Toro Co (TTC) 2006 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to The Toro Company second-quarter earnings conference call. My name is Cherelle, and I will be your coordinator for today. (OPERATOR INSTRUCTIONS). As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's conference, Mr. Michael J. Hoffman, Chairman, President and CEO of The Toro Company. Please proceed, Mr. Hoffman.

Thank you. Good morning, ladies and gentlemen. I'm pleased to welcome you to our earnings conference call for the second quarter of fiscal 2006. Joining me this morning are Steve Wolfe, our Chief Financial Officer; Tom Larson, Treasurer, and John Wright, Director of Investor Relations.

Before we begin, let me review our Safe Harbor policy. Please keep in mind that during the call we will make certain predictive statements to assist you in understanding the Company's results. You are all aware of the difficulties in making predictive statements in a highly seasonal and cyclical business. The Safe Harbor portion of the Company's press release, as well as SEC filings, detailed some of these important risk factors that may cause actual results to differ from those in our predictions. Our press release was issued this morning by PR Newswire and can be found in the Investor Information section of our corporate website, thetorocompany.com.

Now let's turn to the highlights for our second quarter ended May 5, 2006. I'm pleased to report that fiscal 2006 is shaping up to be a strong year of market leadership and shareholder returns for The Toro Company as we delivered another quarter of record net earnings and record net sales. Delivering results like these quarter after quarter is thanks to the tenacity of our loyal employees and partners in pursuing the dual goals of operational excellence and revenue growth as defined in our three-year 6+8 initiative.

Despite the challenges posed by lower residential segment volume and increasing commodity costs during the quarter, we still gained additional leverage by diligently employing lean practices on the production floor and in the office. In addition, a favorable product mix and improved gross margins in our professional segment boosted Toro's overall performance while helping to offset slower sales in the residential segment.

Now please follow along with this morning's press release as I review the second-quarter and year-to-date results. Toro's net earnings for the quarter were 70.1 million compared to 62 million last year, an increase of over 13%. Earnings per diluted share were up more than 17% to a record $1.56. Worldwide Toro's net sales for the quarter rose nearly 5% to 659 million. This improvement was driven by a strong custom customer demand both here and abroad for our innovative family of turf maintenance and irrigation solutions for professionals in the landscape contractor, golf and grounds market.

As we have discussed previously, one of our core strategies is to increase the contribution of international sales to 30% or more of total Company revenues. While exchange rates hampered sales a bit during the second quarter, professional sales outside the U.S. accelerated thanks to numerous new golf course projects in Asia, Europe and South America. Strong shipments in our professional segment helped to offset worldwide residential sales that declined compared to the same quarter last year. This decrease was due primarily to lower shipments of lawn power mowers to other residential and other residential products, resulting from a shift in inventory control strategies in the home center channel.

For our first six months, net earnings were 84.4 million, up more than 15% from last year. Earnings per diluted share climbed nearly 21% to $1.87, a result of executing against our long-term business strategies and creating a more integrated lean organization with processes and disciplines that drive measurable results to the bottom line. Net sales for the six months exceeded $1 billion for the first time in Toro's history as we recorded an increase of 5.5% to $1,029,000,000.

You will recall that we launched our 6+8 growth and profitability initiative at the beginning of fiscal 2004. We challenged employees to achieve an average annual revenue growth rate of 8% or more over a three-year period. We are pleased to note that this year-to-date sales figure combined with our performance in fiscal 2004 and 2005 position us well to reach our 6+8 compounded growth target.

Now let's take a closer look at our segment results. As I mentioned earlier, Toro's professional segment delivered excellent results across nearly all product categories. Second-quarter sales rose 12.9% to just over 439 million. No surprise given the optimism at the industry tradeshows we attended earlier this year. This prompted our distributors to anticipate strong dealer demand for landscape contractor equipment and active spring selling season among their golf customers.

Our Company's comprehensive portfolio of brands including Toro, Xmark, Irritrol and Hayter, combined with outstanding customer care, helped to drive the sales momentum in the professional segment. Our ongoing investments in engineering and new product development continue to deliver innovations that customers value most. The season highlights include Toro and Xmark diesel Z mowers that last longer, new fairway mowers that groom the turf for a beautiful after-cut appearance and our industry-leading 800 series golf sprinkler heads.

