Q2 2020 Simpson Manufacturing Co Inc Earnings Call
Greetings and welcome to such embedding batteries called second quarter 2020, <unk> earnings Conference call. At this time, all participants are in listen only mode.
Question answer session will follow the formal presentation, if any what's required operator systems. During the call. Please press star zero on your telephone keypad. He's no. This conference is being recorded I would now let's turn the conference or what's your host Kimberly I know I don't Investor Relations. Thank you you may begin good afternoon, ladies and gentlemen, and welcome to Simpson manufacturing companies second.
For 2020 earnings conference call any statements made on this call that are not based on historical facts are forward looking statements.
Such statements are based on certain estimates and expectations and are subject to a number of risks and uncertainties.
Actual future results may vary materially from those expressed or implied by the forward looking statements. We encourage you to read the rest describing the company's public filings and reports which are available on the fccs, where the company's corporate web site.
Except to the extent required by applicable securities laws, we undertake no obligation to update or publicly revise any of the forward looking statements that we make here today, whether as a result of new information future events or otherwise.
Please note that the Companys earnings press release issued today at approximately 415 PM Eastern time.
The earnings press releases are available on the Investor Relations page of the company's website at Simpson and F. G dotcom.
Today's call is being webcast and a replay will also be available on the Investor Relations page of the company's website.
Now I would like to turn the conference over to Karen Colonias, So since president and Chief Executive Officer.
Thanks, Kim and good afternoon, everyone.
I'm pleased to discuss our results will be today I'll begin with a high level summary of our second quarter financial results and we'll then turn to a more detailed discussion on our key performance drivers along with the actions we've been taking in response to the cobot 19 pandemic.
We executed a strong second quarter sales of $326.1 million, improving 7% year over year, and 15% quarter over quarter on higher volumes. Despite the significant level of macroeconomic challenges, resulting from coke.
19.
We maintained a strong gross profit margin of 45.9% due to a combination of sales mix.
And lower material cost on improved overhead absorption.
Yes, when coupled with her effective expense management resulted in a 35% year over year increase in our income from operations to $72.2 million and strong earnings of $1.22 per diluted share.
Our sales volume improved primarily due to the return of a home center customer during the quarter, which resulted in significantly higher demand associated with the initial product rollout into those stores.
I'll give more details on this new customer relationship momentarily.
In addition, we saw improved sales in the repair and remodel market, which were stronger than anticipated as a result of a shift in consumer behavior toward home renovation, which we believe stems from the cobot 19 can damage and associated shelter in place orders.
Partially offsetting this strength, we're volume declines specific to Europe.
Only government shutdowns in the United Kingdom, and France in late March.
Second our operations there.
These facilities are now back up and running at near full capacity.
I'd like to take this time to think all Bart Simpson employees for their dedication and commitment through their extraordinary challenging times.
As the health safety and well being up our employees is our number one priority we've been extremely diligent in our efforts to ensure Simpson remains a safe place to work.
We've been enacting rigorous safety protocols in all of our facilities, including improved sanitation measures mandatory social distancing temperature screening staggered shifts schedules and remote working when possible.
These actions in addition to being Dean and essential business have enabled us to continue operating our business with minimal disruptions during the pandemic.
Importantly, we have not experienced any supply chain disruptions related to cobot 19, and have been able to continue meeting our customer needs.
I'd now like you discuss a key driver of our performance during the second quarter.
Some of you may recall, we had a prior relationship with Lowe's back in 2011, and we're delighted to have the opportunity to once again supply their customers with our industry, leading mechanical anchors connector and fastener product solutions.
During the second quarter, we shipped our connector products into lows and expect to ship selections of both our mechanical anchors and fastener products in the current quarter.
Please note that the sell through into the low stores acquired for initial inventory stocking in Q2, and Q3 will not be indicative of volume trends moving forward.
In addition.
We anticipate some of our mechanical anchors and faster products will be phased out of the home depot throughout the remainder of the year.
These products, where in some but not all home depot locations.
Next I'll turn to an update on our S.J.P. implementation, which has continued to progress on track despite travel interruptions related to cope with 19.
We have transitioned our rollout and training efforts to a virtual format for the time being which has been working out quite well.
As of the ended the first quarter 2020, all of our U.S. be sales organizations have been transitioned over to Sep.
And as of today, we still anticipate a companywide completion goal near the end of 2021.
