Broadwind Inc (BWEN) 2017 Q2 法說會逐字稿

Good morning, and welcome to the Broadwind Energy Second Quarter 2017 Earnings Conference Call. (Operator Instructions) Please note, this event is being recorded. I would now like to turn the conference over to Joni Konstantelos, Director of Investor Relations. Please go ahead.

Thank you. Good morning, and welcome to Broadwind Energy's Second Quarter 2017 Earnings Conference Call. With me today are Broadwind's President and CEO, Stephanie Kushner; and Broadwind's Vice President and Corporate Controller, Jason Bonfigt, who has recently been named Broadwind's Chief Financial Officer effective August 7. This morning's earnings news release is available on our website at bwen.com. Before we begin today, I would like to caution you that this call will include some forward-looking statements regarding our plans and market outlook, and also will reference some non-GAAP financial measures. Actual results may differ materially from these forward-looking statements. Please refer to our SEC filings and consider the incorporated risks and uncertainties disclosed there, including our Form 8-K and the attached news release filed with the SEC this morning, and our Form 10-Q, which will be filed later today. We assume no obligation to update any forward-looking statements or information. Having said that, I will turn the call over to Stephanie Kushner.

Good morning. Thank you, Joni. I'm pleased to be joined today by Jason Bonfigt, who was announced as our new CFO just yesterday. Jason has been with Broadwind for 8 years in both line management and financial roles. Most recently, he's been our VP and Corporate Controller. Jason has an undergraduate degree in accounting, an MBA from Northwestern and a CPA. I'm excited about the breadth of thinking that Jason brings in his new role, and personally, very pleased to relinquish the CFO title and be able to increase my focus on the commercial and strategic side of the business. Our Q2 results were consistent with our guidance: $43 million of revenue, $2 million of EBITDA and a $0.05 per share operating loss. Our revenue was flat with Q2 of 2016. The short summary is that tower sales were down, offset primarily by revenue gain from the addition of Red Wolf, but also reflecting the early signs of an uptick in Gearing revenue, which will be more pronounced in the second half. Tower has performed very well in the quarter. Segment earnings rose from last year, despite 19% lower volume throughput because of improved mix, higher productivity and cost efficiencies. We're seeing strong operational performance in towers. Our production leaders are consistently achieving our productivity improvement objective. Our market outlook is mixed, with near-term weakness in towers, strong recovery in gears, some modest softness in gas turbine installations and continuing weak demand for new CNG stations. Our diversification and growth strategy is gaining traction. Over the past several quarters, we've invested in our commercial organization, adding positions and boosting training and development, and added some important technical certifications. I'm excited to see that we're growing relationships with important customers like Komatsu and Caterpillar. In our weldments business, we have begun production of fabrications for asphalt plants, supporting road construction infrastructure. After a slow start, our Process Systems business is also growing. We've just received our first order for large welded vertical separator vessels from a significant new oil and gas customer. We continue to be active with regard to bolt-on acquisition opportunities that will add further to our customer diversification strategy and add new technical capabilities.

In the next slide, towers bookings have been low this year, in part due to low volumes of turbine awards. The industry has experienced somewhat of a pause in signed turbine contracts despite the very high volume of development projects in the pipeline, and our largest customers are reducing inventories of components, such as towers, in the face of this weakness. The contrast in Broadwind orders versus last year is especially large, because that's when we signed a 3-year framework agreement. At least for the next few quarters, our customer is indicating they will we purchasing at the low end of the contract quantities, which leaves us with available capacity. We continue to work aggressively to expand our customer base and secure new tower orders to fill both plants. We were pleased to see that the political efforts to initiate steel tariffs under Section 232 have paused, since those tariffs, unless also applied to imported towers, would have hurt our competitiveness as a U.S. tower manufacturer.

