Good afternoon. My name is J.P. and I will be your conference operator today. At this time, I would like to welcome everyone to the Carlisle Companies Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] I would like to turn the call over to Mr. Mehul Patel, Carlisle's Vice President of Investor Relations. Mehul, please go ahead..

Thank you, and good afternoon, everyone. Welcome to Carlisle's fourth quarter 2023 earnings call. I'm Mehul Patel, Head of Investor Relations for Carlisle.

We released our fourth quarter and full year 2023 financial results today, and you can find both our press release and the presentation for today's call in the Investor Relations section of our website. On the call with me today are Chris Koch, our Board Chair, President and CEO; along with Kevin Zdimal, our CFO. Today's call will begin with Chris.

He will provide highlights of our results and accomplishments followed by Kevin, who will provide an overview on our financial performance and an update on our outlook for 2024. Following our prepared remarks, we will open up the line for questions.

Before we begin, please refer to Slide 2 of our presentation, where we note that comments today will include forward-looking statements based on current expectations. Actual results could differ materially from these statements due to a number of risks and uncertainties, which are discussed in our press release and SEC filings.

As Carlisle provides non-GAAP financial information, we provided reconciliations between GAAP and non-GAAP measures in our press release and in the appendix of our presentation materials, which are available on our website. With that, I will turn the call over to Chris..

manufacturing energy-efficient products, minimizing our value chain greenhouse gas emissions and diverting waste and end-of-life materials from landfills. Under our first pillar, we provide end users access to solutions that drive energy efficiency in their buildings.

As an example, adding 1 inch of Polyiso insulation to a 50,000 square foot roof can save building owners as much as $110,000 in avoided energy costs over the service life of the building. Our second pillar, reducing our operational and value chain emissions helps Carlisle reduce our carbon footprint and the negative environmental impacts.

As an example, let's take our blowing agents in our spray foam operations. We finished the year converting over 50% of our HFC legacy spray foam products to a more environmentally friendly formulation amounting to over 250,000 metric tons of greenhouse gas is avoided, a compelling achievement.

As a reminder, HFCs are 1,000x more carbon-intensive than HFOs. Carlisle also obtained five additional ISO 14001 certifications through 2023, bringing our enterprise-wide total to 26. Additionally, our Montgomery Polyiso plant recently obtained ISCC+ certification, clearing the plant to run bio-based MDI and polyol on a mass balanced approach.

This is a pivotal achievement in Carlisle's ability to manufacture and extend the credits of bio-based Polyiso to its customers. Lastly, our third pillar focuses on the reduction of construction waste entering landfills.

As an update here, Carlisle's rooftop takeoff program diverted over 1 million square feet or 120 metric tons of reclaimed insulation and membrane materials from landfills throughout 2023. We have also expanded incentives for the program, which we believe will further expedite this growth and adoption amongst our customers.

I personally take great pride in Carlisle's sustainability legacy spanning over 100 years. Carlisle's commitment to operating efficiently, minimizing waste and offering solutions to empower end users and reducing energy consumption has been ingrained in our culture and will be essential to our success in the future.

And with that, I'll turn it over to Kevin to provide additional financial details as well as our 2024 outlook.

Kevin?.

Thank you, Chris. Looking at our fourth quarter results on Slide 7. Despite a 1.9% decline in revenue, we were able to expand our EBITDA margins by 440 basis points to 26.4%. Furthermore, we achieved record fourth quarter earnings with an adjusted EPS of $4.17, an increase of 30% year-over-year.

Looking at our segment highlights, starting with CCM on Slide 8. CCM delivered fourth quarter revenues of $816 million, up 1.9% from the fourth quarter of 2022. The increase was driven by favorable weather and the return to normalization of order patterns, including the end of destocking in the channel.

CCM EBITDA increased 12% to $255 million, with EBITDA margin up 270 basis points to 31.2%. This was driven by a combination of leveraging higher volume growth, favorable input costs and realizing cost savings through the Carlisle Operating System. Moving to Slide 9.

Revenues at CWT decreased 11% year-over-year, primarily due to the well-known declines in residential demand and the exit of a noncore business in the first quarter of 2023. However, despite the revenue decline, we were able to drive EBITDA growth of 54% to $69 million.

This represented an EBITDA margin of 22.2%, expanding at an impressive 940 basis points from the fourth quarter of 2022. The margin improvement was bolstered by operational efficiencies gained through targeted restructuring actions, strategic sourcing and the realization of synergies from the Henry acquisition.

