Q1 2025 Centuri Holdings Inc Earnings Call
Across the organization, we've aligned our kpis top to bottom with companywide growth targets and foster broader thing can and collaboration across the organization.
Moving into the second and third quarters, we plan to take a deeper examination of our end markets long term potential as part of our strategic planning process that will result in development of actionable measurable initiatives to further improve.
<unk> growth our business resilience taken us into the next three to five years.
We will plan to elaborate more on the results of this process in the fourth quarter.
Turning to recent business development activity, we are very encouraged by the recent robust growth in our sales pipeline, which is now approaching 12 billion in revenue opportunities and we remain confident in our ability to achieve a book to bill ratio exceeded one one times this year as laid out in the February call.
Importantly, we have been working towards this at an aggressive pace with a strong start to 2025.
Specifically, we have achieved a record booking quarter with new bookings totaling $1 2 billion in the first quarter.
This is a significant increase over the $221 million, we booked into 2024 in the fourth quarter.
These bookings drove the book to Bill ratio of two two times and an increase in backlog to $4 5 billion as at Q1 2025 from the $3 7 billion as of year end 2024.
We are we have begun to keep the market appraised of our commercial achievements on a more real time basis, demonstrating our commitment to growth targets and accountability.
As such many of the Walton our bookings number what captured in press releases, we issued in late March and April you can review those for additional color. So I won't delve too deeply into the details, but do want to highlight a few key points.
Consistent with our history of viewing all of our Msas are Q1 bookings represented approximately $700 million of anticipated to billing and revenue from Msas that we previously flagged the renewal in 2025, we expect to continually successfully negotiate renewals and extensions.
Long term contracts through the remainder of this year.
Beyond that we've been laser focused on expanding our customer base through exploration in pursuit of new opportunities within our end markets.
This focus resulted in approximately $505 million of new MSA is a new bid awards won during the first quarter. These new bookings spun our segments regions and end markets and include a significant new customer MSA to provide essential good resiliency for a leading U S electric utility in the southwest.
Project estimated to generate tens of millions in revenue in electrical infrastructure work for data centers and.
And two new gas msas in the Pacific Northwest Northwestern.
The new gas Msas, Mark a return to a territory, we exited several years ago and were made possible by our strong relationship with the customer from work performed in other territories in the more recent past.
We expect the timing of renewals and varying award size it to create some lumpiness in the magnitude of awards from quarter to quarter. However, we remain very bullish about the opportunity set ahead of us as we work to win more wallets with now nearly 12 billion in the identified opportunities we.
We are excited to continue to report our progress in the months ahead.
Pivots into business trends from the first quarter and today, starting with our gas business.
During the quarter the U S gas segment faced some impact from adverse early year weather conditions compared to recent years, which had milder winters. However, significant improvements in March put us back in line with expectations and continue to improve as we enter the second quarter, Greg will provide more details shortly.
In our electric business. We are pleased with the first quarter's performance and current market dynamics are non union electrical segment is benefiting from strong market trends across the sunbelt and southeast.
With the widespread impact of damage and outages caused by major storm <unk> seem to be driving grid resiliency and hardening programs forward.
And a more and a more bit heavy union electric business Bijan activity remains very high and we are winning work, particularly of some of the more industrial focused end markets, while we performed substrates and infrastructure and inside electric work.
This includes data centers, which are quite significant infrastructure investment and construction time.
Looking forward, we are confident about our ability to maintain the positive trajectory, we are seeing across segments and delivering strong growth in the <unk>.
Strong results in the coming quarters.
Greg: Now over to Greg to elaborate on our results and our 2025 will look great.
Greg: Thank you, Chris and good morning to those listening in.
Greg: First quarter 2025, consolidated revenues totaled $550 1 million or.
Greg: A four 2% increase from the first quarter of 2024 and consolidated gross profit was $23 million, which is a 53, 1%.
Greg: Increase.
Greg: Over the prior year period.
Greg: Most profit margin of three 7% in the first quarter of 2025 was higher than the two 5% we reported in the first quarter of 2024.
Greg: As a reminder, the first quarter is historically, our slowest period, primarily due to the seasonal winter weather.
Greg: Revenue exceeded our expectations with most segments delivering year over year growth.
Greg: Most profit demonstrated improvement.
Greg: In the majority of our segments with particular strength in our non Union electric segment.
