Q3 2024 Vontier Corp Earnings Call
Speaker Change: Good morning ladies and gentlemen and welcome to the 1 year third quarter, 2024 earnings call. At this time, all lines are in a listen only mode.
Speaker Change: Following the presentation, we will conduct a question and answer session. If at any time during the call, you require immediate assistance, please press star 0 for the operator. This call is being recorded on Thursday, October 21, 2024.
Speaker Change: and a replay will be available shortly after.
Speaker Change: I would now like to turn the call over to Ryan Edelman, one year's Vice President of Investor Relations. Please go ahead.
Ryan Edelman: Thank you, good morning everyone and thank you for joining us on the call this morning to discuss our third core results. With me today, our Mark Morelli, our President and Chief Executive Officer and I'm Trubon Aga, our Senior Vice President and Chief Financial Officer.
Ryan Edelman: You can find both our press release as well as our slide presentation that we will refer to during today's call on the investor relations section of our website and investors.bondere.com
Ryan Edelman: Please note that during today's call, we will present certain non-gap financial measures. We will also make forward looking statements within the meetings of the Federal Security's laws, including statements regarding events or developments that we expect or anticipate will or may occur in the future.
Ryan Edelman: These forward-looking statements are subject to risks and uncertainties. Actual results might differ materially from any forward-looking statements that we make today and we do not assume any obligation to update them.
Ryan Edelman: Information regarding these factors that may cause actual results to differ materialy from these board-looking statements is available on our website and our SEC findings.
Speaker Change: With that, I'd like to turn the call over to Mark.
Mark Morelli: Thanks Ryan and good morning everyone. Thank you for joining us on today's call. I'll provide a high level overview of our performance in Q3 and a brief update on our end markets and the progress we're making on our strategy.
Mark Morelli: will then provide a deeper dive into our results and outlook for the full year.
Mark Morelli: Let's get started with a summary of the quarter on slide three. We delivered solid results in the third quarter as we continue to capitalize on strong momentum across our convenience retail, entailing and markets supported by increased adoption of our market leading technologies.
Mark Morelli: Corsales increased 3% above the high end of our guidance range with upside from both our environmental and healing and mobility technologies segments.
Mark Morelli: Discipline Operational Performance Strove Operating Margins toward the better end of our guidance and EPI at above the high end of our range.
Mark Morelli: Funtier has a unique competitive advantage within the mobility ecosystem with a purpose-built portfolio connected hardware and software solutions. We continue to make solid progress on our connected mobility strategy which places us at the forefront of our customer's digital transformation journey.
Mark Morelli: A great example of how we're delivering differentiated solutions is the traction we are seen with our invento offerings in payment and enterprise productivity.
Mark Morelli: Inveccals sales increase more than 20% in the quarter, driven by higher adoption of our recently launched FlexPay 6 payment terminal, as well as our vehicle identification system discussed on last quarters call.
Mark Morelli: As we connect, manage and scale the mobility ecosystem, our focus on re-invigorating R&D and new product introductions are delivering tangible results.
Mark Morelli: Our environmental and fueling business improves the country and delivered nearly 9% core growth in the quarter with broad-based demand across regions and product lines.
Mark Morelli: broke with particularly strong in North America across the entire product portfolio. The pipeline of new site build activity continues to expand and increase adoption of flex basic. It's helping to re-accelerate, record fit and refresh activity.
Mark Morelli: Note of Ontoer orders were encouraging in the quarter up 10% year over year organically and resulting in a book to bill over one for the third consecutive quarter. Someone has reflect the benefit of Q2 order recovery, but the underlying booking trends were a positive indicator.
Mark Morelli: We are seeing the early endings of our simplification program under pillar one optimized the core and we will continue to execute against the pipeline of opportunities leveraging VBS and the AD20 principles embedded in our focus and prioritization program.
Mark Morelli: Operating profit margins benefited from accelerated cost actions announced last quarter, delivering approximately $5 million in savings.
Mark Morelli: The turn of slide four.
Mark Morelli: Looking across our primary and markets and the individual verticals within each, we continue to see momentum for most of the portfolio. Convenience, retail and killing are largest and market has unmasked channel presence with leading chair positions.
Mark Morelli: The man here remains robust with the one exception being car wash, which accounts for about 7-8% of total tear sails.
Mark Morelli: Successful Spicer operators continue to execute their multi-year site expansion and modernization plans and the industry continues to consolidate.
Mark Morelli: This favors the large national and regional operators where we have the higher market share and where we are focusing innovation.