I'm excited to say that the order rebound in gears that we reported last quarter has accelerated. Gearing orders more than doubled to $11.6 million in the quarter, mainly a surge from oil and gas customers, both long-term customers and some new ones added this year. And even outside of oil and gas, our other orders were up as well. The plant has been performing well, and that is positioning us to win new business. We're also seeing some increased activity with mining customers. Although this is not yet reflected in bookings, we believe this should support strong order intake in the second half. Process Systems orders of $4.4 million were soft because of low gas turbine aftermarket bookings and no CNG equipment orders. Q3 is starting much stronger, with about $3.5 million booked in the month of July alone. And at June 30, our ending backlog was $156 million. We're seeing some unusual dynamics in the U.S. wind market, mainly because of the specific terms of the PTC extension. As you can see in the left chart, wind power capacity under construction or in advanced development between now and the end of the decade remains strong and continues to grow, with nearly 26 gigawatts either under construction or in advanced development status. Those 26 gigawatts are spread across 143 projects in 29 states, 30% of which are in the Midwest and 27% in Texas. However, completions are becoming increasingly back-end loaded towards the end of the decade. As you can see in the right-hand graph, in their forecast of installations, MAKE has adjusted 4-year installation estimates upward by about 6%, but they've tweaked down their 2017 estimate slightly, while adjusting up the slope of the growth curve. So now the expectation is for more than 12 gigawatts coming online in 2020, the final year to qualify for the 100% PTC.

During the first part of 2017, the industry has seen some sluggishness in awarding new turbine orders, as developers push to improve their economics in the face of tax code uncertainty and declining power prices. We in turn are seeing this in terms of the tower market and are continuing to drive improved productivity and stringent cost management to improve competitiveness.

Following a temporary lull, we fully expect a strong market to emerge during the next few quarters, and are bracing for a resurgence of last year's boom in the next few years.

Turning to gears. We're moving through an inflection point in the demand for U.S.-manufactured gears this year. And in our markets, the uptick feels more pronounced than this April forecast suggests, partly because we have expanded our customer base. The non-automotive U.S. gearing industry has been in a multiyear slump, triggered by weak oil and gas and mining segments and a strong U.S. dollar. But the market is shifting. Exported gearing is recovering because of the weaker dollar, which is down more than 8% year-to-date against a trade-weighted basket of currencies. In addition, domestic demand has risen due to the recovery in the oil and gas markets and generally strong industrial activity. Our customers are telling us that they have shifted a higher share of their buy back to U.S. gear manufacturers, partly because of the buy America political environment, and because during the last oil and gas cycle, their long supply chain was costly to turn off and turn on.

Our Process Systems segment participates in the natural gas markets in 2 ways: Supporting utility gas turbines and the compressed natural gas market. The chart on the left tracks global orders awarded for gas turbines for power gen, both units and gigawatts. So as you can see, orders totaled about 42 gigawatts in 2016, with 275 units.

The anecdotal market estimates project slightly order -- slightly lower orders this year, maybe 40 gigawatts. With only Q1 industry data available, 7 gigawatts were awarded, down from 11 gigawatts in 2016.

However, this almost certainly overstates the decline, as orders tend to back-end loaded in this industry. For Red Wolf, our first half orders for content for new gas turbines was about flat versus prior years, although lower in the U.S. market and higher overseas.

The bulk of Red Wolf's business, historically, about 2/3, goes into the gas turbine aftermarket, which is tied to the install base of turbines and specific campaigns to repair, retrofit and operate the turbines. The order intake for that business has been soft for Red Wolf in the early months of this year, but we've begun to see some recovery and expect a stronger second half order intake rate. We are still learning about the key drivers for bookings in this aftermarket business, which can vary significantly depending on the model of the turbine, the intervals between outages and the mix of the work being done. Our other Process Systems product line is the manufacture of compression units for CNG stations.

In the chart on the right, our new CNG station additions in the U.S. plotted against the spread between the CNG and diesel fuel prices. Since the mid-2014 slump in oil, new station builds have been down sharply, the spread between natural gas and diesel, once well above $1 a gallon, is now down to about $0.12. Given the very limited market for new stations and an entrenched set of competitors, we've not booked units for any new stations this year. We have begun to gain some traction, mainly in producing decompression and other equipment for what is referred to as the virtual pipeline, that is, moving gas in high-volume trailers between pipelines. Now I'll turn this over to Jason now to talk about the financials.

