Mercer International Inc (MERC) 2023 Q1 法說會逐字稿

Good morning, and welcome to Mercer International First Quarter 2023 Earnings Conference Call. On the call today is Juan Carlos Bueno President and Chief Executive Officer of Mercer International; with David Ure, Senior Vice President Finance, Chief Financial Officer and Secretary.

I will now hand the call over to David Ure. Please go ahead.

Good morning, everyone. Thanks for joining us today. I will begin by touching on the financial and operating highlights for the first quarter, before turning the call to Juan Carlos, to provide further color on the marketing, capital plan, as well as our strategic initiatives. We're also pleased to have with us today, Richard Short, most of you know, will become company's next CFO when I step out in June. Also, those of you that have joined today's call by telephone, there is a presentation material, that we have attached in the Investors section of our website.

Before turning to our results, I'd like to remind you, that in this morning's conference call, we will make forward-looking statements according to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. I'd like to call your attention to the risks related to these statements, which are more fully described in our press release and in the company's filings with the Securities and Exchange Commission.

This quarter, we achieved EBITDA of approximately $28 million compared to the Q4 EBITDA of $96 million, after adjusting for $15 million noncash Torgau and inventory impairment. EBITDA is (technical difficulty) the increase in Q1 from Q4 is a consequence of lingering effects in relation to our fiber and chemical costs, combined with (technical difficulty) by recently rise in interest rates and economic uncertainty.

All of our mills ran well this quarter with the Friesau sawmill achieving record production, continue to see the benefits of our capital upgrades to the mill. Our Pulp segment contributed quarterly EBITDA of $40 million, while our Solid Wood segment went up negative $7 million. You can find additional segment (technical difficulty) Form 10-Q, which can be found on our website and at (technical difficulty).

In Q1, average NBSK and NBHK list prices were down in all of our markets compared to Q4. Overall demand was relatively weak in the current quarter as customers reduced inventory levels in anticipation of lower prices and inflation and economic uncertainty negatively impacted paper demand. European NBSK list prices averaged $1,377 per ton in the current quarter compared to $1,442 per ton in Q4. In China, the Q1 average NBSK net price was $891 per ton, down $29 from $920 per ton in Q4.

As we've seen several times in the past decade, the Chinese market price gap between NBSK and NBHK grew to about $180 this quarter as the hardwood market digests new eucalyptus hardwood capacity from South America. Average NBHK pricing was down marginally in the U.S., but down 15% in China compared to Q4. In China, the Q1 average NBHK net price was $710 per ton, down $127 from $837 per ton in Q4. The lower hardwood prices and relatively high chemical and logistics costs resulted in the recording of a $15 million noncash inventory write-down in Q1.

Lower pulp prices resulted in a negative impact on EBITDA of about $29 million compared to the fourth quarter. In addition, the weaker U.S. dollar negatively impacted EBITDA by $8 million compared to Q4. Our pulp production was strong this quarter, up 31,000 tons from the fourth quarter, but due to relatively soft demand, our sales volume was down 29,000 tons, creating an inventory build that we expect to reverse over the next few months. Our Celgar mill had a 10-day shut in the first quarter compared to the fourth quarter when we had a 21-day shut at the Stendal mill. In Q1, the Stendal mill received almost $8 million for business interruption insurance related to the fire damaged wood yard infrastructure. These proceeds were principally covering operating losses in the current quarter. The final repairs to the mill are scheduled to be completed in Q2.

For our solid wood segment, lumber pricing was up slightly in the European market, but down in the U.S. market. European demand was steady in the first quarter, but pricing continued to decline in the U.S. market due to the economic uncertainty and rising interest rates. The Random Lengths U.S. benchmark for Western SPF 2 and Better averaged $386 per thousand board feet in Q1 compared to $410 in Q4. Overall, lumber prices negatively impacted EBITDA by approximately $5 million when compared to the fourth quarter. Today, the benchmark price for Western SPF 2 and Better 2/4s in the U.S. is $350 per thousand board feet, virtually unchanged from the beginning of 2023.

We had record quarterly production at our Friesau mill, as we continue to realize the benefits of the capital improvements to the mill. Total lumber production was 134 million board feet in the quarter, which is up 17 million board feet from the fourth quarter. We also had record lumber sales volumes due in part to the timing of certain vessels that were delayed out of Q4. Lumber sales volumes were approximately 140 million board feet, up 41 million board feet from the prior quarter.

