Knowles Corp

NYSE:KN

Earnings Call Analysis

Knowles Projects Revenue Growth, Solid Q3 Performance

Knowles Corporation reported a robust third quarter, aligning $175 million revenue with their forecasts and surpassing expectations with a 21% adjusted EBIT margin, $0.31 earnings per share (EPS), and impressive $40 million cash operations. The quarter was marked by strategic growth through the acquisition of Cornell Dubilier, set to bolster EPS from 2024. Key segments showed mixed results: Precision Devices declined 22% year-over-year, while Medtech & Specialty Audio (MSA) grew 20%, and Consumer MEMS Microphone business edged up by 2%. Q4 is expected to show continued improvement, with projected revenue between $210 million to $220 million, an EPS range of $0.27 to $0.31, and cash operations anticipated between $40 million to $50 million. The company targets a 19% adjusted EBIT margin for the second half, excluding Cornell Dubilier, and affirms its second-half EPS should align with prior expectations.

Q3 Performance with Strategic Moves

The company reported Q3 revenue of $175 million, consistent with their prior guidance, showcasing stability in their business operations. They exceeded their own expectations with impressive adjusted EBIT margins of 21% and earnings per share (EPS) of $0.31, thanks to efficient operational management and cost controls. A strategic move was made with the acquisition of Cornell Dubilier, which enhances the company's Precision Devices segment and is set to be accretive to EPS in 2024, indicating the company's focus on growth and value creation.

Segment Performance Insights

The company's Precision Devices experienced a 22% year-over-year decline in revenue due to ongoing demand weaknesses, although there was an improvement from the previous quarter. However, the Medtech & Specialty Audio segment saw a 20% revenue increase compared to the previous year, signifying resilience in market demand and positive growth prospects. The Consumer MEMS Microphone business modestly grew by 2%, with expectations for the upcoming Q4 to be its strongest quarter, affirming a robust demand for mobile shipments.

Anticipating Continuity and Expansion

Heading into Q4 and beyond, the company has conveyed solid momentum that suggests a strong belief in sustained growth, reflecting in its financial targets such as a 19% adjusted EBIT margin for the second half of the year and an expected alignment with previous EPS expectations despite earnings shifts between quarters. They plan to provide detailed future guidance on revenue, EPS, and cash from operations, incorporating the effects of the Cornell Dubilier acquisition.

Financial Prudence and Expectations for the Next Quarter

The company exhibited financial discipline with $40 million in cash generated from operations—aligning with a higher adjusted EBITDA and efficient working capital management. They invested $4 million in capital expenditures and returned $15 million to shareholders via share repurchases. For Q4, the revenue forecast is set between $210 million and $220 million, marking a 9% year-over-year increase, while EPS is projected to range from $0.27 to $0.31 per share. The anticipated cash from operations is $40 million to $50 million, with capital spending expectations at $5 million for the quarter.

End-of-Year Financial Positioning

Exiting the year, the company anticipates holding around $80 million in cash against a debt of $286 million. This includes a strategic use of debt facilities to finance acquisitions and operations, highlighting the strategic expansion efforts and the commitment to manage net leverage, which is expected to be around 1.4.

Looking Forward to 2024

The future outlook remains promising, with the Precision Devices segment forecasted to be around flat year-over-year in Q1, excluding the latest acquisitions. However, with the addition of Cornell Dubilier, significant year-over-year revenue growth is projected for Q1, demonstrating the company's strategic growth initiatives. Total 2024 revenue growth is expected to be solid, particularly in the first quarter, even without considering Cornell Dubilier, setting a positive tone for the year ahead. Moreover, as part of their growth strategy, the company is exploring strategic alternatives for the nonmobile portion of the business, seeking opportunities to further optimize and potentially divest segments to sharpen focus on core growth areas.

Earnings Call Transcript 2023-Q3

[Operator]

Thank you for standing by. My name is Kayla Baker, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Knowles Third Quarter 2023 Earnings Conference Call. [Operator Instructions]I would now like to turn the call over to Vice President of Investor Relations, Patton Hofer.

