Baylin Technologies Inc

TSX:BYL

Earnings Call Transcript 2022-Q3

[Operator]

Good day, ladies and gentlemen, and welcome to the Baylin Technologies Inc. Third Quarter 2022 Conference Call. [Operator Instructions] The operator call is being recorded on Thursday, November 10, 2022.

I'd like to turn the call over to Mr. Daniel Kim, Executive Vice President of Corporate Development of Baylin Technologies. Go ahead.

[Daniel Kim, executive]

Hello, and welcome, everyone. Thank you for joining us this morning for the Third Quarter 2022 Earnings Conference Call for Baylin Technologies. On the call with us today from Baylin are Leighton Carroll, Chief Executive Officer; and Dan Nohdomi, Chief Financial Officer. We will all be available for questions at the end of the presentation.

Before we begin, let me make it clear that our comments today may include forward-looking statements and information and answers to questions that could imply future expectations about the prospects and financial performance of the business for 2022 and could include the use of non-IFRS measures. These statements are subject to risks, uncertainties and assumptions. Accordingly, actual performance could differ materially from statements made or information provided today, so you should not place undue reliance on them. We also do not intend to update forward-looking statements or information, except as required by law. I ask that you read our legal disclaimers and explanation of the use of non-IFRS measures and refer you to the risks and assumptions outlined in our public disclosures, in particular, the sections entitled Forward-Looking Statements and Risk Factors in our annual information form for the year ended December 31, 2021, and other filings, which are available on SEDAR. Our Q3 2022 results were released after market closed yesterday, the press release, financial statements as well as the MD&A are available on SEDAR and on our website at baylintech.com.

I would now like to turn the call over to Leighton.

[Leighton Carroll, executive]

Thanks, Daniel. We continue to see significant challenges with the quarter was positive $0.1 million, the fourth consecutive quarter of adjusted EBITDA positivity since the third quarter of 2020. While it's not as strong as we would have liked, overcoming real challenges with supply chain was a key theme this past quarter. Our embedded in the infrastructure teams continue to show resiliency in the face of the zero COVID policy in China and ongoing supply chain constraints. Our mobile business dealt with our primary customers reduction in volume, which have impacted everyone in their vendor ecosystem. SATCOM also dealt with significant supply chain issues at 3 key suppliers during this quarter. Despite these challenges, adjusted EBITDA in the third quarter of 2022 was a $0.8 million increase compared to the third quarter of 2021. The increase in adjusted EBITDA was despite total revenue declining slightly and was primarily due to an increase in gross profit that Dan will discuss further.

With regards to OpEx, operating expenses in Q3 of 2021, approximately $300,000 in government COVID incentives were received. These were recorded as a reduction to the cost of sales and operating expenses. In contrast, we have not received any COVID assistance this year. Taking that into account, this is a positive swing of $1.1 million year-over-year in adjusted EBITDA, a $0.8 billion plus 0.3%. In other words, despite continuing to deal with these external challenges, which are pervasive and really almost every company is dealing with them. We're continuing to have positive results and continuing to demonstrate resiliency. Our backlog at the end of the quarter remained at a very consistent level was $37.4 million. Backlog in particular, in our SATCOM and embedded lines are very strong. SATCOM sure is seeing our business capitalize on multiple tailwinds. Overall, this translates into our backlog increasing by $8 million or over 27% year-over-year at this time. And this is a reflection of improvements in our go-to-market, our business development and a double down on specific sales activities and sales activities that are -- it's not just about selling, right? We can sell stuff that is cheap. You can throw concessions. We actually have been working very aggressively to rightsize our product portfolio to improve our margin structure and to eliminate low-margin products. So it's actually one of the things that -- when you talk about a backlog number, it's not just the number. How did you get there? And if you got there by improving your product portfolio and improving your margin structure, that's a good story. In September of this year, we also announced that Galtronics had expanded its multi-beam antenna portfolio. I'll save you the details, but this is really an important product set for us because it's an area where we have unique competitive differentiation. It's patent pending, and we are seeing a lot of traction with this.