We are making solid progress with the integration of our Torgau mill. And while economic headwinds and seasonality are negatively impacting pricing for pallets, biofuels and lumber, which make it more difficult to quickly obtain our synergies targets, we continue to expect annual synergies from the transaction to approach $16 million annually once product pricing turns to more normal levels. Electricity sales totaled 237 gigawatt hours in the quarter, which is up 15 gigawatt hours from Q4 due to our strong production in the current quarter and the absence of the planned maintenance shut at Stendal in Q4. Pricing in Q1 fell to about $130 per megawatt hour due to the implementation of the German energy price cap, which came into effect at the end of 2022. We currently expect that the energy price cap will not be renewed when it is scheduled to expire in June due to reduced energy supply concerns in Europe.

We reported a consolidated net loss of $31 million for the quarter or $0.46 per share compared to net income of $20 million or $0.30 per share in Q4. After removing the impact of the noncash inventory charge, the net loss is about $0.29 per share. We used about $53 million of cash in Q1 compared to using about $8 million in Q4. The increased cash usage was due to lower EBITDA and a significant buildup of inventory in our Canadian mills. We increased our log inventory at our Peace River mill to prepare for the start-up of the new woodroom, which was completed in Q1. And at Celgar, we opportunistically build some wood inventory to secure our operating position through the summer. Our pulp finished goods inventory also grew modestly in the quarter as we tried to manage our sales process in the backdrop of falling prices. We expect this working capital build to reverse considerably beginning in Q2.

Capital spending was about $33 million in Q1 and included costs to complete the Peace River woodroom which started operating late in the quarter. We expect to see the benefits from this project in the form of lower fiber costs for the mill beginning in Q2. Looking ahead, we have moderated our expected CapEx spend to be between USD150 million and USD180 million in 2023. At the end of the quarter, our liquidity position totaled about $556 million comprised of USD301 million of cash and USD255 million of undrawn revolvers. And as you have seen from our press release today, our Board has approved a quarterly dividend of $0.075 per share for shareholders of record on June 28, 2023, for which payment will be made on July 6.

That ends my overview of the financial results. I'll turn the call now to Juan Carlos.

Thanks, Dave. Let me start by saying that I'm very pleased with the strong performance of our mills as we exceeded our production targets for the quarter. Yet our operating results were negatively affected by a number of external factors. The most impactful was finished product pricing. Compared to Q4, pricing for most of our products was down. On average, pulp pricing was down about 5%, while lumber prices down about 15% in the U.S. And although fiber prices peaked in Q1 and were coming down through the quarter, our pulp mill costs on average were considerably higher than Q4.

However, our first quarter results also reflected some positives. Most notably, our recent investments in our Friesau mill allowed the mill to achieve record production and sales volumes this quarter. I am also excited with the progress we're making in developing our mass timber business. Our order book is filling rapidly, and we continue to bid on numerous mass timber projects. As production ramps up in Q2, we expect to realize a noticeable increase in CLT revenue.

In addition, as some of you may be aware, we are the stalking-horse bidder for the bankrupt Structurlam assets. This process may end up in an auction, so the outcome is unclear today, but I will say that regardless of the outcome, we will continue to invest in the growth of this very profitable mass timber business. I am satisfied with the progress we have made on integrating our Torgau sawmill, and I applaud our Torgau call employees for being open to changing how they do things, especially around safety. Despite the current market dynamics that are limiting our synergies, I believe that in the fullness of time, this asset will add significant shareholder value.

Softwood pulp prices were steady through most of Q1, but fell off about $50 per ton on average late in the quarter. During this same period, hardwood prices in China fell roughly $185 per ton. Subsequent to the end of the quarter, pulp prices in China have continued to weaken. Pulp markets were put under additional pressure by a number of factors, including Chinese buyers holding off new orders mid-March while speculating on lower pulp prices and Russian producers accepting discounts with a backdrop of higher supply of hardwood as new capacities are starting to reach the market.

