Enovis Corp (ENOV) 2022 Q3 法說會逐字稿

Good morning, everyone. Thank you for standing by, and welcome to the Enovis Third Quarter 2022 Earnings Call. I would now like to turn the call over to Derek Leckow, Vice President of Investor Relations. Please go ahead.

Thank you. Good morning, everyone. Thank you for joining us today for our third quarter results conference call. I'm Derek Leckow, Vice President of Investor Relations. And joining me on the call today are Matt Trerotola, CEO; and Chris Hix, Executive Vice President and CFO, and Ben Berry, who we previously announced, will serve as Enovis' CFO when Chris retires at the end of the year.

Our earnings release was issued earlier this morning and is available in the Investor Relations section of our website, enovis.com. We'll be using a slide presentation on today's call, which can also be found on our website. Both the audio and the slide presentation of this call will be archived on the website later today.

During this call, we'll make some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in the safe harbor language in today's earnings release and in our filings with the SEC. Actual results may differ materially from any forward-looking statements that we make today. The forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them, except as required by law.

With respect to any non-GAAP financial measures referenced during the call today, the accompanying reconciliation information relating to those measures can be found in our earnings press release and in the appendix of today's slide presentation.

With that, let me turn the call over to Matt on Slide 3.

Thanks, Derek. I'm pleased to discuss our great operating and strategic progress this quarter. We had strong growth and are demonstrating clear strides toward our strategic goal of sustainable, high single-digit organic growth. Our growth is supported by an innovation engine that continues to produce exciting new technologies and solutions to improve patient outcomes and health care workflows. In a moment, I'll discuss the latest P&R product offering that highlights our innovation vitality and momentum.

Despite a high load of inflation on our results, we continued to improve our core margins this quarter, aided in part by price versus cost progress and operating leverage from our strong sales growth. Teams are using our business system, EGX, to drive continuous improvement and productivity gains throughout Enovis. We've also taken actions this year to improve our cost structure.

Our acquisitions expand our addressable market and fuel our strong share gain. These businesses are performing as expected, including double-digit growth in our Foot and Ankle business after reconfiguring the sales channels earlier this year. I continue to be impressed by the dedication and excitement of our global teams. I want to thank our associates for their contributions this quarter as we continue to build a high-value MedTech growth company.

Our strong growth is underscored by another quarter of double-digit Recon requirements highlighted on Slide 4. Total sales grew 23%, including strong contributions from acquisitions. Organic growth of 15% is again well above market level. This double-digit growth was achieved across all of our product lines. We had strong growth in the U.S. and international markets, demonstrating our favorable market segment positioning, product portfolio strength and successful commercial execution.

In the third quarter, we expanded our U.S. surgical facility to further support our double-digit revenue growth and in-sourcing programs for margin expansion. Mathys has also achieved double-digit growth. We acquired this strong franchise a year ago and will now start contributing fully to our organic results. Our Recon segment is well positioned for very strong and sustainable organic growth.

As you can see on Slide 5, we have successfully invested in exciting and faster-growing opportunities. Foot and Ankle is a rapidly growing market segment. At the recent AOFAS conference, we highlighted several products that were recently FDA 510(k) cleared, including the DynaClip Delta, the DynaClip Quattro and the DynaNail Helix. These products extend our innovative shape metal technology into new indications that can benefit patients and surgeons.

Our Mathys business is growing strongly, and we're making great progress on cross selling that will solidify well above market growth and improve gross margins in international Recon markets. We recently conducted workshops with surgeons from 7 European countries, leveraging our U.S. KOL network to show the advantages of our products, our commitment to innovation. I got to attend one of those sessions in Switzerland and was extremely excited to see the interest from competitive surgeons as well as the great teamwork between our Enovis teams.

We have very healthy opportunity funnels for both our EMPOWR Knee and our AltiVate Shoulder. We recently completed the acquisition of Insight Medical Systems and its augmented reality technology. ARVIS delivers real-time, hands-free surgical guidance that is highly accurate and also space and cost efficient. The number of procedures is ramping very quickly and positive surgeon feedback gives us confidence in the accretive growth potential of this differentiated surgical system.

