Jason Campbell - Investor Relations
Jacques Esculier - Chairman & Chief Executive Officer
Ulrich Michel - Chief Financial Officer
David Leiker - Baird
Jeff Hammond - KeyBanc Capital Markets
Peter Chang - Credit Suisse
Alex Potter - Piper Jaffray
WABCO Holdings Inc. (WBC) Q1 2012 Earnings Call April 26, 2012 9:00 AM ET
Good day, ladies and gentlemen, and welcome to WABCO First Quarter 2012 Results Conference Call. At this time, all participants are in listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder this conference call may be recorded.
I would now like to hand the conference over to Mr. Jason Campbell, Director of Investor Relations. Sir, you may begin.
Thank you, Saed. Good morning everyone and welcome to WABCO’s quarterly conference call. Today, we will present our first quarter 2012 results. With us this morning is Jacques Esculier, our Chairman; and CEO and Uli Michel, our Chief Financial Officer.
As a reminder this call, webcast and the presentation that we are using this morning are available on our website, wabco-auto.com under the heading WABCO Q1 2012 results. A replay of this call will be available through May 26.
Also, as shown on chart two of the presentation, certain forward-looking statements that we’ll make today are based on management’s good faith expectations and beliefs concerning future developments. As you know, actual results may differ materially from these expectations as a result of many factors, examples of which can be found in our company’s Form 10-K and quarterly reports, including our first quarter 2012 Form 10-Q which was filed this morning with the SEC.
Lastly, some of our remarks contain non-GAAP financial measures as defined by the SEC. Reconciliations of the non-GAAP financial measures to the most comparable GAAP measures are attached as an appendix to this presentation and to our press release from this morning, both of which are posted on our website.
With that I’ll turn the call over to Jacques Esculier.
All right. Thanks, Jason. Good morning, good afternoon to you all and thank you for attending our call today. While the first quarter of 2012 is actually from the market and business standpoint very much aligned with what we had anticipated and shared with you three months ago. We actually opened the year that we call year of transition that we still believe is characterized by high level of uncertainty and by market evolution in certain of our key markets like Europe, China, Brazil. Also to recognize actually a continuous growth and recovery at this time in the North American market.
Now in this environment you will see that today WABCO is starting on a high note. We are continuing to outperform our market and actually we also set new record in operating margins. So looking at the numbers on the first page, starting with top line. First quarter sales established itself at $657 million, up 0.5% in local currencies. We generated a gross profit margin at almost 30%, 29.9% to be accurate. Which happens to be a record level for WABCO at this time and it’s significantly, nicely up versus 29.2% a year ago, leading to a performance operating income of $91.3 million which also represents 13.9% in terms of margins versus sales. And that’s also a new record breaking for WABCO.
Generating performance EPS of $1.17 versus $1.12 a year ago and a free cash flow of close to $79 million which drives a conversion rate of 102%. Of which we returned $49 million to shareholders with the repurchase of 874,000 shares. And as of today we see no reason to revise or modify our guidance and we would maintain that. So our growth this quarter is again characterized by a continuous market outperformance in a market that is uncertain and eroding in some areas of our business, as well as some new records that were our operating and gross profit margin.
Moving to this following page, as we do quarter, we kind of you give you the profiles of our sales performance starting with obviously kind of showing the 0.5% improvement in terms of performance at the top line. And then from the channel standpoint we have seen a 3% erosion from sales to OE manufacturers. It’s still up sequentially 0.5% versus the last quarter 2011. Again, kind of driving increased content per vehicle through the outperformance but again recognizing that it is in an environment where some of our key markets, particularly in Europe slowed down.
Aftermarket generated 4% growth, we broke another all time record in revenues. However, as you notice, the 4% is below the 8% to 10% that we have been used to in the latest years, and that’s because obviously we are also dealing with this slowdown in the OE activities, particularly in Europe, in aftermarket as we already shared with you. This is usually kind of going in hand in hand with the erosion of OE business even being an indicator of near future evolution of that business.
Sales through our joint ventures is representing mostly our sales to our Meritor WABCO joint venture in the U.S. at 19%. Then when we look at the evolution of our sales by region versus the evolution of the production of commercial vehicles starting with Europe, production was down 3%, our sales were down 4%. Now I would also add that production was down actually 8% versus Q4 2011 which kind of highlights the fact that quarter-to-quarter there has been a pretty strong decrease in production of commercial vehicles in Europe. That again kind of leads to rationalization of inventory of parts of companies like WABCO which obviously explains the fact that we have been lagging this market by 1%.
