Greif - Q1 2023
March 2, 2023
Transcript
Operator (participant)
Good day. Thank you for standing by. Welcome to the Greif First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during this session, you will need to press star one one on your telephone. You will hear an automated message advising you that your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Matt Leahy. Please go ahead.
Matt Leahy (VP of Corporate Development and Investor Relations)
Thanks, good morning, everyone. Welcome to Greif's First Fiscal Quarter 2023 Earnings Conference Call. This is Matt Leahy, Greif's Vice President of Corporate Development and Investor Relations, and I am joined by Ole Rosgaard, Greif's President and Chief Executive Officer, and Larry Hilsheimer, Greif's Chief Financial Officer. We will take questions at the end of today's call. In accordance with Regulation Fair Disclosure, please ask questions regarding issues you consider important because we are prohibited from discussing material non-public information with you on an individual basis. Please limit yourself to one question and one follow-up before returning to the queue. Please turn to slide two. As a reminder, during today's call, we'll make forward-looking statements involving plans, expectations, and beliefs related to future events. Actual results could differ materially from those discussed.
Additionally, we'll be referencing certain non-GAAP financial measures and reconciliation to the most directly comparable GAAP metrics can be found in the appendix of today's presentation. Now I'll turn the presentation over to Ole on slide three.
Ole Rosgaard (President and CEO)
Thanks, Matt. Good morning, everyone. During our first quarter 2023, Greif took several important steps towards advancing our Build to Last strategy. We completed the acquisition of Lee Container in mid-December and are rapidly integrating this new growth business into Greif. We proudly announced our new 2030 science-aligned sustainability targets, a roadmap for achieving our goals around climate, waste reduction, and circularity. We divested one of our higher cost CRB mills and today announced that we will be reinvesting that capital into another growth platform with a significant majority ownership in Centurion Container, our IBC reconditioning joint venture. We are increasing our ownership from approximately 9% to 80% with a path to full ownership in the next few years. I am proud of the progress made so far in 2023, and I look forward to building on this new foundation in the year to come.
Our first quarter results. Our global businesses clearly felt the impact of several headwinds in the first quarter. In our fourth quarter call, we cautioned against a weaker start to the 2023 year, specifically highlighting the volume softness we were seeing, as well as the steel price cost headwinds in GIP and their impact to first quarter margins. Actual volume trends in both businesses came in below our low original expectations, the net impact was a challenging first quarter results relative to fiscal 2022, though it was the second-best first quarter in Greif's 145-year history. Also noting Q1 fiscal 2022 included full quarter EBITDA contribution from the FPS business, which was subsequently sold.
While the demand environment remains uncertain, our teams acted swiftly on cost out actions, working to match production with demand, rationalizing and optimizing our footprint, and tightly managing working capital. We will continue to aggressively manage costs during this period of volume softness, and yet will remain agile enough to respond and support our customers when demand improves. I'm proud of our team's ability to adapt to the changing demand environments and our commitment to taking actions to rightsize our costs while still focusing on growth and disciplined execution of our Build to Last strategy. Please turn to slide four. On Tuesday, we signed an acquisition agreement to increase our ownership stake in Centurion Container to 80%, subject to customary closing conditions and regulatory clearances.
As I mentioned a few months ago regarding our acquisition strategy, our most attractive targets are close to our core business of industrial packaging, add diversification benefits in product offerings or end markets, and are margin accretive. We also want to grow with businesses that have a strong sustainability component. Centurion Container meets all those criteria, and I'm even more excited about the future of our partnership than I was when Greif made its initial investment almost three years ago in April of 2020. The Centurion partnership helps accelerate our growth in resin-based products with a sustainable offering of both new and reconditioned IBCs.
Since inception in 2020, the joint venture has grown EBITDA by nearly eightfold through both organic and inorganic top-line growth and a scalable business model with strong margins and exceptional cash flow conversion. I'm excited about the continued growth potential of this business, and I look forward to formally welcoming the Centurion colleagues as part of Greif after we conclude the transaction. Let's now turn back to our quarterly results on slide five, please. As mentioned earlier, in our fiscal first quarter, our Global Industrial Packaging business experienced dual headwinds in decelerating demands and temporary margin compression from rapid steel price deflation. Steel, plastic, and IBC volumes were each down low double digits year-over-year on a global basis. The North American market was weakest, largely due to lower demand within the chemical and coating end markets.
