Watts Water Technologies - Q1 2024

Transcript

Operator (participant)

Ladies and gentlemen, welcome to the Watts Water Technologies Incorporated first quarter 2024 earnings call hosted by Bob Pagano, President and CEO, Shashank Patel, CFO, and Diane McClintock, Senior Vice President, FP&A and Investor Relations. At the end, we will open the line for questions, and I will now turn the call over to Diane McClintock.

Diane McClintock (SVP of FP&A and Investor Relations)

Thank you and good morning, everyone. Welcome to our first quarter earnings conference call. Joining me today are Bob Pagano, President and CEO, and Shashank Patel, our CFO. During today's call, Bob will provide an overview of the first quarter and discuss the current state of the markets and our operations. Shashank will discuss the details of our first quarter performance and provide our outlook for the second quarter in the full year. Following our remarks, we will address questions related to the information covered during the call. Today's webcast is accompanied by a presentation which can be found in the Investor Relations section of our website. We will reference this presentation throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled in the appendix to the presentation. I'd like to remind everyone that during this call, we may be making certain comments that constitute forward-looking statements.

These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, see Watts' publicly available filings with the SEC. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. With that, I will turn the call over to Bob.

Bob Pagano (President and CEO)

Thank you, Diane, and good morning, everyone. Please turn to slide 3, and I'll provide an overview for the first quarter. We began 2024 with better-than-expected first quarter results, including record sales, adjusted operating margin, and earnings per share. I'd like to express my appreciation to the entire Watts team for their hard work that made this outperformance possible. Organic sales growth of 6% in the quarter was largely driven by extra shipping days, as discussed on our last earnings call. We also benefited from incremental sales due to our acquisitions of Enware, Bradley, and Josam. We are very pleased with the performance of these new acquisitions and expect them to continue contributing to our long-term success. Adjusted operating margin exceeded expectations, primarily due to incremental volume from the extra shipping days, solid price realization, and productivity, which more than offset inflation, lower European volume, and incremental investments.

As a result of our strong earnings and expected cash flows for the remainder of 2024, we announced a 19% dividend increase with payments beginning in June. Our balance sheet remains strong and provides ample capacity to support flexibility in our capital allocation strategy. From an operations perspective, we are pleased with the progress of the Bradley, Josam, and Enware integration efforts. Our teams are working together to capitalize on synergies and capture additional growth opportunities. We expect both acquisitions to be accretive to adjusted EPS in 2024. Regarding inflation, we continue to see cost increases across labor and overhead, and we're seeing renewed escalation of raw material costs. While the inflation rate has moderated, it is still above normal historical levels. Our teams have done a great job driving productivity not only in our operations but outside the factory walls, which has helped offset some inflationary pressure.

We continue to invest in our digital strategy, as we believe providing smart and connected solutions is vital to improving water safety and regulation, water conservation, and energy efficiency. We will provide you with an update on our Smart Water Initiative later this year. In addition, enabling our customers to achieve their sustainability goals and meeting our own remain a top priority. We'll be issuing our annual sustainability report by the end of June. Additionally, we'll be establishing new long-term goals, including an absolute carbon emissions reduction commitment. Our team has made tremendous progress advancing our sustainability strategy and initiatives, and we're looking forward to sharing this with you, so stay tuned. As I discussed during our last call, 2024 is the 150-year anniversary of Watts. We are proud of this milestone and are hosting customer and employee events across the globe to celebrate this tremendous accomplishment.

Our new customer training programs introduced in connection with our 150th anniversary have been well received. Next, I'd like to provide an update on our end markets. Global GDP, which is a proxy for our repair and replacement business, is lower than last year but remains positive in our key markets. Europe's residential and non-residential new construction markets remain soft and continue to be impacted by the conflicts in Ukraine and the Middle East. The reductions of the energy incentive programs in Germany and Italy are unfavorably impacting OEM volume, particularly in the heat pump market. In the Americas, single-family new construction is expected to remain flat, at least until interest rates begin to ease. Multifamily new construction indicators, including starts and permits, have been down double digits in recent months and indicate a decline in multifamily new construction as 2024 progresses.