Synergies now exceed $50 million, significantly above our deal model estimate of $30 million. Slide 10 provides a year-over-year fourth quarter adjusted EPS bridge items for your reference. Moving to Slides 11 through 13. Carlisle ended the fourth quarter of 2023 with $577 million of cash on hand.

We had $1 billion of availability under our revolving credit facility. We generated operating cash flow from continuing operations of $1 billion and invested $142 million in capital expenditures. Our free cash flow margin was 20% in 2023, and we ended the year with a solid net leverage of 1.6x, comfortably below our 2x to 3x long-term target.

Our disciplined capital allocation framework remains focused on delivering ROIC in excess of 25%.

As stated in Vision 2030, we continue to focus on being a superior capital allocator by investing in our high ROIC building products businesses, making synergistic acquisitions that deliver significant opportunities for value creation and repurchasing shares given our attractive valuation.

We deployed $900 million towards share repurchases during 2023 and paid $160 million in dividends. This represented our 47th straight year of dividend increases. Expanding on share repurchases at the end of the fourth quarter, we have 7.4 million shares available under our share repurchase program.

Notably, the $2 billion of expected proceeds from the CIT sale provides us with additional dollars and flexibility to execute further share repurchases and fund our high-returning capital allocation priorities.

Overall, we believe our pristine balance sheet, conservative leverage profile and ample liquidity positions us to drive additional value creation in 2024 and beyond. Turn to Slide 14 to see our full year 2024 financial outlook. We expect 2024 revenues to increase by approximately 5% versus 2023 and EBITDA margins to expand by 50 basis points.

We remain focused on disciplined pricing as we leverage greater operational efficiencies and effectively manage costs through our continuous improvement efforts. Additionally, we expect to deliver free cash flow margins of 15% and ROIC in excess of 25%. As such, we expect double-digit EPS growth in 2024.

This is directly aligned with the objectives outlined in our Vision 2030 strategy and a positive first step towards a $40-plus EPS target. Looking at the components of the outlook. For CCM, we expect year-over-year revenue to grow approximately 6% in 2024.

The primary drivers are the tailwinds from the return to normalization in order patterns that was absent during 2023 due to destocking. For CWT, we expect year-over-year revenue to grow approximately 4% in 2024.

Strong sales execution on key growth initiatives and stronger trends in residential should more than offset any headwinds posed by nonresidential markets. With that, I turn it over to Chris for closing remarks..

Thanks, Kevin. In closing, I am grateful for the hard work and dedication of Carlisle's employees that was demonstrated throughout 2023. As they have in the past, our teams demonstrated their resilience, perseverance and a commitment to excellence and delivering value in a difficult environment.

I would also like to specifically call out and thank John Berlin and the entire team at CIT for their many years of significant contributions to Carlisle. CIT was one of the longest owned assets in the Carlisle portfolio and began with our acquisition of the Tensolite Company in 1959.

Through a commitment to innovation, industry-leading operations and a unique combination of organic growth and synergistic acquisitions, CIT embodied the key tenets of value creation at Carlisle. We wish John and the entire team the best as they become part of the Amphenol family. Turning to 2024.

We have entered the year with significant positive momentum and a clear focus on the goals outlined in our recently launched Vision 2030 growth strategy.

We are confident that our ability to innovate with a focus on energy efficiency and labor-saving solutions puts us on the right path to drive above-market growth and in return, drive superior financial results.

The improved profitability by our simplified building products portfolio, a robust free cash flow engine and the expected proceeds from the sale of CIT leave us well positioned to achieve significant value creation for shareholders and deliver another year of industry-leading ROIC in excess of 25%. That concludes our formal comments.

Operator, we are now ready for questions..

[Operator Instructions] Your first question comes from the line of Tim Wojs from Baird..

Maybe just to start on CCM.

Is there a way to maybe bridge some of the underlying assumptions on the 6% revenue growth? So just really kind of interested in how much you're kind of baking in for the lapping of destocking kind of what the underlying implied kind of volume growth is? What would kind of be on the roof or sell-through? And then how are you thinking about pricing as well..

Yes, Tim. So overall, expecting CCM to be up about 6% in 2024. We have the destock benefit. That's about a 11% benefit -- and then pricing, we expect to be down really from the carryover from 2023, which was about 2% to 3%. And then the overall end market also down about 2% to 3%..

