ESAB - Q3 2023

Transcript

Operator (participant)

Good morning, and welcome to the ESAB third quarter 2023 earnings release and conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Mark Barbalato, Vice President of Investor Relations, you may begin your conference.

Mark Barbalato (VP of Investor Relations)

Thanks, operator. Welcome to ESAB's third quarter 2023 earnings call. This morning, I'm joined by our President and CEO, Shyam Kambeyanda, and CFO, Kevin Johnson. Please keep in mind that some of the statements we are making are forward-looking and are subject to risks, including those set forth in our SEC filings and today's earnings release. Actual results may differ, and we do not assume any obligation or intend to update these forward-looking statements except as required by law. With respect to any non-GAAP financial measures mentioned during the call today, the accompanying reconciliation information related to those measures can be found in our earnings press release and today's slide presentation. With that, I'd like to turn the call over to our President and CEO, Shyam Kambeyanda.

Shyam Kambeyanda (President and CEO)

Thank you, Mark. Good morning, everyone. Thank you all for joining us today. ESAB achieved record results for the third quarter. Our team delivered strong year-over-year organic growth, margin expansion, and free cash flow. Before getting into the slides, let me make a few comments. First, let me appreciate and thank our dedicated associates for their commitment and hard work. Their efforts are driving us closer to our long-term goals. Second, our markets continue to be resilient, benefiting from favorable macro trends. The third quarter also underscored the strength of our global franchise. Our European team, in particular, excelled in the quarter, identifying opportunities to sell our new products and gain market share. During this period, I also had the privilege to travel and meet with our teams in the Asia Pacific and Middle East regions.

It's always inspiring to be with our regional teams, and I was reassured by the remarkable progress we've made in both regions. Our teams continue to execute our EBX playbook, which has resulted in organic growth, margin expansion, and cash flow improvements. Both regions added new customers to our equipment and automation portfolio. It is a testament to our exceptional ground game that is difficult to replicate, and their hard work and excellence are evident in our results. Third, in September, we had two of our biggest industry events, Essen and FABTECH, where we unveiled ESAB's innovative equipment and automation solutions, generating tremendous interest among our end users and sparking excitement among our valued customers. Since 2016, in FABTECH, we have systematically revitalized our equipment portfolio by bridging product gaps and fortifying our distribution networks, while simultaneously creating a global presence in global gas control products and solutions.

Fourth, we continue to ramp up the use of EBX business system. During the third quarter, we completed several Kaizens, including our process Kaizen at our Denton facility as part of our product line simplification initiative. For this Kaizen, our teams mapped out product families, created plans to eliminate low-volume SKUs, and aligned customers with similar SKUs to enhance customer value while reducing complexity. We are already seeing the positive impact of this Kaizen that has allowed us to increase on-time shipments, improve customer satisfaction, and expand margins. Last, as a result of our record third quarter performance and the good start to Q4, we're raising our guidance for the year. Turning to slide three, we delivered outstanding third-quarter results. Total sales grew 12%, with our organic sales growing an impressive 700 basis points.

We continue to experience resilient end markets in both geographies, with EMEA and APAC leading the way. Our innovative new products continue to experience robust demand, and we're on track to achieve our goal of increasing our equipment mix to 35% of sales. Profits also reflect a strong quarter, with adjusted EBITDA margins expanding by 170 basis points. Our EBX initiative, including product line simplification, continue to enhance our operational efficiency and cash flow generation. Moving to slide four. In the past, I've discussed how we're positioning ESAB for the future. ESAB has always had a leading consumables franchise. When I started in 2016, equipment represented only 26% of our sales. Our strategy was to refresh our equipment portfolio, fill product gaps, and extend our leadership in gas control equipment while protecting our consumables franchise.

I'm proud to say we have made great progress on our equipment offering and have successfully filled our product gaps. Last month, we showcased products like the VOLT, the digitally enabled Warrior Edge, and our newly digitally connected Cobot at FABTECH and Essen trade shows, generating significant interest and excitement. We are making substantial investments in marketing, advertising, and sales training to leverage our new product offering. These innovations are beginning to bear fruit, with equipment or automation sales seeing high single-digit growth. Cobot sales increasing by triple digits compared to last year. Additionally, our Ohio acquisition has been successful in selling our GCE gas control products, like MediVital valves, further enhancing our position in the North American gas control market. All in all, strong progress as we continue to shape ESAB into a premier, narrowly diversified industrial company. Moving to slide five, our financial performance.

