Good day, and welcome to the Alamo Group Inc. Third Quarter 2021 Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Edward Rizzuti, Vice President, General Counsel and Secretary for the Alamo Group. Please go ahead..

Thank you. By now, you should have all received a copy of the press release. However, if anyone is missing a copy and would like to receive one, please contact us at (212) 827-3746, and we will send you a release and make sure you're on the company's distribution list.

There will be a replay of the call, which will begin one-hour after the call and run for one-week. Replay can be accessed by dialing 1 (888) 203-1112 with passcode 7942443. Additionally, the call is being webcast on the company's website at www.alamo-group.com, and a replay will be available for 60 days.

On the line with me today are Jeff Leonard, President and Chief Executive Officer; Richard Wehrle, Executive Vice President, Chief Financial Officer and Treasurer; and Dan Malon, Executive Vice President and Chief Sustainability Officer. The management will make some opening remarks, and then we'll open up the line for your questions.

During the call today, management may reference certain non-GAAP numbers in their remarks. Reconciliations of these non-GAAP results to applicable GAAP numbers are included in the attachments to our earnings release. Before turning the call over to Jeff, I'd like to make a few comments about forward-looking statements.

We will be making forward-looking statements today that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results.

Among those factors which could cause actual results to differ materially are the following. Market demand, COVID-19 impacts including operational and supply chain disruptions, competition, weather, seasonality, currency-related issues, geopolitical issues and other risk factors listed from time to time in the company's SEC reports.

The company does not undertake any obligation to update the information contained herein, which speaks only as of this date. I would now like to introduce Jeff Leonard. Jeff, please go ahead..

Thank you, Ed. First, I'd like to again thank all of you for joining us today. Dan will begin our call with a review of our financial results for the third quarter of 2021. I will then provide more comments on the results. Following our formal remarks, we look forward to taking your questions. Dan, please go ahead..

total company net sales of $338 million were up 16%. Industrial division net sales of $219 million were up 12%, Agricultural division net sales of $119 million were up 25%. Operating income of $30 million was down 3%, net income of $17.5 million or $1.49 per diluted share was down 13%.

Adjusted net income of $18.9 million or $1.59 per diluted share was down 8%. Adjusted EBITDA was flat to the prior year third quarter and remained up 7% from full year 2020. Total debt outstanding was reduced by $20.7 million during the third quarter and was down 21% from the prior year third quarter.

And our backlog increased to $645 million, which is up 154% over the prior year third quarter. Third quarter 2021 net sales of $338 million was 16% higher than the prior year third quarter.

We continue to benefit from strong order rates and recent pricing actions, but supply chain constraints and labor capacity issues are still limiting our ability to ship finished product. Industrial division third quarter 2021 net sales of $219 million, represented 12% increase from the prior year third quarter.

Despite stronger customer demand, this division's top line result was particularly hit hard by truck chassis availability as well as other supply chain disruptions. Agricultural division third quarter 2021 sales were $119 million, up 25% from the prior year third quarter.

During the quarter, favorable agricultural market conditions, low dealer inventories and pricing actions continue to drive organic sales growth in this division, which was also affected by court delays and other supply chain constraints.

Gross margin for the third quarter of 2021 was $86.3 million, or 25.5% of net sales compared to $78.6 million or 27% of net sales in the prior year third quarter.

The favorable gross margin impact we would normally expect from higher volume and aggressive pricing actions was more than offset by continued material inflation, production and efficiencies resulting from supply chain and labor capacity constraints and a less favorable mix of service parts sales.

Operating income for the third quarter of 2021 was $30 million or 8.9% of net sales, which was down 3% from the prior year quarter. The gross margin effects already mentioned were offset by a more normal level of operating expenses compared to the reduced spending levels of the pandemic affected prior year period.

As mentioned last quarter, while our recent pricing actions have been aggressive, the effective impact of these actions continue to lag rising costs. On a positive note, September was the first month and over a year that we didn't see a rise in published in mill prices for hot-rolled steel.

Net income for the third quarter of 2021 of $17.5 million or $1.40 per diluted share was down 13% from the prior year third quarter.

If we exclude from the current year quarter, $1.4 million of after-tax charges stemming from accelerated stock award vesting related to the retirement of our former CEO as well as Morbark inventory step-up expense from the prior year quarter, third quarter adjusted net income of $18.9 million was down 8% from the prior year results.

