Azul SA (AZUL) 2024 Q3 法說會逐字稿

Hello, everyone, and welcome to Azul's third-quarter earnings call.

My name is Ed, and I will be your operator for today.

This event is being recorded.

(Operator Instructions)

I would like to turn the presentation over to Thais Haberli, Head of Investor Relations.

Thais, please proceed.

Thank you, Zach, and welcome all to Azul's third-quarter earnings call.

The results that we announced this morning, the audio of this call, and the slides that we reference are available on our IR website.

Presenting today will be David Neeleman, Azul's Founder and Chairman; and John Rodgerson, CEO.

Alexandre Malfitani, our CFO; and Abhi Shah, the President of Azul, are also here for the Q&A session.

Before I turn the call over to David, I'd like to caution you regarding our forward-looking statements.

Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives and expected performance constitute forward-looking statements.

These statements are based on a range of assumptions that the company believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in our CVM and SEC filings.

Also, during the course of the call, we will discuss non-IFRS performance measures, which should not be considered in isolation.

With that, I will turn the call over to David.

David?

Thank you all for joining us for our third-quarter 2024 earnings call.

We have a lot to talk about today.

But first, we have our third-quarter results, which were very positive with an all-time record revenues and EBITDA with industry-leading margins.

Second, we want to talk about the results of our recent renegotiations with our principal partners, which are going to create a fundamentally stronger Azul for 2025 and beyond.

John will lead you through the details.

But first, let me thank our crew members for once again delivering a solid quarter under very challenging circumstances.

Like many airlines, around the world, we continue to face disruptions with our fleet, engine removals and supply chain issues, which are leading to short-term changes to our network.

Our crew members are doing an amazing job taking care of our customers, and I want to thank them for all their efforts.

On slide 3, I want to remind you about the strength of our business and our competitive advantages, which are now greater than ever.

Our differentiated network, combined with our fleet flexibility, allow us to access demand and grow the market in a sustainable and profitable way.

As John will show you, our next-generation fleet, combined with the efficiency initiatives give us the lowest unit cost in the region.

Finally, our fast-growing, high-margin business units, Logistics, Avi, Vacations and Loyalty are a key driver to the growth and margin expansion.

These are all structural features that we will continue to boost our profitability into the future.

On slide 4, I want to show you a perspective going back to 2019 pre-COVID.

We've overcome a large number of challenges.

And the key message here is that even with these challenges, Azul has continued to produce earnings growth and margin expansion.

Let's take a look at Q3 as an example.

In the quarter, our revenue was 69% higher than the third quarter of '19.

Our EBITDA was 77% higher and our EBITDA margin was 1.4 percentage points better.

All this with a currency that is 40% devalued and fuel prices that are 73% higher.

That is how strong and resilient this business is.

This is our ability to grow profitably, to create and expand our competitive advantages.

Everything we do is focused on making Azul stronger for the long term from our fleet, our network, our business units and our capital structure.

I'm amazed with what we have accomplished so far and even more excited about the future.

With that, I'll pass the word over to John.

John?

Thanks, David.

I would also like to thank our crew members for all of their hard work during the quarter.

What David said is just incredible.

With the efforts of our crew members, Azul's revenue is now 69% larger than 2019.

On slide 5, you can see that we set several records this quarter.

Our revenue was an all-time record BRL5.1 billion.

Our RASK was 42.87% a record.

We generated an all-time record revenue -- record of over BRL1 billion of operating income in the quarter with an all-time record BRL1.7 billion of EBITDA.

As David mentioned, our ability to expand margins compared to 2019 in spite of the currency and fuel headwinds is a clear demonstration of the strength and competitive advantages of our business.

On slide 6, you can see the recovery in capacity and unit revenue compared to the second quarter, which was impacted by the severe floods in Rio Grande do Sul.

As we mentioned on our last call, we're starting to see signs of recovery in bookings and revenue.

And now you can see clearly that we are back on a normal revenue trajectory with RASK up 12% over second quarter.

I'm also happy to report that the Porto Alegre Airport, which was closed since the first week of May, was partially reopened on October 21.

This is a very positive sign as these customers can now access the full potential of Azul's network.

Just to be clear, our third quarter had no contribution from Porto Alegre as the main airport remained closed until October.

