Q4 2022 Methode Electronics Inc Earnings Call

Speaker 2: Good morning Ladies and gentlemen. Thank you for standing by. Welcome to the methload electronics fourth quarter fiscal 2022 results. At this time, all participants on the listen-only mode. After management's prepared remarks, there will be a question-and-answer session. I would now like to turn the call over to the host, Vice President of Investor Relations, Robert cherry. Sir, Please go ahead.

Speaker 3: Thank you, operator. Good morning and welcome to methelectronics. Fiscal 2022: fourth quarter earnings conference call.

Speaker 4: For this call, we have prepared a presentation entitled fiscal 2022: fourth quarter financial results, which can be reviewed on the westcast or found at metho com on the Investors page.

Speaker 4: This conferences call contains certain forward-looking statements which reflect management's expectations regarding future events and operating performance, and speak only end of the date hereof. These forward-looking statements are subject to the safe harbor protection provided under the Securities laws.

Speaker 4: Method undertakes no duty to update any forward-looking statement to conform the statement to actual results or changes in methods expectations on a quarterly basis or otherwise.

Speaker 4: The forward-looking statements in this conference call involve a number of risks and uncertainties.

Speaker 4: The factors that could cause actual results to differ materially from our expectations are detailed in metsod's filings with the Securities and Exchange Commission, such as our 10 -k and 10 -q reports.

Speaker 4: At this time. I'd like to turn the call over to MR Don Duda, President and Chief Executive Officer.

Speaker 5: Thank you Rob, and good morning everyone. Thank you for joining us for a fiscal 2022 fourth quarter earnings conference call.

Speaker 6: I'm joined today by ronzumas, our Chief Financial Officer.

Speaker 6: Both run- and I will- of opening comments and then we will take your questions.

Speaker 6: Let's begin with the highlights on Slide four.

Speaker 6: Our sales for the quarter were $289 million.

Speaker 6: Opening our sales by seven million were successful spot buy and premium freight cost recovery efforts.

Speaker 6: However.

Speaker 5: Our automotive segment encountered demand headwinds in North America and Europe due to program rolloffs and the ongoing global supply chain disruptions.

Speaker 5: Also in Europe . The extent of the weakness in the auto market due to the conflict in Ukraine was worse than expected.

Speaker 5: Also unexpected were the COVID-19 lack bounds in China, which led to weaker than forecasted sales in Asia.

Speaker 5: While the overall sales for the quarter were in our expected range, sales could have been better, reducing it. The effects of other headwinds.

Speaker 7: We continue to face the ongoing supply chain challenges in the quarter.

Speaker 5: Our team worked diligently to mitigate these challenges, which required remedial actions such as spot buyes and expedited shipping.

Speaker 5: We have worked relentlessly with our customers to share in the absorption of these increased costs.

Speaker 5: You may recall that we had made solid progress on this front in the third quarter.

Speaker 5: However in the fourth quarter we saw even more acceleration in our material labor and freight costs.

Speaker 5: Our ability to obtain reimbursement for or to offset these costs is likely the lag as a matter of process, as long as inflation continues.

Speaker 5: In addition, the demand weakness in Europe resultted in an unfavorable product sales mix.

Speaker 7: All of these factors, along with some unanticipated expenses, significantly changed the landscape.

Speaker 6: From the time that we proved guidance until the quarter closed at the end of April .

Speaker 5: Going forward. We will work to mitigate the cost increases and product mix impacts, as we have successfully done in the past.

Speaker 5: Ron will a library further on this later in mccall.

Speaker 5: On the order front, we had another very strong quarter with over $1 million in program awards.

Speaker 6: Of these awards approximately 90% over evy applications with a variety of products, customers and regions.

Speaker 6: I will provide more color on awards in a moment.

Speaker 8: Focusing on EV last quarter we reported the sales into EV applications when 19% of the consolidated sales.

Speaker 6: This quarter, EV sales were 70% of consolidated sales. The lower percentage was directly related to the COVID-19 kno downouns in China.

Speaker 6: Nonetheless, we still our second best quarter ever for EV sales.

Speaker 8: Given ongoing momentum in our EV activity, we are expecting sales to reach 20% of our total sales in fiscal 2020. -three and.

Speaker 5: In the quarter we further reduced debt and now had the lowest debt level since the graycon acquisition.

