Custom Truck One Source Inc (CTOS) 2022 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Custom Truck One Source's Fourth Quarter 2022 Earnings Conference Call. Please note, this conference call is being recorded. I would like to hand the conference call over to your host today, Brian Perman, Vice President of Investor Relations for Custom Truck.

Thank you, and good afternoon. Before we begin, we would like to remind you that management's commentary and responses to questions on today's call may include forward-looking statements, which, by their nature, are uncertain and outside of the company's control. Although these forward-looking statements are based on management's current expectations and beliefs, actual results may differ materially. For a discussion of some of the factors that could cause actual results to differ, please refer to the Risk Factors section of the company's filings with the SEC.

Additionally, please note that you can find reconciliations of the historical non-GAAP financial measures discussed during the call in the press release we issued today. The press release we issued this afternoon and our quarterly investor presentation are posted on the Investor Relations section of our website. We filed our 2022 10-K with the SEC this afternoon.

Today's discussion of our results of operations for Custom Truck One Source Inc., or Custom Truck is, presented on a historical basis as of or for the 3 and 12 months ended December 31, 2022, and prior periods. While our reported results can only include Custom Truck One Source LP for the period since the April 1, 2021, date of the business combination, we have presented and will be discussing today pro forma combined results as if Nesco and Custom Truck had operated together for all periods. All references and comparisons to 2021 results are made on a pro forma basis. We believe such combined information is useful to compare how the combined company has performed over time.

Joining me today are Fred Ross, CEO; Ryan McMonagle, President and COO; and Chris Eperjesy, CFO. I will now turn the call over to Fred.

Thanks, Brian, and welcome, everyone, to today's call. I'd like to begin by thanking all of our employees, customers and suppliers who supported our business and helped us achieve our fantastic results as we navigated the challenges our industry faced last year. The entire team continues to work tirelessly to maintain record levels of production so we can fulfill our goals of providing unrivaled service to our customers, growing our market share, and creating value for our shareholders.

Last quarter, we delivered record revenues, adjusted gross profits, and adjusted EBITDA. We generated $487 million of revenue and $124 million of adjusted EBITDA in Q4, up 37% and 30%, respectively, versus Q4 of 2021. We sold $244 million of new equipment in the quarter, which is a quarterly record for the sales organization. Additionally, we continue to grow the fleet, adding $27 million of net OEC to the quarter. While our supply chain continues to improve, we are working closely with our vendors to continue to address remaining issues and have 2023 be a better year than the last year.

Our ERS business continues to perform very well, with utilization increasing by 250 basis points over the prior quarter. Our TES business continues to see very strong demand with backlog growing to a record of $754 million, more than 83% higher than a year ago. Strong demand for both rental and new sales provide us the opportunity to focus on improving profitability through margin expansion.

Finally, we remain well capitalized and our focus on reducing our net leverage, which Chris will discuss later. Our fourth quarter results provide continued momentum for us and a strong foundation for this year. We are confident that our team will continue to execute well and deliver strong results during 2023. We expect to see continued strong revenue, adjusted gross profit, and adjusted EBITDA growth across all our business segments.

As you know, after founding Custom Truck more than 25 years ago, I will retire from CEO role next week. Building this business has been one of the greatest accomplishments of my life. Leading our employees and serving our customers is something I have been passionate about my entire career. I have worked with Ryan for more than 8 years, and I'm confident in his leadership ability in the rest of the Custom Truck leadership team. I look forward to seeing what they achieve in the years ahead.

With that, I'll now turn the call over to Ryan.

Thank you, Fred. I am tremendously grateful for your leadership and guidance. I am deeply honored to have the opportunity to build upon the enduring legacy that you created here at Custom Truck. As CEO, I want to continue to serve our customers, create more opportunities for our employees to grow and develop and push forward our objective to establish Custom Truck One Source as the leading provider of specialized trucks and heavy equipment solutions in North America.

Demand remains strong in each of our strategically selected 4 primary end markets. T&D, telecom, rail, and infrastructure. We continue to believe that these markets offer compelling long-term growth opportunities well in excess of GDP and should for the foreseeable future. This can be seen in the reported backlogs of the utility and telecom contractors, our largest customer base, which continue to be extremely strong and at or near record levels.