And then I guess on pricing, where do you think the industry kind of stands there? I guess we've heard mixed anecdotes around where kind of pricing stands. I'm just kind of curious how you see it. I mean, you said carryover pricing which would assume that maybe things have stabilized, but just kind of curious on your comments on price..

Yes. I think, Tim, we thought 2023, given the significant sales declines, we thought pricing held up really well. through most of the year, it fluctuated, but I would say it was stable. When we look back, we've got a couple of components in there too. We've got the core roofing. We've got the CAM we've got Europe and we've got some mix.

And so I think, overall, I'd characterize it as stable and going to this year, I think it will be pretty much the same thing as what Kevin was talking about with the 2% to 3%. But again, it's early. It's Q1. it's January.

But I think definitely, given all the declines last year, I thought the pricing held in there and maybe that gets to some of this pricing to value and what we're providing and others are providing..

And then just on, I guess, reroofing, how visibility do you kind of walk into a year with on the reroofing side? I'm just trying to kind of think through the ability of a building owner or a contract that kind of pushed that around based on other dynamics.

But how would you kind of think about kind of the underlying reroofing backlog and just your visibility to that as you go into '24..

Well, I think it's still -- there's a good backlog. Obviously, when new construction was cooking there, we had some backlog. We've got the labor constraints. We tend to look at it at a macro level. We've gone through the chart with looking back 20 years and what's coming due.

We know we have our share of the market that when it is warranted, we also know when those roofs are coming due. We think that the average roof in the industry is a 20-year roof based upon our warranties. I mean there are longer warranties you can buy, but on average, it could be about 20 years. So we track all that.

I think the thing is you're talking about a very dispersed demand pallet across the entire United States is this reroofing. And you've got some things in there where you can patch and some people will repair and the place early. Others may delay a variety of functions. But I think overall, we try to get a sense through surveys.

We talked about two surveys we did last year with about 600 contractors talking about what was happening in their markets around the country. And then obviously, Steve Schwar, Frank Reddy and their sales teams are out there every day talking to them. So we think the visibility is pretty good.

I think those other things just create some difficulty in pinning it down. So as we go in, as Kevin said, we're looking at that 11% on the tailwind from destocking.

And I think if we look at the industry in general, we're back at that mid-single digits that we've been at historically, the combination between reroofing and new construction, and we think reroofing is holding up well..

So then just to confirm, if volumes should be down 2% to 3%, and then just based on your mix, I mean, you probably have reroofing flat to upsell and then new construction kind of down in the high single digits or something like that?.

Yes, yes. I think going in the year, that's how we're thinking about it. A little pressure on new construction from interest rates and the economy and then reroofing, picking that up with the backlogs Yes, exactly..

Your next question comes from the line of Bryan Blair from Oppenheimer..

Nice finish to the year..

Bryan, thanks..

Your guidance strikes us as a touch conservative, especially given the momentum you have coming through Q4 and knowing the comps that you've asked, but it's early in leading some of certainty to the upside is certainly fine.

But the level set on the framework, maybe walk us through how you're thinking about the cadence of sales and margins throughout the year. And if you can speak to those dynamics by segment, that would be extremely helpful..

Yes. So let's start with sales. And we're looking at sales is really what our historical seasonality has been. So if you go back pre-COVID, the three-year average on sales at CCM. The first quarter is typically about 20% of full year sales than the second quarter is about 29%. Third quarter was 27% and in the fourth quarter was 24%.

And those were the historical averages, and we think '24 is going to be a more normal year, and that's what we're expecting on the CCM side. For CWT, they're pretty much the same on the quarterly. The only difference is the first half of the year, where CWT historically has been a little bit stronger in the first quarter, so about 22% of sales.

And then 27% of sales in the second quarter and then the second half of the year was the same as CCM. Then if you look at the EBITDA margin, overall, we would expect the -- really the incrementals that we've talked about to drop through based on those sales numbers at CCM, it's about 40% incrementals. CWT, low to mid-30s and incrementals.

Only difference of all of that is the first quarter for CWT that one just based on just how the numbers are playing out, if you look at a CWT should increase a couple of hundred basis points in Q1. So that's one exception to what I just talked about. And that improvement is really from the carryover of all the synergies that they picked up in '23..

