Tetra Tech, Inc.
Q4 2014 Earnings Call Transcript

Published: 13 Nov 2014

[Operator:]

Good morning, and thank you for joining the Tetra Tech earnings call. By now, you should have received a copy of the press release. If you have not, please contact the company's corporate office at [phone]. With us today from management are Dan Batrack, Chairman and Chief Executive Officer; and Steve Burdick, Chief Financial Officer. They will provide a brief overview of the results and we'll open up the call for questions. During the course of the conference call, Tetra Tech management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements concerning future events and Tetra Tech's future financial performance. These statements are only predictions and may differ materially from actual future events or results. Tetra Tech's Form 10-K and 10-Q reports to the Securities and Exchange Commission identify certain risk factors that could cause actual results to differ materially from the forward-looking statements. Tetra Tech undertakes no duty to update forward-looking statements. In addition, since management will be presenting some non-GAAP financial measures as references, the appropriate GAAP financial reconciliations are posted in the Investor Relations section of Tetra Tech's website. [Operator Instructions] With that, I would now like to turn the call over to Dan Batrack. Please go ahead, Mr. Batrack.

[Dan L. Batrack:]

Great. Thank you very much, Jennifer, and good morning, and welcome to our Fourth Quarter and Fiscal Year 2014 Year-End Earnings Conference Call. While Steve Burdick, our Chief Financial Officer, will present the specifics of our financials, I'm going to start this morning with a brief overview of the company and then turn to some of our key financial metrics. At the end of fourth quarter, we completed a strategic review of the company, and particularly, we're focused on our Remediation and Construction Management segment, which is where most of our construction work is performed. As a result of the evaluation, we took the following actions

[Steven M. Burdick:]

Thank you, Dan. I'll begin with the fiscal 2014 fourth quarter financial overview in a bit more detail. Overall, our fourth quarter operating results fell in line with management's expectations, as well as the guidance ranges that we had provided for both net revenue and earnings per share. First, comparing the fourth quarter results this year to last year, our revenue did decrease by about $76 million or 11% to $622 million. This decrease was due to our decision to exit the RCM markets, representing low-margin, high-risk, fixed-price work. The year-over-year comparisons were also negatively impacted by foreign exchange rates due to the strengthening of the U.S. dollar. Now this decrease was partially offset by our North American markets, which focused on commercial and oil and gas activities, which did perform very well. Our net revenue decreased to $462 million or about 13% for the same reasons the gross revenue decreased. Although lower than the prior year, these net revenue results were within our expectations and the guidance range provided due to the fact that we did see strength in our core markets

[Dan L. Batrack:]

Great. Thank you very much, Steve. At the beginning of the fiscal year, we initiated a new alignment of our business segments in the company. We've now organized around 2 primary segments, which are both aligned by the market, irrespective of geography. These 2 organizational units are designed to be efficient, entrepreneurial and technically differentiated. Each of these segments are leaders in their markets, and they support our #1 North American rankings as listed by the Engineering News-Record in water, environmental management, solid waste and wind energy. Both our Water, Environment and Infrastructure segments and the RME, Resource Management and Energy segments, have high profitability, and they're going to help us move toward our goal of greater than the 13% margin for the entire company. And finally, for the remainder of 2015, we are going to continue to report on the RCM segment as we exit and wind down all of the remaining projects. I'd now like to give you a brief overview of each of these 2 segments and give you a little bit better description and understanding of where they're focused and what some of their markets are. So for the first segment, the Water, Environment and Infrastructure segment, we'll refer to this as WEI, the segment has a staff of about 6,500 professionals. They're primarily in North America, and their business is about 75% for government clients. Now about 35% of their work is for the U.S. federal government, with another 40% for works for states, provinces in Canada and for local cities, and that would leave the remaining 25% of the work that they perform being done for commercial clients. The WEI business mix is inherently very low risk, highly predictable -- and very highly predictable, as you might expect, having such a large percentage of government work. They're differentiated by their water consulting and design services for programs like nutrient management and regional modeling, desalination design, flood protection and coastal restoration projects. And WEI also includes our high-end consulting activities in environmental management, and this is where we study and design solutions for hazardous waste removal and restoration and cleanup programs all across primarily the U.S. and Canada. The second segment is our Resource Management and Energy group, we'll refer to this as RME, now slightly larger at 7,500 staff, and is primarily focused on our commercial customers. So for the Resource Management and Energy group, RME, they're going to lead most of our resource -- natural resource management activities for our clients in oil and gas and mining practices. This is also the unit that's going to lead our waste management practice that includes delivering high-end solutions to fly ash management for our utility customers. And the RME segment is also where our energy practice primarily resides, which is performing innovative studies for offshore renewable energy projects, where we have a lot of our marine activity. They support the permitting and design of transmission and distribution projects across primarily the United States and Canada, and they also provide master planning in emerging economies such as the work that we do for USAID and the Power Africa program that we're currently managing for the U.S. federal government. Tetra Tech's biggest differentiator, and this really goes all the way back to the founding of the company, is providing support to both our public and our private companies and clients in solving their most important and complicated water problems. Now for our government clients, they have 2 primary issues that we address

