Forterra, Inc.
Q2 2018 Earnings Call Transcript

Published: 11 Aug 2018

[Operator:]

Good morning, and welcome to Forterra's Second Quarter 2018 Earnings Conference Call. Today's call is hosted by Jeff Bradley, the company's Chief Executive Officer; and Charlie Brown, the company's Chief Financial Officer. With that, I will now turn the call over to Mr. Brown.

[Charles Brown:]

Thank you, and good morning to everyone. Welcome to Forterra's Second Quarter 2018 Earnings Conference Call. Before turning the call over to Jeff, I will point out that Forterra intends to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, as noted in the earnings release, we filed this morning. Please remember that our comments today may include forward-looking statements, which are subject to risks and uncertainties, and actual results may differ materially from those indicated or implied by such statements. Some of these risks are described in detail in the company's SEC filings, including our annual report on Form 10-K. The company does not undertake any duty to update such forward-looking statements. Additionally, we will refer to certain non-GAAP financial measures during the call, including EBITDA, EBITDA margin, adjusted EBITDA and adjusted EBITDA margin. You can find a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure and other related information, including a discussion of why we consider these measures useful to investors, in our earnings release. Now Jeff Bradley, our Chief Executive Officer, will give an update on our business.

[Jeffrey Bradley:]

Good morning, everybody, and thank you for joining us on the call this morning. Our results for the quarter reflect the continued improvement in our Drainage business and lower costs in Corporate. The better results in Drainage and Corporate more than offset lower margins in Water, due primarily to higher scrap costs. Our results in Drainage reflect strong market demand and the continued benefit of the cost savings initiatives we launched last year to drive our margins higher. We more than offset the impact of higher labor, freight and raw material costs in the quarter. Market demand in Drainage is very good. We ended the quarter with a healthy backlog, including continued higher year-over-year average selling prices, and we expect to see continued strong bookings in the third quarter. I'm pleased with the progress our Drainage team has made, and I anticipate that our second half 2018 margins will be higher than the same period last year. Turning to the Water segment. Our lower year-over-year margins primarily reflect the impact of higher scrap costs that were not fully offset by higher average selling prices. This is consistent with the guidance we gave on our last call. We talked last quarter about our increasingly disciplined approach to pricing in the face of higher costs. We have raised our selling prices, and we're seeing the benefit in our bookings and backlog. While we achieved higher average selling prices in our bookings in the second quarter, it takes time to work through the backlog, which averages about 90 days, to realize the benefit of the higher prices. We also recently announced an organizational change in the Water segment that is a part of a broader initiative focused on accelerating margin improvement through commercial and operational enhancements. On the operational side, we hired Rich Hunter as our Chief Operating Officer in June. Rich is a seasoned operational executive, and he's already driving improvements in the business that we expect will lead to lower costs and higher output. On the commercial side, Vik Bhatia, who joined Forterra last year, recently assumed leadership of the Sales and Customer service group. He is reviewing all aspects of the business to evaluate and reassess our commercial approach. Rich and Vik bring a lot of experience, along with a fresh perspective to an industry that has historically been slow to adapt to changing conditions. I am working closely with them and the rest of leadership team to improve the business. I'm encouraged by the strong demand for ductile iron water pipe that we have seen this year, which is up significantly over the same period last year. And we expect demand to remain strong into next year based on discussions we have had with some of our key customers. Our DIP backlog is up year-over-year across all of our regions, and I believe we are taking the right steps to improve this segment of the business. I also want to provide some brief comments on key end market fundamentals. In highway infrastructure, the largest driver of our Drainage segment, we have seen steady growth in demand this year as compared to last year with higher project activity in many of our key regions, including Texas, Florida, California, Colorado and the Midwest. Year-to-date highway construction spending is up about 4% as compared to the same period last year according to Census Bureau data. This compares to a decline in full year 2017 of about 4%, also according to census data. We are seeing positive trends in project lendings in many of our key states, and our optimism about continued growth in highway spending has been echoed by our peers and by our customers. On the residential side, a significant driver of Water and Drainage businesses, we continue to see strong single-family residential growth trends. Census data year-to-date through June shows residential construction spending is up about 8%, and year-to-date single-family construction starts also up about 8%... We're watching the leading indicators and recent market concerns that have been raised, including the year-over-year decline in new home starts in June, rising interest rates and concern over tightening lending standards. However, most analysts and economic forecasts continue to point to growth in single-family residential spending through 2020, although at a somewhat lower level than we have seen in the last few years. From a strategic standpoint, we completed a couple of small tuck-in acquisitions in Drainage this year, and we continue to evaluate a number of potential smaller acquisitions and expansions in key markets. In summary, I'm pleased with the progress we continue to make in our Drainage business, and we expect year-over-year margin improvement through the end of the year. In Water, I believe the actions we are taking and our ongoing initiatives will put us on the right path to improve performance in the business, consistent with the trends that we are seeing in our bookings and our backlog. Finally, we have significantly reduced our Corporate cost in 2018 as compared to 2017, and we continue to look for further opportunities to lower our costs. Charlie?