Actually the opposite plays for North America that has seen a production growth of 6% and WABCO’s sales up 46%, however this North American market is up 8% sequentially versus Q4 last year. South America down 32% as we expected, and we have been mitigating the impact by basically 11%, we are down only 21% there. Japan, Korea grew a healthy 29% and we actually underperformed by 5% at 24%. That’s mostly due to the fact that the growth we have seen there in this first quarter was mostly addressing export markets which called for less sophisticated vehicle obviously with less content per vehicle for WABCO’s systems and products.
China was down a strong 23% and we are down 24%. And actually we were affected by the fact that the decrease in demand was heavily effecting the heavy-duty construction trucks that unfortunately is a strong contributor to the main customer, one of the main customers we have. So we are actually more hit this quarter than the average industry over there. India, market growth 1% and WABCO grew 4%. So overall, again kind of challenging market in some of our key areas for commercial vehicles but we are still outperforming that market globally.
Now I am going to let Uli drive you through the detail of our financial results. Uli?
Thanks, Jacques. Good morning, everyone and thanks again for joining us today. I would take you through our financial results for the first quarter 2012. Turning to chart five, I will walk through the details from sales to earnings per share for the quarter, looking at both our reported and performance numbers. Performance numbers are adjusted to remove operation streamlining and separation cost as well as discreet and other tax items. In additions, comparisons to 2011 have been adjusted for currency translation effects.
Our sales in the quarter increased 0.5% in local currencies versus last year. This was 1% sequential decline in revenues from the fourth quarter of 2011. As you can see, our order book has remained stable at the same level as of the end of the fourth quarter 2011. The increase in sales versus last year includes price reductions to customers of only 0.4% which is the lowest level we have ever seen in our business.
Gross profit increased 3.3% with an adjusted gross profit margin that was 81 basis points higher than a year ago. And reached, as Jacques had mentioned, a new record. Our productivity initiatives keep delivering at high level. Materials productivity projects delivered 5.1% which was partially offset by 1.2% of commodity inflation. The result was a net materials productivity of 3.9% for the quarter and a reduction of material cost by $9.8 million.
Conversion productivity was 5.5% for the quarter, saving $5.8 million of conversion cost. Overhead absorption and other costs had a negative impact on cost of sales in the amount of $8.2 million. The results was a performance gross profit margin of 29.9% this quarter. In operating expenses as you can see an increase of $1.4 million, the first quarter versus a year ago. The increase in operating expenses resulted in a small erosion of margin by 14 basis points versus a year ago.
So altogether we generated operating income of $91.3 million or 13.9% of sales on a performance basis, setting a new record for operating margin at WABCO. Continuing down the income statement, you can see that this quarter equity income was $4.9 million, which is up slightly from $4.7 million a year ago. Additionally, the expense to minority shareholders amounted to $2.8 million this quarter compared to an expense of $3.6 million a year ago.
Our performance EBIT this quarter was $93 million or a margin of 14.1%. Moving to taxes, you will see that our reported U.S. GAAP tax expense for the quarter was approximately $14 million lower than our performance tax expense. If you recall from the last quarter we recorded the U.S. GAAP tax reserve of $13.6 million in Q4 of 2011 that we knew would reverse in the first quarter of this year.
In December 2011 we took advantage of an opportunity to repatriate approximately $300 million of foreign earnings to the U.S. at no addition to tax cost. Based on that transaction, the U.S. GAAP accounting rules required us to record this $13.6 million tax reserve although we knew at that time that no contingent tax liability existed in this respect and therefore this reserve would be reversed in the first quarter of this year. So this reversal has now happened as indicated to you on our last earnings call.
The 15.3 million U.S. dollar performance tax expense is based on our estimates for the full year performance tax rate of 16.5% that we shared with you on our last call. After excluding the non-performance items, net income attributable to the company was $77.4 million. With regards to earnings per share this translated to $1.17 on a performance basis versus $1.12 last year. In summary, although we achieved only a small amount of organic sales growth, we are pleased to report the quarter with strong levels of profitability.
