Q2 2023 Illinois Tool Works Inc Earnings Call
Speaker 1: Good morning, my name is Rob and I will be your conference operator today. At this time I would like to welcome everyone to the ITW 2nd Quarter Earnings Conference Call. Call lines have been placed on mute to prevent any background noise.
Speaker 1: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to withdraw your question, again press star 1.
Speaker 1: For those participating in the Q&A, you will have the opportunity to ask one question, and if needed, one follow-up question. Thank you. Karen Fletcher, Vice President of Investor Relations, you may begin your conference. Thanks, Rob. Good morning and welcome to ITW's second quarter 2023 conference call. I'm joined by our Chairman and CEO Scott Santi and Senior Vice President of Investor Relations, Rob
Speaker 2: three outlook.
Speaker 1: Slide 2 is a reminder that this presentation contains forward-looking statements. We refer you to the company's 2022 Form 10-K and subsequent reports filed with the SEC for more detail about important risks that could cause actual results to differ materially from our expectations.
Speaker 1: This presentation uses certain non-GAAP measures and a reconciliation of those measures to the most directly comparable GAAP measures is contained in the press release. Please turn to slide 3 and it's now my pleasure to turn the call over to our Chairman and CEO Scott Santi.
Speaker 3: Thanks, Karen, and good morning, everyone.
Speaker 3: As you saw from our earnings release this morning, the ITW team delivered another quarter of strong operational execution and financial performance.
Speaker 3: Quarterly operating income grew 9% and exceeded $1 billion for the first time in ITW's history.
Speaker 3: Operating margin expanded 170 basis points year on year.
Speaker 3: to 24.8%, a second quarter record.
Speaker 3: with a 130 basis point contribution from Enterprise Initiatives.
Speaker 3: Operating margins for the company are now solidly above 2019 levels and
Speaker 3: With a normalizing price-cost environment, we are back to making progress toward our 2030 goal of 30%.
Speaker 3: With regard to revenues, organic growth was 3%, as stable underlying demand in many of ITW's industrial end markets was partially offset by inventory reductions at our end customers and channeled partners in response to stabilizing supply chain performance. We estimate that this impacted organic growth by a point to a point in time.
Speaker 3: through EPS screw 9%.
Speaker 3: Looking ahead, while customer and channel inventory normalization will continue to be a factor for the next several quarters at least, we expect stable underlying demand and continued strong margin and profitability performance through the balance of the year.
Speaker 3: As a result, we are raising our FOIA 2023 EPS guidance by 10 cents at the midpoint.
Speaker 3: I'll now turn the call over to Michael to discuss our Q2 performance.
Speaker 3: and full year guidance in more detail. Michael. Thanks Scott and good morning everyone. Q2 revenue grew by 2% with organic growth of 3% and divestitures reduced revenue by 1%.
Speaker 4: Foreign currency translation impact was neutral and not a headwind for the first time since the third quarter of 2021.
Speaker 4: Underlying demand remains stable across the majority of our end markets, with some softness in about 25% of our portfolio.
Speaker 4: As Scott mentioned, our businesses estimate that inventory reduction efforts by our end customers and channel partners reduced organic growth by 1 to 1.5% at the enterprise level.
Speaker 4: By geography, North America was flat, Europe grew 5%.
Speaker 4: Asia Pacific grew 11% with China up 22%.
Speaker 4: On the bottom line operating income grew 9% exceeding a billion dollars for the first time ever. Operating margins were a real highlight this quarter as they improved to a new Q2 record of 24.8%
Speaker 4: with enterprise initiatives contributing 130 basis points.
Speaker 4: Price-cost margin impact contributed 260 basis points in Q2.
Speaker 4: while higher wages and benefit costs lowered margins by around 100 basis points.
Speaker 4: In addition, we continue to fund our growth investments, including headcount additions,
Speaker 4: to support our organic growth strategies and initiatives.
Speaker 4: All in, we delivered 170 basis points of margin improvement in the quarter, with margin expansion in six of our seven segments.
Speaker 4: Three of them, welding, food equipment, and construction products, recorded all-time highs.
Speaker 4: Gap EPS was 248, an increase of 5%.
Speaker 4: And excluding one-time tax items in both years, EPS grew 9%.
Speaker 4: Our cash performance was strong as free cash flow grew 68%.