How does price cost take out for CCM and CWT in 2023? And then what have you baked into guidance on that front? And just running the simple math, we assume that all of growth is well even based and thinking about the normalized incrementals that you just referenced, the 50 basis points seems to come exclusively from growth in that drop through, but I suspect price/cost remains a good guy for you guys coming into the year, and it's certainly a typically a lever for the Carlisle story.

So just curious how you're thinking about that, but starting with how price cost [indiscernible]..

Yes. For 2023, we had given a range in the third quarter, and we hit the top end of that range where we came in for CCM at $80 million benefit -- that's for the full year, CWT for the full year was $40 million benefit. As we get into 2024 as you said, maybe a little of the numbers were conservative.

This is one where we're pretty much looking at price raws to be flat for both segments. And that's offsetting that 2%, right, 2% to 3% price down. So obviously, there's a benefit of the raws take that a flat number..

And then last one, staying on the margin bridge, how much of a step-up in R&D expense are you factoring in for this year? We know the 3% target kind of medium to long term. How's that being phased in? And what's the near-term focus for the team.

We've kind of come to the conclusion that it's more evolutionary focus in terms of product development for the time being and perhaps more revolutionary over time? Just curious about the sale..

Yes. So R&D expense overall is about 80 basis points as a percent of sales, and we're looking to nearly double that in 2024. Everyone can hear the operator was dropped from the call.

So we're just waiting to have the operator rejoin and then we'll resume the questions -- so if you can hear, please be patient, and we will get this issue resolve momentarily..

And your next question comes from the line of Saree Boroditsky from Jefferies..

Glad we got a technical issue fix. So I want to talk a little bit about cash, you're about to receive almost $2 billion in proceeds.

So just -- and you did a lot of share buybacks already, but what's the appetite this year for share repurchases? And then what are you seeing from an M&A pipeline perspective, ultimately, how are you thinking about the optimal capital structure for your business?.

Yes. So from the cash, one piece we do have in 2024 is $400 million of debt coming due in the fourth quarter. So we'll use some of the cash there. We have dividends, that's about $160 million. And then at that point, we'll invest in the R&D and some of the capital expenditures, capital expenditures, we put out $160 million to $180 million.

And then it comes down to share buybacks versus acquisitions. We've been doing about $400 million a year in share buybacks. We'd expect to do that plus we're allocating right now is about half of the CIT proceeds to put that also towards share buybacks this year..

I can talk about the pipeline, if you want to. Did you want to ask any more about the share repurchases. We get 3 things there. I think maybe just pause and make sure you get everything you need on share repurchases..

No, that's good. M&A pipeline next would be great..

Yes. And then we'll get this optimal capital structure. Yes. The M&A pipeline has been a little bit, I think, all the way around slow. We are seeing deals. We'd like to see more, hopefully, we see things free up a little bit more as the spring gets here, interest rates change a little bit.

But I think we're following kind of the same pattern you're seeing with everyone else that just '23 was not a great year for M&A and probably not a great year for people selling their businesses. So we're still optimistic there are things out there we can add to the building products portfolio and the envelope.

I mean, as a reminder, as we said in Vision 2030, we're going to be really, we have some really specific hurdles for of them. We want to have an organic growth story within the asset that we're buying.

We want to make sure that there are really hard synergies like we had with Henry, not just sales synergies and things that are hope for, but real raw material savings and plant savings like we did with Henry. We want to have a really good management team.

And this is the one that I think in the Henry acquisition has been the hardest in the past is to get that type of management team that we had coming in with Henry that just right off the bat picks up the integration playbook, which is number 4.

And then they run with it, and we get -- I don't know if you've heard recently, but the synergies we estimate of $30 million with the Henry deal. Now we've exceeded $50 million. And a lot of that really is to that great management team that great integration playbook and now pause once they were acquired.

So when you layer those things on, I think we're a little bit more picky than most, but I think Henry is a great example of what we want to do with M&A, and I think there are more out there like that, just harder to find. And then Kevin will pick up on the capital structure..

Yes, capital structure, we're looking to have net debt EBITDA in the range of 1x to 2x. And at times looks like above that if it's the right acquisition, like we did with Henry and then our plan is to pay that back within 18 to 24 months to get us back in that 1 to 2x net debt-to-EBITDA ratio..

And so I guess, given where kind of the M&A pipeline is, you talked about half of the proceeds for buyback within your guidance, you have about $20 million of net interest expense.