Our LATAM region remains solid, essentially flat against a strong Q1 2022 on continued strong demand from the agchem and food markets. EMEA and APAC volumes were weak through most of the quarter, we saw some isolated sequential improvements in order patterns in February that gives us some hope that demand may be on a path to recovery in Q2. In the face of these challenges, I commend our global GIP team for their decisive actions taken in managing costs and maintaining our price discipline. Our expectation is that the combined impact of our team's actions, along with normalization in steel prices, should result in sequential margin improvements in GIP next quarter. Please turn to slide six. Paper packaging's first quarter sales declined by approximately $50 million in the quarter due to lower mill and converting volumes throughout the quarter, despite a year-on-year pricing tailwind.
First quarter volumes in our CorrChoice sheet feeder system and tube and core system were down low double digits per day compared to the very strong Q1 2022. Tube and core volumes suffered from particularly slow demand in the paper, film, core, and protective core end markets. In the quarter, Greif took approximately 94,000 tons of economic downtime across our mill system with approximately 40,000 tons taken in containerboard, 35,000 tons in URB, and the rest in CIB. As in our GIP business, our PPS team is responding quickly to the changes in demand, taking actions on costs across the network with shifts in labor cost reductions, temporary furloughs, and advancing our footprint consolidation plans. In both businesses, teams remain laser-focused on working capital management, and we expect to capitalize on incremental opportunities to improve margins and cash flow in the coming quarters.
I would like to now turn it over to our CFO, Larry Hilsheimer, on slide seven, to discuss our Q1 financial review as well as our 2022 guidance. Larry?
Larry Hilsheimer (CFO)
Thank you, Ole. Good morning, everyone. As Ole mentioned, our first quarter fiscal faced several challenging headwinds, more than we anticipated when we provided guidance in December. I, too, want to commend our teams for acting swiftly to manage costs as we face a tougher demand environment. First quarter of 2023 was Greif's second-best start to the year ever, bested only by our record Q1 2022, which included the $12 million EBITDA contribution attributable to FPS, which was sold in April of 2022. I am proud of our performance to date, given the strong economic headwinds. Net sales were down $293.3 million in the fiscal first quarter, driven primarily by volume declines and the impact of $89.4 million of prior year net sales attributable to the FPS business, which we divested last April.
Gross profit declined by $38.1 million, primarily due to lower volumes and the impacts of the previously mentioned steel price cost headwinds in our GIP business, which we expect will abate in the second half as price trends have stabilized. Adjusted EBITDA was $164.5 million in the quarter, down $32.3 million year-over-year, though only down approximately $20 million when factoring in the prior year contribution of FPS, with consolidated EBITDA margins of 12.9%, a 30 basis point improvement versus Q1 2022. CapEx came in line with our plan at $48 million for the quarter, a slight increase versus our first quarter of 2022.
Our organic growth plans remain intact. Teams are finding it easier to execute on our capital projects as the wait times on new machinery constrict and more engineering staff becomes available. As Ole mentioned, we improved our free cash flow over prior year, which is especially notable given the pronounced volume weaknesses we've seen. Highlights the solid execution of our teams on reducing working capital and generating cash. We are still challenging our teams to drive further on working capital reduction initiatives, even if demand improves. We believe we can capture additional efficiencies throughout our supply chain. Let's turn to slide eight to discuss guidance. Setting guidance in 2023 has posed a particularly difficult challenge.
In our Q4 call, we provided a guidance range of $820 million-$906 million in EBITDA and $410 million-$460 million in free cash flow. Admittedly, a wide range with a great deal of caution given the uncertainty and demand in the macro environment. We also tried to frame Q1 weaknesses for you based on the volume trends we were seeing through November and into December that we expected would level out and improve in January based on discussions with customers. That did not happen. Volumes in both businesses finished worse than our expectations through January, and that weakness has continued into February in North America while stabilizing in our other regions.
