Dexterra Group Inc

TSX:DXT

Earnings Call Transcript 2023-Q4

[Operator]

Thank you for standing by. This is the conference operator. Welcome to the Dexterra Group's Fourth Quarter 2023 Results Conference Call. [Operator Instructions] and the conference is being recorded. [Operator Instructions]

I would now like to turn the conference over to Denise Achonu, CFO. Please go ahead.

[Denise Achonu, executive]

Thank you, Karl, and good morning. My name is Denise Achonu, and I'm pleased to join you as the Chief Financial Officer of Dexterra Group Inc.

With me today on the call are Mark Becker, our CEO; and our Board Chair, Bill McFarland, who will provide some brief introductory comments. After a brief presentation, we will take questions with the call ending by 9:15 Eastern Time. We will be commenting on Q4 2023 results with the assumption you have read the Q4 earnings press release, MD&A and financial statements. The slide presentation, which supports today's comments is posted on our website. and we encourage participants to access the slides and follow along with our presentation.

Before we begin, I would like to make some comments about forward-looking information. In yesterday's news release and on Slide 2 of the presentation that we have posted to our website, you will find cautionary notes in that regard. I won't cover the contents of the cautionary notes in any detail. However, we do claim their protection for any forward-looking information that we might disclose on this conference call today.

I will now turn it over to Bill McFarland for his introductory comments.

[R. McFarland, executive]

Thank you, Denise, and welcome as our new CFO to your first analyst conference call. It's great to have you on the Dexterra team, and Mark and the Board are looking forward to your future contributions.

2023 was a record year for the company as it delivered on its near-term goal of $100 million in EBITDA and over $1 billion in annual revenue. This is an important milestone and accomplishment for the company and a big thank you goes out from the Board to all of our employees for their dedication and hard work in making this a reality. Our 2023 results included the exceptional results for the Workforce Accommodations, Forestry and Energy Services business and the Integrated Facilities Management business took an important step forward in improving its profitability. These positives were offset by the weak results of our modular business, which in Q4 included construction rework and remediation identified on some Ontario social affordable housing projects.

Management and the Board have completed a strategic review of the modular business, including its fit with the strategic direction of Dexterra and we have decided to sell the business. This decision allows us to focus the company on our 2 remaining key support service businesses and to deploy capital in the areas of the business with stronger returns. We believe this decision will be a positive for our shareholders, and the modular businesses, customers and employees.

Our goal in 2024 and beyond is to maintain a strong balance sheet and build a business for the long term that is competitive, delivers reliable results with strong shareholder returns.

I will now pass it over to Mark Becker for his comments.

[Mark Becker, executive]

Great. Thanks, Bill, and good morning, everyone. As Bill mentioned, we made good progress on our 2023 business plan. Our adjusted EBITDA grew from $65 million to over $100 million including record revenue and profit driven by our IFM and WAFES businesses. Our IFM business on top line growth and improved profitability, which increased by 40%. In WAFES, increased revenue was driven by strong new sales and market activity across all segments of the business. And of course, our support of provincial agencies and communities dealing with the unprecedented wildfire activity in 2023.

Our year-over-year EBITDA growth in WAFES and IFM was partially offset by the modular results, which I'll speak to in more detail in a moment. We also renewed, expanded the size and extended the term of our debt facility to 2026 and lowered our debt level. We have a strong balance sheet today that gives us flexibility for growth and protection against economic uncertainties.

We continued to buy back shares in Q4 under our previously announced normal course issuer bid as we believe our shares are undervalued in the market. And lastly, we issued this week our ESG report for 2023, which is available on our website. This report is something I and everyone at Dexterra are incredibly proud of and represents our continued evolution of all we are doing as a business with our clients, with our employees and community to achieve our sustainability goals. It's a great document and I encourage everyone to check it out.

So moving to Slide 6 and speaking in more detail to the business units, starting with IFM. We have a strong revenue and EBITDA growth in the IFM business in 2023. Annual revenues for IFM were up 19% and adjusted EBITDA was up 40% over 2022. Q4 tells a similar story. Year-over-year growth was driven primarily by new sales in the postsecondary education market as well as continued growth of the hotel, rail and leisure division. Adjusted EBITDA as a percentage of revenue is 5.7% for the year compared to 4.9% in 2022. While we've improved our overall IFM profitability, Q4 experienced slightly lower margins compared to Q3 due to start-up labor costs as we onboarded several new large post-secondary education contracts.

