Stoneridge Inc (SRI) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome. Thank you for standing by and welcome to Stoneridge Second Quarter 2018 Conference Call. (Operator Instructions) As a reminder, this conference call may be recorded.

At this time, I would like to turn the conference over to Mr. Matt Horvath, Director of Investor Relations. Please go ahead, sir.

Great, thank you. Good morning, everyone, and thank you for joining us to discuss our second quarter results. The release and the company presentation was filed with the SEC yesterday evening and is posted on our website at www.stoneridge.com in the Investors section under Webcasts and Presentations. Joining me on today's call are Jon DeGaynor, our President and Chief Executive Officer; and Bob Krakowiak, our Chief Financial Officer. Before we begin, I need to inform you that certain statements today may be forward-looking statements. Forward-looking statements include statements that are not historical in nature and include information concerning our future results or plans. Although we believe that such statements are based upon reasonable assumptions, you should understand that these statements are subject to risks and uncertainties and actual results may differ materially. Additional information about such factors and uncertainties that could cause actual results to differ may be found in our 10-Q, which has been filed with the Securities and Exchange Commission, under the heading forward-looking statements. During today's call, we will also be referring to certain non-GAAP financial measures. Please see the appendix for a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures. After Jon and Bob have finished their formal remarks, we will then open up the call for questions. I would ask that you keep your questions to a single follow up. With that, I will turn the call over to Jon.

Thanks, Matt, and good morning, everyone. Yesterday evening, we released our results for the second quarter, in which we delivered another quarter of strong financial performance.

Let me begin on Page 3 with a summary of the quarter. Our second quarter sales of approximately $221 million resulted in a gross margin of 30.6%, and an adjusted operating margin of 9.1%. Adjusted EPS for the quarter was $0.55, an increase of $0.13 or 33% relative to the second quarter of last year. Each of our segments contributed to our success during the quarter, delivering adjusted operating margin performance that exceeded the prior quarter. Control Devices continued to drive operational performance resulting in gross margin expansion of 130 basis points over the prior quarter, which translated to continued up -- adjusted operating margin improvement for the segment. Electronics, with a continued focus on engineering efficiency and SG&A leverage, delivered adjusted operating margin improvements of 30 basis points over the first quarter and 220 basis points over the second quarter of last year. PST delivered adjusted operating margin expansion of approximately 160 basis points relative to the first quarter of the year. More specifically, in Control Devices, revenue growth was offset by temporary reductions in customer production volumes in China and on certain key platforms in North America. Gross margin improved as we continued to address the production inefficiencies that we discussed on the last call. The gross margin expansion was somewhat offset by additional expenses targeted at developing the technologies and products that will deliver future growth. Overall, adjusted operating margin expanded by 20 basis points relative to the first quarter. Electronics revenue increased by 22% quarter-over-quarter, as the global commercial vehicle and off-highway markets remained robust and our recently launched driver information system and connectivity products continued to ramp up. Improved D&D efficiency and SG&A leverage although somewhat offset by the impact of foreign currency, contributed to the segment's success in the quarter. Within Electronics, we continue to focus on refining our product portfolio, optimizing our global engineering footprint and utilizing our existing resources more efficiently. At PST, the continued growth in track and trace was offset by reductions in our lower margin audio products. Margin expansion of 150 basis points relative to the first quarter was also driven by reduced SG&A expense as the segments aligned cost with margin conditions. Despite some external challenges, PST delivered stable revenue performance and significant margin expansion relative to the first quarter. In addition to the performance in the quarter, this morning we are announcing a significant driver information systems reward. We will discuss the importance of this award and what it means for our Brazilian OEM opportunities in further detail later in the call. Finally, this morning we are maintaining our 2018 full year guidance range. Top line growth continues to outpace the underlying vehicle markets, and margin progression remains strong. We expect continued success for the remainder of the year. However, we are tempering our performance expectations due to external factors including the impact of customer volume, adjustments, currency fluctuations and recently announced tariffs. Bob will provide additional detail on our guidance and the macroeconomic factors impacting our full-year outlook later in this discussion.