Non-residential new construction indicators in the Americas are mixed. The ABI has been below 50 since July 2023, and the Dodge Momentum Index turned negative in March. However, the most recent ENR, Construction Industry Confidence Index, rose above 50 for the first time in two years. Industrial and mega projects remain resilient and are expected to be supportive in 2024 but will be tempered by challenging subverticals, including retail, office, and recreation. In the Asia-Pacific region, China end markets are moderating but are still expected to grow. We are seeing improving markets in the Middle East due to continued higher oil prices. Elevated interest rates have impacted new construction in Australia and New Zealand, but GDP is still expected to be positive.

We continue to monitor the geopolitical uncertainty in the Middle East and expect to proactively address any direct or indirect impacts to our customers and supply chain as they arise. Now, an update on our outlook for the remainder of the year. We are increasing our full-year sales and operating margin outlook due to our strong first quarter performance. We expect continued weakening in Europe as new construction slows, including a decline in OEM volume from the reductions in energy incentives. As I mentioned before, the declining volume will have a more significant impact on earnings for the rest of 2024 due to our higher fixed cost base in Europe. Interest rates are now expected to remain higher for longer. This may unfavorably impact residential and non-residential new construction in the second half of the year.

With that, let me turn the call over to Shashank, who will address our first quarter results and our second quarter and revised full-year outlook. Shashank?

Shashank Patel (CFO)

Thanks, Bob, and good morning, everyone. Please turn to slide 4, and I will review the first quarter's consolidated results. Sales of $571 million were up 21% on a reported basis and up 6% organically. As Bob mentioned, we benefited from extra shipping days in the quarter. We estimate the extra days contributed approximately 7% of sales growth in the quarter. The acquisitions of Bradley, Josam, and Enware contributed approximately $68 million or 15%. In foreign exchange, primarily driven by a stronger euro, increased sales by approximately $1 million versus 2023. Compared to last year, adjusted operating profit of $104 million increased 23%, and adjusted operating margin of 18.2% was up 30 basis points. Adjusted EBITDA of $118 million increased 25%, and adjusted EBITDA margin of 20.6% was up 60 basis points.

Benefits from price, productivity, and volume from extra shipping days more than offset acquisition dilution of approximately 60 basis points, inflation, and incremental investments of $6 million. Adjusted earnings per share of $2.33 increased 21% versus last year. Earnings per share growth was driven primarily by solid operational performance, including the benefit of the extra shipping days and the strong performance of our acquisitions. The adjusted effective tax rate was 23.8%, up 130 basis points compared to the first quarter of 2023, primarily due to a lower tax benefit from the vesting of stock compensation awards that occurred in the first quarter of 2024. For GAAP purposes, we incurred $7 million of non-recurring acquisition-related charges. We also recorded a restructuring charge of $1.2 million related to several cost actions. These charges were partially offset by the non-recurring gain on the sale of an office building in Europe.

Our free cash flow for the quarter was $37 million compared to $28 million in the first quarter of last year. The cash flow increase was primarily due to higher net income and lower working capital investment. We expect sequential improvement in our free cash flow and are on track to achieve our full-year goal of free cash flow conversion greater than or equal to 90% of net income, as previously communicated. During the quarter, we repurchased approximately 20,000 shares of our Class A common stock for $4 million. Additionally, as Bob mentioned, we announced a 19% increase in our dividends that will begin in June. The balance sheet remains strong and provides us with ample flexibility. Our net debt-to-capitalization ratio at quarter-end was 3%, and our net leverage is 0.1. Our solid cash flow and healthy balance sheet continue to give us capital allocation optionality.

Please turn to slide 5, and let me provide a few comments on the regional results. Americas organic sales were up 11%, and reported sales were up 30%. Both were ahead of expectations due to slightly better price. Reported sales benefited from better-than-anticipated acquisition performance. The additional shipping days increased sales by high single digits. Solid growth in our core valve products was partly offset by declines in water quality and radiant heating products. The acquisitions of Bradley and Josam added $60 million or 19% to Americas sales in the quarter. Adjusted operating profit increased by 28%, while adjusted operating margins decreased by 40 basis points. The operating margin decline was primarily driven by acquisition dilution, inflation, and incremental investments, which more than offset price, productivity, and leverage from the extra shipping days. Europe organic sales were down 5% as we expected.

