Ladies and gentlemen, thank you for standing by. Welcome to Enerpac Tool Group's Second Quarter Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded, March 23, 2022. It is now my pleasure to turn the conference over to Bobbi Belstner, Senior Director of Investor Relations and Strategy. Please go ahead, Ms.

Belstner..

Thank you, Operator. Good morning, and thank you for joining us for Enerpac Tool Group's Second Quarter Fiscal '22 Earnings Conference Call. On the call today to present the company's results are Paul Sternlieb, President and Chief Executive Officer; and Rick Dillon, Chief Financial Officer. Also with us is Barb Bolens, Chief Strategy Officer.

Our earnings release and slide presentation for today's call are available on our website at enerpactoolgroup.com in the Investors section. We are also recording this call and will archive it on our website. During today's call, we will reference non-GAAP measures such as adjusted profit margins and adjusted earnings.

You can find a reconciliation of non-GAAP to GAAP measures in the schedules to this morning's release. We would also like to remind you that we will be making statements in today's call and presentation that are not historical facts and are considered forward-looking statements.

We are making those statements pursuant to the safe harbor provisions of federal securities laws. Please see our SEC filings for the risks and other factors that may cause actual results to differ materially from forecasts, anticipated results or other forward-looking statements.

Consistent with how we've conducted prior calls, we ask that you follow our 1 question, 1 follow-up practice in order to keep today's call to an hour and also allow us to address questions from as many participants as possible. Thank you in advance for your cooperation. Now I will turn the call over to Paul..

Thanks, Bobbi, and good morning, everyone. Thank you for joining our Q2 earnings call. I'm pleased to provide you an update not only on our second quarter results but most importantly, to share what we confirmed from our work over the past several months as a result of our review of the business and our intended path forward.

As I mentioned in our Q1 earnings call, we had begun a deep dive holistic review of the business and our markets. We spent several months evaluating commercial opportunities, operations and footprint, support functions and organizational structure.

This was an extensive effort in which we looked across the entire business and market landscape with deep involvement from dozens of Enerpac team members yielding unique insights on both commercial and operational areas.

Through that evaluation, we have identified meaningful growth and efficiency opportunities that we believe will enable us to not only achieve but exceed our previously communicated 25% adjusted EBITDA margin target. As we announced this morning, we have launched our ASCEND transformation program to enhance shareholder value.

This is a strategic program focused on driving accelerated earnings growth and efficiency across the business.

The program is built on 3 main pillars, including accelerating organic growth through focused market penetration and updated go-to-market strategies, improving operational excellence and production efficiency by utilizing a lean approach and driving greater efficiency and productivity in SG&A by better leveraging resources to create a more efficient and agile organization.

This will be underpinned with an 80/20 approach to help simplify what we do, both commercially and operationally. With elements of the program intended to drive both organic growth and margin improvement, the initial phase of ASCEND will focus more on driving greater efficiencies and reducing operating costs.

We expect our ASCEND program to drive between $40 million to $50 million of incremental annualized adjusted EBITDA, which would be in our run rate as we exit fiscal '24, with the full impact in our fiscal 2025 projections, and we anticipate investing between $60 million to $65 million over the program period to support the ASCEND initiatives, which could include any potential restructuring costs.

As we will continue our work on other -- excuse me, and we'll continue our work on other key growth initiatives, such as innovative NPD, digital and IoT enablement in our products and services and stronger regional strategies in developing markets.

We also expect to pursue a disciplined M&A strategy while continuing our focus on the pure-play industrial tools and services market.

The Board and management team are very excited about this program and the potential to drive significant value creation by approving how we go-to-market, innovate, buy materials, manufacture product and serve our customers. We'll provide further updates as we progress on the planning and implementation of the specific initiatives.

In addition, we expect to hold an Investor Day later this calendar year, where we can share more details on our strategy, the ASCEND transformation program and our view on a multiyear financial framework for the company.

In addition to investing in ourselves, another important aspect of our capital allocation strategy includes returning capital to shareholders through opportunistic share repurchases. As we announced this morning, the Board of Directors has approved a new share repurchase program of up to 10 million shares of the company's common stock.

This share reauthorization and our intent to purchase shares reflects the confidence we have in our strategy and in our ability to create shareholder value and generate cash to invest in both internal opportunities such as ASCEND as well as M&A.