Page 4 provides a summary of key financial metrics for our second quarter compared with the second quarter of 2017, as well as a comparison to last quarter's performance. Historically, we have provided either a trailing 12-month comparison or a year-to-date comparison. However, I wanted to highlight the margin progress that we have made in sequential quarters. Gross margin improved quarter-over-quarter, resulting in gross profit of -- growth of 5%. Additionally, our continued focus on operational efficiency resulted in gross margin expansion of 50 basis points relative to the first quarter. While we have addressed a number of the issues that impacted results in the first half, we expect continued marketing progress for the balance of the year. Adjusted operating income grew by 8% while operating margin increased by 20 basis points compared with the second quarter of 2017. Relative to last quarter, operating margin expanded by 120 basis points to 9.1%, due in part to improved engineering efficiency and reduced SG&A costs. We expect additional operating margin expansion going forward as we drive operational improvement and work to optimize our engineering footprint and leverage our existing cost structure.

Adjusted EBITDA improved by 9% and EBITDA margin improved by 50 basis points compared to the second quarter of 2017, and 90 basis points relative to the first quarter of this year. Finally, adjusted EPS was $0.55, compared to $0.42 in the same period in 2017, representing growth of 33%. We were able to achieve this financial performance through continued topline growth and continued operating efficiency, which is driving higher, sustainable long-term margins. This growth comes as we continue to execute on our long-term strategy of driving higher content per vehicle through systems-based solutions. We are pleased with the continued growth in each of our key financial metrics.

Turning to Page 5, we are announcing a significant award related to an extension and expansion of an existing driver information systems platform. Of the awards, $38 million of annual revenue, $8 million of the award is related to new business and $3 million of that is related to Brazilian production for the local market. Our next generation product will begin production in 2021 and is scheduled to be produced in 5 of our production facilities worldwide. The next generation product will bring performance increases and cost savings and is one of the largest awards in company history.

As I mentioned, this award includes the localization of driver information systems in Brazil. In 2018, Brazil was forecasted to be the 7th largest commercial vehicle market and one of the fastest growing markets over the next 5 years. Our segments continue to work together to leverage our product portfolio and core technologies in markets across the world. As discussed in previous calls, our customers have been requesting localization of OE products for the Brazilian market as a way to reduce cost and streamline their supply chains. Our existing manufacturing footprints in Brazil allows us to serve our global customers more efficiently and cost-effectively and is a market differentiator for Stoneridge. We expect continued growth in our Electronics product lines, as we expand our commercial vehicle OE capabilities in Brazil. This award is a result of our dedication to deepening our relationships with our customers and utilizing our global capabilities to serve them more effectively.

Turning to Page 6. I'm pleased to report that our MirrorEye trials are progressing as planned. We continue to partner with some of the largest fleets in the United States and have amassed over 1 million miles driven with fleets using the MirrorEye system. Specifically, we are conducting trials with leading fleets such as Maverick, J.B. Hunt and Schneider. We appreciate their support in this activity. The Trucking Alliance and the American Trucking Associations, in addition to J.B. Hunt and Schneider, have publicly commented in support of the FMCSA exemption for MirrorEye that we have requested. We are expecting a decision on the proposed exemption shortly.

During the quarter, we also announced our partnership with Shell Lubricants and the AirFlow Truck Company on the Starship Initiative Truck, with the goal of improved efficiency for class A trucks. The truck completed the drive across the country to demonstrate its fuel and freight ton efficiency. The truck featured our MirrorEye system as part of the streamlined aerodynamic design. The Starship Truck obtained 28.4% better fuel economy than the average truck and MirrorEye played a part in that improvement. MirrorEye will help change the commercial vehicle industry through significantly improved safety, as well as improved fuel economy.

Finally, we remain optimistic on our timing to launch the MirrorEye retrofit program in late 2018, with our previously announced OE program following shortly thereafter.

Turning to Page 7. I'm pleased with our achievements during the quarter. As a team, we continue to deliver strong financial performance and respond to the opportunities and challenges in the marketplace. Our efforts have resulted an impressive margin progression for each segment, as well as the overall business. Our efforts are also being rewarded by our customers. This morning we announced a significant award related to our driver information systems. Not only is this the largest award in company history, but is also the first driver information system program that will be produced by Stoneridge in Brazil for the local market.

With that, I'll turn it over to Bob to discuss our financial results in more detail.