Mark Morelli: We're seeing more evidence that the organic and inorganic investments we've made to accelerate growth, executing on pillars two and three of our primordial pain off, giving us even stronger conviction around this end market.
Mark Morelli: As you may recall, pillar 2, expanding the court is about leveraging our current market positions to accelerate profitable growth with a focus on driving shareings or innovation and marketing product vitality.
Mark Morelli: We're advancing our vento product strategy and we are seeing increased customer adoption of our innovative payment, going to sale and for core automation solutions.
Mark Morelli: We are standardizing our convenience, retail offerings around our In-effects microservices architecture. This allows us to deliver a customizable scalable platform that unlocks the ability to drive growth, reduce cost, and enhance the consumer experience.
Mark Morelli: As an example, we were recently selected by one of our longstanding customers Costco.
Mark Morelli: To deploy our unified payment solution across their footprint in Canada.
Mark Morelli: This includes our FlexPay 6 payment terminal and in effect microservices software.
Mark Morelli: With this solution, Costco will have the ability to seamlessly integrate their existing hardware, software and services while enabling over the year updates, optimizing payment security compliance and customizing loyal programs.
Mark Morelli: The critical value proposition where offering customers like Costco is improved uptime, faster transaction times, and lower cost operate. The end result is improved productivity and throughput for our customers and a better user experience for the consumer.
Mark Morelli: We also secure a contract with a major global cease-for operator in the third quarter with a total contract value approximately $10 million.
Mark Morelli: This project involves upgrading and converting legacy payment technology to flex-tase six across their acquired sites in North America.
Mark Morelli: This serves as a clear example of how industry consolidation drives increased retrofit activity as operators standardized technology platforms following acquisitions.
Mark Morelli: At Environmental Healing, we won three large multi-year tenders in India and Q3, but the total contract value of approximately $70 million.
Mark Morelli: This was a direct result of our BBS initiatives to design out costs and improve the quality and security of our dispenser equipment, as well as localized production.
Mark Morelli: Just last week we awarded a fourth tender to install underground submersible tank pumps across their network, which is an incremental contract value of approximately $15 million over the next 12 to 18 months.
Mark Morelli: These winds are reflective of the significant effort by our teams and another example of how we're growing market share and improving market lean margins in our EFS segment.
Mark Morelli: Pillar 3 is about delivering profitable growth from adjacent markets.
Mark Morelli: We are pursuing opportunities to expand into adjacent and markets with solutions, leveraging new and existing offerings and channels to market.
Mark Morelli: We continue to see strong evidence that convenience stores will be a big beneficiary of the build-out of EV charging infrastructure as it prefers to stop on the go-charding.
Mark Morelli: Archenex, Turnkey, EV, solution launched in May, specifically targets this market and continues the game on menop.
Mark Morelli: We were recently awarded a $2 million contract by a large regional convenience store chain to begin to point in next at its sites across the US.
Mark Morelli: Connect includes EV Chargers, Network Software Management, and leverages our extensive channel and service network from GBR. It also incorporates our FlexPay 6 payment terminal to deliver the same reliability and integrated payment capability user crafts convenience retail sites.
Mark Morelli: The first sites go live this month and we are managing everything from site selection and netty funding applications to installation and technical support.
Mark Morelli: Dryeth is now a leading software offering for charge point operators to manage their growing network of EV charges. We are accelerating our plugs under management further now sitting at over 100,000 more than doubling your over year.
Mark Morelli: 80% of these are located in Western Europe, which is the leader in the world for EV adoption.
Mark Morelli: In October, we signed one of the largest global fleet operators with 1.5 million vehicles on their management to support their fleet electrification efforts.
Mark Morelli: Drives revenue is up nearly 50% year to date and contributing to overall volunteer growth for 2024 and beyond.
Mark Morelli: While we're seeing healthy demand across most of our in-market, there are two primary areas that are experiencing some pressure near term. Car Wash and Auto Repair.
Mark Morelli: The car wash industry continues to transition from a multi-year hypergrowth phase for tunnel car wash systems to more normalized growth rate. After rising significantly, construction costs for tunnel systems have now stabilized and interest rates are beginning to move in the right direction.
Mark Morelli: However, we anticipate there will be a lag between these developments and an inflection in demand for greenfield tunnel systems.
Mark Morelli: Turning to the auto repair and market, as we noted previously, headwinds that repair solutions are related to slower discretionary spending by service technicians resulting from persistent inflation in general uncertainty regarding the U.S. economic and political environment.