[Operator:]

[Operator Instructions] The first question comes from Corey Greendale with First Analysis. There was no response from that line. Your next question comes from Tahira Afzal with KeyBanc.

[Tahira Afzal:]

Okay. I guess, first question is, Dan, what are your assumptions around oil and gas? It seems that, in the longer term, you continue to be pretty upbeat on commodities and their contribution. So I would love to get a sense on how you're thinking about that, both anything that's commodity-oriented, given all the movements we are seeing, at least the nearer to medium-term oil prices?

[Dan L. Batrack:]

Well, I'll talk about oil and gas first under the work we do in the commodity sector. Our oil and gas was very strong for the year. It was the highest margin-producing unit we had within the company as an end client. The contribution was quite significant, we've grown it to $400 million. Our goal was to make it $400 million at the company, and in total revenue, it was just slightly over that. So it not only met but slightly exceeded our goals for growth. Now most of our work is on the midstream. Now we're associated -- we're really trying to support the design, the permitting and the environmental oversight of the pipelines. Most of the design work is here in the U.S. and it's mostly associated with the Bakken Shale work. And it's really pretty simple, it's getting it out of trains and into pipelines. And right now, we've got as much work as we can possibly handle, and we're looking at adding additional capabilities so we can grow this even quicker. Now we have established -- and I didn't put it in this quarter's presentation, but it has not changed. We have a, roughly, a 3 to 5-year goal to take that $400 million and more than increase it by 2.5x to take it up to $1 billion, and we actually see that there's plenty of work. We see that the midstream or the pipeline work is relatively less affected for oil prices. And certainly, in the short term, from the work that we have with respect to backlog and opportunities, we've not seen any slowdown in that. So we are very bullish on oil and gas market.

[Tahira Afzal:]

Got it. Dan, I guess, from the longer term, I mean, Bakken, for example, is considered to be the highest in terms of price points or the most likely to eventually see some impact. So would you be looking to sort of diversify your exposure within the different shales?

[Dan L. Batrack:]

We definitely are. In fact, if we had to pick one area that's our #1 focus, it's the Permian in West Texas. So a bit with the Eagle Ford, but mostly the Permian is our next biggest area of focus. We still think, though, that it is the most expensive oil to get out or one of the most expensive in the U.S. in the Bakken, but the area we're focused on is simply, over the next several years, would be the pipeline support to move what they've already identified. So it's not the upstream work that we're involved in that could be significantly impacted more in the transport. But we are moving quickly to the south, to Texas, and we expect that, that, at some point, will be as large or larger than even the Bakken work we're doing.

[Tahira Afzal:]

Got it. Okay. And one follow-up and I'll just jump back in the queue. Any talks around the Republicans coming in? I assume it's good for your energy and resources segment, maybe mixed for some of your federal components. So would love to get your first take on that, guys.

[Dan L. Batrack:]

Well, a bit of time will tell. Certainly, we've seen multiple bills being proposed to get the Keystone pipeline moving. And while that particular project is not a big mover for us, it is indicative of the focus on getting more pipelines and movement of the oil and gas in the U.S. underway and allowing it to move forward. So certainly, that would be a big positive for us. I do believe that, certainly, nobody has the executive and both houses, so they don't have all of it. So I do expect additional environmental regulations to continue to move forward. And the one part that I feel very positive about is the oil majors get more and more involved in these activities. They bring their own environmental regulations in cleanup and standards both for water, environment, permitting, in order to minimize and to manage the long-term liability. So it's not strictly regulatory and government-driven. A lot of this is going to be brought in by the oil majors and the more mature oil producers. So I feel pretty good about that.