What's also interesting when I say traction, European and Australian customers have proactively contacted us about these products based on the quality of our brand, the quality of the engineering we historically have and the fact that these antennas actually do what they say they will do. And at the price points which are good for us, but given the competitors who are out there, give us a unique position relative to them. It's really an interesting time in the business. Now these are long sales cycle products. They were just released. It doesn't mean they're going to turn into revenue tomorrow, but it is opening up new relationships for us. When a European carrier proactively calls us about these products, that's an interesting sign. Also, the same month, this is something we're very proud of. Our Advantech Wireless Group, the team in Montreal and in the U.S. launched a new line of solid-state power amplifiers. Its SSPAs and SSPBs and SSPB includes an RF converter.

The new line is called Genesis, part of the reason we called Genesis. It's a bit of a rebirth of the technology. It provides a slew of high-end features that we have not had in the product line before. It is extremely modular, something that's also very important to me is aside from the performance and the customer experience and the customers' ability to monitor and control these is the improvements in manufacturability. We've already produced 6 of these and 6 have already been purchased. And our second largest customer has indicated that they are going to be placing in it.

Lastly, in August of 2022, I'm pleased to announce that Bejoy Pankajakshan was appointed to Baylin's Board of Directors. Bejoy is the Executive Vice President and Chief Strategy Officer for Mavenir Systems. Mavenir is latent opinion, really one of the strongest, if not the strongest player conversations directly with operators and technology companies around the world. Obviously, he's developed a lot of expertise and insight into technology, product development, strategic development and growth. And we look forward to him helping us on our journey as we play a role in this broader ecosystem. Given the strength of our Board, we see this as a really nice fit and a great augmentation.

Dan Nohdomi, our CFO, will now comment on third quarter results.

[Dan Nohdomi, executive]

Thank you, Leighton. I'll begin with a summary of our third quarter results. Revenue in the third quarter of 2022 was $30 million, which was a moderate decrease of about $0.2 million or 0.8% compared to the same quarter last year. The decrease was primarily due to softer sales in Asia Pacific business line, which was adversely affected by production volume reductions at their largest customer. And the decrease was partially offset by stronger sales in Embedded, which was attributable to increased demand from new customers for home networking products.

Gross profit in the third quarter of '22 was $7.9 million, an increase of $1.6 million or just about 26% compared to the same quarter last year. Gross margin was 26.4% in the quarter compared to 20.8% in the third quarter last year. The improvement in gross margin resulted from a balanced product mix due to both changes in pricing strategy and a data-driven focus on margin at the business line level, which in the third quarter of '22 was primarily generated by one operating and financial efficiencies in Asia Pacific and consistent growth in embedded.

Adjusted EBITDA in the third quarter, as Leighton mentioned was $0.1 million, the fourth consecutive quarter sequentially of positive adjusted EBITDA. What that means is on a trailing 12-month basis, adjusted EBITDA was positive $1.5 million. And again, adjusted EBITDA for the quarter was $0.8 million higher compared to negative $0.7 million in the same quarter of last year, mainly due to the increase in gross profit discussed earlier, partially offset by an increase in operating expenses compared to the same period last year.

Backlog was $37.4 million, as Leighton mentioned at the end of the quarter, again, mainly attributable to strong backlog levels at SATCOM in Asia Pacific compared to the backlog level at December 31, 2021. And that was an increase of $8 million or 27% compared to the backlog at the end of the third quarter of last year. And again, as a result of improved marketing, business development and sales activities that Leighton mentioned. For the third quarter of '22, we recorded a net loss of $4.9 million, which was comparable or consistent to the loss recorded in the same quarter last year. It was primarily due to an operating loss of $3.4 million interest expenses as well as income tax expenses.

On a per share basis, a net loss of $0.06 per share in the third quarter of '22 compared to a net loss of $0.07 per share in the third quarter of last year. Net debt at September 30 was $21.5 million, which was an increase of $9.2 million from the end of last year, mainly due to an increase in non-cash working capital specifically investments in inventory in SATCOM to get ahead of the long lead times and to mitigate supply chain risks to support the increased backlog and help them execute against that backlog.

Secondly, CapEx and lastly, debt service, which includes principal and interest payments. As disclosed previously, we extended the credit facilities 12 months to September 30 of '23 with RBC and HSBC, Canada, we are needless to say, we are very grateful for our lenders continued support of our business and the extension will provide us with additional time either to renew the existing facilities when they mature or to find alternative credit facilities.

I'll now turn the call back over to Leighton.

