Q4 2023 Enpro Inc Earnings Call
Operator: Greetings. Welcome to the EnPro Q4 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the Anthro Q4, 2023 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Operator: The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to James Gentile, Vice President, Investor Relations. Thank you. You may begin.
And what should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note. This conference is being recorded I would now.
Now I'll turn the conference over to James John Kelly, <unk>, Vice President Investor Relations. Thank you you may begin.
James Gentile: Thanks, Daryl, and good morning everyone. Welcome to EnPro's fourth quarter and full year 2023 earnings conference call. I will remind you that our call is being webcast at enpro.com, where you can find the presentation that accompanies this call. With me today is Eric Vallencourt, our President and Chief Executive Officer, Milt Childress, Executive Vice President and Chief Financial Officer, and Joe Broderick, Executive Vice President, Finance. During today's call, we will reference a number of non-GAAP financial measures. Tables reconciling the historical non-GATT measures to the comparable GATT measures are included in the appendix to the presentation material.
Thanks, Darryl and good morning, everyone welcome to <unk> fourth quarter and full year 2023 earnings conference call I'll remind you that our call is being webcast at end pro Dot Com, where you can find the presentation that accompanies this call with me today is Eric Vallat, CT, our president and Chief Executive Officer, Milt Childress Executive Vice President and Chief financial.
Sure and Joe Broderick.
Negative Vice President Finance.
During today's call, we will reference a number of non-GAAP financial measures tables reconciling the historical non-GAAP measures to the comparable GAAP measures are included in the appendix to the presentation materials also a friendly reminder, that we will be making statements on this call that are not historical facts and that are considered forward looking in nature.
James Gentile: Also, a friendly reminder that we will be making statements on this call that are not historical facts and that are considered forward-looking in nature. These statements involve a number of risks and uncertainties, including those described in our filings with the SEC, including our most recent Form 10 filing. Also note that during this call, we will be providing full year 2024 guidance, which excludes unforeseen impacts from these risks and uncertainties. We do not undertake any obligation to update these forward-looking statements. It is now my pleasure to turn the call over to Eric Valancourt, our President and Chief Executive Officer.
Statements involve a number of risks and uncertainties, including those described in our filings with the SEC, including our most recent Form 10-K.
Also note that during this call we will be providing full year 2024 guidance, which excludes unforeseen impacts from these risks and uncertainties. We do not undertake any obligation to update. These forward looking statements. It is now my pleasure to turn the call over to Eric Vaillancourt, Our President and Chief Executive Officer, Eric.
Eric Vallencourt: Thanks, James, and good morning, everyone. Thank you for joining us today as we review our results for the fourth quarter and full year 2023 and provide a business update that includes our outlook for 2024. Before we get started, I'd like to introduce Joe Rudereck, who recently joined our team as Executive Vice President of Finance. Joe will be succeeding Milt Childress as Chief Financial Officer on April 1st.
Thanks, James and good morning, everyone. Thank you for joining US today as we review our results for the fourth quarter and full year 2023, and provide a business update that includes our outlook for 2024.
Before we get started I'd like to introduce introduce Joe brought Iraq recently joined our team as executive Vice President Finance.
Joe will be succeeding Milt Childress as Chief Financial Officer on April one.
Eric Vallencourt: We know we'll be staying through the end of May to ensure a smooth transition of finance. We are delighted to have Joe join our team following his almost 25 years of senior financial and operational experience. This is an exciting time in our company's history, and I'm glad to have Joe's partnership as we look to capitalize on the opportunities ahead. Please join us in welcoming Joe to EnPro.
No it will be staying through the end of may to ensure a smooth transition of finance leadership.
We are delighted to have Joe join our team following his almost 25 years of senior financial and operational experience.
This is an exciting time in our company's history and I'm glad to have Jones partnership.
We look to capitalize on the opportunities ahead, please join us in welcoming Joe to end problem.
Yes.
Eric Vallencourt: We are pleased with EnPro's strong performance and execution in 2023. C-Link Technologies delivered strong performance, largely offsetting the negative year-over-year impact from a soft semiconductor market in AST. In ceiling technologies, we saw record segment profitability with adjusted segment EBITDA margins exceeding 29% for the year, despite a sequential decline in the fourth quarter that we anticipated and communicated on our third quarter call. We are very pleased with the underlying strength of the segment and how our team is positioning the business for future growth while maintaining our disciplined focus on profitability and continuous improvement. AST revenue ended the year down roughly 16%, driven by weakness in the global semiconductor industry.
We are pleased with <unk> strong performance and execution in 2023.
Sealing technologies delivered strong performance largely offsetting the negative year over year impact from a soft semiconductor market in asps.
And fueling technologies, we saw record segment profitability with adjusted segment EBITDA margins exceeding 29% for the year.
Despite a sequential decline in the fourth quarter that we anticipated and communicated on our third quarter call.
We are very pleased with the underlying strength of the segment, how our team is positioning the business for future growth, while maintaining our disciplined focus on profitability and continuous improvement.
S. T revenue ended the year down roughly 16% driven by weakness in the global semiconductor industry.
Eric Vallencourt: Despite the drop in volume, adjusted EBITDA margins for this segment were approximately 24% for the year, clearly demonstrating the segment's value-added capabilities and resilience. Our multi-year strategy to drive growth in this attractive market remains unchanged. We reported $238 million in adjusted EBITDA for 2023, which is inclusive of $7.1 million in share price-driven, long-term incentive compensation expenses. Given the downturn experienced in the semiconductor market throughout the year, we are pleased with the total EnPro margins at 22.5%. We made meaningful progress on several long-term strategic initiatives this year, including the recently completed acquisition of Advanced Microbe Instruments, or AMI, which broadens our ceiling technology segment capabilities into compositional analysis. We expect to leverage AMI's differentiated gas analyzer technologies across multiple industry segments. The unique insight we will gain into our customers' processes will expand our competitive advantage in designing seals for a variety of critical solutions. We are excited to welcome our new colleagues and my colleagues.
The drop in volume and adjusted EBITDA margins for this segment was approximately 24% for the year clearly demonstrating the segments value added capabilities and resilience our.
Our multiyear strategy to drive growth in this attractive market remains unchanged.
We reported $238 million and adjusted EBITDA for 2023, which is inclusive of $7 1 million in share price driven long term incentive compensation expense.