Reported sales were down 4% and included a 1% favorable impact of foreign exchange movements. The additional shipping days increased sales by mid-single digits. Growth in our drains business was more than offset by declines in wholesale plumbing in France and Benelux, as well as our OEM business in Germany and Italy, where the reduction of government subsidies and heat pump destocking had an unfavorable impact. Despite the challenge, top-line operating profit increased 3%, and operating margins increased by 110 basis points as price-favorable mix, productivity, and the extra shipping days more than offset inflation investments and volume deleverage. APMEA organic sales were up 6%. Reported sales growth of 43% was negatively impacted by 3% from unfavorable foreign exchange movements and favorably impacted by 40% or approximately $8 million of acquired Enware sales. The extra shipping days increased sales by mid-single digits.

Growth in Australia and Middle East was partially offset by declines in China due to weak residential under floor heating sales and project timing in data centers. Adjusted operating margin decreased 150 basis points as a result of inflation investments and the diluted effect of the Enware acquisition, which more than offset price, volume, and productivity. Slide 6 provides our assumptions about our second quarter and full-year operating outlook. First, let's cover the second quarter outlook. On a reported basis, we expect sales to increase between 7% and 11%. Organically, we expect sales to decrease between 1% and 5%. Organic sales in the Americas are expected to be flat, while APMEA is expected to be up low single digits, offset by a low double-digit decline in Europe. In addition, we expect approximately $64 million of incremental sales in the Americas from acquisitions.

Second quarter adjusted EBITDA margins are expected to be in the range of 20%-20.6% or down 100-160 basis points. Second quarter adjusted operating margin should be in the range of 17.6%-18.2% or down 130 basis points to down 190 basis points. This is partially due to a very difficult comparison to the second quarter of 2023 when margins exceeded 19%. Additionally, acquisition dilution of 110 basis points, incremental investments, and volume deleverage, particularly in Europe, will all have an unfavorable impact. We expect incremental investments of approximately $5 million. Corporate costs should be approximately $15 million. Net interest expense should be approximately $3 million. The adjusted effective tax rate should be approximately 25%. We are estimating a 1.08 euro U.S. dollar exchange rate versus the average rate of 1.09 in the second quarter of 2023.

This would imply a decrease of 1% year-over-year or approximately $1 million in sales, which is less than a penny per share in EPS versus the prior year. Now let's cover the updated full-year outlook. For the full year 2024, we are increasing our reported sales growth outlook to a new range of +7% to +12%. Our previous guidance was +6% to +12%. Additionally, we are increasing our organic sales growth outlook to a range of -4% to +1%. Our previous guidance was a range of -5% to +1%. In effect, this raises the midpoint of our reported and organic growth range by 50 basis points based on our stronger-than-expected start in the first quarter. We are increasing our full-year Adjusted EBITDA margin outlook to a range of 19.6%-20.2% compared to our previous guidance of 19.4%-20%.

Additionally, we are raising our full-year adjusted operating margin outlook. We now expect our 2024 adjusted operating margins to be between 17.1% and 17.7% compared to our previous guidance of 16.9%-17.5%. The updated outlook for adjusted EBITDA margin and operating margins represents an increase of 20 basis points from our previous guidance and reflects the flow-through of our better-than-expected first quarter, including acquisition performance. Our free cash flow expectation remains in line with our previous outlook from February, as we expect to deliver free cash flow conversion of greater than or equal to 90% of net income in 2024. For the full year, we are now assuming a 1.08 euro U.S. dollar exchange rate, which is flat versus 2023 and down versus our previous assumption of 1.09 euro U.S. dollar exchange rate.

This change reduces our sales guidance by $5 million in sales and our EPS guidance by $0.02 cents a share for the full year versus the prior year. Regarding other key inputs for the full year, which can be found in the appendix, we expect corporate costs to be about $55 million for the year. Net interest expense should be approximately $12 million. Our estimated adjusted effective tax rate is expected to be approximately 25%. We expect our share count to be approximately 33.5 million. CapEx spending is anticipated to be approximately $50 million. Finally, depreciation and amortization should be approximately $55 million for the year. Now let me turn the call back over to Bob before we begin Q&A. Bob.