Greg: On a GAAP basis net loss attributable to common stock in the first quarter was $17 9 million or.
Greg: Diluted loss per share of <unk> <unk>.
Greg: Improved from a.
Greg: Net loss attributable to common stock of $25 1 million or 35% or.
Greg: Or <unk> 35 on a per share basis in the same period last year.
Greg: In the first quarter of 2025 total company adjusted EBITDA, a non-GAAP figure was $24 2 million.
Greg: Or approximately 20% higher from the prior year.
Greg: <unk> $22 million adjusted EBITDA margin was four 4% up from three 8% in the first quarter of 2024.
Greg: non-GAAP adjusted net loss in the first quarter came in at $10 $5 million or an adjusted diluted loss per share of <unk> 12.
Greg: Up from <unk>.
Greg: 14.4.
Greg: $4 million or an adjusted diluted loss per share of <unk> 20 in the prior year period.
Greg: The difference between our GAAP and non-GAAP adjusted net loss, primarily reflects the impact of amortization of intangible assets as well as separation related costs and noncash stock based compensation.
Greg: Turning to our reportable segments.
Greg: Revenue for U S gas segment totaled $197 7 million.
Greg: Reflecting a year over year decrease of 12, 7%.
Greg: Typically our gas business is more impacted than our electric business segments, when we experienced very cold weather and snow.
Greg: The majority of gas work involves digging trenching and boring all of which are challenging when temperatures are below freezing.
Greg: As many of you can attest, we had a much harsher winter than not only last year, but relative to the last several years.
Greg: Century was particularly hard hit in the central and southern Great Plains, and the southern portion of the mid Atlantic.
Greg: Gross profit margin in this segment decreased to negative seven 5% in the first quarter of 2025 from negative one 8% in the prior year period. This.
Greg: This decline was due again to the inefficiencies caused by weather disruptions and from a sluggish start to the calendar year across certain customers as.
Greg: As Chris mentioned March saw significant improvement in work volume and improved margins that continued into the second quarter as discussed on our February call. We began taking steps to structurally improve our contracts and cost structure. In this segment early in the year and we look forward to much stronger segment results in the second quarter and beyond.
Greg: Our Canadian gas segment remains a steady business with strong margins.
Greg: Revenue totaled $39 8 million.
Greg: Down two 9% from the prior year period, while segment revenue segment margin of 17, 8% was more than double the prior year period, seven 5% as profitability in the prior year period was negatively impacted by performance issues on certain projects.
Greg: In our Union Electric segment revenue was $175 5 million, an improvement of seven 1% year over year.
Greg: Our core Union electric segment, which excludes offshore wind and storm restoration services experienced 32, 7% growth year over year drill.
Greg: Driven by increased bid project activity, particularly in industrials work around substation infrastructure.
Greg: Within this segment offshore wind revenues were down 64, 1% or $22 $3 million.
Greg: Million.
Greg: As work as project work winds down in line with our expectations.
Greg: Gross profit in the Union Electric segment was six 7% in the first quarter of 2025 largely in line with the first quarter of 2024.
Greg: Non Union electric segment revenue in the first quarter 2025 was $137 1 million.
Greg: <unk> 41, 9% increase year over year.
Greg: Core non union work increased 27, 1% during the period, primarily due to an increase in volumes on msas as we deployed significantly more crews and had higher work hours during the period.
Greg: Segment gross profit increased meaningfully to 11, 9% in the current period compared to two 9% in the prior year period.
Greg: This reflected the favorable impact of more efficient utilization of fixed cost due to an increase in resiliency work that drove higher crew counts and higher and hours worked as well as an increased contribution from more profitable storm work.
Greg: Okay.
Greg: Turning to capital expenditures in line with our capital efficiency program outlined in our February call net Capex was $23 2 million down from $24 6 million in the prior year period, and our free cash flow in the first quarter 2025 improved by $44 6 million.
Greg: Compared to the first quarter of 2024.
Greg: Moving to some balance sheet highlights on a trailing 12 month basis, our net debt to adjusted EBITDA ratio improved to three five times at March 32025 from three six times at.
Greg: At December 29, 2024, we ended the quarter with $15 $3 million in cash and cash equivalents on the balance sheet growing our business in a capital efficient manner remains a core strategic priority.