As we optimize operation with the new contracts and continue to proactively manage labor and inflationary pressures across the business, we anticipate our overall IFM EBITDA margins to be in the range of 6% to 6.5% in the back half of 2024. This is similar to what we're seeing from other participants across our competitive marketplace.

Our sales pipeline continues to be very strong, including broad service, fully integrated IFM opportunities. We anticipate our organic growth in this business will exceed 10% over 2023. Combined with the impact of acquisitions will help us to continue to build scale and improve margins as much of the new work is expected to be in the higher margin full IFM space.

Building on our positive momentum in IFM, on February 29, we completed the acquisition of CMI Management for USD 23 million. CMI is based in the Greater Washington, D.C. area and provides full IFM services to major U.S. federal government agencies and commercial clients across the United States. With USD 50 million in annual revenue, healthy EBITDA margins and a good backlog of business, CMI is a great strategic fit for Dexterra and expands our U.S. IFM presence. We are excited to work with Shason Yavari and the whole CMI team as we continue to build our U.S. IFM platform.

Moving to WAFES on Slide 7. Revenue from WAFES of $595 million for '23 was a 22% increase compared to 2022. Fire support services accounted for $56 million of that revenue compared to $9 million in 2022. Adjusted EBITDA was $106 million, a 42% increase compared to the prior year as we continue to win new work, manage inflationary costs and get the benefit of the -- from increased scale of our operations.

Revenue for the WAFES business for Q4 was $142 million, a 15% increase compared to Q4 of 2022. This stronger revenue is due to continued high camp occupancy of tenancy in open lodges as well as the strength of our access matting business. Adjusted EBITDA as a percentage of revenue was consistent with Q4 of '22, excluding onetime retroactive price increases recorded in that quarter.

Sales progress has been strong with new major contracts mobilizing in the first half of this year, which, once fully mobilized, will offset several large projects nearing completion, including LNG Canada and the Coastal GasLink pipeline. We see continued strong activity levels in all segments of WAFES in 2024 with margins above 15%, driven by our business mix. As in 2023, we remain well positioned and prepared to support the wildfire season and local communities this year. We've renewed key contracts related to fire-based support and continue to be contracted for First Response call out in Western Canada.

Moving to the modular on Slide 8. Modular Solutions for revenue for 2023 was $189 million, a decrease of 5% compared to 2022 due to reduced backlog, including delays related to approvals for social affordable housing projects. The adjusted EBITDA loss for the business of $6.1 million in 2023 was impacted by $15 million in field construction rework and remediation costs on social affordable housing projects over the year due to third-party design, manufacturing quality and subcontractor errors as well as costs related to a subcontractor in solvency.

Of that, $9 million was identified in late Q4 related to certain Ontario-based projects and includes a provision of $5.7 million for the expected 2024 cost to be incurred. Also, $1.6 million of costs related to the delayed DC-based projects have been incurred in excess of the provision taken in 2022. These impacts do not include recoveries from contractual claims from third parties that are underway.

Our recurring educational portables and commercial industrial modulars business continues to grow and deliver strong profitability. While we're disappointed with the results in modular, the impacts are contained to a limited number of specific issues, which are not expected to have an impact on future projects. Normalizing for these impacts, our overall EBITDA for 2023 would have been in excess of $9 million that we know is more reflective of the future profitability of the modular business.

While we're disappointed with our modular results, the impacts are driven by onetime effects across our specific scope of projects. As we mentioned earlier, we're in active discussions to sell the business. Unlocking the value in modular will allow greater strategic focus on our support services business, and we'll free up cash we can use to pay down debt for accretive acquisitions that are aligned with our growth strategy. We are confident that this direction will support the long-term success of modular benefit our shareholders and will provide a good home for our employees and the business.

With that, I will now turn it over to Denise.

[Denise Achonu, executive]

Thank you, Mark. I'll speak about our financial position and capital markets, starting on Slide 10.