As you can see in the current environment our business is capable of running at close to 14% operating margin. At this same time, the negative impact on earnings and profits from foreign currency translation has basically been offset by favorable impact on margin from transactional FX. As we had pointed out to you previously, our business model has to a large extent a natural hedge between translational and transactional FX exposure. At the net income level, the foreign exchange impact versus last year basically offset each other this quarter.
Turning to chart six, I will now take you through our cash flow for the first quarter of 2012. You can see that working capital had a negative impact on our cash flow in the amount of $8.9 million. The increase in working capital is in line with the regular seasonal activity increase during the first quarter compared to the end of the fourth quarter. Our days sales and part use have improved again compared to December 2011, whereas our inventory turns have slightly decreased. The changes in other assets and liability were an unfavorable amount of $8.2 million. The largest piece included in this amount is the adjustment for the non-cash tax reserve reversal that is included in our net income. More significantly the $13.6 million related to the repatriation as discussed previously. The result was a net operating cash flow of $94.3 million.
Net cash used in investing activities was $18.9 million which is slightly below our depreciation and amortization for the quarter, but $4.5 million higher than last year. Our investments continue to support the growing regions and new business we had won. Therefore free cash flow was $75.4 million or $78.8 million, when excluding the streamlining and separation payments throughout the quarter resulting in a strong conversion rate of 102% on our performance net income attributable to the company of $77.4 million.
Under the share buyback plan that we implemented back in June of last year, we repurchased another 874,000 in the first quarter at a cost of $49 million, bringing the total shares purchased till June 2011 to $4.4 million shares at a total cost of $230 million. This represents approximately 6% of our total shares outstanding last May before we began the program. For the time being we intend to keep returning our free cash flow generation back to our shareholders through this buyback program, which still has approximately 170 million remaining under the current board authorization.
Finally, I would like to inform you that the oral hearing of our appeal against a fine imposed by the European commission on certain former American Standard companies took place on March 27. As a reminder, WABCO has nothing to do with the infringement itself but paid the €326 million fine in 2010 under an indemnification agreement that was part of the separation from American Standard in 2007.
We were pleasantly surprised by this early hearing date. It is basically a year or two ahead of the indications we were given. The hearing went well and we got chance to reiterate and further explain our arguments. The oral hearing constitutes the final step in the procedure prior to judgment. We now expect the court to issue its decision by April 1, 2013. This is all we can tell you at this point.
Now I would like to turn it back over to Jacques who will highlight some market dynamics. Jacques?
Okay. Thanks Uli. So turning to page seven, we will update today our view of the market dynamics in the two regions of the world, of our world. Starting with Europe. The level of registration was down 6% in the first two months of the first quarter, January, February. Then our order book for European based commercial vehicle manufacturers is actually stable. However, the level of orders we have yet in our books for the Q2 of this year is actually below the -- it’s 5% below the level of sales that we had reached a year prior.
So there is still lot of uncertainty remaining in the market. However, kind of sharing information with our customers, taking into account that GDP growth expectation is actually now more favorable than it was three months ago for the year 2011 by about 0.2%, we believe that the market may not drop as severely as we had anticipated and we revise our estimates to down 7% to 12% from an original bracket of 10% to 15% down.
North America Q1 production was, as I said up strongly, 36% driven by a good recovery addressing the strongly aging fleet in the U.S. And it actually benefits both the heavy and medium truck segments. However, we think that we have to decrease our estimate for this market in terms of growth for 2012 from the 15% to 20% original estimates down to 10% to 15%.
Moving to China. As I said we are down 23% year-over-year, however we have to remind ourselves that Q1 2011 was actually at a record high level of 403,000 trucks built. So we are down to about 310,000 at this point and 6% up actually sequentially versus Q4 2011. We kind of keep updating you on ABS and ABS penetration right now is at a high level of this segment of the commercial vehicle that is being addressed by legislation. It’s about 90%, it’s about flat now quarter-over-quarter.
2012 production estimates. Actually we have brought it down from the original estimate of flat to minus 10% to a minus 10% to minus 15%. And again because of quarter one 2011 being so strong, the strongest decline was seen actually in the first quarter of this year.
Looking at India, our production was -- the production of commercial vehicles was up 1% year-over-year and 18% sequentially over the last quarter of 2011. One has to remember that actually market is very seasonal and the first quarter is always the strongest of the year so this 18% is actually quite normal. The market is obviously still very attractive to many global manufactures continuing to establish grounds over there. And overall we don’t change the estimate we had shared with you three months ago of flat to up 5%. So again, lot of uncertainty remaining in some of our key markets with still some erosion planned for this year.