Thank you, Stephanie. Turning to Slide 8. Sales for the quarter were $43.4 million, in line with the prior year quarter and at the low end of our guidance. Q2 tower sales were lower compared to Q2 2016, as our customers begin to work off inventories that were previously built to support the terms of the production tax qualification period. In Gearing, revenues were up 13% over the prior year quarter, as we begin to meet the rise in demand from oil and gas and other industrial customers. Lastly, our Process Systems segment added an incremental $3 million of sales during the quarter. Our margins, including gross margin of 8.9% and an operating loss of 1.2%, were below the prior year, as Process Systems' operating loss outweighed improvements in our Towers and Gearing segments. We generated $2 million of EBITDA during the quarter, or 4.5% of sales, and our loss per share was $0.05 for the quarter, in line with our guidance. Year-to-date, revenue was up 10% year-over-year due to the acquisition of Red Wolf and higher tower revenues, and we have generated $1.1 million of operating profit relative to a breakeven last year. EBITDA margins have increased by 160 basis points, resulting in $5.9 million of EBITDA for the 6-month period. Continuing EPS for the 6-month period is $0.38, which includes a one-time $0.34 tax adjustment associated with the Red Wolf acquisition in Q1, a result of netting the deferred tax liabilities related to the book-to-tax differences associated with the purchase, against our full valuation allowance.

Moving to Slide 9. Despite the reduced production levels indicated on our last call, tower sales exceeded expectations, as we met our customers' requests to expedite completions near quarter-end. As anticipated, towers sold during the quarter were down 19% versus the prior year, primarily driven by lower demand following the Q4 2016 PTC qualification boom in Q1. Revenue was down 10%, disproportionately lower than the towers sold figure, due to higher complexity and higher material content associated with the tower models produced in the current quarter. In Q2, operating income EBITDA margins each improved 100 basis points, a result of improved labor productivity and other cost reduction initiatives we continue to be focused on.

The first half improvement of 290 basis points in operating income and EBITDA margins was wider still, due in part to the operational improvements made at our Abilene facility, following production challenges in 2015, which had a residual impact on margins in early 2016. As we look forward to our priorities for the remainder of the year, we are focused on diversifying our customer base and filling excess plant capacity. According to the American Wind Energy Association's Q2 market report, roughly 12 gigawatts are in advanced development in the U.S.

Our plant locations in Manitowoc, Wisconsin and Abilene, Texas are well-positioned to serve this demand, as 50% of the projects are located in the Midwest and the fact that Texas continues to be one of the leading states in wind energy installations. Additionally, we are taking aggressive actions to align our cost structure with the reduced second half demand, and we will continue to pursue solutions that reduce our manufacturing process costs.

Lastly, we'll be completing several capital investments that will further improve our production flexibility and provide additional capacity in our Abilene, Texas facility.

Based on Stephanie's commentary and discussions for near-term demand from our customers, our scheduled Q3 production is down approximately 50% from Q2, as our primary tower baseload customer reduces its component inventories. We anticipate $15 million to $17 million of revenue at breakeven -- and a breakeven EBITDA for this segment in Q3.

Slide 10. In our Gearing business, revenue was up $700,000 in Q2 versus 2016, a 13% year-over-year increase, as we begin to ship longer lead time orders received in Q1. Improvements in productivity and lower compensation expense cut our operating loss in half and drove positive EBITDA for the quarter. Given the strength of our end markets and the expansion of our commercial organization, we are targeting approximately $8 million of quarterly sales in the second half, up from $6.1 million in Q2. We anticipate further improvements in productivity in response to higher volumes and due to the investment in continuous improvement programs and reconfigured plant layout, which will optimize throughput. We expect these factors to drive increased positive EBITDA and positive operating income in Q3. I would note that we added several new oil and gas customers during this recovery that will drive growth in the second half. However, our commercial efforts continue to be driven towards expanding and supporting other industrial customers that will lead to broader end-market diversification and reduce the cyclicality we have traditionally experienced in this business. In the near term, we are pursuing options to optimize our manufacturing footprint and resolving an environmental remediation project associated with a property we vacated in 2014, which will further improve our cost structure.

Moving to Slide 11. Our Process Systems segment, which consists of Red Wolf and our CNG business, took $4.4 million of orders and booked $3 million of sales during the quarter. We did not complete and ship any CNG units in the quarter, and Red Wolf shipments were lower than expected due to generally lower order intake from aftermarket customers and due to a customer holdback of $1 million of completed product near quarter-end. I would note that we are transitioning Red Wolf into our public company environment, and specifically, we are learning to better anticipate shipment volatility in this newly acquired business. We have not finalized Red Wolf's purchase price accounting as of today, but reported $360,000 of intangible amortization during the quarter, and expect this to be our quarterly run rate moving forward. Our focus continues to be on integration of the Red Wolf business and how we leverage the competencies further into the gas turbine and adjacent markets. We've had a strong start in July, with sales in the month near $3 million, the same as for the entire second quarter. As a result, our Q3 forecast is $6 million of sales and generating $0.5 million of EBITDA and approaching positive operating income.