Mark Morelli: While the volume declines in Q3 played out largely as we anticipated, order rates and distributors cell-through volumes are showing improvement.
Mark Morelli: The backdrop for auto repair remains strong, technician wages and employment are healthy and the age and complexity of the car park is increasing providing demand for auto repair.
Mark Morelli: A similar transformation to giving you stores is happening in the commercial and industrial fleet market.
Mark Morelli: As the industry looks to modernize and decarbonize, managing fleets is a major challenge in requires multiple technologies, fuel types, and the integration of traditionally disparate systems and data.
Mark Morelli: Our Cross Business Solutions optimized fleet deep-o management with the lowest total cost of ownership while achieving sustainability and compliance goals.
Mark Morelli: Turning S like 5.
Mark Morelli: Earlier this month, Archaean Scattered at the Angel Max Treycho in Las Vegas, the convening store industries largest Treycho, the year where we were able to showcase the whole breath in depth of the volunteer portfolio.
Mark Morelli: This was a great opportunity to highlight the outcomes of our connected mobility strategy with a best in class suite of end and solutions that deliver enhanced consumer engagement and productivity while lowering the cost operate.
Mark Morelli: At Nax we introduce the hub.
Mark Morelli: A great example of the unique capabilities of our portfolio. The hub is built on the Infects Micro Services Architecture and seamlessly integrates all existing devices at a retail site onto a single cloud-based platform to manage their infrastructure remotely and more efficiently.
Mark Morelli: We also introduce several differentiated solutions in feature sets that expand our existing portfolio productivity and revenue generation capabilities.
Mark Morelli: feedback from customers at the show Valedates, our strategy around delivering Beth and class and to end open architecture solutions.
Mark Morelli: I'm confident we're on the right trajectory. We're well positioned and durable, attractive and markets with long-term profitable growth opportunities.
Mark Morelli: Our leading market share positions, business simplification opportunities, and cash generation profile are bolstering our position, and we expect to capture even greater operating leverage as demand accelerates.
Speaker Change: With that, let me turn the call over to Insumen.
Speaker Change: Thanks Mark and good morning everyone. I'll start on Flight 6 with the summary of our consolidated results for the third quarter.
Insumen: Reported sales was 750 million, but core growth of approximately 3%. Led by solid growth, from our environmental and fueling and mobility technology segment.
Insumen: Adjusted Operating Profit margin declined 80 basis points.
Insumen: At the better end of our guide, as contributions from positive price cost and accelerated cost actions were more than offset by lower volume and unfavorable makes associated with lower sales at DRB and repair solutions.
Insumen: This resulted in adjusted EPS of 73 cents for the quarter ahead of our expectations.
Insumen: Aga, the free cash flow was 109 million with conversion of 98%.
Insumen: Let's review our segment results, starting on Flight 7.
Insumen: Environmental and fueling solutions achieved 4 growth of 9% in the quarter, driven by broad face trend across the portfolio.
Insumen: Total dispenser sales increased high single digits with U.S. dispenser contributing mid-singered digit growth.
Insumen: After Market Park sales increased over 20% in the quarter, bringing year-to-date growth into the high teens.
Insumen: We continue to leverage our large and expanding install base and focus on higher value components, accelerating growth in the higher margin offering.
Insumen: Environmental Solutions grew low single digits, which strong growth in North America supported by Upright at Longest earlier in the year, partially offset by a strong 30% prior year comparison in international markets.
Insumen: Second operating profit margin expanded 50 basis points in the quarter on positive price cost and continued execution on an ongoing simplification efforts.
Insumen: Here today segment operating profit margins at EFF are up 160 basis points over the briar.
Insumen: The team has done an incredible job executing, leveraging VBS and fellow one-in-sherded.
Insumen: Turning to slide it.
Insumen: Mobile Detectualities reported, a core sales increase of over 4% in the quarter, driven by robust demand for payment and enterprise productivity solutions, partially offset by our car wash business.
Insumen: Inventor achieved impressive double-digit orders and sales growth for Q3 and year-to-date, demonstrating the effectiveness of our investments in new product development.
Insumen: Sales the DRV declined, as expected in the quarter, but revenues stabilizing, sequentially, on a dollar basis.
Speaker Change: Mobile-Higgy Technologies Operating Profit margin declined approximately 270 basis points versus the prior year. Do you primarily to ongoing R&D investments at Invento and Unfavorable Max?
Speaker Change: Moving to our repair solution segment on Flight 9.