Speaker 4: to $705 million, a new Q2 record.
Speaker 4: Free cash flow was 94% on net income, about 10 percentage points above our historical Q2 average.
Speaker 4: helped by an inventory reduction of 6% since year-end. Like our end customers and channel partners, our divisions are also beginning to reduce inventory levels as supply chains normalize.
Speaker 4: That being said, we added almost a billion dollars of inventory over the last two years to mitigate supply chain challenges.
Speaker 4: And it would likely take us until the first half of next year to get our inventory levels from currently 3.2 months on hand back to our normal months on hand levels of about 2.
Speaker 4: We expect that it will be much the same for many of our channel partners and customers.
Speaker 4: Overall, for Q2, excellent operational execution.
Speaker 4: financial performance across the board including record operating income, operating margin, and gap EPS.
Speaker 4: Turning to slide 4, we wanted to spend a minute on ITW's operating margin performance in Q2.
Speaker 4: Like I said, one of the highlights of the quarter. Not only did margins significantly expand year over year and quarter over quarter, but at 24.8% margins and I'm also solidly above pre-pandemic levels and we're back on track in terms of making progress towards our goal of 30% in 2030.
Speaker 4: Let's move to the segment results starting with automotive OEM which led the segments with strong organic growth of 16% and positive growth of 2.5%.
Speaker 4: in all regions. North America was up 3%.
Speaker 4: Europe grew 18%.
Speaker 4: 18%. China grew 51%.
Speaker 4: Operating margin expanded 250 basis points to 16.8%, and price-cost margin impact turned positive for the first time in more than three years as this segment continues on the margin recovery.
Speaker 4: and improvement path that we laid out at our 2023 investor day.
Speaker 4: As a reminder, we're executing a plan to get auto OEM margins solidly back into the 20s.
Speaker 4: over the next three years.
Speaker 4: Organic growth in this segment in the second half reflects some tougher comparisons.
Speaker 4: and we expect continued meaningful sequential improvement in operating margins in Q3 and Q4.
Speaker 4: Turning to slide five.
Speaker 4: Food equipment also delivered strong organic growth of 7%, with North America up 8%.
Speaker 4: Institutional end markets were up 13% with continued strength across the board.
Speaker 4: International Revenue Group 5%, with Europe up 5%.
Speaker 4: and Asia Pacific up 2%.
Speaker 4: A real highlight was service revenue, which grew 16%. The ninth quarter in a row
Speaker 4: with double-digit growth as we continue to support existing customers, new product installations and game market share.
Speaker 4: Operating margin expanded 310 basis points to 27.8%.
Speaker 4: an all-time record for the food equipment segment.
Speaker 4: Test and measurement and electronics deliver positive organic growth of 1%.
Speaker 4: The slowdown in semiconductor related revenues, which represent about 20% of the segment, reduced the segment growth rate by 6% points.
Speaker 4: Test and measurement grew 10% with continued strong demand for capital equipment, as evidenced, for example, by Instron, which grew 30%.
Speaker 4: Electronics declined 13% on semiconductor softness, which is however beginning to show some signs of bottoming out.
Speaker 4: Moving on to slide six.
Speaker 4: Welding delivered 1% organic growth against a tough comparison of plus 22% in the prior year.
Speaker 4: Equipment revenue was essentially flat and consumables were up 2%.
Speaker 4: Industrial sales were really solid with organic growth of plus 5% on top of 27%.
Speaker 4: in the prior year, while the commercial side was down 9%, about as expected against the comparison of 19% last year.
Speaker 4: This quarter's highlight was definitely operating margin expansion of 460 basis points to 33.9%.
Speaker 4: a new record for the segment and for the company.
Speaker 4: And the fact that our highest margin segment continues to improve margins, and not just by a little bit,
Speaker 4: is a good example of the never-satisfied continuous improvement mindset.
Speaker 4: that is so core to the ITW culture and mindset across the company.
Speaker 4: Palmer's and Fluids organic revenue was down 1% against a difficult comparison of plus 10% last year.
Speaker 4: Divestitures impacted revenue by 6%.
Speaker 4: Automotive aftermarket was up 1%, polymers down 2% and fluids down 1%. On a geographic basis, North America grew 1% and international...
Speaker 4: declined 3%.
