REZI - NYSE

Hello, ladies and gentlemen. My apologies for the technical delay. At this time, I'd like to welcome everyone to the Resideo Technologies Third Quarter 2023 Earnings Conference Call. Today's call is being recorded. All participants will be in a listen-only mode until the formal question-and-answer portion of the call. [Operator Instructions]

Good afternoon, everyone, and thank you for joining us for Resideo's third quarter 2023 earnings call. On today's call will be Jay Geldmacher, Resideo's Chief Executive Officer; and Tony Trunzo, our Chief Financial Officer. A copy of our earnings release and related presentation materials are available on the Investor Relations page of our website at investors.resideo.com. We would like to remind you that this afternoon's presentation contains forward-looking statements. Statements other than historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties. Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Resideo's filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward-looking statements. We identify principal risks and uncertainties that affect our performance in our annual report on Form 10-K and other SEC filings. With that, I will turn the call over to Jay.

Thank you, Jason, and thanks, everyone, for joining us today. During the third quarter, we continue to take actions to improve the business, both structurally and through cost actions, while delivering adjusted results above the midpoint of our guidance range, improving operating cash flow and repurchasing 1.8 million shares. I'm excited by the significant progress over the past several months on key strategic operational and cost initiatives highlighted by new product and partnership momentum within Products & Solutions and digital experience improvements at ADI, which I will discuss further during the business reviews. As part of our portfolio optimization work, we completed the sale of our nonstrategic Genesis Cable business for $87.5 million. We also acquired Sfty, a small Norwegian provider of life safety monitoring technology for the multifamily market. Sfty will bolster our European life safety services offering with attractive reoccurring revenue capabilities. These transactions demonstrate our commitment to execute value creation opportunities across the organization. We will continue to actively review the products and solutions portfolio and ADI operations against our long-term strategic and financial goals and expect to execute further asset realignment actions in the coming quarters. During Q3, we took further steps to reduce both near-term and long-term structural costs across Resideo. These actions resulted in a $38 million charge in the third quarter. This brings restructuring costs over the past four quarters to over $60 million with an expected annual gross cost savings of at least $125 million. We have taken these actions against a residential market backdrop that remains challenging. Existing home sales, an important driver for repair and remodel activity, and new security installations remain significantly below recent historical levels. While our efforts within the new construction channel continue to gain momentum, the number of new units built in 2023 is expected to be down from 2022. Despite these cyclical headwinds, there is no change to our view that the outlook for both the creation of new housing stock and increased investment in the home remain very favorable over time and are supportive of growth in our businesses. During this period of near-term macro uncertainty, we continue to be laser focused on what we can control through execution and driving efficiencies. Turning to the businesses. Products & Solutions delivered solid performance in our retail and new construction channels led by First Alert life safety products. Our new construction sales are outperforming the pace of new housing units as we grow content per home and further expand our smoke and CO products within the builder community. We believe our content per new home has increased by 20% over the past 12 months, positioning us well for outside growth when new home trends turn positive. The environment remained unsettled in the HVAC distribution channel where demand drivers were less favorable relative to 2022 and inventory remains elevated. Our energy products continue to be impacted by declining furnished unit volumes in the U.S. and near-term uncertainty created by regulatory shifts around gas products across Europe. While market conditions continue to negatively impact Products & Solutions revenue, we are driving actions to improve the performance of the business. In Q3, we expanded Products & Solutions gross margin by 250 basis points, reducing operating expense by $11 million and grew operating profit by $8 million versus last year, excluding restructuring. We are also driving momentum within our new product introductions. In the fourth quarter, we will be introducing our new outdoor security camera and launching First Alert smoke and fire alarm products compliant with the upcoming UL 8th Edition release. We are also seeing increased customer engagement in EMEA around our recently introduced ProSeries security products. On the partner front, we are excited to have expanded our relationship with two leading insurance providers, USAA and Nationwide, to help enhance homeowner comfort and safety and reduce insurance claims. We see significant opportunity in working with insurance providers who value the breadth of our product portfolio and channel presence, particularly in key life safety and water leak categories that address major customer claim areas. Lastly, we are honored to have been recognized by Lowe's as their Vendor of the Year for the electrical category, competing against a number of large, well-known brands. This recognition is the result of significant work from across the Resideo team, including sales, customer experience, product management and supply chain and underscores the value proposition of our products and brands. We see significant additional opportunity within the retail channel, particularly as we grow First Alert offerings across connected life safety and water products and build partnerships and programs with insurance companies and utilities. ADI is continuing to drive investment in digital initiatives aimed at enhancing customer experience. Much of this focus is on improving the speed of our online experience and reducing friction for customers. ADI is focused on providing the information and support customers need to manage their projects where the purchase ultimately takes place online or at the branch. E-commerce grew 5% in the third quarter versus Q3 last year, representing 19% of total ADI revenue, and overall, touchless sales were 38% of ADI sales in the quarter. ADI's large and diverse commercial exposure have helped to insulate from many of the negative market trends discussed earlier. ADI does, however, continue to see headwinds in the residential intrusion market which has historically accounted for around 20% of ADI sales. In September, ADI announced the opening of its new Super Center distribution center in Dallas. The site has over 400,000 square feet of distribution space and the capacity to house more than two million units of inventory. This site is equipped with advanced warehouse automation technologies and provides real-time and advanced inventory management. This investment will optimize supply chain operations for ADI enhance customer service and provide capacity for long-term growth. Before turning the call over to Tony to discuss third quarter performance and outlook, I wanted to highlight our second annual ESG report which was published in late August. The report showcases the progress Resideo has made in the areas of increased transparency, products sustainability, strong company culture and development of the next-generation of leaders. More information about Resideo’s sustainability journey can be found at resideo.com/sustainability. With that I will turn the call over to Tony.