However, we will continue to monitor and update our timeline should cover 19 continue to impact international travel for an extended period of time.
As many of you are aware, we withdrew our financial targets associated with our 2020 plan back in April given the uncertainties surrounding the impact of cobot 19 on our operations customers and suppliers.
That said, we made significant progress from when the plan was first publicly announced to the implementation of strategic changes to our business torture, the long term sustainability and profitability over operations.
By investing in adjacent products and markets, we've achieved enhanced diversification in our product and service offerings.
Leading our business to be far less reliant on U.S., helping starch then it has been historically.
We also took significant steps to rationalize our cost structure.
In addition to reducing discretionary expense in the current environment.
In order to operate more efficiently.
The outcome. These efforts is directly evidenced by our 280 basis point improvement in our total operating expenses as a percentage of sales for the second quarter of 2020 compared to the second quarter of 2019.
In summary, we were very pleased with our second quarter financial performance. Despite the highly volatile and unpredictable environment that has continued into the third quarter.
So far in the first few weeks in July our net sales have increased approximately 10% compared to July of 2019.
Looking ahead, we believe the solid demand trends, we experienced in the second quarter of 2020 from the addition of lows and improved repair and remodel market will continue.
Offsetting expected weakness in housing construction.
Brian will provide additional details regarding our reinstated financial outlook for the full year of 2020 shortly.
We look forward to continue to execute our model with an emphasis on enhancing our operational efficiencies and cost savings, which will serve us well through this pandemic and in the long term I.
I continue to believe our business is very well positioned given our strong brand reputation and loyal customer base, which has been built over 64 years or deep rooted industry relationships are many many talented employees and our superior customer service standards.
Industry, leading high quality trusted products.
Hi level financial flexibility and a healthy balance sheet and solve liquidity position.
Thank you again to our employees for their commitment to help.
Safety and best in class customer service.
I'll now like to turn the call over to Brian will discuss our second quarter financial results and the outlook in greater detail.
Brian.
Thank you Karen and good afternoon, everyone I'm pleased to discuss our second quarter financial results with you today.
Before I begin I'd like to mentioned that unless otherwise stated all financial measures discussed.
My prepared remarks today to refer to the second quarter of 2020.
And all comparisons will be year over year comparisons versus the second quarter of 2019.
No what turning to our results.
As Karen highlighted our consolidated sales were strong increasing 7% to $326.1 million.
Within the North America segment sales increased 10.7% to $286.8 million due primarily to the return of lows and the corresponding higher sales volume necessary to support the rollout of our products into their stores.
In Europe sales decreased 14.4% to $37.4 million, mainly due to government mandated cobot 19 related closures, which resulted in lower sales volumes.
Europe sales were further negatively impacted by $1.2 million from foreign currency translations.
Bolton from Europe currencies weakening against the United States dollar.
Local currency Europe that sell still declined on the whole.
What construction products represented 86% of total sales compared to 84%.
And concrete construction products represented 14% of total sales compared to 16%.
Gross profit increased by 11.6% to $149.8 million, resulting in a gross margin of 45.9%.
Gross margin increased by 190 basis points, primarily due to improved a material costs.
Which were partially offset by higher warehouse and shipping costs.
Well the segment basis, our gross margin in North America improved to 47.4% compared to 45.1%.
All in Europe, our gross margin decreased to 35.1% compared to 37%.
From a product perspective, our second quarter gross margin on what products was 46.2 per cent compared to 43.4% in the prior year quarter.
And was 40.7% for concrete products compared to 44% in the prior your core.
Now turning to our second quarter costs that operating expense.
Research and development and engineering expenses increased.
10.3% to $12.2 billion, primarily due to increases in cash profit sharing expense and personnel costs.
Selling expenses decreased 6.5% to.
The $26.8 million due to declines in travel fuel and entertainment expenses professional fees.
And from promotional expenses, which were partly offset by increases in cash profit sharing.
Stock based compensation and personnel costs.
On a segment basis selling expenses in North America were down 4.3% and in Europe, They decreased 13.3%.
General and administrative expenses decreased 8.1% $38.6 million.
Primarily due to declines in professional and consulting fees.
And travel and entertainment expenses, which were partly offset by increases in cash profit sharing.
Stock based compensation.
Computer hardware and software expenses in depreciation and amortization.
On a segment level general and administrative expenses in North America decreased 7.9%.
In Europe Junaid decreased by 13.6%.