Sales for the quarter reached a record $644 million, representing 12% total growth. Our end markets continued to perform better than expected, displaying resilience. Our acquisitions continued to outperform. EBITDA margins expanded by 170 basis points, reaching a record 18.3. Turning to slide six, the Americas regions performed as expected during the quarter. Total sales increased by 9%, organic sales increased by 400 basis points year-over-year, and acquisitions added an additional 500 basis points of growth. Excluding our product line simplification initiative, volumes grew low single digits. Our new products and solutions for the distribution channel, automation, and robotics are expanding our growth opportunities. Our gas control business also continued to perform well. EBX and our new product launches played a significant role in driving 220 basis points margin expansion in the quarter.

Turning to slide seven, our EMEA and APAC segment posted an outstanding quarter, with total sales growing by 14%. Organic sales increased by 900 basis points year-over-year, and acquisitions added 200 basis points of growth. Europe continues to demonstrate resilience, and the Middle East and India markets are showing notable strength. Our strong showing at Essen drove sales volumes higher by $4 million in September. EBITDA margins in the region expanded by 130 basis points. The team is effectively utilizing EBX and our product line simplification initiative to stimulate growth and expand margins. On that positive note, let me hand it over to Kevin for slide eight.

Kevin Johnson (CFO)

Thanks, Shyam. We delivered another strong quarter of free cash flow, up 30% versus last year, to a record $100 million. We ended the third quarter with net leverage of less than 2.2 turns as we continued to repay debt. Key to our performance was a 0.5 turn improvement in working capital as we ramp up the deployment of our EBX business system. We have a deep funnel of opportunities for the future, and we continue to embrace the latest developments in AI to accelerate improvement. Our cash flow momentum has continued into the fourth quarter, and we are on track to deliver a year of record free cash flow and expect a net leverage of below two turns as we exit the year. Turning to slide nine, as Shyam mentioned earlier, we have again raised our full year 2023 guidance.

Sales guidance has been increased to $2.59 billion-$2.61 billion on organic growth of 5%-6%. This reflects continued resilience in our end markets, a strong performance from acquisitions, offset by negative FX that is expected to impact our Q4 top line by approximately $12 million. Adjusted EBITDA guidance increased to $465 million-$475 million, which includes continued progress on margins from manufacturing consolidation, product line simplification, and automation in our back office, offset by around $2 million of FX impact. Adjusted EPS guidance has been raised by $0.15 at the midpoint, reflecting a stronger adjusted EBITDA performance, improved outlook for tax, and an update to our interest expense guidance. Cash flow conversion remains on track for a strong year for ESAB.

With that, let me hand back to Shyam on slide 10 to wrap up.

Shyam Kambeyanda (President and CEO)

Thank you, Kevin. To wrap up, our teams continue to execute our strategy, and we're well on our way to becoming a premier, narrowly diversified industrial. Our markets continue to show strength and resilience on the back of favorable macro trends. In addition, our focus on introducing new innovative product solutions to our customers is allowing us to grow and gain share. We're taking EBX up a notch, and I'm proud of our team's energy and commitment towards continuous improvement. As a team, we remain focused on creating value for our customers, associates, and shareholders. We're poised for a strong finish to 2023, and we're building momentum going into 2024. Thank you again for joining us. Operator, please open the line for questions.

Operator (participant)

At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. We ask that you please limit yourself to one question and one follow-up. Your first question today comes from the line of Tami Zakaria from JPMorgan. Your line is open.

Tami Zakaria (Executive Director)

Hi, good morning. Thank you so much for taking my question. I think I just saw pricing turned negative in Europe. Can you help us understand what drove that and what's the outlook going forward?

Shyam Kambeyanda (President and CEO)

Hi, good morning, Tami. Yeah, thanks for the question. A couple of things. We still anticipate pricing to be sort of in the low single digits as we finish out the year. You know, we just saw some items, especially steel, sort of abate in the region. But the real story for us in the EMEA and APAC region was the markets continued to stay resilient. Our teams actually got significant volume, and our EBX initiatives drove a significant beat in margin versus where we expected. So all in all, really strong execution by the team. Pricing was just one part of the story based on some inflation that sort of began to abate, but the real story for us was really strong markets, great execution, and margin expansion year-over-year.

Tami Zakaria (Executive Director)

Got it. Thank you so much. Just to follow up, as you think about raw materials prices coming down, how should we think about pricing in the Americas as we look to the next few quarters?

Shyam Kambeyanda (President and CEO)

Yeah, you know, Tami, we've talked about this before. We really have three strategies on pricing, the first one being inflation-based. You know, we play in varied markets, and not every market is seeing steel prices abate. So there's sort of a mixed bag out there. But there's two other pieces that we're working hard on. One is value pricing, and the second one is, you know, our Product Line Simplification-based pricing. So from that perspective, we're evaluating all of our options and looking at next year in that context. We're confident on holding price, you know, regardless of where the markets grow. So our intent, as we go forward, is to sort of talk more about it during our Investor Day call, but as of right now, nothing changes in our strategy.

Tami Zakaria (Executive Director)

Got it. Thank you. Great quarter.

Shyam Kambeyanda (President and CEO)

Thanks, Tami.

Operator (participant)

Your next question comes from a line of Nathan Jones from Stifel. Your line is open.

Nathan Jones (Managing Director and Head of Industrials Research)

Good morning, everyone.

Shyam Kambeyanda (President and CEO)

Hi, Nathan.

Nathan Jones (Managing Director and Head of Industrials Research)

I was hoping to dig in a little bit more on PLS and its impact on the business. It's been going on for a few quarters. It obviously has, you know, some headwind on the revenue line, some tailwind on the margin line. I think you talked about it having some positive impact on the pricing line there. Maybe you could unpack some of the impacts of PLS for us, just in terms of the revenue drag, margin benefits, and anything else you can give us some color on.

Shyam Kambeyanda (President and CEO)

Yeah, you know, the best way to think about PLS is that, you know, one, we've been very happy, with the engagement, and the execution of our teams on this particular initiative. And what you could see is we talk about PLS a certain way in the Americas market, and then we're also doing PLS in Europe and the Middle East, and, and to some extent, also in India. And where you can actually see the power of the PLS initiative as it focuses also on growth, fortifying and understanding how you sell to your customers. So what I'd say is that the PLS story is not just about, you know, refinement and elimination of, of SKUs, but it's also about growth. And so the best way to think about PLS is look at ESAB's performance.

We've talked about the North America business being more complex than some of our other regions, selling a significant larger amount of SKUs and a lot of third-party sales, where we were not adding much value, in terms of sales content. And so one of the things that we had talked about is that it would take us this year to get through that aspect of PLS and begin to focus on growth. I was very happy with the progress that the North American team made as the quarter rolled on. We saw improvement, you know, starting in July all the way to September in terms of volume. And to answer your question as to the volume impact, we've said this: if you exclude the PLS volume impact, we had low single-digit growth, in the region.

And all in all, in our view, really strong initiative, something that we believe is gonna be a core toolkit of ours, with a big focus on growth as well. And we're demonstrating that in the Middle East and demonstrating that in Europe.

Nathan Jones (Managing Director and Head of Industrials Research)

Thanks for that. Is it your opinion then that the impact of PLS... I know PLS will be an ongoing initiative, but the major impacts that we're seeing, at least to the top line in Americas, because, I mean, you're talking about probably five points of volume or something like that, that you're dragging on revenue in 2023, that we should see the end of the major impacts for that and be into a more normal cadence where we can more easily identify the impacts to growth of these tools in 2025?

Shyam Kambeyanda (President and CEO)

That's right. Our intent is to sort of exit this year and be in a spot where the comparables are sort of more equal and excluding sort of the big PLS impacts that we've made this year in the North American and Americas market. That's correct.

Nathan Jones (Managing Director and Head of Industrials Research)

Awesome. Thanks very much for taking my questions.

Shyam Kambeyanda (President and CEO)

Thanks, Nathan.

Operator (participant)

Your next question comes from a line of Mig Dobre from Baird. Your line is open.