International sales in the professional segment were also up for the quarter as Toro equipment and irrigation systems were selected for major new course construction projects throughout Europe, Asia and South America. Our long-standing partnership with the K Club in Ireland, site of this fall's Ryder Cup, provides valuable brand visibility throughout as we help them prepare the course for this competitive U.S. versus Europe tournament. And in China our commercial irrigation systems were installed at high-profile venues like the new terminal at the Beijing airport.

In fact, Steve Wolfe and I, along with other members of our management team, had the opportunity to visit China this spring to explore opportunities from both a customer and a supply chain standpoint. We visited several golf courses, and it was encouraging to witness first hand Toro's strength in this growing industry. We talked with golf course owners and superintendents to learn more about their unique challenges and came away confident in our ability to continue leading the market, and by the way, we did not play any golf over there.

Second-quarter operating earnings for the professional segment rose 23% to 104.2 million over the previous year. Gross margin improvements came from ongoing cost reduction efforts, selective price increases and a favorable product mix. These gains were offset slightly by higher fuel and other commodity costs.

In our residential segment, worldwide sales declined 7.7% for the quarter. Shipments of Toro riding products including the popular TimeCutter Z and our new family of lawn tractors were strengthened by the expanded retail placement and competitive pricing strategies. These gains were more than offset, however, by declines in worldwide sales of walk power mowers.

Here in the U.S. we saw a marked shift in the timing of shipments to the home center channel. However, we have a good portion of the selling season in front of us. With typical retail sell-through occurring in the third quarter, we still expect year-over-year growth in residential sales.

Second-quarter operating earnings for the residential segment were 18.1 million, down from 29 million last year, primarily due to spreading fixed costs over a lower sales volume into product mix. In addition, our brand strategy to offer several lawn tractors manufactured under a private-label agreement had a somewhat dilutive effect on operating earnings as a percent of sales.

Now let's shift our attention to the operating results for the quarter. Gross margin for the second quarter was 34.9% compared to 34.5% last year. Key factors in the improvement were a more favorable product mix and the impact of price increases in our professional segment. SG&A expense as a percent of net sales also improved slightly for the quarter to 18.9% from 19% in last year's second quarter. We improved leverage of these expenses while significantly increasing our investment in engineering and R&D to support our long-term strategy to derive at least 35% of our revenue from new products.

Interest expense for the second quarter was up slightly to 5.2 million compared to 4.9 million last year. Higher interest rates were responsible for the increase, which was somewhat offset by lower average short-term debt. During the quarter, our effective tax rate was reduced to 32.1% compared to 33.5% last year due to refunds from prior years' tax returns.

Finally, as we have reported several quarters in a row, our balance sheet remains quite strong. We managed our net receivable to 546.4 million, an increase of just 1.3% against a sales increase of nearly 5%. In addition, net inventory levels were down 3.4% to 248.1 million at the end of the second quarter.

That wraps our review of operations. Now let's take a moment to look ahead to the balance of the year.

While Toro will never be immune to the impacts of weather, we have transformed this Company over the years to one that is much more weather resilient. This journey was possible because of our ability to first, deliver a steady flow of innovative products; second, serve our markets through a strong distribution channel, and third, maintain loyal relationships with customers and partners -- all competitive advantages that will help sustain our growth over the long-term.

Today Toro is a vital worldwide organization that derives more than two-thirds of its revenue from the professional segment. While we continue to invest considerable resources in the professional segment, we remain committed to growing the residential segment as well. More than ever our product offerings for homeowners is broader and more competitively priced. These products range from innovative Toro walk-behind mowers, riding Z mowers and snow throwers that enable homeowners to love their yard, to be ergonomically designed Lawn-Boy products that add ease of use and comfort to outdoor chores, to our convenient do-it-yourself home irrigation systems. We expect residential shipments to gain momentum in the second half of the year, and we are positioned to achieve full year sales growth of approximately 8%. Of course, these predictive statements assume seasonally normal weather for the remainder of the year.

Therefore, in light of our first-half performance, benefits from our ongoing lean efforts and market expectations, we're raising our fiscal 2006 outlook. We now expect earnings per share to increase 14 to 17% over last year.

That concludes my prepared portion of the conference call. Now let me pause so that Steve, Tom, John and I can respond to your questions.