We see this reflected in both our new sales backlog and the rental fleets performance. Additionally, we continue to experience strong demand from our customers, both rent and purchase assets in the rental fleet, which we see as a positive leading indicator for sustained demand. Strong investment in the rental fleet and sales of certain aged assets in the quarter resulted in the reduction of our fleet age to 3.7 years, which we believe remains the youngest in the industry.

Continued supply chain issues were the only significant headwind to our ability to meet customer demand last year. During Q4, we saw solid improvements in the number of chassis and attachments we received, which was reflected in our near-record production and growing levels of inventory. Overall, our inventory increased by $41 million versus Q3, which we see as a positive indicator and positions us well for 2023. Because of our strong vendor relationships and the efforts of our team, we continue to experience increased inventory flows from our suppliers with deliveries up more than 50% during Q4 compared to Q4 last year. We met our target of adding more gross CapEx to the rental fleet in the second half of last year than we did in the first half, deploying $214 million into the rental fleet in the second half versus $127 million in the first half.

We also met our stated goal of both sequential, quarterly, and year-over-year revenue growth in our TES segment in the fourth quarter. Strategically, we remain focused on optimizing our production and investing to ensure we deliver the service levels our customers expect from CTOS. Our production team performed very well in the fourth quarter and continues to deliver strong results so far in 2023. Our sales organization was able to deliver record volumes in the fourth quarter in the infrastructure and system investments we have made, provide confidence we can deliver our expected 2023 volumes.

We will continue to invest in our footprint and service organization to ensure we can support our rental fleet growth. As we look ahead to this year, we believe that favorable in-market tailwinds, robust customer demand, improving supply chain and continued solid execution by our team, all positioned Custom Truck to deliver strong revenue, adjusted gross profit and adjusted EBITDA growth.

While Chris will discuss our 2023 outlook in greater detail, we are currently projecting 2023 total revenue in the range of $1.61 billion to $1.73 billion, and adjusted EBITDA from $415 million to $435 million. We know our employees are the key to delivering the record financial results and unmatched customer service we saw last year. And I'd like to extend a sincere thank you to them.

I will now turn it over to Chris.

Thanks, Ryan. As Fred and Ryan have indicated, Q4 was a record quarter despite the supply chain challenges we continue to face. Total revenue of $487 million was up 37% compared to Q4 2021 and 36% versus the prior quarter. Adjusted EBITDA was $124 million, a 30% improvement compared to Q4 2021 results and 36% sequential growth. For all of 2022, adjusted EBITDA was up 18% compared to 2021.

Net income for the quarter was $31.1 million, the highest since the combination. Gross profit, excluding rental depreciation was $169 million, representing an adjusted gross margin for the quarter of 34.7%, down marginally from 35.1% for Q4 2021 and down from 36.6% last quarter, both solely as a result of mix. ERS and TES segments both experienced significant improvement in adjusted gross margin versus last year, driven primarily by our strategic focus on pricing across all of our operating segments. SG&A was $59 million for Q4 or 12% of revenues, which is down from almost 14% in Q3.

Turning to our segment results. Fred referenced our continued strong utilization within our ERS segment for the quarter, which was more than 86%, up from 84% for Q4 2021 and up 250 basis points compared to last quarter. Average OEC on rent increased by more than $85 million compared to the previous quarter and was up $116 million for 2022. On-rent yield was 39.5% for the quarter, up from 39.1% for Q4 2021 and up 100 basis points versus Q3.

Our OEC ended the year at $1.46 billion, up by more than $27 million in the quarter and $92 million for the year. We deployed $117 million of new equipment into our rental fleet in the quarter, which is the most CapEx we've ever deployed in a quarter, and we expect to continue to invest heavily in the fleet in 2023. For Q4, ERS rental revenue was $123 million, a 13% increase versus Q4 2021 and a 10% increase versus Q3. Reflecting our comments from last quarter regarding strong demand for rental asset purchases, ERS equipment sales for the quarter were a record $78 million, up more than 120% versus Q4 2021 and up more than 110% from Q3. ERS gross profit, excluding rental depreciation was a record $118 million for Q4, up 33% from Q4 2021 and up 24% from Q3.

Adjusted gross margin was 58.3%, a decrease from Q3 solely as a result of revenue mix as rental adjusted gross margin continued to improve and rental sales adjusted gross margin was essentially flat to Q3. For TES, we achieved a quarterly record with revenues of $247 million, which were up more than 42% sequentially from $174 million in Q3 as this segment benefited from record backlog, continued strong inventory flows and near record levels of production.