Bob Pagano (President and CEO)

Thanks, Shashank. On slide 7, I'd like to summarize our discussion before we address your questions. First quarter performance was better than we anticipated, with record first quarter sales, adjusted operating margin, and earnings per share due to better-than-expected price and acquisition performance. As a result of our solid first quarter, we are increasing our full-year sales, operating margin, and EBITDA margin outlook. Our 2024 outlook reflects our expectation of softer market conditions as the year progresses, especially in Europe. As we have said, our portfolio is agnostic to end markets, and we expect our teams to pivot to growing subverticals as needed. Our business model includes a large repair and replacement component that provides a durable base and drives steady revenue and cash flow. Despite the challenging markets, we plan to maintain our incremental investments to support long-term profitable growth, notably in our digital strategy.

We continue to focus on the integrations of Bradley, Josam, and Enware to ensure a seamless transition, and are pleased with the progress to date. Our balance sheet remains strong post-acquisitions and provides ample flexibility to support our capital allocation priorities, including the 19% increase in dividends that we recently announced. We are well-positioned financially, operationally, and commercially to take advantage of market opportunities as they arise, and I'm confident in our team's ability to execute in this uncertain environment and to continue creating value for our shareholders. With that, operator, please open the lines for questions.

Operator (participant)

Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 a second time. If you are called upon to ask your question and are listening via speakerphone on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Again, press star 1 to join the queue. Your first question comes from the line of Nathan Jones with Stifel. Your line is open.

Adam Parrington (AVP of Equity Research)

Hey, good morning. This is Adam Parrington for Nathan.

Shashank Patel (CFO)

Good morning, Adam.

Bob Pagano (President and CEO)

Good morning.

Adam Parrington (AVP of Equity Research)

Wanted to start on Europe. Really strong margin performance despite the organic revenue decline, plus given the relatively high fixed cost base there. So what was the main tailwind to margins from mix in Europe?

Shashank Patel (CFO)

Yeah, so it was a combination of favorable mix. So we had higher sales in drains where we have higher margins, and then we had lower sales in the OEM channel, primarily out of Germany, which have lower margin. So it was a double benefit on mix. And then also we benefited, as you know, we lock in certain commodities, for example, brass in Europe, and we had locked that in in Q4. We benefited from that in Q1. Certainly, copper brass has been escalating, but we benefited from some of the locks we had. And then productivity came in real strong as well in Q1.

Adam Parrington (AVP of Equity Research)

Okay. And then how should we think about margins in Europe for the remainder of the year? Should mix continue to be positive? Productivity improvements continue? Maybe a narrowing in the price-cost spread?

Shashank Patel (CFO)

Yeah, I would say that productivity and mix should continue positive. However, on the commodity side, as I said, we lock in for a period of time, so those locks do come undone, so to speak. We have seen escalating commodities, especially on the brass side. There could be some headwind down there. We'll see how it plays out for the rest of the year.

Adam Parrington (AVP of Equity Research)

Okay. Thank you for taking my questions.

Shashank Patel (CFO)

Thank you.

Operator (participant)

Your next question comes from the line of Mike Halloran with Baird. Your line is open.

Michael Halloran (Senior Research Analyst)

Hey. Good morning, everyone.

Bob Pagano (President and CEO)

Morning, Mike.

Shashank Patel (CFO)

Morning.

Michael Halloran (Senior Research Analyst)

Can you just talk about guidance front half, back half, and just run through the moving pieces? I know last call you talked about uncertainty as you moved to the back half of the year, and you reflected that in the guidance. I imagine that's still the case today, but we'd love some context on that. Then shipping days are probably an impact front half, back half, but it's certainly weighted front half from a guidance perspective relative to what you would see historically. Just want to understand the moving pieces and the thought process behind it.

Bob Pagano (President and CEO)

Yeah, Mike. Nothing has significantly changed. We believe Europe is going to continue to get soft. We also are being conservative in the second half of the year, cautious, I should say, given that we believe multifamily is going to start impacting us in the second half of the year. So we're watching that very carefully. And finally, you are correct regarding the days. The favorable days we have in Q1 get offset in Q4. So you'll see the fourth quarter be softer where we'll give up those days. So we just got to keep that in balance. But for the most part, it's playing out as we expected. Europe's probably a little softer than we expected based on current order rates, even through April. So we're watching that very carefully.