While income before taxes was up $0.3 million over the prior year third quarter, mainly due to lower interest expense, net income was lower due to an income tax provision for stock-based compensation in anticipation of a 28% full year effective income tax rate as well as the non-deductibility of compensation expenses related to the retirement of our former CEO.

Third quarter 2021 adjusted EBITDA was flat to the prior year third quarter. Adjusted results as trailing 12-month adjusted EBITDA of $155.3 million remained flat to the trailing 12-month result that we reported at the end of the second quarter 2021. This remains 7% above the adjusted 2020 EBITDA.

During the third quarter of 2021, we continue to delever the balance sheet by further reducing debt $20.7 million on the flat adjusted EBITDA performance. We ended the third quarter of 2021 with a record high order backlog of $645 million, which was an increase of 154% over the prior year third quarter.

We continue to see strong customer order rates and no significant order cancellations despite supply chain induced shipping delays. To recap our third quarter 2021 results. Total company net sales of $338 million were up 16%. Industrial division net sales of $219 million were up 12%, Agricultural division net sales of $119 million were up 25%.

Operating income of $30 million was down 3%, net income of $17.5 million or $1.49 per diluted share was down 13%, adjusted net income of $18.9 million or $1.59 per diluted share was down 8%. Adjusted EBITDA was flat to the prior year third quarter, but remained up 7% from full year 2020.

Total outstanding debt was reduced by $20.7 million and was down 21% from the prior year third quarter. And our backlog increased to $645 million, up 154% over the prior year third quarter. I'd now like to turn the call back over to Jeff..

Thank you, Dan. I'd like to start by again adding my personal welcome to everyone who's joined the call this afternoon as we review Alamo Group's third quarter results. Before discussing our results for the quarter, I'd like to offer a brief update regarding COVID-19.

I'm pleased to report that during the third quarter, we experienced very few cases of COVID-19 among our employee population.

While the direct impact of COVID was far less this quarter than what we've experienced during the last several quarters, the lingering indirect effects of the pandemic significantly impacted our operations during the third quarter.

As I commented in the earnings press release, during the third quarter, Alamo Group simultaneously experienced both potent market tailwinds and operational headwinds. Our markets remained strong during the quarter, clearly across the board, and our order bookings for the quarter increased sequentially again as they've done every quarter of this year.

In the agricultural market, prices for corn, soybeans and livestock while off from their previous peaks remained at historically attractive levels.

Tractor sales were also modestly higher than they were a year ago, although recent demand growth has been skewed to the larger tractors that are somewhat less meaningful to Alamo Group's sales of attachments. Activity in our governmental markets also remain strong.

State, county and municipal governments continue to invest in equipment to update their right-of-way maintenance fleets. In addition, demand for our industrial products from industries such as steel, cement and mining also continue to rebound.

Finally, demand for our forestry and tree care products has been very strong as we anticipated when we acquired the Morbark, Rayco and Denis Cimaf brands late in 2019. The increased pace of order bookings brought our backlog to a new all-time record of $645 million by the end of the quarter.

To date, we've not observed any signs that the momentum of our markets will change in the near term, nor have we experienced any meaningful order cancellations due to the extended lead times we are currently experiencing.

So long as dealer inventories remain at the current low levels, we expect demand for our agricultural division's products will remain strong with minimal risk that orders will be canceled or postponed.

Governmental agencies by their nature don't purchase equipment on speculation or in advance of known fleet renewal requirements, so we don't foresee significant risk of order cancellations from these customers.

Non-governmental buyers of our industrial products, including operators of our forestry and tree care equipment, place orders to meet expanding demand for their own products and also in anticipation of their current equipment reaching the end of their expected life cycle.

While there is some risk that these customers could cancel orders in the event of a recession, we do not anticipate this recurring in the near – that's occurring in the near term. Turning now to Alamo Group's operations in the third quarter.

We experienced significant disruption in our normal manufacturing process flows during the third quarter as a result of instability in the supply chain.

We experienced extended delivery times for a wide variety of components we require to manufacture our products, including shortages and delivery delays of truck chassis, industrial engines, gearboxes, cutting blades, hydraulic components and even such relatively mundane items as wiring harnesses and specialty assembly hardware.