Chris: As Chris discussed in February.
Chris: Enhancing capital efficiency by refining our capital equipment sourcing and fleet management, and reducing working capital levels through improved <unk> and DSO management are among centuries key strategic priorities.
Chris: We are progressing on all of these fronts with the goal of improving free cash flow and further strengthening our balance sheet.
Chris: Okay.
Chris: Finally, turning to our 2025 outlook for revenues, we affirm we expect to deliver between $2 six from $2 8 billion.
Chris: For adjusted EBITDA, we retained our outlook of generating between $240 $275 million.
Chris: And finally on Capex, we continue to forecast, our net spend to be between $65 million and $80 million.
Chris: Chris mentioned, it but I'll repeat it at this time, we do not foresee a material impact from tariffs on our business.
Chris: We plan to of course continue to follow any developments and the resulting effects on our business as we move through the weeks and months ahead.
Chris: Over to Chris to conclude our prepared remarks.
Chris: Chris.
Chris: Thank you Greg.
Chris: Essentially remains committed to delivering structured profitable growth to.
Chris: To summarize we are well underway implementing a unified business development strategy we.
Chris: We have enhanced our pipeline management and sales strategies and are fostering a growth orientated culture.
Chris: Our business performance is off to a solid start in 2025.
Chris: <unk> been very strong and diverse market trends are driving growth across both our gas and electrical segments.
Chris: The work on the contract and the highly probable opportunities suggests that we are on track to deliver revenue of the upper end of the guidance range for the year.
Chris: Simultaneously, we continue advancing our other strategic objectives, improving capital efficiency and performance buyouts amounting funding sources of reducing working capital.
Chris: Our core end markets remained strong with.
Chris: With capital investments, reaching double digit growth driven by increasing demand for energy resilience, which gives us confidence to maintain our full year 'twenty five forecast introduced in February.
Chris: Thank you very much for your time and support we continue we look forward to providing additional updates on our achievements.
Chris: Operator, you may start the Q&A session.
Speaker Change: Thank you ladies and gentlemen, now begin the question and answer session should you have a question. Please press star followed by the one on your Touchtone phone you will hear from your hand has been raised should you wish to decline from the polling process. Please press star followed by the tune.
Speaker Change: If you are using a speaker phone please lift the handset before pressing any keys, we request that our callers limit their questions to one question and one follow up.
Speaker Change: Your first question comes from drew Chamberlain with Jpmorgan. Your line is now open.
Speaker Change: Thanks for taking the questions.
Speaker Change: First one for me can you just talk a little bit about.
Speaker Change: The trajectory for 2025.
Speaker Change: How you think you're still going to get to the I mean, it sounds like the upper end of the revenue guidance. Despite the weaker.
Speaker Change: <unk> in U S gas they're in.
Speaker Change: Maybe where is that other catch up or rebalancing coming from gas being stronger throughout the rest of the year or is it is it the other aspects of the business.
Chris: Sure. Thanks for the question is Chris.
Speaker Change: So the.
Speaker Change: The weather the weather affected us in just January and February in the gas business bounced back and we were up the expected margins in our margins in March and continuing into April.
Speaker Change: It was eight to nine days I think we lost in the first two months, which caused which caused the slower than anticipated start for the gas business by as I say it recovered in March and April.
Speaker Change: For the full year, we are we have work under contract I'll, just repeat what I've said as.
Speaker Change: As well as backlog that is pushing us towards the upper end of the guidance.
Speaker Change: All of the operating companies.
Speaker Change: Well on track and forecasting that they will they will meet that puts your expectations. So even though the gas is how does the gas businesses U S gas business had a slow start in January February they fully anticipate about getting back to the the level of performance we have budgeted for the year about form the best.
Speaker Change: It's about guidance so.
Speaker Change: It's across all of the businesses that we're expecting delivery to the expectations drew gas was just a slightly slower spot stop theres been an overcorrection in March and going into April.
Speaker Change: We still feel very good about the opportunities in the gas business as well as the broader electrical both union and nonunion.
Chris: Okay. Good to hear thanks, Chris and then just maybe.
Chris: Stepping back for a follow up can you just talk a little bit more about maybe some of the key findings of the strategic review obviously good to hear that it's.
Chris: Near nearly wrapping up here, but maybe just if you can just.