Shashank Patel (CFO)

Also, Mike, we had baked in also on the non-commercial new construction site softness in the second half because the ABI has been down for roughly nine months.

Michael Halloran (Senior Research Analyst)

Thanks for that. And let's follow up on that train of thought. Obviously, you sell into a lot of different non-RES markets, numerous commercial and institutional subsets. When you think about the moving pieces there, how does that play out as we get into next year, to the back half of the year, however you want to think about it? In other words, there's a lot of puts and takes. It's a really large market. You're talking about some of these leading indicators where there's concern, but you also feel optimistic about some of these other areas. How much of a balancing mechanism is it? Maybe just talk about the moving pieces there and anything interesting from a subset perspective.

Bob Pagano (President and CEO)

Yeah. I always start, Mike, with 60% of our business is repair and replace given our large installed base. So that tends to follow GDP. So that stabilizes a lot of these ups and downs. So you're right on some of these markets, we do offset them. For example, data centers, mega projects, a little more lumpy, but that offsets some of the softness you see potentially in multifamily and/or Europe that we're trying to balance. So we have a diversified portfolio. We move to where the work is. As I said earlier, our products are agnostic to the markets. We're just trying to shift. So we look where construction is going, and it's still happening right now. But we can't ignore some of the leading indicators, which in the past have always held true for us.

But again, our large installed base certainly helps on the repair and replacement side.

Shashank Patel (CFO)

Thank you.

Bob Pagano (President and CEO)

Thank you.

Operator (participant)

Your next question comes from the line of Jeffrey Hammond with KeyBanc Capital Markets. Your line is open.

Hey, good morning, everyone. This is David Tarantino on for Jeff.

Shashank Patel (CFO)

Good morning.

David Tarantino (AVP of Equity Research)

Maybe to start on the acquisition dilution, could you give some context around the expectation for the deals to be more dilutive in Q2 versus the first quarter? Then maybe for the full year, it looks like you're expecting modestly less dilution. Could you give some color around what's kind of the change in assumption there?

Bob Pagano (President and CEO)

So I'll start with a look at we're very pleased with the acquisition performance. Integrations are going extremely well. A lot of the heavy lifting, especially on the front end, closing up some sites, is going positive. And some of the day's favorability helped us in the first quarter because we've got them on now our 4-4-5 calendarization. But I think overall, we're very pleased. So Shashank, you want to talk about the dilution?

Shashank Patel (CFO)

Yeah. As we noted, the acquisitions outperformed in Q1, and that's why we took down the overall guide. The dilution from the acquisitions is now 70 basis points versus 80 basis points. It was less than that in Q1, right? We factored that into the equation. Overall, for the full year, we expect 70 basis points dilution from the Bradley Josam acquisitions.

David Tarantino (AVP of Equity Research)

Okay. Great. Thank you. And then could you maybe give some more color on what you're seeing in terms of underlying demand in Europe, kind of with cracks becoming a little bit more evident, and maybe the line of sight you guys have on these destocking trends? And maybe on that, could you give some color on the forward view, just given the extra days dynamic in the first quarter?

Bob Pagano (President and CEO)

Yeah. I think there's just a lot of uncertainty in Europe right now with the wars going on right now. So I think new construction is halting a little bit or slowing significantly. We're seeing that down double digits. Repair and replacement, other than, let's call it, the retrofit related to some of the heat pump initiatives, there is where we're seeing destocking in the channels. They were ordering a lot last year. And if you recall, Q1 and Q2 were very strong quarters for Europe, exceeding our expectations. And now we have some really tough compares, in particular in Europe in Q1 and Q2. So destocking, we think, is going to take at least through Q2. And then let's see at that point in time. But in general, I would say inventories have some need to go down, especially in that heat pump area.

We're cautious on Europe, as we always are, and are taking appropriate cost actions as we analyze where that business is going.

David Tarantino (AVP of Equity Research)

Great. Thank you.

Bob Pagano (President and CEO)

Thank you.

Operator (participant)

As a reminder, press star 1 if you would like to ask a question. Your next question comes from the line of Joe Giordano with TD Cowen. Your line is open.

Michael Anastasiou (VP)

Good morning, everyone. This is Michael on for Joe.

Shashank Patel (CFO)

Good morning.