Mig Dobre (Senior Research Analyst)

Hey, good morning, guys. Thank you. Thank you for the question. If I may, I'd like to see if you can unpack your growth a little bit more. So, you know, on slide three here, rather slide four, you mentioned that equipment and automation volumes were up low double digits. Just running basic math, it looks like your consumables were flat and your growth and volume was really kind of all driven by equipment and automation. So correct me if I'm wrong there. What I'd like to understand from you is sort of how you see these two sides of your business progressing into the fourth quarter, or maybe if you're willing to comment even beyond that? How sustainable is this growth in equipment and automation? What do you think is happening with volumes just on a consumable side?

Thank you.

Shyam Kambeyanda (President and CEO)

Yeah, so thanks, Mig. Always good to hear from you. So a couple of aspects. The first piece is something that I spoke about in my prepared comments, was that in 2016, we really did not have an equipment line. One of the best stories that came out of FABTECH and Essen was the excitement our sales team saw with the fact that we now have a full toolkit and a lineup to go sell on equipment, and the progress that we've made in creating automation solutions with our new Warrior Edge product line.

So fundamentally, think of it as ESAB was playing back in 2016, primarily as a consumables franchise, to today, we've now got a full product line on the FABTECH side to go out and get behind, and our sales teams and our customers to rally behind. So we're seeing a lot of excitement on that particular front. We're seeing a lot of engagement, and so we fundamentally believe that over the next couple of years, we will be able to sell more equipment vis-à-vis consumables. That being said, you know, the assumption that you're making primarily as the right assumption, which is equipment and automation, is growing faster than consumables, but probably the incorrect part of it is that the underlying, we did see consumables growth as well, just not as much.

And so we feel that this journey continues for us. Our position of strength in the geographies that we spoke about is significant. Our ground game is bar none and unparalleled. We genuinely feel that our teams are now executing our ESAB growth playbook and EBX playbook quite well. So we believe that we continue to have an opportunity to gain share and drive volumes to be positive over the coming years. The other aspect, Mig, that I'd say to you is, you know, we've been very positively, you know, surprised by how resilient the markets have been. And you know, in reality, what we find... You know, I was in the Middle East, and I can tell you, never before have I seen the kind of infrastructure and investment projects underway.

I was in India, and I can tell you from the times that I've, you know, came to college here and have been going back, I've never seen the kind of development that's happening in that particular region. We all know about the opportunity that's gonna happen in the U.S., Canada and Mexico over the next decade. With, you know, whether you call it reindustrialization or an industrial renaissance or reshoring, there truly is significant opportunity for companies like us, and ESAB in particular, to be able to drive volume growth. We're also looking forward to sharing a lot more detail on all of these topics during our Investor Day in December.

Mig Dobre (Senior Research Analyst)

Sure. And thank you for that, for that color, but maybe just to put a finer point here, you know, when we're looking at what your peers reported, for instance, what we have seen there, for lack of a better term, is just deceleration in activity. That's not really apparent in what you reported today, which is why I'm asking the question: Is it that the penetration of new products and all your initiatives are leading to the kind of outgrowth in the market that you deem to be sustainable, even as maybe broader demand conditions potentially shift going forward? Thank you.

Shyam Kambeyanda (President and CEO)

Yeah, so twofold. The first one is just a simple answer. Yes, we believe that we've got good, good processes in play that allow us to continue to do what we're doing and get better from there. But the other piece that I would also say is that the markets actually are showing reasonable resilience, as we see it, and where we are playing. You know, we talked about this before. We're seeing ag continue to show some strength, we're seeing renewable energy show some strength, and we continue to gain customers in that particular place. We see downstream oil and gas and investment in the Middle East, and infrastructure doing well.

The emerging markets exposure that we have, really, we've always talked about it having sort of a 2x impact on ESAB's growth, and we're seeing that play out.

Mig Dobre (Senior Research Analyst)

Okay. Thank you.

Operator (participant)

Your next question comes from the line of Chris Dankert from Loop Capital. Your line is open.

Chris Dankert (SVP of Equity Research)

Hey, good morning, everyone. It might be a question more for December here, but I'll give it a shot anyhow. You know, Kevin, I think you touched on manufacturing consolidation. Maybe just any kind of update on, you know, what the actions were in the quarter and kind of what needs to happen yet on that front?

Kevin Johnson (CFO)

Yeah, so we've been working hard on the manufacturing consolidation. We had a couple of large projects this year with a focus on our European business this year in terms of some work that we're doing. You know, there is an impact in the fourth quarter, probably of a few million dollars as a result of those actions. It's benefiting our margins, and we've got a funnel of opportunities that we're excited about for the future.