Gross profit increased by more than 90% in the quarter compared to Q4 2021 and by more than 63% sequentially. TES gross margin for the quarter was 18%, up from 13% in Q4 2021 and a 230-basis point improvement from Q3. Our sales activity continues to be extremely strong with backlog growing by more than 6% sequentially from Q3 to $754 million. This strength was very broad-based across our product portfolio. While supply chain issues, albeit at a moderated level are resulting in near-term headwinds to our ability to fully take advantage of the strong demand, we believe the continued growth in TES sales backlog reflects growing demand for equipment, indicative of our favorable end market dynamics, our strong market share gains, and our pricing discipline.

We have been successful in countering inflationary pressures through the implementation of ongoing production efficiency initiatives, in addition to gaining favorable price increases with our customers. As this quarter's TES results show, we are confident we will be able to hold or improve margins over the coming quarters, even with elevated levels of inflation.

Our EPS business posted revenue of $38 million, up 9% versus Q4 2021 and up 8% over Q3. Gross profit margin in this segment was negatively impacted by higher inventory costs due to shifts in product mix. Maintaining a strong liquidity position and improving leverage remain priorities for us as to investing in the rental fleet and pursuing selective strategic growth through M&A. Pursuant to our previously announced stock repurchase program, we purchased $8 million of our stock during the quarter. We also reduced borrowings under our ABL by $9 million, with the outstanding balance ending the year at $438 million. As of December 31, we had $309 million available and $189 million of suppressed availability under the ABL with the ability to upsize the facility.

With LTM adjusted EBITDA of $393 million, we finished 2022 with net leverage of just over 3.5x, an improvement of more than a turn since the close of the transaction and down from just under 3.8x last quarter. Achieving leverage below 3x remains our target and one that we believe we can achieve by the end of fiscal 2023. We will continue to seek to make incremental investments and prudent acquisitions when we believe they create long-term shareholder value.

With respect to our 2023 outlook, we believe ERS will continue to benefit from strong demand from our rental customers as well as for purchases of rental fleet units, particularly older equipment in 2023. We also expect to further grow our rental fleet net OEC by mid- to high single digits. Regarding TES, supply chain improvements, improved inventory levels exiting 2022 and record backlog levels should improve our ability to produce and deliver more units in 2023.

We are providing guidance for our segments as follows: We expect ERS revenue of between $665 million and $705 million, TES revenue in the range of $800 million to $870 million and EPS revenue of between $145 million and $155 million. As Ryan mentioned previously, this results in total revenue in the range of $1.61 billion to $1.73 billion, and we are projecting adjusted EBITDA from $415 million to $435 million.

In closing, I want to echo Fred's and Ryan's comments regarding our record 2022 performance despite the significant challenges that we experienced, we have executed a transformational integration with Nesco, delivered double-digit adjusted EBITDA growth, expanded margins in an inflationary environment, reduced leverage and continue to deliver the highest levels of customer service.

With that, I will turn it over to the operator to open the line for questions.

(Operator Instructions) And our first question is from Scott Schneeberger with Oppenheimer.

My first question, it still feels like the most important question out there is the supply chain. Demand was excellent in 2022, yet there were the constraints on the supply end of it. You guys highlighted it a bit here on this call, but I'd love if you just talk a little bit more about what you're seeing from the suppliers. You said it's gotten better on both chassis and attachments. But can you just take us a level or 2 deeper into what you're seeing and what gives you confidence for that clearing up and allowing you to give the guide that you have for '23. Thanks.

Sure. Scott, good to hear from you. It's Ryan. I'll start. But we are seeing good improvement on the supply chain side, Scott. So it's -- we referenced it in 2 comments that we made, one about inventory -- our receipts in Q4 was up 50% over where it was last fourth quarter. So we take that as a really positive sign. And then inventory levels are up as well sequentially. And so we are seeing that flow and then we're seeing the production side of things continue to improve too. So -- and I'd say right now, we're feeling good with the chassis with our chassis partners. We're seeing good inflows on the chassis side and on the attachment side of things too, where we have -- continued to have good relationships with our partners there.