And we expect that our available cash, existing credit facilities and access to capital markets will support a disciplined M&A strategy as we continue to identify complementary additions to the Enerpac Tool Group portfolio. Moving to Slide 6. I'll provide an update on what we are seeing within the markets that we serve.

I was pleased that we broke our typical Q2 seasonal trend in which Q2 net sales are generally lower than Q1 due to broad-based improvement in demand. As expected, supply chain and logistics challenges persisted throughout the quarter, which Rick will speak to in more detail.

But I do want to thank our supply chain and operations teams across the globe for their incredibly hard work managing through these challenging times.

In January, we took the pricing actions that we discussed on our Q1 earnings call to offset the ongoing inflationary pressures, and we will continue to evaluate the need for additional pricing actions, which Rick will also cover.

While COVID-related challenges continue to impact the business in Q2 to varying degrees by region, we have seen some improvement in recent weeks in certain regions, which we expect to continue through the back half of our fiscal year should COVID continue on its current path.

As it relates to the ongoing conflict in Russia and Ukraine, our thoughts are with all of those impacted by this tragic situation.

While Enerpac Tool Group does not have a material of top line exposure in Russia or Ukraine, we are managing the ancillary impact of the crisis on our business which is primarily related to supply chain, increased commodity costs, FX and dealer confidence, particularly in parts of Europe.

And in March, we suspended sales into Russia to comply with sanctions imposed by NATO nations. I'll now provide some detail from a regional perspective, including key verticals and distribution. So in the Americas, core sales were strong with approximately 20% year-over-year core growth and general industrial markets showed solid signs of activity.

This was primarily driven by product with growth in the mid-20% range, while service was up mid-single digits as a result of being impacted by the delayed start of projects, and the overall outage season, partially driven by COVID-related labor shortages.

Our heavy lift business continued to see favorable trends in Q2 with an uptick of inquiries in the past month related to bridge and infrastructure, power generation and mining activity. Earlier in the quarter, distributors and customers continue to limit in-person visits.

However, in an encouraging sign, these restrictions started to ease towards the end of February. Distributor sentiment in the U.S. remains cautiously optimistic though inflation and supply chain issues continue to be a concern.

Latin America is seeing solid results from copper mining and oil and gas activity despite several companies continuing to have restrictions regarding supplier visits. Moving on to Europe.

This region experienced low single-digit year-over-year core growth in the second quarter, with more challenges in our service business as COVID restrictions were put in place in response to the Omicron spike for several key customers, thereby limiting access for our personnel.

Overall, product improvement was broad-based, with end customer demand increasing in most geographies and infrastructure was strong in the quarter due to continued government spending on aging infrastructure.

Distributor sentiment in much of Europe is generally favorable with some variation by region with Central and Eastern Europe more recently more cautious due to the crisis in Ukraine. Moving to Asia Pacific. The region delivered high single-digit year-over-year core sales growth.

COVID appeared to have stabilized within the region during Q2, although we have seen an uptick over the past several weeks, and the majority of verticals continue to be steady or improving with broad-based improvement in the quarter. Both oil and gas and power generation were strong for the region in the quarter, driven by the high demand for energy.

In addition, mining was also a positive in the quarter driven by high iron ore prices and coal demand. Moving to Slide 8 in the MENAC or Middle East region. MENAC experienced solid year-over-year core growth of approximately 25%.

From a vertical market perspective, the region has seen a strong pickup in oil and gas activity due to underinvestment the past few years. While there are large new projects and major shutdowns occurring, some maintenance work has continued to be pushed out due to the high oil prices and customers postponing shutdowns to continue producing.

While protocols remain in place, COVID-related travel restrictions have started to ease in some countries as the region returns to a more normalized state with increasing end customer demand. And in addition to oil and gas, power generation and infrastructure were particularly strong in the quarter. Now moving on to Cortland.

The business experienced core growth of 35% year-over-year in the second quarter. On the medical side of the business, demand and order rates continue to rise throughout Q2 to pre-COVID levels. In the quarter, there were several sports medicine and orthopedic products that moved from the development phase and into production.

And our team's collaboration with customers on new product development opportunities remains high. Moving to the industrial side of the Cortland business. Overall order rates have normalized and lead times and on-time delivery continues to improve despite ongoing supply chain and logistics challenges.

