Q4 2022 Hydrofarm Holdings Group Inc Earnings Call
Speaker 2: Good day ladies and gentlemen and thank you for standing by. Welcome to the Hydrofarm Holdings Group fourth quarter and Fiscal Year 2022 Earnings Conference call. At this time all participants have been placed in a listen-only mode and the lines will be open for your questions following the presentation.
Speaker 2: Please note that this conference is being recorded today, March 9, 2020-23. I would now like to turn the conference over to Anna Kate Heller at ICR. To begin, please go ahead.
Speaker 3: Thank you and good afternoon. With me on the call today is Bill Toler, Hijra Farms Chairman and Chief Executive Officer and John Lindemann, the company's Chief Financial Officer. By now everyone should have access to our fourth quarter 2022 earnings release and form 8k issued today after market close.
Speaker 3: These documents are available on the investors section of Hydrofarm's website at www.hydrofarm.com.
Speaker 3: Before we begin our formal remarks, please note that our discussion today will include forward-looking statements. These forward-looking statements are not guaranteed with future performance and therefore, you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results and different material input from our current expectations.
Speaker 3: We refer all of you to our recent SEC filings for a more detailed discussion of the risks that can impact our future operating results and financial conditions. Lastly, during today's call, we will discuss non-GAAP measures, which we believe can be useful in evaluating our performance.
Speaker 3: The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAP, and reconciliations to comparable GAAP measures are available in our range release. With that, I would like to turn the call over to Bill Toler.
Speaker 2: Thank you, Anna Kate, and good afternoon, everyone. 2022 was a challenging year for our industry and as a result for Hydrofarm. However, I'm encouraged to report that we finish the year at the upper end of our previously provided outlook for net sales for last year.
Speaker 2: We also generate a positive free cash flow in Q4, marking the third consecutive quarter of positive cash generation.
Speaker 2: While I'm encouraged by these metrics, it is really the many decisions we made, the actions we took last year that leave me the most optimistic about our future. In Q4, our team here in the US consolidated our product portfolio, eliminating more than 40 brands, 1,100 SKUs.
Speaker 2: representing about 20% of our brands and over 33% of our SKUs.
Speaker 2: We have also begun to right-size our manufacturing and supply chain footprint by closing a nutrient manufacturing facility in Canada and we have begun subletting some space in our distribution centers.
Speaker 2: In addition, we have reduced total headcount by more than 30%, primarily as a result of integrating the companies we acquired. We have also aggressively reduced our working capital and have begun to further expand our sales efforts into non-cannabis channels including
Speaker 2: CEA, food and floral and lawn and garden. As you see in today's earnings release, some of these actions started in Q4 and were part of a restructuring initiative, which John will elaborate on later.
Speaker 4: Collectively, these actions set us up to be a leaner, more nimble, more diverse, and importantly, more profitable business.
Speaker 4: And so looking ahead, I see brighter days ahead on many fronts. From a sales perspective, we have experienced stabilization in our average daily sales from November of 2022 through February of 2022. We're also starting to see some positive signals from several industry metrics.
Speaker 4: Although no single data source captures a complete view of demand in the hydroponic or cannabis industry, we are encouraged to see several data points that reflect some level of stabilization.
Speaker 4: In particular, according to headset data, US cannabis dispensary inventory in 23 is below the average inventory in 22. And US cannabis prices have been stabilizing in many markets, while US cannabis dispensary sales measured by unit volume has continued to grow.
Speaker 4: We believe our recent sales trends in these positive signals give us a reason to expect a return to growth in the second half of 2023.
Speaker 4: From a profit margin standpoint, we expect to see many of the benefits of the actions we took in 2022 come to fruition. Specifically this year, we expect improved sales mix, more focused and efficient trade spend, and increased productivity across our manufacturing and distribution centers.
Speaker 4: All of which will help in driving improvement in our adjusted eva dha and our adjusted eva dha margin.
Speaker 4: Finally, as we begin a new fiscal year, I'd like to remind all of our stakeholders of my bullish view on the long-term prospects for our Category and for Hydroform. Our company has a long history of double-digit, compound annual growth despite some brief periods of revenue softness.
Speaker 4: The fact still remains that in the US, the largest consumer economy in the world, a large portion of the population is still just beginning to experience the improved access to cannabis, reduced stigma, and higher quality branded products that come from legalized medical and adult use regulations.