Michael Anastasiou (VP)

You had mentioned in the slides that price realization was a bit higher than expected in the quarter. What was the price component specifically? And also just for the remaining part of the year, I believe the logic before was about low single-digit increase of inflation on the commodity front and also the same on the wage front. Is the calculus for the remainder of the year still the same? Thank you.

Shashank Patel (CFO)

So on the price front, we had assumed about a 1% price realization. We actually achieved about 1.5%, so about 50 basis points better than we thought, obviously, on the back of lower inflation. And on the inflation side, on the people inflation, compensation inflation, running at 3.5%-4%. On the commodity inflation, all up, all in, including the I talked about commodities, especially copper brass escalating. But overall, commodity inflation is in the 2%-3% range.

Michael Anastasiou (VP)

Great. That's helpful. And just a follow-up, if I may, but so last quarter, you mentioned OEM destocking in Europe was about a third of the business there. Can you just run through perhaps the channel and inventory at OEMs from the different regions and just kind of expectations for the remainder of the year?

Bob Pagano (President and CEO)

Yeah. I would think let's start with the Americas. I think the channel inventory is in line with expectations. So I think destocking is done pretty much for North America. So inventory levels are reasonable levels. Europe, as I said on the previous question that we just had, I think there's continued destocking in the OEM channels, which exactly what you said is about a third of our business there. APMEA, I think it's reasonable, very similar to the Americas. So really, the issue is in Europe.

Michael Anastasiou (VP)

Great. Thank you.

Bob Pagano (President and CEO)

Thank you.

Operator (participant)

As a reminder, this is star 1 if you would like to ask a question. Your next question comes from the line of Walt Liptak with Seaport Research. Your line is open.

Walt Liptak (Industrial Analyst)

Hey. Good morning. Thanks.

Bob Pagano (President and CEO)

Good morning.

Shashank Patel (CFO)

Good morning.

Walt Liptak (Industrial Analyst)

Good morning. I'll try one on the M&A with the revenue, maybe a little bit better than expected in the first quarter. Can you help us with second quarter revenue so we can get that number closer to right? I mean, there should be some seasonal uptick, I would think. Do you have a view on where revenue could be for M&A in the second quarter?

Shashank Patel (CFO)

Yeah. So Walt, for the full year between Bradley and Josam, we're talking about $210 million. And you're right. In the second quarter, it tends to be a little higher. So in that approximately $55-$57 million range, approximately.

Walt Liptak (Industrial Analyst)

Okay. And then also wanted to ask about just the Americas region. And you sell a lot through distribution, but can you differentiate as products go out to single-family versus multifamily? Or do you have a view on what the percentages are and if there are any differences that you're seeing in the trends for those markets?

Bob Pagano (President and CEO)

Look, when you look at our business, 35% of our business is residential, half of that single-family, half of that's multifamily. We've seen basically flatness in the first quarter. We're expecting flatness in the second quarter. Then we're expecting multifamily to go down in the second half of the year, low single digits, maybe to mid-single digits. That's kind of how we're looking at it, and single-family holding up flat for the rest of the year.

Shashank Patel (CFO)

Hey, Walt, just a correction on that. Acquired sales second quarter, $64 million.

Walt Liptak (Industrial Analyst)

Oh, 64. Okay.

Shashank Patel (CFO)

Yep.

Walt Liptak (Industrial Analyst)

Okay. Thanks, Mike. Do you think that your distribution channel's already adjusted in the Americas for the multifamily outlook? I think it's been kind of pretty well pronounced.

Bob Pagano (President and CEO)

Yes. Yeah. I do believe they've adjusted.

Walt Liptak (Industrial Analyst)

Okay. Okay. Great. Thank you.

Shashank Patel (CFO)

Thank you.

Operator (participant)

As a reminder, please press star 1 if you would like to ask a question. With no further questions at this time, I would now like to turn the conference back to Mr. Bob Pagano for any additional or closing remarks.

Bob Pagano (President and CEO)

Well, thank you for taking the time to join us today. We appreciate your continued interest in Watts. We look forward to speaking with you again during our second quarter earnings call in early August. Have a good day and stay safe.

Operator (participant)

Ladies and gentlemen, this concludes today's call, and we thank you for your participation. You may now disconnect.