Chris: Talk to us a little bit about what you found is most valuable from that process.
Chris: I think there was some.
Chris: I'll break it down probably into <unk>.
Chris: And so for components.
We structurally we needed to make sure the business how to.
Chris: Top to bottom across all operating companies detail avail.
Chris: Available in labs lives sales pipelines, so we could generate analytics to provide us with the right level of information. So we can make informed decisions on how we position ourselves in the market I think we we were still a little bit abstract across the five operating companies now we've got a fully integrated <unk>.
Chris: <unk> pipeline that basically is more forward looking allows us to make decisions around increasing the pipeline decisions on pricing decisions on positioning so the pipeline was one.
Chris: Secondly, I think cross selling is a term I think we've used in the past.
Chris: We've got great capability across all of the op Cos, we've got great scale, we've just been trying to maximize that and go to the market as one century, so theres been a position in the broader company to our customers.
Chris: That thing is.
Chris: Is culture.
Chris: Think everybody's objectives in the business and faces a customer should be not only.
Chris: Delivering the services were contracted to provide but also.
Chris: Densify more what we can do for our customers and that's been a cultural shift and then probably the fault is and I mentioned in the prepared notes is having kpis from top to bottom on both growth.
Chris: As well as increasing profitability in the business.
Chris: And then as far areas.
Speaker Change: That's great. Thank you very much Chris I'll pass it over.
Chris: Got it.
Speaker Change: Your next question comes from Steven Fisher with UBS. Your line is now open.
Steven Fisher: Thanks, and congratulations on the progress just on the U S gas segment I'm curious, how you would frame.
Steven Fisher: The loss relative to what you would have expected going into the quarter.
Steven Fisher: I guess a bigger picture question here is really.
Steven Fisher: Is this a.
Steven Fisher: Business or a segment that should generate a profit in Q1.
Steven Fisher: Is that your sort of ongoing strategic target and if so is there anything that structurally you need to do to be able to achieve that or just every year you have to hope that the weather is going to be friendly enough to allow for a profit.
Speaker Change: David I'll answer the question around positioning the business in the future and on the correction.
Steven Fisher: Answer the questions on what we would normally expect.
Speaker Change: The.
Speaker Change: There's no doubt when you do work in certain states in certain regions of the country. The weather comes in we cap with cost control the weather, but what we can do is help migrate the business further south.
Speaker Change: So that we've got more sales opportunities across the sunbelt, what other parts of the country, both in industrial and traditional utility clients. So that we get we can get some size and scale into the pipeline.
Speaker Change: And the lowest states are mitigating the impacts of the weather, particularly in the northeast maybe even across across going across the west coast. So the answer to your question is does some work we have implemented to build up a pipeline of opportunities in states that are less affected by the weather.
Speaker Change: So that we can be profitable earlier in the year.
Speaker Change: That's something we're ongoing with.
Steve: And from an expectation perspective, Steve and good morning.
Steve: What I would say as you know Q1 is a seasonally slow period, most notably for the gas business just given the weather conditions that I articulated in my prepared remarks, and we still remain confident that the full year will.
Steve:
Steve: Well performance as expected heading into the year.
Steve: Okay. That's helpful. And then I think you still have the one one times book to Bill target.
Steve: Now with over two times in the first quarter I sort of should we expect some pretty I know you mentioned lumpiness.
Steve: But should there be some pretty kind of light quarters within that what kind of visibility and cadence should we expect on the bookings from here. Thank you.
Steven Fisher: Good question Steven.
Steve: The strength of the bookings.
Steven Fisher: Has continued nicely into Q2, and we track it weekly so.
Steven Fisher: We've got good visibility on the full year, we have continued into Q2 with a very strong booking quarter.
Steven Fisher: I think the the one one.
Steven Fisher: Definitely.
Steven Fisher: And achievable target for the full year I think there are there are months of the year, where the traditional MSA renewals.
Steven Fisher: Off slow and then get a pickup as you move into the fourth quarter to the year close to the year end.
Steven Fisher: So we to answer your question I would see some lumpiness in the third quarter.
Second quarter looks robust on the fourth quarter, driven by not only MSA renewals, but also some new new bid work, we'll we will pick up again.
Steven Fisher: We are confident we will achieve if not exceed the one one target with Q3, probably being our quietest quarter, but Q2, and Q4 being pretty solid on bookings, both msas and new bid awards.