Looking forward, we expect pulp pricing to continue to be under pressure in Q2. On the softwood side, we feel that prices will begin to firm late in Q2 as Chinese buyers and traders take advantage of low prices to refill their inventories and the impact of reduced supply is felt as producers head into the maintenance season. History tells us that producers will consider extending their maintenance shuts during times of weaker pulp prices. On the hardwood side, we also see buyers reentering the market to refill inventories, but the new supply will create an extended headwind as the market absorbs this new supply. At these low prices, we expect Asian integrated hardwood production to curtail, which will help support prices. However, we expect the gap between hardwood and softwood prices to continue to grow beyond the current $180 per ton level.

As a result of these market pressures, we will be extending our Peace River mill annual maintenance this quarter from 13 days to 29 days. This will allow us to reduce the cost of the shut by allowing us to reduce overtime hours and reduce the work done by contractors. In addition to the 29 days, our Peace River mill will be down in Q2, our 2023 annual maintenance schedule includes Stendal having a short 3-day shutdown and Cariboo being down for the entire month of May, now in Q2. In total, we expect our Q2 annual maintenance downtime to reduce production by about 55,000 tons.

Rosenthal will be down for 14 days in Q3, reducing production by about 14,000 tons. Stendal will have another short 3-day shuts and Celgar, we have a 26-day major maintenance in Q4 or roughly 41,000 tons of production in total. Our first quarter lumber results reflected mixed markets with the U.S. market down compared to Q4 and the European market up slightly. The negative market sentiment in the U.S. continues to be the result of uncertainty created by rising mortgage rates and uncertain economic indicators. The U.S. lumber market prices have been range bound through Q1 and into the second quarter. Despite some positive announcements around housing starts and growing optimism from homebuilders, lumber prices remained low due to general economic uncertainty.

We continue to believe that low lumber channel inventories, the large number of sawmill curtailments, relatively low housing stock and constructive homeowner demographics will put positive pressure on the supply-demand fundamentals of this market in the midterm. We will continue to match our mix of lumber products and customers to current market conditions. In Q1, our lumber sales volumes were roughly evenly split between the U.S. and the European markets. We continue to see improvements in our logistics channels and modest decreases in our freight costs.

In Q4, we saw pulpwood prices peak. These high cost inventory was utilized in Q1, which pushed our fiber costs up in the first quarter. The high pulpwood costs were mainly driven by demand from the energy sector as users were looking for cheaper forms of energy, but the energy sector demand will have significantly decreased, and we expect fiber costs to come down noticeably in the second quarter. In Western Canada, we expect the impact of our new Peace River mills woodroom and increased log harvesting levels to bring our fiber costs down in the second quarter.

Looking ahead, in light of lower product pricing and uncertain market conditions, we have made the prudent decision to reduce our planned CapEx slightly to between $150 million to $180 million in 2023. We have retained all high-value projects delaying only those that were discretionary. Our CapEx spends includes the completion of the Celgar woodroom as well as the lignin development center and the extraction pilot plant, which is a large step towards being able to begin commercialization of lignin. We will also do the majority of a $27 million expansion project at our Spokane Mass Timber plant, an investment that will allow this state-of-the-art facility to fully utilize a more varied raw material mix, add glulam to our product portfolio and increased finger-joint production. This is a first step in what will ultimately be an expansion of CLT capacity in anticipation of our efforts to steadily increase our order book for Mass Timber products.

We will also complete upgrades at our new Torgau mill to increase lumber production and debottleneck certain elements of our shipping pallets and heating pellet plants. As the world becomes more sensitive to reducing carbon emissions, we believe that products like lignin, mass timber, green energy, extractives, lumber and pulp are all products that will play increasingly important roles in displacing carbon-intensive products, products like concrete and steel for construction, plastic packaging, fossil fuel generated electricity and synthetic fragrances and flavors, even synthetic textiles. We're committed to our 2030 carbon reduction targets and believe our products form part of the climate change solution. In fact, we believe that in the fullness of time, demand for our low carbon products will dramatically increase as the world looks for solutions to reduce its carbon emissions.

To that end, going forward, we will see us looking to grow these areas of our business. We remain bullish on the long-term value of pulp but to bring more balance to our business, solid wood and extractors will grow more quickly. I encourage you to look at our website for more details. We're so confident in our ability to meet these targets that we converted our German revolving credit facility to a sustainability-linked loan, making us part of a small group of wood product producers willing to invest in carbon emission reduction targets in favor of modest reductions in our cost of borrowing.