[Patton Hofer, executive]

Thank you, Kayla, and welcome to our Q3 2023 earnings call. I'm Patton Hofer, Vice President of Investor Relations. And presenting with me on the call today are Jeffrey Niew, our President and CEO; and John Anderson, our Senior Vice President and CFO.Our call today will include remarks about future expectations, plans and prospects for Knowles, which constitute forward-looking statements for purposes of the safe harbor provisions under applicable federal securities laws. Forward-looking statements in this call will include comments about demand for company products, anticipated trends in company sales, expenses and profits, and involve a number of risks and uncertainties that can cause actual results to differ materially from current expectations.The company urges it investors to review the risks and uncertainties in the company's SEC filings, including, but not limited to, the annual report on Form 10-K for the fiscal year ended December 31, 2022, periodic reports filed from time to time with the SEC, and the risks and uncertainties identified in today's earnings release. All forward-looking statements are made as of the date of this call and Knowles disclaims any duty to update such statements, except as required by law.In addition, pursuant to Reg G, any non-GAAP financial measures referenced during today's conference call can be found in our press release posted on our website at knowles.com and in our current report on Form 8-K filed today with the SEC, including a reconciliation to the most directly comparable GAAP measures. All financial references on this call will be on a non-GAAP continuing operations basis unless otherwise indicated. Also, we've made selected financial information available on webcast slides, which can be found on the Investor Relations section of our website.With that, let me turn the call over to Jeff, who will provide some details on our results. Jeff?

[Jeffrey Niew, executive]

Thanks, Patton, and thanks to all of you for joining us today. Knowles delivered solid third quarter results with earnings and cash flow above our expectations. Revenue of $175 million was in line with guidance, while adjusted EBIT margins of 21%, EPS of $0.31 and cash from operations of $40 million finished above the high end of our guidance ranges.In Q3, we took strategic actions to advance our transformation into an industrial technology company by announcing the acquisition of Cornell Dubilier and the exploration of strategic alternatives for our Consumer MEMS Microphone business. These actions reflect our ongoing efforts to increase exposure to high-growth markets and higher value opportunities.The Cornell Dubilier acquisition, which was successfully completed yesterday, bolsters our Precision Devices segment and is a testament to our commitment to growth, innovation and delivering greater value to shareholders. This transaction significantly expands our serviceable available market through CD's capacitor offerings, that will enable us to deliver a wider portfolio of products and solutions to both existing and new customers.CD's end markets are aligned with growth -- key growth tailwinds, including increasing defense budgets, medtech and critical care application growth. They are also well positioned in industrial electrification, clean energy and the implementation of next-generation fast-charging architectures.We are thrilled to welcome Cornell Dubilier's talented employees to Knowles and look forward to realizing the tremendous benefits of this transaction for our customers and our shareholders.The acquisition is expected to be accretive to our EPS in 2024. Importantly, we continue to have a strong balance sheet, allowing us to focus on balancing organic investment in R&D and CapEx with accretive M&A. We'll continue to return cash to shareholders through share repurchases. While we won't be getting into the specifics today relative to the exploration of strategic alternatives of the Consumer MEMS Mic business, what I will say is the process is progressing.Turning to segment results. Precision Devices' Q3 revenue improved sequentially and was down 22% from the prior year. Demand weakness associated with excess channel inventory continued in Q3, leading to low manufacturing capacity utilization. Demand has improved since Q2, and we are encouraged by the positive ordering trends in PD as book-to-bill finished above 1 for the first time in 6 quarters. We expect orders to continue to rebound in Q4, which gives us confidence in a return to growth in 2024.In Medtech & Specialty Audio, revenue was up 20% versus the prior year as market demand remains resilient. Based on our projected sequential growth and strong execution over the quarter, we believe we are past the inventory correction we experienced in the first half of '23. We remain confident in our ability to grow MSA in 2024.In the Consumer MEMS Microphone business, revenue was up 2% from last year and earnings were slightly better than expected as consumer electronics markets have stabilized and demand for nonmobile products grew year-over-year. We expect Q4 will be the strongest quarter for CMM this year, including the highest quarter for mobile shipments driven by timing of customer product launches and improved share position.To summarize briefly, MSA continues to perform well and we expect another strong quarter in Q4 with solid momentum heading into 2024. In PD, ordering trends have improved, but due to timing of the recovery, margins continue to be impacted by low capacity utilization. With the robust secular trends in defense, medtech and EV markets, complemented by the Cornell Dubilier acquisition, we believe we are well positioned for a return to growth in PD.For CMM, consumer electronics markets have stabilized and we expect second half revenues to be up year-over-year. Q4 is expected to be the peak quarter for the year, driven by strong shipments to mobile. We expect 2024 to benefit from the improving market trend and for CMM to return to full year revenue growth.While 2023 has been a challenging year, we are performing well in the second half. On the last earnings call, we laid out a target of 19% adjusted EBIT margin for the second half. Excluding Cornell Dubilier, we expect to achieve that target. Although there has been some shift in earnings between Q3 and Q4, our second half EPS is expected to be in line with our previous expectations.As we enter the next phase of our transformation into an industrial technology company, I am confident the strategic actions we've taken will drive long-term shareholder value.Before I turn it over to John, I want to highlight the change in our guidance metrics starting in the fourth quarter. We will be providing revenue, EPS and cash from operations guidance, which is inclusive of the Cornell Dubilier acquisition. We believe these metrics are the best measure for our business and are aligned to the company's focus.Now let me turn the call over to John to detail our quarterly results and guidance. John?