(OPERATOR INSTRUCTIONS). Jim Lucas, Janney Montgomery Scott.

A couple of -- actually three quick housekeeping questions and then two strategic questions. Steve, any FX impact on the balance sheet?

Yes, there was. In fact, if we look at the other income section on the P&L, you've really got two pieces to that. As the currency works against you and your assets get devalued on the balance sheet, you reduce that on the balance sheet and you get a pickup on the contracts that you have in place on the P&L. So if you look at our other income for the quarter and for the year-to-date, you can see that is up pretty significantly because the gain on those contracts was higher than it has been in the last couple of years.

Is there any specific currency is that predominantly Euro, or is there anything else that might be impacting that?

It would be predominantly Euro.

Okay. And tax rate, you mentioned a couple of refunds in the quarter. What is your outlook for the remainder of the year?

We would probably tell you to use 32.7, somewhere in that range for the rest of the year. There are still some things up in the air, the R&D credit, and some of those things that we don't know whether they are going to get renewed. But for now I would use that, and we will give you additional guidance as we know more.

Okay. And then on the strategic side, Mike, you alluded to your visit to China and talked a little bit about some of the potential market opportunities. Could you maybe expand on that a little bit and as well delve a little bit deeper onto the supplier side? And then your reference to 6+8 in your prepared remarks, we're getting near the end. I'm wondering what is next?

Okay. Well, first China. We had a great trip to China. It was eye-opening for Steve and Sandy Meurlot, our Vice President of Operations, and myself, and then subsequently Tim Ford and Tom Swain, the General Manager of Consumer, made trips over there was well. We see a lot of opportunity in China. We're not alone there.

On the market side, if you compare China to the U.S., there is 1.3 billion people there and a couple hundred golf courses. There is 300 million people here and 17,000 golf courses. So needless to say there is a lot of opportunity for us to be looking at China as a growth market for businesses we are in. Golf may be at the core. And beyond that, residential, commercial irrigation has infrastructures being developed hand over fist in China. So we have a strong focus on China on the market side, and we have a leading position today on the golf side and are building strength beyond golf. It may be awhile before there is a large consumer market there for us, but we're looking at that as well.

On the supply-side, we source a lot of products components, if you will, from China today that come into our Juarez plants or into our professional plants up here in the Midwest. We also looked -- we visited a number of those component suppliers. We also looked at other suppliers there that have the potential to be -- I will say more strategic partners in the long run.

So that is a continual focus of ours to look at not just China but more broadly Asia and make sure that we're taking appropriate advantage of the opportunities there, you know, in manufacturing, supply of components, supply of technical resources. So maybe I gave you a little bit of a flavor.

Yes, that is a good flavor. Thank you. And then on the ending of 6+8?

What is after 6+8? I would just say it is a work-in-progress, and we're not prepared to comment in any more specifics at this point. I think you can figure out that we will challenge the organization as we have challenged the organization after five by five to the next level, 6+8. And I think the bottom line is we have here an organization that is very engaged, very committed to achieving the goals that we have set. We now have six years of very steady solid performance of achieving those goals, and we expect the next chapter to be the same, that the organization will engage, and we will take this Company to an even higher level.

Eric Bosshard, Midwest Research.

A couple of things. First of all, your confidence, can you help us understand a little better your conference in a recovery in consumer in the second half of the year? You talked about a shift in timing of some shipments. But can you just explain a little bit better about what you see, perhaps even what you have seen since the quarter has ended that gives you confidence in an improvement from the revenues that we saw in the second quarter?

Well, Eric, I'm going to remind you of when we sat here last year and we came out through the first half with very strong performance, and then mother nature did not cooperate very well. That kind of summed it up that we had that two standard deviations to the left in terms of a cold wet spring followed by a very hot dry summer as evidenced in the Midwest and on out through towards the Northeast. That had a very depressing effect on particularly the residential business. It also affects some elements or some parts of the professional business, landscape part of it particularly.

So our expectation is more positive because we don't think that the weather is going to be -- I won't say that abnormally poor. We kind of qualified our second-half expectations assuming seasonally normal weather, and to date through the first few weeks of the third quarter, as you know, it has been -- still remains somewhat cool out in the Northeast. But the good news is there is a lot of moisture, there is more moisture in the Midwest, and as soon as things heat up a bit, we think that that is going to help with -- and makes the comps somewhat easier when you go against the kind of comps we had last year or kind of results we had last year.