And finally, as Dave noted, Richard Short will assume the CFO role effective June 1. As most of you know, Rich is a seasoned industry leader and has been with us for over 15 years. They will remain with us for a few more months to finish some transition activities and is available, of course, with Rich and I at any time, should you need further information.

Thanks for listening, and I will now turn the call back to the operator for questions. Thank you.

(Operator Instructions) And we'll first hear from Sean Steuart of TD Securities. Sean, do you have a question?

Sorry, apologies, guys. Yes, I'll start with Wood Products. Can you give us an idea of how much the losses this quarter were split between Friesau and the Torgau facility? And then I guess, more specific to Friesau, you're still shipping half your volume to the U.S. Can you give us an idea of the rationale of continuing at that pace with prices where they are, freight rates where they are, any intention to pull back on volumes into that market?

Yes, I guess starting with the mix of the wood products mix, I'd say they're all -- between Torgau and Friesau, they were similar. It wasn't one driving it, wasn't one driving the result over another. They were broadly in alignment for different reasons, of course, but broadly in alignment. So not really an outlier there. In terms of the 50%, I'd say that's a little bit higher than our target. We had the shipments there were quite a bit higher than normal. We had a little bit of a backlog in vessels that came from Q4 and ended up in Q1. So I don't think you should think of 50% as being indicative of what we're going to do there in the future.

Okay. And then Dave, just comments on overall comfort with liquidity and leverage, and I guess, particularly with respect to your interest in Structurlam, and I appreciate that engineered wood products mass timber is going to be a growth focus for the company, but your funding constraints will arguably increase as pulp prices are capitulating here, just overall thoughts on comfort with your balance sheet at this point in the cycle.

Yes. It's hard to see it at the moment, but maybe I'll just talk about the liquidity at the moment. We think it's quite sufficient $300 million of cash. We've got a lot of working capital at the moment that's going to unwind itself quite quickly. So we're coming out of Q1 is our -- always our largest inventory quarter for wood. So that will start unwinding itself and materialize into cash quickly. We've got -- we held back on some pulp sales in Q1 that will come out will be unwound here in Q2. So there's a working capital element.

The other thing that is happening in the background where we've just passed the peak of some of our most important costs in our cost structure. So for example, the pulpwood costs have -- we peaked during Q1, and we're now seeing considerable reductions in wood costs, and we'll have a noticeable improvement in wood costs in Q2. And we're seeing the same thing with chemicals. So most of our chemicals are derivatives of electricity or gas, which ran up really hard in Q4, and now there's some starting to come back, not coming back as quickly as the revenue from our electricity, but they're coming back very quickly. We see the same thing. We purchase a little bit of gas on the market as well, and that's coming down very quickly. So these are inputs that most of these inputs went up by 50% or more over the last year, and now they're backing off very, very quickly. So we're looking ahead to that.

We also have you've heard us talk a little bit about our mass timber business, and we got our first big order. We believe that that's the beginning of more to come. And so we're preparing for that. And in terms of the leverage, yes, we know that the leverage is going to be a little bit higher than our target here for a while, but I'd see that as more having to do with the depressed EBITDA at the moment than the value of the debt that we have in place. So I think to get -- just to get right to the nub of your question, this is a place that we're pretty comfortable. We've got working capital coming. We're trimming back on our CapEx. As you heard Juan Carlos say, we're going to moderate the CapEx for 2023, but still push ahead with the high-return projects and prepare ourselves that we can participate if the Structurlam transaction goes to an auction, we can participate in that.

And just one follow-up there, Dave. For pulpwood costs and chemicals, can you give us an idea of what kind of declines you might expect to see in the second quarter?

Yes. So when we talk about the declines, we're principally talking about Europe because that's where the big inflation was. We're getting a little bit of inflation in Canada, but nothing like we had in Europe. And we're probably expecting somewhere in the range of 10% to 15% reduction in Q2 from Q1. And probably similar for chemicals. And those 2 elements are from, as you know, from probably 90% of our cost structure.

And next, we'll hear from Paul Quinn of RBC Capital Markets.

Yes. So you outlined Chinese NBSK prices are $891 in Q1 average down, I think it was $29 from Q4. What are current prices in April there? And what do you expect for the Q2 prices average?

Prices right now are a bit north of $700 -- around $700 a ton for softwood. So yes, the big decline has happened in April, more than it did in May. And we believe it's very close to the floor or we expect that floor to be hit during this quarter.