Looking ahead to our peak summer season, we see a positive combination of overall demand and industry discipline, which gives us confidence in continued strong revenue performance going forward.

On slide 7, you can see the early results of our Elevate program, which was described in some detail last quarter.

Elevate is a new way of thinking for the entire organization in terms of processes, in terms of priorities, in technology, and this new thinking is already giving us some early results.

Let me give you a few examples.

If you look back to our second-quarter results, you will see that we have almost 15,800 full-time crew members.

This quarter, we have 15,500, and that is with a 10% increase in capacity quarter over quarter.

As a result, the airline now is 11% more efficient compared to just last quarter.

In addition to staffing, we're laser-focused on a wide range of initiatives from purchasing to logistics to fuel, all of which will drive CASK improvement going forward.

We already have the lowest cost in the region, even with a more diverse fleet and lower average seat count, and this will only get better over the next few years.

Turning to slide 8, we highlight our performance over the previous quarters.

Even with the headwinds in fuel and currency, we expanded both operating and EBITDA margins compared to last year.

This clearly shows that over the medium and long term, our business model is 100% able to recapture and recover the negative effects of macro changes.

The competitive advantages inherent in our business model allow us to be resilient, robust airline over time and over varying macroeconomic conditions.

On slide 9, we show our cash evolution in the quarter.

We generated BRL1.7 billion in EBITDA, and we amortized more than BRL100 million of debt in the quarter, which led us to a flat liquidity position at the end of the third quarter.

Keep in mind, we paid around BRL600 million of interest expense this quarter.

This is going to be very important as we talk about the outcome of our transaction we announced with our bondholders as we will significantly decrease our interest expense and therefore, improve cash generation going forward.

On slide 10, I want to show you that we're firmly back on our earnings growth trajectory. 2024 will be our biggest year ever in terms of revenue, EBIT and EBITDA.

As we look across the board at our passengers, logistics, vacations and loyalty businesses, we can confidently say that the demand for Azul's products and services has never been higher.

Our outlook for 2025 with a projected record EBITDA of BRL7.4 billion is even brighter.

As we said in the beginning of the call, we wanted to first talk about the strong third quarter.

Now we want to talk about the results of our negotiations with our partners.

Setting the stage on slide 11, it's important to remind everyone of the challenges we faced in 2024, starting with the devaluation of the currency, now at BRL5.8 to the dollar, an 18% devaluation since the beginning of the year and almost 50% weaker since 2019.

We had the devastating floods in the south of Brazil, which impacted 10% of our domestic revenue in one of the highest margin markets.

As David mentioned, we continue to face challenges with OEMs.

When including the impact of delivery delays, early engine removals, delays in spare parts and logistics, the effect on our network and cash generation is significant, over BRL1 billion this year alone.

Finally, as we've discussed before, as the currency devalued, the local capital markets froze, further restricting our ability to raise local capital.

As you can see on slide 12, in response to these challenges, we strengthened the partnerships with our major stakeholders.

First, we reached an agreement with our lessor and OEM partners on the equity structure, the results of which we announced on October 7 and which eliminated the obligation at a significantly lower dilution than projected, and there was no cash outflow.

Second, we strengthened our partnership with existing bondholders, raising new capital, creating a significantly improved cash flow and reduced leverage for our airline.

The initial results were announced on October 28, and I will talk more about that shortly.

Finally, the Brazilian government also contributed, signing a bill into law that allows FNAC, the National Civil Aviation Fund to fund loans to Brazilian airlines.

These developments, together with increasing strength of our business, provide a solid footing for Azul to continue to grow into the future.

Turning to slide 13, I want to get into the details of the transaction that we announced over the past several weeks and most importantly, how positive this is for Azul and our partners.

This process is comprised of several steps.

The first step was the agreement with our lessors on the equity instrument, which addressed pandemic era lease deferrals and reductions.

As we've already announced, we have agreed to settle BRL3.1 billion in obligations with our lessors and OEMs for 100 million preferred shares of Azul.

This is a strong vote of confidence from the leasing community in the future of Azul and their desire to increase their commitment to us.

In fact, as they have done in the past, this year's lessors continue to deliver aircraft to us, four A330s, two A321s, four E2s, even while we were in active negotiations.

Clearly, they have a strong belief in the future of Azul.