Our financial position and liquidity remains strong. Our net debt decreased to just under $90 million at December 31, 2023, from $134 million at September 30, 2023. Q3 is our busiest period, and this resulted in strong accounts receivable collections and free cash flow of $53.4 million in Q4. In August, we reached an agreement with lenders to amend our credit facility and extend the maturity date to September 2026. The amended credit facility has an available limit of $260 million, plus an uncommitted accordion of $150 million. Our amended credit facility and leverage ratio provides flexibility for growth as opportunities arise. We expect to keep our leverage ratio within approximately 2x, taking the seasonality of the business into account.

Free cash flow was higher for the year ended December 31, 2023, compared to 2022, and the adjusted EBITDA conversion to free cash flow for 2023 met expectations at 52.7%. Sustaining capital expenditures are expected in 2024 to continue to approximate 1.5% of revenue, including applicable lease obligations. This excludes growth capital spending, which is incurred to expand operations when opportunistic and economic advantageous opportunities are identified.

As Mark mentioned earlier, our normal course issuer bid activities are ongoing. Dexterra repurchased 855,100 common shares in 2023 at a weighted average price per share of $5.73 for a total cash cost of $4.9 million. And we are continuing to buy back shares given the discounted share price. Lastly, Dexterra declared a dividend for Q1 2024, of $0.087 per share, for shareholders of record on March 29, 2024. This dividend will be paid on April 15, 2024.

I will now turn it back to Mark for closing comments.

[Mark Becker, executive]

Thanks, Denise. The points on Slide 11 serve to summarize our key focus areas for 2024. The Canadian and global economies continue to experience inflationary pressures interest rates remain high and labor availability remains tight. We are actively managing the impact of inflation through proactive pricing adjustments and contracts, cost management and other operational initiatives across all business units. My focus and the focus of the Dexterra team is to continue to drive strong execution of our business plan, including divestiture of the modular business, improving margins and profitability through the effective management of our business and our strategic focus on our capital-light support services model. We will continue to leverage our strong sales momentum, deliver profitable organic growth in our target markets.

Our team is energized and has the platform and building blocks in place for strong growth in IFM and continued WAFES success. This concludes our prepared remarks. I will now turn our call back to Karl for our Q&A portion of the meeting.

[Operator]

[Operator Instructions] The first question comes from Chris Murray of ATB Capital Markets.

[Chris Murray, analyst]

Turning just to the sale of the modular business. I guess a couple of questions here. One, I think if I read correctly in the MD&A, you'll be showing the net asset value is available for sale as in Q1. So a couple of questions around that, one, what exactly is the net asset value that -- for the modular business? Do you think you're going to be able to realize that at 100% or should we be taking a discount to that number? It would be the first question, if you want to -- if you can answer that, please.

[Mark Becker, executive]

Yes. Chris, Yes, good question. Net asset value, the modular business right now is about $40 million. A bulk of that is actually working capital within that. And we look at the underlying value and the value of the modular business. It's got strong value. We've had these issues, specific issues related to projects. As I mentioned in my comments, we see modular even its current revenue state being $9 million to $10 million or more per year. So we see a significant value in the business. We know it delivers value. We've delivered value with it in the past. So we are expecting and with our active conversation that's going on to get a positive value for the business, but we won't know until the end of the day until we close the deal. But we're not expecting a discount, in fact, probably quite the opposite.

[Chris Murray, analyst]

Okay. Fair enough. And then I guess the other question, just thinking about use of capital. So right now, you're sitting essentially on levers, and I appreciate you've got the 1 acquisition that you just did, so probably leverage came up a little bit on that. But you're talking about a 2x leverage ratio on a business that's actually performing reasonably well ex the modular business. Any thoughts about expanding the buyback or at this point? Or are there other opportunities that you really see to deploy capital that gets you into that 1.5% to 2% range on a sustainable basis?

[Mark Becker, executive]

I think, Chris, our capital allocation -- my capital allocation priorities. I mean, obviously, the divestment of the modular business is going to free up some working capital, free up some cash. Further debt reduction, but really in the aim of further IFM acquisitions. CMI has been -- is a really strategic add to our business. We are still active on a number of fronts, looking at other potential targets, both in the U.S. and Canada around acquisitions. So our use of capital is going to be focused on the acquisition front.

[Operator]

The next question comes from Aaron MacNeil of TD Cowen.

[Aaron MacNeil, analyst]

As it relates to the CMI acquisition, you sort of hinted stronger margins. I'm wondering, could you give us a better understanding of what that means and -- is this business inherently different from your other IFM businesses?