But given that you're expecting to hold on to some of these cash proceeds, should you not realize some interest income on that? And how do you think about earnings interest income within your guidance?.

Yes. So interest expense is around $70 million. And then yes, we have about $50 million of interest income. So $70 million, $50 million and then the net $20 million..

Your next question comes from the line of Garik Shmois from Loop Capital..

Great. Just wondering if you could just speak to a little bit more of your view of the market in CCM being down 2 to 3 points. I appreciate that the view is that the repair side could be flat to slightly up and the new down high single-digits or so.

But just curious as where are you seeing maybe some upside or downside risk to that market outlook, would it be more repair versus new or anything you can add this into how you're assessing variance around the market outlook..

Yes. I think, Garik, the biggest thing for me is this idea that this interest rate environment that we've been facing in the economy, I mean, we're not unique in this idea that we're going into the year. First, we hear there's going to be three interest rate cuts, okay, that's super positive. We like that.

Then we hear now, we're going to pull back on that. I think cash carry came out, [indiscernible] said and said maybe it's too soon to talk about that. So we've got that. We've got the economy that everybody is on pins and needles about with, obviously, employment and other things like that.

So I think as we sit here, the hard thing for us to do is to be sitting in January, which is in the first quarter, our lightest, as Kevin mentioned, 20% of overall sales and trying to forecast that with the real construction season is going to be in the spring and summer.

So right now, we're saying, as we did on the 2030 video that things are relatively stable and they're moving along as we expect -- and so we're kind of looking at historical averages, really what we get from the market, what our sales teams are telling us what we're seeing in project pipeline.

We also get to things like value but we actually read your reports. When you do your surveys and your pulse checks and those kind of things and take all into account. So I think the biggest thing for us is just -- it all feels optimistic right now, and we like that.

But when we get down to granularity, I'm looking at the economy to be the biggest variable. And then we look at specifically into some of the verticals. And when you look at '24, we see that continued, I'd say, pressure on warehouses, specifically. But to call out one that seems to be the biggest decliner would probably be warehouses.

I think Dodge has it somewhere in the high teens, low 20s forecast for '24. Education looks pretty good. Retail stores, health care, we still think there's a trend there. And seems to be happening with aging population that we'll see more long-term care. Medical seems to be good. There seems to be a lot of money in medical.

And then we get the reshoring of manufacturing, which think Dodge estimated was somewhere around 8% in '23. And then I think the last 1 really is the office building.

So we don't deal on the tall buildings that we had Citicorp and there was a lot of distress there with the work from home, but we're more in the low 3, 4-story buildings, and we think that's good and suburban office buildings have been pretty good. So that's kind of how we see the verticals then. I think we just layer in the reroofing on top of that.

And obviously, that's a little bit less vertical dependent and more dependent on the age of the -- so again, optimistic about '24.

I think specifically, if we are -- continue to see the economy perform as it is, and we do get a couple of cuts that could be a pretty good year going forward, especially with the fact that I would say that there's been -- we have the destocking, but we haven't really had in this winter period, a return to restocking, which typically back four or five years ago before COVID, the result was a load-in in the spring in the March, April time frame.

So there may be some of that to -- if the economy turns around and things look good..

I appreciate the plug. I guess a follow-up question is just on CWT, maybe similar, you touched on some of these things in the prior answer. But coming down to 3Q, you specifically indicated that there were some more project delays than you anticipated and CWT, certainly is more on the commercial side than residential.

But just curious has that maybe pacing continued? Or maybe from the sounds of it, you're seeing some stabilization, but just wondering if you could address some of those project delays in CWT and what occurred in the fourth quarter..

Yes. Garik, it's Mehul here. I'll take that one. So overall, to your point, 2023 was very challenging, given the dynamic nature of the macro environment. That's what impacted the project delays in 2023. The way we see it now, it's basically stabilized.

I think more or less, the economy is kind of what it is around higher interest rates and what's going on with nonresidential. So I'd characterize it as being stable. And then overall, on the CWT side, specifically on the commercial side, we're mainly focused around the institutions, medical, education and government.

So those tend to be a little bit more stable as well..

Your next question comes from the line of David MacGregor from Longbow Research..

Yes.

Just to start off with a quick one -- any sense of what benefit the extended days in December may have represented to the quarter?.

Yes, we think it picked up probably about two days of positive weather..