Total operating expenses were $77.7 billion decrease of $3.4 million or approximately 4.2%.
As a percentage of sales total operating expenses were 23.8%.
An improvement of 280 basis points compared to 26.6%.
Stock based compensation expense included adjustments to performance based shares.
5.2 million in the second quarter of 2020.
Our strong gross margin and diligent management of costs and operating expenses helped drive a 34.6% increase.
Holiday that income from operations to $72.2 million compared to $53.7 million.
In North America income from operations increased 41% to $72.2 million due to the strength of our gross profit margin coupled with reduced operating expenses.
In Europe income from operations was $2.7 million compared to $4.7 million.
Due to the combination of lower sales and slightly higher operating expenses.
On a consolidated basis, our operating income margin of 22.1% increase.
Approximately 450 basis points.
The effective tax rate decreased to 25.8%.
From 26.4%, primarily due to a reduction in foreign losses subject to valuation allowances.
Accordingly, net income totaled $53.5 million or the dollar 22 per fully diluted share.
Compared to $39.6 million.
Or 88 cents per fully diluted share.
Now turning to our balance sheet in cash flow.
Our balance sheet remain healthy with ample liquidity to operate our day to day operations.
At June Thirtyth cash and cash equivalents totaled $315.4 million.
Increase of $13.7 million compared to the balance at March 31st.
Our inventory position of $265.4 million at June Thirtyth increased $9.6 million from our balance at March 31st.
In line with the seasonal increase in inventory, we typically experience in the summer and fall months due to increased construction activity.
We continue to be highly selective in regard to inventory purchases inline with our goal to improve our inventory balance through careful management and purchasing practices.
We generated strong cash flow from operations of $29.3 million for the second quarter of 2020.
The decrease of $14.6 million or 33.2%.
During the second quarter, we used approximately $7.3 billion for capital expenditures, which included a minimal about for ongoing Sep implementation project.
In regard to stockholder returns, we paid $10.2 million and dividends to our stockholders during the second quarter.
On July 13th our board of Directors declared a quarterly cash dividend of 23 cents per share, which will be payable on October 20 socket.
The stockholders of record as of October 1st.
Before opening up the call for questions I'd like to discuss or 2020 financial outlook.
As indicated in our earnings press release issued today, we believe that we are no one a better position to provide a full year outlook, primarily reflecting an additional quarter of actual results.
As well as improved visibility on the progression of pandemic related restrictions and the impact of those restrictions on our operations.
As such based on business trends and conditions as of today.
Like 27, we estimate our outlook for the full fiscal year ending December 31, 2020 to be as follows.
Net sales are estimated to increase from the range of 1.5% to 4% compared to the for year ended December 31 2019.
Gross margin is estimated to be in the range of approximately 43% a 45%.
Operating expenses as a percentage and net sales are estimated to be in the range of approximately 27% to 29%.
The effective tax rate is estimated to be in the range of 24%, 26%, including both federal and state income taxes.
Notwithstanding the improved visibility it is important to note that the potential economic impact related to covert 19, although our operations raw material costs consumers suppliers and vendors.
Which we are unable to predict at this time may have immaterial adverse impact on her 2020 financial outlook.
In summary, despite broader cobot 19 related challenges in the marketplace. We were very pleased with our second quarter financial results and operating performance.
We remain focused on executing our strategy to <unk> to drive improved performance moving forward.
I'd like to again, thank all of our employees across the globe, who are dedicated to working safely and supporting our customers under these difficult circumstances.
Our industry leadership position geographic reach and diverse product offerings combined with our strong balance sheet and liquidity position gives us confidence in our ability to maintain our operations and support current and future demand trends.
We look forward to updating you on our progress in the coming quarters.
Thank you for your time and attention today.
At this time I'd like to open the call up for questions.
Operator.
Thank you that's actually been reluctant.
Sorry, actually before we jump into questions.
I'd like to correct the cash flow from operations figure I stated in my prepared remarks.
The corrected figure as noted in our earnings press release is as follows for the second quarter of 2020, we generated strong cash flow from operations of 30 million for the second quarter 2020, a decrease of 14 million or 31.2%.
Now I'd like to open it up for questions operator.
At this time, we will conduct in a question answer session. If you like that's question. Please press star one on your telephone keypad a confirmation. So indicate your line is in the question Q. You mean for start you. If you will affect your move your question from the Q for participants using speaker equipment, and maybe necessary to pick up your had said before Christmas Sarkies. One moment. Please if we pull for questions.