Thank you, Jay, and good afternoon everyone. Third quarter operating results were above the midpoint of our expectations when adjusting for restructuring costs, driven by our Products and Solutions business, which posted a 250 basis point year-over-year gross margin improvement and $11 million reduction in operating expenses, excluding restructuring. Resideo consolidated third quarter revenue of $1.55 billion declined 4% versus Q3 last year. Operating income for the quarter was $109 million, including $38 million of restructuring compared to $155 million last year. Adjusted EBITDA was $138 million compared to $160 million in Q3 of 2022. Fully diluted earnings per share were $0.14 and $0.41 on a non-GAAP basis compared with $0.42 and $0.48, respectively last year. Products and Solutions third quarter revenue of $654 million was down 7% compared with the third quarter of 2022. Price realization added approximately $25 million to revenue but was more than offset by low-double-digit unit volume declines. Our First Alert product revenue was flat compared to Q3 last year as was our traditional security business revenue. Year-over-year volume declines were mostly attributable to air and energy product categories, reflecting slower end demand for HVAC products and continued inventory management in the HVAC distribution channel. The end market demand and volume trends experienced in the quarter were broadly in line with our expectations entering the period. Orders were down approximately 2% compared to the prior third quarter, but were up sequentially and orders picked up in September and October compared to the prior several months. While orders remained below peak 2022 levels, we are encouraged by the signs of stabilization we are seeing in key channels. Products and Solutions gross margin in Q3 was 38.7%, up 250 basis points compared to last year. The increase reflects progress on managing raw material, component, labor and freight costs, all partially offset by the impacts of reduced volumes and less favorable mix. We realized over $15 million of year-over-year freight cost reductions in the quarter and saw limited broker buy activity. Our labor efficiency continues to improve with direct labor headcount in North America down over 20% since the middle of 2022. This allowed us to reduce fixed labor expenses in Q3 as a percent of sales despite ongoing wage inflation. Total operating expenses for Products and Solutions was down $11 million year-over-year, excluding $25 million of restructuring costs. Cost reduction efforts were partially offset by labor and services inflation and investments in software development. Excluding restructuring costs, operating profit was $132 million or 20.2% of sales and up 8% compared to Q3 2022. Turning to ADI. Q3 revenue was $900 million, down 1% to the prior year period. A 2% decline in North America was partially offset by 8% growth in EMEA. Category trends were consistent with recent quarters with strength and access control, double-digit declines in residential intrusion and relatively flat performance in other key categories such as commercial fire, video surveillance and wire. ADI gross margin in the third quarter was 18.3% compared with 19.3% in Q3 last year. Margins were negatively impacted by transitory inflationary pricing benefits experienced in 2022, reduced vendor rebate activity due to lower volumes and more competitive pricing in certain categories. ADI operating profit of $60 million was down 23% compared with Q3 last year and includes $10 million of restructuring costs. During the third quarter ADI accelerated restructuring activities, including headcount reductions and consolidating its physical and geographic footprint. Corporate costs were $58 million, up $11 million compared with the prior year third quarter. The increase reflects $3 million in restructuring, timing of certain costs and an $8 million non-recurring benefit in the prior year period. Q3 cash from operations was $60 million compared with $37 million in Q3 last year. During the quarter, we repurchased 1.8 million shares of our stock for a total cost of $30 million. We expect to remain active in executing against the repurchase authorization as we see a significant disconnect between our share price and the underlying value of the business. Including the restructuring activity undertaken in Q4 of 2022, we have taken over $60 million of restructuring charges over the past four quarters. We expect these actions to generate at least $125 million of gross savings in 2024. Approximately 60% of these savings are in operating expense with the remainder expected to benefit COGS. Moving to our outlook. Note that the completion of the sale of Genesis in mid-October reduces our previously communicated 2023 outlook by approximately $25 million of revenue and $4 million of operating income. Genesis historically generated sub 20% gross margin and sub 10% EBITDA margins. We expect to record a gain of approximately $24 million in other income in the fourth quarter related to the sale. For the fourth quarter, we expect revenue to be in the range of $1.495 billion to $1.545 billion; consolidated gross margin to be in the range of 26% to 27%; and GAAP operating profit to be in the range of $135 million to $155 million. For the full year, we now expect revenue to be in the range of $6.2 billion to $6.25 billion. Consolidated gross margin is expected to be in the range of 26.6% to 27.2% and operating profit is expected to be in the range of $535 million to $555 million. In conclusion, we delivered Q3 results that met or exceeded our expectations adjusting for restructuring. Driving this was better than expected performance at Products and Solutions where gross margins expanded by 250 basis points year-over-year. We are encouraged by the pickup in Products and Solutions order activity experienced in September and October. As we look to cyclical improvements in our end markets, we expect our cost and efficiency initiatives to be helpful to Products and Solutions profitability moving forward. I will now turn the call back to Jay for a few concluding remarks before we take questions.