Transitioning to Slide 12. Our cash conversion cycle trended to a more normal range at 6/30. This was driven by the roll-off of customer deposits, which were attributable to the lower near-term tower production volumes and a delay in receiving an $8 million customer payment until after quarter-end. As a result, our working capital was $0.13 per dollar of sales. And as you can see on the graph on the right, we are back into the $0.07 to $0.15 normalized range. We expect our operating working capital as a percent of sales to continue to be within this band for the remainder of the year, as the decrease in operating working capital related to the towers volume decline is partially offset by investment to support the Gearing and Process Systems segments' growth.

Next slide, please. Cash assets were near 0 and flat relative to 3/31, and borrowings under our $25 million line of credit with a private bank totaled $13.7 million. I would note that we had an additional $10 million of availability under the line as well at 6/30. As I mentioned previously, the increased usage under the line on June 30 was driven by the delayed receipt of a sizable payment from a customer immediately following quarter-end. And as of today, our borrowings have reduced down to the $9 million range. We have highlighted in the past the CapEx projects to improve the operational flow, productivity and capacity of our Abilene, Texas plant. CapEx as a percent of revenue normalized at 2.4% in Q2 from over 5% in the preceding quarters, as the projects was winding down. Upon completion of the project, we expect to return to a more normalized rate of 2%. And during the second quarter, we also purchased a large machining center to boost our large fabrication machining capabilities at our Manitowoc, Wisconsin facility, as we expand and diversify this business.

Lastly, we estimate full year CapEx to be in the $7 million to $8 million range. I will now turn the call back to Stephanie.

Thanks. So looking at our outlook and priorities, we are forecasting third quarter revenue of $30 million, as we've reduced the tower throughput to support inventory reduction by our largest customer. As Jason described, revenue for both gears and Process Systems should be up and partially compensate. At this revenue rate, we expect to generate EBITDA of approximately $1 million and an operating loss in the range of $0.15 to $0.17 per share. Our priorities for the second half of the year include working through the near-term weaker tower demand, which could reduce our EBITDA generation down to the $1 million to $2 million quarterly run rate, depending on how quickly we add new customers and to deliver earnings growth with our other businesses. We are committed to making progress with our growth and customer diversification strategy and are very excited about our recent progress. Although we do not have any immediate plans to use it, we are filing a shelf registration this quarter to give us optionality in the event we want to raise capital to fund an acquisition. The board, Jason and I all think this is important to provide strategic flexibility. We will complete commissioning the capital investments at our Abilene plant that support higher, more flexible production. This will give us the ability to manufacture efficiently multiple tower designs concurrently. We're adding unique machining capabilities in Manitowoc, Wisconsin to support growth of our large weldments product line to support diversification outside of wind towers. We are working on market expansion initiatives for Red Wolf, bringing their kitting and assembly capabilities into other markets. We are expanding our production and workforce in Gearing in support of our revenue growth, and expect this to be a profitable business beginning in Q3. And we continue to evaluate bolt-on acquisitions that will add capabilities and customer diversification that aligns with our precision manufacturing strategy. So that concludes our prepared comments, and I'll turn it over to Steven for Q&A.

(Operator Instructions) And our first question comes from Justin Clare with Roth Capital Partners.

So first off, it sounds like you've made some productivity gains in the tower segment. And I was just wondering, in 2018, if we do see a rebound in demand and you're able to get to a point where you're fully utilizing capacity, do you have a sense for how high your operating margins could be at that point, in that scenario?

I think that as we work on productivity gains, at least the way we're discussing this with our customer, we'll probably share those gains, the economics on those gains, with them. And we're still discussing the projects that we will be working on and how that will impact pricing. So I think it's premature to answer that question. But it's definitely -- we've made a lot of progress on our productivity already, but there's definitely even more urgency, in part because of some of the pricing pressure.

Okay, great. And then with the recovery that you're seeing in oil and gas volumes, you talked about getting to a run rate of $8 million in revenue in Q3. Beyond Q3, how do you see your ability to grow after that point in time? Can we expect sustained growth beyond $8 million in revenues a quarter?