As we contemplated guidance for the remainder of the year, we determined we have insufficient data to expect an inflection point in the demand trends which we have experienced in the past two quarters beyond normal seasonal drivers in end markets, including agriculture and construction. As a result, we cannot establish a high end of guidance and consequently determined that we could choose to either provide no guidance or provide guidance assuming the trends we have been experiencing with adjustments for the seasonal drivers. We chose to provide low-end only guidance based on that determination, concluding that some guidance is better than none. We also believe that if the demands pattern continues, further deterioration in pricing in the paper industry could emerge.
On an overall basis, we've reflected volume impact in the low-end guidance of $42 million in our GIP business and $62 million in our PPS business relative to the midpoint of our prior guidance range, inclusive of 1Q results. In addition, we have included a pricing impact in the paper business of $33 million. We will not be providing the breakdown by paper grade. While this approach may seem draconian when compared to our prior guidance and especially our record results in 2022, I do want to reframe things with a broader look at history to highlight the improvements we've made in the business model and our earnings power. Looking back at our investor day last year, we presented a recession downside case of $600 million-$700 million of EBITDA and $260 million-$320 million of free cash flow.
The volume trends we're seeing at present are significantly worse than those scenarios, and our earnings and cash flow outlook is better. This low end guide is above our fiscal 2021 results excluding FPS, and yet again, our volumes are currently trending materially worse than during that year. We have simply raised the bar on performance at Greif by taking action to right-size our cost by maintaining our strict pricing discipline in the marketplace and by using our balance sheet to continue to grow the business. I'll close by saying we are hopeful that current volume pressures subside, and we see the demand recovery in the second half of 2023 in line with our view in December.
We have aggressive working capital goals in place as well as some exciting targets in our M&A pipeline, including Centurion, that, if closed and depending on timing, could add an additional $20 million-$40 million of EBITDA in 2023. Even if our low-end guidance is realized due to negative economic environment, we find comfort in the strength of our balance sheet and cash flow generation to continue to provide growth capital to fund our business in the years ahead. With that closing thought on guidance, I'd like to share again our capital allocation strategy on slide nine. As mentioned in Ole's opening remarks, even with the $300 million acquisition of Lee Container and a slower first quarter, we are still towards the low end of our target leverage ratio range.
We plan to continue to invest in our long-term strategic objectives and look to be opportunistic when attractive targets become available. I am confident, given our balance sheet strength and cash flow generation, that Greif will be able to continue to grow our dividend and repurchase shares while simultaneously funding our critical maintenance CapEx and executing on our strategic growth plan. I am excited about the strategic opportunities captured thus far in 2023 and the growing list of attractive businesses in our M&A pipeline. We will maintain our strict discipline around capital allocation and acquisitions and continue to pursue only the highest quality businesses that fit our strategy and culture and elevate the breadth and competitive positioning of the Greif portfolio. With that, I'll turn things back to Ole on slide 10.
Ole Rosgaard (President and CEO)
Thanks, Larry. To build off Larry's comments or final comments, Build to Last is about long-term growth and a strategic vision to be the best customer service company in the world. That means executing with discipline regardless of where we are in the business cycle. It also doesn't happen without thoughtful and continued capital investments. Despite our slow start to 2023, we are confident in the global Greif team to execute well in full year 2023 and post strong financial results to continue fueling our growth and business objectives. We are excited for the year ahead and will work to continue to produce results worthy of your investment in our company. We thank you for your interest in Greif. Michelle, you can open the line to questions.
Operator (participant)
Thank you. As a reminder to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Ghansham Panjabi with... Robert W. Baird, your line is open. Please go ahead.
Ghansham Panjabi (Senior Research Analyst)
Thank you. Good morning, everybody. I guess just building off your comments on destocking, do you have a sense as to where we are in that process? As it relates to your comments on February, you know, clearly China is starting to reopen. Some of the early data points seem pretty positive as it relates to, you know, economic pickup, et cetera. Are you starting to see that in specific regions, including Europe, or is it just too early at this point?
Ole Rosgaard (President and CEO)
Probably a bit too early, Ghansham, but what I can say is that we do see some improvement, especially in APAC and in Northwestern Europe. LATAM, you know, remains what, you know, fairly strong, but North America is really where we don't see any improvements. It's not getting worse, but it's not getting better either.
Ghansham Panjabi (Senior Research Analyst)
Gotcha. Then on the destocking, where do you think we are on that?