Secondly, international I think grew a little slower or grew materially slower in Q2 relative to Q1. Can you help us understand what happened there and what type of growth we ought to see in the balance of the year out of that business?

Yes. We still have strong expectations for the international business. It did slow down a bit. I think that may be more timing. The Hayter residential business was a little bit soft. It was soft because of a supply issue and a couple of production challenges, and the residential business in the UK, which is mainly the Hayter business, was soft. It has been dry there as well.

I would tell you the professional side of the business in Europe and even more so around the world in Asia and other markets continues to be very strong. The new golf development continues to be very strong. So we don't think the international business will slow down. It was maybe a little slower this last quarter, but it should stay as a strong growth driver for the company in the next couple of quarters.

And then my last question in regards to repurchase, it looks like you bought some more stock in the quarter. Can you just remind us what the authorization is? What is remaining on the authorization and sort of your thought process on how long it will take you to complete that.

This is Steve. I think we went into the year we told you we had 1.8 million less or roughly 1.8 million left on a 2 million share authorization going into the year. We have purchased 1.2 million of that 1.8 million through the first six months. So we've got roughly 600,000, 650,000 remaining, and we will repurchase those during the rest of the year. So we're pretty much on target for the schedule that we talked about going into the year.

And then I guess one last question, Steve, while I have you. The inventory performance in the quarter was very good -- down inventories with up sales. Especially considering that you think sales are going to improve in the second half, can you lever inventory through the year? In other words, have inventory grow below below or materially below sales growth for the year?

We would hope to. Yes, we think we can. Part of that is we've had the professional side of the business, as Mike talked about, that inventory is flowing very well. Even on the Walker side, we are not sitting here with a whole lot more inventory then we ought to have. So we think we can get some leverage out of that as we go through the back half.

Seaver Wang, Utendahl Capital Partners.

I had a couple of questions. The first one is, just your general view of renovations in the golf market, are you seeing more of a pickup? It seems like new golf courses have picked up a little bit, but I just wanted to see if that large base of renovations is coming back strong or if you are seeing hints of that?

And two, just as much detail as you can about the tractor business in terms of the mix between Depot and the dealer network and what you think that might contribute in 2006?

Good morning. This is Mike. Regarding your first question about golf irrigation, I would say that the renovation business is very solid. I don't have specific numbers here in front of me. One of the things that is driving that is many of these courses have older systems, and the older systems are less efficient both in the use of water, as well as the energy they draw, and with the challenges, the cost of water and the cost of energy, courses are looking to finally make the capital investment and change out their systems.

So you're right, that the new golf in the U.S. has been relatively slow over the last several years. Renovations are growing. Situations like last year when you had drought -- somewhat of a drought in the Midwest, will stimulate that as well. Golf courses that Mother Nature waters regularly, when she chooses not to reminds the players that perhaps they ought to be investing in a new system. So we see that kind of impact as well.

So the technology, the costs, the redos, if you will, in the U.S. are sound, and then the new golf business around the world continue to be very strong. So we think that in our position of leadership in the golf -- new golf and the redo, if you will, market continues to be very sound. We get our measurements from a marketshare standpoint, and we have a commanding position there.

Regarding your question on tractors, the strategy on tractors has been to partner with the Home Depot on a brand licensing strategy to take those same tractors on a revenue basis into our dealer channel, and they are using a third-party to manufacture that. I would say to you that the strategy, while it is not adding a lot of additional earnings for the company, a key part of that was the brand strategy, and that is working very well. Our numbers are up dramatically in terms of our relative share of the lawn tractor business.

Clearly our focus is on Z mowers, and we will continue to stay focused on Z mowers because we believe that is the future. Our Z mowers are up as well at the Home Depot, for example, because we think of that having a much stronger presence with tractors.

So the strategy is -- well, we are early into it. It seems to be working well. It is adding we think value to the brand, as well as driving financial value, particularly around Zs.

And the vast majority, of course, is going to Depot. But is that like a 90% Depot and then 10% dealer, or did you put in the dealers just to keep the name -- I guess make sure that the product is in every channel possible?