[Mark Becker, executive]

Aaron, yes, CMI is a full integrated IFM business. So they work with U.S. federal government agencies across the U.S. on again, a full integrated IFM basis, which at Dexterra currently have. We have a mix of business currently. Our strategic target, as I think you're probably aware, is to continue to get into more of the fully integrated IFM business, which we know is higher margin, and we know CMI is at higher margins kind of north of 8%. So our focus is to continue to add fully integrated businesses that have the capabilities that are complementary to ours and additive to ours, provide us more scale on a fully integrated IFM basis and provide us a greater platform, specifically in the U.S. around building our IFM scale.

[Aaron MacNeil, analyst]

Understood. I'm going to stick with IFM for the follow-up, and I can appreciate this could be customer contract specific. But generally speaking, what's the mechanism in IFM to pass through the labor increases that you mentioned in the disclosures?

[Mark Becker, executive]

Yes. I mean it varies. Generally speaking, on a vast majority scale we have cost escalation terms in contracts, and we make sure we're covered that way. We don't look to take a lot of risk around labor inflation or material or commodity inflation for that matter. I don't mind saying to you since the hyperinflation environment and 2023 was a big year for us. Rationalizing contracts and renegotiating some significant contracts. But largely, we are making sure we've got the right terms within the contracts to protect us from inflation and then where necessary, renegotiate contracts. But that's getting to be fewer and far between.

We had a couple of agers last year that we did, which we're happy with the results of and really focused on just making sure we get the right terms in the contracts going forward. And that's as by and large, our major strategy to insulate us from inflation. Of course, when we do, do negotiations, we do have a bit of a timing gap between when we're able to negotiate the contract change, it sometimes takes time but we can realize that in terms of our business results.

[Operator]

The next question comes from Frederic Bastien of Raymond James.

[Frederic Bastien, analyst]

Just a quick one for me. Can you offer more detail on the CMI business you acquired last month. Just wondering if you could get more granularity on the region it's operating in, kind of margins you're looking at and also how competitive that market is?

[Mark Becker, executive]

Yes. Good questions, Frederic. Yes. CMI has been in business for a long time, 20 to 25 years in this business, and they've always been in this federal government contracting business where engaged with significant major U.S. federal government agencies. And I think it's okay to measure -- to mention a couple, FEMA, GSC some of the other military ones as well. But the scope of the company is really across the U.S. Most of that contracting is done obviously through the Washington, D.C. area, but they're in 15 states spanning all across the U.S. and a really important growth potential there as well. The growth plan around expanding that.

And to your question around competitiveness, I would say, along with often what we see across our different market segments. We know -- you know that we're fairly active in Canada with government institutional contracting. We find it in the U.S. to be to be less competitive. There's a lot more opportunity in the U.S. related to what we see there. And we do see margins that we expect for full IFM services, which they do at all locations kind of in that 8% plus territory.

So our goal is to kind of -- CMI has a growth plan and has been growing over the last 10 years, and we expect to continue that growth plan and support that growth plan and continue to expand margins kind of 8% plus. Generally speaking, and I think I've mentioned this before, we do see fully integrated IFM in that 8% to 10% range. And we do see CMI being solidly in that range as well.

The other thing I'd mention about -- I mentioned about CMI is they've got quite a solid backlog of committed projects. And similar to what we have in Canada, there are long cycle contracts as well which -- will have a pretty defined renewal protocol related to them.

[Frederic Bastien, analyst]

Okay. That's helpful, Mark. How far along are those discussions with the potential buyer for the modular segment? I may be reading too much into this, but presumably, you would not have added that comment in the press release had you not been confident those discussions would eventually lead to an agreement.

[Mark Becker, executive]

Yes. Good question, but I really can't say much at this point other than to say the discussions have progressed quite well and continue to progress well, and we expect to get through that process at pace. So we expect in the upcoming weeks to be able to announce something either way related to that transaction.

[Operator]

The next question comes from Michael Doumet of Scotiabank.

[Michael Doumet, analyst]

So first question on IFM. I'm not sure if I missed this in the prepared remarks, but wondering what you're expecting in terms of margin in the first half of '24 versus the 6%, 6.5% in the second half? And then just longer term, Mark, you just mentioned 8% to 10%. What's it going to take to get from that 6% to 6.5% to 8% to 10% longer term?