Speaker Change: 4 sales decline 5% as expected due to ongoing macro uncertainty, pressuring technicians spending particularly for more discretionary, larger ticket items.
Speaker Change: However, we're seeing signs of improvement.
Speaker Change: 2-storey sales decline just over 10%, which is a significant improvement from Q2's exit rate.
Speaker Change: As demand for most product lines has come under pressure, we have leveraged our Aga Business Model to pivot product vitality towards the tools that service technicians need most.
Speaker Change: Lawyer Price, Point Tools, that add value and productivity in the day-to-day workloads.
Speaker Change: From a most recent technician survey, we know they continue to prioritize R2s, Hardline hand tools and agnostics.
Speaker Change: Secondary operating profit margins declined 560 basis points driven by lower volumes and mix, as well as timing of bad debt reserves year over year.
Speaker Change: Sequentially, Martins are up 10 basis points in line with what we were anticipating.
Speaker Change: Looking at a balance sheet and cash flow on slide 10
Speaker Change: Our net leverage ratio remains flat sequentially at 2.7 times, but improving from 2.9 times a year ago.
Speaker Change: We completed $105 million in share repurchases in the quarter. Through both an accelerated share repurchase plan and open market transactions.
Speaker Change: Year to date, through September we have reperch is $165 million or approximately 4.7 million shares.
Speaker Change: Appalachian Sheed Remains healthy but strong liquidity over $300 million in cash on hand and an undrawn predator Volvo.
Speaker Change: We continue to believe there is a significant valuation disconnect relative to a long-term growth, profitability and cash-generation potential.
Speaker Change: As a result, we expect to continue to deploy Freakash for two buybacks in the Ford Quarter and plan to repay a small amount of debt.
Speaker Change: With that, let me provide an update on our thinking for the fourth quarter and full year. I'm on slide 11.
Speaker Change: For the full year, we are narrowing Agaiden's ranges around the midpoint of a prior guide. And now expect revenue of approximately $2.97 billion, which reflects score growth of slightly above 1%.
Speaker Change: Operating margin will be relatively flat year over year.
Speaker Change: We are maintaining a prior adjusted EPS midpoint of approximately $2.90.
Speaker Change: Thanks for watching!
Speaker Change: This translates to 1.5% core growth at the midpoint for the fourth quarter, with operating profit margins down approximately 20 basis points equating to EPS of roughly 79 cents.
Speaker Change: Before I turn the call back over to Mark, I wanted to provide some early thoughts on 2025.
Speaker Change: While it is too early to provide guidance.
Speaker Change: As you start to find tune your models, there are a few things to consider.
Speaker Change: We expect a man from majority of our end markets to remain healthy next year supporting overall growth and margin expansion.
Speaker Change: Although we are seeing early signs of recovery in repair solutions and car wash markets, the timing of the eventual inflection is difficult to predict. That said, expectations are that both markets likely trend flat-ish next year.
Speaker Change: Additionally for Q1.
Speaker Change: We will have a top compare at AFF.
Speaker Change: which grew 10% in expanded margins nearly 400 basis points this year.
Speaker Change: Also, our annual MagcoExpo event will move from Q1 to Q2 and 2025 shifting approximately 30 million between the two quarters.
Speaker Change: With that, I'd like to pass the ball back over to Mark.
Mark Morelli: Thanks, Anshooman. I'm encouraged by our progress here today as we're gaining traction in our end markets that are strong, offsetting some weaker segments with innovation and beginning to see signs of stabilization and recovery in the businesses that have
Mark Morelli: We're executing on our connected mobility strategy and our focus on innovation is delivering critical new product introductions at a faster pace.
Mark Morelli: We have a good setup for 2025, the continued acceleratory growth and profitability.
Mark Morelli: Frontiers, uniquely positioned to lead the digital transformation of the mobility ecosystem, which is still in the early innings.
Mark Morelli: We're enabling our customers to manage an increasingly complex infrastructure through back-and-class technology and a portfolio of multi-energy solutions.
Mark Morelli: As we connect, manage and scale the mobility ecosystem, we expect our continued portfolio transformation, will enable sustainable growth and allow us to deliver top-tier financial returns.
Mark Morelli: I'd like to thank our teams around the world for their commitment to execution and dedication to delivering for our customers. Our performance is directly attributable to our cultural continuous improvement, which are on fully demonstrate every day.
Mark Morelli: With that operator, please open the line for questions.
Speaker Change: Thank you ladies and gentlemen, we will now begin the question and answer session. And as a reminder, if you were to ask a question, please press star 1 on your touchstone phone.