Going to page eight, starting with Japan and Korea. As I said we started the year on a high note for these market with increase of 29% year-over-year. It was actually up a healthy 6% sequentially, and we don’t modify our estimate of an increase of 10 -- between 10% to 15% in the number of trucks and buses produced in 2012.
Brazil, this first quarter was significantly down, 32, actually even 39% sequentially. Our estimate of 2012 overall actually is down 15% to 20% which is worse by 5% as compared to what we had shared with you three months ago. And that’s because the first quarter was really deep and because we think that actually the latest estimate and discussion we had with customers shows that we may have been still overly optimistic.
Aftermarket, up 4% in the first quarter. We still believe it’s going to be ending up the year between 5% to 8%. Again that 4% is pined by a slowdown in the OE business, particularly in Europe and also a fairly mild winter condition in Europe particularly as compared to what we had gone through during the winter of 2011.
And then finally around trailers. Production of trailers in Europe is down 5% in the first quarter and basically flat versus Q4 2011. We don’t modify our estimate that the overall trailer business would end up flat to down 5% for the full year.
Moving to next page. And again reporting achievements around the three pillars of our strategy. Starting with globalization. We have celebrated the 2 millionth air compress built in our Charleston factory. It’s a joint venture with Cummins and I think as a kind of proof of the continuous strong relationship that we have between our two companies. Also I want to highlight again the fact that we have created a new executive, senior executive position to conquer the business for WABCO across Americas. Nik Varty who was the business leader for the compressor and braking business in Brussels before, is moving into this newly created position. His objective is to obviously maximize the leverage and harmony between the joint ventures we have over there with Cummins, with Meritor. As well as drive wholly owned business, obviously maximizing the sales of our products, particularly as we introduce our new ABS brakes. And obviously, leading the execution of a future factory that we are going to built in that part of the world.
Moving to new technologies and products. Actually confirming our leading position as the supplier of autonomous emergency braking systems, we have closed a very strong year with one of the major OE manufacturers in Europe for the delivery of up to 50,000 systems of this ABS technology. And that would start in Q3 2013 as the regulation for this systems will be put in place in Europe. Then we have signed a contract with a major truck U.S. manufacturer for the delivery of technologically advanced air compressors that will be manufactured in our factory in Charleston.
And finally, we have signed a contract with one of the leading car manufacturers in the U.S. for us to remanufacturer their air-conditioning compressors. And finally, along executions, we have won a record number of recognitions and awards in China. We have won actually 11 awards from eight major commercial vehicle manufacturers in 2011, highlighting our excellence, innovation and quality from WABCO.
And then as Uli share with you, we continue to drive good strong productivity from material and conversion at the level above 5%, thanks to the continuous implementation of our WABCO operating system. Moving to the next page, as I said, the guidance that we present to you today is very -- is actually completely similar in line with what we had shared with you three months ago. We continue to see the 2012 sales moving from minus 2% to plus 3% versus 2011. At a exchange rate of $1.30 it would mean $2.57 billion to $2.71 billion bracket performance operating margin, ending up in the range of 12.8% to 13.8%. Performance EPS in the range of $4.30 to $4.80 with free cash flow conversion targets still in the range of 80% to 90%.
And then finally as a summary I would say that during our last conference call we kind of characterized 2012 as what we call the year of transition, really highlighting the uncertainty in the evolution of the commercial vehicle market. The erosion of certain of our markets, particularly Europe. And also kind of leading potentially and hopefully to a 2013 that would renew movement towards growth.
So in this kind of very uncertain and fairly chaotic and sometimes even eroding market in certain regions, because of our continuous focus on our core strategy and also benefitting from the flexibility that we have built across our globalization, WABCO is still able to outperform it’s market globally and also kind of set new record in gross profit margins as well as operating margins and delivering this quarter, a very solid cash flow conversion.
So on whole I would say that this is really the WABCO we like to drive. We want to keep driving, even the WABCO we want to keep enhancing as we face this market uncertainty. And I want to tell you that we also are, as you know, prepared to flex and jump on any upturn in the market and prove that we can flex up as well as we can flex down. But overall, always maximizing our return to shareholders.
With this, this concludes our presentation and we will open the Q&A session. Saed?