Turning to Slide 6. Our Prevention and Recovery business also had a strong quarter. Its 4% organic growth was in line with our strategic goals for the segment, and we believe the business continues to grow faster than its underlying markets. We are the market leader in most of our segments and our strengthened operational capabilities and healthy vitality levels are clearly reading through. P&R has incurred most of our company's inflation pressures and the team continues to increase prices to customers to mitigate the net effect.

In the third quarter, these actions stemmed further net price cost erosion with sequential and year-over-year improvement in gross margins. We remain committed to recover the cumulative heavy inflation for the past 2 years as the environment normalizes in the coming years. We talked earlier about the inflation within our Recon business. We continue to make great strides in P&R as well on innovation. We've been investing in R&D and are now sustaining a healthy mid-teens vitality rate.

On Slide 7, we highlight an exciting development that furthers our P&R market leadership and company digital strategy. We recently introduced significant updates to our Motion iQ platform, the X-ROM iQ postoperative knee brace and the SRB iQ 3D-knit compression sleeve. These award-winning solutions combine smart sensors and great functional braces with groundbreaking apps to help patients achieve better recovery and rehabilitation outcomes.

Patients access videos of proper rehab exercise techniques and receive real-time monitoring and feedback. The care team can monitor patients on a dashboard and dynamically intervene to encourage patient compliance or to adjust and customize recovery programs during the patients' rehab journey. These innovations were recognized recently at the American Orthopaedic Society for Sports Medicine's Annual Meeting, winning the coveted ACE Award.

In addition to terrific performance in Q3, we're also making important progress toward our strategic goal to create a $2 billion revenue MedTech company by 2024.

Slide 8 shows our accelerating organic growth this year on the path towards sustainable, high single-digit organic growth. Our success reflects the strength and cornerstones of our strategy. High-performing teams, continuous improvement in everything that we do, better innovation processes and acquisitions that position us in faster-growing market segments. We are well positioned to outgrow our markets and execute against our large M&A target funnel to achieve our goals.

Slide 9 shows that we're also improving our margins in a year when most in the industry are not. Considering the significant inflation that we have encountered since COVID, we are proud of this performance. If you peel away the impacts of currency movements and recent acquisitions, we've increased our core margins 80 basis points year-to-date. Our strong growth creates operating leverage that helps our margin journey, and we've also taken $25 million of structural costs out versus 2021.

As our acquisitions continue to scale, we expect further margin expansion. We've made great progress but recognize that inflation and currency pressures are extending the time required to achieve our 20% goal. In 2022 alone, we have about 100 basis points of headwind from FX and additional net inflation. We remain confident in our ability to leverage our EGX toolkit to drive long-term productivity and pricing, that will move us forward every year and ultimately drive us to 20% margins and beyond.

Now I'll turn the call over to Chris to take you through our Q3 financial results and near-term outlook. Chris?

Well, thanks, Matt. I'll start my prepared remarks on Slide 10. We had a strong operating quarter in Q3 with above-market organic growth and core margin expansion. Our company grew 7% with a strong organic component, while the acquisition and FX factors offset each other. Gross margins grew 140 basis points year-over-year, reflecting our faster-growing, higher-margin Recon segment. We also reduced the net inflation pressures that had been increasing each quarter in our P&R business. We expect another strong quarter of year-over-year gross margin expansion in the fourth quarter.

Our year-over-year EBITDA margins of 14.9% in the quarter reflects several key drivers. Recent acquisitions joined Enovis with less than company average margins, which reduced year-over-year margins by a full point. We expect margins to expand as these acquisitions scale from fast growth. Our core margins increased 40 basis points in the quarter or 80 basis points year-to-date, despite having significant pressure from net inflation.

Besides having strong operating performance, our EPS results of $0.59 in the quarter included onetime tax benefits that temporarily pushed our tax rate below 10% in Q3. We expect the tax rate to pop back into the mid-20s in Q4 and in the full year at around 18%. We are working to implement changes that can sustainably reduce our tax rate to 20% or lower next year.

Our Q3 results also include higher interest costs that reflect the current value of the ESOP retained stake and higher interest rates. We are pleased with the results of Q3 and are positioned for a healthy finish to the year as shown on Slide 11.

As Matt noted earlier, we expect Q4 organic growth to be at or higher than Q3 rates. We are expecting about 6.5% full year organic growth supported by strong product vitality and operating execution to continue our fast growth and market share gains. Overall market growth is improving seasonally, but there are pockets of pressure from procedure cancellations, caregiver staffing and other market disruptions. We are projecting total growth of about 10% for the year, including roughly 3 points of currency headwind.