[Mark Becker, executive]

Yes. Yes. Good questions. And I mentioned in my remarks, I mean, we've been a little bit challenged in terms of where we wanted to be. I mean we'd want to be more towards 6% to 6.5%. On our current work we're a little short of that in Q4. We expect Q1 to probably be similar, but then ramp up to that 6% to 6.5% margins across the IFM category.

I would also say that looking at our current business, which is 30, 30-plus percent full integrated IFM business, which we also currently deliver at that 8% to 10% margin range. You can do your own math around as we build increased margins. So CMI is another step towards increasing that volume and that mix of business.

And as we increase that percentage, brings up our margins. So I would say the 6% to 6.5% is really our view of our current base business, as I just described it. Things like CMI and maybe another acquisition or certainly other organic growth, we're very active. And as in my comments I mentioned around a number of really strong fully integrated IFM contracts in Canada that as we bring on organic growth, that's fully integrated, as we bring on CMI and potentially other acquisitions, that will tend to bring that 6% to 6.5% or 6.5% up higher.

[Michael Doumet, analyst]

That's really helpful color Mark. And then maybe a second question. obviously, congratulations on the CMI transactions. Just maybe if you can clarify what your longer-term ambitions are in the U.S. And then as well, just comment on the potential synergies from this deal? Or whether we should just think about synergies once the U.S. platform is a little bit more established?

[Mark Becker, executive]

Yes. Yes. appreciate that question. And it is the topic of a platform. So as you're probably aware, we have penetrated the U.S. market over the last 2-plus years. We're active in 5 states from the west all the way to Florida on work that we've earned organically.

The CMI acquisition is just another piece of that. And we want to make sure we bring CMI on board. The numbers that CMI delivers and the reliability of revenue and profitability and growth of revenue that CMI has had, we want to bring that on board, but then look to how do we synergize and leverage that our existing business that we have organically grown in the U.S. with CMI. And I don't -- how do we build that into the platform is our key strategic focus and our key tactical focus of the team.

And then even potentially if there was another acquisition in the U.S. that would be even as well complementary to that, we would look to build that platform.

The other thing I would mention, too, is just the nature of CMI being federal government contracting, large federal government, long cycle, federal government contracts really complementary to what we have in Canada. So it's a geographical platform for us in the U.S., but also a strong backdrop between our current government work that we do in Canada compared to what's in the U. S.

[Operator]

The next question comes from Zachary Evershed of National Bank Financial.

[Zachary Evershed, analyst]

Can you give us more detail on how and when the strategic review was conducted, what prospective buyers were contacted time line, all that stuff?

[Mark Becker, executive]

Yes. Appreciate that question, Zach. The strategic review. We do our review and annual strategic review with our Board in December of every year, started with that, but it's been a discussion that has progressed.

In terms of the acquisition or the transaction, don't mind saying we were approached actually from an outside party around purchasing of the business. So that's how the conversation developed.

[Zachary Evershed, analyst]

Good color. And could you paint a picture of some of the new projects that WAFES taking on?

[Mark Becker, executive]

Yes. So of course, as I mentioned in my comments, we had some -- some of our large projects ending. The new projects that we've been taking on are related to one of them actually quite large in the oil sands based on a mobilized camp on a large site that's a long-term contract for us related to deployment of our existing gear and operations of that lodge as well in the East in the mining business as well. A large camp project that actually is taking some of the assets related to our Kitimat position with Crossroads Lodge a portion of that Crossroads Lodge and mobilizing it to -- mobilizing into Northern Quebec and installing -- selling those assets actually to that client, installing those assets and then operating them over the long term.

So all those contracts or both those contracts plus a couple of others are all mobilizing in the first half of this year, and we'll be up and running by the end of Q2 and really provide that offset that we've been talking about related to the ramp down of those major projects like Coastal GasLink, providing that backfill that we've been looking for to continue the watch growth profile.

[Operator]

The next question comes from Sean Jack of Raymond James.

[Sean Jack, analyst]

So you completed 1 acquisition this year. Just wanting to see where your guys thoughts are on what the cadence for the rest of the year could be. Obviously, integration is going to be a big point, but wondering if you foresee another adds coming up here on the horizon? And also further to that point, obviously, CMI seems like a great business that you guys are folding in here. Can you talk a little bit about how the market looks like? Like how many more CMIs are out there and who are willing and ready to sell?