From a vertical market perspective, utilities and recreational remained strong, oil and gas is expected to improve due to crude pricing and seismic is showing positive signs for the first time in over 2 years. While COVID challenges continued in the quarter, we have seen improvement in recent weeks which we expect will continue.

With that, I'll hand it over to Rick to take us through the financials as well as an update on supply chain and operations.

Rick?.

Thanks, Paul, and good morning, everyone. So let's start with our adjusted second quarter results on Slide 9. Sales were $137 million with core sales up 16% when compared to the second quarter of fiscal '21. Tool product sales were up 15%, service sales were up 13% year-over-year and Cortland sales were up 35%.

Adjusted EBITDA margin was at 12%, a 250 basis point improvement over prior year second quarter. Our tax rate for the quarter was 18%, up from 16% in the prior year. This resulted in an adjusted EPS of $0.14, up from $0.06 last year. If we turn to Slide 10, and we'll take a look at the sales waterfall.

Product sales increased roughly 16% with over 80% of the increase attributable to our tools product and the remainder to Cortland. As Paul discussed, we saw solid tools product growth across all of our regions with Cortland product growth driven by the medical business.

Service growth in MENAC, the Americas and APAC were partially offset by a decline in ESSA. Pricing actions contributed over $3 million to our top line. Turning quickly to Slide 11.

Our second quarter results reflect sequential improvement with strong demand throughout what was historic -- what has historically been our lowest second seasonal end second quarter. Almost all regions are seeing order rates ahead of 2019 levels. Let's move on to the details of the 250 basis points of margin expansion on Slide 12.

We saw year-over-year and sequential improvement in product volume this quarter. The incremental margin on the increased volume was roughly 60% consistent with last quarter. Our service utilization was down, driven mostly by delays in service work in our ESSA region due to the spike in COVID cases in the quarter.

We were also impacted by a negative mix of service projects year-over-year with more of our activity in countries with the lower margin profile. The SG&A improvement reflects spending levels and cost reductions from restructuring actions taken in the quarter.

We expect these actions to yield $1 million of incremental savings in the back half of the year. We recorded a $3 million reserve against our receivables in the quarter.

The charge was primarily against receivables from an agent in our MENAC region for which we have previously disclosed a concentration of credit risk and due to [indiscernible] receivables being beyond historical levels for the region.

At the end of the quarter, and as we negotiate future commercial terms, our remaining net exposure with the agent was $8 million. We also recorded a reserve against Russian receivables due to the uncertainty of collection given the sanctions imposed.

So for the quarter, volume growth and operating efficiencies were partially offset by service underutilization and the receivable reserves.

Our incremental margin for the quarter, as reported, was 28% that's consistent with last quarter and it's reflecting the negative impact of both pricing actions that offset inflation and the impact of the incremental reserves.

Excluding the receivable reserves, our incremental margin would have been approximately 45% on the high end of our expected rates. So moving on to operations and supply chain. The supply chain challenges, inflationary costs and logistics constraints continued during our second quarter as expected.

However, the escalating Russia-Ukraine crisis over the last 4 weeks creates incremental supply chain and macroeconomic headwinds that significantly alter our expectations for the back half of the year. During the quarter and pre-Ukraine conflict, we were seeing some signs of the expected improvement we talked about last quarter.

The supply chain opened up a bit in the U.S. with long lead time components arriving and allowing us to ship more from our past due backlog.

Prices and availability in ESSA were steady for the last 2 months of the quarter; China remained steady, if not stronger, as we had some suppliers producing at near capacity levels; and our supplier on-time delivery improved as we moved through the quarter.

While we were able to ship more backlog product during the quarter, strong demand did result in a net increase as component lead times remained high. Past due backlog was approximately $6 million to $8 million at the end of the quarter, and that's up from the $5 million to $6 million in the first quarter.

We still expect shipments from several key suppliers of material components, including in-transit items in April, that will allow us to continue to churn our backlog in the near term. In anticipation of the U.S. West Coast port union strike this summer, we also pulled forward orders to ensure availability.

Freight costs remained high as expected and electrical component shortages continue and are expected to remain a large factor in our past due backlog. As a result, we did see inventories increase in the quarter and expect that we will see additional increases in the back half of the year with current conditions and a potential port strike.

