Ladies and gentlemen, welcome to the Badger Meter First Quarter 2021 Earnings Conference Call. [Operator Instructions]. As a reminder, today's conference is being recorded. It is now my pleasure to turn the conference over to Karen Bauer, Vice President of Investor Relations, Corporate Strategy and Treasurer. Please go ahead, Ms. Bauer..

Good morning, and thank you for joining the Badger Meter First Quarter 2021 Earnings Conference Call. On the call with me today are Ken Bockhorst, Chairman, President and Chief Executive Officer; and Bob Wrocklage, Chief Financial Officer. The earnings release and related slide presentation are available on our website.

Quickly, I will cover the safe harbor, reminding you that any forward-looking statements made during this call are subject to various risks uncertainties most important of which are outlined in our press release and SEC filings. On today's call, we will refer to certain non-GAAP financial metrics.

Our press release and slides provide a reconciliation of the GAAP to non-GAAP financial metrics used. Finally, during this call, we refer to core results for various financial metrics. For example, core utility water sales. Core, in this case, means the designated financial metric, excluding the impact of the recent s::can and ATI acquisitions.

We believe this reference point is important for year-over-year comparability. With that, I'll turn the call over to Ken..

Thanks, Karen, and thank you for joining our first quarter earnings call. In summary, I'm pleased with our results for the quarter, delivering sales and EPS growth, margin expansion and robust cash flow.

Most exciting, we experienced record order rates for our Smart Water solutions across both lines of business as the underlying growth drivers for our Digital solutions based by customers.

The well publicized and widespread electronics supply shortages limited our conversion of these record orders into sales in the quarter, tempering core sales growth, but resulting in a record high order backlog heading into the second quarter which bodes well for the balance of the year.

Our recent acquisitions delivered strong top line results with net profitability muted as expected as a result of purchase accounting items. Overall, our acquisition integration activities are progressing as expected. I'll talk about the current environment and our outlook later in the call.

But for now, let me turn the call over to Bob to go through the details of the quarter..

Thanks, Ken, and good morning, everyone. As you can see on Slide 4, total sales for the first quarter were $117.8 million compared to $108.5 million in the same period last year, an increase of 9%.

In Utility water, overall sales increased 12%, reflecting the addition of the s::can and ATI acquisitions, which contributed approximately $10 million of sales in the quarter.

Excluding acquisitions, core revenues in the utility water product line were essentially flat year-over-year despite record orders due to the intermittent electronic supply component shortages and logistics challenges that limited manufacturing output.

Scarce capacity of electronics is a pervasive market issue impacting many industries and is not isolated the Badger Meter. We did experience growth in overall meter sales and BEACON Software as a Service revenue, and we benefited from strategic value-based pricing actions.

As Ken noted, we ended the quarter with strong order momentum and a record backlog, which gives us confidence in our sales outlook moving forward.

As expected, the flow instrumentation sales rate of change improved sequentially from down 10% last quarter to down 3% year-over-year, with the majority of end markets served experiencing recovering demand trends. We expect to return to overall growth moving forward as a result of improving demand conditions and easier comparisons.

We are pleased with the operating profit improvement, delivering a 30 basis point increase in margins to 15.1% from 14.8% in the prior year. Gross margin for the quarter was 41.9%, up a healthy 200 basis points year-over-year.

The core business delivered higher gross margins due to positive sales mix, name or SaaS revenues, along with favorable pricing, which continued to offset the impact of higher brass costs in the quarter. Margins also benefited from favorable acquisition mix.

You may recall from last quarter, we described the water quality acquisitions of s::can and ATI as having higher than line average gross margins, combined with higher SCA as a percent of sales and therefore, with a net EBITDA range for the combined businesses in the mid-teens.

The positive acquisition mix benefit to gross margins was muted by the amortization of inventory fair value step-up in the quarter, but that's mostly behind us moving forward. Copper prices continued their upward trajectory after our last earnings call in late January when they were averaging approximately $3.60 a pound to now near $4.20 a pound.

This obviously increases the potential cost headwind for the year that we had estimated at $4 million to $5 million to closer to $7 million to $8 million on a year-over-year basis, if it were to stay in that $4.20 range.

We have executed well in implementing appropriate pricing mechanisms to offset this inflation as evidenced by our first quarter results and will continue to remain nimble in actively addressing inflation. Turning to SEA expenses. The first quarter spend of $31.6 million increased $4.3 million from the prior year.