We're updating our full year EBITDA toward the lower end of previous guidance to reflect market demand trends, persistent inflation and currency challenges that we believe will continue into 2023. We expect to outgrow our markets and expand our margins this year despite the combined 100 basis points of FX and net inflation pressures that we are absorbing. This performance includes strong sequential margin growth in Q4 to reflect our seasonally highest revenues.

Our 2022 EPS outlook includes this year's margin expansion, increasing interest costs and recent onetime tax benefits. We are pleased with our forecast for double-digit EPS growth this year.

So to summarize on Slide 12, we've created a company with sustainable market outperformance, both for growth and margins. We have strong teams, a healthy innovation engine, a business system that drives continuous improvement and a successful M&A strategy with capacity for a lot more. We are shaping the company to be an enduring MedTech growth leader.

On a personal note, this will be my last earnings call as I head into retirement at the end of the month. I'm retiring with satisfaction of having been a part of a strong team that accomplished a lot at Enovis and Colfax, and I'm pleased that we have such a strong new CFO, Ben Berry, who will step into my shoes.

And with that, (inaudible) let's go ahead and open up the call for questions.

(Operator Instructions) Our first question comes from Vijay Kumar from Evercore ISI.

Congrats on a steady execution here. Maybe my first question is on the top line here. Q4 implied of 7% to 8% organic, and that's coming against a pretty tough comp. Can you just talk about the visibility here at high singles? What's driving this growth? And any early thoughts on '23, should we be still be looking at the high singles above industry growth model for '23?

Yes. Thanks for the question, Vijay. And so yes, we did try to give a narrow guide at this point in terms of how we expect the year to finish out from a growth standpoint. And we are -- we think that our growth in Q3 is nice and strong and shows nice share gain across our businesses. We're expecting to see sort of a normal seasonal step up on the Recon side as we head into Q4. At this point, the possibility of a real kick up late in the year is probably off the table. That was a possibility going back a few months. But at the same time, we're not feeling some of the heavier pressure on that business than there was, say, back in June and July.

So we're expecting a sort of a normal seasonal finish to the year on the Recon side. And on the P&R side, we feel like the markets are steady and they're feeling some of the backside of that Recon pressure. So we feel good about the path to have the same or better growth here in the fourth quarter of the year as we had in the third.

Got you. And Chris, maybe 1 on margins here. If I just look at the guidance at the midpoint, I think EBITDA margins for the year is around 15%, up 50 basis points year-on-year. Can you just talk about the different moving parts? What's implied in total FX headwinds in that 15%? What is the impact of inflation, M&A? The reason I ask is, of those 3 buckets, FX, inflation and M&A, what pieces improve? Or should we expect any improvements heading into '23?

Yes, I'll take that. This is Ben. Thanks for the question. Yes, if you think about kind of our margin performance this year, I mean, we're continuing to control the controllables. As Matt mentioned, we've taken some of the cost out of the system, which has given us some benefit as we've managed through some of the FX pressure and the inflation that we mentioned in the prepared remarks of about 100 basis points. We do expect some of that to continue as we go into next year. It continues to be a tough environment.

And what we're showing is that we're showing that we're expanding while a lot of our competitors are contracting. So we're making a good step forward, but we do expect some of those pressures to continue as we go onto next year.

And then I'll just add 1 comment that is we started the year with the expectation that margins would expand roughly 150 basis points plus or minus, and it's interesting. If you look at that piece that we're absorbing FX and inflation, which is about 100 basis points, we're pretty much right on track with the controllable part of the business.

So executing where we can, and now as we're gaining ground on the inflation price dynamic, we'll see that continue to help us to drive margins a little bit as we go forward here.

Our next question comes from Vik Chopra from Wells Fargo.

Congrats on a great third quarter, and Chris, thanks for all your help this year here, and best of luck in your retirement. I had 2 questions. I guess I'll ask them upfront. Just following up on Vijay's questions on 2023. I know you're not providing guidance right now. But can you give us a framework on how to think about 2023, specifically any items you're aware of now like FX and inflation running through the P&L that you can share? Any potential headwinds and tailwinds?