Speaker 6: We also made progress on reducing working capital and delivered strong free cash flow of $34 million.

Speaker 6: Last Thursday, in addition to our quarterly dividend, we announced a $1 million increase to our existing stock fiyback authorization.

Speaker 5: As of the end of the fourth quarter and now have approximately $129 million of capacity in the authorization, which expires in June of 2020. -four.

Speaker 7: Moving to Slide five.

Speaker 5: methood had another very strong quarter of business awards.

Speaker 5: The awards identified here represent some of the key wins in the quarter and represent over $1 million in annual sales at full production.

Speaker 6: As a reminder.

Speaker 5: The full launch timing of most of these programs could be anywhere in the range of one to three years from now.

Speaker 5: Also some of these awards are notable volume increases on existing OEM programs.

Speaker 7: As you can see, the list is dominated by EV programs that representing 90% of the dollar value.

Speaker 7: Was also clearly notable is the rich variety among the awards.

Speaker 7: They aninclle power, lighting and sensor products.

Speaker 7: They cover the top half and skateboard of an EV.

Speaker 7: They are with seven different auto OEMs and they are in our three main geographic regions: Europe , the U's and Asia.

Speaker 7: The EV market growth trend and our exposure to continues to be robust.

Speaker 6: In other applications. We Ward programs for an ebike sensor can offer a vehicle control module and a data center. Bus bar assembly.

Speaker 6: All strategic and growing markets and applications for methyl.

Speaker 6: Overall it was a very successful quarter for awards that will drive organic growth in future years.

Speaker 7: Turning to Slide six and our fiscal 2022 highlights.

Speaker 6: We delivered sales growth for the fifth year in roll and finish with record sales of one point one six four billion for the full year.

Speaker 6: Even excluding $22 million in cost recovery and a favorable impact from foreign exchange, we have over 4% year-over-year sales growth.

Speaker 7: Supply chain challenges and the market disruptions during the year took a toll on earnings.

Speaker 7: However program awards were' very strong, reaching almost.

Speaker 5: $3 million.

Speaker 6: We had record sales into E application for the year and they reached 70% of our total sales for the full year.

Speaker 9: As I.

Speaker 6: Already mentioned, we see that number reachion 20% in FIS Cal 2020. -three.

Speaker 6: Our balance sheet story is one that we continue to be proud of, with our debt level now at the lowest level since a 2018 acquisition of greay con.

Speaker 5: While our free cash flow generation was down year-over-year, it was still healthy in supported the purchase of over one point four million shares of stock, as well as our ongoing dividend program.

Speaker 6: With a strong award pipeline for the past two years, and the effort method is made to diversify its product portfolio further: lighting power and sensors.

Speaker 5: We are now confident to announce a three -year organic sales compounded annual growth rate target of 6% and.

Speaker 7: This targeted damage leadaves that our business model is not just healthy.

Speaker 7: But as prospering from the strategic stps that we have taken to grow the business.

Speaker 5: Turning to the Beard, it achieved over were four million sales for the year.

Speaker 7: A key factor to the success of this business has always been, and will continue to be, the ability to gnect product evaluations at hospitals.

Speaker 6: While the interest in the product has remained high in recent years, the COVID-19 pandemic has been a headwind over the last two -plus years.

Speaker 6: To our ability to execute these valuations.

Speaker 7: As such, a sales growth of business has been stunted and continues to be hampered, as sales always lag evaluations.

Speaker 10: However we remain confident in those prospects, but we're also exploring options to engage external mechanisms to help accelerate the growth in the business going forward. To conclude.

Speaker 6: It was a challenging year.

Speaker 6: In a year, playby ongoing demand headwinds and supply chain challenges.

Speaker 7: However our worldwide teams will delivered organic sales go through the year.

Speaker 6: Moving forward. I am confident, with the team's experience and operational expertise, that method is positioned to mitigate these pressures and deliver sales and earnings growth for fiscal 2020. -three.

Speaker 6: Looking beyond 2023, we are confident when our strre enategy and our award pipeline continues to be robust.

Speaker 10: This firmly putwass M on a path to deliver on our 6% compounded and annual sales growth target over the next three years.

Speaker 10: At this point, I'll turn the call over to Ron, who will provide more detail on our fourth quarter and full year.

Speaker 10: Ram.

Speaker 11: Thank you Don, and good morning everyone.