[John Anderson, executive]

Thanks, Jeff. We reported third quarter revenues of $175 million, in line with guidance and down 2% from the year ago period, driven by lower shipments in Precision Devices. The Precision Device segment delivered revenues of $50 million, down 22% from the prior year, driven by continued weak demand associated with the excess channel inventory in industrial and distribution end markets and timing of shipments into the defense market. Bookings in the quarter were $58 million, resulting in a book-to-bill ratio of 1.2 for Q3.In the Medtech and Specialty Audio segment, revenue was $57 million, up 20% versus the prior year as demand has returned to more normalized levels. Consumer MEMS Microphone revenues of $68 million were up 2% versus the prior year, driven by higher shipments into nonmobile applications.Third quarter gross margins were 44.6%, 110 basis points above the high end of our guidance range and up 610 basis points from the same period a year ago. Precision Devices' segment gross margins were 40.4%, down 710 basis points from the prior year due to lower factory capacity utilization. Medtech and Specialty Audio segment gross margins were 54.9%, up 700 basis points versus the prior year, driven by factory productivity improvements, favorable product mix and the favorable impact of foreign exchange rate changes.Consumer MEMS Microphones delivered gross margins of 39.9%, up nearly 16 percentage points versus the prior year, driven by a gain on the sale of assets, lower factory costs, favorable product mix and higher factory capacity utilization, partially offset by price reductions in the smartphone market.R&D expense in the quarter was $17 million, up $1 million from the prior year, driven by higher incentive compensation costs and timing of material spend, partially offset by reduced spending in our CMM segment driven by the benefits of prior year restructuring actions as we continue to shift our focus and spending to our higher-margin businesses.SG&A expenses were $25 million, $1 million lower than prior year levels, driven by lower sales commissions and incentive compensation costs in Precision Devices, partially offset by higher professional and legal fees associated with the exploration of strategic alternatives for CMM. For the quarter, adjusted EBIT margin was 21%, 520 basis points above prior year levels and 100 basis points above the high end of our guidance range. EPS was $0.31 in the quarter, $0.06 above prior year levels and $0.01 above the high end of our guidance range.Now I'll turn to our balance sheet and cash flow. Cash and cash equivalents totaled $75 million at the end of the third quarter. We generated cash from operations of $40 million, above the high end of our guidance range, driven by higher adjusted EBITDA and lower net working capital. Capital spending was $4 million in the quarter. And we repurchased approximately 900,000 shares at a total cost of $15 million. We ended the quarter with cash net of outstanding bank borrowings of $30 million. As Jeff mentioned, future guidance will be provided for revenue, EPS and cash from operations.We believe these financial metrics align best with our long-term strategic focus and are the best measure for our business as we transition to an industrial technology company. We expect to hold a virtual Investor Day to provide updates to our midterm financial targets, capital allocation, addressable markets and long-term strategy shortly after the completion of our evaluation of strategic alternatives relating to the CMM segment.Moving to our guidance for the fourth quarter, which includes the Cornell Dubilier acquisition which closed yesterday. Revenues are expected to be between $210 million and $220 million, up 9% versus the same period a year ago. We're projecting EPS to be within a range of $0.27 to $0.31 per share. This assumes weighted average shares outstanding during the quarter of $93 million on a fully diluted basis. We're projecting cash from operations to range from $40 million to $50 million, and capital spending is expected to be $5 million.We expect to exit 2023 with approximately $80 million of cash and $286 million of debt, which includes $175 million of borrowings under our revolving credit facility and an interest-free seller note which was issued in connection with the Cornell Dubilier acquisition. We expect to have a net leverage ratio of approximately 1.4 as we exit 2023.I'll now turn the call back over to the operator for questions and answers portion of the call. Operator?