[Mark Becker, executive]

Yes. We are active in the market as we have been for a while as we've communicated. We continue to be active in discussions and targets. There are other targets out there. It's important that we find the right strategic fit for us from all aspects, including what we've discussed today. And there are other targets out there. We're hopeful around future acquisitions, but we are continuing discussions on that front.

[Sean Jack, analyst]

Okay. Perfect. And then my next question is going back to WAFES. Just talked about those new projects coming in here. Do you guys envision a case of the world where there's actually no fire volumes or that a much more normalized situation of fire volumes that those new contracts that you're bringing in could actually bring 2024 up on a revenue standpoint? Or are those -- a pretty big hill to climb?

[Mark Becker, executive]

Yes. And we included, Sean, in my comments, some in our MD&A some of the calibrations around what happened last year, which was very significant in terms of fire compared to 2022, which was quite a bit less. I mean in the past, we've had fire years that are 0, right, because of weather conditions. But generally speaking, we're seeing an uplift in fire activity. We're seeing an uplift related to the conditions that support fire activity. Certainly, our position related to fire activity is positive, and we look to maintain that position in the market.

So I think if you look at what we referenced in terms of a 2022 activity level, which we did purposefully is, call it, an average, but it can vary, obviously, from very low to something quite a bit higher.

[Operator]

Next question comes from Trevor Reynolds of Acumen Capital.

[Trevor Reynolds, analyst]

I was just wondering if you could provide any guidance around what sort of costs could be eliminated with the sale of the modular division?

[Denise Achonu, executive]

Trevor , Denise here. So we really have started taking a look as we do all the time, just with regards to rationalization of costs. At a high level, with modular coming out, we have some idea, but that's something we do have to refine as we get closer to in a deal. And then at that point, we'll have a better idea. But there'll be more to come on that later on in the year, but we are looking at it.

[Trevor Reynolds, analyst]

Okay. That's fair. And then maybe just what sort of revenue mix you'd be targeting moving forward between IFM and WAFES if the sale is successful?

[Mark Becker, executive]

Yes. And I think if we look at starting with WAFES, I think we had $595 million, I think, last year, including the significant fire impact that we talked about. If you normalize that a little bit, you might take off $45 million or so gets you to mid $550 million plus the growth that we're going to see in sales around WAFES, is probably where we would see revenue landing within WAFES.

In IFM, obviously, the CMI addition is part of that margin in 2024 with CMI coming on here beginning in -- the beginning of March. We are seeing at least a 10% increase in organic growth in IFM. So I think if you blend kind of a 10% organic growth over 2023 plus the CMI should get you pretty close to where we would see our revenue for the company. And if you want to call it, pretty close to $1 billion, I think that's where we would see it.

[Operator]

[Operator Instructions] The next question comes from Chris Murray of ATB Capital Markets.

[Chris Murray, analyst]

Mark, just going back to an earlier comment you made about WAFES margins and maybe just as we talked a little bit about IFM, but if you think about WAFES. Unfortunately, as much as we talked about, what's the fire season going to look like it's actually shaping up to be pretty strong this year.

But with that being said, was that -- you talked about WAFES margins potentially up year-over-year. And I'm just trying to gauge whether or not that's driven on additional fire activity or if there's something else going on out there?

Or if it's just sort of the strength that you've been seeing in Q4 continuing into the first half of the year and revenue like between the mix of projects staying relatively flat? So any commentary to triangulate those numbers would be helpful.

[Mark Becker, executive]

Yes, Chris, I'm not sure we're going to see like increase in WAFES margin over 2023. Obviously our strategic target is to keep that business and the mix of activity and the mix of business we have within WAFES north of 15%.

What I would foresee with everything that we're seeing in 2024 on activity levels, across energy, mining, infrastructure as well as mix of activity work or the type of work that we're doing. I would say probably a good number around WAFES margins at the segment level would be somewhere between 15% and what it was in 2023 over 17%. So if you pick something in between there, it's probably what we're seeing.

And in terms of fire activity we would then tend to, I guess, budget, if I could say it that way or plan for or think about, I guess, that average sort of 2022 level of fire support built into what I just talked about.

[Operator]

This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.