[Leighton Carroll, executive]

Thanks, Dan. As I mentioned in the opening remarks, the performance this quarter was really in many respects about overcoming adversity. The problems with our supply chain, the labor markets are obviously challenging, and we're still dealing with general lockdowns. This affects everyone who produces in China, and I don't know how many CEOs have talked to and we all commiserate about supply chain and labor markets and what's going on in the broader world. Regards to these challenges, we achieved positive adjusted EBITDA in the quarter, which is our fourth consecutive quarter, which is great.

We also continue to maintain our backlog at elevated levels, right? And at the end of the day, if your customers are buying from you, while you're improving your business, even despite the economic conditions, that's a good thing. That said, look, I do want Baylin to have much stronger results than we were ultimately able to deliver this quarter. That's not to take away from the things that we overcame, but where we are is still is not where I want us to be. And it's not where, ultimately, I think this company can get to by any measure.

So with that, let me take a moment to thank the employees of Baylin. While the results are good, not great, we wouldn't have even gotten too good if the people at this company have not bought in, have not had the level of commitment and engagement. And in some cases, we really work through some challenges. Our turnaround strategy for this business has been to fundamentally change the culture, look at data and the way that we use it, improve our efficiencies, drive accountabilities and have a strong customer commercial focus.

Talking about culture is easy implementing it is not having your employee base buy in and help you get something as complex as Baylin with as many parts as we have to turn around. It's something that I'm honestly very thankful for by them embracing this culture and helping us reinforce it and grow and be empowered to make smart decisions for themselves, it's something I'm very thankful for. So leveraging honestly the quality of our people, obviously, the strength of our engineering, given these new product developments, our unique manufacturing capabilities and geodiversity therein, I do believe that in the long term, we are going to be in a much better place.

Now one of the things I will say is, previously, we had talked about the challenges in supply chain, material shortages, the Chinese zero- COVID policy. All of these things we expected to ease in the second half of '22. We've said that previously. Clearly, that's not the case any longer. Obviously, at the beginning of this year, I didn't anticipate that Russia would invade Ukraine or that China would stay as locked down as long as they have. At this point, there's no crystal ball, but we anticipate several of these challenges are going to continue for the remainder of the year and likely through at least the first quarter of 2023. That just means Doug doesn't meet your homework, we just have to deal with the challenges and keep moving forward.

Now I'd like to speak about each of our businesses and the work that is going on within each excuse me. In the embedded antenna business, we had continued strength. It's been a strength all year, but Q3 was an absolute standout for us. We have seen strong order volume across a number of our products and platforms. And this is despite some of our customers having chipset shortages and pushing out order volume or delaying the time that they wanted delivery.

Despite this, we continue to be robustly profitable and we continue to outperform from expectation within this business. I would also like to share that we've actively been working in both our embedded and infrastructure business lines on diversifying our manufacturing base. While I don't foresee moving away from China completely, given the strength and maturity of that manufacturing ecosystem, we will begin selectively manufacturing products in countries such as Vietnam and Malaysia. Some of this is customer driven. Some of this is just candidly, geopolitical risk mitigation on our part.

Speaking of the wireless infrastructure line, it had a slightly weaker quarter and did not perform to the level of revenue and adjusted EBITDA that we had liked historically, September and October for our business is a little bit lower than other parts of the year. We do expect DAS deployments to strengthen, particularly in the east of stadium and in building wires for the remainder of the year. And we also expect these new multi-beam antennas in our small cell portfolio to open up additional opportunities to drive sales across multiple carriers.

That said, the sales cycle is not overnight just show up and say, "Hey, I've got a great antenna, what do you think?” It's substantially more technically complex in that, a lot of times, as an example, a Tier 1 carrier in a country. So I think here's a great example. We launch a multibeam antenna. Wow, that looks great. The specification look amazing. “Hi, I am Tier 1 U.S. carrier. I'm interested in your antenna. We're going to give you a trial. We're going to deploy a couple of these sites at a high-traffic area in x, y, z location and then we're going to evaluate it.” Oh, now it does actually perform like you said it would net so you understand that this doesn't happen overnight. You have to, in many cases, with these carriers because the customer experience is so critical to them. You have to prove yourself and that proof point doesn't come overnight. While it is phenomenal to have all of these new products, it will take time for them to get the traction in the market that we foresee. Now with that being said, that's a good story, and it does mean our best is in front of us.