Larry Hilsheimer (CFO)
Yeah. You know, it's been extremely difficult to get any clarity on that, Ghansham. I mean, it is clear through discussions with our customer that there has been an impact to destocking, but it's not clear whether we're through it yet. I mean, Given what we've seen in February relative to volume trends in December and January, there's certainly no indication to us that anything has shifted yet.
Ghansham Panjabi (Senior Research Analyst)
Got it. Then just for my second question on Centurion, you know, can you just give us a sense as to what's so unique about the asset that underlies the EBITDA margin profile of 23% and, you know, the outsized growth since the joint venture was formed?
Ole Rosgaard (President and CEO)
It's essentially it's a service business, you know, where we collect used containers from our customers, and then either we recondition them, or we put a new container into the steel cage. When we recondition them or when we use the old plastic to manufacture new products. It's a circle of products, very sustainable. Because it's a service business, it comes with, you know, solid margins as well. It plays into our, you know, our strategy of, you know, high margin EBITDA growth.
Ghansham Panjabi (Senior Research Analyst)
Okay. Got it. Thanks so much.
Operator (participant)
Thank you. Again, if you would like to ask a question, please press star then one. One moment for our next question. Our next question comes from the line of Gabe Hajde with Wells Fargo. Your line is open. Please go ahead.
Gabe Hajde (Senior Analyst)
Yes, good morning. I think, Larry, in your prepared remarks, you talked about opportunities, I think it was specific to PPS to take out cost as well as improve working capital. If you could expand on that a little bit. I'm curious what you're referencing. You did talk about some footprint consolidation. I don't know if that's part of what you're talking about, but just help us there.
Ole Rosgaard (President and CEO)
Hey, Gabe. It's Ole here. I can talk a little bit about that. We have been planning some rooftop consolidations primarily on the converting sites, and we're speeding them up and executing them, and they're in flight at the moment. We're also looking at, you know, our shift structure, taking some shifts out, consolidating shifts so that we can maximize, you know, production when we are running. We have furloughs, two mills. We don't know when, you know, for how long, but we have furloughed them until further notice.
Larry Hilsheimer (CFO)
Yeah. Part of the other thing that comes with that revamping of our shift structure, Gabe, is in this industry, there's been a lot of structural overtime built into the way that the workers work, and we've been addressing that to take out some of that structural overtime cost.
Gabe Hajde (Senior Analyst)
Yep, understood. Okay. The other one is or second question, I guess, on the low end of guide, maybe just so we reframe it up correctly or make sure that we're hearing everything properly. You're sort of extrapolating out, you know, down, I guess, low double digits in GIP and call it low teens in PPS and then kind of holding price constant from where we're at today. You gave us the OCC assumption. I guess, A, can you confirm that? B, you know, is there a scenario that you look at when you guys kind of did your rebudget or recast that could come in lower than that, and maybe what could be the drivers there?
Larry Hilsheimer (CFO)
What we believe. Well, first of all, let me get to some of your specific numbers just to clarify. You're, you're right maybe on the GIP side. On the PPS side, you're actually light. I mean, we've been, you know, our bill volumes are, you know, low 20% down year-over-year. Now that's over some strong performance in particularly in Q2 last year. It'd be, you know, still pretty significant volume roll forwards on that that are gonna be painful. You know, could it be worse? I guess, yeah, I guess you can always have worse. We think what we've laid out, we don't have any indications to us that things are gonna get worse than where they are. We just don't have any indication it's gonna get better.
That's how we've landed where we are. I did also want to restate something I said in my prepared remarks. We believe that if, you know, this volume trend in paper continues like this, it's inevitable that there would be some price pressure. We did build in, you know, relative to the midpoint of our prior guide, about $33 million of impact of further price erosion, from where we were in our assumptions in our guidance midpoint.
Gabe Hajde (Senior Analyst)
Okay. The last one is... Yep.
Matt Leahy (VP of Corporate Development and Investor Relations)
Hey, this is Matt. I just want to clarify your question first. Were you asking the view on paper volumes for the full year or where they were trending currently?
Gabe Hajde (Senior Analyst)
Well, I guess if you offer that up, that would be great. It was more just to clarify, to make sure I understood what's embedded in the 740 number, which it sounds like it's sort of down consistent with what you reported in fiscal Q1.