Speaker Change: Very helpful. Thank you.
Speaker Change: Your next question comes from Justin Hockey with.
Speaker Change: Well Robert W. Baird. Your line is now open.
Justin Hockey: Great. Good morning, Thank you for taking my question.
Speaker Change: Morning.
Speaker Change: I guess first one just to clarify.
Speaker Change: The guidance when you say the upper end of revenue I didn't hear you say the upper end of adjusted EBITDA as well. So I just wanted to kind of confirm.
Speaker Change: What's your thinking on the EBIT side and then maybe.
Speaker Change: Some comments on.
Speaker Change: Kind of the cadence and the seasonality given that you.
Speaker Change: <unk> had some slower starts in electric to kind of start the year last year and maybe it's a little tougher in the back half just kind of how to think about.
Speaker Change: The contribution of our important.
Speaker Change: I can take the guidance question look we have not raised guidance because.
Speaker Change: At quarter end.
Speaker Change: We want to be cautious.
Speaker Change: As everybody knows we've had.
Speaker Change: What's going on in the business and a lot of change so we are cautious.
Speaker Change: What I would say to your question is yes, the bookings the backlog and the very highly probable work.
Speaker Change: It's taken us towards the upper end of the guidance as we said in our prepared notes.
Speaker Change: That's closer to the $2 8 billion of revenue for the year, we don't see any.
Speaker Change: Impacts and we don't see any dilution of our margins as we continue to drive growth into the business, nor do we see any margin erosion coming from competitive pressures. So we're still very happy with the EBITDA margin to answer your question.
Speaker Change: [noise] incentives seasonality.
Speaker Change: All of the all of the businesses.
Speaker Change: With the exception of January February and the eight nine days, we have got affected.
Speaker Change: The gas business up in the northeast and Atlantic Coast.
Speaker Change: All of the businesses are showing strong Q2, Q3 Q4, all the way to year end. So we don't see any any further seasonality as we've come through the first quarter.
Speaker Change: Okay. Thank you.
Speaker Change: I guess my second question is obviously, a big part of the story. This quarter was the really strong bookings, which we've already discussed.
Speaker Change: I wanted to ask about the 505 million, that's the new work and some of that is <unk>.
Speaker Change: Msas that you mentioned the wild Pacific Northwest, but then some of them are these strategic bids, which I know Chris has been something.
Speaker Change: Wanted the company to pivot towards <unk>.
Speaker Change: I was just curious to understand kind of the risk profile of that work.
Speaker Change: The strategic stopped there are those customers you've worked with in the past and just how do you get comfortable.
That it doesn't change kind of the lower risk MSA profile. Thank you.
Speaker Change: Just and I will tell you the.
Speaker Change: Yeah.
Speaker Change: The type of work we are performing is just sticking to the knitting. It just simplifies. The same is the same services, we've been providing for the last the last number of years.
Speaker Change: It's nothing new it's nothing different risk profiles not change and there is no need to change it.
Speaker Change: Lenny of opportunity doing the same thing the same type of services the same forms of contracts.
Speaker Change: With many of the same same customers. So there's no <unk>.
Speaker Change: Shifting at all and what we're doing and how he is just how we positioned ourselves in the market.
Speaker Change: Holding ourselves to two accounts, what do we find more opportunity.
Speaker Change: So.
Speaker Change: Wouldn't read in the $5 five and its continued as we've gone into the second quarter the focus to drop businesses on these new opportunities in these new MSA is doing the same thing the same services under the same type of risk profile that we do each year and have done so for many years. So there is no change there no need to.
Speaker Change: Okay.
Speaker Change: I appreciate the perspective thank.
Speaker Change: Thank you very much.
Speaker Change: Appreciate it.
Speaker Change: Your next question comes from Sam <unk> with Keybanc capital markets. Your line is now open.
Sam: Great. Good morning. Thank you for taking my question. So if I can ask one more on margin.
Speaker Change: Just trying to see if that thing that you will need to do.
Speaker Change: The strategic Cynthia to get you to the full year EBITDA margin, especially if.
Speaker Change: It's a more normal storm year versus last year.
Speaker Change: Thank you for the questions and no I don't.
Speaker Change: Theres nothing radical is nothing different we need to do.
Speaker Change: The insights we are tracking the budget, we expected to track that will deliver will deliver.
Speaker Change: The full year guidance.
Speaker Change: The backlog.
Speaker Change: Type of work, we expect to bookings that we see in the <unk>.
And the next few weeks.
Speaker Change: Basically confirmed because we just got to execute and deliver a execute and deliver to achieve this year's consensus. There is nothing there is nothing abnormal to it.
Speaker Change: Yes, there was a bit of disappointment in January and February with the with the web again with top cut really change the weather what was what was absolutely clear was the bounce back in March and April in the gas business. So nuts, that's now trending to exactly where we wanted it to be for the year.
Speaker Change: Okay.
Speaker Change: Great. Thank you and if I can ask on the new Msas that you spoke about can.
Speaker Change: Can you just add in more detail.
Speaker Change: If you were able to displace income incumbents on those or if that was an increase in utilities scope of work that allowed you to participate in beef.
Speaker Change:
Speaker Change: Was it was both two ones here clearly.
Speaker Change: We were we've been performing well with many of our customers. We've been spending time with our customers and asking if there are opportunities to do more and more of a stronger position in <unk>.
Speaker Change: Not all of the competition perform as well as we do so we've seen opportunity to displace but we're also seeing opportunity just because clients are spending more money. So.
Speaker Change: So it's both and that's continued as we've gone into the second quarter also.
Speaker Change: Great. That's good to hear thank you so much.
Speaker Change: Thank you for the question.
Speaker Change: Ladies and gentlemen, as a reminder, should you have a question. Please press star one.
Speaker Change: Our next question comes from Sharif, Elsa <unk> with Bank of America. Your line is now open.
Sharif: Hi, good morning.
Speaker Change: Good morning.
Speaker Change: Doing well thanks.
Speaker Change: Wanted to touch on the non Union Electric storm was a substantial lift there could you give us a sense of what gross margins would look like ex storm just to give an idea of how much fixed cost absorption contributed to the improvement in the quarter.
Speaker Change: Oh.
Speaker Change: <unk>.
Speaker Change: It was about 10% of their revenue it wasn't overly material I mean, the drive an improved EBIT margin was our gross margin excuse me was really driven by the increase crews that we added.
Speaker Change: Not just the ones in the first quarter, but also the the 40 or so crews that we added in the last half of 2024 that we talked about in prior calls.
Speaker Change: And then just increased work hours.
Speaker Change: Especially given some of the.
Speaker Change: The headwinds we had last year.
Speaker Change: With work hours, we've really seen those return to more normal levels.
Speaker Change: Understood and looking at the bookings you had good bookings in the quarter you touched on this a bit earlier with the Lumpiness of MSA renewals can you give us a sense of typically use Q1, the heavier renewal period for a lot of those msas and can you give us a sense of what backlog looks like in the first quarter historically in 'twenty, two or 'twenty three.
Speaker Change: Just to understand the typical MSA impact at the start of the year.
Speaker Change:
Speaker Change: MSA renewals, mainly in the fourth quarter is what the data tells me.
Speaker Change: So.
Speaker Change: Uh huh.
Speaker Change: We can probably do the calculation on the on the backlog, Greg, we'll we'll look into that.
Speaker Change: The lumpiness.
Speaker Change: <unk>.
Speaker Change: Is is typically in the middle of the year and the utility clients, where MSA has a renewing but recall our drive is to fund new opportunities new bid work, which is less seasonal.
Speaker Change: So I did answer the question a little earlier Q1 was was busy across MSA renewals as well as.
Speaker Change: MSA bidding as well as.
Speaker Change: New bid work Q2 is the same.
Speaker Change: Although there are one or two msas that we expect to renew round about June 37 megawatts of the quarter, but we expect Q2 to be busy Q3 does not have a lot of MSA renewals.
Speaker Change: So it will be mainly bid work, which is why I said earlier it will be somewhat quieter and then as we get into the fourth quarter. There are some larger msas that will be renewed and we will be also a significant amount of bid work around dissipating.
Speaker Change: So that's how I'd answer the question.
Speaker Change: Thank you.
Speaker Change: There are no further questions at this time, ladies and gentlemen. This concludes your conference call for today, we thank you for participating and ask that you. Please disconnect your lines.
Speaker Change: Okay.
Speaker Change: [noise].