Step two is the agreement with the existing bondholders for new funding via a super priority note.

We initially announced this agreement on October 28, whereby Azul bondholders have agreed to inject up to BRL500 million in fresh capital into the company.

Funding is coming in steps with BRL150 million already received, BRL250 million to come upon the completion of documentation and a final BRL100 million based on a collaborative initiative to generate cash flow savings of BRL100 million per year, which I'll talk about next.

And finally, step three, as we discussed our plans with our bondholders, they challenged us to look at a much larger opportunity here to fundamentally strengthen Azul's balance sheet and increase cash generation.

They committed to increase the new money to BRL500 million and equitize BRL800 million in secured loans.

This would, in turn, create BRL100 million in annual cash flow savings from reduced interest expense.

The condition to unlock this, which will fundamentally improve Azul's financial strength is to realize another BRL100 million in cash flow improvements per year from '25, '26 and '27.

We, therefore, embarked upon a joint effort with the bondholders to identify these improvements and meet this condition.

I realize this is a lot of information, and we will show you what this means for our financials next, but let me summarize.

We structured a comprehensive transaction together with our partners to eliminate over BRL1.5 billion of debt from our balance sheet.

And this process improved our annual cash flow by another BRL200 million.

Put this all together with our projected EBITDA growth for 2025, you can see how this plan is so transformative for our business.

Slide 14 is what I'm really excited to show you.

This is the result that gets us so optimistic about our future.

I know it took a lot of slides to get here, but it's really important to set the stage and describe the various steps for us to be able to get this result.

Let's highlight the important numbers on the table above.

First, the lessor equity, you can see in the adjustments column that this value is being eliminated, the BRL2.3 billion from our balance sheet, which is the present value of BRL3.1 billion in obligations I talked about earlier.

Second is the total debt.

This is a very significant reduction of BRL2.2 billion in the equitization of the BRL800 million second lien notes, together with the new capital of BRL500 million coming in.

Third, we have another BRL800 million in additional concessions from lessors and OEMs related to the 2030 notes.

Putting it all together, you can see the result, a net BRL5.4 billion reduction in debt and a 1.4 turn improvement in leverage from 4.8 today, if adding the lessors and OEMs equity instrument to a pro forma 3.4 when considering the last 12 months EBITDA of BRL5.6 billion.

As I stated earlier, we're going to do BRL6 billion this year and BRL7.4 billion next year.

Now you can clearly see why this is such an important opportunity and why we had to take advantage of it.

Resetting Azul's balance sheet to 3.4 from 4.8 today is extremely powerful.

This resets our credit rating, puts us in a completely different category of airlines globally.

Azul is already one of the highest margin airlines in the world, but we had a challenged balance sheet.

With this transaction, we're now placing Azul back on the list of the strongest, most resilient, profitable airlines in the world.

Slide 15 demonstrates the significant leverage reduction from this transaction, but it's important to also highlight the component parts of this leverage.

Since we are an airline that primarily leases our aircraft, our main asset by which we generate our revenue and EBITDA, the majority of our leverage is related to our aircraft leases.

After this transaction, our leverage from loans and financing will only be 1.4x.

On slide 16, we highlight the benefit from the agreement with our partners leading to a significant reduction in gross debt through equitization envisioned by this transaction.

The gross debt and leverage reduction, together with the cash flow savings and EBITDA generation puts us in a very confident position from which to service this debt.

This truly makes Azul a robust, resilient airline for the future.

A key element of this plan is to improve cash generation via a reduction in interest expense.

If you recall back on slide 9, I asked you to remember the BRL600 million we paid in interest expense in the third quarter alone and how this is such a large drag on cash generation.

Well, now thanks to this plan, we're able to reduce our interest expense by nearly BRL1 billion per year, as you can see on slide 17.

This reduction translates directly to cash generation, which then leads to a consistent virtuous cycle for liquidity and deleveraging.

This is a structural improvement that fundamentally strengthens us for the years to come.

On slide 18, we present our 2025 EBITDA and cash flow guidance.

Thanks to our strong EBITDA generation of BRL7.4 billion, combined with a significantly reduced interest expense, our guidance is free cash flow to firm of BRL1 billion for the year.

And now we will become an airline that will consistently generate cash.

And this is including all of the challenges from higher fuel, which is 70% higher and a currency, which is almost 50% higher than it was in 2019.