Okay. Two days. Secondly, I wanted to ask you about market share in CCM. And clearly, during the pandemic, you guys won share.

And so I guess the question is, if the market is stabilizing, how do you defend that share now that they want it back, and they're likely prepared to use price to get it? And then maybe within the context of that answer, you can just talk about what you expect in terms of CCM market share in 2024..

Yes. I think for market share, I don't know, I don't want to get contentious. I would say that during COVID, I would say there were a couple of phases to it. And maybe in the first phase when we came out, if you might recall, we had actually built inventory going into COVID when others were declining. And when we came out, we captured a lot of share.

So there was demand we had at others weren't able to provide. And that was part -- attributed to our belief of the Carlisle experience, providing a lot of value to our contractors, the right place, right product, right time, right? So we picked up share then. Then we did get through and is the time went on.

We had others that implemented different types of techniques to get out into the market and to sell things. They handle their approach to direct sales to contractor may be different? Or are they funded distribution in a different way. And I think you're right. As we chose a path under, I think we call it our MSP program, we made some decisions.

And one decision was we felt it was better to I would say, be more democratic in our approach to funding distributors, we didn't put all the eggs with the biggest distributors of contract because we make sure that all of our long-standing customers got a little bit so that everybody could survive. So we may have suffered a little bit there.

And then I think there was some pricing as we came out into '23, that some attempts to gain share through that in the first quarter -- in the first quarter of the year, which could acerbated the destocking. But ultimately, things guide, as we've already touched on, it was a very stable year for pricing so things came back.

And so really, when I look at the time I've been a COO to now 2014 to '24, I would say that overall market shares have remained relatively stable. There's ebbs and flows in each segment is very specific TPOs different than EPDM. EPDM is different than PBC.

But on the whole, I think one of the reasons it stays relatively stable for us is our great network of architect specifications, distributors and then this warranty and specifying these things and viewing the whole thing as a system, which is what Mehul talks a lot about with Henry as well. This idea that we're having a specified system.

So I don't think '24 will be any different. I think '24 will probably play out in a similar way and market share will be relatively consistent around the big buckets of our business. The three roofing membranes, the insulation, the accessories at ESI and seals of that..

And then the last question I had for you was just with regard to the backlog that you referenced in your prepared remarks.

Can you size that roof in backlog for us? And what would it normally be -- so to what extent are you above normalized levels? And -- and how are you thinking about [indiscernible] on that?.

I would or -- I guess without -- I don't want to share too much, and I would go back to maybe more of a public figure. And I think it's -- ABI, I think. Contractor -- so that's steady 8.6 that Kevin referenced is pretty similar to what we've seen for the last few years. 9.1, I think, was there for a while. I don't think it's really dipped below 8.5.

So I think backlog has remained relatively consistent, which is kind of what we talked about with labor constraints that people aren't paying resume, but there's a healthy backlog of demand there..

Your next question comes from the line of Adam Baumgarten from Zelman..

Just looking at the margin guidance, the EBITDA margin expanding overall 50 bps -- is that a bit more weighted or higher than the total company at CWT given the stronger starters, is it relatively balanced across both businesses for the year?.

Yes, it's relatively balanced across both CCM and CWT..

And then just a couple of others. One, you mentioned the positive weather in 4Q just a moment ago was weather a headwind perhaps in January? And then also just on CapEx, kind of coming up a good amount, and I know you guys noted some growth investments.

Can you give maybe some more specifics on where you're spending that incremental CapEx?.

Yes, CapEx is going to be a couple of key areas. One, the R&D. We're going to continue to invest in the innovation and doing expansion there. We have, certainly with COS, there's always cost reduction programs, whether it's through automation and those types of investments. And we also for future growth.

There will be some capacity, not new lines or anything like that, but additional investments that will enhance some of our growth overall..

Okay. And just on the January or if that was anything notable..

Not really. I would say not that we've heard from the division. I think one thing is this rain in California, and this atmospheric River that they talk about. I know Frank in the CWT team do a lot there on the retail side. Once those kind of things hit, obviously, leaks appear and things like that, and that tends to be something that gets stocked up.

So probably have more of an impact here as we get into February a little bit further..

There are no further questions at this time. Please continue..

Thanks, operator. Well, that concludes our fourth quarter '23 conference call. I appreciate all the questions and the interest, and we look forward to talking to everyone soon. Thanks very much..

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect..