Universal Stainless & Alloy Products Inc (USAP) 2019 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and Welcome to the Universal Stainless Fourth Quarter 2019 Conference Call and Webcast. (Operator Instructions)

Please be advised that today's conference is being recorded. (Operator Instructions)

I would now like to hand the conference over to your speaker, June Filingeri. Please go ahead.

Thank you, Sarah. Good morning. This is June Filingeri of Comm-Partners, and I also would like to welcome you to the Universal Stainless conference call and webcast. We are here to discuss the company's fourth quarter 2019 results reported this morning.

With us from management are Denny Oates, Chairman, President and Chief Executive Officer; Chris Zimmer, Executive Vice President and Chief Commercial Officer; Paul McGrath, Vice President of Administration and General Counsel; and Chris Scanlon, Vice President, Finance, Chief Financial Officer and Treasurer.

Before I turn the call over to management, let me quickly review procedures. After management has made formal remarks, we will take your questions. And the conference operator will remind you of procedures at that time.

Also, please note that in this morning's call, management will make forward-looking statements under the Private Securities Litigation Reform Act of 1995 regarding future events and financial performance. We caution you that such statements reflect management's best judgment based on facts currently known and that the actual events or results could differ materially. Please refer to the company's documents that are filed from time to time with the SEC, in particular, the Form 10-K, 10-Q and Form 8-K filed today with the company's press release. These documents contain and identify important risks and other factors that may cause actual results to differ from those contained in management's forward-looking statements.

Forward-looking statements made during the call are being made as of today. If this call is replayed or reviewed after today, the information presented during the call may not contain current or accurate information. The company disclaims any obligation to update or revise any forward-looking statements. Management may provide guidance on today's call but will not provide any further guidance or updates on the performance during the quarter, unless it is done in a public forum.

During this call, management will also discuss non-GAAP financial measures. These non-GAAP financial measures are not prepared in accordance with generally accepted accounting principles. A reconciliation of the GAAP and non-GAAP results is provided in today's press release.

With these formalities complete, I would now like to turn the call over to Denny Oates. Denny, we are ready to begin.

Thanks, June. Good morning, everyone. Thanks for joining us today.

During the fourth quarter, we improved gross profit margins sequentially, generated positive cash flow, reduced debt and made tangible progress in operations, particularly the North Jackson forge operations.

Our net sales in the fourth quarter totaled $55.2 million, down 2.5% sequentially and 3.3% below the fourth quarter of 2018. It is worth noting that 2019 fourth quarter sales included $37.6 million to the aerospace market, which brings total aerospace sales for 2019 to a record $170.4 million, an increase of 14.5% from 2018.

It is also noteworthy that customer year-end inventory planning, probably compounded by the 737 MAX issue, led to a deterioration in shipment mix with a higher percentage of lower-margin semi-finished product shipping as compared to earlier quarters in the year.

Aerospace will continue to be a major driver of our future results, and our aerospace backlog remains healthy going into 2020. That said, given the current uncertainty related to the 737 MAX situation, we are staying especially close to our customers. Thus far, several customer push-outs are manageable and cancellations have been minor, less than $1 million.

The supply chain is currently digesting the Boeing announcement yesterday afternoon, which pushes the return-to-service target date to midyear. We are prepared to react quickly as the RTS process evolves.

Our backlog and order entry remained solid in the fourth quarter, and we ended December with a backlog, before surcharges, of $119.1 million, up slightly from the end of September. Our backlog includes a record backlog of premium-melted products. Order entry before surcharges of $50 million was on par with the last couple of quarters, reflecting a recovering tool steel plate market, initial signs of life from the semiconductor market and moderate aerospace activity.

Fourth quarter premium alloy sales totaled $7.4 million or 13.4% of sales compared with $8 million or 14.2% of sales in the 2019 third quarter and $8.1 million or 14.2% of sales in the fourth quarter of 2018.

As discussed on our last call, our focus has been on shipping the premium alloy products that were delayed by residual fire-related issues at the Radial Forge. Although we made headway in the fourth quarter, some of those shipments were pushed into the first quarter of 2020.

We achieved record production volume at our hydraulic forge in North Jackson in the fourth quarter, leading to significant productivity gains and lower costs as that operation continued recovering from the June fire. Additionally, the ramp-up of our Daisho mid-size bar cell unit at our Dunkirk facility continues, resulting in further efficiency gains. We also posted continued melt cost reductions in our vacuum induction melt shop at our North Jackson facility. I'll return to some operational highlights later in my remarks.

The operating progress in the fourth quarter contributed to sequential improvement in our gross margin, which totaled 10.6% of sales versus 9.4% of sales in the 2019 third quarter. Gross margin also benefited from material cost of sales that were more closely aligned with selling prices as surcharges stabilized and melt costs declined. The fourth quarter 2019 gross margin was below the 11.3% of sales recorded in the 2018 fourth quarter due to less favorable product mix in the most recent period, specifically a higher percentage of semi-finished products. The impact of sequentially lower sales of certain aerospace products, on gross profit margins, was 2%.

Net income for the fourth quarter of 2019 was $200,000 or $0.02 per diluted share versus $0.08 [million] (added by company after the call) or $0.09 per diluted share in the third quarter of '19, which included $0.04 of insurance recovery related to a fire in the Dunkirk facility in September 2017. Net income in the fourth quarter of 2018 was $600,000 or $0.07 per diluted share. Full year 2019 income was $4.3 million or $0.48 per diluted share.

Fourth quarter EBITDA was $5.5 million compared with $6 million in the third quarter of 2019 and $5.4 million in the fourth quarter of 2018. Full year 2019 EBITDA was $26.7 million.

Cash flow from operations remained positive in the fourth quarter at $4.7 million and managed working capital was down by $2.9 million sequentially. Total debt was reduced by $1.7 million from the third quarter and totaled $64.3 million at year-end 2019. Chris Scanlon will provide further detail in his financial report.

Looking more closely at commodity prices. On our last call, I noted that the price of nickel had jumped 48% in the third quarter, reaching $8.02 per pound at the end of September. Nickel prices stepped down in subsequent months, ending at $6.26 in December. Nickel was quoted at $6.18 this morning.

The performance of other commodity prices was mixed in the fourth quarter, with scrap ratcheting up each month, while moly and chrome were lower than at the end of the third quarter. Vanadium continued its unprecedented decline, ending the year at $10.59 a pound compared to $51.31 a pound at the beginning of the year. Moly, chrome and vanadium are key components in the production of tool steel and directly impacted by surcharges.

We are pleased with fourth quarter operating activities which are driving down cost and bode well for Q1 and Q2 of 2020 as we sell-through fourth quarter production. Record throughput at the Radial Forge lowered cost per pound by 20% compared to pre fire, Q1 2019.

Vacuum induction melting operations set new records for heats per campaign, reducing operating cost 14% compared to 2018. We've also ordered a new 18-ton furnace body for $1.5 million, which will deliver in the fourth quarter of 2020 and will reduce operating costs another 25%.

Our air melt operations in Bridgeville has consistently improved output per hour each quarter of 2019. Our remelt shops activity, particularly vacuum arc remelting, was strong all year. We placed an order for another state-of-the-art furnace for delivery in the fourth quarter of 2020 to support our growth in premium alloys and specialty remelted steels.

We have now processed just under 9 million pounds on the new intermediate bar cell and expect further growth in volume in 2020, along with continued movement up the learning curve, the completion of Level 2 automation and the installation of phased array ultrasonic testing. Although small at $8 million per year in sales, our Titusville precision rolled shapes business recorded a second consecutive record year in terms of sales and profitability and remains poised for a third record year based upon existing backlog.

Turning to our end markets. Let me start with the largest, aerospace. Our aerospace sales totaled $37.6 million or 68% of sales in the fourth quarter of 2019. That's down 8% from $41 million or 72.3% of the sales in the third quarter of 2019. Full year 2019 aerospace sales increased 14.5% from 2018, reaching a record $170.4 million, as mentioned earlier. Although aerospace sales were lower in the fourth quarter, our backlog remains healthy amidst the uncertainty regarding the 737 MAX situation.

What we do know is that Boeing has ceased production of the 737 MAX and announced yesterday, and I'll quote, "The ungrounding of the 737 MAX will begin during mid-2020."

GE has communicated a 750-unit cut in their engine production. Spirit Aero has executed layoff plans. We know that our supply chain, our customers are closely assessing the situation, especially in view of yesterday's announcement. We also know that the MRO business and the Defense Aero business remains strong, particularly helicopter. We know Airbus continues to produce, and we know the long-term macros are somewhat below trend but remains supportive of the long-term outlook for aerospace. In any event, we are staying very close to our customers and maintaining our flexibility to adjust quickly to market conditions.

The oil and gas end market remained our second largest end market in the fourth quarter of 2019, increasing to 11.3% of sales compared with 10% of sales in the 2019 third quarter and 11% of sales in the fourth quarter of 2018.

Fourth quarter oil and gas sales totaled $6.3 million, up 10.6% from the 2019 third quarter and in line with the fourth quarter of 2018. Last quarter, we characterized the oil and gas market as moving sideways to softening, although it remained active for Universal. Rig counts in North America have fallen, but continue to achieve greater efficiencies. Oilfield service companies are guiding towards more international and offshore growth over the next few quarters. The oil and gas market continues to be active for Universal, and our strategy remains focused on expanding market penetration, utilizing our unique capabilities in North Jackson.

The heavy equipment market was our third largest market. Fourth quarter heavy equipment sales, which are primarily tool steel plate, totaled $4.8 million, an increase of 9.2% from the third quarter of 2019, but down 47.9% from the fourth quarter of 2018. Full year 2019 heavy equipment sales totaled $22.7 million compared with $41.6 million in 2018, an $18 million or 45% reduction during the year. Remember that 2018 was an all-time record year for tool steel plate revenue.

I've already noted the effect of dropping commodity prices and surcharges on our tool steel results. The positive news is that our tool steel order entry has been strong going into the first quarter. With customer inventories in better balance versus the first half of 2019, current demand is being supported by a number of automotive and off-route changeovers in 2020 and 2021, with somewhat improved the economic outlook and a strong market for industrial cutlery.

Power generation market sales were $2.9 million in the fourth quarter, which is up 2% from the third quarter and up 51% from the fourth quarter of '18. Power generation represented 5.3% of 2019 fourth quarter sales. For the full year 2019, power generation sales rose 24.3% from 2018, totaling $11.5 million. As I've noted over the past many quarters, our power generation sales mainly reflect maintenance spending, and we continue to see little change in market dynamics over the near term. We intend to continue to supply seasonal maintenance needs until the replacement market for industrial gas turbines materializes.

Our fourth quarter general industrial market sales were $2.4 million, an increase of 20.8% from the 2019 third quarter, but 36.5% below the 2018 fourth quarter. Full year sales were $9 million versus $19.1 million in 2018.

Our general industrial category includes sales to the semiconductor, infrastructure and general manufacturing markets. The semi market -- semiconductor market was especially hard hit in '19, with full year industrial sales estimated to be down by almost 13%, mainly due to a soft memory chip market, reflecting the deteriorating U.S. relationship with China.

The Semiconductor Industry Association sees the signing of Phase 1 of the U.S.-China trade pact and, more importantly of the USMCA, as major steps forward for the industry. We have also seen a strong pickup in semiconductor quotes and demand.

That includes -- concludes my review of end markets. Let me turn the call over to Chris for his financial review. Chris?

Thank you, Denny, and good morning, everyone. Let's get started with the income statement. As Denny discussed, fourth quarter 2019 sales of $55.2 million were down 2.5% or $1.4 million from the 2019 third quarter and down 3.3% compared with the 2018 fourth quarter. 2019 full year sales of $243 million were down $12.9 million or 5.1%, and compared to 2018 full year sales of $255.9 million.

We did achieve record aerospace sales in 2019, which increased to $170.4 million or 14.5% from 2018. Additionally, our power generation annual sales improved to $11.5 million, an increase of $2.3 million over 2018. Sales to the balance of our end markets declined in 2019.

Next, I wanted to summarize the impact of the Forge fire on our consolidated 2019 operating results as the fire negatively impacted operating results by approximately $3 million. This amount is comprised of missed sales, declined production levels following the fire and increased operations activities, which were all negatively impacted by the fire. Additionally, we incurred impairment and insurance deductible charges directly related to the fire. We expect a positive impact on both cash flow and income as we work through the Forge fire insurance claim settlement process.

Our fourth quarter 2019 gross margin totaled $5.9 million or 10.6% of sales up from 9.4% of sales in the 2019 third quarter, but down from 11.3% of sales in the 2018 fourth quarter.

Our Q4 gross margin was favorably impacted by the improved operating activities Denny previously discussed, as well as lower material cost of sales compared to the third quarter of 2019. Our material cost of sales was more closely aligned with selling prices on more stable surcharges and declining material cost of melt.

Selling, general and administrative costs in the fourth quarter totaled $5.3 million or 9.5% of sales, an increase of $730,000 compared with the 2019 third quarter, but a decrease of $310,000 compared to the 2018 fourth quarter. Changes in accrued management incentive costs drove the changes compared to each [prior] (added by company after the call) quarter. Fourth quarter 2019 SG&A also included increased property and business insurance-related costs, totaling $300,000 compared to the 2019 third quarter.

Upon our property and business insurance renewal in October, our annual insurance premiums expense increased by $1.2 million. This increase totals $300,000 per quarter and began in Q4 2019 and will continue into the third quarter of 2020.

Specific to the fourth quarter, our income tax benefit was $560,000 and was driven by favorable changes in state income tax items and increased research and development tax credits. For the full year 2019, our income tax benefit totaled $500,000. We expect our effective annual tax rate in 2020 to approximate 17% to 18%.

Net income in the fourth quarter was $200,000 or $0.02 per diluted share. Third quarter 2019 net income totaled $766,000 or $0.09 per diluted share, and 2018 fourth quarter net income totaled $582,000 or $0.07 per diluted share.

Note, our 2019 third quarter net income included Dunkirk facility fire-related insurance proceeds, totaling $0.04 per diluted share.

Our fourth quarter EBITDA totaled $5.5 million. Q4 EBITDA, as adjusted for noncash share compensation, totaled $5.8 million. Fourth quarter EBITDA declined $500,000 from the third quarter 2019 total of $6 million and increased $100,000 from the fourth quarter 2018 total of $5.4 million. Full year 2019 EBITDA totaled $26.7 million compared with $35.6 million in 2018. The EBITDA and adjusted EBITDA calculations are provided in the tables to the press release.

Fourth quarter cash flow from operations totaled $4.7 million compared to our third quarter cash flow from operations, which totaled $6.6 million.

Related to the balance sheet, managed working capital totaled $142.1 million and decreased by $2.9 million compared with the third quarter of 2019. Accounts receivable decreased by $800,000 and inventory increased by $6.7 million or 4.8%, while accounts payable increased by $8.8 million.

Fourth quarter 2019 backlog totaled $119.1 million and is up $800,000 from the 2019 third quarter. Year-over-year, fourth quarter 2019 backlog decreased $7.1 million or 5.6% compared to the 2018 fourth quarter.

Capital expenditures for the fourth quarter were $4 million, with full year 2019 capital expenditures totaling $17.4 million. Fourth quarter 2018 capital expenditures totaled $2.2 million, with 2018 full year capital expenditures totaling $15.4 million.

In 2019, Dunkirk and North Jackson fire-related capital expenditures totaled $500,000, with 2020 fire-related capital expenditures expected to approximate $1 million. 2020 capital expenditures are expected to range between $13 million to $15 million.

The company's total debt at December 31, 2019, was $64.3 million, a decrease of $1.7 million from the prior quarter. Our debt is primarily comprised of our PNC bank revolving credit facility and term loan, which collectively totaled $47.7 million at year-end 2019 and our notes, which were issued in connection with the acquisition of our North Jackson facility in 2011. These notes totaled $17 million at the close of 2019. We have included $2 million in current debt related to the portion of the notes due in March 2020. Following this $2 million payment, the remaining $15 million of the notes will be classified as current debt as these notes are due and payable in March 2021.

With that, this concludes the financial update. And Denny, I'll hand the call back to you.

Thanks, Chris. So let me summarize. While the fourth quarter of 2019 was a quarter of improving margins, positive cash flow and debt reduction, along with tangible operating progress we are far from satisfied. We have much more work to do in expanding margins and generating cash this year. The fourth quarter was also marked by market uncertainty associated with the 737 MAX, partially offset by a recovering tool steel plate market and promising -- and a promising outlook for the semiconductor business.