This is a result of all the work I just described, the lessor instrument converting to Azul shares, the improvements in operating cash flow, the EBITDA generation, the reduction in interest expense and the reduction in leverage.

All of this combines to produce positive free cash flow to firm in 2025 and beyond, truly making Azul a much stronger company.

Finally, turning to slide 19, to conclude my comments, we're incredibly excited about our future.

As I showed you before, Azul is already one of the most profitable airlines in the world.

And now with this work and our capital structure, we're making ourselves one of the most resilient as well.

In addition to these incredible results, the best is still to come.

We still have significant fleet transformation ahead of us with more E2s to be delivered in 2025.

Our business units continue to be high-growth, high-margin businesses.

Our Elevate way of thinking is already producing unit cost reduction with more opportunities in front of us.

Combining all of this with our exclusive network and a unique fleet flexibility lead us to be incredibly excited and optimistic about the future.

With that, David, Alex, Abhi, and I are available to take your questions.

(Operator Instructions) Andre Ferreira, Bradesco BB.

Congrats on the results.

I wanted to ask about two points here.

So first, if you could update us on the expected deliveries for the wide-bodies for -- by year-end and for 2025, if there are any delays?

Same for the E2s, how many are left this year and for the next year as well?

And if you're -- I mean, you already commented a bit on the delays, but when should those aircraft come in?

And second point about the 2025 guidance.

I just wanted to know how much capacity growth is assumed in those numbers?

Andre, Abhi here, I can answer that.

On the widebodies, we got four wide-bodies this year.

So we are in good shape for now.

The next set of wide-bodies is our next Neos, the next order of the Neos, the A330s Neos, which are scheduled for fourth quarter of next year, probably late next year.

So this year, we had four wide-bodies already delivered, already in service.

On the E2s, we have 10 deliveries this year.

A little bit of delay, I would say, maybe 30, 45 days delayed, but still okay.

And then for next year, we're assuming between 12 and 15 E2s, maybe some of them slip into January '26.

So in that range of E2s.

So our growth, as you probably know, is going to be very much focused on the E2s, which is an upgauging strategy from the E1s, significantly lower trip cost, significantly lower fuel burn for 18 extra seats.

So we're very excited about that aircraft.

So 10 E2s this year and maybe 12 to 15 next year.

In terms of capacity growth, we're looking at roughly about 10% next year capacity growth.

It's going to be lower than that on the domestic side, and it's going to be higher than that on the international side because of the four wide-bodies we received this year, halfway through the year, they will come full circle next year.

So I would say high single digits domestic and then the rest of it mostly the growth will be on the international side, thanks to the wide-bodies.

Michael Linenberg, Deutsche Bank.

Two questions here.

So first, when we look at the BRL807 million of debt that's going to be equitized, it looks like three different phases there.

And then it looks like the three phases represent 47.5% of the principal.

And then there's another 52.5% that I think is tied to a note that becomes an exchangeable.

Can you give us a sense because I think you indicated in the release that there were term sheets on the Investor Relations site, and I didn't see them yet.

But give us a sense of maybe the underlying shares tied to that BRL807 million.

So Mike, just to kind of walk through what the transaction does, okay?

Most likely, this will all close by the first quarter.

We're hoping in the January time frame.

That's what we're looking at right now.

We're actively working with these partners.

Obviously, there's dilution here but this is a significantly stronger company going forward.

And so it's going to be based on what the share price is at the time.

And so we feel very good about it.

And in addition to taking the debt off the balance sheet, this is now a company that will cash flow on a go-forward basis.

And so we are going to be measuring free cash flow every year going forward and not just valuing Azul based on EBITDA.

And so we'll walk through the details.

But you're right, it happens in a couple of different phases.

An initial part happens right away at 10% that turns to equity, then the second chunk and then the rest of it is a convert that hopefully will get converted through maybe by the end of 2025 is what our expectation is based on the value of Azul at that time.

And I should be clear that it is a real deleveraging moment, and I should offer congratulations on the amount of heavy lifting that you guys accomplished.

Just one quick follow-up on the widebodies to Abhi.

As I recall last quarter, I thought we were going to see some wide-bodies come later this year and some got pushed into the early part of 2025.

And now it seems like you're not going to be getting anything until late in 2025.