Thanks, Jon. Turning to Slide 9. Net sales in the second quarter were $220.6 million, an increase of 5% relative to the second quarter of 2017. Adjusted operating income of $20.1 million or 9.1% of sales, represented an 8% percent increase over the same period last year. I will discuss the financial performance of each segment on the subsequent slides. This morning, we are maintaining our previously provided guidance range for 2018.

As Jon discussed, we continue to drive performance in each segment, resulting in margin progression. Our outlook for the remainder of the year is impacted by several external factors including customer volume adjustments, currency fluctuations and recently announced tariffs. Based on these external factors, we are guiding to the lower end of our range.

Page 10 summarizes the key financial metrics in both the year-over-year and quarter-to-quarter periods specific to Control Devices. Control Devices sales decreased by 3%, relative to the second quarter of last year. Continued growth in certain actuation and second products was more than offset by temporary declining volumes on some of our customers key passenger car and light truck platforms in North America and China. For the full year, expect Control Devices revenue to remain relatively flat as compared to 2017.

As we discussed on the first quarter call, Control Devices operating margin in the first quarter was adversely impacted by production inefficiencies. During the second quarter, we were able to effectively address those issues resulting in gross margin expansion of approximately 130 basis points for the segment, relative to the first quarter. Gross margin expansion was somewhat offset by SG&A and engineering investments to ensure efficient production processes going forward and position the segment for continued top and bottom line growth. Overall, operating margin expanded by approximately 20 basis points relative to the first quarter. We have and will continue to appropriately respond to current market conditions through optimization of our cost structure. While we are still incurring costs due to new product launches in Control Devices, we expect reduced launch costs and incremental opportunities as a result of the ramp-up of these programs. We are projecting continued margin expansion for the segment for the balance of the year.

Page 11 highlights the substantial growth in both revenue and adjusted operating income in our Electronics segment. Electronics sales increased by 22% percent, relative to the second quarter of 2017. It is important to note that this is our first quarter of comparable year-over-year results, inclusive of Orlaco and as such, the reported growth is 100% organic. Orlaco continues to outperform our expectations, while continued strong global commercial vehicle production has accelerated growth in our legacy driver information systems and connectivity products. Recently launched programs continue to ramp up and drive topline growth. Adjusted operating income increased by 61% in the quarter, relative to the second quarter of last year. Operating margin improved by 220 basis points, relative to the second quarter of 2017, and 30 basis points compared to the first quarter of this year. We continue to invest in our engineering and design and development resources. We expect continued margin expansion for the segment for the balance of the year.

As Jon discussed earlier, our Electronics segment is positioned well for continued growth through utilization of our global manufacturing capabilities, deep customer relationships and a product portfolio targeting commercial vehicle megatrends. We expect that our Electronics segment will continue to drive above market growth in the commercial vehicle and off-highway end markets.

Turning to page 12. PST had sales of $20.3 million during the quarter, a decrease of 13% versus the second quarter of 2017, primarily due to unfavorable exchange rates which drove a decline of approximately $3.6 million, or 15% of quarterly sales. Additionally, macroeconomic conditions during the quarter, including the Brazilian and Argentinian truckers' strikes, contributed to the relative decline in revenue. Quarter-to-quarter revenue remained flat despite the headwinds. PST continues to drive improvement in margin by leveraging fixed costs and accelerating growth in higher margin product lines, including our track and trace business. Adjusted operating margin improved by 70 basis points, relative to the second quarter of 2017 and 180 basis points relative to the first quarter of the year.

As Jon mentioned earlier, we are successfully utilizing our existing footprint in Brazil to win OEM business in the region. We expect that the award we announced this morning will be one of many OEM opportunities in Brazil, which will provide strong growth for the segment going forward. The business is structured to scale well in growth and as such, additional OE business and continued growth in our track and trace activities should drive strong bottom line performance.

Turning to Page 13. Like our peers, customers and suppliers, we are reviewing the potential impact that the recently announced tariffs will have on our performance. We are subject to the recently imposed 25% tariff on certain goods and raw materials imported from China, both directly and indirectly through our supply chain. Our current view is that the tariffs will create a $1 million to $2 million growth profitability headwind for the remainder of the year. We will continue to work with our customers and suppliers to reduce the net impact of the tariffs. As always, we continue to monitor the current business environment and believe that our global manufacturing footprint and supply chain will allow us to quickly and efficiently adapt to changes in policies.