Given the downturn experienced in the semiconductor market throughout the year. We are pleased with the total infra margins at 22, 5%.
We made meaningful meaningful progress on several long term strategic initiatives this year, including the recently completed acquisition of advanced microbe instruments or am I.
Which broadens our sealing technologies segment capabilities into compositional analysis.
We expect to leverage <unk> differentiated gas analyzer technologies across multiple industry segments.
The unique insight, we will gain into our customers' processes well expand our competitive advantage in designing seals and a variety of credit and a variety of critical solutions we.
We are excited to welcome our new colleagues and my colleagues Dan problem.
Yeah.
And I S T. During the year, we execute we continue to execute on our multifaceted strategy of technological differentiation vertical integration and regional expansion, making significant progress on the phased buildout of our Arizona facility and expanding our capabilities in Asia, where.
Eric Vallencourt: In AST, during the year, we continue to execute on our multifaceted strategy of technological differentiation, vertical integration, and regional expansion, making significant progress on the phased build-out of our Arizona facility and expanding our capabilities in Asia. We are executing this expansion through strategic positioning in collaboration with key market-leading customers. In 2024, we anticipate additional investments in our semiconductor business to support what's widely expected to be a near doubling of the semiconductor market by around the end of this decade. Now, I'd like to take a moment to comment on our safety accomplishments. We strive to create an injury-free workplace as we deliver critical products and solutions to our customers. Safety, which includes both physical and psychological safety, is our number one core value.
We are executing this expansion and strategic positioning in collaboration with key market leading customers in 2024, we anticipate additional investments in our semiconductor business to support what is widely expected to be a near doubling of it.
Semiconductor market.
By around the end of this decade.
Okay.
I'd like to take a moment to comment on our safety accomplishments, we strive to create an injury for injury free workplace, because we deliver critical products and solutions to our customers' safety, which includes both physical and psychological safety is our number one core value and for 2023, we are celebrating our 59.
Eric Vallencourt: And for 2023, we are celebrating a 59% reduction in our total recordable incident rate, as well as a 47% reduction in our lost time case rate. These outstanding results build upon our already world-class safety record and are well below the latest industry averages presented by the Bureau of Labor Standards. I want to recognize our environmental, health, and safety leadership team and our colleagues across the company for these terrific results. Before turning the call over to Milt to discuss our fourth quarter results and 2024 guidance, I want to reiterate what I've said on many occasions. There is no better time to be part of EnPro. With our reshaped portfolio generating excellent margins and cash flow, and a strong balance sheet, we are well positioned to drive continued growth through focused execution, as together we empower technology. Thanks, Eric, and good morning, everyone.
Per cent reduction in our total recordable incident incident rate as well as a 47% reduction in our lost time in case rates.
These outstanding results build upon our already World class safety record and are well below the latest industry averages presented by the Bureau of Labor statistics.
I want to recognize our environmental health and safety leadership team and our colleagues across the company for these terrific results.
Before turning the call over to Mel to discuss our fourth quarter results and 2024 guidance I want to reiterate what I've said on many occasions. There is no better time to be part of <unk> growth without reshaped portfolio generating excellent margins and cash flow with a strong balance sheet. We are well positioned to drive continued growth through focused execution is together.
We empower technology with purpose no.
Thanks, Eric and good morning, everyone.
Milt Childress: In the fourth quarter, sales of $249.1 million decreased 8.4 percent, and organic sales declined 9 percent, driven primarily by lower results in the AST segment due to ongoing softness in semiconductors. The decrease also reflects lower results in the seedling technology segment, where we saw a sharp decline in the commercial vehicle OEM market and lower demand in general industrial, commercial aerospace, and pharma markets. As a reminder, we posted very strong results in the ceiling in the fourth quarter of last year. However, fourth quarter adjusted EBITDA of $46.9 million decreased roughly 12% compared to the prior year period. An adjusted EBITDA margin of 18.8% decreased 80 basis points year over year.
In the fourth quarter sales of $249 $1 million decreased eight 4% and organic sales declined 9% driven primarily by lower results in the a S. T segment due to the ongoing softness in semiconductor.
The decrease also reflects lower results in sealing technologies segment, where we saw a sharp decline in the commercial vehicle OEM market and lower demand in general industrial commercial aerospace and pharma markets. As a reminder, we posted very strong results in Chile in the fourth quarter of last year.
Fourth quarter, adjusted EBITDA of $46 $9 million decreased roughly 12% compared to the prior year period, and adjusted EBITDA margin of 18, 8% decreased 80 basis points year over year.
Milt Childress: Volume declines just noted were partially offset by strategic pricing, cost mitigation, and continuous improvement initiatives. Results for the quarter were also adversely affected by $6.4 million of incremental long-term incentive compensation expense tied to our strong share price performance during the fourth quarter. By comparison, in the fourth quarter of 2022, share price-driven long-term incentive compensation expense was $4.8 million. We do not contemplate compensation expenses related to share price changes when determining guidance.
Volume declines just noted were partially offset by strategic pricing cost mitigation and continuous improvement initiatives results.
Our results for the quarter were also adversely affected by $6 $4 million of incremental long term incentive compensation expense tied to our strong share price performance during the fourth quarter.
By comparison in the fourth quarter of 2022 share price driven long term incentive compensation expense was $4 $8 million.
We do not contemplate compensation expenses related to share price changes when determining guidance.
Milt Childress: As such, the incremental long-term compensation expense of $6.4 million during the fourth quarter of 2023 was not considered when providing prior 2023 guidance commentary. However, modifications made to the Long-Term Incentive Compensation Program during 2023 will lessen this impact in 2024 and eliminate the impact in years thereafter. Corporate expenses of $14.4 million in the fourth quarter of 2023 were down from $15.6 million a year ago, primarily due to lower total compensation expense. Adjusted diluted earnings per share of $1.19 decreased 8.5% compared to the prior year period, largely because of the decline in adjusted EBITDA, partially offset by a 35% reduction in net interest expense driven by debt repayment during the year and higher interest income on cash balances. The previously noted $6.4 million share price-driven incentive compensation expense in Q4 equates to around $0.23 per share.
As such the incremental long term compensation expense of $6 $4 million during the fourth quarter of 2023 was not considered well providing prior 2023 guidance commentary.