Speaker 4: and that should drive more reliable and trackable consumption patterns.
Speaker 4: Given this incredible industry dynamic, our team remains resilient and focused on executing our strategy position in the company for higher margins and future growth. For these reasons, I have made several open market purchases in 2022 continue to increase my personal investment in hydropower. My actions support my view that we are positioned to be a proven leader in the hydropower industry.
Speaker 4: With that, I'll turn it over to John who will let you discuss further details of our fourth-quarter financials and provide our outlook for 2023. John ? Thank you very much for having us.
Speaker 5: Thanks, Bill, and good afternoon, everyone. Net sales for the fourth quarter were 61.5 million compared to 110.4 million in the prior year period.
Speaker 5: Our 2021 acquisitions added 3.1% to our top line in the fourth quarter of 2022 relative to the prior year period. But this M&A benefit was more than offset by a 46% decline in organic sales volume.
Speaker 5: We realized the 0.9% price mix decline in the quarter, which was driven by a strong effort from our sales team to sell through discounted lighting products.
Speaker 5: Without that factor, we estimate that our Q4 price mix impact would have been positive similar to prior quarters. Also, as noted in prior quarters, the industry recession can see to have an impact on our sales mix.
Speaker 5: While proprietary brands increased as a percentage of total sales to over 55% and Q4, the margin contribution of our proprietary brand category was diluted by the sell-through of discounted proprietary branded lighting products.
Speaker 5: We did see some positive sales trends in the quarter. First, the level of year-over-year sales declines improved in Q4 from Q3 in several more mature states including Oklahoma, Colorado, Oregon, Washington, Michigan, and Maine.
Speaker 5: Second, our commercial sales continue to advance on a relative basis.
Speaker 5: For the full year 2022, our commercial sales represented approximately 40% of total sales versus approximately 25% in the prior year.
Speaker 5: I will now take a minute to discuss our restructuring initiative.
Speaker 5: As we heard from Bill, we instituted a restructuring initiative that included consolidating our product portfolio, consolidating our Canadian, nutrient manufacturing facility, eliminating our China office, and turning contracts to help reduce future facility and transportation costs.
Speaker 5: As a result of these actions, we recorded pre-tax charges of approximately $7.7 million in Q4, of which approximately 6.1 are non-cash.
Speaker 5: We also expect to incur approximately 1.7 million of additional charges primarily in the first half of 2023 as we continue to execute our restructuring plan.
Speaker 5: We believe that our restructuring and related actions will result in efficiencies and cost savings of approximately $7 million on an annualized basis.
Speaker 5: Gross loss in the fourth quarter was $0.5 million compared to gross profit of $18.7 million in the year-ago period.
Speaker 5: Adjusted gross profit was $9 million or 14.7% of net sales in the fourth quarter compared to $23.3 million or 21.1% of net sales last year.
Speaker 5: The decrease in adjusted gross profit margin is largely due to proportionally higher freight and labor costs and $0.7 million of inventory reserve and related charges for which we did not adjust. The increase in adjusted gross profit margin is largely due to proportionally higher freight
Speaker 5: Selling in general in administrative expense was $26.2 million in the fourth quarter of 2022, compared to $27.7 million in the year-ago period. Adjusted SG&A expense was $17.4 million in the quarter versus $18.4 million last year.
Speaker 5: The decrease was primarily due to a decline in employee compensation costs, professional and asset service costs, and facility costs, are fully offset by an increase in the insurance expense.
Speaker 5: I should also note that the Justice SGA and ANQ-4 was negatively impacted by 1.8 million and accounts receivable reserves of related charges that we took there in the period.
Speaker 5: Finally, adjusted EBITDA decreased to a loss of 8.4 million in the fourth quarter from a 4.9 million profit in prior year period.
Speaker 5: The decrease in adjusted EBITDA was driven primarily by lower net sales, lower adjusted gross profit margin, as well as $2.5 million in inventory and accounts receivable reserves and related charges, again for which we did not adjust in our EBITDA calculation.
Speaker 5: Moving on to our balance sheet and overall liquidity position, our cash balance improved. The $21.3 million as of December 31st, up nearly 5 million from the third court. We ended the year with an aggregate principal amount of data outstanding of $125.8 million. The vast majority of which does not mature until 2028. And as was the case for the entirety of 2022, we have zero draw on the company's revolving credit facility. We estimate total liquidity of approximately $61.3 million as of December 31st, comprised of our cash position plus...