Thanks, Tony. While we navigate short-term cyclical market headwinds, we are taking important steps to position the business for long-term sustainable growth and structurally higher profitability. We remain focused on driving positive change in the areas we can control across the businesses. We have made progress reducing input costs within Products and Solutions and are driving gross margin improvement despite challenging volume conditions. We are rightsizing our portfolio and operations to fit our long-term strategic and financial goals and managing operating costs to protect near-term profitability, while also ensuring critical long-term value-driven investment continues. Later this week in Scottsdale, we will host our annual CONNECT event showcasing our product innovation and capabilities and offering networking opportunities for over 700 professional contractors and partners. This event highlights the thought leadership position we have in the industry with dealers, integrators and installers across the HVAC, security, water and smart home landscape. Our positioning with the professional contractor remains a unique asset and much of the work the business has and continues to undertake is centered on positioning us to better leverage these relationships. I want to again thank the entire Resideo employee base for their work during the quarter and a continued focus on delivering for our customers. Operator, we are now ready for questions.

[Operator Instructions] Your first question comes from the line of Erik Woodring with Morgan Stanley. Your line is open.

Hey guys. Good afternoon and thank you for taking my questions. Maybe if we just start at the top. Both Tony and Jay, you guys both in your prepared remarks alluded to headwinds from whether it’s residential home sales, less home turnover, new home construction, they are all related by a common thread here. So, just based on your conversations with customers and integrators, how should we think about kind of the inning of the residential downturn that we are in? How do we think about the longevity of that headwind? Just trying to better understand how these trends could – can evolve over the next, again, two months, but really into early next year. And then I have a follow-up. Thank you.

Hey, Erik, it’s Tony. Thanks for the question. We track, as I know you all do as well. We track new home starts, we track – and we track existing home sales. And both are off pretty significantly. Existing home sales are off more significantly than starts. And that’s obviously a bigger driver for a big chunk of our business. As we said in our comments, the market is, it seems to have – order rates seem to have stabilized. Does that mean that we’re at the bottom? We’re not in a position to call that. But certainly things seem like they have gotten somewhat better in those marketplaces. It’s just really difficult for us to call a clear bottom given that – given where we are in the value chain.