Aerospace was a major driver of our performance in '19, and our sales to the aerospace market rose 14.5%, reaching a record $170.4 million or 70.1% of our total sales. Aerospace will continue to be a major driver of our future results. While our aerospace backlog remains strong, we are staying very close to our customers as the 737 MAX impacts continue to unfold throughout the supply chain. We will continue to assess the Boeing production outlook and its potential impact on order entry as we move through the coming months, and we are prepared to respond to any significant changes up or down. The balance of our end markets saw sequential sales growth in the fourth quarter. And demand for tool steel, in the semiconductor market, is much improved going into first quarter.

Let me also reiterate a few highlights for our operating progress during the fourth quarter. First, the record volume achieved at our hydraulic forge and North Jackson as we recovered from the fire there in -- early in the second quarter -- early in the third quarter, excuse me. Second, the continuing ramp-up of our bar cell unit in Dunkirk and its increasing efficiencies. Third, ongoing melt cost reduction activity in our North Jackson vacuum induction melting operations. Fourth, improving productivity at our Bridgeville air melt operations. Fifth, our Titusville cold rolling operations continued at a record-setting pace. Lastly, our tool steel misalignment eased as lower material cost in our melt began to sell-through. This progress contributed to the sequential improvement in the fourth quarter gross margin and positions us for continued improvement in 2020.

In closing, let me once again recognize the substantial effort of all of our employees throughout the year. Their dedication and hard work are at the core of our ability to successfully execute our strategy over the long term.

That concludes our formal remarks. Operator, let's take some questions.

(Operator Instructions) Our first question comes from the line of Phil Gibbs with KeyBanc Capital Markets.

Denny, you had said in the script, GE cutting 750 engines, so just the question on that is, are you referring specifically to the LEAP? Or is that something that -- and is that something that they're communicating to all their suppliers? I don't think we had heard or seen a number on that.

It's a supplier communication. Initially, it was 600 reduction in the LEAP, and there was an additional 150 added after the news yesterday afternoon, from what we're being told.

Okay. That makes sense. And in terms of how sentiment in businesses is just shaping up early in the year, any color you could provide on that, right now?

Sure. In terms of the aerospace market, I use the term uncertainty. I mean, everybody's looking at the 737 MAX situation. There's 2 schools of thought on the announcement that came out yesterday: one is disappointment, and obviously, no one wants to see those dates move further out into the future. So I think the supply chain is trying to assess what that means, currently. I think there's also a strong school of thought that says that Boeing, quite frankly, has been wrong on every one of these dates, and they want to over deliver. So there's some optimism that remains out there that, that date is probably -- very conservative, and we may still see an earlier return to service. But right now, I would describe the supply chain as trying to assess what's going on. And the impact that we have seen is not all that material other than some pushouts from the fourth quarter into the first quarter and some minor pushouts from the first quarter into the second quarter. We did receive about $800,000 of cancellations that was attributed to the 737 MAX. And as you know, we can't tell exactly how many pounds of our product gets onto the 737 MAX because we're so far back in the supply chain, and we sell primarily to service centers and forgers. So we're not dealing directly with the OEMs in terms of customer, only in terms of being approved.

I would also say that the defense business is still very active in aerospace, the MRO business, still very active. We're seeing particular activity in the helicopter world. So it's the 737, you just got to be careful -- we are trying to be careful. We don't let that color, over color what we're doing here internally. So our posture is to stay very close to the customers and be ready to pull the trigger on any specific actions to capitalize on any delays, further pushouts or as what inevitably happens in these cases at some point in time, everything starts getting pulled in.

As far as the oil and gas business goes, the market itself is kind of quiet. We had some nice improvement towards the end of the year, and that really is reflective of some of the products of North Jackson because of its ability to sell into that market. The general wrap is the lower activity in North America, more offshore business, more international business. More offshore does not hurt us at all. So that's fine by our standard, but overall, the market itself, it tends to be pretty quiet at the moment.

The tool steel business is firing up again. If you recall, we had a record year in tool steel in 2018. That's a very short turnaround market, very lumpy demand over the years. So after that record, around the fourth quarter of '18, we saw a very sharp drop in incoming business. We had some reasonable inventory levels to support the higher level of activity in '18. And at the same time, commodity prices collapsed for things like vanadium, going from $50 down to $11.