Modifications made to the long term incentive compensation program. During 2023 will lessen this impact in 2024 and eliminate the impact in years thereafter.
Corporate expenses of $14 $4 million in the fourth quarter of 2023 were down from $15 $6 million a year ago, primarily due to lower total compensation expense.
Adjusted diluted earnings per share of $1 19 decreased eight 5% compared to the prior year period, largely because of the decline in adjusted EBITDA, partially offset by a 35% reduction in net interest expense driven by debt repayment during the year and higher interest income on cash balances.
Yes.
The previously noted $6 $4 million share price driven incentive compensation expense in Q4 equates to around 23 per share.
Moving to a discussion of segment performance.
Milt Childress: Moving to a discussion of segment performance, ceiling technology sales of $147 million decreased 6.3%. During the quarter, we saw a sharp decline in commercial vehicle OEM sales, as well as softness in our general industrial, aerospace, pharma, and commercial vehicle aftermarket demand. Softness in these markets was partially offset by strategic pricing actions and continued strength in nuclear energy. However, excluding the impact of foreign currency translation in a divested business, sales decreased 7.5% in the quarter.
Sealing technology sales of $147 million decreased six 3% during.
During the quarter, we saw a sharp decline in commercial vehicle OEM sales as well as softness in our general industrial aerospace pharma and commercial vehicle aftermarket demand.
Softness in these markets was partially offset by strategic pricing actions and continued strength in nuclear energy.
Excluding the impact of foreign currency translation, and the divested business sales decreased seven 5% in the quarter.
For the fourth quarter adjusted segment EBITDA decreased six 3% in line with the sales decline, resulting in adjusted segment EBITDA margin being flat with last year.
Milt Childress: For the fourth quarter, Adjusted Segment EBITDA decreased 6.3%, in line with the sales decline, resulting in Adjusted Segment EBITDA margin being flat with last year. Excluding the impact of foreign exchange and divestitures, Adjusted Segment EBITDA decreased 7.9%. Sealing's margin performance through a sales decline reflects the benefits of strategic pricing actions, cost mitigation efforts, and ongoing 80-20 pruning across the segment. As Eric noted earlier, we are pleased with the progress made over the past few years in rationalizing the ceiling technology segment, and we will continue to invest in targeted growth opportunities while maintaining cost discipline and continuous improvement. Turning to advanced surface technologies, while we saw sequential improvement from the third quarter, fourth quarter sales of $102.1 million decreased 11.5% over the prior year, driven by continued weakness in semiconductor capital equipment spending. Our cleaning solutions business tied to advanced node chip production was a bright spot in the quarter and throughout the year, and we saw stabilization in the optical filter business with improved profitability during the quarter. For the fourth quarter, Adjusted Segment EBITDA decreased approximately 21% versus the prior year period.
Excluding the impact of foreign exchange and divestitures adjusted segment EBITDA decreased seven 9%.
Ceilings margin performance through a sales decline reflects the benefits of strategic pricing actions cost mitigation efforts and ongoing 80 20 pruning across the segment.
As Eric noted earlier, we are pleased with the progress made over the past few years and rationalizing the sealing technology segment, and we will continue to invest in targeted growth opportunities, while maintaining cost discipline and continuous improvement.
Turning to advanced surface technologies, while we saw sequential improvement from the third quarter fourth quarter sales of $102 $1 million decreased 11, 5% over the prior year driven by continued weakness in semiconductor capital equipment spending.
Cleaning solutions business tied to advanced node chip production was a bright spot in the quarter and throughout the year.
So saw stabilization in the optical filter business with improved profitability during the quarter.
For the fourth quarter adjusted segment EBITDA decreased approximately 21% versus the prior year period.
Milt Childress: Adjusted EBITDA margin of 22.4% improved sequentially and, as Eric mentioned earlier, finished the year close to 24%. Volume decline, in addition to mix, material cost increases, and increased operating expenses supporting growth investments, were the primary drivers of the European reduction in profitability, offset in part by cost mitigation efforts and pricing actions. We continue to invest in AST as the long-term growth opportunities in this segment far outweigh the recent market headwinds. The phased upgrade of our facility in Arizona is ongoing, and as Eric noted, we are expanding our capacity in Asia. We are well positioned to see a bright future ahead for this segment. Turning to the balance sheet and cash flow, our balance sheet remains very strong. Subsequent to quarter end in late January, we closed the AEMI acquisition using $210 million of cash.
Adjusted EBITDA margin of 22, 4% improved sequentially and as Eric mentioned earlier finished the year close to 24%.
The volume decline in addition to mix material cost increases and increased operating expenses supporting growth investments were the primary drivers of the year over year reduction in profitability.
Offset in part by cost mitigation efforts and pricing actions.
We continue to invest at a S. T is the long term growth opportunities in this segment far outweigh that recent market headwinds.
The face upset of our facility in Arizona is ongoing and as Eric noted we are expanding our capacity in Asia, we are well positioned to see a bright future ahead.
For this segment.
Turning to the balance sheet and cash flow our balance sheet remains very strong subsequent to quarter end in late January we closed the <unk> acquisition using $210 million of cash our net leverage ratio inclusive of the acquisition stands at approximately two times 2023 adjusted <unk>.
Milt Childress: Our net leverage ratio, inclusive of the acquisition, stands at approximately 2 times 2023 adjusted EBITDA. With our reshaped portfolio, we continue to generate substantial cash. Free cash flow in 2023 was over $174 million, compared to about $77 million in the prior year.
EBITDA.
With our reshaped portfolio, we continued to generate substantial cash free cash flow in 2023 was over $174 million compared to about $77 million in the prior year.
Milt Childress: Working capital management across the company and lower cash taxes were key drivers of cash flow during 2023, in addition to the stellar results in ceiling technology. We have strong financial flexibility to execute our strategic initiatives, both organically and through strategic acquisitions that broaden our capability. Our goal is to build upon our leading positions in markets with secular growth drivers that safeguard critical environments and applications that touch our lives every day. During 2023, we paid a $0.29 per share quarterly dividend, totaling $24.3 million for the year. On February 15th, our board approved another increase to the quarterly dividend to $0.30 per share, representing the ninth consecutive annual dividend increase since we initiated a quarterly dividend in 2015.