And as we said also Erik, there are some encouraging signs that we’ve seen in terms of orders in the last month or so. And so I think it’s a mix. And so, Tony is right, I think it’s pretty difficult to call the bottom.

I guess...

Sorry. Go ahead, go ahead.

No, I was just going to say, I guess, one thing that we pointed out that I’d underscore Erik is we are making really solid strides in the new construction market, particularly with some of the First Alert brands. So our content in that market is, is growing even though the market itself is still trending down.

Yes, I would agree with that. That’s a really important piece and something that we’ve talked about in the past of expanding our footprint and overall contribution into every new home that we do that we’re able to sell into, as well as the teams have done a nice job of gaining new wins with new builders.

Okay. That is really helpful. Thank you for all that color. And Tony maybe – can only give you the downfall here, because you made a comment in your prepared remarks about a disconnect between the current stock price and the value of the business and that’s kind of driving some of the buyback activity. But what do you think that the market is underappreciating today or doesn’t understand about the Resideo business today? And what efforts are you taking to kind of change that understanding that the market has of the underlying value in Resideo?

So thanks for the question. A number of things. Look, I mean, obviously, as we said, we’ve been active in the market buying back the shares, which does indicate that we think the valuation is lower than it should be. Look, it’s been – we’ve had a number of quarters where things have been soft and the results have been down. I think as always our focus is on execution and to the extent that we continue to execute. We’re going to see that valuation gap close at least in my – from my perspective. A lot of the things that we talked about today are really demonstrating some underlying progress operationally and functionally within the business. We’re realigning the portfolio, we’re focused on cash generation, the P&S results this quarter, they showed significant margin expansion, lower operating expenses and after taking out the restructuring charges higher profitability than Q3 of last year on lower revenue and significantly lower volume. So I think that really bodes well for the opportunity for this business to perform better in an upswing. And I think that’s going to be as we see that happen, whenever it does sooner rather than later, I think we’re much better position now than we were a year ago to see operating leverage in that kind of a growth environment.

Yes. And I’d add and we stick – we indicated in our prepared remarks that the details behind a lot of the actions we’ve taken from a cost structure standpoint. And as you go through a cycle like this doing that is really important because then when you come out of the cycle that you’re in a really good position of moving up. And I think I’m sure and you know better than anybody and the rest of the folks on the line that as you watch the cycle, but it’s important for everybody to try to figure out, who’s got the best crystal ball on when the cycle does bottom out and things come back. But in the meantime, the things we have control of are the things that Tony and I just talked about there. So again the cost position, right, the execution, we’ve continued to highlight our new MPI and the importance of new MPI and velocity of MPI is super important for us. And I think all those things together help us, as we kind of go through the cycle, I think we’ll significantly have opportunities on valuation.

No, that’s perfect. Thank you. And then just one question on clarification, maybe for you Tony is, the midpoint of your full year operating income guide was reduced by I think $10 million but you raised your EPS guide by about $0.15. If we take into account 3Q results, I think that means 4Q earnings relative to – prior to earnings comes up about $0.15. Just correct me, if that math is wrong. But my question really is I think $0.12 of that comes from – roughly $0.12 comes from the sale of Genesis. Where should we think about the remaining $0.03 of kind of EPS upside coming from? Is that another below the line item that we’re maybe not just considering? Just a point of clarification. And that’s it from me. Thanks.

Yes. Erik, I’ll try to address that. Net-net, I mean obviously there’s a lot of moving pieces, right, with the sale of Genesis and some of those things. But net-net our outlook for the business in Q4 is a few million dollars better than what our original – what our prior outlook would have indicated. We ended up above our midpoint for Q3 and the guidance that we have now from an operational standpoint points to a few million dollars better at the midpoint as well. And I think that’s the increment. I’d have to do the math on the EPS. But I suspect that’s probably the increment on the EPS.

Okay. That works. That’s perfect. Thank you very much guys. Good luck.

Thanks, Erik.

Your next question comes from the line of Ryan Merkel with William Blair. Your line is open.

Hey, good afternoon and thanks for taking the questions.

Hey, Ryan.