Our SATCOM business line has also continues to demonstrate consistent demand with spending by our customers continuing at the momentum that we saw in the first half of the year. Given what we're seeing in the SATCOM ecosystem, we expect this is going to continue for the remainder of the year and through easily into early 2023. Our Genesis line of SSPAs has generated significant interest from commercial clients, particularly those in aviation and maritime, given the power levels within that family of product and the band -- the initial band that we deployed, which is very purposeful.

Moreover, given that, that is a platform and not just an amplifier, we will be launching several new products in the coming quarters based on the underlying Genesis technology platform. The reason that, that is cool is that this is not a single event. It is going to be multiple new products across multiple different SATCOM use cases that will allow us to not just have something that is unique and that we believe our customers will like a great deal, but it also improves our manufacturability, which means it will be more efficient in Montreal. It should also be noted that for military and government-related entities, we are seeing continued increases in spending. This is both driven by -- look, it's unfortunate in respect, but defense spending in the Western world is increasing broadly. And then secondly, many countries coming out of the COVID pandemic have focused on improving world broadband. All of those things are good for us. Additionally, I want to point out that the team in Kirkland has done an admirable job dealing with substantial supply chain challenges.

Now if I'm talking about Q3 results in themselves, we were lowering revenue than I would have liked. That was driven 100% and by problems that we were having with supply chain and vendors and it meant that our team had to double down, come up with unique solutions, in some cases, bigger alternative components. The engineering team in Kirkland had to deal with challenges to how we overcome challenges and manufacturability. All those things needed to be addressed. With that, the nice part is we more than hit-plan at the end of the quarter on a monthly basis, and we are starting to see consistency in the volume that the team is producing, which is a really favorable sign for our future.

Based on these improvements, we expect the revenue and adjusted EBITDA of our SATCOM business line to, obviously, given we had these challenges that were not where they wanted. In Q3, we do expect Q4 and our SATCOM business line is going to be substantially better. And to be substantially better than all on a quarter comparative basis, substantially better in the fourth quarter than it was any of the prior 3 quarters of the year.

As mentioned earlier, our Asia Pacific line, which is dominated by one large customer has had substantially lower revenue. Management of that business, we're able to limit the effect of the lower revenue by proactively managing costs. If you compare that to, say, Q1 and Q2 of 2021, when the revenue in APAC was down. Q1 and Q2 of 2021, there were significant losses. That did not happen. We effectively mitigated the negative financial impact, which is part of why you see kind of even despite a material change in revenue and one that we had not forecast and happened fairly quickly to us, we were able to mitigate the negative financial impact.

Additionally, we recently completed a restructuring of our APAC unit. This was done in conjunction with our customer and discussions with them. And as part of our work over there, I'd like to both thank and then announce that our President of our APAC business and who has been with us since 2014, will be retiring due forth through a handful of other steps we are taking. We do expect to see some improvements in our cost structure in that unit as well. And separately, given the dependency that we have on this particular customer and look, they're a great customer and we love them. But you do need if you're running any business, you have to think about revenue diversity and customer diversity.

At this time, we are taking a number of very active steps to not just improve the profitability and contribution margin of that business, but to diversify our revenue streams and to diversify our business over there so that we are not as dependent as we are or have been historically on this large customer. With all of this being said, across all of our business units. And this is just one of the unique things about Baylin is you don't talk about Baylin as a single thing.

We have 4 discrete businesses, each has puts and takes with everything that has gone on, the way that we've been managing through it and the way that we have been overcoming supply chain despite all these economic headwinds, we're going to have a fourth quarter, we believe, will be roughly comparable to the third quarter. That doesn't mean we're going to be a rock star. It doesn't mean it's going to be awful. It means we should be relatively consistent. Reflecting on this quarter, I want to reiterate that the resilience of this business is important. This quarter was particularly challenging in terms of supply chain and some of the things that have happened.

To be able to overcome this and to have a business that is substantially better than it was a year ago. It is something I believe our people are proud of. We have better operational controls, reporting visibility and engagement for our employee base. And obviously, with the launch of the products that I mentioned, we're investing in innovating and that's important because it's not just about trying to run a ship tightly and having everything buttoned up. If you're not launching new products that your customers really resonate with and that they want to buy, you're not going to get to where you ultimately need to be in your business, and we are doing so. And even with these new products, and there's sometimes the sales cycles are not overnight. Our backlog of our current portfolio remains strong, and we have been working diligently behind the scenes to improve our margin structure despite some of the things that we've talked about.