So I think we're seeing good flows in both the attachment and the chassis side. And then with bodies as well, we are -- have continued to identify additional partners who can help us with our bodies as well. So we're feeling good and sitting here in the middle of March, I think as we said in some of the prepared comments, the year is off to a good start from a supply chain standpoint as well.

Sounds good. Can we speak a little bit or discuss a little bit, what you're seeing across the end markets? Have you seen any discernible benefit from the infrastructure bill funds flow yet? And just kind of end market perspective on -- it sounds like broad-based demand, but maybe a little bit more from each of the areas.

Yes. I'll start and let -- and then Fred, do you want to...

Well, yes. So basically, if you look at our dump trucks and water trucks, which is usually part of pure infrastructure, are really up and doing well. Demand is high, sales are high and the rental fleet is also expanding with those products. So I think we're starting to see the beginning of the infrastructure lift that we've been talking about for 1.5 years or so. And I think it is beginning now.

So I think that's where we see the infrastructure bill the most immediately, Scott is -- and then utility, we still are very bullish on utility broadly, both transmission and distribution. I made that comment in the prepared remarks around our customers' backlog. So we're continuing to see strong demand for equipment from both transmission and distribution. And then railroad continues to be a good area for us, both from an end market demand standpoint and then just from a share gain standpoint in that segment. And then telecom continues to perform well, which again is a smaller segment for us, but we're continuing to see growth in telecom.

And as Fred said, on the infrastructure bill, we're seeing the most in the infrastructure. And hard to say if there's any shovel-ready projects on the utility or telecom side, those typically take longer to permit but we are seeing -- still seeing good demand in all 4 of the end markets.

Sounds good. And it sounds like record CapEx as a combined company. What -- how are you thinking about CapEx, I would imagine higher with the constraints easing, in 2023 versus 2022. But how are you thinking about CapEx and maybe taking that a step further, how are you thinking about free cash flow for this upcoming year?

Scott, it's Chris. I think this year, we are -- 2022, we've given guidance of mid- to high single-digit growth in that OEC. We continue to see that extending into 2023 and probably towards the higher end of that range. In terms of free cash flow, we've said that our goal is to get below the 3x. You can kind of do math on our guidance in terms of where we are in terms of debt. So you should see some positive free cash flow, absent any significant M&A activity or any additional investments we make in the rental fleet beyond the guidance we just gave you but you should definitely see positive free cash flow this year.

I appreciate it. I will turn it over, but just 1 more quick one, kind of a nuanced question. There -- in the prepared remarks, there was comments from the rental fleet expecting older equipment to be purchased, particularly older equipment. What's the context of that comment? Is that just where you think in this inflationary environment customers will be looking the most. I think that's a good development for you all. But just a little bit more on what that comment was actually.

Yes. That's Scott, that's really just a continuation of some of what we've talked about in terms of bringing the legacy CTOS and legacy Nesco fleets together of disposing of some of the older assets. So I think partly is just a function of what the combined fleet looks like. And then to your point, because residual values have stayed strong and continue to stay strong for our used equipment, it's been a good time to dispose of assets, plus the fact that now that supply chain is improving, we have more new equipment available to continue to replace and then to grow the rental fleet also.

Our next question is from Mike Shlisky with D.A. Davidson.

I want to get a feel for the outlook utilization for 2023, you will be growing to quite a bit, it looks like. And I guess I'm kind of wondering whether all those new units that are already spoken for from customers that need them. And do you think you can maintain the good utilization at the end of the year -- into most of 2023 here?

Yes, Mike. Good to talk to you. Yes, we're feeling good about utilization. So I think we mentioned that utilization in Q4 was up to 86%, right? So we finished the year very strong from an overall utilization standpoint and strong utilization is held so far through Q1. And so we're feeling good from a demand standpoint. We have a significant portion of the new equipment; we're adding as a reservation against it. We don't work quite that far forward that we have visibility to the whole year from a new equipment reservation standpoint, but we see utilization staying strong through the full year of '23.

Okay. Also, in your comments, you had mentioned investing in your footprint. Just curious if you can update us on whether you have your eye on any new locations coming in 2023 at all.

Sure. We've mentioned -- I think in our investor deck, we've mentioned 6 kind of broad markets, the Pacific Northwest, in the Northern California, in the Southwest, in the Carolinas, in New York, and New Jersey where we know that we need to add to our footprint. So those are certainly the target markets that we're focused on. Nothing imminent to report from a new location, but we're actively working in all those markets to look at both opening up a greenfield site and then also looking at kind of local or regional M&A opportunities in those markets as well.