Has there been a change or a shifting in the order book?

So Mike, we actually got wide-bodies from the secondary market actually.

So we received two Neos from the used market.

We received two Ceos from the used market as well, ex-Condor.

Those are currently flying all those four.

We were looking at two other Neos as well that were used to enter maybe 1Q, 2Q of next year.

But we think we're better off not taking those right now and going directly to our order with Airbus, which is going to be in the December time frame of next year.

And Mike, there's just challenges with the engines worldwide right now, and that's not exclusive to narrow-bodies.

It's also a challenge we're seeing on the wide-bodies as well.

And so that's why it was important for us to kind of lock down these used aircraft this year, but then we'll be taking aircraft in our spec on a go-forward basis.

Savi Syth, Raymond James.

Can I clarify on the 2025 guide, if that reflects the completion of everything that you're working on today and the current kind of FX environment, which has become a little bit more challenging.

And along those lines, maybe, Abhi, just if you could talk about the demand environment today and like what you're seeing on the pricing front, both in the leisure and corporate side of things?

Savi, it's Alex here.

On the 2025 guidance, so for example, EBITDA essentially doesn't depend on the transaction.

It's a firm 7.4% in our estimation.

As we usually do, the big unknowns here are FX and oil.

For oil, we always use the Bloomberg forward curve.

We essentially look at heating oil, which tracks very nicely to jet fuel, but it's a much more liquid derivative.

So we like using HOA instead of jet fuel.

And we essentially just use the forward curve to project next year.

On FX, we normally use the Focus survey with some adjustments when you have strong movements because there is a little bit of a lag for the Focus survey to kind of reflect current market conditions.

So right now, for example, when the spot price is much higher than what the Focus survey is projecting, we also adjust the Focus survey a little bit up.

So we're a little bit higher than what the Focus survey has for 2025 FX.

But normally, we use Bloomberg and the Central Bank Focus survey to project oil and FX.

Now when we're talking about leverage and interest expense and cash generation, yes, the projections assume that we complete Stage 3, and we're confident that we will be successful.

And I just want to highlight on that before I pass it to Abhi.

Savi, our partners are excited about this.

When we go to our lessors, our OEMs and they say, wait a second, I can be inside of a delevered to Azul.

And all we have to do is everybody contributes a little bit, helps cash flow generation over the next couple of years.

And it's across all of our partners, our lessors, our OEMs, all of our suppliers.

And we sat there and say, hey, we have the opportunity to take leverage down by 1.5 turns overnight.

That is a powerful thing, and people have been with us along this journey for many years, and everybody is really excited about that.

So I think the BRL100 million a year in '25, '26 and '27, we are very confident that will happen.

And I think we're going to kind of announce to the market that we completed that prior to year-end.

Savi, on the demand side, we're not assuming anything too different from what we're seeing right now.

If you just look at the second half this year and you take that as an exit rate, that already puts us at the BRL7.2 million EBITDA number, BRL3.6 billion is second half exit rate.

So the international network is just what we're flying right now.

But instead of flying basically four months this year or five months this year, it's going to fly 12 months next year.

So that's not going to be anything too different.

And on the domestic side, it's going to be E2s taking up E1 markets well within our own network.

So we're not really asking for anything too different.

I'm overall pretty happy with the way demand is looking.

We've seen good recovery August, September, October, November, each month being ahead of the month before.

And actually, if you remember, 1Q of this year, which we're now looking at the booking curves for next year, we actually flew some pretty low load factors.

We flew 73 in February, low 70s in March as well.

So we're actually quite ahead of our booking curves right now when we look at first quarter on a good fare base.

I think the industry overall has done a good job of keeping pace with the way dollar is moving, with the way fuel is moving, trying to make sure that the fares are keeping pace.

I think the industry has shown good discipline.

And finally, our business units, if you notice third quarter, just 76% of our unit revenue came from the passenger business.

Our vacations business unit revenue was up 30%.

Our loyalty business, unit revenue was up 30%.

Our charters business unit revenue was up like 90%.

And so we made a strategic decision to diversify our revenue base.

And so that's really going to give us a lot of benefits as we go forward here.

And these businesses keep growing and they keep diversifying.

So I'm pretty confident overall about how next year is looking right now.