This includes a full quarter of SEA spending for both s::can and ATI along with the higher level of acquired intangible asset amortization. Beyond the impact of acquisitions, higher personnel costs were more than offset by lower travel, trade show and other ongoing pandemic impacted expenses.

The down -- the decrease of which we will anniversary starting next quarter. The income tax provision in the first quarter of 2021 was 22.2%, slightly lower than the prior year's 25.6% rate. In summary, EPS was $0.47 in the first quarter of 2021, an increase of 15% from the prior year's EPS of $0.41.

Working capital as a percent of sales was 24.3%, down from 25.5% at calendar year-end despite the addition of ATI, largely due to working capital initiatives in the quarter. Our free cash flow of $28.8 million was consistent with the prior year.

In early January, we deployed $44 million net of cash acquired for ATI and currently have cash on the balance sheet of approximately $51 million. Along with the untapped revolver, we have significant financial flexibility to execute our growth strategies. With that, I'll turn the call back over to Ken..

Thanks, Bob. Turning to Slide 5. We don't provide guidance, but believe it is important to bring awareness to the increased level of unevenness we're likely going to see in our top line as this year unfolds.

I want to spend just a minute highlighting comparative sales data to provide a clearer picture of the varied influences on the quarterly sales growth trend lines and discuss the optimism we have for our results for the remainder of the year and beyond.

This chart depicts the quarterly sales growth rate of our core business in 2020 and into the first quarter of 2021. As you can see by the various call-out boxes, we had some specific dynamics in 2020 with COVID and now in the first quarter of 2021 that we need to be mindful of as we look at -- to the rest of the year comparisons.

Namely, we will have an easier comp for our upcoming Q2 versus the 2020 COVID lockdowns combined with a portion of the record backlog converting to sales given the anticipation for some modest improvement in electronic supply.

As we move into Q3, we'll have a difficult comparison based on the post-COVID lockdown order rate and manufacturing recovery last year. The bottom line to all of this is that we continue to have strong momentum and robust bid activity order rates and backlog consistent with our long-term outlook for mid-single-digit growth.

From a top line standpoint, the acquisitions are performing in line with their historic growth patterns, and our integration teams are working to begin putting the steps and processes in place to realize future growth synergies. Turning to our outlook. The underlying market drivers for smart water solutions remain intact.

And in fact, as we've discussed, COVID is spotlighted the benefits of AMI for common utility challenges, such as remote work efficiencies and regular and automated consumer engagement tools. Water quality and security concerns also are driving accelerating interest in our real-time digital solutions.

We saw evidence of that during the recent climate events in Texas and other Southern U.S. states, which experienced a debilitating deep freeze. We had a number of customers describe the real-life benefits of having our cellular AMI solution deployed, which remained in service due to the criticality of cellular networks.

These utilities were able to obtain real-time mission-critical data, which helped identify potential main breaks, pipe freezes and burst keeping safe water supply available for their end consumers.

Now surprisingly, 1 of the most common outlook questions we get from investors relates to the potential impact of the recent infrastructure proposal from the Biden administration.

Specifically, the portion of the plan that calls for $56 billion of spending to upgrade and modernize America's drinking water, wastewater and storm water systems and additional $10 billion in part to invest in rural small water systems.

As we have repeatedly stated, the underlying secular trends driving demand for our digital water solutions are already evident and growing. Stimulus investments could perhaps accelerate or add to those underlying drivers but are not necessary for us to realize our long-term growth plans.

In fact, as we stated over the past couple of quarters, It's the widespread availability of vaccinations that are most relevant to near-term demand patterns. It's too early to tell if a potential pause in spending might occur as utilities wait and digest the implications of the stimulus proposals.

Our view is that if a pause would occur, it would simply be a matter of timing and not a change to the long-term structural growth of our business. We will, as always, focus on the elements of our business within our control.

Our teams have done an outstanding job managing value-based pricing initiatives, which have mitigated the significant increase in brass costs.

Our sourcing and supply chain teams have their hands full actively managing the varied ramifications of the wide-ranging and universal electronic shortages, along with certain logistics bottlenecks, including those at West Coast ports.

While these circumstances are not unique to Badger Meter, I am confident that we will be able to adequately support customers despite these many challenges. We will continue to manage working capital and drive cash flow in order to support our investments in both organic and acquisition-driven growth.

Our focus remains on enhancing the product and software offerings serving water-related markets and applications globally. Finally, I want to provide an update on our ESG activities, notably establishing our first greenhouse gas intensity reduction target.