I would say it has been very important to the dealers. In fact, our dealers have been telling us for a number of years, you're really putting us an in awkward position not having contractor to sell to our customers who want a tractor. Just having a Z mower left them somewhat exposed.

So I would say to you that it is working at the dealer level as well. You're right. Clearly the large majority of the volume is going through the Home Depot. That is no different than walk power mowers and some of those other products. But it is working well at the dealer too.

And your point of keeping -- we need a healthy dealer network as we talked about all along. They are a very key part of the whole aftermarket service proposition for units that go through the mass units. So there we always have looked hard to make sure we are keeping the dealer pretty much on equal footing with the other channels.

Now, what is the deal with Depot? In this instance, are you able to revise on an annual basis, or is this like a three-year deal or a five-year deal?

We don't get into those specifics. We have, as you know, an important relationship with Depot, and we work very well together on the walk power mower strategy or the riding strategy or the Z strategy.

James Bank, Sidoti & Co.

Since Seaver was just talking about Home Depot, I was just wondering if you might be able to give us an idea of what Home Depot might contribute by the end of the year on just a full-year basis? I think last year it might have been 13, 13.5%. Are you on track to do that again?

Roughly the same level. A lot depends on what happens the last half of the year here and where that ends up.

Right, of course. Okay. Start from the top, other revenue reporting line saw a pretty steep decline. I did not think I heard you touch on that. Could you kind of elaborate on that? I understand it is possibly two of your distribution hubs?

Yes, the bulk of that is we have made a distribution change with one of our segments where we are going direct and not taking that business through the distributor. There is about -- I think it is down $2 million, roughly $2 million, and that is the business that we are now taking on a direct basis.

So those sales are being made up?

They are booked elsewhere.

Okay, I see.

They have gone out of the distributor's P&L, and we book it in the division that is selling them directly.

Okay. So what happened in the second quarter then for that revenue launch should just be more of a run-rate for the year?

Yes.

Okay. Great.

(multiple speakers) the distribution strategy change.

Okay. Could you possibly touch on your exposure, if there is any, for aluminum and copper? These prices have seemed to have doubled. I understand you do have hedging practices in place. If you can elaborate for 2007 what kind of impact the prices might have on you?

On 2007 I -- (multiple speakers)

For next year. I would suspect that you would buy six months, 12 months out or have forward contracts in place. I don't suspect it hurt margins this year, but if you're buying it for next year or the manufacturers that you purchased from, your suppliers, I'm just trying to get an idea of what impact these prices might have on you, if any at all.

Yes, they have gone up, but you've got to remember they are not as big an impact as a steel or a resin might be. You know steel is 20% of our purchases, and resin is probably half of that, 10%. When you get into copper and aluminum, what we buy directly is a smaller percent of the total. A lot of the aluminum exposure that we end up having comes back through the engines' suppliers. They are the ones that are really seeing the impact of aluminum. We have it somewhat (indiscernible), but it's a smaller dollar amount.

So we are to your point seeing some pressure on engine prices pretty much across the board. We have seen quite a bit of manufacturers coming in and asking for price increases. So as we start to look at that for '07, it will be key in our negotiation with those engine vendors where we end up to really give you an idea where aluminum is going to be for '07. But there is still pressure there. There is no doubt about it.

Okay. So that would probably assume then you might go for another price increase as you did this year, a little bit heavier on the professional side, a little bit lighter on the residential side?

We will look at all of that as part of our '07 planning. But yes, we will look at the cost. We have said all along you don't always price cost. You price market. That certainly will be one of the considerations we will look at as we look at '07 planning.

Okay. Also, the currency exchange, it seems like the American dollar has been slipping this past month. I was wondering if we might see some tailwind heading into the second half of the year?

Well, we had, if you look through six months, currency reduced sales by about 1% overall, or if you go back just to the international business, we had a question on the slowdown in the international side. It slowed down their sales, reduced their sales by almost 3%. So we are seeing some impact of that, and as we said earlier, it is primarily on the Euro side. It also had -- it was not big, but a couple of million dollar impact on both receivables and inventory in terms of lowering receivables and inventory.

So it has gone the other way. The Euro is starting to go a little bit the other way, but I don't know that there will be any major -- I would not factor in any major headwind for the second half.