Working capital management across the company and lower cash taxes were key drivers of cash flow. During 2023. In addition to the stellar results in sealing technologies.
We have strong financial flexibility to execute our strategic initiatives, both organically and through strategic acquisitions that broaden our capabilities.
Our goal is to build upon our leading cash positions in markets with secular growth drivers the safeguard critical environments and applications that touch our lives every day.
During 2023, we paid a <unk> 29 cents per share quarterly dividend totaling $24 $3 million for the year.
On February 15th our board approved another increase to the quarterly dividend to <unk> 30 per share representing the ninth consecutive annual dividend increase since we initiated a quarterly dividend in 2015.
Okay.
Moving now to our 2020 for guidance.
Milt Childress: Moving now to our 2024 guide, taking into consideration all the factors that we know currently, we expect total EnPro sales growth to be in the low to mid-single-digit range in 2024. We expect Justice Eva Dock to be in the range of $260 million to $280 million, and adjusted diluted earnings per share to range from $7 to $7.80 per share.
Taking into consideration all the factors that we know currently.
We expect total improved sales growth to be in the low to mid single digit range in 2024.
We expect adjusted EBITDA to be in the range of $260 million to $280 million.
And adjusted diluted earnings per share to range from $7 to $7 80 per share.
Milt Childress: The normalized tax rate used to calculate the adjusted diluted earnings per share remains at 25%, and fully diluted shares outstanding are approximately $21 million. Capital expenditures are expected to be approximately $60 million, or around 5% of sales, in 2024 as we continue to invest in compelling future growth opportunities across the country. Two-thirds of this capital spending for 2024 will be in support of growth investments on focused, leading-edge platforms in the Advanced Surface Technology segment. In AST, we expect continued demand in the first half of 2024. After seeing sequential improvement in AST in the fourth quarter of last year, based on current backlog and order patterns, we anticipate results to decline sequentially in the first quarter of this year. We believe the first quarter will represent the bottom of the semiconductor decline for our business, with adjusted EBITDA about 5-10% below Q3 of last year. Capital spending typically lags unit growth after a trough, and approximately two-thirds of our semi sales are driven by equipment builds, with the remaining one-third tied to wafer production.
The normalized tax rate used to calculate adjusted diluted earnings per share remains at 25% and fully diluted shares outstanding of approximately $21 million.
Capital expenditures are expected to be approximately $60 million or around 5% of sales in 2024, as we continue to invest in compelling future growth opportunities across the company.
Two thirds of this capital spending for 2024 will be in support of growth investments on focus leading edge platforms and the advanced surface technologies segment.
And I S. T. We expect continued demand in the first half.
Excuse me, we expect continued demand weakness in the first half of 2024.
After seeing sequential improvement in Asps in the fourth quarter of last year based on current backlog and order patterns, we anticipate results to decline sequentially in the first quarter of this year.
We believe the first quarter will represent the bottom of the semiconductor declined for our business with adjusted EBITA EBITA about 5% to 10% below Q3 of last year.
Capital spending typically lagged unit growth after a trough and approximately two thirds of our semi sales are driven by equipment builds with the remaining one third tied to wafer production.
Milt Childress: We are well positioned when capacity utilization improves and capital spending recovers. In the ceiling technology segment, we anticipate normal seasonality to return this year, resulting in an incrementally stronger first half of the year compared to the second. The largest portion of segment revenue follows trends in global industrial production and North American commercial vehicle production, although we have growing exposure to faster-growing markets such as aerospace, space, Sustainable Power Generation, and Pharma. As Eric noted, the acquisition of AMI will be a creative boost to students' results, both in the coming year and longer term. In commercial vehicles, the sharp decline in OEM demand anticipated this year is expected to be partially offset by improved aftermarket mix and new product advancements as the year progresses. According to industry forecasts, commercial vehicle trailer bills are expected to decline by 25% in 2024.
We are well positioned when capacity utilization improves and capital spending recovers.
And the sealing technologies segment, we anticipate normal seasonality to return this year, resulting in incrementally stronger first half of the year compared to the second.
The largest portion of segment revenue follows trends in global industrial production and North American commercial vehicle production.
Although we have growing exposure to faster growing markets, such as aerospace space sustainable power generation in pharma.
As Eric noted the acquisition of <unk> will be accretive to ceilings results, both in the coming year and longer term.
In commercial vehicle the sharp decline in OEM demand anticipate this year is expected to be partially offset by improved after aftermarket mix and new product advancements as the year progresses.
According to industry forecasts commercial vehicle trailer builds are expected to decline 25% in 2024.
Eric Vallencourt: As a reminder, approximately one-third of our commercial vehicle market is tied to OEM trailer builds, with the balance serving the aftermarket. Also of note for the ceiling segment, in 2024, we expect a smaller impact from strategic pricing initiatives compared to 2023. We have made progress over the past several years optimizing and repositioning the ceiling technology segment, resulting in significant improvements in the composition and profitability of the segment. We are well positioned currently and will continue to invest in various pockets of growth while focusing on broadening the segment's capabilities through selecting organic moves over time. We believe the timing of the upturn in our semiconductor business, and to a lesser degree, the magnitude of the decline in commercial vehicle trailer bills, as well as Transient Global Industrial Production, will be the primary swing factors driving our performance in 2024.
As a reminder, approximately one third of our commercial vehicle market.
Our commercial vehicle business is tied to OEM trailer builds with the balanced serving the aftermarket.
Also of note for the C&I segment in 2024, we expect a smaller impact from strategic pricing initiatives compared to 2023.
We have made progress over the past several years optimizing and repositioning the sealing technologies segment, resulting in significant improvements in the cost position and profitability of the segment.
We are well positioned currently and will continue to invest in various pockets of growth, while focusing on broadening broadening the segment's capabilities for select inorganic moves over time.
We believe the timing of an upturn in our semiconductor business and to a lesser degree the magnitude of the decline in commercial vehicle trailer builds as well as trends in global industrial production will be the primary swing factors driving our performance in 2024.
Eric Vallencourt: The mid to high end of our guidance range reflects a robust second half recovery in our semiconductor business, while the lower end reflects the possibility of the uptick happening later. Regardless of the precise timing, we are well-positioned for the widely expected upturn, and we are making the appropriate investments to drive future growth and value. Now, I'll turn the call back to Eric for a few closing comments. Thanks, y'all.