Our first question comes on line of Daniel Moore with CJS Securities. Please proceed with your question.
Karen Brian Good afternoon.
But in all right, Dan I'm, well, congratulations on a an exceptional quarter and [laughter], obviously, an extraordinary environment and remind me that's play poker with either of you anytime soon.
Side note, but.
I wanted to talk about I guess first off <unk> North America overall trends in the quarter. If we exclude the impact of lows would revenue in North America still have experienced positive growth year over year in Q2.
Oh, I see there were pretty consistent share count.
No no.
Not quite okay. That's helpful. In terms of order magnitude and then is it possible to estimate how much of the revenue from lows reflects end market demand versus pure inventory stocking.
Most Dan is is inventory stocking.
Versus.
Got a refill replenishment orders at this time work through the quarter.
Understood and I was going to ask how many stores are initially stocked as of June thirtyth, but maybe a better way as I think Karen you mentioned you benefited from connectors, while Q3 will benefit from anchors and fasteners can you give us a little more color on a relative size of the opportunity across each.
Those categories I'm, just trying to get a sense for you know selling in Q3 relative to Q2, if it's actually a larger potential opportunity or you not where it magnitude smaller.
Yes, it it's a great question, Dan a we reset for most set our product our connector product in just a little over 1700 locations.
And in Q3 will be doing somewhere.
Locations with both the fasteners and the mechanical anchors, although the set size will be substantially smaller.
Got it okay.
It appears from a gross margin perspective that the selling seen appears to be margin accretive is that a fair assessment or would you view it more neutral in the.
The strength in the quarter was more you know mix and favorable raw material costs.
Rose Bowl, but since it was primarily the connector line in that.
The in part of the wouldn't product category.
How about higher.
Mix benefit in the quarter, so little bit of all those.
Got it and all that someone jump back but the guidance.
I would ask several but from a revenue perspective implies flat to slightly lower revenue in the back half of the year you know given the rollout of lows and the clear momentum we have going into Q3 is there a reason we would expect revenue to be lower year over year I I recognize we're still in the middle of a pandemic and if it's just kobin.
Related conservatism.
Or do you do you see the housing environment getting a little bit tougher any thoughts there.
But definitely a cobot environment for for sure also but the latest figures from the census Bureau show [noise].
Housing starts.
To be lower than they were.
Last year. So I think there were couple of those.
Considerations.
That we utilized <unk> guide.
Okay.
That's it for me I will jump back cues any follow ups. Thank you.
Thanks, Dan Thanks, Dan.
Our next question comes on line of Tim Weiss with Baird. Please proceed with your question.
Hey, everybody. Good afternoon, they said they shut in a quarter, where do you guys are extended.
Maybe just on if we can just maybe started on gross margins or are there any kind of explicit headwinds to gross profit that you're kind of considering in the second half and.
I think the guide implies kind of 40% to 45% gross profit margins in the second house.
I think you're closer to really 46 in the first Tas I'm just trying to understand if there's.
Anything sequentially that would drive such a material deceleration.
Yeah, a little bit on volume related so overhead absorption.
Definitely benefits from higher volume.
And.
Oh, no potentially a little less material impact.
And the back half of the year.
Okay. Okay.
And then any any color just if you stick to your iron ore business, just any color on [noise] kind of the areas of strength you saw so I don't know if you want to talk about channels or maybe product gets to use and just.
Is that more concentrated and just some of your decking and outdoor categories or are you actually seen you know much higher activity and things like room expansions and build outs.
Well, Jim as you know, it's a little difficult tries to get that granular, but certainly as.
As you as you look at somebody's home centers.
And the shelter in place that people are working on a lot of projects and so I'm I'm thinking there's decks and senses and garage organizers.
You know our outdoor solutions product, but we'll have to get too granular on is it room additions because.
Same Joyce Tanger used for a room addition could be used to go the deck.
Okay, Okay, I get Misha and then I guess, maybe just the last one I have is you know today, what's the best assessment, you have a wholesale inventory levels today and I guess.
How would you characterize that relative to normal for your distributors I'm. Just wondering if things are leaner than normal Chris you know inventories have you given your your consideration.
[noise], Yeah, I mean, we keep a close tracking all of our sales people worked very closely with all of our distributors unless you were kind of been an normalized area, what they're holding from an inventory standpoint not.