[Charles Brown:]

Thanks, Jeff. In the second quarter, we reported net income of $7 million and adjusted EBITDA of $58 million, both above the same quarter last year. Organic sales increased 7% for the quarter as compared to the second quarter of 2017, with 7% growth in both Drainage and Water segments. In Drainage, we are pleased to deliver higher organic shipments on a year-over-year basis and higher average selling prices on both the year-over-year and sequential quarter basis. We generated higher gross profit, and our adjusted EBITDA margin increased to almost 21% for the quarter despite the impact of inflationary pressure on labor, freight and raw materials. We remain focused on our pricing actions and cost reduction initiatives to drive continued improvements in our year-over-year margins. In Water, we delivered organic sales growth of 7% on the benefit of higher shipments and higher average selling prices. The organic growth reflects the benefit of strong demand fundamentals. The average market cost of shredded scrap in the American Metal Market rose another 7.5% in the second quarter as compared to the first quarter average. This followed a 20% sequential wrter increase in Q1 that we discussed in our last call. In addition to higher scrap costs, we also experienced higher labor and freight costs. In Corporate, we reported adjusted EBITDA cost of $13 million, well below the same period of last year of $24 million and below the range that we communicated in our Q1 earnings call. The improved year-over-year results primarily reflect the benefit of lower professional fees. As we announced in June, we amended our existing sale-leaseback arrangement in order to facilitate an exchange of certain manufacturing plans. The amendment resulted in a change in accounting treatment for a portion of the sale leaseback from an operating lease to a finance lease effective early June 2018. At that time, we estimated an annual reduction in SLB operating expenses of $19 million. Upon final review, the annual reduction will be about $17 million. In the second quarter, our sale-leaseback operating expenses were $1.4 million lower than in the same quarter last year. In regards to the balance sheet, we ended the quarter with $30 million in cash and no outstanding balance on our $300 million revolving credit facility. Our change in working capital and capital expenditure for the quarter were well below prior year levels and consistent with our expectations relative to the communicated key cash outflow components for 2018 from our previous guidance. Turning next to our forecast for the third quarter. We expect adjusted EBITDA to be in the range of $60 million to $68 million. In Drainage, we expect to deliver continued year-over-year improvement in adjusted EBITDA and adjusted EBITDA margin, reflecting the benefit of higher selling prices that are expected to mitigate the impact of input costs. In Water, we expect to see a decline in adjusted EBITDA and adjusted EBITDA margin as compared to the same quarter last year, due primarily to significantly higher scrap costs as well as higher labor and freight costs. While we are seeing the benefit of our pricing initiative in our bookings and backlog and we expect to see continued improvement in average selling price in the third quarter, we do not expect the price improvements in the quarter to fully offset the impact of cost inflation. In Corporate, we expect costs consistent with previously provided expectations of $15 million to $16 million. We are not satisfied with our performance in Water, and we do not believe that our currently depressed margins are consistent with the strength of demand and end market fundamentals. In addition to operational and commercial initiatives, our team is working closely with our customers and our suppliers to ensure that we are taking every appropriate action to improve this business. Similarly, while we had made progress in Drainage in the first half of 2018 and reduced overhead costs within Corporate, we remain focused on continuous improvement to increase our operational efficiency and lower our cost structure in all segments of our business. We have strong demand fundamentals, a good team and plenty of opportunities to enhance margins. I look forward to sharing our progress with you in the coming quarters. That concludes our prepared remarks. Operator, will you please open the line for questions?

