versus manufacturing business, but it is operating with a good margin profile. And as we had expected, we pointed out in the earnings release, there is some kind of purchase price allocation still flowing through there this quarter, but that's largely behind us and a good amount of depreciation.

But in terms of the volume profile, I expect it to remain in this level in the immediate term. And there are some opportunities to expand that that we are exploring, but we've not made any decisions on that quite yet.

[Unknown Analyst]

Great. That's helpful. And just going to the wallboard side of the business, you've seen wallboard EBIT margins north of 40% for the fifth consecutive quarter now. I guess how sustainable is this level of margin just given the uncertain macro backdrop that we're in?

[D. Kesler, executive]

Colin, look, it's a function of price and cost. And price, as we've said, has been much more resilient, pretty much flat and almost exactly flat year-over-year. And again, we just don't face some of the other uncertainties that we had in prior cycles. So not surprised to see pricing more resilient here.

And then on the cost side, as we pointed out, paper prices have stabilized here at least sequentially, gas prices for us, natural gas has remained pretty stable here, $3 or a little below that on an MMBtu basis. Those are the primary inputs into the manufacturing of wallboard and don't see any significant changes on the horizon as we sit here today. So those are the biggest factors, and they've been very supportive so far.

[Unknown Analyst]

Appreciate the color.

[Operator]

This concludes our question-and-answer session. I would now like to hand the call back over to Mr. Michael Haack for closing remarks.

[Michael Haack, executive]

Thank you, MJ. I just want to say I appreciate everybody joining us for the call today, and we will talk to you in our early 2024.

[Operator]

The conference has now concluded. Thank you for your participation. You may now disconnect.