Our operations depend on reliable and timely supplies of these kinds of components to operate efficiently.

When the supply chain is significantly disrupted as we experienced broadly in the third quarter, our workforce is less productive as they have to shift production priorities frequently based on what products can be completed with the materials on hand.

When a component needed to assemble – needed for the assembly of our products is delayed, our work in process inventory also increases beyond what is normally expected as orders increase. Input cost inflation was also a significant issue during the third quarter.

While our teams have been closely monitoring supplier cost changes and adjusting our prices regularly, there is a lag effect until these pricing actions materialize in our margins. Our Agricultural division has had success for renegotiating pricing for orders and backlog.

However, it's not really possible for our industrial division to renegotiate prices for orders and backlog from governmental customers. Shortages of skilled labor were also more impactful during the third quarter than we had experienced earlier in the year.

While we've been able to partly address the shortage of welders by increasing the pace of our deployment of robots, skilled assembly technicians with experience in electronics, hydraulics and pneumatics remain difficult to recruit.

Although this was certainly less impactful to our results than supply chain bottlenecks, it also has contributed to restraining sales growth in some of our operations.

Transportation costs were another headwind we encountered during the third quarter, particularly costs associated with inbound shipments, while transportation costs were higher across the board, we also incurred additional costs to expedite inbound shipments of components to complete production in order to achieve the earliest possible delivery dates to our customers.

As a result of the cost pressures I've described, our margins in the third quarter were lower than they were in the third quarter of 2020. However, our margins were actually slightly higher in the third quarter than they were in the second quarter of this year. And I think this indicates that better pricing in the backlog is beginning to flow through.

Finally, sales, general and administrative costs were higher in the third quarter. As expected, selling costs increased as COVID-related travel restrictions eased, and our sales teams were able to travel more regularly to serve our customers in person and to attend trade shows, many of which were suspended last year.

With our higher sales in the quarter, commission expenses also increased. The increase in administrative expense primarily involved non-recurring costs related to the retirement of our previous CEO. Our effective tax rate in the third quarter was 37% compared to 27% in the third quarter of 2020.

The higher tax rate was primarily the result of a provision for stock-based compensation and in anticipation of a full year 2021 tax rate at 28%. So as you can see, there was a lot going on during the third quarter, and this is reflected in our results.

At the moment, there is no clear evidence that the external business climate will be meaningfully different or better during the fourth quarter. One positive note is that we've recently seen steel prices begin to stabilize, albeit at higher levels than we would like.

Otherwise, inflation generally seems to be gradually gaining momentum at least in the United States. In spite of this, I remain optimistic about the future prospects for our company.

Our strong record high backlog gives us confidence and good visibility to allow us to make appropriate investment plans concerning the development of our people, our products and our facilities. I was also very pleased to announce the acquisition of Timberwolf Limited last week. Although this is a small company, they are a U.K.

market leader with a very nice range of brush and limb shippers. They have a comprehensive dealer network spanning the U.K., Europe and other areas that will provide important access points into these markets for our full range of forestry tree care and recycling products.

At the same time, Timberwolf shipper products fill an important product offering gap in Morbark's range that will complete and strengthen our tree care offering in North America.

Finally, I want to take this opportunity to remind the investor community that commencing in the fourth quarter, we will report our business through two new segments, namely vegetation management and industrial equipment. All of Alamo's products that cut or process organic material will be organized under vegetation management.

This division combines all of the brands of our former Agricultural division with the governmental mowing, forestry and tree care operations that had previously been part of our former Industrial division.

More specifically, this means that our Alamo Industrial Tiger Mowers, Morbark, Rayco and Denis Cimaf brands will be reported as part of vegetation management going forward. Our Industrial Equipment division includes our excavator vacuum truck, street sweeper, leaf removal and snow removal brands.

I believe this structure brings improved strategic clarity and more closely balances the size and scope of our two operating divisions. This concludes our prepared remarks. We're now ready to take your questions. So operator, please go ahead..

[Operator Instructions] Our first question comes from Mike Shlisky with D.A. Davidson..

Hi. Good afternoon, guys..

Hi, Mike..

So maybe I could start first touching on what you just mentioned about Timberwolf there.