Hey, my first question just back to this outlook for repair and remodel and the turnover. Are your products tied more to housing turnover or there is this team out there that people can’t move because of high mortgage rates and home prices are high, so people are investing in their current residents. I’m just wondering if that’s something that you could benefit from?

So, Ryan, you’ve highlighted two countervailing types of dynamics there. And it’s hard for us to tease out one compared to the other. But if you look at just the unit volumes of existing home sales, they are down by more than a third from peak to trough. There’s a lot of repair and remodel activity that happens by people, right, before they sell their homes or right when they purchase their homes. And that that significant decline I think it’s from 6 million to 4 million units annually plus or minus. We think that’s clearly been a headwind for us. Whether or not be, not moving trend has maybe helped a little bit in terms of people deciding to do projects on their existing house, I think potentially it has. But I think it’s probably significantly outweighed by the dynamic of just the drop in existing home sales.

Got it. Okay. Thanks for that. That’s helpful.

And if you look at – I guess, if I think about it, if you just to follow-up on my own answer. Our unit volumes are down low-double digits, and we’re seeing – and this is kind of a very broad brush view. But they’re down low-double-digits. And as I said, we’re seeing a reduction in existing home sales of 30-plus-percent, and new housing starts are down as well, which is also a driver for us. So I think clearly some of that we’re outperforming those metrics. So probably there is some lift that we’re seeing from the – from people’s investment in their existing homes.

Yes. Okay. Question number two is portfolio optimization and it sounds like there more to do there. Can you maybe talk about what inning you’re in for that and what more should we expect?

It’s early innings for sure. The two big things that we’ve done this year is we outsource the – we closed our facility in San Diego and we moved our castings activities offshore. That was a pretty important thing for us to do. The sale of Genesis is incrementally a pretty important thing for us to do. The sale of Genesis is incrementally a pretty important thing for us to do as well. But there are still assets inside the business and factories and those kinds of things that we're going to be evaluating over the coming quarters. And look, it would be awesome if we could just do it kind of all at once and say, look, here's the new Resideo. Here's what it looks like from the standpoint of vertical integration and manufacturing. Here's what it looks like from the standpoint of the businesses that we're investing in and the businesses that maybe we're going to move out of. It is just going to take some time. But it's early innings.

Yes. And I think if you remember in our last earnings call, at that point in time, we could talk about – and really it was a follow-up on what we did in San Diego, and at that time, we couldn't tell you about Genesis for obvious reasons, but now we're able to do that. And I think I said in my remarks, both in Q3 and I said it again today, that we have a number of really good opportunities there, and it's a matter of how you time some of these because some of these are larger than others. But it's a focal point of the team in terms of optimization, as we've talked about, and so we have more opportunities coming.

And just to be clear, the objectives, the underlying objectives, of all of this is to improve our margins and to incrementally improve the growth rate, the underlying growth rate, of the business.

Yes. Well, if I could say one more and just high level, I think the guidance you gave in early 2021 for 2024 EBIT was $900 million, correct me if I'm wrong. Now you're going to obviously miss that. I know the macro has probably been different than you thought, but what if you graded yourself on cost cutting and portfolio optimization and other things, how did you perform relative to the goals that you had set out?

Yes. I mean, if you think about – and we've talked about this before, we had two years there, the worst supply chain situation that anybody's ever experienced, at least in my career, I know. And we also – so we had all the challenges associated with that as well as you still had limitations on what you could do because of COVID for a period of time during that period. So a lot of – and that's why we've highlighted before, especially I think today in the last earnings call, that the opportunities that we knew were there, some of them we have kind of hold back on. We're – hopefully, you'll begin – you're seeing some more momentum there because of what we talked about with San Diego, what we talked about with Genesis. And so if anything, we had a lot of these things that we've reviewed and maybe kind of on the shelf and now we're able to begin to move the ball forward in a more – at a higher level of velocity and speed. And that's why I think the team is excited about being able to take those opportunities. And then, of course, we're going to share them with you as each one of those comes along.

Okay, thanks. Pass it on.

Thanks Ryan.

Your next question comes from the line of Amit Daryanani with Evercore ISI. Your line is open.

Hey, guys. It’s Michael Fisher on for Amit. So I was curious, just quick on the gross margin outside in the P&S business, is this primarily driven by the portfolio optimization stuff you guys talked about on the last couple of questions? Or is there any other dynamics to play there?