Yes, I think that we'll exit this year at that $8 million, maybe a little higher than that, run rate. And then our objective is to get this business up to a $50 million or $60 million revenue run rate over a couple of years.

Okay, great. And then just one last one from me. So your cash balance was fairly low to -- in Q2. It sounds like it's a bit higher now, but I'd just like to understand your plans to manage liquidity a bit better. And then what level of cash are you typically comfortable with on your balance sheet?

So generally, any time we are drawn on our credit line, we are not going to show any cash, because all the cash, as it comes in, it pays down the credit line. The only time you'll start seeing rising cash balance is if our credit line is fully repaid. We expect to be into our credit line this year or the rest of the year, but probably up to $10 million. So a little bit lower than we were at the end of Q2, that was unusually high. We're about $9 million, I think, today. We expect to be around that level for the rest of the year.

(Operator Instructions) And our next question comes from Jeff Osborne with Cowen and Company.

Just a couple of questions from my end. I was wondering, can you just talk about the Siemens-Gamesa merger, and the kind of information flow of the combined company. Has that management structure been set up and you're getting good visibility from them? It's -- the issue that you're experiencing is just an inventory issue? Or is there any information dissemination problem?

We are starting to get, the information flow is getting clearer by the day, almost. I think that one of the things that -- we are seeing changes. So for example, they are introducing new tower models and there are design implications on those and so on. So we are seeing some changes, but we're -- we had very good relationships with both of those customers, they were both important customers for us. So we're working with them very closely and communicating -- getting better and better communication all the time.

And maybe just a follow-up on that, is the new tower model that you just referenced, is that what you were alluding to in the press release and on the call, about the complexity within towers? Is that from existing customers, I guess?

Yes, I mean, that's a piece of it. Any time a new tower model -- any time we roll out a new tower model, there is a learning curve. And in the case of the tower models that we're looking at now, they are -- we're still getting the information that we need to allow a good, smooth introduction.

Got it, that's helpful. And then you alluded to some other applications within weldments in the tower segment that you were exploring with asphalt and whatnot. How do we think about what the margin impact of that is? Is it -- given it's more of a bespoke opportunity, are you able to capture more margin than you would for wind towers? Or is it vice versa, that maybe there's more of a margin impact because it just -- manufacturing's a bit of a pain?

I think we're still learning about that. So I would say, to your point, the individual product margins are maybe a little bit higher, but the production flow could be more erratic. So at this point, I'd say, maybe those 2 things offset each other. But it's still early days.

Got it. I just had 2 other quick ones, if you don't mind. One is, I think you in the past, you talked about synergies within the Red Wolf procurement team within the towers organization for kind of the ancillary components that you need, that you're buying from a host of different providers. Is that something that you've implemented yet or looking to implement in calendar '17?

So we are actively quoting on opportunities and -- but we have not landed any material piece of business yet. But it's still kind of early.

Got it. And the last question I had was...

The bigger -- the biggest opportunity we see, kind of, is as the market continues to strengthen, as we kind of build into this late '18, '19-type surge, that's probably going to be our best opportunity.

Makes sense. And then can you just talk about the visibility that you're getting from your key customers and maybe potential new customers for Q4, just given the vagueness in the presentation and on the call about kind of the run rate within towers, in particular, exiting the year? Are you getting 30 to 45 day forecasts about their inventory that they're depleting or is it a little bit longer?

Yes -- no, I mean, normally -- yes, normally, we would have probably 6 to 9 months of visibility. And I'd say, right now, that's squeezing down to this 3, 4-month window. We expect as the year progresses, that to widen back out a little bit, and we are very active in the market, quoting on other opportunities. We've built towers for just about every turbine OEM, and we think that gives us good perspective, and our top plants are in the right location.

Our next question comes from Angie Storozynski with Macquarie.

Okay, so I wanted to talk about the expansion of the manufacturing capacity of the towers business. So I mean, are you having any second thoughts about it? Do you think that it's just a temporary slowdown in orders, but you think that this increased manufacturing capacity is going to be filled up with wind new build that's supposed to materialize by the end of 2020?