[Operator:]

[Operator Instructions]. And our first question comes from the line of Scott Schrier with Citi.

[Scott Schrier:]

I'm curious if you could talk a little bit about your guidance for 3Q '18. If you can help us think about pricing and volumes in each segment, maybe not specifically, but in terms of low single digits, mid-single digits or something of that nature.

[Charles Brown:]

Thanks, Scott. Yes, I think as we look at Q3, we do have the demand so we do expect volume to continue to step up. And that will be -- this is a very important part of the year for us. The pricing expectations I think in both businesses, we will see progress. Again, low single-digit would be appropriate. Until we deliver them, our goal is to come through with more proof than to promise things that we have yet to see. So again, good progress in both businesses. And volume and price in Q2, further progress. But we are against tough inflationary environments and -- which is beneficial as far as getting the pricing increases out there. So certainly, all of our competitors are seeing the same type of cost initiatives. I think on a positive side for us, we're seeing the benefit of the work that we did last year and our procurements and many of the other projects paying off to benefit in the margin side.

[Jeffrey Bradley:]

And Scott, just to add a little bit more to that, we look at our backlogs in both the businesses, and our backlogs are up both in tonnage and in price in the third quarter. So we're really optimistic about the demand we're seeing.

[Scott Schrier:]

That's helpful. And then, obviously, you have strong margins in Drainage. I'm curious if -- we've seen aggregates in cement pricing this year hasn't really been as strong as maybe what was originally anticipated. Has that been a tailwind relative to your initial expectations? And it looks like some of the producers are getting more aggressive. So do you see the ability to push that through? Or are you going to try to proactively put more price increases in the marketplace in anticipation of some of those pricing actions?

[Jeffrey Bradley:]

Yes, the answer is both. The procurement team here has really done a nice job. We really beefed up that team about 1.5 years ago. The guys have really done a nice job. The Drainage team has really done a great job on price increases. We've gotten increases in all the markets that we serve. And as we see costs going higher, we will continue to raise price where we can. So we're optimistic about both.

[Operator:]

And our next question comes from the line of Matt Bouley with Barclays.

[Marshall Mentz:]

This is actually Marshall Mentz on for Matt. Another one on your Drainage margins. So moving pieces here, but your sales are effectively flat. You've got close to 300 basis points at gross margin expansion. Can you help us understand how much of that is price over cost? Is there a mix element to this? I know you called out Bio Clean in the prepared remarks. Is there any operating leverage that you're gaining in the business ex the asset sales? And then, I guess, just all in, what's different this year versus last year?

[Charles Brown:]

Well, Marshall, I'd say we're seeing growth on a comparative basis in volume. And I do think we're getting the -- I wouldn't try and give too much detail here. But yes, we're getting price across all of our markets. As Jeff had indicated, we're seeing volume, there's strong demand. It really is, as you know, a limited season. So we have some compression. The weather has been fairly positive so far. We've had some markets where we've seen rain, particularly in our mid-Atlantic joint venture. But overall, I would say this is a continued improvement. Last year, as you know, we suffered from a lot of different challenges, and we're really working our way through that. So I would see this as just our normal progression, business improvement, more focus on getting our -- covering our costs through price, realizing the benefit of the initiative that we've invested in and just basically business improvement going forward.

[Jeffrey Bradley:]

Yes. I mean, we've done -- the Drainage team has done a really nice job across the country in all the regions. And we've really focused on driving our margins higher, as you've noted, and in many cases, margins versus volume. I think that's what you're seeing.

[Marshall Mentz:]

Great. And then on Water, you obviously spent some time on the demand backdrop there and talking about how much higher your demand levels are this year versus last. Would it be possible to give some examples or quantification of what you're seeing there? And then just at 7% sales growth, and I think you said most of that is volumes, I mean, is there a way to break that out price versus volume?

[Jeffrey Bradley:]

Well, we really haven't seen the major pricing impact yet. As I talked about, we have a backlog that usually lasts about 90 days. We have liquidated most of that lower-price business in the backlog. So we're going to see higher prices, and that was still happening in July. We'll see higher prices -- higher average selling prices in the third quarter. We're really not going to break it out on price versus volume. The good news is we're seeing very strong demand there, and I've personally been out with the largest customers that we sell, and they're really optimistic not only about the remainder of this year, but next year as well. And now we're going to start to see the price starting to come through as we've liquidated, as I said, the older-priced backlog.