On Page 14. We anticipate headwinds as some of our key customers have reduced forecasted production on certain passenger car platforms in North America and China, which specifically impacts our Control Devices business. While commercial vehicle forecasts remain strong, the forecast for the remainder of the year has not materially changed relative to our prior guidance. We continue to expect headwinds related to our currency exposures, specifically related to the Brazilian real as well as the Swedish krona and euro, that could impact profitability and sales for our PST and Electronics segments. We are forecasting currency rates to adversely impact earnings per share by $0.04 to $0.05 relative to our prior guidance. Finally, as discussed, we expect recently announced tariffs to impact second half earnings by approximately $0.03 to $0.05. We continue to work to mitigate the net impact of our exposures with our customers and suppliers. As an organization, we have demonstrated our ability to respond to dynamic market conditions. We expect to offset some of the macroeconomic challenges with margin expansion and as such, we are maintaining our full-year guidance and guiding to the lower end of the range.

Moving to Slide 15. In spite of production volume reductions, currency headwinds and recently announced tariffs, we are maintaining our guidance ranges for each of our financial metrics. We expect revenue growth this year be at least 6% relative to last year. Our margin guidance represents an EBITDA margin increase of at least 90 basis points over 2017 results. Finally, our EPS guidance range for the full year represents an increase of at least 31% or $0.48 compared to last year. While we do not provide specific detail regarding quarterly guidance, it is important to understand our expectations for the remainder of the year and the historical cadence of our earnings. As was the case last year, we are expecting fourth quarter performance to exceed third quarter performance. Due to summer plant shutdowns, most of our customers have more production days during the fourth quarter. Additionally, continued margin progression and the timing of engineering recoveries, which are traditionally weighed heavily towards the fourth quarter, should result in an increased fourth quarter margin performance. The expectation of stronger margin performance and additional production days should drive stronger fourth quarter revenue and EPS results relative to the third quarter.

Moving to Slide 16. In closing, we are pleased with our performance during the second quarter, in which we delivered strong results for all our key financial metrics. We are maintaining our previously provided full year guidance ranges and guiding to the lower end, due to reduced production forecasts, currency headwinds and tariffs, which we expect to be somewhat offset by continued margin expansion. Stoneridge is committed to driving shareholder value through strong financial performance and profitable long-term growth.

With that, I will open up the call to your questions.

(Operator Instructions) And our first question comes from Justin Long with Stephens.

So on the volume reductions, you discussed in North America and China, I was wondering if you could give some more color on the timing. Is this a headwind that you expect to impact both the third and fourth quarter by an equal amount? And is this something we should be thinking about as a headwind that persists into 2019? Or is there potential for this to be temporary?

As we talked about in our prepared marks, we look at these as much more temporary as our customers adjusting their inventories and adjusting to the marketplaces in which they compete. As we've said regularly, we look at a variety of forecasting sources, all of our backlogs and all of our calculations are foundationed on IHS, but we look at a variety of other sources. And at this point, we don't see this as a long-term balance of the year 2019, 2020 view but more as the customers are adjusting and therefore, we have to -- we had to react to that and we will react to those if more adjustments come. But we look at it more as a temporary, not a long term.

Maybe as my follow-up. I wanted to ask about the expected level of outperformance in the business this year. If you were to look at your revenue and you're talking about 6% plus growth versus your weighted end market build rate, what is the level of outperformance you're expecting in 2018? And longer term, has there been any change to your outgrowth objective?

From a longer-term standpoint, there's certainly hasn't been a change to our objectives. We talk often about the backlog that we have and the progress that we're making there. Certainly, business wins, like we talked about in the call, reinforce our confidence in our longer-term objectives. We still are 100% confident that this business, over the planning cycle, will outperform our end markets by 2x to 3x. And I think it's important to note, Justin, that while we talk a lot about what's happening with passenger car markets, because our exposure is pretty diverse between passenger car, light truck and then also the commercial vehicle and off-highway markets, it gives us the chance to offset any headwinds in one space where maybe some progress or outperformance in other places.

Just to add something to that, we were just looking at some of the data. If you look at North America passenger car production, the latest forecast is -- for the year is up 0.7% and then you look at Europe commercial vehicle production for the full year, the forecast is up 2.8%. So it gives you kind of a weighted mix of primary end markets, we're basically right where we said we would be in the 2x to 3x the underlying market growth for the year.