Shyam Kambeyanda (President and CEO)

Yeah, Chris, I think we've talked about this before, where we think we're in the middle innings in terms of where we think our footprint efficiency can go, but we've done a lot of heavy lifting in the past. So, but the point still is that plenty to do in terms of footprint rationalization, in terms of the things that Kevin spoke about also related to AI and data mining, that sort of fundamentally drives our OpEx to a different position. So we're looking forward to executing those as we go into the budget cycle. Kevin and I actually looked at several of those initiatives for us and we're putting plans in play, you know, depending on what the end markets do for us to either accelerate or run them through the course.

Chris Dankert (SVP of Equity Research)

Perfect. Thanks for, for the color there, both of you. And then just kind of following up here on, on price cost, any kind of color you can give us on what the impact of, of price cost was to, to EBITDA in the quarter, and kind of what we're expecting to finish out the year here?

Kevin Johnson (CFO)

Yeah, so I think as Sean mentioned earlier, we're constantly watching inflation and reacting to inflation with price. And we would say at this point, we're a little bit ahead of where we are with price over inflation, and we'll look to continue to you know monitor that closely and keep that as we you know step through the fourth quarter.

Shyam Kambeyanda (President and CEO)

We have a really strong system, as we've talked about, Chris, in the past, where we look at, you know, net impact of price within our business. Kevin did a really nice job a few years back, kind of creating what I'd call a standard work for us to monitor how our business is doing against that particular metrics. And so we feel confident that we've got enough sensors out in our space to ensure we're doing the right things associated with price. And then I spoke about the two other ones that we're going hard on, which is value pricing and PLS-based pricing in the marketplace.

Chris Dankert (SVP of Equity Research)

I guess if I could just put a fine point on that last topic there. PLS, with the price dynamic, is that—should we think about that as, like, an 80/20 price approach as we move kind of beyond this year? Or how do we think about that component of pricing after kind of the lines are kind of reset into 2024?

Shyam Kambeyanda (President and CEO)

You know, we believe that it's an ongoing initiative. You continually look at where you add value, where you are delivering significant amount of value to your customer, and work that piece. But, the short answer would be, yes, there's some sort of low-hanging fruit that come at you early, and then it becomes a stable process. But it is a powerful process of how you think about your business, how you think about your customers, and how you think about your product line and SKUs. So we're excited about it. The one thing that we've always talked about, PLS for us is not an exercise in cutting, it's an exercise in growth and efficiency, and that's what we're focused on.

Chris Dankert (SVP of Equity Research)

Got it. Thanks so much.

Operator (participant)

Your next question comes from a line of Sherif El-Sabbahy from Bank of America. Your line is open.

Sherif El-Sabbahy (Equity Research Analyst)

Hi, good morning.

Shyam Kambeyanda (President and CEO)

Hi, Sherif.

Sherif El-Sabbahy (Equity Research Analyst)

I just wanted to follow up a bit on, you know, some of the strong equipment sales you've seen. On the FABTECH side, are you seeing the uptick in equipment sales, mostly from existing customers that are buying sort of the new refreshed product lines? Or is it also growing market share among sort of the non-traditional ESAB customer?

Shyam Kambeyanda (President and CEO)

Yeah, really both. The first piece is that, you know, I sort of talked about this in the context of us having a really strong consumable franchise and not being able to sell to the customers that were already buying from us, a full portfolio. And so today, that has changed. And then the second piece that comes along with it, with these exciting new products like the VOLT, like the Warrior Edge, and the fundamental transformation of our portfolio, new customers are engaging with us, and customers that did not have the opportunity to allow for a full ESAB workflow solution are now engaging with us. And so we're actually winning on both sides. And something that I've talked about, a dollar sales for us in equipment is not only a dollar sales in growth, but a dollar in share gain.

And so it's a really nice dynamic for us. Very proud of our engineering team and the efforts that were put in, in terms of open innovation, to get us there. Our intent now is to continue to refresh this line, keep it on the forefront, keep it in the best-in-class category, and continue to build on this.

Sherif El-Sabbahy (Equity Research Analyst)

Understood. And then you mentioned just on some of the end markets, you're seeing strength in renewables. You know, we've seen some upheaval in clean energy projects, particularly on the wind side. Can you remind us just of your exposure in renewables and sort of where your areas of strength?