Speaker 4: Turning to slide 7, organic revenue and construction was down 6%.
Speaker 4: against a comparison of plus 15% last year.
North America was down 3%, with US residential construction down 2%.
and commercial construction which represents about 15% of the region down 5%.
Europe was down 14% and Australia and New Zealand was down 4%.
Despite some challenging end market conditions, operating margin expanded 170 basis points.
to 29.3% an all-time record for the construction products.
segment.
Finally, specialty organic revenue was down 4%, which included 1 point a headwind from product line simplification.
and an estimated three percentage points from end customer and channel inventory reduction efforts.
North America was down 7%.
and International grew 4%.
Equipment revenue, which represents about 20% of the segment, was up 23%.
and consumables were down 9%.
With that, let's move to slide 8 for an update on our full year 2023 guidance.
As you saw this morning, we raised our gap EPS guidance by 10 cents with a new midpoint of 975 based on our strong first half performance with record first half gap EPS.
of $4.81 and the expectation for stable underlying demand and continued strong margin and profitability performance through the balance of the year.
Our organic growth guidance of 3 to 5% includes our expectation that end customer and channel inventory normalization activities will continue to modestly impact overall demand through at least the balance of the year.
Operating margin is projected to expand by more than 100 basis points at the midpoint of our range of 24.5 to 25.5 percent.
which includes a contribution of more than 100 basis points from enterprise initiatives.
We're also protecting strong free cash flow performance with a conversion of over 100%.
performance with a conversion of over 100% of net income.
And we expect our typical 24% in the second half for an expected full year rate of around 23%. In summary, a strong first half both operationally and financially. And as we head into the second half, we're in a strong position to continue to deliver differentiated performance through the balance of the year. With that, Karen, I'll turn it back to you. Thank you, Michael. Rob, can you please open up the lines for questions? At this time, I would like to remind everyone in order to ask a question press star then the number one.
Thank you.
I wonder if we could address, Michael, just kind of the price cost algorithm for the remainder of the year now. We're up to 260 bits in the Q2. I know you've still got some more work to do there, particularly in automotive. So imagine you had had a small source ofd
Yeah sure Jeff, so I think overall on price cost we'd say we're on track to recover the margin impact from a period over the last two years of unprecedented inflation which has now stabilized. So in the first quarter price cost was positive 190 basis points, Q2 260 basis points and for the balance of the year we're looking at a more normalized 130 to 150 basis points.
range and for the full year we should recover somewhere around 150 to 200 basis level
I think what was encouraging is every segment is now margin positive.
including automotive OEM, and we expect that for auto, since that was your question, specifically to remain the case for the back half of the year.
And combined with enterprise initiatives, we expect sequential improvement in Q3 and Q4 in the automotive segment, and we should end up somewhere in the high teens as we exit.
2023 was still a long way to go over the next two to three years to get back to kind of the
the low to mid-20s, which is the path that we laid out at investor day. Great. And your comments about the supply chain normalization and everything were pretty clear, but I just wonder if you could give us some perspective on your backlogs. Typically, you don't have big backlogs, but you got the kind of 2X normal in a number of your businesses.
Where are we at the ITW level and kind of getting things back to the normal run rate?
Yeah, I think similar to what we talked about on the last call, supply chain performance continues to improve. And as that happens, our backlogs are also starting to come down. And at this point, we're still above our normal levels. If you look at
the businesses where we do carry some backlog, food equipment for example, we're running at 2x normal levels and the same is true in welding. But as I said those backlogs are coming down pretty quickly as supply chain performance improves.
Thank you very much. Sure. Your next question comes from a line of Jamie Cook from Credit Suisse. Your line is open.
Hi, good morning. Two questions. Follow up on the inventory reductions from your customers and channel partners. Exactly what's embedded in the back half of the year is another visit one to one and a half points and in the guide in the back half of the year. And then as a follow up to that, you're maintaining your revenue guide despite this, so what's doing better than expectation.
on that. Thank you. Yeah, I think the inventory reduction impact that we saw here in Q2 is now embedded in our run rates and therefore embedded in our guidance for the balance of the year. Actually, if you look at our Q2, we have a
It came in right in line with run rate, except for these de-immentory impact that we estimate at a point to a point and a half. And underlying demand, as we said, is really stable, if not strong in places like auto and food equipment. So we feel really good about...
our assumptions here going into into the back half of the year. You know your question specifically on construction, you know I agree with you that's
some pretty impressive performance given the challenging end markets, particularly if you look at Europe . The big drivers here continue to be enterprise initiatives, which has been called the gift that keeps on giving. By you. By me? Yes. I may say so.