(Operator Instructions) We have a question from David Leiker from Baird.
David Leiker - Baird
I guess I want to start with the question on the guidance. I mean you got very strong numbers here in the quarter. Europe seems to be not as bad as expected. Obviously Brazil and China are a little bit worse. And that’s only out of Scania and Volvo and folks like that. You know it’s a lot more constructive. Just what's the thoughts behind that there is upside to that guidance from how we are starting the year.
Well, David, first of all the guidance offers a range. And within that range we may be feeling more comfortable that we would potentially see ourselves ending up more kind of in the upper end rather than the lower end of the range. But we are only three months in the year. As I said, we still see enormous amount of uncertainty in many things that could and actually will influence the market overall. I would see that it would be more legitimate and appropriate I think to potentially readjust our guidance after another three months, very frankly.
There are lot of thing going on in Europe, right now. Macro economy, political levels, that could have positive or less positive impact on the overall economy. And again, I think it would be a little bit aggressive to declare victory and kind of strongly recognize today that what we were thinking three months ago has to be updated. So if you don’t mind, give me another three months at this point to have potentially and hopefully legitimate information to upgrade hopefully this guidance.
David Leiker - Baird
Okay. Great. And then just on the service revenue, particularly out of Europe. Again I think it seems like the service activity there has stayed up pretty well and some of that maybe driven by weather. But do you think that that’s going to end up in the European market to end up being flat or even down at some point here? Obviously that the macro environment creates some uncertainty but is that your expectation here?
You are talking about the aftermarket, right, David?
David Leiker - Baird
Yeah. The aftermarket in Europe.
Well. I think at this point we would not see the aftermarket going down in Europe. Again, our best estimate today would see the aftermarket ending up in that up 5% to 8%. And obviously if we would have any degradation in Europe, we could never reach that 5% to 8%. So our numbers call for actually, probably a certain enhancement from where we are today to where we are going to end up at the end of the year.
Thank you. Our next question comes from Jeff Hammond from KeyBanc.
Jeff Hammond - KeyBanc Capital Markets
Just wanted to get a sense I guess, if we look at absolute production levels, I mean is it fair to say that we are 1Q kind of represented the bottom for China and Brazil and we start to see sequential lift from here.
Brazil. Absolutely. I mean, we kind of are basically at 40,000 trucks. I think it can go nothing but up from there. We would kind of see that thing going back to the 60,000 kind of quarterly level to what's the end of the year, I would say, or second half of the year. And Q2 should be incrementally moving in that direction. China? No. China, actually, potentially because those numbers are still not completely finalized yet. It takes some time to kind of have odd numbers coming from China for the previous quarters. But we see the production right now at about 310,000 trucks. We believe these could stabilize more in the 270,000-280,000. So sequentially we may still see some further kind of erosion versus first quarter.
Jeff Hammond - KeyBanc Capital Markets
And that’s what's built into your new forecast for China?
Jeff Hammond - KeyBanc Capital Markets
Okay. And then similarly, Europe, I mean how are we thinking about production levels sequentially for Europe. Given kind of the new forecast, and it seems like there were still some destock going on in the 1Q.
Yeah, actually you know, we see every quarter down year-over-year, Jeff. However, sequentially, the second quarter is always strong and stronger than the first. So we see a sequential increase in the number of trucks between Q1 and Q2. Right. And then obviously it goes down because Q3 is usually the weakest one and then comes up again the first quarter. But across the board year-over-year we see a consistent erosion of that market at this point.
Jeff Hammond - KeyBanc Capital Markets
Okay. And then it sounds like from your prior comment on guidance like you came in ahead, but our estimates are relevant for the quarter. I mean can you give us a sense of where 1Q ultimately came in relative to how you are thinking about and maybe some of the puts and takes were?
Well, as I said, it was pretty much aligned with what we had kind of thought of. Obviously, it was a little bit more here, a little bit less there, but that like of rule there is nothing kind of compelling enough to again challenge the integrity of the overall guidance we shared with you three months ago.
Thank you. And our next question comes from Peter Chang from Credit Suisse.
Peter Chang - Credit Suisse
My first question is on the outgrowth press release on outgrowth press release and the contract press release you guys had put out last week. And specifically how that outgrowth should relate for 2012? Do you see any quarters this year where you may underperform, the markets. And how should we think about that outgrowth as a whole for 2012. I know it’s usually backend weighted as new platforms get brought up to speed. But any color would be appreciated?