The mid to high end of our guidance range reflects a robust second half recovery in our semiconductor business, while the lower end reflects the possibility of the uptick happening later.
Regardless of the precise timing, we are well positioned for the widely expected upturn and we are making the appropriate investments to drive future growth and value.
Now I'll turn the call back to Eric for a few closing comments. Thanks mill, we continue to.
Eric Vallencourt: We continue to demonstrate our best-in-class, balanced portfolio that generates attractive margins and cash flow returns in a variety of economic environments. Our value-creating strategy remains unchanged, and we continue to invest where we are strongest while considering strategic acquisitions that build upon our leading-edge capabilities. We'd like to recognize the hard work of all of our colleagues across the company as we continue to differentiate ourselves in a disciplined and consistent fashion. Thank you for joining us today.
Demonstrate our best in class balance portfolio that generates attractive margins and cash flow returns in a variety of economic environments, our value, creating strategy remains unchanged and we continue to invest where we are the strongest are considering strategic acquisitions to build upon our leading edge capabilities.
To recognize the hard work of all of our colleagues across the company as we continue to differentiate ourselves in a disciplined and consistent fashion.
Thank you for joining us today, we appreciate your interest in Umbro will open the lines to questions.
Operator: We appreciate your interest in EnPro. We'll open the line to questions. Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue.
Thank you we will now be conducting a question and answer session. If you would.
Like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Jeff Hammond: You may press star 2 if you would like to remove your question from the line. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start key. One moment, please, while we poll for your question. Our first question comes from the line of Jeff Hammond with KeyBank Capital Markets. Please proceed with your questions. Hey, good morning, everyone.
You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys, one moment. Please while we poll for your questions.
Okay.
Our first questions come from the line of Jeff Hammond with Keybanc capital markets. Please proceed with your questions.
Hey, good morning, everyone. Congrats a welcome aboard Joe and congrats Mitch sounds like we might hear from you one more time.
Milt Childress: Congratulations. Welcome aboard, Joe. And congratulations, Mitch. Sounds like we might hear from you one more time. Yeah, I think that'll be the case. I'll be in the room next quarter. Great, great. Just want to dig into the organic guide.
Yes, I think that'll be the case I'll be I'll be in the range next quarter.
Great.
Just wanted to dig in on the organic guide it looks like Am I is maybe included so you know.
Milt Childress: It looks like AMI is maybe included, so I'm kind of getting down one to up one. I'm just trying to kind of clarify that, and then maybe how to think about the organic growth for each of the segments embedded in the guide. Yeah, Jeff, hey, I'll take the AMI question, and then we can go back and forth a little bit on the segments. So with AMI, when we announced the deal, we had indicated that we paid approximately 13 times EBITDA at a $210 million price. That gives you a general idea of what the run rate earnings for the business has been prior, or at the time of the acquisition. And so when you take into account this year, which will be a partial year, we'll have it for most of the year, but it's not a full year, and some one-time integration costs that will work their way through in fairly short order, that will give you a general indication of what we've included in the $260 to $280 million EBITDA guide. So.
I'm kind of getting down one to up one I'm just trying to clarify that and then.
Maybe how to think about the organic growth for each of the segments embedded in the guide.
Yes.
Jeff I'll take the <unk> question, and then we can go back and forth a little bit on the segments.
Would they not when we announced the deal we had indicated that we paid approximately 13 times EBITDA.
Price that gives you a general idea of what the run rate earnings.
For the business has been prior or at the time of the acquisition and so when you take into account this year, which is a partial year, we'll have it for most of the year, but it's not a full year and some onetime integration costs that will work their way through in fairly short order.
That will give you a general indication of what we've included.
And to.
$260 million to $208 million EBITDA guide.
So.
Yes.
Milt Childress: You know that you know that that puts brackets around the low to mid teens of EBITDA contribution for the year. In terms of the organic growth guide, you know, with the balance and ceiling and the sharp decline in the commercial vehicle OEM market, you can expect kind of flat, plus or minus a little bit, excluding AMI and Advanced Surface Technologies. As we said in the prepared remarks, the second half is expecting kind of a more brisk recovery, Go ahead and weigh in with a little more clarification on what you'd like to hear about the segments in terms of guidance, Jeff. So, okay, so, yeah, just, so the midpoint of the guide says, you know, soft 1Q, that's the bottom for AST, and then, you know, I think, James, you said brisk inflection into the second half, and then, yeah, I guess the lower end contemplates maybe a slower recovery. Is that, is that fair to say?
That puts brackets.
And capital.
Low to mid <unk>.
Teens.
<unk> EBITDA contribution for the year.
And in terms of the organic growth guide.
With the balance in sealing and the sharp decline in the commercial vehicle OEM market, you can expect kind of flat.
Plus or minus a little bit excluding.
Excluding AMRI and an advanced surface technologies as we said in the prepared remarks, the second half.
Is expecting kind of a more brisk recovery, but we still expect some softness to persist through the first half of 2024.
Okay.
Yes go ahead go ahead go ahead way and with a little more clarification on what you'd like to.
Like to hear about the segments in terms of guidance Jeff.
So okay. So yeah just.
So the midpoint of the guide says soft <unk>, that's the bottom for ASP and then.
I think James you said brisk inflection in the second half and then I guess at the lower end contemplates maybe a slower recovery is that is that fair to say yeah, you got it.
Milt Childress: Yeah, you got it. And then, to a lesser degree, you know, what we see in commercial vehicle markets for the year and then just the overall economy, obviously. But the big, you know, kind of the big swing factor is going to be the pace of pickup for our business in semiconductors. We're already starting to see... You know, green shoots, you've heard it from other companies, it depends on where you play and where you're positioned in the industry, and it will come, it will happen for us. We're just, we're just working through this cycle for our business. Hey Jeff, Joe and I took a tour of our West Coast facilities a week ago.
And then to a lesser degree what we see in commercial vehicle markets.
For the year and then just the overall economy, obviously, but the big kind.
The big swing factor is going to be the.
Pace pick up for our business in semiconductor are already starting to see.
Green shoots you've heard it from other companies as it depends on where you play and where you are positioned in the industry and it will come it will happen for us.