[Charles Brown:]

Yes. To your point, it is more volume than it is price in the second quarter.

[Jeffrey Bradley:]

Yes.

[Operator:]

And our next question comes from the line of Nishu Sood with Deutsche Bank.

[Timothy Daley:]

This is actually Tim on for Nishu. So again, just to touch on Water. So obviously, some continued external headwinds, but it's good to hear that you're taking a more aggressive positioning to attack the profitability in the business. So obviously, you just talked through kind of the 90-day lag and when the prices should come through. But I just wanted to get a bit more detail. I guess, some of the initiatives that you talked to, specifically the leadership changes and everything like that, it seems like the commentary, at least, that was provided seems like that might be more of kind of on the SG&A side of things, maybe some more operating leverage. Just help -- curious if you could help us walk through the different components of the operating margin line and how we should think of the trajectories going forward there.

[Jeffrey Bradley:]

Sure. So we made an announcement, and I will start out by saying we think it's going to be we have more upside on the operational side versus the SG&A side, although there's going to be some SG&A upside as well. The guy that we've put in as our Chief Operating Officer has got a tremendous amount of experience of turning around businesses, improving businesses. He's been here 60-plus days now and has really identified some really exciting stuff in the Water business, on the operational side, things down to just improving change over time and just the way we run our plant, working closer with sales. So I really don't -- I really can't share everything that he's doing, but we're going to see, we believe, some really significant operational improvements. But again, it takes time.

[Charles Brown:]

Yes. So I'm going to say the important thing there is getting efficiencies in operation, however we achieve that lower defect rate, better customer satisfaction on the commercial side, and there's a great opportunity. As we had indicated, this is an industry which has been slow to react to certain things. We believe with our new management team we've got a lot more initiative, we've got a great team underlying this business in the Water organization that we will be activating more effectively going forward.

[Jeffrey Bradley:]

And the biggest thing that Rich is going to bring, which we really need, is additional output, getting more output out of these plants. Again, he knows how to do this. He's done it before. He's working on a plan now, but that's the key because demand is so strong and forecasted to be strong through next year that we've got to squeeze more productivity and volume out of these plants. And that's what he's working on, and that's what we're going to do.

[Timothy Daley:]

I appreciate the color. Then, I guess, just following up on that. So the commentary on how the second half margins will be higher than the same period last year, I just wanted to clarify that on kind of booking and modeling wise. So that's just kind of a -- you're referring to a blended second half for a second half metric. And then I know that -- just trying to, I guess, break down the components. So Drainage, we should see some margin improvement on a year-over-year basis in both 3Q and 4Q, but not expect an improvement in 3Q for the Water segment. Is that, just to clarify the best, what we should be modeling for?

[Charles Brown:]

That is correct. Yes, Drainage improvement, Water disprovement. But again, it's -- Q3 is my focus right now and certainly, the guidance that we're providing. And we have to prove the changes that we've made within the Water segment will play through. And we've not gone into specifics on Q4. We've made some references to upside. I do think Drainage has good visibility for the remainder of the year. Water, less so until we prove ourselves capable.

[Timothy Daley:]

Got it. And then just quickly, any update on Bessemer? Is it all kind of on track, everything going as planned?

[Jeffrey Bradley:]

Yes. You're talking of the outage from the first quarter?

[Timothy Daley:]

Correct, yes. Just kind of that, any change.

[Jeffrey Bradley:]

No. But again, we still have improvement that we have to make there.

[Operator:]

And our next question comes from the line of Mike Dahl with RBC Capital Markets.

[Michael Dahl:]

I wanted to follow up on the questions around Water because, clearly, the demand side seems to be kicking in. You talked about the -- some of the cost issues, which are more of a price/cost issue, but then the operational side, that's been a challenge for a while now. The -- some of the changes in place, those sound like they'll be helpful. Could you share anything about just broadly speaking beyond some of those operational improvements within the plants? What you're thinking about in terms of just the overall footprint of that business and if anything more significant needs to change there?

[Jeffrey Bradley:]

No. We're not thinking any more about the footprint. When you say the footprint, are you talking additional plants? What do you mean by the footprint exactly?