Matt Leahy (VP of Corporate Development and Investor Relations)
Yeah. I think the comment is for the full year, it's not down as much as it was down in Q1.
Larry Hilsheimer (CFO)
Yeah, because there's seasonal pickup.
Matt Leahy (VP of Corporate Development and Investor Relations)
The comps get easier in the back half. I just want to be clear there that that's more what we're referring to is the, you know, the volumes we saw down in Q1 are off a pretty strong comp, and then comps get easier in the back half. Things kind of normalize throughout the year. It's not the same % decline every quarter through the full year.
Larry Hilsheimer (CFO)
Yeah. My, my point was, you know, we saw pretty significant drag in, as we talked about on last call, in 3Q beginning. Four Q was bad. You had overall volumes for fiscal 2022, as you'll remember, down about almost 3%. Now if you then add the rest of this year, it's, you know, even further down.
Gabe Hajde (Senior Analyst)
Understood. Okay. I guess the February trends, it sounds like not much has changed, but just to confirm that.
Larry Hilsheimer (CFO)
Yeah, that's correct.
Gabe Hajde (Senior Analyst)
The last one, it looks like there's, call it, I don't know, $45 million left on the share repo authorization. I guess, tough question to ask, not asking exact timing, but just maybe that would be on pause until we get a little more clarity on the macro?
Larry Hilsheimer (CFO)
No, no, we're very comfortable with our balance sheet position. We're moving forward on our stock repurchase.
Gabe Hajde (Senior Analyst)
Okay. Thank you.
Operator (participant)
Thank you. 1 moment for our next question. Our next question comes from the line of Aadit Shrestha with Stifel. Your line is open. Please go ahead.
Aadit Shrestha (Equity Research Associate VP)
All right. Thank you for taking my questions. My first question is just about Centurion. When do you actually expect that to close? You know, sort of what is the annual EBITDA profile? I know you gave $20 million-$40 million, but sort of the timeline we're pretty uncertain about. The margins kind of are they expected to be in line with, you know, Greif's IBC business already?
Larry Hilsheimer (CFO)
You know, we've got just this standard timeline to get through the regulatory process. We expect it to close near term. Just to clarify, that $20 million-$40 million was not Centurion alone. That $20 million-$40 million was Centurion and some other near-term opportunities in our M&A pipeline if they materialize. It's looking at all of that together. As the Centurion, you know, the slide in our deck does a good job of laying out what it is on an annual basis and the margin profile of it.
Aadit Shrestha (Equity Research Associate VP)
All right. Thank you. I'll take a look at that. The divestment of the CRB mill, how much sort of volume, sales, EBITDA, free cash, can we get sort of color on how much is actually being lost from that divestment?
Larry Hilsheimer (CFO)
Yeah. You know, That is a high cost mill for us. You know, It was more valuable to them than it was to us. You know, we had built in for this year, you know, a EBITDA realization for the full year that would make that a very, very attractive multiple that we sold that at, given current volume trends that we've seen. I don't really wanna go into exact numbers on the EBITDA on that mill, but it was a very nice multiple.
Matt Leahy (VP of Corporate Development and Investor Relations)
It was in our prior guidance too, by the way.
Larry Hilsheimer (CFO)
Yeah.
Matt Leahy (VP of Corporate Development and Investor Relations)
That not being in the number.
Aadit Shrestha (Equity Research Associate VP)
Okay. Thank you.
Operator (participant)
Thank you. Again, to ask a question at this time, please press star one one on your telephone. Our next question comes from the line of Justin Bergner with Gabelli. Your line is open. Please go ahead.
Justin Bergner (Research Analyst and Portfolio Manager)
Good morning, Ole. Good morning, Larry, sorry.
Larry Hilsheimer (CFO)
Morning, Justin.
Justin Bergner (Research Analyst and Portfolio Manager)
First question just is in regards to the $600 million-$700 million of downside EBITDA at the Investor Day and, you know, the $740 million being sort of a new low-end guide tracking above that. Can you sort of help handicap, I mean, the Investor Day wasn't that long ago. Can you help handicap, you know, what is allowing the business to perform better than that $600 million-$700 million scenario, despite you experiencing, you know, recessionary volume conditions, at least for your business this year?