Speaker Change: and wait for your name to be announced. Once again, star n1 if you were to ask a question.
Speaker Change: The End
Speaker Change: And we have questions at Kemen and the first question comes from the line of Nigel Coe from Wolf. Your line is no open, please go ahead.
Nigel Coe: Thanks, good morning everyone, thanks for the question.
Nigel Coe: and Shumar, I just wanted to make sure you just kick off with just any additional color on your high C4Q.
Nigel Coe: So that one-on-off percent will go on a growth break and out between the segments. And then the I think you're guiding for 50 bits of sequential margin expansion, which would be obviously very normal with the full keys functionality, but again any color on the second speed help.
Speaker Change: Yeah, the morning Nigel.
Speaker Change: from Environmental and Fuelling Perspective.business.
Speaker Change: should continue to have good growth in the fourth quarter of the expecting high single-digit growth for the FS. They're coming off a really strong quarter of booking and a good book to belt.
Speaker Change: Mobile Detectonology is also a book to build was about one and actually all of business but mobile Detectonology business should be flat-ish for the fourth quarter from a revenue perspective.
Speaker Change: We continue to see good growth and good traction on in Venko with our innovation very paying off.
Speaker Change: The Car Wars Market, as we talked about, we think sequentially it stabilised from a year on your perspective, that would be a headwind for us, that leads to a flattish.
Speaker Change: Number for mobility technologies and then repair solutions. Again, while the market is stabilizing, we're expected still to be down on it, year to date, basis year over year, basis of about missing of the digits.
Speaker Change: Okay, that's helpful. And then just wanted to dig into the aftermarket strength within the EFS segments. I mean, 20% growth for...
Speaker Change: Parts and an aftermarket is extraordinary number. There are anything here that the LAPA did in its whole base. Other some growth initiatives come to bear here. You know, share gains. I know that you've been showing the loads of growth here, but this one's just...
Speaker Change: Dig into that and just remind us how big is that portion of the segment.
Speaker Change: So, Nigel, I'll take that question as Mark.
Mark Morelli: Look, this is a beneficiary of the EMV cycle that we all had to live through, but the install base went up and I think we demonstrated we gained share during that cycle.
Mark Morelli: At the same time, it was one of our earlier profitable growth initiatives that we launched post-spin to re-segment this as a separate business inside of...
Mark Morelli: and Sada Vantir, and then have that business.
Mark Morelli: Run with a strong focus on VBS.
Mark Morelli: and putting in place some of these AB20 principles to try to clean up some of the offerings. A great example of that is we do some refurb of manufacturing of boards. It was one of the new launch efforts.
Mark Morelli: and then we took out some of the skews so that we could try to get some more acceleration on that. So you've seen a great trend.
Mark Morelli: on that business and I think it continues to show that this is going to be a business for a long time where we get that and then the total revenue for the business is over 200 million.
Speaker Change: Ed, Ed above League March and by the way. Great, thanks Mark. Appreciate it.
Speaker Change: Thank you and the next question comes from the line of Julian Mitchell from Barclay, Sir Line Snow Open, Pisco ahead.
Julian Mitchell: Thanks very much and good morning. Maybe.
Julian Mitchell: Just coming off the back of some of the initial comments on 2025, you know, first thinking organic sales, exiting this year up, low single digits.
Julian Mitchell: with the headwinds that also, you know, what a repair and car wash, so it has low singles he did for the next year, at least the first half looks reasonable for now.
Julian Mitchell: and anything on operating leverage or below the line to emphasise. I think operating leverage of the low 30s placeholder from the investor day.
Julian Mitchell: Any reason that would not apply in 25 and then anything sort of below the line to emphasize it's if you look looking at today.
Julian Mitchell: The End
Speaker Change: So, I hate not to, excuse me, Julian, this is, I think, a great setup for 2025 for us. I think the areas that we really encouraged about is...
Speaker Change: One, we're seeing stabilization in some of the markets that we talked about that were choppy, we're seeing some really great innovation read through.
Speaker Change: and we're of course bringing on the call some really specific examples where there's uptake on this integrated network that is getting a lot of favorability with our customers. So we think we're going to get uplifted.
Speaker Change: and the market has been stronger and the self-help-based issues in our pillar one are going to help of buoy the margin so that...
Speaker Change: So the setup for 25 looks pretty positive from us, of course, you know, mix is not been our friend.
Speaker Change: with some of our profitable businesses being weighed down. But I think we've got the right actions in place regardless of what.