[Operator:]

The next question comes from Noelle Dilts with Stifel.

[Noelle C. Dilts:]

My first question is sort of a housekeeping question. When I look at your recast segments, the WEI margin was very strong in the quarter, it looks like 16.5%. So I'm just trying to figure out how much of that came from the earnout reversal. And then, also, I was hoping you could speak to what kind of drove the earnout reversal in the quarter and essentially what segment it was in.

[Dan L. Batrack:]

I'll speak to the segment with respect to the fourth quarter on the recast at the roughly 16% margin. None of that was associated with earnout forfeitures, so that was strictly based on operational performance on projects. Now we, in some instances, on federal programs, asked for projects to be closed out by the fiscal year. They performed very well. And so, as I've said before, quite happy with the 12% to 13% in this recast. You can see they were a bit higher than that, but none of that was contributed from an accounting reversal or other noncash accounting treatment of earnouts or anything like that. And with respect to what drove the pickup, it was primarily the acquisitions that we did in 2013 in the RCM segment. So if you go back and track those, you'd see that the pickups were in the RCM segment that offset the charges that we took in the quarter. So while I do understand one is operational, one is a noncash accounting pickup, it was really all affected by the units -- operating units as we refer to them in the RCM segment.

[Noelle C. Dilts:]

Okay. Perfect. And then, I was hoping -- you talked about this pickup in government work. Can you speak to -- a couple of quarters ago, you talked about just kind of DoD releases of task orders being slow. Can you talk about what you're seeing in terms of task orders versus new IDIQ contracts, kind of where you're seeing the improvement?

[Dan L. Batrack:]

That's a great question because it's across both, it's across all of our end segments, so it's interesting. As good as I feel about the orders that came out -- and if you go back to the backlog slide in the presentation, we have a small table that's actually detailed some of the specific orders that we had. So for instance, during the quarter, we had $77 million in USAID or the Agency for International Development, it's a division that the State Department issued, so $77 million there. We had over $50 million in Navy task orders. We had the Department of Energy also at about $50 million. The Army Corps of Engineers at just under $40 million. And the EPA issued new programs. But the story that's actually not told in those numbers in our backlog -- so when I say $2 billion, we should feel good about that, and we do. But mainly, the part we feel even more bullish and that'll translate in coming quarters is we had even more contract awards. And in fact, what you saw in a press release by Tetra Tech is actually only a small part of what was awarded. The one thing that we've had through this economic downturn is anytime you win a project of any size, everybody protests that, and we're going through this, "I win." "Oh, I protest," and we go through anywhere from a 1- to 6-month period. But if you go through the government release pages, you'd find that this past quarter was substantially more beneficial for us on new awards than what you've seen here. Now these awards, these protests go through and they get resolved and they come out. But I would like to tell you it was -- I actually don't want to tell you, but I can tell you, it's just AID or it was just the Navy or just DoE. But I think, Page 20 in our backlog slide shows that quantitatively, and it gives example of some of the contracts. So it's kind of a long answer, very broad-based, and the awards are coming out in task orders across all these vehicles, and they're adding more vehicles.

[Operator:]

The next question comes from Andy Wittmann with Baird.

[Andrew J. Wittmann:]

Dan, I was hoping you could give us some characters or some flavor of the charge that you took in the RCM, the $35 million. Is that charges from exiting projects? Or is that a charge from fixed costs on fixed-price contracts going higher in your new accounting look of those projects? Just understanding some of the components there, I think, would be helpful.

[Dan L. Batrack:]