This represents an important step on our ESG journey as we work to mitigate the impact we have on the environment and continue to be good stewards of the resources we use in our operations.

The 15% intensity reduction goal by 2030 was developed through a strategic initiative to capture baseline greenhouse gas data globally and identify opportunities to reduce energy and consumption in other level 1 and 2 emissions.

We will set annual smart goals to monitor progress, and we'll report externally on our efforts in our biennial sustainability report. To close out our prepared remarks, I want to thank our teams around the globe for their consistent and dedicated efforts to serve our customers. With that, operator, please open the line for questions..

[Operator Instructions]. Your first question today comes from the line of Nathan Jones with Stifel..

I'm going to start on gross margins. Obviously, a very strong year. I think we talked last quarter when they were about 42% and you guys didn't think that was sustainable. Most of the inputs here of the higher-margin acquisitions would have already been factored into that. So I can only imagine that pricing was probably better than you had anticipated.

Can you just give us a few comments on that gross margin level with another quarter under your belt, if you think this is sustainable.

Did these acquisitions change the structural gross margin range that you guys have been talking about at 36 to 43 years? Just any comments you've got on those?.

Yes. Nathan, I'll go first and then I'll turn it over to Bob. But we're obviously very pleased with the performance of the business this quarter and frankly, in the fourth quarter as well. The work that our team has done around value-based pricing, which for us is not a project. It's not an initiative.

This is a change in how we do business and how we assess the value we provide for our customers and what that value is worth. So we feel great about the pricing program that we've started. We've talked many times about the structural changes that we have in more BEACON revenue and structural mix changes that are favorable.

Bob can talk a little bit more about the acquisitions. But in general, from an execution point of view, I just wanted to get out there that really proud of the work everyone's done here to manage all the inputs to have us in a really good price/cost position..

Yes. I don't have a much whole lot to add to that, Nathan. I think let us -- we're obviously very excited about the last 2 months -- 2 quarters worth of margin performance. As a cautious company, I think we always like to see more wins on the board before we draw the lines on the field or declare victory.

So I think something to certainly keep an eye on. I don't think we're ready to declare a movement in that range. But still if you add up the last 8 to 10 quarters of performance, we've definitely been in that tighter band. And yes, the acquisition mix does change that to a certain extent, but I don't think you're going to get us to stretch yet today..

Okay. Fair enough. Then maybe just a follow-up on the supply chain. Obviously, the electronic supply chain has been big news around the investment community. So we know it's not something that's restricted at Badger.

Can you talk about how much that impacted the quarter? Like was there a meaningful amount of revenue that you had to defer out of the quarter because of those restrictions and your ability to produce where you want to? And just how you see that going, what your suppliers are telling your comments on that?.

Yes, sure. We -- as you're certainly well aware, we don't provide guidance. So the fact that we even brought it up is the fact that we think it is meaningful enough in nature that it should be called out.

And the supply chain challenges that we're seeing, again, similar to the comments I made on the price cost dynamics, We've got a great team that's been executing extremely well for years, not just the past quarter or 2, we expect to see some moderation and improvement as we get into Q2 and throughout the year.

Certainly recognize that this is a global challenge and that there's not a quick fix. We're not going to see it snap back right away in Q2, but we do see We do see some moderation and improvement in the future. And the backlog increase is really something we're really excited about. And that's why we're stressing that Our outlook is positive.

It's a matter of digesting through some of these supply chain challenges that I think you're going to hear from everybody else..

Yes, I would expect to -- is that -- I mean, you had a number of different supply chain themes freight and those kinds of things.

Is there a number that you think was deferred out of Q1 that if you didn't have those supply chain challenges, you would have been able to ship in the quarter?.

Yes. We're probably not going to frame that out for you because from quarter-to-quarter, backlog can change, just I would guide in a way that this change has been higher than others we've had..

Your next question comes from the line of Conor Lunagh with Morgan Stanley..

I was wondering if we could just stay on margins for a second year because there were just a couple of things you specifically called out in the press release. So there was the fair value step-up of the acquired inventory and then the breast input cost.

And basically, what I'm wondering is as we move into the second quarter here, do either of those trends significantly in your favor or against your -- against margins.

Basically, if we strip those out or thought about where we're going to be in the back half of the year 2022, how should we think about the underlying trend?.