Our next question comes from Scott Stember with CL King & Associates.

Can you maybe just talk about MirrorEye, a couple of things? It sounds like you're still pretty optimistic about this business. Last quarter, you seemed pretty comfortable or pretty optimistic that we would get federal regulatory approval here in the U.S. Do you still feel that way?

Yes, we do, Scott. And as we talked on the last call, there -- obviously it's a government approval that we need to get there. There's a period of time and a period of challenge that goes along with that. That 90 days is coming to an end here in the middle of August. We will make sure that we communicate appropriately once we get an official answer. But based on what we've seen throughout the process, we are as confident as we were when we submitted the proposal for an exemption. We're as confident as we were then that we will get it. The other aspect of this is, the feedback and the support that we've gotten from the fleets that have been in our initial trials, as well as some of the safety leaders in the Trucking Alliance and the American Trucking Associations, give us confidence that there's going to be a pull for this from the end consumer in the North American market, and that continues to add to our confidence in the product.

Maybe just touching base on with MirrorEye related to the retrofit with fleets. Obviously, that seems like it's a disproportionate opportunity versus the OEM side. How does that layer in, is that in your guidance for this year? And maybe just talk about the overall opportunity from that as you continue to roll this out to fleets.

So Scott, I think it's important to clarify that the revenue impact and therefore, as well as it relates to guidance in 2018 for retrofits is relatively immaterial. We're talking about thousands of systems, not tens or hundreds of thousands of systems. But the important aspect of this and why we continue to talk about it in 2018, is it will create -- it will expand the market pull, it will drive the credibility of the product and accelerate, what we believe is, the overall adoption of the product and it will build a lot more confidence in the robustness of the technology. What we have seen through the first million miles it has been incredibly positive with great feedback from the fleets. But as we expand and do more of the fleet trials, we believe that that pull and the confidence will accelerate. Certainly, when you've got vehicles that are pieces of production equipment, we want to make sure that we are providing absolutely robust product. And so these fleet trials are more about the expansion of fleet trials, they're less about getting near-term revenue that it is making sure our product is absolutely robust, is something that will be well adopted by the fleets, and we create a longer-term pull for the product.

I'll just add a couple of things to that. The first one is -- so we are launching the program late this year so, obviously, there is a ramp up with ramping of the program. We have said ultimately, that we believe that the retrofit market is a $100 million -- is a $100 million opportunity for Stoneridge.

Last question on tariffs. Maybe could we just get a little bit more granular? Obviously, it sounds like 301 and 232 are the two areas that have hit you guys, whether it's, like you said, directly or indirectly. What are the some of the things that you can do with your supply chain to mitigate that? And maybe just give us a flavor of that as we head into the end of the year.

Our total -- first, our overall strategy is to try to make and buy in the regions in which we sell. That's our overall strategy. There certainly are things where, in our supply chain, we -- sources of supply, be they for Electronics or be they for certain wiring activities or for other things, there's only certain places in the world where you can buy them. As -- this tariff situation is a dynamic situation, so we wouldn't immediately start changing around our supply chain until things stabilize a little bit further, but what we know we can do is, there are other locations where we can buy from, we can look at how we ship product and where we -- into which manufacturing facilities we ship them. So there are levers that we can pull, but we wouldn't start pulling those immediately until we start to see the level of permanency of the cost impacts of these tariffs.

Our next question comes from Christopher Van Horn with B. Riley.

I was wondering if you could elaborate a little bit more on Electronics. Now that we have a [third] quarter, are you taking (technical difficulty) or is this new customer wins that are driving a lot of the growth? Any more detail would (technical difficulty).

So Chris, as we talked over the last couple quarters, we are winning business -- extension business. The award that we talked about here is with an existing customer. In the last quarter, it was a discussion of wins with new customers. What we're saying with regard to Electronics is, we are very confident and comfortable with the product portfolio that we have there, with the depth of the customer relationships that we have there and the competitiveness of our products, which is giving us the ability to win in all of the segments within Electronics. And you're seeing it both in historic Electronics business as well as with Orlaco. And as Bob talked about, this quarter-over-quarter comparison is all organic. So it's not having any difference in the year-over-year with the addition of Orlaco, it's growth in Orlaco and growth in the base Electronics business that you're seeing in this quarter.