Shyam Kambeyanda (President and CEO)

Yeah. So do you have the number, Mark?

Mark Barbalato (VP of Investor Relations)

It's low single digits.

Shyam Kambeyanda (President and CEO)

But what we are seeing is a significant amount of investment that is going in and an activity as a result of it. I mean, yes, there may be... I mean, I'm not sure of the upheaval that you're speaking of. What we do see is a significant amount of offshore investment that's going on in Europe that's gonna continue probably for the next decade. We're seeing sort of renewable energy peak its opportunity also in the Middle East. We're seeing, obviously, the U.S. also engage hard on that particular aspect along with South America. So our opportunity list, and something that we've talked about at our industrial shows, called adaptive welding for that particular category, is actually gaining a ton of traction. We're seeing some excitement around that field where we're displacing a few incumbents.

And so, so we like, we like the space, we like the efforts our team has put in in terms of the technology that we have. And so it's, it's a growth driver for ESAB.

Sherif El-Sabbahy (Equity Research Analyst)

Got it. Thanks so much.

Operator (participant)

Your next question comes from a line of David Raso from Evercore ISI. Your line is open. David, your line is open. And your next question-

Mark Barbalato (VP of Investor Relations)

Thank you.

Operator (participant)

Yeah, we'll move on to our next question. It is from the line of Rob Jamieson from UBS. Your line is open.

Rob Jamieson (Equity Research Analyst)

Morning, guys. Congrats on a good quarter. Yeah, just real quick on the end markets. I think your exposure to auto is pretty small, like probably low single digits here in the U.S. Just, is there anything baked in to full-year UAW strikes, you know, as it's related to your consumables business in the Americas?

Shyam Kambeyanda (President and CEO)

No, we actually have very little auto exposure in the Americas, and so as a result, we really saw no impact of the strike. You know, but that being said, we do expect to continue to sort of work that aspect of the channel and continue to have growth opportunities there.

Rob Jamieson (Equity Research Analyst)

Gotcha. Okay, perfect. Thanks. And then just a couple on free cash flow. I mean, look, another strong quarter here. And Kevin, I know you mentioned the use of AI, and what that's doing for working capital. Just curious if there's opportunities to use similar technologies across the rest of the organization to maybe become more efficient on, you know, sales initiatives or leads as you're trying to grow your equipment business. And then I guess another question on, like, net leverage being sub two turns by the end of the year. Just an update on the acquisition pipeline and prioritization there. Are you still looking to expand the gas control business? Any other areas of the portfolio that you're looking to fill? Thanks.

Kevin Johnson (CFO)

Yeah, Rob, I think we've spoken a few times that we are piloting some projects in AI that are supporting the cash side of the business. But, you know, we'll probably talk a little bit more in detail about some of the activities we're doing at our Investor Day in December. But AI is something that we're looking at across the entire business, and the areas that you mentioned are areas where we are definitely focused and see significant opportunity in this evolving AI world to get even more benefits in the future. So, definitely at the forefront of our mind, and definitely something that we're, you know, working on across the wider business. In terms of the M&A and the funnel, I'll maybe hand over to Shyam.

Shyam Kambeyanda (President and CEO)

Yeah, we actually have a very strong M&A funnel, very balanced. We've got a lot of opportunities on the gas control side, as well as some opportunities to create more strength within our FABTECH business. And so, yes, we're actively working it. The funnel has never been stronger. It's just comes down to us executing, you know, based on timing on a few of them. And so we'll see when those happen. But, you know, we continue to expect to be a compounder in our category. Our intent is to create a less cyclical, higher margin, better cash flow business, and begin to shift ESAB to a narrowly diversified premier industrial.

I think we're well on our way on that particular front, and you'll see that our acquisition strategy will fuel that direction.

Rob Jamieson (Equity Research Analyst)

Great. Thanks for taking my questions.

Shyam Kambeyanda (President and CEO)

Thank you.

Operator (participant)

There are no further questions at this time. Mr. Mark Barbalato, I turn the call back over to you for some final closing remarks.

Mark Barbalato (VP of Investor Relations)

Thank you for joining us today, and we look forward to speaking to you on our next call.

Operator (participant)

This concludes today's conference call. Thank you for your participation. You may now disconnect.