Not an increase or decrease just sort of normalize for this time of year.
Okay. Okay I appreciate the thoughts could look on the second half.
Thank you Kim.
Our next question comes on line of steep terkel would be a debit Sir. Please proceed with your question.
Thanks, Hi, Karen Hi, Brian.
Steve.
So.
My first question is on the growth in repair and remodel and do you think that it's a temporary phenomenon whereby folks who were sequestering home to project like decks incentive where do you think it's gonna have legs as consumers invested in their homes as opposed to going on vacations to Europe in did.
In the land et cetera.
Yeah. That's it that's a good question I think are certainly again as as you look at some of the home center numbers that you see the uptick we're seeing is people working on projects that their homes I mean, we certainly focused and we'd we'd like to have that portion.
No bar market be larger and contribute more than again not being so tied to that U.S. housing start number and you can see weve developed some products that are specific for that market really our outdoor solutions are specific for those home builder projects at home on a project so.
See if that's going to be a continuation, but certainly something that we're focused on trying to get a bigger pizza.
Yeah, I mean, just you know covering the wood products space.
Russia treated lumber I mean couldn't be had really for any price.
In the second quarter and entering the third quarter as well.
So it seems a lot of it was the honey do projects it guys were saying.
I'm home like you know I got to do something so I just wonder if it's going to persist do you have any views I guess into the trends as we're now almost complete in the month of July.
Well, we don't have any view on the what we potentially could triangulate into our in our versus the.
New home starts.
It it does make sense when you think about pressure treat that's material that you're going to use for your substructure of your decks are your fences or any outdoor projects. So.
Certainly had a shortage of pressure cheatwood would correlate with what we're seeing on well be connector sales on our space.
Well, maybe asking the same question a different way lets ignore lows because there's a lot of noise as they put in their initial inventories, but how are the volumes to home depot were they up substantially into they remain up early into Q3.
Don't know about into Q3, but I think we had some good sell through at home depot and Q2.
Okay.
And then switching gears.
It doesn't sound like you guys had any shortages or outages in Q3. So what does your inventory level like you know finished goods, but also for steel because a lot of commodities are starting to move higher have you.
Late in any surplus steel.
Yeah, I think we as you look at the steel markets.
You know and when automotive shut down.
That's certainly had some impact with the steel manufacturers as far as our situation you know, we're always looking to be sure that we can.
I have the best steel and take advantage of any any price availability as well to ensure that we have material needed as we go for it so I don't think our steel levels or.
Any higher or lower than we typically have in a normalized year.
And just for Okay for comparison purposes work.
Up a bit on raw material from June.
29 team.
And then from your end so when I tend to comes out obviously, we'll have more and more detail in that but raw materials as of June 30, 2020 were.
Little bit higher than the year ago period for the prior year end.
Got you Okay. Thank you both.
Our next question comes on line of Julio remember, what's the Dougherty and company. Please see with your question.
Hey, Good afternoon Hope you all are well.
[noise] Julio Hope you are too.
Can you talk about maybe the sequential trend throughout the quarter I know last quarter on your once you call. You mentioned you know sales were down sequentially from March to April and I guess now you're calling out.
Yep.
Sales up 10% year over year in July so I guess that.
Kind of implied some pretty strong trajectory upward can you maybe just talk about that trajectory I mean was it kind of a steady trajectory throughout the quarter or did you see more of a step function.
Throughout June.
Oh, It was largely may and June.
Like you said as we noted we had called out that April a.
Figure before.
And those were the early pandemic shelter in place a lot of uncertainty days, but as we.
Stocked.
Or as we sold and product in the lows for that for that initial stocking that happened in the.
Well the latter part so that the quarter.
Versus.
April.
Got it I'm, sorry, I should have asked that like flows.
And your other businesses, if you saw that kind of trajectory.
Kind of steady or more of a step function.
I think it was more steady.
Hey.
Yep.
Morstan.
Okay and.
Maybe to follow up on Steve's question on lumber I mean.
Maybe to ask that a different way has that affected you at all I mean, you're not direct user of lumber, but that's the most maybe the downstream uses of your products, maybe trying to make up margin by trying to offset lumber price at all or is that maybe not a concern at this point everyone. Just wants to kind of you know there's so much demand out there that that wouldn't be it sure.
Yeah, we haven't seen any issues from that standpoint, I'm on the lumber front.