So throughout '19, we suffered through sharp declines in surcharges, and we had to work through some high cost inventory. So we had a penalty from a margin standpoint. We also had a penalty from a volume standpoint. Late summer, early fall, we started to see improvement in bookings and that's continued through the end of the year and frankly, right through the first couple of weeks of January. So we've got some nice tool steel business returning. Power gen, as I said, is relatively stable, largely maintenance, nothing big to report there. And we are seeing increased activity in semiconductor, in terms of early warnings of business to come, actual inquiries. So as we look at semiconductor, we see that building in the first half and some nice increases in the second half of the year as we sit here now.

Denny, what are the puts and takes in terms of gross margins in the first part of the year versus the second half of last year?

So if you look at -- just focus on the fourth quarter, we had a noticeable change in mix. And by that, I mean, some of the aerospace products that were pushed into the first quarter and second quarter of 2020 and out of the fourth quarter were our higher-margin products. So if you look at the mix, the percentage-wise, we had more semi-finished product, which is quick turn -- relatively quick turn, lower-price, lower-margin type business. If you quantify that, that's about 2 percentage points of margin on the 10.6% we reported. Said another way, if we shipped the product that was pushed out, we would have had margins higher by 2%.

As we look at the first quarter and the second quarter, we -- as you know, we run an average costing system. So as you look at the prior quarter, you can see trends in costs coming out in the ensuing quarter. So we've had 3 record months of production, 2 of which were record months in productivity as measured by throughput per hour at our Forge so that lower cost went into work in process inventory, some of it came out during the quarter, but a lot of that will come out -- the rest of it will come out in the first half of 2020.

And I went through the other improvements we've made, we're working very diligently on our bar cell, getting that up to speed. We've ramped up the activity in that each quarter. We've run the size from the 3-quarter inch all the way up to the large ones in and virtually all of our alloys across the machine. We've got some additional work to do with some of the ultrasonic testing, which is state-of-the-art equipment that's being put in as we speak. And just putting lots of finishing touches on the Level 2 automation, which will help us control that process in a much better fashion over time. So those benefits were evident in our improved margins on round bar out of Dunkirk, and we would expect those margins to continue to improve as that becomes a bigger and bigger part of our production up at the Dunkirk facility.

Then the other operations, I mentioned, just that were noteworthy, was the improvement in our air melt operations here in Bridgeville, if you look at throughput at the melt shop here. Quarter-to-quarter, we've seen very consistent improvement in each quarter of 2019. And obviously, the melt shop here in Bridgeville represents about 50%, 60% of the total non-metallic spend at this facility here where I sit.

So as we look at margins going into 2020. We've seen easing in the misalignments that we suffered through in 2019. And we see the benefits of some of these operating cost improvements. On the negative side, we have some very specific, the property insurance industry is very tough. We have some big hits there. So you'll see in our SG&A, we have got about $300,000 a quarter of increased spend that you'll see in 2020 compared to 2019. It's probably the biggest single negative that I would point to.

And then lastly, and I'll jump out here, Denny. What -- how should we think about the impact of nickel? Kind of did a bit of (inaudible) in move through last year, as you mentioned, finishing down. So any impacts, positive or negative?

Well, I think right now, obviously, it's gone down. So we'll see some lower surcharges and probably a modest squeeze or on some margins for a few months. As long as it cycles up and down, it's fine, where we have -- significant issues is where you get double-digit reductions continuously quarter-to-quarter as we had with vanadium in 2019, where you got a key commodity going into a product, like tool steel and it falls from $51, $52 a pound down to $11 a pound over a very short period of time. So it's going to continue to cycle. I don't see any drivers right now that's going to cause nickel to skyrocket. By the same token, I think demand and when I look at inventories of nickel, I don't see anything that from a supply and demand standpoint, is going to cause it to go down. So as we're planning, we're looking at relatively flat nickel prices in the $6.50 to $7.50 per pound in our internal planning. But as you know, all that takes is some environmental person in the Philippines to close a couple of mines and the market gets -- it's a very psychological environment these days, and sometimes that overrides supply and demand.

(Operator Instructions)

This concludes today's question-and-answer session. I would now like to turn the call back to Dennis Oates for closing remarks.

Once again, I want to thank everyone for joining us this morning. We deeply appreciate your ongoing support and interest in universal stainless, and we look forward to updating you on our progress on our next call in April. Have a good day.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.