The Russia-Ukraine crisis accelerated essentially at the start of our third quarter. We saw significant panic and commodity price increases within the first 10 days of the conflict. And although the pace of the rising cost appears to have slowed, costs remained significantly elevated and are expected continuing to increase over the coming months.

Our suppliers have limited direct Russia or Ukraine sources but the downstream effect on other sources, rising prices and availability will keep costs high.

Energy costs, transportation and broad logistics challenges caused by no-fly zones and port congestion in Europe due to Russia, workarounds will continue to drive up freight costs and likely increase transit times. The longer the conflict continues, there is increased uncertainty of the short- and long-term macroeconomic impact.

We are seeing cost increases on almost all of the categories we purchased. We have seen many suppliers that have moved to daily pricing, and we are working with limited expectations of availability. With current headwinds and the exacerbated lead times, we do not expect to see improvement in the back half of our fiscal year.

It generally takes about 2 to 3 months for us to see the full impact of the current costs in our results. Now let's turn back to pricing. As we noted earlier, pricing actions taken to date have covered inflationary costs in the first half of the year.

As discussed on our last call, we implemented the January 1 price increase across all regions and categories aimed at delivering 1% to 2% price cost realization based on known cost increases at the time and assuming cost moderation in the back half of the year.

Given the current situation, we now see supply chain challenges remaining and a worsening inflationary environment remaining with us through the end of our fiscal year. Accordingly, we are preparing for a new round of price increases in the coming months.

We are also in the process of implementing surcharges in the coming days to accelerate these actions. Our objective remains to protect price realization while responding to a hyperinflationary environment, however, we do expect there to be pressure on our EBITDA margins, backlog and demand in the back half of the year.

Paul will cover this in a moment. So I'll wrap up with liquidity on Slide 14. We generated $8 million in cash flow during the quarter. We are pleased with the results given we have historically used cash in the second quarter on sequentially down revenues.

Working capital increased by $4 million on increased inventory, primarily attributable to the in-transit inventory. Capital expenditures were $2 million in the quarter.

In the prior year, we generated $1 million of free cash flow in the second quarter with higher CapEx and working capital attributable to timing of billings on certain project receivables.

Our leverage is at 0.6x down from the $2.1 in the prior year, reflecting $35 million in debt reduction over the course of last year, combined with the higher trailing 12-month EBITDA. We expect our leverage will continue to improve in fiscal 2022 with continued year-over-year EBITDA growth and cash generation.

We are well positioned from a liquidity perspective as we launch our ASCEND Transformation and will continue supporting our overall strategy with disciplined capital allocation. With that, I'll turn the call back to Paul..

Thanks, Rick. Despite the strong quarter, the turmoil of global events in the last month and the resulting macroeconomic challenges have created second half headwinds and uncertainty in our markets. And as such, we are adjusting our full year guidance for fiscal 2022.

Factors such as the strong dollar which account for roughly half of the impact to our new top line guidance, continued inflationary pressures, continued supply chain disruptions as well as greater supply chain difficulties resulting from the Russia-Ukraine conflict and to a lesser extent, products sold directly into Russia, which has been suspended to comply with sanctions have caused us to revise our full year sales guidance to a new range of $560 million to $580 million.

While we have some potential tailwinds that could help support growth, we remain cautious. We continue to expect incremental EBITDA profitability of 35% to 45%, excluding the impact of foreign currency. Our guidance is based on current conditions such as foreign exchange and the macroeconomic environment.

So before we open the line for questions, I want to reiterate that this is an important and exciting time to be part of Enerpac Tool Group. As I've outlined on the call, we are now taking decisive actions to position the business for its next phase of growth and shareholder value creation.

I am very much looking forward to the next steps in our journey and particularly the execution of our ASCEND transformation program.

I would like to conclude by thanking all our Enerpac Tool Group employees around the world for their hard work and dedication to serving our customers despite the ongoing COVID and supply chain-related challenges they faced during the quarter..

Operator, that concludes today's prepared remarks. Please open it up for questions..

[Operator Instructions]. Our first question comes from Michael McGinn with Wells Fargo..

Touching on the supply chain headwinds.

Is this a situation where you're on allocation with certain suppliers and you can get product, but just not enough? Or is this more of a situation where there is no supply and you need to look towards those third and fourth tier suppliers you've added as of late? And maybe more long term, how do we transition out of this? Is this a situation where supply comes back online and there's relief on gross margin or a scenario where you need to keep all suppliers on Blanket POs for maybe a longer extended time period..