Do you think that's going to be an avenue to expand more box distribution outside the U.S.? Is that one of the reasons why you bought it?.

It is, Mike. In fact, that's a very significant reason why we bought it. Morbark traditionally was a North America company with only a few distribution points in Europe that actually weren't very effective. And Timberwolf is a young, rapidly growing company, and they've built out a tremendous network that covers in the U.K.

and most of the continent of Europe and also some other places in the Middle East and other areas that can be interesting markets for us. And as I said in the press release, they have a very nice range of smaller chippers starting with 6-inch chippers and 8-inch chippers areas where Morbark traditionally has not been very successful or competitive.

So we plan to also cross-brand those products back into the Morbark range and bring them back in North America. So we see synergies in both directions, both market and product synergies in this acquisition..

Great. Thanks for that. I wanted to just maybe talk broadly also about the order trends. Obviously, great numbers, great backlog unfortunately, in an inflationary environment.

Can you maybe give us a sense as to whether you think that the two are connected? Are you concerned that people are just trying to or all they can now before they get their prices jack-up on them again.

And is there a potential that things have just been pulled forward from 2022 from the order perspective?.

Yes, that's a great question, Mike. I mean, let's take the easy one first. You've heard me talk about this before. I mean the governmentals don't order on speculation regardless of pricing and so on. So I really don't see any risk or erratic behavior in the governmental side of our business, which is a very large chunk of our company.

On the Ag side of it, if you look at it, I've said before, the tipping point will be when dealer inventories start to meaningfully rise. And I think that will be a signal to dealers that maybe it's time to back off a little bit. I'm sure with some of the dealers, there's some speculative going on.

But at the moment, it seems they're retailing everything they can get their hands on as quickly as they can get their hands on it. So I think that will eventually come, but I don't see it in the mirror yet. I don't see it coming at least in that segment of our business.

Forestry and tree care, particularly the bigger industrial machines in the Morbark range, those are big ticket items that demand has just been, frankly, overwhelming, impressive to say the least. And of course, we're new to that space. So we don't know it as well as some of the author markets that we've been in for a very long time.

I guess if I have one area of concern, that might be that we may have actually seen some cancellations or let's call them repricing actions by some of the customers in this space.

But again, I want to emphasize, there's no evidence of that yet, absolutely none on the horizon at all, and no discussion about cancellation or trying to cancel and reorder.

And of course, the problem is anybody that would cancel and order now has to get in the back of the line with another supplier or with the supplier they were originally in line with. So it obviously just compounds the problem. So until I actually see the demand itself softening, I don't see much risk of that, to be candid with you..

Can I follow up there, Jeff, would you say that for government customers that are – if you're a government customer, the orders are, you call it, more rational or just not growing as quickly as the private sector right now.

Is that a fair statement?.

Well, I mean, they're not growing as fast as the Ag business is. I mean, obviously, the Ag market is in a cyclic upturn. It's just in a very good place generally. And that's just market driven, as I mentioned in the remarks. The forestry and tree care space, these are big-ticket long lead time items.

And when the lead times go out beyond a year for those pieces of equipment, if you're an operator, if you have any doubt about the longevity of your machine, if you've got a machine that's reaching the end of life cycle, you're going to get in line for sure. And that's the area where, as I said, there just might be a little bit of risk.

But honestly, I'm not too concerned about it, Mike, because there's just no evidence yet. There's no discussion about, gee, I want to steel tipping down, can I renegotiate the price? Or are you guys going to move away from the pricing you put in place, we've had no contacts like that at all thus far. So the momentum just feels really good, Mike.

And as I said, it's across virtually all of our business. The only part that hasn't seen the momentum really tick up sharply yet is snow removal. But even there, our snow removal backlog is sharply upward from where we were last year. So I'm not concerned about that. We're just heading into the snow season.

So I think we'll see even further demand there..

Got it. Rich, more outer for you. And on capital allocation. I mean I saw you paid down more debt this past quarter, $20 million plus. It looks like your leverage levels are basically at this point, healthy and really of no concern. I would imagine to anybody at this point.

Yet you appear to have with your backlog is a pretty giant sort of EBITDA coming in, especially if the inflation abate at all.

Any update you can give us as to what your capital allocation plans might be going forward? Is there are there any major maybe looking at or other ways to take some of that cash that become some and to work?.