And the second question I had was on your European business. Obviously, Mathys has performed really well this quarter. Just given talks of a potential recession in Europe, have you seen any demand disruption when it comes to procedure volumes? And are you expecting a slowdown in Q4 in procedure volumes in Europe?

Thanks a lot, Vic. Let me try to pick those up. I think we're certainly not ready to guide 2023. We'll do that early next year. I'll say a few things, though. First, I think what we're demonstrating this year in terms of our growth and our relative growth, really, I think, certainly shows that we are capable of driving our company to consistent high single-digit organic growth performance. As far as next year, we'll have to kind of see how things look as we turn the corner on this year into next year. But I think the back half of this year does have a little bit of recovery tailwind in it and maybe a little bit of extra price in it.

And so I think we're probably not going to be super leaning in on next year versus having kind of a thoughtful kind of guide there. And as far as the inflation part, as was commented on before, we're confident that we'll be able to keep moving our margins forward. But we also expect that next year is going to have some of the same conferred currency and inflation pressure that we're feeling this year. And so we'd expect to take another good step forward towards our 20% goal. But as I said in my comment, the path to that goal has gotten a little bit longer based on the way this couple of years are playing out.

On the Europe question, we're seeing pretty healthy demand in Europe and strong performance by our Mathys team. A lot of positive energy in that business, both between the existing products and some of the innovation in hip, they've been bringing to market and then bringing our products from the U.S. over there. And so we are seeing a kind of a healthy finish to the year and not seeing a lot of market pressure over there.

Certainly, the one market that's still dragging is Australia. That's one that we had thought might really kick here at the end of the year, and we're now seeing it just sort of slowly improving back. But the markets on the continent are in a solid place right now, and we're certainly very excited about the momentum we've got in the Mathys team over there.

Our next question comes from Matthew Mishan from KeyBanc.

First, I just want to understand the change in the fourth quarter guidance. Because I think it implied, as you previously had implied a stronger ramp in the fourth quarter. I think what -- and you had a really good third quarter. So like what's changed in your thinking around like 4Q organic growth?

Yes. Matt, thanks for the question. In our comments on the last call, I think we tried to be transparent that we were keeping a pretty wide band on the fourth quarter in terms of what the growth could be. And keeping in the frame, the full range of possibilities from heavier COVID pressure that might even lead to a small decel to a real kicker with everything kind of clearing in the back half of the year and some backlog clears.

So I think we did signal a wide range of possibilities in the fourth quarter. And what we're now dialing in, as you can see, is an expectation that we'll have at least the growth we had in the third quarter and potentially a little bit of acceleration. And I think that's really what we're seeing in terms of the elective path that there is a normal seasonality playing out, but there's still pockets around the market of pressure, pockets of pressure in the U.S., whether it's cancellations in certain areas or staffing pressure in certain areas. And a couple of markets outside the U.S. Australia, the one I mentioned, that's one of the larger ones that's still under some pressure.

And then on the P&R side, we have seen in Q3 and expect in Q4, a little bit of the backside of the elective pressure that there was back in June and July. In our P&R business, some of the impacts are delayed there. And so as we're kind of seeing some of that and thinking about how it can affect the P&R business in Q4. We've put a thoughtful guide out there as to what we now expect is going to happen down the back half of the year, which should be a good, strong finish, about 6.5% full year growth for the company, something we're certainly proud of in terms of how it stacks up and how it shows our ability to make good, strong progress on our strategic goals.

Okay. Excellent. And then I think you mentioned that the path to the 20% is extended, that's your long-term goal. I'm not sure you ever put a time frame on that. But just can you put that comments into context and how we should think about a time line to achieve that 20%?

Yes. As Chris said, as we talked about our path to 20%, we talked about the various factors that would drive that very credible path in terms of taking the structural costs out of the system, driving productivity, recovering some of the price/cost squeeze that we had started to already feel back then and the scaling of the acquisitions as they grew up against high gross margins that we have in those acquisitions. We talked about that credible path and talked about a pacing that implied maybe closer to 150 basis points a year of progress or 100 to 150 basis points a year of progress to move towards that.

And at the time, we could see a very credible path to how that could happen. What's happened this year, and we're expecting to see it carry a little bit into next year, is that there is this currency pressure and continuing waves of inflation. And so while we can execute that on an underlying basis, is then headwinds that are offsetting a portion of that. And so we're trying to be transparent here to say that until this inflation and currency situation clears, our annual progress towards that goal is going to be a little more modest and there's still that big opportunity there to eventually have larger strides of annual progress and to blow past that 20% goal. But we're trying to be transparent about what the first couple of years here look like.