So a lot there and a little bit of yes to the first 2 elements of that question. We do have some suppliers that are in allocation mode. But we're also leveraging our second and third suppliers as we have been throughout this scenario.

So we're getting good response of balancing and working early with our suppliers on demand and having the long-term relationships that we've had, it's allowed us to kind of get out there early, understand what's available and get them orders early, which we've been talking about as we look from our dealers and distributors of early indications of demand.

So far, that's really been working well for us. We do like the second- and third-tier suppliers. Admittedly, we're using them more than we have historically. And I think what this process has done for us has allowed us to identify and get multiple sources up and running versus just having them qualified.

So that's even a step further to tapping that incremental source if we have continued increased demand. So we view the scenario, we view having learned a lot from the scenario.

We view ourselves as being in a better position on a go-forward basis and being able to leverage the more relationships that we have and deeper relationships we develop with all of our suppliers. We view this as where we keep all suppliers up and running.

Well, based on demand, we'll respond with the supply chain and based on cost negotiations, which is kind of get back to a typical environment with our supply chain. So hopefully, I've answered all of them..

And Michael, it's Paul. I would also just add on top of Rick's comments, a couple of things. I mean, one, we do benefit from the fact we have a very global supply chain organization.

So we have colleagues sitting in all major regions, which has been a strength for us to enable us to identify and work directly with current and new suppliers, admittedly in somewhat of a more tactical fashion than typical strategic sourcing given the challenges we faced but that's been helpful.

I do think we also saw some improvement in Q2 from China-based suppliers, which was encouraging, meeting more of their commitments in OTD. Some caution there in the quarter given their uptick in COVID activity in that country. But we did see better improvement in China, particularly towards the end of Q2..

And just a reminder, our supply chain is almost split equally across all regions. So we purchase equally, spread set of suppliers and volume based on the regional demand..

Great. I appreciate the color. And second, understanding this might be more of a conversation for the upcoming Investor Day, but can you provide any guardrails on the timing of the investments and maybe the buckets as the strategy progresses. So is there something where it's front-end loaded for corporate.

You begin moving towards facilities? And then reengineering the products that you've curated from your 450-page catalog. Any commentary there would be great..

Sure. It's Paul. I can address that, Michael. So it is -- it's a broad-based program as we shared. It's really meant to cover the next sort of 30 months or so of intense activity for us. As I referenced in my remarks, in the near term, we are focused on some cost-related actions and operational efficiency still to be completely planned and defined.

We don't expect, I would say, material or significant impact in this fiscal. But we'll see some certainly cost from the program throughout fiscal '23 and '24, and we expect we'll see benefit flow in both of those fiscal years. Some of the things could be near term that are more cost related and can be actioned more quickly.

And then things that take more time, particularly around a potentially footprint or some of the things that are more sort of engineering and innovation dependent for some of the end market work that we're doing. Those might flow sort of later in the time frame closer to the fiscal '24 period. But that's how we think about it today.

And we'll certainly provide more updates and color in quarterly earnings calls and, of course, in our Investor Day when it's scheduled..

Our next question comes from Jeffrey Hammond with KeyBanc Capital Markets..

This is David Tarantino on for Jeff. So you mentioned some strategic pricing strategies around the ASCEND strategy. And it seems like you were modestly price/cost positive in the quarter.

So just given that, how do you see price/cost playing out through the balance of the year given the incremental increases? And how are you thinking about pricing longer term within the ASCEND strategy?.

So from a balance of the year, we talked about -- as I mentioned, with the January pricing increase, pre-conflict, we were targeting 1% to 2% realization, all of which for the year, all of which would have been in the back half. And as I noted, we're preparing for price increases and surcharges right now with our goal to protect that realization.

So that's still kind of our expectation, although we are certainly in a hyperinflationary environment with a lot of challenges and uncertainty. So we're trying to stay ahead of that as we progress. And I'll let Paul cover..

Sure. And I think on the second question, David, just sort of the more midterm on some of the strategic pricing actions. So based on the analysis that we've done as we dug into it and we look through various different lenses, including using kind of an 80/20 framework, it became clear to us we have a number of opportunities there.