Well, I mean, obviously, Mike, we're always active in the M&A space. But as I've said to you before, I think one of the things we want to do is pick the deals we want to do. Timberwolf was one of those. It was a private sale. We contacted the owner.

There were no other players, some meaningful players anywhere at the table, and we were able to buy that business at an attractive valuation from our point of view.

Other than that, I'm sure Richard is waiting to jump in here and make a comment about our inventory, among other things?.

A couple of things, Mike, I think our cash is obviously up. It's at $89 million for the end of the quarter. The majority of that is overseas and it is somewhat tied up already with exchange rates, and we're somewhat hesitant to bring that back to incur a bunch of exchange rate losses.

So yes, we'd like to use those funds as much as we can, especially in the case of what Jeff was mentioning to you for the Timberwolf acquisition. Our inventories are up.

Our turns are not up, but a big problem with the turns not being up is we're not able to get all the components, and as Jeff mentioned to you closing out work orders and getting products shipped to the customer. So I do believe, hopefully, if we get moving forward, I think that cash – I mean, that inventory probably will go up a little bit more.

But I think we're trying to balance that out with what's going on with the deliveries themselves, so..

We have taken a fair conservative in this quarter, Mike, with regard to paying down the debt because of the rising inventories. And we expect that some of the supply chain problems abate, the inventories are going to continue to rise, demanding more working capital over time, at least in the short run.

But beyond that, our – as you said, our balance sheet is in very nice shape, and we're going to keep doing the things we do. We're going to keep acquiring businesses and reinvesting in the businesses that we have.

We had a very interesting discussion with our Board about improving the – not only the operational efficiency but also the environmental efficiency of our facilities, and that's an area here we'll be increasing our investment over time as well..

Got it. That makes a lot of sense. I will leave it there guys. Thank you so much for your time..

Thanks Mike..

Thanks Mike..

Thank you. Our next question comes from Chris Moore with CJS Securities..

Hey good afternoon guys. Thank you for taking a few questions..

Good afternoon..

Good afternoon. So looks like steel is showing some signs of letting up, as you talked about, given you don't typically reprice can't report government orders.

Your best guess at this point is you still have a couple of more quarters of lower margins on the government orders?.

I think that's true, I wouldn't say a couple, but I'd say probably at least one, Chris, is my guess. I was pleased to see our gross margin actually tick up a little bit from Q2 in spite of the fact that we did some inventory revaluation in the quarter. So I think that's a sign that the better pricing is already beginning to show in that space.

And for example, in our snow removal space, where we ended the year with a larger backlog than we normally have, we have started to see some of that reprice coming through now and the snow removal business has sort of been skip back to a more traditional level of margins. So I'm really encouraged to see that along the way.

Also, in our excavator and vacuum truck segment, I've seen evidence of the better pricing starting to flow through. In fact, that group had an excellent quarter, tremendous quarter..

Got it. That's helpful. Revenue up 16%, I mean, roughly the price volume kind of split..

I don't know, Dan, what would you say about that? You got to guess at that. I mean I think on average, if you think about that being 5% to 6% on price and the balance probably on....

Absolutely. And I also think, too, Chris, if you go back and look, you can't really see – we don't show you the numbers. Our new orders for the third quarter were tremendous. They were. And even though our backlog is up, too, we did experience some of the backlog that got left in there because we weren't able to ship inside the quarter.

But the majority of the increase in the backlog came from straight up new orders, and those do have pricing increases in them..

One of the interesting things, Chris, that we faced as quarter came to a close, was having truck chassis delivered to us without chips and building machines on them in anticipation that the chips were going to some time to get these out for the quarter.

And in some cases, that didn't happen both in our sweeper operations and in our vacuum truck operations. We've also got a few excavators that were built that are awaiting axles, where we built the entire machine, and we're waiting on an inbound supply of an axle to go underneath it. So those are the kinds of things we're running into.

And in one extreme case, we're waiting on trying to find some small electrical connectors, waterproof electrical connectors that are very inexpensive items that are just in a shortage globally. Our European companies are trying to find the same parts and you just can't find them anywhere. We've scored high and low.

That's partly due to defense demand among other things.