Speaker 5: approximately $40 million of available borrowing capacity under our revolving credit agreement. We generated positive free cash flow in Q4 and accumulated approximately $14 million in total free cash flow for the full year 2022. With that, let me now turn to our full year 2023 outlook.
Speaker 5: We expect net sales in the range of $290 million to $310 million for the full year. Our estimate assumes a seasonal lift in the spring and summer months, which we expect will be modest in comparison to the lift we have seen in four of the last five years, and which we expect will result in growth resuming in the second half of 2023.
Speaker 5: We are modeling that on the heels of the restructuring initiative in which we reduced SKUs and brands, largely in our distributed and preferred product categories, we will see a further increase in the percentage of our proprietary brands sold.
Speaker 5: We expect to feel some negative pricing impact in Q1 from the continued sell-through of discounted lighting products, but then expect positive price mix will resume for the remainder of the year, primarily from the benefit of price increases put into effect across the course of 2022. We expect to see some positive prices increase in Q1 from the continued sell-through of discounted lighting products, but then expect positive price mix will resume for the remainder of
Speaker 5: We do expect to realize productivity savings in 2023, which on top of a more favorable sales mix, should further energize our adjusted gross profit margins and help us return to margins that approach 2021 levels.
Speaker 5: To get there, we need to see sales levels within the expected range, continued improvement in our sales mix, productivity improvements contributing to lower costs, and minimal increase in inventory reserves.
Speaker 5: We expect adjusted EBITDA that is modestly positive for the full year 2023. This assumes a significant improvement in adjusted gross profit margin, some reduction in adjusted SG&A, and the expectation that inventory and accounts receivable reserves are largely behind us.
Speaker 5: We expect to generate positive free cash flow for the full year of 2023. We expect that with total sales down from our 2022 levels, we will continue to reduce our working capital and generate positive free cash flow.
Speaker 5: I should note that we do not expect to generate positive recash flow in Q1, primarily because of the seasonal nature of our cash flows. But just to be clear, we do expect positive recash flow for the full year, 2023.
Speaker 5: We have laid out a few other assumptions in today's earnings release and we encourage you to review them in conjunction with our full year outlook. In closing, I want to thank our team at Hydrofarm for all they did in 2022 to better position our business for improved profitability in 2023 and beyond.
Speaker 2: With that, let me ask the operator to open the line for any questions you may have. Thank you. Ladies and gentlemen, we'll now conduct the question and answer session. If you'd like to ask a question, please press star, then the number one on your telephone keypad. If you'd like to withdraw your question, press star, fold by two.
Speaker 6: Mentioning the lighting kind of actions that you saw that's negative pricing in the quarter. First off, could you tell us the impact of the product margin? I might be confusing things and what's adjusted and what's not. Number two, you have more to go in the first quarter if I understand that.
Speaker 6: And if I look at your drawdown in the fourth quarter of inventory, it was a $26 million or so benefit to cash flow. Was the majority of that delighting products moving, and how much more inventory drawdown do you think you can do and still maintain a healthy business?
Speaker 5: Yeah, I can jump in there and start, Bill. So thanks, Andrew.
Speaker 5: I think our lighting sales in Q4 were roughly about 10 or 11 percent of our total sales. Give you some perspective. And as we indicated, they're definitely with some margin compression. A good chunk of our lighting that we sell is proprietary branded. And again, when you think about the discounted lighting products we're selling.
Speaker 5: that are branded predominantly the high pressure sodium phantom lights, dominantly, that were sold through in Q4. We do have some more inventory of those, although our team did do a very good job selling through it in Q4. We expect that we'll work through the remainder of it in Q1.
Speaker 4: Okay, we've taken got it. Yeah. All the stuff we expect to sell through. Yeah.
Speaker 6: Gotcha. And then kind of the second question is, now that you've kind of done this restructuring initiative and if you back into your volumes this year, you're 60% of where you were in 21. Any idea, can you give us any sense of kind of where your manufacturing network is from a utilization standpoint? And if we have another step down in volume, is there more to take out or just anything you'd give us on that front? Thanks.