Speaker 11: Please turn to Slide. eightfourth quarter net sales were 288.7 million in fiscal 22 compared to 301 million in fiscal 21, a decrease of 12.3 million or 4%.

Speaker 11: Fiscal 22, sales included seven million of spot buy and premium freight cost recovery partially offset by an unfavorable foreign currency impact of sales of five point seven million.

Speaker 11: Excluding the spot by premium freight cost recovery and foreign currency impact.

Speaker 11: Sales decreased by 13.6 million or 4%.

Speaker 11: Sales declined in the automotive, industrial and interface segments but increased in the medical segment.

Speaker 11: The decrease in the fourth quarter sales was mainly due to program rolloffs in North America, supply chain issues in North America and weakness in Europe due to the conflict in Europe .

Speaker 11: While year-over-year sales in Asia were higher in fiscal' 22 as compared to fiscal' 21, the lockdown in China due to the Zero COVID-19 policy impacted our fourth quarter results especially to our expectations to our March guidance issuance.

Speaker 11: This weakness was partially offset by higher sales of BV product application, which amounted to 17% of sales in the quarter and for the full year.

Speaker 11: We now expect EV sales to represent over 20% of our full year fiscal' 23 consolidated sales.

Speaker 11: Income from operations decreased to 14.6 million from 33.7 million, mainly due to higher cost due to material cost, inflation spot buze and increased on reimburse freight, which accelerated during the quarter, and our ability to fully recovever the increased costs from our customers was hampered from a timing perspective.

Speaker 11: Also reduced sales and unfavorable product mix contributed to the decline in the operating margin.

Speaker 11: Fourth quarter, net income decreased 14.9 million to 16.2 million, or 43 cents per diluted share, from 31.1 million, or 81 cents per diluted share, in the same period last year.

Speaker 11: Please turn to Slide nine.

Speaker 12: Fiscal 22 fourth quarter, gross margins were 19% as compared to 25% in the fourth quarter of fiscal twenty-one.

Speaker 12: A key factor in the decline of consolidated gross margin profile was the sharp decline in the industrial segment margin profile, which is our highest margin segment by far.

Speaker 12: Industrial segment gross margins decreased to 24% in the fourth quarter down sharply from the 40% gross margin in fiscal 21 four Q and thefiscal 22 third quarter year-to-date gross margins of 34.3 percentup. The overall margins decreased in this segment. Approximately 50% was due to material cost inflation and premium freight and related issues and 25% was related to inventory related items such as unfavorable absorption due to the China lockdown increased profit neting inventory illuminations and other year-end inventory adjustments. While some of the items may recur in fiscal 23 we anticipated.

Speaker 11: Shared in the fourth quarter.

Speaker 12: We do anticipate cost inflation and supply chain disruptions to continue in our fiscal' twenty-three.

Speaker 12: Fourth quarter, selling and administrative expenses as a percentage of sales was flat at 12% in both relevant quarters.

Speaker 12: Our selling and administrative expenses. Percentage of sales is consistent from a cost structure perspective and should yield an efficient flow-through from gross margin to income from operations.

Speaker 13: Please turn to Slide 10. net income was negatively impacted from the items mentioned prior and lower other income partially offset by a lower tax expense.

Speaker 12: The effective tax rate in the fourth quarter of fiscal 'twenty-two was 6%, as compared to 15% in the fourth quarter of fiscal twenty-one.

Speaker 12: Most of the effective tax rate difference was due to a mix of jurisdictional earnings and the impact of U's guilty tax on foreign earnings.

Speaker 12: Shifting to EBITDA, a non-GAAP financial measure. Fiscal 22 fourth quarter: EBITDA was 30.8 million versus 50.8 million in the same period last year.

Speaker 12: Ebitda was negatively impacted by higher cost to to material cost inflation, spot eyes and premium freight, lower sales volumes, unfavorable product mix and lower other income.

Speaker 13: Please turn to Slide. elevenfull year net sales increased 75.6 million to one point one six four billion, which is a record, and that the fifth consecutive year of increased sales.

Speaker 12: Sales included 22.1 million of spot BU and premium freight cost recovery and five million attributed to foreign exchange.

Speaker 12: Without the cost recoveries and foreign exchange, sales increased approximately 48 million or 4%.