Okay. And maybe last one for me is on the pricing of new equipment in 2023. You had to discuss with pricing so far, but do you think you've got more room to grow in 2023, and is some of it's going to be more optimistic than just passing along higher costs?

I think we've always taken the view and looks let the market kind of dictate pricing. And so as backlogs continue to grow, we've tried to work closely with our customers to be able to pass along cost increases where we see them and then just also react to how the market seems to be pricing equipment.

Our next question is from Tim Thein with Citigroup.

Maybe first question just on, if there's any help you can provide as to -- from a full year perspective, I mean the quarterly cadence and the seasonality has been disrupted by all kinds of factors, especially in '22, given the supply chain issues, but you're almost halfway through March. Can you just give us a sense of any kind of handholding that you would provide in terms of any just rough parameters and from a seasonality perspective in '23 from either revenue and/or EBITDA perspective?

Yes. Sure. Tim, this is Chris. As you know, we don't give quarterly guidance, but just to give you some general color. If you look back the past 2 years in terms of our EBITDA, I think it's been roughly split 45-ish percent first half, 55% second half. I think revenue split was similar in 2022. We would expect a similar kind of flow in cadence in 2023. We just had an extremely strong fourth quarter. And so our expectations for Q1 are probably more in that mid-single digit in terms of EBITDA growth for Q1 but that's probably about as much as I can give you right now. So 45%, 55% first half, second half and kind of mid-single-digit growth on EBITDA in Q1 versus Q1 of last year.

Got it. That's good. That's helpful. And then another one just on -- going back to the rental fleet. So the expectation to grow mid to -- closer, I guess, to the high single digits, any help there in terms of gross versus net CapEx? I would -- should we assume that the new sales continue maybe at a faster pace than they did in '22 or how should we think about that?

Yes. So we're -- I think our expectation right now is in the neighborhood of $400 million in terms of gross CapEx and you can calculate the kind of the net on that to get to that mid- to high single digit. And I think in terms of the rental asset sales, it's going to be directional similar to what you saw this year.

Got it. Okay. Very good. And then just lastly, on the TES backlog, I mean that I don't know, it's like 90-ish percent of the midpoint of your guidance, the backlog -- the ending backlog is 90-ish percent of your revenue guide. Does some of that extend beyond '23? Or obviously, it speaks to, I would assume a fairly good level of visibility. Are there things within that backlog that we should be mindful of that, I don't know that you would call out?

Some of it will extend beyond '23, just depending on the exact stack of the truck that's in backlog. But I would say the majority of that -- the far majority of that can be -- will be delivered this year in '23, but some of it, if you really expect the unique product could extend out into 2024.

Okay. But not a big deal -- not a material. Okay.

Not a material.

Yes. Yes. Okay. And the pricing in the backlog you feel that hopefully, we don't have the same level of inflationary factors we have but presumably that's all price protected or the majority of it anyway?

Yes. I mean we've repriced the backlog kind of as we've seen any cost increases that have come through. And that's -- as we need to, we'll continue to work with our customers to figure out what makes the most sense there.

Our next question is from Noelle Dilts with Stifel.

Congratulations to both Fred and Ryan on your respective changes. So first, I was just wondering if you're seeing any shift in the buy versus rent decision at your utility contractor customers given that there seems to be a lot of conviction and a very long runway for investment in the grid.

Yes, I'll start and Fred can certainly chime in. But we're still seeing strong demand in both ways, Noelle, to both buy equipment and to rent equipment. And so I think we're feeling strong demand on both the ERS and TES segment with utility. Customers, some of what we saw in the fourth quarter in terms of buying out some of the utility gear. We see that as another kind of -- another bullish indicator in terms of the demand cycle that contractors have a meaningful amount of work that they want to own that equipment as well.

We're not seeing a lot of shift between buying and renting, where we're seeing any -- we're seeing a slight shift towards renting more equipment right now with some of the contractors too. But again, that's where we think the one-stop-shop model really is dynamic and allows us to pivot between how customers want to consume the equipment. But right now, certainly, in the utility space, all the indicators we're seeing are certainly strong demand for both buying and renting gear.