Okay. Excellent. And then just on Motion iQ. I mean I love the idea of that being a connected solution. How are you thinking about getting paid for it and being reimbursed for it? Like -- and how do you think that you could show improved outcomes as a result of that? And then going back to your customers and saying, "This is what we can get you with this solution."

Yes. I mean that's a great question, Matt. First of all, as the leader in bracing and the only player that really plays along the full orthopedic continuum of care in our company, we really have decided we're going to lead the way in connected bracing, because there clearly is a great opportunity there that really has the potential to meet the health care system need of better outcomes at less total cost. And so we're confident that with the technology that's available and the need there, there's a big opportunity, and we're leading the way here.

And we've got a great, great solution out there that we've got some really good positive feedback on. Now at the same time, this is going to be a journey in terms of how things develop over time, because I think we've got a great solution. We're now working with a number of very excited docs about getting that into their protocols and being able to start to demonstrate the benefits that, that solution provides. And we're confident that, we've seen in other parts of the health care industry that if you have a great solution, you demonstrate the benefits that it brings over time, the reimbursement can follow.

Fortunately, the solution doesn't have a lot of extra cost. And so getting it out there into the marketplace, in an environment where it's not reimbursed is a great way to lead the way and to start to get some of the data developing that could lead to reimbursement over time. And we've seen other connected applications in the U.S. getting reimbursed. There's also several countries outside the U.S. now that have reimbursement for connected medicine solutions.

And so we feel like that's the way things are going to likely go here over time, and we're going to be a company that's leading the way.

Our next question comes from Xuyang Li from Jefferies.

Congrats on your retirement, Chris. Thanks for all your help during this transition and best of luck going forward and looking forward to working with you, Ben, as well.

I guess maybe for the first question, good to see that Foot and Ankle returned to strong double-digit growth in the quarter. It sounds like you made a lot of good progress with the channel integration and helped by some new products as well. Should we assume most of the disruption seen in Q2 are behind us? And can you give us an update on the STAR Ankle outlook for the intermediate period as you modernize it?

Yes. Thanks for the question, Xuyang. We are excited about the progress and opportunity in Foot and Ankle. We have worked through the channel integration. And so I feel like we're now on a good path there. We are -- on the STAR front, we expect that as we move into next year, we'll have new cutting guide in the market and have our poly switched out in that product. And so we've already been able to start to reintroduce that product to the marketplace and get people excited about what's coming.

And so we do think that next year will start the STAR recovery and there's certainly a lot of share to get back after and we've got a number of surgeons that used and love STAR that are excited about the potential to come back and start using it again. And then we've got a great innovation pipeline in that business, some great new products that I talked about on the call there -- here coming into the market as well as the Ankle -- Arsenal Ankle Plating that we launched last quarter.

So between the integrated channel, great innovation and being able to kind of lean in on STAR next year, we feel like our Foot and Ankle business is going to be on a very nice growth path, and there's also some interesting bolt-ons that are potential in that space as well.

Okay. Great. That's really helpful. I guess on the M&A environment, I think you have around $1 billion in capacity in the intermediate term. How's the pipeline looking and your discussions with targets and valuations going? And are there any areas you're more focused on either from a product or scale perspective?

Yes. So our M&A pipeline is healthy and it's in the same areas we've talked about in the past in terms of differentiated offerings that we can bring into our Recon businesses that can accelerate our growth opportunities to expand our market access geographically and things that we be bring into the P&R portfolio that would shape that portfolio in a positive direction from a growth and margin standpoint. So we do see a number of different opportunities in the funnel there. It's definitely a less frothy environment in terms of the kind of the valuation environment, but at the same time, we're looking at high-value businesses.

And so I do think we're going to be able to find some good things to get done here in the coming quarters. But -- and I do think that it's going to be a better valuation discussion than it was a year ago. But at the same time, if they're high-value businesses, we're going to have to pay a fair price in order to get them acquired.

Our next question comes from Kyle Rose from Canaccord Genuity.

Hey, Kyle. Are you there? Looks like we lost Kyle, operator. We can get him back in the queue if he wants to.