That's a great question, Andy. I mean, I certainly, by no means, meant to simply say the number $35 million and move on. So first of all, this was not -- I don't want to say it was not unexpected, we certainly didn't expect this, but I knew, and in the last quarterly conference call that I shared with you all a little over 3 months ago, I did indicate that we were going to make a strategic decision in RCM, and we would drive what was in the best interest of the company and try to complete it in the fourth quarter. That was quite a high standard that we were going to get ready, set, go and finish all in the quarter, and that's what we did. So of the $35 million, let me break it down into sort of 3 buckets real quick. The first is we did reduce staff, we had severance costs, we had separation costs with individuals, and we closed down a number of offices. So around $5 million is in what I'd call just operational wind-down of offices and staff. Because we dropped our revenues so significantly during the quarter by having turned everything off with new work coming in and accelerating the reduction, we did have about another $5 million of unabsorbed overhead. So now, that leaves about $20 million to $25 million left. We did incur about that number, $20 million to $25 million in project charges. Now some of it was very tactical on our part. If a project was on hold, we approached the clients and said, "What do we have to do to exit the project?" So in some instances, we had actually been awarded work and we had bid bonds out. We say, "We don't want to work, take it back." And they cashed our bid bonds. So that happened during the quarter. Other projects, it felt that it was more important to add certainty to the quarter and put this behind us before going into 2015. So we dramatically accelerated projects by adding more staff, more equipment, paying overtime, subcontracting, and so it did incur project charges. But the focus we had here was, I'd rather take certainty, even though it added up to $35 million to put this behind us, than to allow this to languish. And I'm not going to say that we were free with taking charges and spending money, but I know that by trying to take and save a dollar now, by stretching it out over the next year to try to save it, the reality is by all that additional time, we have issues with respect to completion, moving into the winter weather, staffing changes, all these different things that make what may look like a logical savings, not the case. So we drove that number in order to reduce the amount of work we had remaining with RCM. So that's what the $35 million was made up of.

[Andrew J. Wittmann:]

I also wanted to dig into your comment, Dan, that some of the earnout reversals were from acquisitions in 2013. As I think back to 2013, that was Parkland, that was AEG, were really the 2 bigger ones there. I don't know, was it maybe -- I don't know if Rooney was with the pipeline business, I guess, that was earlier. But 2 of those businesses are some of the businesses that you've been kind of talking more about growth, more about opportunity. So I was just hoping you could help us reconcile the fact that they've failed to achieve the ultimate earnout with the fact that those are some of the better businesses today.

[Dan L. Batrack:]

Well, you've got our calendar for 2013 down exactly, so you're right on that. It did not include Rooney, so just to be -- just to reinforce what you said, that was earlier, it was not part of this. So let me just describe briefly, I'll try to keep this concise. When we came on, we had unbelievably, together with the owners of Parkland, unbelievably optimistic and positive expectations for that business. And here's one artifact that I think is quite misunderstood by, sometimes, our shareholders and analysts, and so I'll just spend a moment on this. An acquisition can come into Tetra Tech and produce very good profit and very good earnings and still not achieve the standards set for the earnout, because sometimes there's a perception that if you don't receive the earnout, they performed poorly or didn't even make money in some instances. That is absolutely not the case. The valuations that we pay include the entities achieving growth rates that they've identified when they come in. So for instance, if an entity says we're going to grow 35%, and that's what's required to achieve the earnout, and they only grow 15%, while we had 15%, it didn't achieve the earnout thresholds, and therefore, the earnout component is forfeited, but we still have positive performance in the unit. And so that's the juxtaposition between how can you get an earnout back without a unit performing poorly.

[Andrew J. Wittmann:]

Got it. I had 2 more questions that, I think, are important, I feel, for me [ph]. The next one is on, basically, I guess, the guidance and as it relates to some of the components that you kind of sped up here, part of the $35 million to get out of RCM. Are there future charges or costs of exiting RCM included in this guidance range? And how are they included, if so?

[Dan L. Batrack:]

Well, our guidance is, on an earnings per share basis, is $1.55 to $1.75. The midpoint would assume that RCM essentially is at 0. There's no operating income contribution nor subtraction. And so the lower end and what would drive us to the lower end, I would believe, would be additional charges that we don't anticipate at this time. But I will say, with a $120 million in backlog today, I think, we've got our hands on it. I think. We firmly understand where we're at. We've got everything -- I will tell you that there are some loss projects in there, but they've been reserved for and we're appropriately reserved. So -- but if things slide worse for us, that would then potentially drive you to the lower end. However, it is possible that we actually have some recovery on claims or other receivables that maybe RCM might actually contribute. Liquidation of some of the equipment that we have there, which is not insignificant, could be a net favorable outcome, and we've also assumed sort of a flat mining and a steady-state oil and gas. And if there's a pickup in either of those areas, I would actually see that, that would drive us to the upper end of our range. And if that was particularly strong, it could even go higher.

[Andrew J. Wittmann:]

Great. Last question, I promise here. Just on the buyback, $200 million over 2 years. Is this going to be done under a 10b5-1 plan, as you've done some of your other plans? Or is this one a little bit more discretionary now.