I would just add to that, Chris, that we really, if you look at our businesses and the trends in the overall industry, with respect to connectivity and driver information and safety, we feel that we're positioned extremely well. You're very familiar with the growth rates of those markets and we're in a great position to take advantage of those markets with our technology portfolio.

And then on PST, obviously, there's some macro headwinds there. But you've been able to expand margins in light of (technical difficulty). I'm just curious, if things kind of stay where they are, do you have additional leverage you can pull to kind of keep the margin where it is? Or what's the state of it there?

Well, if you look at the operating margin of PST currently, we're actually pretty proud of what they've done without having any significant level of top line growth, and the team in Brazil has done a very good job of pulling levers. There are still more things to do. But the most exciting thing for me, and I believe for the organization, is the fact that now we can start to rotate this business with the OE business wins and it drives organic growth without just requiring the Brazilian market -- the Brazilian economy to get stronger. The truck market there is strong and we're winning business, which is going to allow us to grow organically without having to just tie with, how is the economy in Brazil? And that tells you about the progress that has been made in that business and tells you what the trust that our customers have in Stoneridge to be able to execute globally.

And just to follow-on what you said because you have a new win in Brazil on the trucking side. Have you looked at kind of the addressable market opportunity for driver information systems in the Brazil market and any quantification there?

Well, I don't have the details specifically at the driver information system level. But if you assume that it is the 7th largest market, it is for many of our customers, it may be their largest non-European based market. We see that the opportunity for growth at PST could -- will be -- we're not talking about percentage points growth for PST over the next planning period, we're talking about significant growth at PST. We don't -- I don't have a driver information system number for you, but we see the opportunity to really transform PST over the next 3 to 5 years.

Yes. Of course, we can do some quick work to quantify that and get back to the investors on that.

(Operator Instructions) And our next question comes from Gary Prestopino with Barrington Research.

Most of the questions have been answered. Bob, could we get an idea of what kind of tax rate we should use going forward for modeling?

Absolutely. So we've provided guidance for the full year for a range of 20% to 25%. You have seen that we've benefited from very strong performance with respect to the tax rate for the first half of the year, and I do have to give some kudos to our tax team here at Stoneridge. We brought in a new team a year ago and they've taken a fresh eyes approach, and they have found real cash tax savings for the company and we're thrilled with the job that Jill and the team are doing. We have seen a benefit from that in the first half of the year. But as we go on, obviously, opportunities in terms of doing some of the things that we've done the first half of the year, they become harder to find, so we are still comfortable with the guidance for the balance of the year in the 20% to 25% range.

Okay. But it would seem that, given your first two quarters here, it probably won't be 25% for the back half of the year, it should be something less?

So, what I would say to that is, obviously we're off to a good start. And we're very, very pleased with the performance in the first half. We -- really just what I said before is, in terms of the opportunity sets getting smaller as we continue to work them down and you should see us move towards more of a regular rate going forward.

And then on terms of the Electronics, good growth there, all organic. Any -- in your product portfolio, what you're saying -- is there anything that specifically is driving it? Or is it just all across the board with connectivity, safety, driver information?

Gary, it's Jon. What we're seeing is, as the commercial vehicle OE and the fleets, one, try to attract and retain drivers; and secondly, try to increase the efficiency of their vehicles and increase the efficiency of how they manage their fleets. The importance of telematics, of connectivity, of the driver information systems as well as vision and safety, all of those are growing at outsize rates. And as we talk about regularly, we don't need the commercial vehicle market to -- we're growing content because -- we talked about a connectivity win on the last earnings call. That was a content add. Driver information systems is a transformation of content, so we're able to drive growth through content addition as the OE's in the fleets that are trying to upgrade their trucks. So we see it across the electronics portfolio, and we see it across the world.

Thank you, and at this time, I'm showing no further questions. I would like to turn the call back over to Mr. DeGaynor for closing remarks.

Yes, thank you very much. And thanks for everybody that has participated in today's call. In closing, I want to assure all of our investors and those on the call, that our company is committed to continue to drive shareholder value through strong operating results, profitable new business and focused deployment of our available capital. We're confident that the actions that we take and that the team that we have will drive continued success in 2018 and beyond, and we look forward to talking to you in future calls. Thanks very much.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone, have a great day.