[Operator]

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

[Bob Labick, analyst]

I wanted to start, I guess, just with guidance since you just kind of ended there. Can you give us a sense of what's included in that guidance from CD? I guess it's 2 months given that it closed yesterday. We just want to confirm that. And maybe give us a sense of what the revenue contribution is there?

[Jeffrey Niew, executive]

Yes, Bob. Obviously, our intent is not to guide by the segment going forward. But I think, obviously, with the period -- we don't own it the whole quarter. It's about 2 months. We're expecting roughly about $20 million in revenue from Cornell Dubilier.

[Bob Labick, analyst]

Okay. Great. And then -- I mean it just closed, obviously. Give us a sense of kind of the integration process and timing? And I know when you purchased it, you mentioned that their margins are lower than your PD, but there's that opportunity potentially to bring those up. So give us -- talk about like that opportunity to raise CD margins up to or closer to PD's historic average, please?

[Jeffrey Niew, executive]

Yes. And just to reconfirm, Bob, kind of what we said was that we expect probably roughly about $140 million of revenue next year, with EBITDA $25 million to $27 million, somewhere in that range for EBITDA next year. And there is some pretty significant cost synergies. That will take some time to get. I think we looked at probably $3 million to $4 million of cost synergies that we think that we'll get.What we didn't detail too much about was revenue synergies. I think there are going to be some revenue synergies with Cornell. We'll probably go into a little bit more detail in that at the Investor Day. But I think we would expect some of these revenue synergies to start showing up in the back half of 2024.

[Bob Labick, analyst]

Got it. Okay. Great. And then last one for me. I'll jump back in queue. Just -- you mentioned at the Analyst Day, just to be clear, when you conclude the CMM process? Or have they concluded -- how is it -- will you have sold -- will you have decided to? Or what's...

[Jeffrey Niew, executive]

Yes. That's a -- I think that's a question we anticipate getting. We kind of put that in John's script. But I think the best way to put this is, I think we need to have some clarity on the outcome of the strategic alternatives process. I don't have a firm date on when that's going to be complete. And so -- but I think it probably is really -- we kind of view it from a perspective is we got to have a -- like kind of some clarity around the outcome of that process.Now what that means in clarity -- and there's a lot of different outcomes here. I don't want to speculate on what the outcomes could be. But I think in order to start giving new midterm targets, we really got to know kind of what the situation is relative to strategic alternatives with the Microphone business.

[John Anderson, executive]

But we are progressing.

[Jeffrey Niew, executive]

But we are completely progressing. I mean, we are making progress.

[Operator]

And your next question comes from the line of Christopher Rolland with Susquehanna.

[Christopher Rolland, analyst]

Perhaps you can talk about PD, how you see inventory there? Are we almost done with the clear out there? Also, anything else you want to talk about pricing, order trends, et cetera, would love to know. Yes.

[Jeffrey Niew, executive]

Yes. I mean I think from our perspective, in the PD business and also within the MSA business, the pricing has been very, very stable. I mean, I don't -- we don't think there's any issues relative to pricing in these markets. What I would say first on the MSA side is the market continues to be very resilient and strong in the hearing health market. And we are very excited about 2024, our position for new products with our customers. The growth of the end market, we feel pretty good. We don't see any inventory issues in this market today.And in fact, I'd just make the comment, Chris, that there's kind of like this -- although we've been kind of tamping down what the belief is about over the counter, well, we're not seeing like great pickup in over-the-counter demand. There is starting to be kind of like with our customers in the market -- I believe that the marketing of over-the-counter hearing aids is actually drawing more people into the traditional channels than would abnormally come in. And so we feel pretty positive about the MSA business.On the PD side, I would say it's a little bit more of a mixed bag. But here's what I would say, is that we had a book-to-bill above 1 for the first time in 6 quarters. And I bring that up -- I mean, that's a pretty big step now. I will say a significant amount of the orders that we saw in Q3 were from defense, which typically are not short orders. Like they're typically longer-term orders that we deliver over sometimes a year, 1.5 years.Now all this being said, I'd say as we look into '24, I think defense looks pretty good, the Med business and EV look pretty good. We think the long term of those businesses or markets looks pretty good. But one I think is probably the least clarity on yet is industrial and distribution. And it does remain weak. The bookings remain weak in this portion of the business and the shipments remain weak.Now we're listening to a lot of other people are saying. We are seeing the work down in our distribution channel. We see the inventory of what they've got. We're starting to see it worked down. But I think, overall, we feel pretty good about growth for 2024 in the PD business. And I think the other side of this is, once we get back to growth, the capacity utilization will improve and the margins will return back to a more like normalized level that we saw when the business was growing.