Some of those will be how we revisit our pricing with respect to what's in the 80 versus the 20. And also as we think about relationship of pricing across different SKUs that might be similar but may not be set with the right pricing structure today or optimized, I should say.

And then the final piece is, as we talked about sort of further channel optimization, there's also an opportunity there to rethink our overall kind of distribution programs and discount structures. So they're more aligned with the key partners as we go forward. And that will also, of course, have strategic pricing implications.

So I think there are a number of different areas that we're evaluating there. And those are really very different from the kind of day-to-day or almost quarter-to-quarter, if you will, tactical pricing that we're doing from an inflationary coverage perspective..

Great. And then just to follow up on supply chain and the rising past due backlog.

Could you give some color on what you're seeing from channel standpoint and inventories and kind of how that could be an opportunity moving forward?.

Yes. I mean we've seen our distributors recover to reasonable inventory levels. But we've not seen any concern that there's higher-than-expected or higher than sort of typical or normal inventory levels in our distributors. So I think that's what we see in the marketplace today. it varies by region, obviously, by distributor.

But as a general rule of thumb, that's what I'd say. But as we alluded to, we saw strong order rates throughout the quarter. And we still have some backlog issues we've got to work through, given the supply chain challenges..

[Operator Instructions] Our next question comes from Deane Dray with RBC Capital Markets..

I might have missed this, but we've been asking companies through this period if there was any lost sales, just you were ready to ship either the customer wasn't ready that's in inventory that would have been implied growth, but you just couldn't ship it.

Can you size any of that for us, please?.

From a product perspective, I would say we haven't lost sales, of course, as we talked about, have incremental backlog, but we haven't seen any cancellations of product orders as a result of everything we're seeing.

As we talked about, certainly on the service side, we've seen delays, some but not significant cancellations but more delays right now on service. And as we've talked about before, we are seeing some pricing challenges on service, primarily related to what I'll refer to as the lower specialty level service..

Got it.

And I'm not sure if you size this on the Russian receivable write-down, was it written down in its entirety? And did you size that?.

We didn't size it. It was reserved its entirety. It's not significant for us, but we reserved it out of caution..

Got it. All right. And then just last question is maybe what strikes me on the time period for the ASCEND initiative when I see 30 months, does that maybe just kind of argue against that there's an unsettling period that the company will be in that there's restructuring, maybe some more divestitures. And then just -- you're in this period of limbo.

Maybe just respond to that because it's yet another restructuring initiative at Enerpac and how is it different this time? And how do you get through this period smoothly?.

Sure. Yes, I can address that. I think -- well, first of all, it's certainly much broader. There may be restructuring elements as we go through the program, but it's significantly broader as an overall transformation of the company. As I referred to in my comments, there's organic growth elements to that. There are operational excellence elements.

And yes, there are cost structure and SG&A productivity and efficiency elements to it. But we view it as a very broad program.

We actually think this is sort of the opposite of being in limbo because it certainly is meant to provide substantial clarity not only to our employees, but ultimately to the market and investors going forward as we share more in the coming months and quarters in the program. But we're excited about it.

We believe it's -- that it will have, obviously, significant impact and shareholder value creation potential as we've laid out in our targets here as we think about exiting fiscal '24. So again, we'll share more in the coming quarters and certainly more detail on Investor Day later this year.

But that's how we think about it and certainly broader than restructuring.

And then with respect to portfolio, I think as we've talked about before, for all intents and purposes, the major portfolio work is really behind us, right, with the divestiture, EC&S, the rebranding of the company as Enerpac Tool Group, we really view ourselves now as a pure-play industrial tools and services business.

And in fact, as we referenced in the remarks, M&A will be a core part of our strategy going forward as we look to identify complementary additions to the portfolio, but stay close to our knitting on that core strategy of pure-play industrial tools.

So we don't expect, at this point, any significant moves from a portfolio standpoint given where we sit today. We always evaluate through a shareholder lens and shareholder perspective. But the heavy lifting, as we called it, around the portfolio work has really been done at this point..

Ladies and gentlemen, there are no further questions at this time. I'll turn the floor back to management for closing remarks..

Okay. Well, again, thank you all for joining our Q2 earnings call today. Have a good day, and we look forward to speaking with you next quarter. Take care..

Thank you. This concludes today's call. All parties may disconnect. Have a good day..