Speaker 12: For the full year, income from operations was 111.7 million, a decrease of 16.2 million or 13% from the 127.9 million of income from operations in fiscal' twenty-one.

Speaker 12: Income from operation was negatively impacted by lower gross margins and increased selling and administrative expenses, mainly due to increased stock compensation expense. As fiscal year 22 hhad 12 months' worth of expense as compared to seven months in fiscal' twenty-one.

Speaker 12: Fiscal 22, diluted earnings per share was $2 in 70 cents, compared to $3 and 19 cents in fiscal twenty-onemainly due from the impact from higher costs due to material cost inflation, premium freight spot buys, higher selling and administrative expenses and a higher effective tax rate of 14%, as compared to only nine point 3% in fiscal 21, which benefited from a significant amount of foreign investment tax credits.

Speaker 13: Please turn to Slide 12. in fiscal 22 we reduced gross debt by 29.6 million.

Speaker 12: Since our acquisition of greatay coun in September of 2018, we have reduced gross debt by one hundred and forty-seven million.

Speaker 11: Net debt and non-GAAP financial measure increased by 31.6 million to 38.5 million in fiscal' twenty-twofrom six point nine million at the end of fiscal 21, mainly due to the share repurchases of 64.5 million and unfavorable working capital changes, especially related to inventory, which increased significantly due to the supply change related to challenges. We ended the fourth quarter with 172 million in cash.

Speaker 12: Our debt to trailing 12 months. Ebitda ratio which is used for our bank covenants is approximately 1.19, well below our covenant threshold of three point five.

Speaker 12: Our net debt to trailily 12 months EBITDA ratio was zero point two two.

Speaker 13: Please turn to Slide. thirteenfree cash flow. A non-GAAP financial measure is defined as net cash provider from operating activities minus CapEx.

Speaker 12: Fiscal year 22 fourth quarter. Free cash flow was 33.6 million as compared to 31.2 million in the fourth quarter of fiscal 21. improvements in working capital allowed for the higher generation of cash in the quarter.

Speaker 12: For the full fiscal 22, we generated net cash provided by operating activities of nearly 99 million, as compared to 18 million in fiscal twenty-one.

Speaker 12: Lower net income of two million and a nearly $77 million. Unfavorable swing and changes in working capital accounted for most of the difference.

Speaker 12: For the full fiscal 22, we generated the free cash flow of nearly 61 million, as compared to 155 million in fiscal twenty-one.

Speaker 12: Capex was highred by 13 million in fiscal 22 as compared to fiscal' twenty-one.

Speaker 12: For fiscal' 22, guest generation was solid but trail the follow year, mainly due to fiscal' 21 working capital reductions which were noted at the time as not being likely repeatable in fiscal' 22.

Speaker 12: We expect free cash flow to improvement fiscal' 23 as we target reduced inventory levels and other positive working capital initiatives.

Speaker 12: The strengthening of the? U SD and fiscal 22 costs an nearly $12 million unfavorable swing and the FX on cash and cash equivalents. In the cash flow statement year-over-yearregarding capital allocation on June sixteenth 2022, we announced a one million increase to our existing stock bubrand program, of which approximately 29 million remains, bring the total amount available for purchases to approximately one hundred 29 million.

Speaker 12: The authorization expires in June 2024. investing for future organic growth and vertical integration remains a key priority from a capital allocation strategy perspective, especially as we rationalize our global footprint for the future, including expanding our EV capabilities, So we can better support our build where we sell strategy and better position ourselves to capitalizing on the EV mega trend.

Speaker 12: We do have a strong balance sheet and we'll continue to utilize it by continuing to invest in our businesses to grow them organically, pursue opportunities for inorganic growth and measured return of capital to the shareholders.

Speaker 13: Please turn to Slide. fourteenregarding fiscal 23 guidance is based on management's best estimates, including the impact of the COVID-19 pandemic, the headwinds from the ongoing semiconductor shortage.

Speaker 12: And both short and long-term supply chain rationalization, other logistic challenges, the conflict in the Ukraine and the rate-related impacts on our financial results, which remain an ongoing challenge.

Speaker 13: While we have experienced some success in recouping some cost recoveries, we weren't as successful in the fourth quarter as we were in the third and we do expect some of these headwinds will likely be with us for the majority of fiscal' twenty-three.