And I think, you know, total company, the enterprise initiative impact ranged from 70 to 200 basis points by segment, with construction at the very high end of that, at about 200 basis points impact. And then certainly there's still some catch up on price costs. Construction was a segment that was hit harder.
than the average in 21 and 22. And so price cost did contribute in a meaningful way. We do expect that, just like we do for the rest of the enterprise, to begin to normalize here in the back half.
but we're still going to see positive price cost impact.
in response to Jeff's question, but we're still going to see positive price-cost impact, and tuning and construction in the second half.
Thank you.
Sure. Your next question comes from the line of Joe O'Day from Wells Fargo. Your line is open.
Hi, good morning. I guess I wanted to sort of extend that a little bit in terms of the comment around underlying demand being sort of stable to strong and sort of calling out auto and food equipment. But anything from sort of a regional or end market perspective that you're watching most closely.
on end market demand and sort of considerations on kind of prospects for slowing anymore.
I think overall it's been remarkably stable to, you know, if anything we saw some firming up in the second quarter based on some
I think overall it's been remarkably stable to, you know, if anything we saw some firming up in the second quarter based on some, you know, some.
Trends in the first quarter that we talked about relative to 25% of our portfolio, I think the one place we saw
Thanks, the Cathedral of Wiken was in Europe and construction.
between Q1 and Q2, but for the rest of the portfolio, I think at this point the best description is pretty firm.
Got it. And then also just the margin strength in the quarter and thinking about the back half of this year, I think the midpoint for the full year would suggest something like a twenty five and a half percent margin in the back half.
I think you've talked about continued progress on auto. Just anything else that you think to be the more notable contributors to that sequential improvement.
Yeah, the big driver continues to be the enterprise initiatives.
the work around 80-20 front to back and strategic sourcing efforts. We expect at least 100 basis points of contribution there in the second half. And then price cost, we still expect a meaningful contribution as we talked about a few minutes ago.
So all of that means that as we look at kind of the second half, we expect margins to continue to improve sequentially from Q2.
to Q3 and from Q3 to Q4, maybe somewhere around 50 to 60 basis points each quarter of sequential improvement. I think we talked in the past about 100 basis points of improvement year over year. That's still looking very good. So like I said in the prepared remarks, we're really well positioned here in terms of our margin and profitability performance.
through the balance of the year and frankly in the next year. So I'll leave it at that.
and frankly into next year. So I'll leave it at that. Thank you.
And your next question comes from a line of Tammy Zaccaria from J.P. Morgan. Your line is open.
Hi, good morning. Thank you so much for using my question.
So my first question is on food equipment. I think I saw on your slide it grew 3% while services were up to 2%. So for the equipment portion, is that entirely pricing driven? Was there any volume growth in the quarter on the equipment side?
So I think you know this, Tammy. We don't break out price and volume, and I'd say both elements contributed. And it's a little different equipment versus service, but certainly some really strong activity.
North America, I think we set up 8%, that has equipment up 5%, services up 15%, by end market institutionalism.
13%, healthcare of 18%.
Restaurants, still really strong performance there. Retail a little softer, that can be a little lumpy. International side of 5%, so I think really strong quarter by food equipment, actually looking really good for Q3.
I think that they should be putting up another really strong quarter. There might be a little bit of, if you go back and look, the comparisons are a little bit challenging.
on a year-over-year basis. But overall, the underlying demand in food equipment remains really healthy and really well positioned again for the second half.
Got it, that's very helpful color. And if I can ask a follow up about your welding segment, I thought the results there were very interesting. Upper and margin was up 460 basis points, even though organic growth was about 1% so what's driving this very strong?
Operating margin leverage. Is it purely price cost or is there something else going on in there?
There is something else going on in there Tammy. So it's a similar answer to what I said for construction. I think there is a healthy dose of enterprise initiatives.
and then we're still recovering the margin impact on price costs.
the main drivers here. And like I said, I mean price cost, we expect that to normalize in the second half, but the enterprise initiatives
We expect that to continue through the balance of the year and into next year.