We're just we're just working through this cycle for our business.
Hey, Jeff, Joe and Joe and I took a tour of our west coast facilities a week ago.
Eric Vallencourt: And we're seeing some optimism. Typically, during the peak, let's say we were making 20 parts a week, and then through the trough, we were making 10. And now it seems like we're making 12 or 13, as an example.
And we're seeing some optimism that typically.
During the peak I'd say, we're making 20 parts a week and then through the trough and making tenant and now it seems like we're making 12 or 13 as an example, so youre seeing that momentum and seeing customers, who haven't purchased in a long time. So I think we're starting to see the supply chain come back into balance.
Eric Vallencourt: So you're seeing that momentum and customers haven't purchased in a long time. So I think we're starting to see the supply chain come back into balance, where they were destocking before. So we're seeing a little bit of optimism, basically, at every facility we're at. But it's still going to be a while before we see the full workout.
They've been Destocking before so we're seeing a little bit of optimism basically in every facility we were at but it's still going to be a while before we see a full recovery.
Okay, Great. That's helpful and then just ceiling.
Eric Vallencourt: Okay, great. That's helpful. And then just ceiling, you know, pretty kind of stark decline here in 4Q. Don't know if you saw, you know, some destocking or if that's just that, you know, the commercial OE, you know, piece, but, but maybe just, you know, how should we think about, you know, that persisting into the end of the first part of the year, that kind of, you know, organic revenue decline, www And then we saw a general slowdown just in industrial production, and really starting in December. October and November were actually where we expected, and then December we started to see some fall off, but nothing significant other than, I would say, industrial production and commercial vehicles. But the clear variance was the commercial vehicle OEM decline quarter over quarter. Okay, I'll get you back in queue.
Let me kind of start decline here in <unk> don't know if you saw some destocking or if that's just you know.
The commercial OE.
<unk>, but but maybe just how should we think about.
You know that persisting into the into the first part of the year that kind of.
Organic revenue decline.
It's mostly driven by the commercial OEM trailer builds that we started to see in the fourth quarter.
And then we saw a general slowness just in industrial production. It really starting in December October November we're actually where we expected and then December we started to see some fall off.
But nothing significant other than I would say industrial production and the commercial vehicle.
Decline, but the clear variance as commercial vehicle OEM declined quarter over quarter.
Okay I'll get back in queue. Thanks.
Milt Childress: Thanks. Thank you. Our next questions come from the line of Steve Farazani with Sudoti. Please proceed with your question. Good morning, everyone.
Thank you. Our next question is coming from the line of Steve <unk> with Sidoti. Please proceed with your questions.
Good morning, everyone.
Steve Farazani: Um, I guess I want, I want to follow up a little bit on the previous questions, just, For 4Q, you know, the guidance had been 2023 sales would be relatively flat to 2022. So, obviously, your 4Q sales had to have disappointed internally. Can you specifically point out, was it primarily a commercial vehicle? Were there other places where you were disappointed?
Hi, Steve I guess I wanted to follow up a little bit on the previous questions just.
For for Q.
<unk> had been 2023 sales would be relatively flat to 2022. So obviously your <unk> sales tattoos disappointed internally can.
Can you can you specifically pointed out.
Was it primarily commercial vehicle or are there other places where.
You were disappointed.
Well it really is the commercial vehicle OEM and and then the continued softness in semiconductor and a S. T. Although at the time of our Q3 call. We did anticipate that.
Milt Childress: Well, it really is commercial vehicle OEM, and then the continued softness in semiconductor and AST. Although, at the time of our Q3 call, we did anticipate that we would see some sequential improvement, which we did see in the fourth quarter. And the commentary around guidance that we made in Q3 is that we anticipated being at the low end of our previously stated guidance range. And when you take into account the $6.4 million of...
So we will see some sequential improvement, which we did see in the fourth quarter.
And the commentary around guidance that we made in Q3 as we anticipated.
Being at the low end of our previously stated guidance range.
And when you take into account the $6 $4 million of.
Milt Childress: I'm just referring to sales. Sales, okay. Okay. I'll stop then.
And I was referring to Milton I'm, just referring to sales Im just for sales. Okay, yes, okay, yes, I'll stop there.
Milt Childress: And then back to the point of, so if I take out AMI, I guess, to the previous questions, you're looking at relatively flat. 24, again. Where do you see some potential? Is the upside purely on an earlier recovery, or semi-, or where else do you see some potential benefits in 24? We see some upside in space, of course, but the biggest thing will be the semiconductor rebound. That will be the biggest thing by far. But we see some optimism in pharma, and I would say it's recovering from the bottom as well. But it's going to be slow growth. And Steve, what you'll remember is if you look at just the cadence of AST last year, notwithstanding some of the weakness we saw in part of the business starting in Q4 of 22, we did have a, you know, relatively strong first quarter and second quarter of the year before things turned down in a more demonstrable way in Q3. So part of what you're seeing now is working through the trough, which is going to be Any reason why Q1 for AST is worse than Q4?
And then back to the point of so if I take out am I guess to the previous questions Youre looking at relatively flat.
24 again.
Where do you see some potential upside purely.
On an earlier recovery of semi or where else do you see some potential benefits in 'twenty four.
Okay.
We see some upside in space and of course, the biggest thing will be the semiconductor rebound that will be the biggest thing that we see some optimism in pharma. It seems like some of that I would say recovering from the bottom as well.
But it's going to be slow growth.
And Steve what you'll remember is if you look at just the cadence of <unk> last year.
Notwithstanding some of the weakness we saw in part of the business starting in Q4 of 'twenty. Two we did have a <unk>.
Relatively strong.
First quarter second quarter or the year before things turned down.
More.
Demand will weigh in Q3, so part of what Youre seeing now is working through the trough, which is going to be a year over year decline and thats. The reason for the year.
It's flattish on sales.
Okay.
Got it.
Any reason why Q1 S. T is worse in Q4.
Let's just order the order patterns.
Milt Childress: It's just the order patterns and backlog. Anything specifically hit in Q4, because your Q4 was much better than Q3, as you noted on AST. Did anything specifically hit on AST, or was it just that was the order pattern?
Okay.
Thank you for taking the Q4, because Q4 was much better than Q3 as you noted on the S. Two did anything specifically hit N. A S T or it was just that was the order pattern.