Speaker Change: The market's bring next year, it's a little bit too early to give guidance specifically on that, but really encouraged by the setup we see. Shaman, did you want to jump in there? Yeah, Julian. So the incremental, the dimension of the 30 to 35 percent should play out. We're in the early innings of our...
Speaker Change: Pilla I and the power of VBS around continues improvements. So we feel confident that we should drive Martin expansion next year. Also below the line, obviously with the buybacks we've done.
Speaker Change: The share count of about 152 million is where we stand right now. For the fourth quarter, the outcome to be some benefit in the next year. When we look at the year on year.
Speaker Change: and then you know, you are point on the low single digit growth. Just I will point out which I also said during the prepare remarks.
Speaker Change: Q1, we have a difficult compare for EFS, but also the MATCO X-Povertis are larger sales event as moving from Q1 to Q2 which moves about 30 million out of MATCO's revenue orders and sales for Q1 into Q2. No change for the first half but just a shift between quarters.
Speaker Change: The End
Speaker Change: That's helpful, thank you and just.
Speaker Change: One director on the sort of margins for the fourth quarter.
Speaker Change: You have that sequential uplift with normal seasonality firm wide. Just any points of emphasis on which segment might lead or lag in terms of the sequential margin increase in Q4.
Speaker Change: You know, done.
Speaker Change: Good.
Speaker Change: You know, it's some of the fall-through front-the-in-commment or revenue of this level play-out. For EFS, we expect margins to be relatively flat to potentially slightly down your on year to have a good Q4 last year from a margin perspective.
Speaker Change: Repair Solutions should be sequentially flat again to potentially slightly up. So that's, we've seen the margin stabilised out there from Q2 to Q3 and we should see that continue in Q4.
Speaker Change: That's great. Thank you.
Julian Mitchell: Thanks Julian, excellent.
Speaker Change: Thank you. Once again for those who want to ask a question, just press star in one on your telephone keypad. And the next question comes from Andrew Oben from Bank of America, your line is now open. Please go ahead.
Speaker Change: Morning, this is David Ridley Lane on for Andrew.
Speaker Change: On the India Tenders, we think that was in over two to three years. I heard that the just confirm it's 15-15 for the underground stuff is coming in 12-18 months. What about the other?
Speaker Change: We're Sam.
Speaker Change: Yes, so after 70 million that we call out in terms of bookings.
Speaker Change: There's two components of it. There's the hardware that goes over the next 18 months or so and then we have the services that goes over multiple years.
Speaker Change: Just from a bookings perspective, our policy is to book the next 12 months, so we've booked about 25 million of the 70 million.
Speaker Change: and the third quarter. So what you can expect over the next 12 months, 25 million of that hardware revenue will flow through up to 70 million that we bought, called out for the third quarter.
Speaker Change: and I'm going to be on the $12 million cost-cutting benefit here in 2024. That would imply you have a 12 million carryover benefit next year. I wanted to get a sense.
Speaker Change: You know, you're doing R&D investments in in Bingo and other places to accelerate the NPI. You know, how much of that do you think would be used for reinvestment?
Speaker Change: versus Flying Thur.
Speaker Change: After 12 million what we said last quarter about two-thirds of Edelman and there's a little bit that as temporary you could expect about 8 million of Edelman to carry forward into next year.
Speaker Change: It's a little early to give guidance but early to have finalized plans but to be expect R&D as a percentage of sales to stay relatively stable going into next year.
Speaker Change: And if I could squeeze one more in on the math code that that reserves to you, just mathematically lap those next year.
Speaker Change: We're good there stuff. We do. Okay.
Speaker Change: Yeah, we locked them next year and you know
Speaker Change: The Market
Speaker Change: For the financial portfolio, it isn't getting worse. It's stabilized.
Speaker Change: So when we look at our actual bad dead expense for Q1, Q2, Q3, it's relatively flat every quarter over those three years, it's just a comparison.
Speaker Change: The Market Stabilized, a portfolio is relatively healthy, and especially when you compare it to some of the credit card industry data we're doing actually better in its stable. Thank you. Thank you very much.
Speaker Change: The End
Speaker Change: Thank you and seems like no further questions that came through. How now like to hand back to Call Over to a Mark, please go head sir.
Mark Morelli: Thanks John. We appreciate folks joining us on today's call and we appreciate the interest in volunteer and look forward to engaging many of you on the road in the next several weeks. Have a good day.
Speaker Change: Thank you, this concludes our conference for today. Thank you all for participating. You may now disconnect your lines.