Well you know, Peter, really frankly for me, even though I shared with you several time I guess, that it’s a major metrics to drive WABCO. And kind of give ourselves clear objective beyond the movements of the market that we are -- that are complicated to anticipate at this point. The problem is our performance by quarter I think is a little bit complicated to rationalize. You know there are things that happen in a quarter that may have an impact, plus or minus. So I would say our performance in a year is a good kind of unit of time. Right? So I would be very reluctant to kind of comment on a quarter versus another. The only thing I can tell you is actually this quarter is up. It’s up sequentially, it’s up year-over-year. But I would not go much further than that. What I can tell you also is, and that’s what we shared with you, we would certainly not reach that 8% to 10% this year for reasons we have already exposed to you. But we still want to be in the 5% kind of range for the year 2012.
But if you don’t mind that’s about what I would want to share with you at that time.
Peter Chang - Credit Suisse
No, that’s very helpful. Thank you. And my follow up question, I know you had talked about the -- there is much more to the EU appeal then you can say. But as far as recourse depending on different scenarios, is this kind of the final chapter with this decision by the court out there? Or is there additional recourse that could be taken if say you -- if that fine gets reduced or it doesn’t by either you or the European Union?
For all practical matters we think this is the final recourse. All other matters, the next court would only render judgment on matters of law in principal and not application of law. So what we would think for the grounds we have appealed on. I mean we had one ground we could, if we wanted to take to another level, but for all practical matters, I would say this is the final recourse.
Thank you. (Operator Instructions) Your next question comes from Alex Potter from Piper Jaffray.
Alex Potter - Piper Jaffray
Question here on margin. I mean your growth margin here obviously was really impressive despite the soft top line and all the uncertainty you mentioned. You mentioned that you think the company can flex on the upside as well as on the upside as well as on the downside. I am just trying to get a sense for what sort of operating leverage you think is in your model. Now I am not asking for some sort of margin guidance, but what do you think if you get top line growth coming back, what do you guys think you could do in terms of growth margins in best case scenario?
Well, Alex, you know I think we have kind of framed it last year pretty extensively around this concept of incremental margin and kind of giving you a certain kind of color of how we would see margin evolve in case we would have very meager movements at the top line. And we said 3% to 5% we would conserve margins, below 5% we would see some erosion, above 5% we would see some incremental margin.
But, in here one would say, you have generated improvement in margins at very low kind of top line growth that again, you know, it’s a quarter. And lot of things happen in a quarter in terms of mix, in terms -- mix of region, mix of type of trucks and what not. You know I would not kind of want to kind of try to take this point and start driving an expectation of what if we would increase by 2% or 3%, could we reach a lot higher level of margins.
Again we see ourselves really kind of probably ending up in potentially in the upper end of the bracket that we shared with you in the guidance. But that’s what I would say at this point and then all the mechanism from the incremental margin standpoint. The company’s margin, as you kind of said, certain assumption for top line growth or decrease, that’s what I would leave you with at this point, you know. And the 13.9, we celebrate it because actually it demonstrated at least that this company at this level of revenue kind of belongs to that 14% type of read. But I would not kind of take it as an excitement to think that we can increase margin with almost no major increase on the top line.
Alex Potter - Piper Jaffray
Okay. Fair enough. I was wondering also if you could give me a little bit of color on what it is exactly that’s driving the Japan and Korea segment? You mentioned it’s mostly export. Can you -- where are they exporting to? What are the drivers that determine that outperformance in that segment?
Well, I think there are exporters to China, there are exporters to South East Asia, and part in Europe and maybe to the U.S. But one thing is kind of that the average content per vehicle on those export vehicles is lower because the requirements in Korea and Japan you know, Korea for example carrying ABS are not aligned with what the requirements are for those trucks that go to those countries I mentioned previously. So that’s why it seems that the mix is actually on that particular situation unfavorable to our level of outperformance.
Thank you. I am showing no further questions at this time. I would like to hand the conference back over to Mr. Jacques Esculier for closing remarks.
Well, again thank you for joining us today and wish you a great next quarter and talk to you then in three months. Thanks.
Ladies and gentlemen, thank you for participating in today's conference. This concludes our program, you may all disconnect and have a wonderful day.
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