Milt Childress: Just the order pattern; there's nothing specific. Okay. The CapEx guidance was a little higher than I would have expected. Could you just point to where specific investments are coming in 24? Yeah, we have several projects. We want to name them small.
Yeah.
Just the order pattern there is nothing specific okay.
Okay.
The Capex guidance was a little higher than I would've expected could you just point to where specific investments coming in 'twenty four.
Yeah, we have several projects.
Namely smartphones.
Well, yeah, it's basically geographic expansion when you look at it you see.
Milt Childress: Well, yeah. It's basically geographic expansion when you look at it. You see our investment in Asia. We also continue to upgrade our Arizona facility. Joe and I were there last week.
Our investment in Asia, We're also continuing to outfit, our Arizona facility, Joe and I were there last week, we expect to start testing in the second half of this year and be ready for revenue as soon as our customers are somewhere in 'twenty five.
Eric Vallencourt: We expect to start testing in the second half of this year and be ready for revenue as soon as our customers are somewhere in 2025. And so we continue to make investments there. And then you'll see some geographic expansion to add capabilities. And you see two of the key prongs, Steve, of our semiconductor strategy that's been in place for the better part of a decade. It's technology differentiation and geographic diversification are two of the pillars, two of the three pillars, and so these investments are really supporting both of those, both geographic expansion and just keeping us on the leading edge, whether it's expansion and what we're doing on the cleaning side of our business, or it's machining capability that gives us capabilities that differentiate ourselves from others in the industry. So I could just get one more in.
So we continue to make investments there and then you'll see some geographic expansion to add capabilities to Asia.
And you look at two of the key prongs, Steve of our semiconductor strategy that's been in place.
For the.
Better part of a decade.
It's it's technology differentiation and geographic diversification are two of the pillars two of the three pillars.
So these these investments are really supporting both of those both geographic expansion and just keeping us on leading edge whether it's.
Expansion in what we're doing on the cleaning side of our business or its machining capability they give us.
Capabilities that.
Differentiate ourselves from others in the industry.
Okay, if I could just get one more in technology as we are still investing in areas.
Milt Childress: Technologies, we're still investing in areas to support new product development and efficiency projects, modernization, et cetera. Given the higher capex in 24 and the overall guidance, any kind of thoughts you can provide on expectations for cash flow in 24, cash conversion, or anything around that? Well, I would say roughly in the $120 million range for the year is what we would expect.
Support kind of new product development and efficiency projects modernization et cetera.
Okay.
Given given the higher capex in 'twenty four.
All guidance and any kind of.
Thoughts you can provide on on its expectations for cash flow in 'twenty for cash conversion or anything around that.
Well I would say roughly you know roughly in the $120 million range for the year is what we would expect.
Yeah.
Okay.
Milt Childress: And anything changing on your app? That's free cash flow, free cash flow. Yeah.
Anything that's changing on your free cash flow free cash flow.
Milt Childress: Right. And any changes in your capital allocation plans? No, it's investing to take advantage of the organic growth that's before us in AST. And then in sealing, it's continued to invest in pockets of growth in markets that are growing faster than the overall economy. So the strategy remains the same.
Right and any changes in your capital allocation plans.
Beyond the net up your Capex no. It's it's investing to take advantage of the organic growth is before us and a S T.
And then in sealing its continue to invest in pockets of growth in markets that.
That are growing faster than the overall economy.
Yeah.
So the strategy remains the thanks Eric.
Eric Vallencourt: Thanks, Eric. Thanks, Eric. Thanks, Mel.
Thanks, Eric Thanks, Mel Thanks, Vince.
Steve Farazani: Thanks. Thank you. As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next questions come from the line of Ian Zaffino with Oppenheimer. Please proceed with your question. Hey, good morning. This is Isaac Salazan on behalf of Ian.
Welcome Steve.
Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
Our next questions come from the line of Ian Safina with Oppenheimer. Please proceed with your questions.
Hey, Good morning. This is Isaac housing on for Ian Thanks for taking our questions.
Isaac Salazan: Thanks for taking our questions. You know, the first is on ceilings. I guess outside of the OEM weakness, you'll see in commercial vehicles. Could you maybe touch on the aftermarket side and how you expect that portion of the business to perform for the year? And then maybe, what are you seeing as far as pricing is concerned there? And do you expect to maintain some pricing power as we move through the year? Thanks. The aftermarket sales are strong, and they'll continue to be strong. Usually, when you see the OEM bills go down, you end up having more maintenance, and so the aftermarket is still very good.
The first on ceilings I guess outside of the.
Oh, yeah weakness youll see in commercial vehicle could you maybe touch on the aftermarket side.
Do you expect that portion of the business form for the year and then maybe what are you seeing as far as pricing. There do you expect to remain some pricing or to maintain some pricing power.
As you move through the year. Thanks.
Aftermarket sales are strong and they will continue to be strong usually when you see the OEM build go down you end up having more maintenance and so the aftermarket is still very good the mix does change and the mix is helpful to us, but we certainly need a certain amount of volume to also drive outstanding profitability, there, but overall that business is strong and continuing to do well and really.
Milt Childress: The mix does change, and the mix is helpful to us, but we need a certain amount of volume to also drive family profitability there. But overall, that business is strong and continuing to do well, and we really don't have any concerns once the market recovers on the OEM bills. In terms of pricing, the aftermarket pricing will hold and will give a little bit back, but not much in the OEM piece here or there over time.
Don't have any concerns once the market recovers.
Please.
In terms of pricing the aftermarket pricing will hold and we will give a little bit back, but not much in the OEM piece here or there over time.
Isaac.
Milt Childress: I think that this won't surprise you because, You know, it's true for all companies. The environment for pricing is not the same, the backdrop for pricing is not the same currently as it was a year ago, 18 months ago, just because of moderating inflation. So, just to note that it's unlikely we will see the same year-over-year impact from pricing as you saw in 2020. That makes sense, thank you.
What surprised you because.
Yeah, it's true for.
All companies.
The environment for pricing is not the same the backdrop for pricing is not the same as it is.
Currently as it was.
A year ago.
18 months ago, just because of moderating inflation.
Just to note that it is unlikely we see the same year over year impact from pricing as you saw in 2023.
Okay.