Speaker 4: As you well know, we bought four nutrient businesses. That's the place where we have the most overlap. We brought them in and then the volume declined. We probably had utilization in the 20 to 25 percent range. By closing the Canadian facility, that moves them up maybe in the 30s to low 40s. We still have room to go there. We don't want to have to do any more.
Speaker 4: some more levers to pull if we find that we need to get further cost out or further optimization footprint.
Speaker 2: Thanks, I'll pass it on. Thanks, Andrew. Your next question comes from Andrea Tashira from JP Morgan. Please go ahead.
Speaker 7: Thank you operator. Hi everyone. Just wanted to go back to the commentary. A couple things I want to clarify in terms of the that capacity and liquidity. I know John you mentioned that you feel comfortable but just to make sure that we are not missing anything and moving pieces there in terms of your
Speaker 7: your revolver or any financial needs that you may expect, then I think you put in $40 million now. Then the other clarifications on what you mentioned in terms of the gross margin approaching 2021 levels, so just doing the math with the lower level of revenues, I think.
Speaker 7: we should be thinking in the dollar EBITDA and how we should be thinking of progression of the quarters because when I say approaching, is that towards the end of the year when we have more of the results of the restructuring, how we should be thinking of all these moving pieces from a cadence perspective.
Speaker 5: Let me try to take those in order. I think we mentioned roughly $60 million of liquidity at the end of the year.
Speaker 5: 20 million plus on the balance sheet in cash, plus 40 million available on the line. We continue to feel good about our liquidity position for a number of reasons. Again, our debt doesn't come due, the bulk of our debt is really held in our term debt facility, roughly 124 million of the...
Speaker 5: That doesn't come due until 2028 and the principal portion that amortizes is only amortizes about 1% a year, which is roughly 1.3 million. So from a liquidity standpoint, we continue to feel good. As we noted, we expect to continue to generate positive pre-cash flow for the full year 2023. We've now done that three quarters in a row, Q2 through Q4.
Speaker 5: And our outlook, as you heard us say earlier, assumes minimal added inventory reserves for 2023. So you might want to consider the $18.5 million in inventory reserve expense in 2022 that we did not add back. And on that basis, that would drive an improvement in the adjusted gross profit margin that kind of takes you to like a 19% level. On top of that, we estimate that with the price mix expectation of improvement, which we'll get from a more effective trade spend, lap pricing benefit from pricing put in 2022.
Speaker 5: and a higher percentage of proprietary brand sales. That will have a contribution for us. We have productivity expectation in our manufacturing business, which is associated with the nutrient manufacturing consolidation. It is part of our restructuring effort. We have an expectation of productivity in our distribution centers.
Speaker 5: We're optimizing our daily activity levels against the relatively higher value of inventory that continues to exist following the SKU rationalization that was part of our restructuring effort. When you add all those things up, we think those actions offer another 200 to 400 basis points of margin opportunity for us.
Speaker 7: I Thank you realize, sorry.
Speaker 7: No, go ahead. Yeah, John , so just to this would offer 200 to 230 basis points opportunity that you think you realize the writing 2023 or that's going to be a long term goal? No, we think on the sales level that we call within that outlook range, we have an opportunity to get there over the course of 2023. So that would mean that 21 to 21.3 is like roughly, so it's about 21%, which is the level that you had in 2021. So just to make sure that that would be at some point, let's say third quarter, fourth quarter, or you think that you're going to be able to get there over the course of 2023.
Speaker 7: Obviously, you called out that pricing will be tough in the first quarter, so I'm assuming you're going to ramp to that level, but not for the full year, of course.
Speaker 7: Is that fair? That's correct. Yes, that's correct. Great. That's helpful. And then in terms of like the inventory, you mentioned that the inventory adjustments are mostly done, but you still have some pricing concessions, I guess, in the first quarter that needs to work through. So within your time frame, we're looking at the schedule frame here for May 8 through 12 from may 31th to the March 30th.
Speaker 7: your guide, like in terms of volume and pricing, how we should be thinking of the $300,000 in top line, like what is the – how should we be thinking in the midpoint $300,000,000, part of how much of that 10% decline would be coming from – actually more than that, would be coming from –
Speaker 5: much like we did here in Q4. And again, for the very same reason that we continue to sell through the remaining portion of our high-risk lighting products.