Yes. So let me just take that in pieces. And I think you meant maybe the back half of 2021 versus 2022. Certainly, you mentioned 2 items. The 1 is the inventory step that is largely for all intents and purposes behind us. So the drag of the step-up in inventory that turns out over the first turn of inventory is effectively done for both s::can and ATi.

So that headwind goes away moving forward. Copper and price cost dynamics, it's a very fluid situation. I mean even just in the first quarter, we saw the input cost go from $3.60 to today, $4.20. And that's after March having been a relatively favorable change that obviously has been a race here in the month of April.

So I think it's what we've been saying all along in terms of continued price focus and the opportunity and the market acceptance of being able to pass some of those increases through in today's dynamics and in today's environment.

We're going to continue to do that, and we're going to do that to a degree that we're able to -- we believe we'll be able to offset the majority of the cost pressures. And I don't see that changing dramatically as we move forward.

There might be leading and lagging effects quarter-to-quarter, but I think we've got that well under control, and that's evident in our first quarter results..

Got it. Appreciate it. And I guess the other question I had was on free cash flow. So you guys have -- I understand you like to be conservative, but you've also done a pretty great job in pulling a lot of cash out of working capital.

So should we expect more of that going forward? What -- how do you think about how much more you can do on that front? And I guess, in a more structural sense, with the acquired revenues and the continued shift towards SaaS revenues, How does the free cash conversion of the business trend going forward relative to what you've done historically?.

Yes. I'm sure there'll be a couple of people giggles, as I say this, because I think after the last two years, I get to -- we get to the end of the year, and I say, we've squeezed all the juice from the fruit in that case and don't expect that level of conversion going forward. I think I said that in the fourth quarter.

And then here we come with the first quarter at 200-plus percent conversion. I will remind you, if you look at the pacing of the free cash flow conversion in 2020, we started out exactly the same way, almost an equivalent amount of free cash flow in Q1 of last year and then that abated throughout the year.

We still landed 2020 at a relatively healthy conversion in that 150% range. I continue to just caution, yes, we had a great start to the year, but 1 quarter does not build 4. We've got some anticipation here of We've talked about the sequencing of the backlog and the recovery here in Q2 relative to an easy comp.

I think that creates some opportunities for primary working capital headwind moving forward. I would just say, we -- I would think about it as a standard deviation less than a year ago's conversion.

I think we've talked about somewhere in that always shooting to be in excess of 100% conversion, but not expecting to be able to repeatedly deliver at that 150% rate. That's just not realistic moving forward. I get that, that's clouded by a really juicy flow-through or conversion rate in the first quarter, but 1 quarter does not make 4..

Yes. Understood.

And just the latter part of that question was just do you think that the shift towards increasing software and higher technology sales alters relative to historical trend? Or do you think we should use that as sort of a guide going forward?.

I don't think there's a dramatic change in the cash flow as a result of that. One might think that there's a bunch of BEACON prepayments and other things that happen with multiyears in advance. And while that is an element, it's not the broad base of that revenue stream.

A lot of that is month-to-month, so it doesn't necessarily change in a step-change way the cash flow profile..

Your next question comes from the line of Rick Eastman with Baird..

Just a quick question. And again, I'm going to go back to the same thing here. But Bob, could you just possibly maybe better define the impact of s::can and ATi to the gross margin.

I think the press release suggests that the gross margin contribution was accretive even with the inventory step-up costs in the quarter? And could you just give us a sense of what -- I mean it's a discrete item.

So could you just give us a sense of what the inventory step costs were in the quarter so we can build on going forward?.

Here's what I would explain about the quarter. So 200 basis points of gross margin expansion. I would tell you the majority of that came out of the base business. and wasn't necessarily acquisition related.

I would tell you, the acquisitions themselves in normal times and in even in the time frame whereby they're absorbing a higher cost structure from the inventory step-up amortization are above line average. That's not like it's 20% above line average, but it's above line average.

So I would just try to frame it that way, short of giving you the defined number..

Yes. So going forward, without the inventory step, it will be somewhat more accretive. And then If you think about your price cost commentary and it's quite visible here in the quarter. But I think about where we are on the raw material side, I mean, electronic shortages, but I would think pricing resin costs up freight costs.

So are you able to match price with those other raw material inflation dynamics there around the other components and freight.

So do we stay positive price/cost here rolling through the second, third and fourth quarter here?.

Yes. So my earlier comment was very isolated to 1:1 copper in price. I was not when I said, our ability to offset was not contemplated over those other tack-on or carry-on effects.