Perfect, thank you.
Your next question comes from a line of Andy Kaplowitz from Citigroup. Your line is open. Good morning, everyone.
morning
So you mentioned you thought electronics related markets look like they may be bottoming out. Could you give us more color into what you're seeing there that prompted you to say that and then stepping back and focusing on the 25% of business including electronics that has been weak. Would you say that like electronics you are seeing a bottoming and you know many of these markets you know maybe outside of European construction which you already mentioned or was that statement really just
focused on electronics. So let me do the semi portions first. I mean, I think
I think there has been this.
view that the second half would be a step up from the first half. Really, we talked about this going into the year. Mostly from what we're hearing from our customers. And I was going to say, you know, the customer feedback has now become even more supportive of that view along the lines of get ready for orders to come back here in the second half to make sure you have the capacity.
and we're not baking any of that into our back. That's a good point. None of that is baked in. So I think that's...
taking them when we see it. Exactly, like we normally do. None of that would be in our run rates, obviously. And so, you know, we'd be happy to see that here late Q3, Q4 if we get those, if that really comes to two fruition. On the 25% of the portfolio, I think maybe to give you a little bit more detail, I think what was really encouraging…
this quarter is if you look at the performance of those businesses, and there are some puts and takes. There are some businesses.
And there were only down 3% in the second quarter. And actually if you look at it sequentially, the businesses as a group improve 2% sequentially. And that includes in that 25% is also, at least a portion of our semi revenues. So I think that's certainly encouraging as we look to the back half of the year. Michael, that's really helpful, man. I just wanted to go back to your commentary on regional demand. You mentioned China was up 22% in the quarter, which I think you expected. But obviously, several of your periods have talked about seeing something, I can't comment the weakness in China moving forward. You still feel a well position there.
you know, maybe given your China auto exposure, you still expecting China food equipment markets to, you know, improve any any color would be helpful. Yeah, I think any, you know, the big driver for us in China is auto. And that's our largest businesses. We talked about this on the last call we expected.
a strong Q2 in China. Based on some of the COVID-related slowing in the first quarter, we bounced back in the second quarter with auto up.
more than 50% in Q2 and all China up 22%. I think a better way to look at China is maybe if you've got the first half.
Our China business was up 7% on a year-over-year basis, and that's maybe a more accurate representation of kind of the underlying levels of demand. And so for the second half, we'd expect something kind of in the...
in the mid-single digits out of that region. But again, it's all driven by the auto business.
that's doing a phenomenal job, frankly.
Gaining share and launching new products, particularly on the EV side with domestic, local Chinese OEMs that are winning big time. And as we talked about it in the investor day. So really well positioned, not just for the second half, but for many, many years to come here in our China business and in the auto particularly.
Hey guys, good morning. Morning. Hey, can we maybe just double click a little bit on the longer term service opportunity and food equipment? Clearly, you know, 16% growth in that business. Very robust and I'm sure carries a pretty good margin for you guys as well. Can you just maybe kind of talk a little bit about, you know, how you're increasing the growth rate today and then what the expectations are going forward?
Yeah, I mean, I think the service business, we've talked about this for a long time now, in terms of long-term organic growth potential. It is a huge differentiator for us in the market. We are the only...
OEM that has service capabilities and it gives us all kinds of advantages in terms of our ability to install, service, maintain, and then capture replacement down the line. So we think there's a lot more to come on the service side. We're obviously still to some extent recovering.
You know, from COVID, if you actually look at it, the equipment side is now fully recovered to 2019 levels. The service side is still catching up.
And so we expect that there's still a lot of runway, particularly with our installed base. I'm not current on the exact, you know, what our business is estimated is our share of our installed base.
Last time I had the conversation, I think it was sort of well into the low 20s at best maybe.
But the point is that we have a lot of room to grow with just giving more penetration with our current install base globally. Got it. That's helpful. Maybe there's an opportunity to elaborate on that point. Scott, I think you guys called out the service business being roughly what...
in your service capabilities or getting feet on the street to improve the penetration there? Yeah, and that's been an active strategy for the last, really coming up really from before COVID.
So some of it is coverage, some of it is programming. You know when you actually service the equipment you sell we have lots of opportunity to integrate.
service offerings at the point we sell the equipment, which is part of why we think this is a big competitive advantage for us.