Larry Hilsheimer (CFO)
Yeah. You know, Justin, it's a whole combination of things I've mentioned, but it's operating efficiency. We've improved things in supply chain. We have done some, you know, we're doing these footprint consolidation activities that Ole mentioned, and it's managing our shift structures. It's just a whole combination of things. Probably the biggest one is even stronger and better execution on our value over volume strategy, and really good strength on pricing discipline among our team.
Justin Bergner (Research Analyst and Portfolio Manager)
Great, that's helpful. Second question relates to, I think, the bridge from the midpoint of the prior EBITDA guide range to the $740 million. I think you said $42 million in GIP volume, $62 million in paper packaging volumes, and $33 million pricing impact. That would leave me, you know, a positive $10 million delta to get to the $740 million. Is that just sort of cost containment actions or is that something else?
Larry Hilsheimer (CFO)
Yeah. We've got a b-- Yeah, you're right on the math. The, we've got about over $40 million of actions of improvement related to the items that we mentioned. Then just got $26 million going the other way of items that are mixed, you know, product mix, margin, stuff like that, and just some inflationary cost elements that offset that.
Justin Bergner (Research Analyst and Portfolio Manager)
Got it. Thanks for filling that picture. Lastly, the Centurion transaction. I mean, given that it was a JV structure, did you actually have to bid against other parties, or did you sort of the right of first refusal?
Larry Hilsheimer (CFO)
It was a when we entered into the deal to acquire the initial piece, we had a buyout mechanism set forth in that that provided the multiple on trailing EBITDA, which is what we ended up paying on.
Justin Bergner (Research Analyst and Portfolio Manager)
Oh, okay. It was sort of like a put call provision from when the JV was entered into.
Larry Hilsheimer (CFO)
Yeah. More of a put, but yeah. Mm-hmm.
Justin Bergner (Research Analyst and Portfolio Manager)
Okay. Thank you.
Larry Hilsheimer (CFO)
Yeah, it was not an upset the process.
Justin Bergner (Research Analyst and Portfolio Manager)
Okay. Gotcha. Thank you. Best of luck.
Operator (participant)
Thank you. One moment for our next question. Our next question is a follow-up question from Gabe Hajde with Wells Fargo. Your line is open. Please go ahead.
Gabe Hajde (Senior Analyst)
Thank you, guys. Wanted to ask one on Centurion, just 'cause you did kind of give us a little bit of detail here on slide four. I guess just to calibrate properly, we make our own assumption in terms of, you know, when things might close. Let's just say, I don't know, for modeling purposes, May or something like that. I don't wanna throw water on here, but is it safe to say that this business is likely kind of experiencing similar trends that you are all seeing in your base business? We may need to adjust that.
Secondly, is part of the magic for how this thing has been able to kinda 8x EBITDA since it sounds like April 2020 when you guys made your initial investment, been just the network overlap and sort of synergy with Greif? Or is that what you'd expect sort of from a conventional refurbished business, if that makes sense? So meaning that the synergy number is sort of already baked in there, on that $24 million or 23% EBITDA margin.
Ole Rosgaard (President and CEO)
On terms of the network, obviously, we are leveraging our footprints and our customer base, in the business, so that has helped. We will continue to do that. In terms of, you know, pay, I can't really comment. We can't comment on, you know, their volume. It's safe to assume that it's in align with the rest of the macro deteriorations that we see in the markets.
Gabe Hajde (Senior Analyst)
Thank you, Ole.
Larry Hilsheimer (CFO)
The one thing I would add to that is there, you know, with us now having, you know, 80% ownership, assuming this closes, which we assume it will, you know, we will then be supplying all of the bottles for their needs, which has not been the case to date. There is some synergy pickup for us there.
Ole Rosgaard (President and CEO)
We'll be able to provide a full service to all our customers, directly rather than them receiving that service separately.
Gabe Hajde (Senior Analyst)
Got it.
Operator (participant)
Thank you. I would now like to turn the conference back to Matt Leahy for any closing remarks.
Matt Leahy (VP of Corporate Development and Investor Relations)
Very good. Thank you everyone for joining today, and have a nice day.
Operator (participant)
This concludes today's conference call. Thank you for participating. You may now disconnect.