Obviously, as you think about talking with customers and in the market, it's easier for someone to understand a copper input cost that's a published rate, and you can look and map out over time. What's harder to understand is air freight and other logistical challenges and even electronics is much more distributed across the component base.

It's not something that's the commodity that you can point to. So I would say our ability, generically, is probably less 1 to 1 on those other tack-on ancillary effects. But at the same time, we did have a favorable price/cost element in the first quarter.

So there's some room to absorb those things, but not a one-to-one pass-through concept like a copper concept. Does that make -- hopefully that made.

Well, and so second, third and fourth here going forward, there could be a bit of a drag around price cost, including all direct materials, if you will, is that fair?.

Yes. So Rick, so this is Ken. So it's obviously a very dynamic situation. Things are moving very quickly. But the 1 thing that I would just like to point out on what we're doing around value-based pricing is, again, when we think about operational excellence, we think about that beyond the shop floor.

And what we're applying here is a real program in process to manage that price cost value. So while there may be drags here and there and there may be upside here and there, I think we've really done good work around this process, and I think we see it in the results.

And then also, which didn't come through in the quarter because of some of the challenges with supply chain is that we're also winning at least our fair share of orders. So we're not making RAS decisions to try to collect quarter and drop a $1. I feel like our process is hitting on all cylinders..

Yes, Rick, the other thing I would add is just that what you just described and what Ken just articulated in terming the dynamic nature of the situation and how it's evolving day by day. That's Part of the reason why we're not going to sit here and declare a new gross margin profile in excess of 40%.

The other thing to real is, I don't want anyone walking away from this conversation and thinking our pricing execution a copper surcharge. It's much more sophisticated than that. So those are just two add-on comments that I'd make there..

Okay. Okay. Fair enough. And just my last question.

When you think back, Ken, is there any history of when you think about the flow business on the meter side, is there any history of business drifting away from the installed base if another vendor can actually supply the meter? Again, I know some of these supply chain issues that are constricting supply are not unique to Badger, but regardless, in the flow business, where you're talking about meter upgrades, if 1 vendor amongst the big 3 cannot supply at any given point in time.

You consider that ending up in backlog, but is there any history of that business drifting to another vendor that can supply?.

Yes. So let me try to be succinct but probably have a long-winded answer. So as we think about the supply challenges and just the Badger Meter portfolio, right, you always hear us talk about choice matters.

So if we think about this in radios or meters and communications, right? So as this global electronic shortage situation tightens, abates, whatever happens here over the future, We have a full product line of meters. So we have both polymer and brass. We have both mechanical and ultrasonic.

Thankfully, we can offer our customers a full solution of meters, which many of our competitors cannot. So one, We're in a much better position on the meter side than most. Two, the D-Flow acquisition that we did in 2017 gives us much more control over our destiny with ASICs and perhaps people who have to buy them from other suppliers.

So on the meter side, even though we're challenged, we certainly feel protected, if you will, better than most in terms of being able to hold on to our share or maybe or maybe even take advantage of some opportunities.

Then if you flip it to the radio side, the majority of the exciting growth we're seeing on the radio side is, of course, in the cellular area. And that's a case where we're rock solid. If someone has decided they're going on the cellular side, they can't and won't flip to a fixed network solution.

On the flip side, they could start installing cellular radios because there's no upfront infrastructure or anything that takes to go into it. So from a radio side, we feel really good there too.

So even though this is challenging and it doesn't feel good at all to have supply challenges from being able to defend ourselves, our Choice Matters platform is going to be really valuable this year..

[Operator Instructions]. Your next question comes from the line of Brian Rafn with Morgan Dempsey..

So I wanted to stick -- I don't want to beat the dead horse here, but I do want to stick with this theme on the electronics. Now when you think of electronics and battery, you think of AMI and a lot of the sort of next-generation solutions. But then again, you mentioned D-Flow and ultrasonic, which I guess is a big component there.

Can you tell us which kind of product line most impacted by that? Is it more of the AMI or is it the ultrasonic Or is it really just equal across the board?.

I think as we think about the last several months and the coming 12 months, that can kind of ebb and flow. It could be radios for a certain supplier, it could be electronics. I would just say it's not limited to 1 or the other, it could be in both areas because it's more electronics as the broad-based category that I would say that's challenged.