It's essentially all of the above, but there's no way to do service remotely. So we've got to have service techs on the street. We've got I think north of 1500 in North America and the same in Europe .
and given the profitability of the business and how much runway we have, we'll certainly continue to invest. That's part of what Michael talked about.
continue to invest in our organic growth strategies. That's certainly a good example.
Great. And then maybe one last question just on M&A. Any comments around the pipeline today, what you're seeing, and whether there's been any movement since you last updated at Investor Day?
Yes, I'd say that there's been no change. We continue to get.
sort of ample flow in terms of people wanting us to take a look at things and as we've talked about for a long time and certainly updated at our investor day, you know, the
flow in terms of people wanting to take a look at things and as we've talked about for a long time and certainly updated at our investor day you know the aperture through which
You know, we will strike on those opportunities as pretty narrow-given.
on those opportunities is pretty narrow given.
all the potential in our core business, but we've done MTS recently, we will continue to opportunistically.
Be aggressive, but from a standpoint of overall flow, is it upper down? I'd say it's been pretty stable.
Okay, great. Thank you.
And your final question comes from a line of Julian Mitchell from Barclays. Your line is open.
Thanks. Good morning.
Maybe a question first off just around the cadence of sort of Q3 versus Q4. Anything to call out there when you're thinking about margins or the top line particularly in the context of that de-stocking that you'd mentioned. Thank you.
Yeah, I think Julian, I think I said this earlier, we do expect, as we typically do,
If you look at our historical sequentials, a lift from Q2 to Q3 of about 1%. The thing to keep in mind is that Q3 has one less shipping day.
relative to prior year and relative to Q2. So that is gonna have a little bit of an impact. So don't expect a big...
jump here in Q3, but certainly based on current run rates, some progress on the top line.
progress on the bottom line with margin expansion. I think we talked about that somewhere along the lines of 50-plus basis points from Q2 to Q3. And I might just add that in terms of our typical
cadence, kind of first half, second half.
If you look at our full year EPS, we're typically 49 to 51 percent, and we are, as we see here today, right in line with that. Based on our 481 gap EPS for the first half.
the midpoint of our guidance of 975, you can calculate what's left to go and you'll see it's a
a lift from the first half to the second half that's right in line with our historical averages.
which gives us a lot of confidence as we…
heading to the second half here.
Thanks very much, Michael. And maybe just my second question or follow up would just be around
you know, when you're thinking about the sort of market share gain efforts across the company, you know, volume growth.
year-to-date very muted or negative. Do you still think you're getting some share or was the sort of the share gain maximized really two three years ago when competitors were supply constrained and now we're in a normal supply chain environment the sort of share gains have dried up largely. Thank you.
Well, so Julian, I wouldn't agree with how you characterize this in terms of no volume gains.
year to date, I think we have a lot of confidence that we continue to take market share, not just as we talked about through the pandemic, but on an ongoing basis. I think if you look at our...
our organic growth rates relative to peers in some of these segments. You've got some good comps. You can certainly take a look at that. And I think we'll continue to invest here in all of our organic growth.
strategies and efforts including headcount to continue to take market share. So we have a high degree of confidence that we continue to take share. And it's not something you measure in a quarter.
No, I think these...
You know, we've committed to organic growth in our.
our organic growth goals and our investor day we just did and those are
organic growth goals that are going to be well above underlying market growth at four to five and in that case by definition we are continuing to take share. Yeah, and I think the other thing, I mean the biggest drivers we talked about at Invested Aid, Julian, I think you were there, is going to be our customer-backed innovation efforts. We're shining a bright light on our customers.
CVI efforts and the whole company is focused on continuing to drive up the contribution to organic growth from our innovation efforts. So you put all of that together, we're highly confident we can deliver our long-term kind of 4% plus.Reporter
organic which is you know given our high levels of profitability that's all we need to grow EPS kind of high single digit low double digit you add an attractive dividend yield on top of that and you're getting that 11 to 13 TSR
over the long term, not every year. This year, yes, but not every year. That's what you should expect from ITW. And it's much more about that than it is a quarterly market share number, which is, I think, what you're asking about.
That's very helpful. Thank you. Sure. Thank you.
And thank you for participating in today's conference call. All lines may now disconnect at this time.