Yes, I would say it continues to stay strong. I do think there's -- that the rental may pick up some. There's no doubt that because of interest rates and so forth, some people may feel that it's a better deal to rent than to put the -- add the equipment to their balance sheet. But both sides are doing really well. But I do think it might be leaning slightly towards -- more towards rental.

Okay. That's helpful. And then just curious, it looks like you're continuing to buy back some shares. How are you thinking about the relative attractiveness of share repurchase with the stock at current levels?

Yes. Noelle, this is Chris. We really view it as an opportunity to show support for the stock. Obviously, we're very bullish on our performance in 2022 and the outlook for 2023. And so we really look at it opportunistically. As you know, we have 30 million approved by the Board I think in the Q -- or sorry, at the K, we disclosed, we've purchased a little over 10 million. And so we'll continue to look at it and buy stock as we think it makes sense to support the stock.

Our next question is from Justin Hauke with Robert W. Baird.

I guess I'll echo the statement of congratulations on change, all the new roles. So good luck. I guess my question, I'm kind of surprised that the rental segment is growing less than the sales segment because -- and the reason why -- in '23, the reason why I asked that is because I guess I kind of assume why you guys supply everything that there was more of a mix to doing more rental, but it seems like the sales side is driving more of the revenue growth outlook. And so I guess commenting -- or your comments on that. And then also within the rental segment specifically, is it the same dynamic of the sales portion is expected to grow faster than the rental portion within the segment for the year as well?

Yes. Justin, I'll start, and then Chris can kind of give a comment on within the year. But I think when you look at ERS growth versus TES growth, we've got a couple of dynamics going on, right? One is just capital allocation and balance sheet management in terms of gross CapEx and how much capital do we want to deploy because of how much the fleet has grown. So in that ERS segment, there's really 2 things. There's the rental fleet, which drives rental revenue, and then there's the rental sales side of that business. And so Chris already kind of gave guidance to the mid- to upper single digits in terms of rental fleet, which will really drive the rental revenue side of that business. And then the rest is just our best estimate of what we're going to sell out of the fleet.

And so I think the ERS versus TES is really a function of just capital allocation and capital deployment more than anything. And then we're doing them both in the context of supply chain is improving. And so as we've seen backlog grow and kind of the fact that backlog is now north of $750 million, we're just trying to begin to make sure we've got the ability to work through backlog there. But again, demand is strong, demand is strong in all 4 of our end markets, that's where we always start. And it is strong to consume equipment as rental or sales. And so it is just, again, balance sheet management and CapEx deployment.

I understand on the -- so the ERS segment then, if you're looking -- your guidance is 3% growth at the midpoint. So I guess what you're saying is the rental fleet within that segment you're assuming you grow that mid- to high single digit. So the sales out of that segment would be flat to down a little bit year-over-year?

I think Chris said close to flat, right, just how we've kind of thought about it?

Yes, exactly.

And then the other assumption there is utilization. And so it's just -- we've run at incredibly high utilization levels in 2022. And so we see nothing saying utilization is going to slow down in any meaningful way, right? So we still see very good indicators in terms of utilization and demand. But just as we're thinking about budgeting, I think it's important that we're managing that as best we can.

Okay. And that kind of brings maybe to my next question. And my final question here is that, so if the fleet -- the rental fleet is growing mid-high single digit and your utilization, as you said, is kind of high, so it kind of stays where it is. So the OEC on-rent yield for lack of a better term, it's kind of a pricing term. It was kind of flattish year-over-year here in the quarter, up 10 basis points. Are you thinking that it stays kind of at that level for '23? Or is there opportunity for more rent yield expansion?

Yes. I think as you look at that, Justin, I don't know that I would be modeling any significant expansion. Certainly, there's a lot of things we're doing that are in terms of efficiencies within the business that in addition to just the availability of units and utilization that can drive that. And so not anything specifically we want to guide you to, but I wouldn't necessarily model any significant movement in either direction.

(Operator Instructions) There are no further questions at this time. I would like to turn the floor back over to Ryan McMonagle for closing comments.

Great. Thank you. Thanks, everyone, for your time today and your interest in Custom Truck. We look forward to speaking with you on our next quarterly earnings call. And in the meantime, please don't hesitate to reach out with any questions. Thank you again, and have a good evening.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.