[Christopher Rolland, analyst]

Yes. The industrial weakness, I would say, is going around. No surprise there. It's a very solid December guide. And without guiding March, perhaps you can just kind of give us the broad puts and takes given your kind of deemphasizing consumer. And so I don't think kind of seasonal trends will hold there. If you could talk about it more broadly and what to kind of expect there would be good?

[Jeffrey Niew, executive]

Yes. So let me start with the Consumer business. Seasonally, Q1 is typically down. That's -- you don't have launches in mobile. So I think we'll continue to see a trend like that, that in Q1, mobile will be -- CMM will be down. I would also say that we're having a very, very strong quarter in Q4 for MSA. It will be down sequentially. But I think the theme around the CMM business and the MSA business is year-over-year there will be significant growth, because if you remember, Chris, we had a very weak Q1 of '23. So there should be some pretty significant growth year-over-year.The PD business, here's what I kind of would frame it is I would sit the and say we're probably going to be flattish year-over-year in Q1 for PD, excluding Cornell, right? So -- and obviously, the Cornell will add -- just think of it, we said about $140 million. It's probably a little bit more back-end loaded than front-end loaded, but you can get to a number there to see kind of what Cornell will be generating. So -- but overall, I think, Chris, what we kind of feel is Q3, without Cornell, we're flattish year-over-year. So we feel pretty good about that considering everything that's going on in the marketplaces. And then Q1, with having obviously some easy comps in Q1 of '23, we should see some significant growth. And then on top of it, adding in the Cornell number as well.

[Operator]

Your next question comes from the line of Anthony Stoss with Craig-Hallum Capital.

[Anthony Stoss, analyst]

Maybe more for John. In terms of total OpEx and gross margins for the December quarter, could you give us kind of your thoughts?

[John Anderson, executive]

You said for the -- for Q4, Tony?

[Anthony Stoss, analyst]

Yes.

[John Anderson, executive]

Yes. So again, we're kind of moving away from gross margin, really focusing on operating margin with this transformation to industrial tech. What I'll say is Q3 had some onetime benefits that were in both gross margin and operating margins that were fixed asset sales. We had roughly $5 million. We also had, I'll call it, an NRE recovery of a couple of million dollars. That is not going to recur in Q4. So you'll see margins going down sequentially.

[Anthony Stoss, analyst]

Okay. But just on OpEx, I know it's like too much...

[John Anderson, executive]

Yes. From an OpEx standpoint, Tony, we ran -- we -- I think a couple of times, I've talked about kind of $43 million to $45 million run rate. We've been a little lower than that. We will jump up with the Cornell Dubler acquisition slightly. But I would say for the core business, that $43 million to $45 million run rate, we're right there. It could be a touch lower than that. And then on top of that, adding into CD. CD is roughly $20 million to $25 million annually in operating expenses.

[Anthony Stoss, analyst]

Okay. Got it. And then if you guys were to -- it seems like things are picking up bookings on PD. If you were just to look at Knowles prior CD, would you expect total revenue growth in 2024 over 2023? Jeff?

[Jeffrey Niew, executive]

Well, I mean, I'm not going to predict the full year at this moment, but I would just start and say is Q1 will definitely be up year-over-year, not counting CD. I would say that's kind of the thing I'd step out. It's a little early to start projecting the full year, but I think we're going to start off very well in Q1. Going back to kind of what I answered on one of the other questions, which is then in the microphone business as well as the MSA business, we expect some pretty strong year-over-year growth in Q1. I would say the PD business is still, I would say, flattish and then add on top of it the CD revenue.