Yes, so we're just completing the expansion. I would say, it'll come online in Q4. And no, we won't really use it in Q4, which is a little bit of a disappointment. But keep in mind that the investment did 2 things: One is that it grew our capacity; but two, it gave us a second paint facility and also, a separate freestanding assembly building. And both of those things are what give us the ability to deal with multiple tower models at a given time, at any one point in time, much more effectively. So it was also about eliminating the risk of a 2015-type production problem, where we got hung up with 2 tower models and we basically couldn't get the production out of the plant, not very smoothly. So we're still getting the flexibility. We're getting improved flow. We're getting improved paint applications because of our paint kitchens, that's part of our productivity gain. And yes, I think we will use that capacity beginning next year.

Okay. And then the shelf registration, I understand that this is to give you more of a flexibility, but what would these acquisitions do? Is this entering a different markets, also an attempt to further diversify your sales? Is this to grow scale in one of the businesses that you already have?

Yes, it would likely be scale in an existing business, and there are a few things that we are looking for. One is some more technical capabilities, some more engineering competencies, specifically, so that we can get an -- a more active role in the design of products. And then separately, to the extent that -- we've also been evaluating opportunities to either expand our Process Systems or expand our weldments volume and customer base. So these are bolt-ons, Angie, probably.

But they would not be -- they would not be focused on the wind industry? They would be more industrial or oil and gas?

So we think of CNG as still being in the clean tech space, so -- but they would not necessarily be in wind. I'll give you another example. We were looking at a gearbox repair facility that was mainly doing wind gearboxes, and that was interesting because it gave us geographical diversification and also an increase in some of the aftermarket work on the Gearing side. In that particular case, it didn't work out, but it would've been some customer diversification and also some interesting geographic and aftermarket-type business.

Our next question comes from Carter Driscoll with FBR Capital Markets.

Congratulations, Jason, on the permanent position. So my question is, you made a comment earlier, Stephanie, with the -- certainly the uncertainty of the current administration and the constant policy shifts, you made a comment about your happiness that it looked like the steel tariff discussion was waning. Have you done any type of quantitative impact or assessment on, certainly, the towers business, but potentially all of your segments, if such a tariff was put into place? Obviously, using some level of assumption, I think I've heard an increasing number of firms that are starting to do that, we certainly have the solar tariff trade case that people are trying to estimate the potential impact there. So that's my first question, then I have one more follow-up.

Yes, I guess I don't have a very crisp answer for you, other than to say it's not -- would not be a good thing, because of the steel that we consume in our businesses. On the towers side, towers are bulky, so the transport cost is high, but there clearly is a cost differential for steel, particularly in Asia. Now there are -- as other trade legislation, the countervailing duties that block imports from China, and maybe to a lesser extent, other parts of Asia, so that kind of helps to mitigate that. But still, to the extent that the domestic steel manufacturers can keep edging up their steel prices, it's not a good thing in terms of the tower market. I'm not -- in our Gearing business and some of our other business, the steel content is not quite -- the material content is not so high as a percent, so it's less of an issue. And then getting very good, high-quality gear steel, for example, would tend to either come from Europe or the U.S. There is not a lot of that today coming in from Asia.

So you would not yet come to a point where you need to evaluate whether you have to source it more domestically?

Source more what domestically?

More steel. I mean, you're not at a point where...

Yes, we are -- we source our -- we are sourcing our steel predominantly in the U.S.

Okay. So it's more about the ability of them to raise prices than actual...?

Yes, it's more about our steel suppliers raising prices because of a tariff, which removes some of their competition.

Okay, understood. And then just -- I realize there's probably not a lot you can say in terms of some of the acquisition targets. Do you have specific financial metrics or a range of what you're hoping to do, whether from either a revenue or margin contribution? I know you talked about customer and geographic diversity and they're -- primarily, will be bolt-ons, but are there specific financial criteria you have in place of what makes an accretive transaction? And does that accretion have to be upfront? Or could some of these -- could some of the gains be longer-term in nature? Like you said as (inaudible)?

Yes, because we are just barely turned profitable ourselves, and because we have a very large $200 million NOL, we are not looking at transactions that we don't believe would be immediately accretive.

This concludes our question-and-answer session. I'd like to turn the conference back over to Stephanie Kushner for any closing remarks.

Thanks very much for your interest. Our quarter was in line with our guidance and last year. As we've explained, we are navigating through some weak quarters in towers, but we're excited about the contribution from gears and Process Systems as well, and we expect to gain some visibility as the year progresses. So we will keep you informed. Thank you very much.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.