[Steven M. Burdick:]

No. We are setting up or have set up a 10b5-1 plan that it'll go into effect here in this quarter.

[Andrew J. Wittmann:]

Got it. So this one isn't like some of the previous plans, Steve, that you kind of said, "Hey, this much by this date, this one, it maybe $200 million." You tell me, is this one -- you fully expect to do the $200 million in the 2 years or is this one going to be more -- should we think of this one as more opportunistic?

[Steven M. Burdick:]

It will be both, and we have a grid set up and we have a buyback program set up and we fully expect to utilize the $200 million over the next 2 years.

[Operator:]

The next question is from Mike Shlisky with Global Hunter Securities.

[Michael Shlisky:]

So could you maybe tell us a little bit about -- now that most of the RCM is kind of past here, can you maybe give us a flavor as to how much fixed-price work you expect to have in your portfolio going forward as far as mix goes?

[Dan L. Batrack:]

It should be about 30%, so it's going to go down from what had been as high as 50% down to 30%, so it's going to drop dramatically.

[Michael Shlisky:]

Okay. Great. My other question is, I mean, you seem a little bit more positive on some of the federal work, given what you said about the backlog and about kind of how that market has been performing. Is there perhaps any upside to your organic growth estimates for '15 for water? Or is this basically based on what you're seeing today? Or just give us some kind of color as to could you actually exceed low single-digit growth there in the coming year?

[Dan L. Batrack:]

Well, Mike, I think, we could exceed it. Certainly, our backlog grew at 5% for the quarter. One quarter doesn't make a long-term trend, but I'll tell you, it looks -- as I described earlier, the contract vehicles coming out give me sort of additional confidence beyond just the orders for the quarter. So I think, it is possible that it could go higher. And so, we sort of -- if you take it on a collective basis, sort of between the lower- to upper-single digits. So maybe depending on how you model this, you could end up with anywhere from a 2% to 7% or 8%. So it is possible, Mike, it could be higher.

[Michael Shlisky:]

Great. Just one last one for me. Is there any large change to your appreciation expenses next year given that some of RCM is, again, in the rearview mirror? Or is that going to be somewhat equal to the past year?

[Steven M. Burdick:]

No. We do expect our depreciation cost to go down as our more capital-intensive projects and businesses are -- go away.

[Michael Shlisky:]

Is there any kind of number we can get? Sort of just broadly speaking, what RCM meant to your overall past numbers?

[Steven M. Burdick:]

I would say that our depreciation cost has usually run, say, around $25 million to $30 million a year. We expect that to be down probably 20% of that.

[Dan L. Batrack:]

I would say, Mike, that if you -- you can actually see the effect of our decision and our actions on this. While we've been in the upper 20s, just under $30 million in the past, in 2014, we're down to $19 million. So we knocked 30% of our CapEx out as part of -- directly in connection with the decision to move out of the RCM group.

[Operator:]

And the next question is from David Rose with Wedbush Securities.

[James Kim:]

This is actually James Kim calling in for David. So I wanted to start out with a question on the commercial business. Obviously, that business has been performing very well. And you had record bookings last quarter. I think, it was about $0.5 billion. Are you still seeing strong growth there in terms of bookings? I know you talked about the strength of oil and gas market, but if you could give us a little bit more color on other end markets. Kind of looking at this quarter's performance, growth in the quarter was slightly lighter sequentially, granted that you had tougher comps, but just wanted to see if there's any other color from that?

[Dan L. Batrack:]

James, oil and gas was the strongest, but I would say that the other areas that were strong for us were commercial utility work, so utilities have been strong. That's work we've done for right-of-way valuation for a number of the commercial utilities across the country, and that would be both onshore and offshore, and so that would be one. Our industrial clients have been quite strong. And I would say that the one area seeing some strength in some very small pockets is actually, and I want to qualify this, is in the mining sector, but mine closures. So because of the downturn in commodity prices, a lot of mining sites have gone inactive, which then trigger environmental restoration, which is cleanup, management, capture the groundwater and these items, and we've had some very nice programs on, we call, restoration projects or environmental cleanup projects and monitoring projects. But with that said, we continue to see -- if you ask, is there a soft spot in our commercial sector, we're still very cautious on the mining, upfront siting and even operations. So we see that continue to be the one watch area out of the commercial sector.