But it's just a very interesting time to try and operate and when you get the big things like the axles and then the chassis in place, that something is always popping up, in fact, I got a notice today of a disruption in the supply of hydraulic cylinders related to a strike at an ArcelorMittal facility.

So every day is a new day right now, and that's – we're just working our way through it as best we can..

Got it. I mean on the chassis side, how would you characterize your competitive positioning in terms of your ability to source the chassis.

Is there – is it a level playing field? Is it – you guys are big players? Does that give you a bit of advantage or?.

We are a big player and certainly, our competitors are too. I don't want to tell you we're bigger than some of the other players in our space at all. But all manufacturers typically have to buy through distribution.

That's kind of the rules of buying truck chassis, and we've aligned ourselves with a particularly good set of dealers who have a great deal of influence and information flow coming out of the major truck OEMs.

So if you look back a couple of quarters where several of our competitors were meaningfully impacted by the truck chassis situation we had not been, and it's begun to catch up now with us as well because, I mean, frankly, just nobody can get chips at the moment.

And even down to small things like the heavy-duty pickup trucks that we build our smaller sweepers on, they're just in very, very short supply. You just can't get them at any price right now. So I don't think we're meaningfully better or worse than any of our competitors in this quarter, in the third quarter.

And I think at this point, everybody is kind of dealing with the same deck of cards. I mean we've all received notifications from the chassis billers about what the impact is going to be on the 2022 bill, and how that's likely to be pretty disappointing, and we're working our way through that.

We've been able to source some chassis from some other manufacturers, which should offset that as long as those manufacturers deliver to their promises. So we're doing all we can to secure our future performance. And I like where we are.

Obviously, I'm concerned about it, but I think our teams are doing the right things, and we're getting very, very good information from our suppliers, and we know they're doing everything they can do to protect our interests..

Got it. I appreciate that. I will jump back in line..

Thanks, Chris..

Thank you. [Operator Instructions] Our next question comes from Greg Burns with Sidoti & Company..

Hi Greg..

So looking at the backlog, could you just maybe give us a little bit more color on the breakdown of the growth in that backlog between Ag versus industrial?.

Yes. I mean the Ag backlog has been growing very rapidly, and demand has been frankly euphoric. I don't know a better word than that. I mean these are happy times in the Ag business, and it's been really, really good.

In the industrial side, if you look at our forestry and tree care business, as I said, that's been overwhelming, particularly on the large end of our product range, the big machines that Morbark is really good at making and also in the mulching products that our Denis Cimaf brand produces through our Rayco operation.

There, actually, we have a significant challenge to ramp up the production. We've got an opportunity there to do a lot better if we can expand production, and we're working on that. We're looking at leveraging a couple to get that growing a little bit faster.

In the traditional governmental space, it's been more steady, but that's what you expect from governmental agencies. As I said, they don't increase or decrease buys based on things like supply chain disruptions that their fleets typically five years out. They have to go through a procurement process involving town councils or state governments.

And so that tends to be less affected by the ebb and flow in the supply chain and the other parts of our business. So while everything is up right across the board in our business, the biggest movers have been our Ag sector in our forestry and tree care sector inside industrial..

Okay.

And then is there any way that you can quantify like how much revenue the supply chain and labor issues cost this quarter?.

I don't know that I could give you a discrete number, but I would hazard a guess to say it was a good $15 million, $20 million would ease maybe a bit more..

Okay. Okay. And then I know Deere, there's a strike going on at Deere. I don't know if that overlaps with the products that you compete with them with.

But has there been any impact on your business from that?.

There hasn't been yet and the facilities that are on strike and Deere are not the ones that we source our tractors from. So that's the first bit of good news. On the other hand, the facilities that are on strike into those facilities that we get our tractors from. So I think what you're going to see is a worsening effect the longer the strike goes on.

At the moment, there's really not been any impact on our business yet. But I think if that strike goes on another month or two then I think we're going to see a real shortage of tractors emerge just like we're seeing in the chassis space..

Okay. Alright. Thank you..

Thanks, Greg..

Thank you. There are no additional questions at this time. I'd like to now turn it back to management for any closing remarks..

Okay. Thank you very much. I appreciate you all joining us today. We look forward to speaking with you again on our 2021 fourth quarter and year-end call in February. Thank you very much..

Thank you, ladies and gentlemen. This concludes today's presentation. You may now disconnect..