It's driven much more so by the progress that we've made in terms of – first of all, I guess if you look at the trajectory of the last several quarters, we made meaningful progress on price, but we were also facing significant inflationary impacts and components. We had significant broker buys. Freight rates were very high, all those kinds of things. And we've been able to work through all of them and those costs have normalized. We've also made significant progress in terms of labor efficiency. And these things we talked about it when this all unfolded, these kinds of things, we really felt like our progress was being masked for some number of quarters. I think what you're seeing is that the progress that we have made is being revealed a little bit in terms of better margin. I have to say I can't overemphasize, from my perspective, the impressive performance of the business on a gross margin line this quarter given the volumes that they're facing, I mean, 2.5 percentage points delta in gross margin with lower volume, it says a lot about the progress that we have made. Like I said, that hadn't really been clear to investors that now I think you're starting to see.

Yes, I would agree.

Makes sense. And then I think you guys caught up your success with higher content for the new home market and just, I think, overall in the homebuilder channel, things are going a little bit better for you guys. I'm just wondering if you can dig into that a little bit and maybe talk about how big the homebuilder channel is versus kind of the rest of the business?

Well, the homebuilder channel for us is a fifth to a quarter of the business overall. We're much more heavily indexed to the repair remodel and existing home sales dynamics. But the progress in R&C is it really comes from two things. One is our ability to add more relationships. I mean the work that our BD team has done in building out relationships with more and more builders and getting into their homes has been a significant driver. And then the other we referenced it, it's really been BRK, which is a brand we got from First Alert in the smoke and CO area, that we've really worked hard to build out more access to that builder channel, and we've seen it.

Right, and that comes back to the increased content that we're continuing to drive, and we have a lot more opportunity on a further content in there. And then back to what Tony said on the first piece, which I mentioned earlier, and that is the expansion of new builders into the R&C. And from my chair, as we expand that number of customers for R&C, as the markets come back, and with the increased content we're going to really be able to – we will benefit by that.

Yes, great. That makes sense. Thanks for taking my questions.

Thanks Mike.

Thank you.

[Operator Instructions] Your next question comes from the line of Ian

Hey, good afternoon, guys. This is Isaac Sellhausen on for Ian. Appreciate you taking the question. Just a follow-up on the previous one on Products & Solutions. Could you maybe talk through the pricing dynamics you saw in the quarter – it sounds like the business still saw some nice benefit for price despite the volume declines. And then the second part to that, what should be our expectations for pricing and volumes going into next year, maybe in the context as you lap some of the increases from 2023 or this year? Thanks.

Yes. Thanks, Isaac. I think a couple of things. First of all, the price realization this quarter, $25 million, I think the large majority of that was flow-through of prior price increases. We did make some changes here and there, but I think it's largely been flow-through. We're not in a position to give anything really specific about 2024. But I would just say, logically, as we've seen our input costs abate, we've been able to maintain price I wouldn't anticipate that there's going to be dramatic moves in price moving forward. I think we'll still get our normal price increases and that sort of thing. But our objective was to – if you go back three-plus years to when Jay and I first showed up, part of our perspective was that we needed to price for the value that we were bringing to the marketplace. And as we saw inflation and as we – we started driving price before the inflation started. And then as we saw the inflation, we were basically chasing our tail, trying basically to stay caught up with the input costs. Now that those input costs have abated, our ability to hold price has helped with margin. And we think that that's going to continue moving forward in an environment where neither where inflation isn't going to be driving either the pricing or the inputs environment.

Yes. I agree with that.

Is that helpful, Isaac?

Yes, it was. Thank you. And then just a quick follow-up on ADI. What categories in the commercial space, are you maybe most positive on given the headwinds in the residential side of the business that you've discussed.

Sorry, did you say the most positive one?

Yes.

Yes. So access control, for whatever reason, has done really well. Fire and intrusion and – or sort of fire and video has held in there, a lot of the residential security. We're still – the unit volumes and the dollars are still off.

Yes, I would agree with that.

Okay, great. Thank you very much.

Thank you.

There are no further questions at this time. I will turn the call back to Mr. Jason Willey.

Thank you, everyone, for participating today, and we look forward to speaking with you over the coming weeks and months. Everyone, have a good rest of your day. Thank you.