[Anthony Stoss, analyst]

Got it. And then speaking of CD, I'm curious if you could share some light on where they stand inventory-wise. Is it similar to Knowles position, there's still a little bit to be worked off? Or what kind of commentary can you give us on CDs inventory?

[Jeffrey Niew, executive]

Yes. I think they're seeing a lot of the same thing in their distribution portion of the business. Just remember, this is quite a bit more distribution business. About 50% of our revenue goes through distribution. And they are seeing the same thing. But here's what I would add. Their OEM business, their direct business is actually holding up a little bit better than the PD business. And the reason I say this is, remember, we had these kind of push outs on defense relative to things like Lockheed, which we've talked about in previous quarters. They have a fair amount of business in what I would call electrification, clean energy, medtech, and it seems to be holding up pretty well their OEM business. So that's kind of like kind of a little bit offsetting. So we're not seeing overall quite the decline that we saw in the PD business. So I think in the distribution/Industrial portion of the business, yes, we're seeing similar things.

[Anthony Stoss, analyst]

Got it. And then last question for me. John, you made a comment about your CMM business going to be pretty strong in Q4. Was there a different change in Knowles thinking on how much business you'll take for the December quarter within, say, smartphones or just in consumer in general?

[John Anderson, executive]

Just repeat...

[Jeffrey Niew, executive]

I seen that we have some pickup...

[John Anderson, executive]

Yes, we've seen the CMM business.

[Jeffrey Niew, executive]

Yes. I'm not going to go in detail by customer, but we have seen an increase, we think, its share in the mobile business in Q4. And to the extent I would sit there and say the positive is, obviously, we get a lot better capacity utilization, we get more revenue. But incrementally, in the CMM business, the margins are not as high in the mobile portion of the business.

[Operator]

[Operator Instructions] Our next question comes from the line of Tristan Gerra with Baird.

[Tristan Gerra, analyst]

Quick questions again on the PD business. You mentioned that the bucket of weakness was still industrial and industry, is it fair to assume it's about 1/3 of your Precision Devices business? And what do you see in some of the other segments, including automotive, which I think in the past was maybe about 10% of your PD business? Is that slowing? Any additional color on the various end markets within that business?

[Jeffrey Niew, executive]

Yes. I would just here to say, yes, the industrial distribution course of the business is probably a little bit less than 1/3 of the business, and it is -- but it is down pretty significantly year-over-year. That's the biggest we point I think we've talked a little bit about defense. It will be down nowhere near kind of what do you call have in industrial and distribution, but more on the timing of orders than anything else. Our automotive business still will be up. It's obviously, from a small base, we're -- we had talked about $15 million to $20 million and $23 million of revenue. We'll be firmly in the middle of that range for automotive this year with some nice growth year-over-year.

[Tristan Gerra, analyst]

Okay. Great. And then I know that you're holding commentary on your CMM business, pending the review. Just what is the willingness to reduce the top line as you potentially restructure that or take any other actions relative to what would be a gross margin accretive event? And how do you mitigate which is what some other companies have done reducing production and as such incurring underutilization charges, but at the same time, avoiding inventory bill. Just trying to look at, at a high level how things could look like or how is your willingness to change the business model in that regard in terms of how drastic that could be in terms of top line and gross margin impact?

[Jeffrey Niew, executive]

Yes. Let me just take the first point. If you remember back middle of 2023, we took some pretty significant action relative -- I'm sorry, middle of 2022, some pretty significant actions in this business, taking out about $30 million worth of costs, a combination of both OpEx and cost of goods sold, taking costs out, fixed overhead. And so I think for now, we're kind of where we want to be until -- and we're actually running pretty close to capacity in the back half of the year in this business right now.I think what we're kind of hopeful for that we see is the opportunity in this business, obviously, we're going through the strategic alternative processes is that the nonmobile portion of the business grows, which is significantly higher margin, the mix shift will help significantly over the next 12 months, 18 months, and we'll naturally be able to take less mobile business as well be filling our capacity with higher gross margin business. I really don't see us taking any further action in this business until we get to the conclusion of strategic alternatives and what's going to happen with the business.

[Operator]

And there are no further questions at this time. This concludes today's conference call. You may now disconnect.