None of this is possible without the commitment of our people's sense of urgency and the engagement is critical. And it's something that I thank them for to be honest, as often as I can. There remains a lot more to accomplish. I would tell you, I'm not satisfied with the financial results we have. I want to see better. And I think we can. Actually, I don't think we can, I believe we can. But with that, we have a lot more to do, and we have a lot more to get after.

Operator, that concludes the formal remarks. We are happy to take questions.

[Operator]

[Operator Instructions] First question comes from Andy Nguyen of Raymond James.

[Andy Nguyen, analyst]

This is Andy on for Stephen Li. Just have quick questions on the backlog for Q4. So I noticed that the back log remained pretty flattish at September compared to July. So could you please comment on the outlook for Q4 backlog?

[Leighton Carroll, executive]

No, thanks for that. So as I think some of the folks in the investment community know, there are certain members of our Board who have a strong affinity for baseball. And an analogy that I use with them is we have been slowly improving. There's a concept in baseball called small ball, and it means you're focusing on your fundamentals, lots of base hits, good infilling, good pitching, but you're not hitting home runs, right? Why am I using this analogy?

Well, how we have built our backlog to date has been a lot of base hits. It's been a lot of banks. And let's get the fundamentals right. Let's do the things we need to be good at every day, right? And that's been our approach. So it's a lot of small things, a lot of incrementality. We are just getting to the point where we're going to take some bigger swings. And within certain of our businesses, like obviously, the mobile business, the mobile business gets what its backlog just sits there, right?

We're sitting at $3 million in backlog on any given day in our mobile business. So we'll go up to 4%. It will go down to 2.8%, but it will sit within that window. That business, you're not going to have these big opportunities to have large wins or significant opportunities. In many respects, that business is about purchase order velocity, the turnover of the purchase words you have. That's what you want within that business. Whereas in other business, for example, SATCOM, you have opportunities for larger programs than government and military in particular, that are unique to that business.

And so by using this analogy, up until this point, given where our company has been, it's been about focusing on fundamentals and base hits and getting better every day. We're now at that transition point where we're going to start taking some big swings, right? And if you've seen Aaron Judge or Brubeck or whatever baseball player you like, those guys hit a lot of home runs, but they also miss a lot, which means you're in the bidding process, you're in a competitive process. We expect, as we start to take these claims, we're going to miss. As I characterize our backlog today, it is continued strength in SATCOM. In fact, if anything, because we're producing higher volumes in SATCOM, our SATCOM backlog actually at the end of the quarter and into October started to come down. However, as soon as we start to produce, your sales teams can go, “Oh, we're going to have a little more consistency in production, guess what the backlog is returning back.” And on top of that, we're taking some big swings.

I don't have anything to announce. We talk about backlog solely as hard purchase orders, not promises, not things we're working on. Our backlog right now is consistent. It's consistent and embedded. It's consistent in infrastructure, which, by the way, it's higher. Right now, last year, we were at, call it, about 1.5% on average for the entire year. Our infrastructure backlog is elevated. Our SATCOM backlog has been consistent and really solid and we have some big swings that we are taking.

So I am hopeful that we're not promise that in our future. I'm going to have a different discussion on one of these earnings calls, and you'll see different press releases about what's coming in our future because we're now going to be taking big swings. And like I said, we're going to take these swings. It doesn't mean we're going to hit the ball every time. It means we're probably going to get a few strikes along the way. We're going to miss, and that's okay.

We have to learn from that process. But as the technology that we're working on connects with the ball, so to speak, and we capitalize this into customer opportunities. It's something that I'm very interested in about our longer-term future for our business. I think in the short term, given the macroeconomic environment, it's going to be challenging. But with where we are, our backlog across all 4 of our businesses have remained consistent for what they each are, and we are working actively to try to transform that, particularly for infrastructure and SATCOM into larger opportunities.

[Operator]

The next question comes from Daniel Rosenberg of Paradigm Capital.

[Daniel Rosenberg, analyst]

I wanted to ask on the backlog. Just you mentioned a different kind of margin profile there. So if you were to consider, let's say, that backlog being steady state, what kind of margins do you think you are at? And is it enough to turn the corner on profitability and kind of how far are you with that?