Okay. And just could you help me understand the process around the stalking-horse bid for Structurlam, and what the process is? And what do you expect on the timing side?

The stalking-horse process with Structurlam gives us kind of the initial bid priority for this project. As you know, we bid USD60 million for it. By May 25 or May 27, the actual auction would commence for those parties that would be interested in acquiring this asset. For anybody to outbid us, they would have to probably bid at least $62.9 million or $63 million for it. And from then onwards, the auction goes very quickly. Every -- I believe every auction, every bid would have to be probably -- I think it's $500,000 higher than the previous one or $1 million higher than the previous one. And that goes fairly quickly. So it's -- on May 27, we should know the results of the bidding process.

Okay. That's great. And then just on the Mass Timber, your existing facility. Great to hear that the order file is growing. I think I heard you describe it as a very profitable business, but I suspect that's the comment that your expectation in the future. Does that business expected to breakeven this year?

Yes, absolutely, yes. I think it's going to be positive this year already. It is positive. So we see that growing very well. The second quarter will be positive without a doubt. So -- and we continue to see a very good momentum on projects that we have been bidding for and more similar projects to the one we won that we're already in production phase. We have others lined up of similar size that are progressing very well. So that's why we're very, very confident about our ability to achieve very good growth results with cross-laminated timber, and we see this mass timber business, as you well said, as -- not only as a profitable business, but the big advantage that it brings is the growth that this industry is having overall in the construction business.

When you look at the rates at which it has been growing in the U.S., or in North America is north of 15% over the past 5 years, and it is expected to keep on growing at more than 15% for the next 5 years. So we have a very significant organic growth behind us. And the fact that we're sitting on probably one of the most modern facilities in the U.S. with high productivity indexes obviously gives us a high confidence in what we can deliver. And Structurlam would be a tremendous complement to that with their glulam capacity on top of what we already have in CLT in Spokane. That obviously rounds it up very nicely with 2 very new facilities and very large capacities. So it's clearly a growth engine for us.

Okay. And just so we understand the Structurlam facility once if you're successful, what is the project -- what's the problem with that company that they ran into trouble that they ended up filing for bankruptcy?

They have some operational issues that basically forced them out of the business on some of the deals that they had contracted and that basically, those businesses were turned down and that put them into dire straits. So those performance issues that got them into trouble.

I guess you guys feel confident that you'd be able to get around those performance issues based on...

Absolutely, because -- absolutely because there were more mistakes than actual issues with the facilities or the structure itself. So there were production mistakes that, that shouldn't have been committed obviously. And we trust that our -- the management team that we have at Spokane, the leaders that we have, the knowledge of the team that we have built within Mercer gives us very high confidence that we will be able to take over this asset and run it under the standards that we're running our facility in Spokane with the highest quality and delivering those projects on a timely basis and on budget.

And next, we'll hear from Hamir Patel of CIBC Capital Markets.

Juan Carlos, with pulp prices coming off as much as they have. Where do you think the cost curve is for Canadian soft and pulp capacity?

I think, obviously, with prices at this level, there are several mills that, that can be having very, very difficult times in making a profit. I think when it comes to softwood, we still believe, even with these prices, we're managing through these rough times, the way that we have set up Celgar allows us that possibility. In Celgar, we've improved tremendously our position from a wood cost perspective. That brings us also some relief going forward from a cost perspective, knowing that we will be able to source wood from the U.S. south of the border. And that's something that is probably unique to Celgar, especially for those mills that are in BC that suffered so much from the curtailments of sawmills and actually just access to chips at good prices.

What we have in Celgar is the capacity to look for different baskets that other mills would not be able to reach at least at a competitive basis. So we see that as a positive development for Celgar, the fact that we can continue to develop the mills stronger from a wood perspective. And also, once we have the woodroom ready by the end of the year, that would give us even more benefit on the cost side. That woodroom benefit, we've seen it already in Peace River. That is helping very much our situation in Peace River going forward. So as we -- once we finish this maintenance shutdown period in Peace River, we'll begin with softwood campaigns and running the woodroom and getting the benefits out of it.

So I think that's a little bit of where we are. Obviously, the situation is complicated in a quarter where, as I said before, I think we're going to reach bottom prices in Q2 for softwood, at least. But I think we can navigate through those with the assets that we have.