Speaker 12: The revenue range for full fiscal 23 is between one point one six billion to one billion to hundred and Ten million.

Speaker 13: The anticipated growth at the midpoint of our range, considers the impact of the GM T one program rolloff, which which had sales in fiscal year 22 of over one hundred million dollars.

Speaker 12: We expect EV sales to be at least 20% of consolidated sales in fiscal 23, up from 17% in twenty-two, and.

Speaker 13: The diluted earnings per share ranges $2 in 70 cents to $3, a 10 cents unchanged from the June fourteenth prerenannouncement and contemplates continued headwinds from supply chain inflation and other macroeconomic events.

Speaker 13: We are expecting softer earnings in the first quarter of fiscal' 23, with EPS improving as the fiscal year progresses.

Speaker 12: Our estimated effective tax rate is between 16% - 18%, without any discrete items.

Speaker 12: We anticipate increased CapEx at between 40 and five million as we expand our capabilities to support the growth in EV sales and strategically position our footprint to support production of our significantly increased order pipeline that we have built over the last two fiscal years.

Speaker 12: Depreciation and amortization expense is expected to be between 54 and fifty-eight million.

Speaker 12: Lastly, based on the strong bookings we have realized over the past two fiscal years, much of which is for the EV market, we announced the three organic compounded annual growth rate target of 6% and.

Speaker 13: This caaggard takes into account the anticipated rolloff of the relevant programs and reinforces our organic growth strategy is putting the company on a nice future organic growth trajectory. Don that concludes my comments.

Speaker 6: Well Thank you very much, Kelly. We are ready to take questions.

Speaker 2: Certainly the floor is now open for questions. If you have any questions or comments, please press star one on your phone. At this time we ask while posing your question. You Please pick up your handset if listening on a speaker phone to provide optimum sound quality. Please hold a moment while we pull for questions.

Speaker 14: Your first question is coming from Luke Junk with Baird. Please post question. Your line is life.

Speaker 15: Good morning. Thanks are taking the questions today.

Speaker 16: Look for starters was just a let us start on the top 1, hoping you could help us unpack the lower sales and power distribution that you said in the quarter. Should we read that as purely a reflection of the market and the weakness that you called in China and, I would assume, probably Europe to some extent as well, or is there anything else that we should be aware of there?

Speaker 9: I would say there's nothing unusual, as the way the orders flowed aroundandy of any additional comment it was.

Speaker 17: The smalllowest quarter in the last several, but nothing. A particularly notable mcgrand? Yes look, I think the lockdown that we experienced in China negatively impacted our ability with our products as well. Is that has lifted? We would expect that to.

Speaker 12: Relieve that pressure in the first quarter of this year after the lockdown is lifted.

Speaker 15: Okay Thank you for that. And then switching to margins, but staying with industrial, maybe a question for you around. Can you just help us by understand the earnings bridge versus last year in the segment? You know, if I look at the top line, down a few million dollars, but income from operations off more than 10, and what I'm wondering is how much of this is timing related or temporary in terms of things like mix or whatnot, as opposed to something that you'll need to ultimately recover from your customers and could have more of a lasting impact as you look into the first half of next year then.

Speaker 18: fairlook yes I took extra care to talk about the industrial segment because it is our highest margin segment and you're absolutely right. I think if we look at some of the margin miss compared to our year-to-date or 40% margin last quarter of that margin miss. About 50% of it was due to the.

Speaker 12: The material excess freight in spot 5, of which we don't anticipate. We anticipate some recovery in the future. And then part of it was due to some of the inventory-related items that I had mentioned, whether they'd be book to physical adjustments, a profit elimination and ending inventory based on the amount of inventory that's on the water. We would expect those types of cost to not not continue or certainly much harder to forecast. So we anticipate in fiscal twenty-th.ree.

Speaker 13: Our industrial gross margins gravitating more tours where we have historically been, as opposed to what we experienced in the fourth quarter.

Speaker 15: Okay Thank you for that clarification, especially the last comment there. And then the last thing I wanted to ask is a related question, But in the auto business, and just want to make sure we're reading the $7 million of spot by and premium freight cost recovery in the quarter correctly. Specifically, I don't know if you can disclose how much of that pertained to the current quarter, offset to cost the experience in the quarter versus some kind of clawback of cost that you'd incurred in prior quarters.