Our next question comes from Kyle Rose from Canaccord.

I'm hoping you can hear me this time.

Yes. I got you loud and clear, Kyle.

All right. Sorry about that, gentlemen. And yes, Chris, we echo the sentiment. Congrats on a well-deserved time off and Ben, we look forward to working together. When we think about just the medium-term margin outlook and I'm not looking for guidance, but just directionally, when we think about the puts and takes, I mean, you're now lapping Mathys from an M&A perspective. I think you called out 1% with respect to EBITDA headwinds there. Just wondering, how should we expect the pace of that rolling off from a headwind perspective moving forward?

Yes. Kyle, it's Chris. What I would say there is that as we do acquisitions, we bring them in, if they're going to have the profile of what we've been searching out these differentiated solutions that they have a lot of high growth in them. Oftentimes, they come in earlier stage, haven't quite caught up with the cost structure that they've got. They come in with typically lower margins, but they've got that sort of fast-paced growth at that expands the margins.

And so as we look at acquisitions as they get into -- it depends on which ones we're talking about, but they get to kind of years 2, 3, 4, 5 and you see them really pick up quite a head of steam on margins and being contributory or accretive to company margins. That's been the game plan all along here.

So as we're looking at the current year, we've got the headwinds from the most recent acquisitions that we've done, which includes Insight, for example, which -- that brings the ARVIS system along with it, but these are also the seed corn for future rapid growth and margin expansion. So as we think about margins heading forward, we're going to continue to be driving productivity. We're always going to have, I think, a good grasp on rightsizing the cost structure to support the growth that we've got as efficiently as possible. We're going to have good operating leverage with these kinds of gross margins. You could expect that.

So all of that is very much in front of us, along with the accretive growth that we're going to get out of the acquisitions. The part that's less in our control that we've been transparent about this year, is more on the inflation and FX side. And everything we see today would suggest that that's going to continue to be a headwind as we go, roll into 2023. But we are making up good ground on the pricing side to try to mitigate that.

So we still carry that big cumulative load of net inflation that's been on us for the last couple of years, but we expect that to become less and less of a drag, still a cumulative drag for us for a little while, but less of a increasing drag as we head forward. So that's sort of a broader answer on the margin front. But as folks are thinking about 2023, it's a little early for us to talk definitively about it. But those are the factors, certainly that are going to play in as we're working toward talking more about 2023 or early next year.

Okay. That's fair. And then, Matt, I think you spoke in your prepared remarks just about seeing a strong demand funnel for both the U.S. Hip or both the U.S. Knee and Shoulder business. I wonder if you could just characterize that as well as some of the upside performance you've seen recently? Are there specific pockets of strength that you're seeing? Is it regionally? Is it by specialty, ASC versus hospital? Just really trying to understand what's driving some of that sustained top line share taking.

Yes, Kyle. And I'll make 2 comments. My comment was actually about the funnel in Europe or outside the U.S., Europe and Australia. In terms of the funnel for AltiVate and EMPOWR as we're driving the cross-selling. And there, we see it in a number of countries, we had some great events in the last few months where we were able to engage surgeons in a number of countries outside the U.S. and really show them the great attributes of those 2 great products, EMPOWR and AltiVate. And there's a lot of excitement building, surgeons want to get their hands on sets and do trials and look at potentially converting.

But beyond that here in the U.S., Kyle, yes, we continue to drive nice share gain across all of the anatomies. As you'll see, we showed -- we talked about we've had growth -- double-digit growth across all the anatomies. And there -- I think we continue to win with our EMPOWR Knee. We continue to win in the ASC environment and have that be a higher part of our -- higher portion of our business than it is for the market overall. And in each part of the anatomy, we've had some good innovation coming to year -- this year and last year. And then certainly, in the Hip and Knee area, Knee particular, ARVIS is creating a lot of energy and excitement.

That does conclude today's questions. I would now like to turn the call over to Matt for closing remarks.

Thank you. Thanks for joining. And before we close, I do just -- I want to say to Chris. Chris, thank you for your many years of terrific service to our company and your partnership with me. I know that I join everyone on the call in wishing you all the best as we head towards your retirement at the end of the year. Thanks, Chris.

Thank you, Matt. Thanks, everyone.

Thank you, ladies and gentlemen. This does conclude today's call. Thank you for your participation. You may now disconnect.