Okay. Great. That's helpful. And just a question for Dave. I believe you referenced pallet prices coming off year-over-year. Do you have a sense as to what kind of maybe the level of price declines you've seen there in Europe and have prices start to stabilize yet? Or are you still expecting further declines from here?

What our teams are telling us that they were still falling during the quarter, during quarter 1, but they're starting to stabilize now. But they've come off probably 40% to 50% in the last 6 months.

Okay. Well, I don't realize it was that much. And had they run up quite a bit in kind of the prior year or 2? Or is that...

They did in the -- in 2022, they were very quite high levels.

Fair enough.

And this is all in the back, Hamir, of this, obviously, economic uncertainty. So we do believe that as conditions improve gradually, the commerce will begin reactivating and we will see, obviously, this market rebounding fairly quickly once conditions stabilize.

(Operator Instructions) We'll now have from Richard Stevens, Amundi.

Just a couple of follow-ups, if I could. I appreciate the comments regarding the pulpwood costs coming down in chemical costs. One of the things you mentioned in terms of cash generation was the increase in working capital. If you look at your free cash flow burn, most of it was related to an inventory drag in Q1. Can you just quantify how we should expect that to work out through the course of the year? I mean, by definition, you would kind of think that maybe Q2 becomes a little more of a free cash flow breakeven period. You guys are at least positive cash from operations. Is that fair to say?

Well, if we talk about the inventory or the inventory build, I'd say, roughly half of it is pulp inventory, and I'm generalizing here a little bit, but roughly half of it is pulp inventory and half of it is wood inventory in front of the mills. And the wood inventory is higher. It's generally quite high at this time of the year. This is a typical quarter where we build wood inventory. It's at the peak, a lot of our harvesting and buying activities happens in the winter, and then we consume it during the summer when we don't have access to the sites. So it's relatively high.

The other thing about our wood inventory at the moment is we've built quite a bit of inventory at our Peace River mill in preparation to start up the new woodroom. So the new woodroom that we built, very high-capacity woodroom. We wanted to make sure we had a lot of wood in front of that when we started it up, and we started it up a couple of weeks ago now. And so a little bit unusually high wood because of that in preparation for the woodroom.

On the pulp side, it's -- it doesn't have that seasonal impact that we have with wood, but we did have relatively high inventories of pulp and the principal reason for that was when the reductions in pulp first started to materialize, we were trying to manage them and not trying to -- we're trying to manage the pricing and make sure that we weren't damaging the price by introducing too much pulp to the market and holding back a little bit on sales. But that pulp will believe itself very quickly here in Q2.

So if you ask about the timing, how this will unwind, I think you can expect that the pulp inventory, so half of the build will come out very quickly into Q2. The wood inventory, the other half will take longer than that, because it's wood that is intended to supply the mill through the summer, you could expect that to unwind over probably the next 2 quarters.

Got it. Okay. That's helpful. And then just to follow up on the stalking-horse bid, the $60 million. I'm assuming that's not included in your CapEx planned, is that fair?

Correct. That is not included. As we mentioned, that is not yet a done deal. So when we regrouped and looked at our CapEx spending and adjusted it to $150 million to $180 million, that is not including the $60 million or above that we would be willing to pay for Structurlam.

Got it. And then final question for me. You mentioned earlier that you -- in terms of the bonds and trading levels that were out there. Post quarter end, have you guys considered or have you been active in potentially repurchasing the bonds in the open market at a pretty steep discount this morning?

No, we've been watching that. And I think perhaps in different circumstances, that would be something we'd be considering. But if you can imagine, we're in a period where we've got some uncertainty on how long the pulp prices are going to stay low. And so preparing ourselves for -- if it could go, if this lasts for longer than a few months. And then also making sure that we've got enough dry powder for something like the Structurlam that we're hoping to complete on. So it just didn't seem like the right time to the prices of the bonds are attractive, but just not the right time.

And at this time, there are no further questions. I will turn the call back over to Juan Carlos for any additional or closing comments.

Okay. Thank you, operator, and thanks to all of you for joining our call. Rich, Dave and I are available to talk more at any time. So don't hesitate to call one of us. Otherwise, we look forward to speaking to you again on our next earnings call in July. Bye for now.

And that does conclude today's call. Thank you all for your participation. You may now disconnect.