Speaker 12: I would say probably half and half look at at a high level 50% eachokay great well I will go ahead and leave it there. Thank you and look iys just want to clarify when on your first question. When we were talking about power and asking the effect I agree with R the evv. Power certainly affected by the shut town on and.

Speaker 17: Asia but also our other noton easy power had a slower quarter then in the past and again there's nothing special there, perhaps a little bit affective by the loack down, but more just of the order rate. But I just wanted to clarify that I was really two areas of our power group.

Speaker 19: Once again. If there are any questions or comments, please press starwone on your phone at this time. Your next question is coming from John Fran reb, with sidodi and company. Please close your question. Your line is life.

Speaker 20: Good morning guys and thanks. Taking the questions. To take a step back, you carved out freight labor or material as the reasons for the margin degradation for the company as a whole. Okay, how much- either dollar values or percentages- did it impact the fourth quarter on either relative or a sequential basis? So on the the fourth quarter, it we.

Speaker 13: Head is about three and a half million dollars net impact.

Speaker 21: Are all three those buckets o.

Speaker 12: Yes So what we build as price recovery and what we incurred as price recovery was a net negative of about three point a half million dollars.

Speaker 1: okand and when you look at the slope of chlor, ING back those, those costs.

Speaker 20: Is it something that's going to take time for any specific reason, or could you get that back relatively quickly?

Speaker 17: Round let me let me answer that person let me let me say this.

Speaker 17: And I curw. I've never had to go back to a customer twice and such short order for price increases. Order to.

Speaker 22: Expedited costs. So it's very unusual and in auto and in the commercial vehicle group. So what we have seen and we do recover those costs and when the team did up until the third quarter I thought a very good job. In the fourth quarter we ran in a more resistance because this has been going on for a while.

Speaker 22: I think I've said in the past that's that can be a six to 12 month process. Now if you have a situation where you presented to the customer. We can ship you parts but we have to over time or something very unusual in the customer agcrease or increase the purchase oto on that that will occur in the same quarter but generally if you're doing for material price increases even even fre recovery. It's it's a process and customers are getting this pressures that we are and there's we saw a fair amount of resistance in the fourth quarter thought thought we won't preail and that we 've.

Speaker 17: Over the years we've done a good job of that, but it is, it is a headwind that, as said, my prepared americmarket. It's going. It's going to be there until.

Speaker 17: Inflation subsides? Do I think whatever we incur here in the fourth quarter are were going to recover at some point in this new fiscal year? Yes, the timing of that is a bit unpredictable.

Speaker 23: Okay regarding the GM Q1 program, are you supplying? Is there any more revenue from that program? That's going to be hit in the first quarter of this year.

Speaker 24: On the GM T one lightweight truck program. That has rolled off. We will have zero revenue this quarter and has fully rolled off fourth quarter.

Speaker 20: Right right, I just make sure that, and you reference that you expect the first quarter EPS to be soft. I'm just wondering if you're comparing to a year ago or you're comparing it to the fourth quarter.

Speaker 13: Comparing the cadence from for the full fiscal year that we anticipate quarter-by-quarter basis for this year coming up, that will be- we anticipate that being- the softest.

Speaker 13: So kind of a continuation. I guess. Little lack of better. We're just coming out of the fourth quarter. Our first quarter will be the. We anticipate that being starting off soft. Okay, So in cadence whyise is the softest, but I're not suggesting that's going to be down versus the fourth quarter.

Speaker 25: That's correct perfect, okay and just, I guess, one of those question regarding your CapEx: are there any significant programs you put on initiating that we should be aware of in the coming year?

Speaker 26: Well some. A fair amount of our CapEx is going to be increased capacity for our grams that we've won, thatas going to be a significant amount of CapEx to do that. So I don't know that there's any particular program that will be CapEx intensive. That is rolling on this year. But overall, with the two years of robust bookings that we've had, especially in the space and the powers buy esspecialwe're going to have to increase our CapEx to accommodate that growth.

Speaker 20: Okay Thank you very much for taking my questions. I appreciate it. Thank you. There appeared to be no further questions in you at this time. I would now like to turn the floor back over to Donald juddo for any closing remarks.

Speaker 27: Thank you Kelly well. Thank everyone for listening and their questions and wish everyone a very safe and pleasant summer. Good day, Thank. Thank you. Ladies and gentlemen, this does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.