[Leighton Carroll, executive]

Yes. No, great question. So with where we are on a blended basis, I think we're in a decent position. A way to think of this, particularly given where we've been in terms of our balance sheet. If nothing happens, right? I'm going to keep with the baseball analogy for a second. We take these swings and we don't get anything. And we just keep trundling along doing what we're doing today.

Our business is going to be fine. It's going to be a bit of a slog. It's a journey. And it won't be easy, but we're going to be fine. And where I'm going with this is, given what we're seeing, just kind of the incremental view of where we are on the playing field of revenue streams we have. And what we expect in the long term will happen with the supply chain and with some of our customers. We expect that we will continue this progressive march towards profitability.

One of the things we do talk about internally is not just the gross profit, but the revenue attainment level, right? Because ultimately, given certain fixed cost structures that we look at regularly. The ability to drive profitability in our business is a function not just of gross profit, but of the total top line that we're able to attain based on that gross profit, it's really a balance point between the 2. With where we are, if nothing changes, it's going to be a slower road. But I think that's part of the point of what we're really talking about.

And really, Andy's question at the beginning, we are working towards not just maintaining our current gross profitability by launching products in SATCOM like we are that have better manufacturability, we believe that our profitability in that product line as an example, will improve. In addition to that, as we capitalize on some of the tailwinds we have and on some of the new products that we have, we believe that the total revenue attainment even with no improvements on profitability will also improve all those things drive us to getting the company to a place of real profitability.

[Daniel Rosenberg, analyst]

And just one question that comes to mind as you speak about the focus on high-value products. It's just at a high level, the strategy here, it sounds like mobile has puts and takes. Is that the right product? Is it complementary to where you're going? Or would you rather focus on different products? Or is the mix right for you and where you want to go?

[Leighton Carroll, executive]

Yes. It's a great question. So look, the mobile product is set if you just think about putting antennas into mobile phones, that tends to be a very volume dependent, lower-margin business, right, which is fair. One of the things that I think that we have realized or at least I personally have realized on this journey is, at the end of the day, a mobile phone is an embedded antenna.

And one of the things that we're doing, I mentioned diversification. That base is still a value to us, even though it has lower margin profile. But there are other opportunities that, in my opinion, I don't know the company has fully realized or had gone after to lever that both engineering and manufacturing capability to embedded like opportunities, not just in North America, but in Asia as well.

So effectually one of the things that we have been looking at is how do we capitalize on the people, engineering and strengths of that business, not just to continue to be this volume-based lower-margin business, but to look at opportunities for additional business with additional customers that line a lot more with what we're doing in our embedded unit and in doing so, start to drive synergies between those 2 businesses. So it's a really interesting point in that it is not a business for the faint of heart. It does have a lower margin profile.

Historically, that business has done a lot of great things for Baylin. Do you just start to walk away from it or view it as something that you don't want? Or do you start to think about how do I lever some of the capabilities of that business into higher-margin opportunities while preserving our base. And I think right now, that's the direction we're going. It's a great question.

[Operator]

There are no further questions at this time. I'll turn the call back to you for closing remarks.

[Leighton Carroll, executive]

All right. Well, look, I'll say this, like a lot of people who I'm sure you've heard from sitting on calls, supply chain, labor markets, all the stuff is challenging. The way that we look at it, honestly, is nobody cares. Everyone deals with it. We still have to deliver. I'm happy that the team was able to deliver a positive result. In some respects, it's a bit of a period victory because I want a lot better for our company.

And I think we're on a really interesting road right now, particularly given some of the new products that have come out. I do think there are some opportunities to have more than just base hits. But at the end of the day, it's great to talk about it. We have to convert those. And right now, as I talk to you guys, we're not there. We're working like that, but we've got to convert.

So I appreciate that where we were last year, particularly the first half of 2021 was not a very good place. I am really happy with how far we've come, but we've got a lot more to do. The good news is we have some really good people in this company, some really good folks in manufacturing, really good people in engineering. And people who come to work every day with a sense of purpose. And at the end of the day, that's I look forward to seeing us capitalize on. It's going to be a journey. I wish it wasn't Sprint. I wish it was already flipped over and we were onto greater things, but we're not there yet. We've got some work to do. With that, I appreciate everyone's time, and look forward to talking to everyone again in another quarter.

[Operator]

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.