Right. No, certainly not headwind. I was suspecting maybe some tailwind for you given the current American dollar weakness.

Yes, probably more '07. Some of that you know we have already gone out and done what we could to hedge. So I would not expect a lot in the back half of '06, and there may be something there that we will put in again in our planning for '07.

Okay. All right, terrific. Last question, touching on one of the other analyst's questions earlier about your 6+8, we're getting into the second half of '06, and that initiative is going to down. Any indication of when you might mention what your newer initiative would be or when you have released the third quarter or when you have released the year-end results?

This is Mike. We think we will tell the employees first. (multiple speakers). We are halfway through the year, so I don't know that we will -- I don't think we will talk about it explicitly at the third-quarter call. You will hear something between then and the fourth-quarter call in December.

Okay. Great. Fair enough. That is all I have. Thank you.

Jim Lucas, Janney Montgomery Scott.

One of the questions just following up on the commodity raw materials side, it was nice, and I'm sure you were happy to see the improvement in gross margins. When you look out the remainder of the year, besides volume what other impacts both positive or negative do you foresee on the gross margin line?

Well, when you look at what happened here for the first six months, you've got a couple of things playing into that. One is we had a more favorable product mix. We had a higher percent of professional sales than residential. As you know, the margins on the professional side of the business are higher, so that helped us. As we go through the back-half, if the residential comes back the way that Mike described, that is going to be pressure on margin, not upside on margin. So you have got that.

We are seeing some of the pricing benefits helped us during the first six months. The market direct segment that I talked about, you get higher margins on the market direct piece, so that helped us a little bit. The real wild-card continues to be commodities and what is going to happen.

Steel, as you know, you see in the paper has leveled off, although we use a lot of specialty steel, not necessarily the base steel that you see priced in the paper. So our costs have not come down as quickly as what you see in the news.

But steel overall has slowed down. It is not accelerating at the same pace as it has. On the other hand, we are still seeing resin prices continue to be very volatile, and that is a big part of our costs of goods, as I mentioned earlier, and then the smaller things like copper and aluminum. But we continue to work hard on lean, do the things we can to try and offset part of that. So we are pretty confident we can still stay marginalized on where we gave you guidance at the beginning of the year, and that is flat to up a couple of pence. You know, if we get lucky, we will get a little more on the upside. But for right now I would tell you to go back to our original guidance.

Okay. I just wanted to make sure there was not anything else in there. Additionally we have got to wait -- I am sure the board will address the share repurchase option. But could you talk a little bit about the acquisition pipeline? Are you seeing any sort of margin -- in terms of the multiples out there, have they changed at all?

I don't think we have seen much change. As we have talked in the past, the kind of acquisitions that we typically find on our target bull's eye, if you will, are private companies, and Steve will, as he often says when we're traveling, it takes an event for these to kind of move into the -- getting them into play.

I will say that as we have talked in the past we are going to look hard at acquisitions that we believe could help the Company strategically, help the Company grow. We are going to be very thoughtful about doing that as our track record would support. And on the other hand, we are going to become a little more systematic at keying these up and kind of betting them and pursuing them. But nothing beyond that, Jim.

And when you say systematic, does that mean that you may need to add additional resources internally?

It may mean that.

Okay. Finally, new product side. That has always been a hallmark of Toros. You alluded in the call in terms of some of the early traction you're getting. Are there any other major new products that are in the midst of being launched midyear, or will they be '07 events?

They will be primarily '07 events. I would tell you that last week at the board meeting we reviewed our new products outside behind our building in our test area, and it was just very exciting for the board to see just all the new products that are in play this year and that are coming down the line. You know, our metric there, that we want to drive 35% of our revenues. We fell a little short of that in F '05. We are tracking at or above that in F '06, and the outlook looks good in F '07 and beyond. So things are working.

There are no further questions at this time. At this time, if there are no further questions, I would like to turn the call over to your host for any closing remarks.

Thank you and thank you all for joining us today and for listening and your thoughtful questions. As we said, F '06 is shaping up to be another strong year. The professional business is off to a very strong start. The residential business has some challenges. We believe the second half will get better, and we think that will all lead to another very strong year and a close of close to our 6+8 initiative at the end of F '06.

So thank you for joining us. We will look forward to visiting you again at the end of the third quarter. Have a great day.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a good day.