Okay got it and you talked about having more clarity cure to your business and I. Appreciate the guidance that you put out there I mean, I guess standing where we are today, what do you maybe the U.S. your biggest risk.
To the business as of today.
Well I'd still say the you know I'm sure you're going to cope with 19, and what that economic conditions will be I mean, we certainly saw.
Pretty dramatic change in the economy when everybody was on a shelter in places that going to happen again.
Well, we still be considered essential businesses that we provide to hardware all those are are unknown.
Understood. Thanks for taking the questions appreciate it thanks [laughter].
Once again, if you like that's question. Please press star one on your telephone keypad. Once again, if you would like first question. Please press star one on your telephone keypad.
You don't follow question from a line of Daniel Moore with CJS Securities. Please proceed with your question.
Thank you again.
In relation to the Opex guide guiding 27% to 29% of revenue for the year <unk> given the strong cost control and ramp in revenue. It was below 26% for the for the first half sort of plays a pretty big ramp and each too and you know maybe what expenses.
That you held it might be coming back in in the second half is there an incentive compensation component perhaps or.
Just the higher end just give you.
Before we go Rubin case revenue was much softer than than anticipated.
And then I think it's it's partly due to that.
Oh, the revenue expectation through the balance of the year also <unk> a large part of the the.
Quarter we.
Or we had.
Our sales team working from home so not a lot of travel not a lot of fuel costs or the like and.
Thinking that if they're out on the road as they are today.
Throughout the balance of the year.
They'll be a little bit more there, yes, but I think it's mostly due to.
Call it that but that revenue guide.
And to to get to the.
Even though the 4% growth for the year would imply a relatively flat back out for the year.
Oh, so the <unk>.
Well the relative expense amount.
To that is what is framing that that guidance on the opex.
Nothing unusual or you know a part of Gionee that you'd call out in terms of you know and incentive comp accruals or anything like that.
No.
No not really we what we did as we noted and.
We had an adjustment to stock based comp in Q2.
We had taken that down in Q1 that the shares that are.
Based on a multi year performance periods <unk>, but if we continue to track that would should that should not add anything significant in that category. So it's.
Mostly just state.
Current spend trajectory relative to.
So that more flattish revenue.
Got it and this one is more curiosity questions I'll sneak one more in I've heard lows starting to advertise obviously ended their lowes for pros campaign, but naming Simpson content.
Much more significantly and directly and their co Mark Im wondering if the is that a co marketing campaign.
You know without getting too deep in the weeds curious if that's all those spend or if it's a ah.
End of a joint venture as far as that direct marketing is concerned.
Yeah Dan.
Most does their own marketing. So we appreciate how their marketing that the fact that our product is in there is that all patients.
I think it goes to the fact that we spend a lot of time getting the product on specifications for new construction and that's really the start to pull that product through the distributors and then out to the job site. So I think it's our strength in specification is partially why that there are got that marketing program that they're working on.
Oh, that's that's a nice situation to be and that's helpful. Thanks, Karen I'm not sure that's it for me [laughter] great. Thanks, Dan.
Thanks.
Our next question comes a lot of to watch that please proceed with your question.
Hey, just a couple of clarifying questions.
Could you tell us what June sales work.
Just for frame of reference.
No we're not going to.
I'm not going to provide that it was.
No we don't we don't how about the breakout.
Okay.
And then just I guess more specifically on on Lewis is are we had just quantify the impacts in the quarter.
You too.
Well as we.
Think about it we don't necessarily comment on a on the individual customer unless or <unk>.
A greater than 10%.
Customer, we would say that.
<unk> sales into the home Center channel.
Which we would classify as a big box retailers home depot and lows.
Not including.
Co ops like ace or true value.
Would be expected to increase despite home depot pulling back on some product lines.
But but not to nothing provide we're not going to provide the individual.
Customer a meld score.
Well those.
Okay, Okay fair enough and then the 5.2 million and on the on a on the long term incentive comp did you say that that it's kind of a onetime adjustment that doesn't build back in the second half is that what you're trying to.
That's right we took a we adjusted down in Q1, and then brought that back in Q2.
Okay. Okay. So it's not at normal levels, Okay, great alright. Thank you very much guys appreciate it.
He said.
There are no further questions left in the queue. So this does conclude today's kuni.
And as well as today's conference call. You May now disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.
[music].
Oh.
[music].