[Michael Dahl:]

Yes, yes. Your plant structure, your geographies, just if anything else needs to be kind of paired down.

[Jeffrey Bradley:]

Paired down, I would say no. Again, all of our plants are running full right now. And I think the -- I can speak for the rest of the industry. As I said, the biggest thing that we've got to do is get more output out of these plants because demand is so strong, and we're going to do that. Again, backlog is strong. Through the end of the next year, it looks very strong. So we just got to get more output out of these plants, and that was -- Rich is going to help a lot there.

[Michael Dahl:]

Got it, okay. And then shifting gears to Drainage. And I guess, it's a somewhat similar question, but just with respect to the change in the sale-leaseback agreement that would seem to increase your flexibility on what you're able to do with some of your Drainage assets. There's obviously been some swaps in the past. Can you give us any detail on kind of what you're thinking about there? And if that's really something that signals that we should expect a little more activity from a portfolio standpoint there?

[Charles Brown:]

Absolutely. I mean, I think that gets into -- we have already made some moves in the first half as far as making a few acquisitions. Small stuff, very focused on enhancing our market positions, filling out holes within our existing markets. As we look forward, those assets become more available for that portfolio management. And it -- we'll get some cash out of that. We haven't -- again, as we deliver, we'll talk about it and we'll demonstrate our growth. But it is just an opportunity for us. We recognize we're well levered right now, and we don't want to extend ourselves beyond our current exposure. But that said, this gives us the flexibility to continue to do the right things for our customers and being able to deliver to our customers and more focused markets and as well as be able to support those price increases. So we're going to be active. There's lots of opportunities out there. It is certainly something that we're involved in all deals out there. We're looking at them. But we do need to stay -- and here I'm putting on my CFO hat. We need to stay within our capabilities. And I would stress again, finishing the second quarter being at the second half, which is our heaviest use of cash, and not having had to touch a revolver and having $30 million of cash in the bank, I would have to say I'm really happy with our team being able to do that. And it talks about the improvement we made in working capital management with some other activities that have led to a pretty good effective use of the portfolio that we have.

[Michael Dahl:]

Okay, got it. I guess I was thinking what's the opposite way if it enables you to sell or trade some of those in the same plants. But just a financial clarification on this. So EBITDA goes up given the capital lease treatment. Is the associated interest expense a one-for-one offset with respect to GAAP earnings?

[Charles Brown:]

Yes, it is.

[Operator:]

And our next question comes from the line of Sam McGovern with Crédit Suisse.

[Samuel McGovern:]

Just continuing on the prior discussion around working capital and the release in the second half. Can you give us an indication in terms of how you're expecting that to play out in the back half? How that all compares to a year-over-year? And then as you look further out, are there opportunities over time to build -- to take working capital out of the business?

[Charles Brown:]

We do see the opportunity to continue to focus on the working capital side. I wouldn't say we've made huge progress on the underlying business. Remember, some of the businesses that we've gotten rid of were high working capital-type businesses. But that said, it gives us another opportunity, under lever as we go forward. We've made progress. We will continue to make progress in that area. And I see -- it will be similar to our previous guidance on what cash outflows we can expect. So we've put that together. We put our fourth quarter guidance out as to what we expect as far as cash flows. Again, until we deliver, I don't want to promise anything that we can't do. So we look forward to being able to tell you at the end of the year how much progress we've made on that.

[Samuel McGovern:]

Got it. And then looking out further ahead, when -- how do you guys think about where you ultimately think leverage should get to this business? And can you talk a little bit about sort of how you get there? I know, obviously, a lot of it will be EBITDA growth-driven, but do you feel like the absolute level of debt should be reduced over time?

[Charles Brown:]

We definitely think that the absolute level of debt should be reduced. The bigger thing to me, as I've mentioned before, is our primary goal to get the ratios in line will be to improve EBITDA. There's only so much as we've indicated so far. There's only so much cash flow that we're generating in 2018 going forward. Obviously, we would expect that to be improved. As I think about my goals, I'm a conservative individual. So obviously, our debt metrics right now are not where we want to be. And certainly, the organization as a whole will be working on that. That said, we are going to continue to manage our portfolio effectively, which means that we will look at growth opportunities, but we'll not be interested in seeing anything that further expands our tenuous position as far as those metrics go. Does that help, Sam?