Speaker 5: But we are expecting low single digit positive pricing for the remainder of the year.
Speaker 5: And so I think when you sort of look at that across the span of the full year, think of it as a very low single digit positive pricing for the full year.
Speaker 7: here. And then the residual will just be the volume. OK. That's great. OK, OK. Perfect. Thank you. Thanks for having us on.
Speaker 8: Thanks, Andrea.
Speaker 2: Ladies and gentlemen, as a reminder, if you'd like to ask a question, please press star followed by one. Your next question comes from John Anderson from William Blair. John , please go ahead.
Speaker 2: reminder if you'd like to ask a question please press star followed by 1. Your next question comes from John Anderson from William Blair. John please go ahead. Good afternoon guys.
Speaker 8: Hey, John .
Speaker 5: I wanted to ask just about the commentary around stabilization in average daily sales and I'm not sure, I've heard similar commentary, perhaps not from you in this way, but from some others in the industry. I'm just wondering if...
Speaker 9: You know, you've seen enough of that at this point in terms of the duration, coupled with other input you're getting from customers and others in the channel that
Speaker 9: gauge your degree of confidence here that not only can we see stabilization and the seasonal recovery in 23, but then growth in the back half and what level of growth you're kind of thinking about second half.
Yeah, I think it's fair to say that we were trending the industry was trending down all the way through October and then it did begin to really flatten and sequentially show a little. Improvement November , December , January , February , so that's good. And we think that's when you take in all the factors, seasonally adjusted and all that you kind of say, all right, we really.
Others have said bouncing along the bottom, and I think that's probably a reasonable way to think about it. But the other thing that gives us more confidence is kind of the things people are saying, the inventory levels we're seeing in headset, the pricing, stabilization, the kind of...
let's say, mood and tone we're getting from customers, is speaking to there being people coming back into the business that it probably took a year, 18 months off. And we think that that is encouraging. But it's been a ride. You've been with us the whole time, John , and it's been difficult to find the bottom here. So we're very cautious about how much we call and how much we're predicting. And that's why our projection for the year is that.
290 to 310, which is still not anywhere close to where we'd like to be, but we think it's reflective of how we believe the industry to be performing right now.
Part of that back half is, of course, you're up against pretty soft comps from the back half of 22. Hopefully, you're able to show growth off of that and get to that midpoint 300 for the year and hopefully go past.
Fair enough. You mentioned the product portfolio work that you're doing. I think you mentioned 40 brands, perhaps over a thousand SKUs.
rationalized. Where are you, do you think in terms of that part of the restructuring work? Is that largely complete at this point? Is there more work to do? And where do you think as the industry does recover, how does your business look different exiting this?
recession than it did entering. And I'm thinking proprietary versus non proprietary mix, maybe even the kind of the categories that mix across the business and perhaps what that says about your kind of position in the industry. Thank you.
Yeah, no, I think that proprietary should continue to expand and it should be, you know, 55 last year, it should get deeper this year, maybe 60, 65 in two or three years from now and get to two-thirds of our business in two or three years would be, you know, proprietary. We saw some very strong branded partners we represent.
smaller businesses and some are going to go away naturally, some are going to go away representing them, some will find other people to represent them. But I think you're seeing from the bigger distributors who also own brands that we're focused on fewer SKUs, more powerful SKUs, less brands, less complexity, and hopefully a simpler, cleaner operation, which will help to come out of it all.
with a higher penetration of proprietary. We have to have the depth of proprietary brands to be able to support the infrastructure to distribute broadly to the industry the way we do. So that's important for everybody to have that kind of healthy proprietary penetration, if you will. So I think simpler business, less brands, less SKUs is certainly there. We've been doing this.
portfolio rationalization every year now for three and a half years and and I think we've done the big work but I think every year you should always do the pruning of the bottom 15 percent or so and I think you'll see that as more the size of our our work going forward. This year was a pretty good whack that we took on you know over 30 percent of the skews and you know 40 some brands is
How about in maybe some of the newer states?