It just happens to sometimes manifest itself in a part that may be going into an electronic meter or it might be a transceiver that goes into a radio. It's not limited to one side. And again, broad-based. I'm not speaking for Badger Meter there. I feel like I'm making a declaration on electronics in general..

Got it. Okay. And then what about -- obviously, Relatively old-fashioned manual read meters still are at a decent percentage of the market. I know that sometimes even surprising to think at this day and age.

But Is there a mix shift risk there that there's customers who are sort of on the fence between sticking with a more manual read solution with less electronics content than a an upgrade that more of them start to say, you know what, this shortage might last a while. We're just going to go with a more basic solution that might carry a lower margin.

Is that any kind of risk?.

No, not for us because, in fact, as we like to point out over and over, we still sell 80% of our meters are mechanical. So if somebody has a problem with a competitor's static meter, would be happy to sell them a mechanical, if that's what they wanted. our ultrasonic, which we think will be better than most in position to do that.

And then frankly, again, with our cellular AMI adoption, If there's a supply issue in the second quarter, so what, they can put them on the third quarter. They can put them out in the fourth quarter. They don't have to chase this fixed network investment. So we have complete flexibility, and that will certainly, I think, be in our favor..

Got it. Okay. And then 1 more, just maybe the silver lining camp. If we link this issue over to another issue kind of pre-COVID one of the big, I guess, talking points and issues people talked about was new entry into North America by some of the Scandinavian players and so forth.

I mean 1 would think that That might have been interrupted by COVID in the first place, some of that new entry. And now when you're having these kind of global supply issues, maybe folks would concentrate on their home core markets and kind of dial back ambitions about new market entry.

Can you update us on that whole kind of new entry situation in North America where that stands?.

Yes. Well, you and I, we had several discussions on that a couple of years ago. And As you recall, we felt really good about our ability to protect our position to begin with. And now you layer on COVID.

And then you layer on the fact that 1 of the things we felt the most strongly about is with our competitors from Europe trying to take over with just a portion of a product line. And now that product line is being challenged by electronics.

Yes, I felt good two years ago when everybody was talking about this, I felt better last year, and I feel even better today..

Your next question comes from the line of Hasan Doza with Water Asset Management..

Two questions for Bob and then a high-level question for Ken. Bob, on the accounts payable and inventory, I noticed the year-over-year uptick, and I assume some of that is due to acquisitions.

So my question is, Can you help us kind of isolate the trends in your core utility and flow business in terms of payables and inventory, excluding the recent acquisitions. Just wanted to understand the reason for the uptick in inventory and payables, excluding the impact of the acquisitions..

Yes, Hassan, the best place to see that, and I won't run the numbers by you because you can find them right in the cash flow. That cash flow -- the cash flow statement effectively neutralizes the impact of the acquisitions. And so you can see the true -- in that case, working capital improvement on a year-over-year basis ex the acquisitions.

And you'll see that, that was effectively, I think, $8 million or $9 million contribution in the quarter to free cash flow..

Okay.

And also in terms of raw materials, can you help us understand your exposure to resin and glass prices, if any?.

Yes. So we typically don't bifurcate cost of goods sold by independent commodities or inputs. Obviously, the 1 we get closest to doing that is on copper historically. Yes, is there a resin and glass in our various products? Absolutely. But it hadn't been a significant impact or changed, we'd have been talking about it.

So really, right now, it's pretty quiet from that front. That isn't to say that there aren't changes in dynamics that happen every day, but it's just not a significant piece for us..

Okay. Just would like to close with 1 high-level question for Ken. Coming back to the topic of industry dynamics, Ken, can you kind of talk about the pricing environment, especially in this post-COVID world, so to speak. If any of the players being irrational, lowering prices to get new business. I know you guys are obviously very disciplined.

I'm kind of just wondering if anyone, especially the new entrants being irrational to kind of book new business in this environment?.

Yes. So we've continued to not see that. And if you listen to our competitors that had to report earnings last quarter, they all said all of them said that they would be recovering inflation. So that was, I think, a clear indication on their part that they weren't intending to do irrational pricing.

And from the new entrants, we get asked that question a lot, and we just have -- you might have a -- you might pull 1 example out here and there, but certainly nothing that is concerning..

There are no further questions in queue at this time. I turn the call back to the presenters..

Great. Well, thank you all for joining our call today. For your planning purposes, our second quarter call is tentatively scheduled for July 20. I will be around all day to take any follow-up questions you may have. Have a great day..

And this concludes today's conference call. Thank you for your participation. You may now disconnect..