[Samuel McGovern:]

Yes, that's very helpful.

[Operator:]

And our next question comes from the line of Jerry Revich with Goldman Sachs.

[Benjamin Burud:]

This is Ben Burud on for Jerry. I just wanted to touch on the Houston market, if you don't mind. Just curious what you guys are seeing there in terms of project cadence on both the public and private side as well as competitive intensity in that area. And then as we also think about that market, is there any potential tailwind year-over-year from adverse weather in 2017?

[Jeffrey Bradley:]

Sure. We're seeing a really nice improvement in the Houston market, really, when you look at Central Texas, Houston, Austin, San Antonio. This year, we've seen an awful lot in North Texas. We're going to continue to see that. But we're going to see more growth, we believe, again in San Antonio, Houston, Austin area. Reg G is up significantly after Harvey. TxDOT, in Q2, bidding activity was high. That will flow through H2 and into next year. So we're seeing good bidding activity, good bidding letting. Still continuing to be very optimistic about Texas, but really more so the Houston and the central area down to this year into next year.

[Charles Brown:]

And the only caution I would throw out is, obviously, we get into storm -- last year we had Harvey. We would hope that we'll continue to have good success and that region will not suffer as they did last year. So yes, does that help us if we have continued decent weather? Yes, that would certainly be a positive.

[Jeffrey Bradley:]

We also talked last year this time about a lot of pricing pressure we had in that market, and the Drainage team has done a really nice job of working through all that.

[Benjamin Burud:]

Got it. And then just touching on cost inflation. Can you give us a little bit clarity on what you're seeing in terms of freight and labor inflation? Maybe some broad quantification of those headwinds and the steps you guys have taken the last few months to address that for the back half.

[Jeffrey Bradley:]

Sure. On the Drainage side, we're definitely seeing labor and freight -- I mean, the unemployment rate is basically 0 I think everywhere. So we're seeing labor inflation. The Drainage team has done a really nice job, as we've talked about on this call, of putting increases through to cover -- price increases through to cover those additional costs. On the Drainage side -- I mean, I'm sorry, on the Water side, we're seeing the same thing. We're seeing a bigger impact on freight expense in our Water segment versus the Drainage segment. When you think about the Drainage segment, it's really a local business. It's a 100 to 150-mile business. We've got 60-plus plants. On the Water side, we've got a plant on the West Coast, a plant on the East Coast and a plant in the South. So we have longer runs. So we've seen more labor -- we've seen more freight pressure on the Water side than we've seen on the Drainage side. But again, as I talked about, we've liquidated a lot of that low-priced orders, and we'll be seeing the higher prices coming through in Water this quarter and into the fourth quarter.

[Charles Brown:]

I would say on the Drainage side, we've -- the work that the procurement team has put in place is we've got our freight more contracted. So we have less exposure to variances there. And that doesn't take out the cost increase. It just does put it under a slightly more controlled and something that we can target next -- and cover hopefully with our pricing actions. On the labor, I would say, yes, we will continue to see labor inflation, as everyone has. But again, there -- we're -- with our operating improvements that we had done so far and will continue to do as well as price, we feel that we can offset that. I think the opportunity really for more improvement in the Water side is clear. We've talked about that several times and will just again highlight. Until we prove it, we don't want to promise anything. But we do believe we've got a great team in place there that will continue to drive for a better solution.

[Jeffrey Bradley:]

We also, about a year ago, brought in some outside expertise into the Drainage business, one we call operational excellence. We brought in some guys with a tremendous amount of lean experience, and we formed, what I'll call, a lean team. And we're also seeing the benefits of that in the Drainage business. That continues to get better every quarter. These guys have done a phenomenal job. And with the new leadership we have in Water, Rich Hunter has an awful lot of lean experience, too. So he's going to do the same thing in the Water business. So that's also helping us to offset labor and just costs in general.

[Operator:]

[Operator Instructions]. And I'm showing no further questions at this time. So I'd like to return the call to Mr. Jeff Bradley for any closing comments.

[Jeffrey Bradley:]

Thank you very much, everybody. We really appreciate your interest and look forward to speaking with you again on the next call. Thank you. Have a good day.

[Operator:]

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program, and you may all disconnect. Everyone, have a great day.