That have been, I guess, somewhat delayed in terms of going live or ramping up it. I'm thinking of some in the Northeast corridor, any commentary around around what you're seeing there and whether that could be a. You know, maybe more positive tailwind. You should move forward. Thanks. Yeah, it should be. I mean, Virginia has been frustrating. They keep.
fooling around with it a bit. New Jersey and New York have been kind of hot and cold. The ones that have kind of stood out recently, Missouri has been a really good state for the industry I think. You've seen a lot of quick sales there. You've seen Louisiana is doing pretty well. There are other places that are popping up now. But yeah, the Northeast really hasn't been that huge wave that we all thought was going to happen. And I think that's been something that's...
caught us all by surprise and we hope they'll get it sorted out. There hasn't really been the windfall or the tailwind that we had hoped for. Thanks so much, guys.
surprise and we hope they'll get it sorted out. There hasn't really been the windfall or the tailwind that we had hoped for. Thanks so much, guys. Thanks, John .
Next question comes from Chris Carey from Wells Fargo Securities. Chris, please go ahead. Evening. Hey, Chris. How are you?
I'm doing okay. Can you just address the health of your core consumer right now and whether you have any concerns there as far as stabilization in the industry? I'm really referring to the growers and whether you just have any read on that one way or the other. Yeah, you do a lot of research in this area and you've got a lot of insight as well. As you know, we still sell primarily through the retail channel and we work with growers but obviously don't sell directly to them. We're close to the growers. I think you're going to see a good bit of consolidation. I think there's still...
In certain markets like in Oklahoma, far too much capacity has been built. I think Canada is still shaking out a bit on that front. California has got an awful lot as well. So I think you're going to see some shake out in capacity and some stabilization by elimination.
in some of these key markets that got overheated, if you will. Back in 2021, in early part 21, they got overheated and they had kind of an artificial level of volume that really wasn't supported by the population that they served. Probably had a lot of trans shipments moving around. And I think that as other states are now legalizing, that's going to balance out and each state will have its own infrastructure to operate the way they choose to operate. But I do think you're going to see some rationalization as these things...
the overbuilt areas get consolidated back down. Okay, all right, thanks. I know you've been discounting on lighting and you mentioned that in the press release. You know, what's your near and medium term view, you know, between consumables and durables? And apologies if I missed this, but you know as we're coming out of this.
the durables have a place in this recovery or are even more focused on just creating a more consumable portfolio going forward. So just any comments on the near term but also the strategic.
For our portfolios, so sort of two thirds, one third consumable versus durable. You know, we had some of our oldest brands are on the durable side. I rock, you know, ironically, Phantom and, you know, an active air and active aqua and other ones are, are there. I think the biggest change in lighting.
caused everybody to get a little off kilter was the fact we all got way ahead in inventory and then the speed of which high-pressure sodium shifted to LED right some industry elements have gone completely out of high-pressure sodium lights we haven't we're staying in them with a very limited range and actually they're doing okay so that part that part is good we think that
branded representation in each of the key categories is still very important to us as a strategy, as a manufacturer and a distributor. We want to compete and operate in the lighting business. We think we've got very good products in the lighting business, but our bigger part of our portfolio is going to be the consumables.
Has pricing got to the point where you can clear inventory? Do prices need to still come down? And then just your sense of lighting inventory in general, is this going to be an ongoing process depending on the year or are you getting close?
across the span of the year, really the bulk of that was in lighting. And so through that, we put ourselves in a place to be able to kind of discount the levels that we can actually sell through. And I think I mentioned earlier, 10% of our sales in the quarter were roughly in the lighting category. That may not sound like a lot, because back when we were IPO'd, it was probably about 20% of our business. But it's actually up from Q3. And so I mention that because our team did a really good job, we mentioned sort of strong effort, they did a really good job of sort of working our way through this.
through this challenged inventory. We do think we've got a little bit more to do. We've kind of focused on trying to get it done in Q1 and then hopefully have some prospects in Qs two through four for a little bit sort of cleaner selling initiative without the discount in late.
And just to give you some perspective on that, the lighting after reserves now, the value of the lighting is about equal to the percent of sales that it represents as a category for us. And when you look at total inventory. So we're much more in line than we would have been.
a year or so ago in that. So that's a very important dynamic is that you get inventory relative to your sales penetration bust segment.
Okay, helpful. Thank you very much.
Okay, helpful. Thank you very much. Thank you, Chris.
There are no further questions at this time. I'll turn it back to Bill for closing remarks. Thanks, Colin, and thank you all for this important interest in hydroforming. I look forward to speaking with you all soon. Take care. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.