But if I might clarify, Alex, the agreements you're working with the suppliers and your partners, is that all related to financing and nothing that flows through then EBITDA?

You mean on the target for BRL100 million of cash flow improvements?

Exactly.

There's both.

There are things that will help the P&L.

There are things that shift or postpone payments, but it's essentially BRL100 million cash flow target.

Ian Snyder, JPMorgan.

Just one for me here.

A couple of other questions were answered.

But just hoping you can quantify what percent of the cash impact from the FX devaluation was offset by the higher fares in this quarter and then what we should expect from fares in 4Q and 2025?

So we're expecting a steady improvement 3Q over 4Q.

4Q seasonality is better than 3Q.

We are heading into our peak summer.

We have been able to recover the effect of FX and fuel 100% over the long term.

A quarter to a quarter, it takes a little bit longer.

Maybe we were 60%, 80% right now.

We can check the number.

But we feel pretty good about the trends going forward with fares, with booking trends.

And you can already see the 12% improvement in flown RASK from 2Q to 3Q.

So it will continue the normal seasonality curve that we've been seeing over the last several years.

But I think there's other two points that I just want to highlight.

First of all, the fourth quarter now has Porto Alegre in it.

We did not have that in the third quarter, and that's very important to us.

And the other is the industry needs higher fares.

It's just a fact.

When you have a 20% devaluation of your currency, the industry as a whole needs higher fares.

The industry as a whole is dealing with the OEM challenges.

And so how do you combat the macro situation that we're in?

You need to dilute your fixed cost with more capacity and you need higher fares.

And I think everybody is in that same boat.

I think as you look at everybody in the industry, they're fighting over engines, they're fighting over deliveries.

And so I think the industry is very disciplined right now, which is a positive thing.

Congratulations on the holistic deleveraging.

Rogério Araujo, Bank of America.

I have one question on two cost lines that caught our attention.

The first one is on salaries.

There was a drop year over year.

You mentioned in the release that you dismissed 1.5% of the employees despite continuing to expand operations.

So the question is if this is sustainable, if you're going to hire new employees again, what to expect for this line in the upcoming quarters?

And the second one is on the other expenses line, which came slightly below BRL400 million.

It was a 26% drop year over year.

And it actually came back to pre-COVID levels.

It's about 7.5% of revenue.

It was almost 10% in the previous year.

So should we expect this to go back to pre-COVID levels already in upcoming quarters?

Can we see that as sustainable?

So on salaries, we need to be more productive, and we will be.

The fleet transformation enables us to be more productive.

There was growth that we had prepared for and didn't come because of Porto Alegre, because of OEM issues.

So we fully expect to be more productive than we are today going forward.

So if you look at our BRL7.4 billion EBITDA for '25, I think it includes essentially the productivity levels that we're seeing today with a little bit more improvement from Elevate, from fleet transformation.

We just need to be constantly more efficient throughout the whole organization.

And beyond the fleet transformation, there are many ways to do it, through processes, through automation, by just being better every day and the idea of having a program and a packaging of the Elevate plan behind it is to rally 15,500 crew members to all push in the same direction and be every day more and more productive.

So we believe that the current productivity that we have is sustainable, and we can actually improve upon that.

On the other expense, that is a catch-all line, which has a number of items.

We periodically look at it to see if it makes sense for us to break it up.

But I think the biggest item within this expense is IT with roughly like BRL40 million or BRL50 million.

So it is a big bucket of other expenses.

And some of them are dollar denominated, some of them are not, some are fixed, some are variable.

So it is a bit more difficult to forecast.

But the BRL7.4 billion EBITDA, I think, has a quarterly rate that is higher than the number you're seeing there, a little bit because of exchange, a little bit because of growth.

This ends our Q&A session for today.

I will now turn to John for final remarks.

Well, thanks, everybody, for joining us today.

We're very excited about where we are.

You're looking at a delevered Azul going forward, a company that will start to generate cash in 2025 and beyond.

And we'll be on the road speaking to many of you.

We're going to have Azul Day, I think, the first week of December.

So we'll have the opportunity to spend time with each of you and kind of go through all of the positive aspects that we've been able to put together.

And feel free to reach out to any of us if you have any questions.

Thank you.

This concludes the Azul's audio conference call for today.

Thank you very much for your participation, and have a good day.