Yes that makes sense. Thank you and then just as a follow up could you discuss the Ami acquisition and the <unk>.
Isaac Salazan: And then just as a follow-up, could you discuss the AMI acquisition and the growth profile of that business, maybe as we look at it for this year, you know, in the longer-term growth algorithm compared to, you know, maybe some of the other ceilings, industrialized markets? We see AMI at kind of mid-single-digit growth, roughly, maybe a little bit more. But it positions us with new capabilities and compositional analysis that we're quite excited about. The primary focus of the business currently is on midstream oil and gas, although the company does sell into other industry segments, and part of our excitement is to take compositional analysis into other applications. All right, perfect. That's all I had.
Growth profile of that business, maybe as we look at it for this year.
And the longer term growth algorithm compared to maybe some of the other ceilings industrial end markets.
We are we see a kind of mid mid single digit growth, Ralph roughly maybe a little bit a little bit more.
And but it.
It positions us well.
With new capabilities.
Oppositional analysis that we're quite excited about.
The primary focus of the business currently is is on.
Midstream oil and gas although we.
The company does sell into other industry segments.
Part of our excitement is to take compositional analysis into other applications.
Alright, perfect. That's all I had thanks, so much guys.
Jeff Hammond: Thanks a bunch, guys. Thank you. Our next questions come from the line of Jeff Hammond with KeyBank Capital Markets. Please proceed with your question.
Okay.
Thank you our next questions come from the line of Jeff Hammond with Keybanc capital markets. Please proceed with your questions.
Jeff Hammond: Hey guys, just a couple follow-ups here. Just on AMI, maybe just talk about, you know, I know that the financial metrics make a lot of sense. But just talk about, you know, fit within the business and, you know, how you think of it. I think it's in the ceiling segment. But, and then just, I think, Mil, you said, mid single-digit growth. I thought the historical growth rate was higher than that. Maybe just just clarify what AMI has been growing at the last four or five years. You're right Jeff, I'll take the last one first and then turn it over to Eric to talk a little bit more about AMI.
Hey, guys just a couple of follow ups here just on <unk>.
Maybe just talk about I know the financial metrics make a lot of sense.
But just talk about you know fit within the business and how you think of it you know I think it's in the ceiling segment, but and then just.
I think you said.
Mid single digit growth I thought the historical growth rate was higher than that maybe just just clarify what what Ams has been growing at the last four or five years.
Youre right, Jeff I'll take the last one first and then and then turn it to Eric to talk a little bit more about EMI, but.
Milt Childress: Historically, the company has grown considerably faster than that. If you look at the underlying market growth, it's kind of mid-single-digit growth. And I think maybe we had indicated that at one point. We'll obviously aspire to do better than that.
Historically, the company has grown considerably faster than that if you look at the.
The market the underlying market growth.
It's kind of mid single digit growth and I think maybe we had indicated at that.
On point, we'll obviously aspire to do better than that part of the company's historical growth rate is a function of the size of the company as its ramped up with.
Milt Childress: Part of the company's historical growth rate is a function of the size of the company as it ramps up with new product introductions. When the company was relatively small, then incremental revenue from new product introductions added a lot on a percentage basis to sales. And as the company gets a little larger, obviously, it doesn't have quite the same impact. But we do have some exciting new products... We, the AMI team, do have some exciting new products that we expect to be introduced to the market in the next year or so. Yeah, we put it in the ceiling because it can affect both Technetics and Garlock. Both. When you look at the oxygen sensors, the moisture sensors, and H2S, they can be used in a variety of different applications, including food and pharma, and general industrial.
New product introductions.
When the <unk> when the company was relatively small then then incremental revenue from new product introductions.
Adds a lot on a percentage basis to sales and as the company gets a little larger obviously it doesn't have quite the same impact, but we do have some exciting new.
The a and my team does have some exciting new products that we expect to be introduced in the market in the next year or so.
Yes, we can.
Put it in sealing.
It can affect both techniques in garlock both.
When you look at the oxygen sensors, the moisture sensors and <unk> can be used in a variety of applications, including food and pharma general industrial so theres lots of applications work spread that throughout the company. So it fits nicely into the ceiling.
Eric Vallencourt: So there are lots of applications for it. We spread that throughout the company, so it fits nicely in the system. Okay, and then just done ceiling margins, you know, really phenomenal year. Maybe just how should we be thinking about kind of long-term margins and if we see, you know, this soft patch that you saw in 4Q kind of extend, you know, just speak to the resiliency of the margins in any kind of, you know, slowdown, and I think, you know...longer term, I think that, you know, we' Well, we've commented before, I think back in the third quarter, that we were looking at somewhere around 28 plus or minus a little bit. And I think it will still be in that range. It really depends on the mix. And so it depends on the industry mix. And that's really the biggest driver: mix and volume.
Okay, and then just on <unk>.
Sealing margins, you know really phenomenal year.
Maybe just how should we be thinking about kind of long term margins and if we see there.
Soft patch that you saw in <unk> kind of extend.
Just speak to the resiliency of the margins in any kind of slowdown.
Okay.
And I think you know.
Longer term I think that.
We have definitely gone through a very successful reshaping of the of the segment.
That enabled us to exceed our previous long term forecast of 25% through a cycle.
And I'll give it to Eric in terms of the drivers moving forward. When we have commented before I think back in the third quarter that where youre looking at somewhere around 28, plus or minus a little bit.
And I think it will still be in that range. It really depends on mix and so it depends on the industry mix and that's really the biggest driver of mix and volume, but overall I expect the margin to hold similar to where they are now.
Eric Vallencourt: But overall, I expect the margins to hold similar to where they are now. Okay, thanks. Thank you. We have reached the end of our question and answer session. I would now like to turn the floor back over to James Gentile for any closing remarks. Thank you for joining us today. Have a good day. Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day, www. EnPro.com, Meeeeeeeeeeeee
Okay. Thanks.
Yeah.
Thank you we have reached the end of our question and answer session I would now like to turn the floor back over to James John Kelly for any closing remarks.
Thank you for joining us today have a good day.
Thank you. This does conclude today's teleconference. We appreciate your participation you may disconnect. Your lines at this time enjoy the rest of your day.
Hum.
Hum.
[music].
Hum.
Hum.
Uh-huh.
Okay.
Okay.
[music].
Yeah.