[James Kim:]

Okay. Next question, regarding subcontractor cost for ECS and TSS. I mean, obviously, for RCM, you guys are trying to wind down the business, and you tend to subcontract out a lot of the construction work. But just wanted to get some more color there on the increase that we saw in the quarter for ECS and TSS. I know you talked about it being sort of under the -- normal level being around 20%, but it seems like it's higher this quarter. Is there anything that we should be sort of taking out from that? Or is that just kind of an anomaly there?

[Dan L. Batrack:]

Well, I'd say there's a little bit of seasonality. So in our 2 front-end segments, the field work they do is not construction-related. This is where we go out in the field and do surveying, data collection, collection of samples, both water and soil. We do marine work, where people subcontract the actual marine vessels that we're on, we don't own the large vessels. So I'd say that it would be a seasonal affect, but no, there's no, what I'd call, a macro change in the subcontract. And in fact, you're going to see, as you just identified, as we move out of RCM, the amount that we subcontract will move from when RCM was a larger part of the business, where it was up to a size of 40% or even more, you're going to see it go down to 20% or even less. And so, no, we think 20% is right, and there was no unusual effect during the last quarter that would indicate that, that number is going up.

[James Kim:]

Okay. And my last question is on the California water bond, $7.5 billion. I know it's a very recent event and it's probably going to take several years to play out, but just wanted to see what your expectations might be there and if this is something that you think will have a somewhat meaningful impact going forward.

[Dan L. Batrack:]

I do. I think this is going to make a difference, in especially our front-end water business. Now I will say that that's a very big number. It is over 5 years, and I do think the first studies that are going to come out, the first funds that are going to come out are right up our alley because it's going to be feasibility studies, alternative analysis, evaluations of different technologies, and a lot of it is for water storage, reservoirs and other supply at the local level, and that fits us very well. So it's still very early. And the 2 big items, if I had to pick the 2 that we're most focused on is the green infrastructure aspect of that bond; and water supply, which, of course, is directly aimed at the drought out here in California. So yes, it will be a contributor. It just got passed, it hasn't been earmarked, and it's going to be administered by our clients who are going to get the money to spend, so the folks we're currently working with. So we feel pretty good about where we're positioned for that. And I'll tell you where you'll actually see the rubber hit the road, so to speak, is when you start seeing it in our backlog in orders. So I'll make a particular point of pointing those out as they come to light.

[Operator:]

Our final question comes from Tahira Afzal with KeyBanc.

[Tahira Afzal:]

I just had one follow-up. Could you kind of give us an idea of -- I know you're undertaking some initiatives to improve your DSOs going forward, could you give us an idea of how you baked that in into your cash from operations guidance for next year, as in if you are behind, to some degree, on that, are we still within that bandwidth?

[Dan L. Batrack:]

I'm glad you asked that, Tahira, because -- let me give you my perspective on that. The cash EPS range or the total cash from operations that Steve Burdick had shared and presented during this call is based on a constant DSO between 70 to 75 from our 2 front-end segments, that would be ECS and TSS, and does not actually translate that reduction of the difference between -- let me say, 75 days and the 87 days does not translate that into additional cash from operations. Now it is my objective that those days are tied up in partial-completion milestone billing and converting the work that we've already completed, so I don't have to spend revenue to get that DSO in. I just got to go collect that money, and that's what we're very focused on. So if we can drop those days, and you can do the math, we're around $7 million a day, 365 days a year could generate $2.5 billion. That could actually drop to the cash bottom line and actually increase that number you see quite substantially, and -- but we did not factor that into our cash EPS or cash flow from operations in the guidance that we provided, so that's all upside. And thank you all for your questions and interest in Tetra Tech. I know it's been, from an accounting standpoint, a bit messy with respect to the wind-down of RCM and the earnout pickups, but I will tell you that we're very excited about the opportunities we have in water and the new challenges that we have for our scientists and engineers and how our strong reputation in these markets are going to put us in an excellent position as we come into this next year. We're also very excited about our new alignment that we have in place, and it provides us a very sharp focus for the future and we're very positive on our outlook and our growth opportunities. And with that, I'm going to look forward to speaking to you all next quarter. Thank you very much.

[Operator:]

Ladies and gentlemen, this concludes our conference for today. Thank you all for participating and have a nice day. All parties may disconnect now.