Great Lakes Dredge & Dock Corporation (GLDD) CEO Lasse Petterson on Q2 2018 Results - Earnings Call Transcript

Great Lakes Dredge & Dock Corporation (NASDAQ:GLDD) Q2 2018 Earnings Conference Call August 1, 2018 10:00 AM ET

Executives

Abigail Sullivan - Manager, IR

Lasse Petterson - CEO & Director

Mark Marinko - SVP & CFO

Analysts

Peter Lukas - CJS Securities

Benjamin Klieve - NOBLE Capital Markets

DeForest Hinman - Walthausen & Co.

Operator

Good afternoon, ladies and gentlemen, and welcome to the Second Quarter 2018 Great Lakes Dredge & Dock Corp. Earnings Conference Call. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Abby Sullivan, Manager of Investor Relations.

Abigail Sullivan

Good morning, and welcome to our quarterly conference call. Joining me on the call this morning is our Chief Executive Officer, Lasse Petterson; and our Chief Financial Officer, Mark Marinko. Lasse will provide an update on the overall themes of the quarter, then Mark will continue with an update on our financial results. Lasse will then conclude with commentary on the market and outlook for the remainder of the year. Following their comments, there will be an opportunity for questions.

During this call, we will make certain forward-looking statements to help you understand our business. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from our expectations. Certain risk factors inherent in our business are set forth in our earnings release and in filings with the SEC, including our 2017 Form 10-K and subsequent filings.

During this call, we will also refer to certain non-GAAP financial measures, including adjusted EBITDA from continuing operations, which are explained in the net income to adjusted EBITDA from continuing operations reconciliation attached to our earnings release and posted on our investor relations website, along with certain other operating data.

During the call, we will also exclude our restructuring costs from certain financial measures to allow the user of the data to better evaluate our financial results from operations as compared to the prior year. Reconciliations regarding these non-GAAP measures are included in our second quarter earnings statement released this morning.

Finally, beginning in 2018, the company has chosen to account for plant and overhead in the same period in which costs were spent, as opposed to the accrual deferral method previously used. As required by guidance, the company has recast the prior years as if accounting standard had always been in place for all periods presented.

And with that, I'll turn the call over to Lasse.

Lasse Petterson

Thank you, and good morning. First, I'd like to start with a comment on safety and then discuss our improved operational results. Safety is a core value in Great Lakes, and we work hard to keep all our employees safe everyday, every hour. Our safety performance metrics are consistently improving, and I'm proud that dredging had 0 recordable incidents in March and April and E&I had 0 lost time injuries throughout 2017 and 2018, which proves that incident and injury free is possible in our industry.

Turning to operational results for the quarter. This morning, we announced another improved quarter, with adjusted EBITDA from continuing operations increasing $6.3 million to $21.4 million, an increase of 42% over the second quarter last year. June marked the beginning of our busiest time of the year and included high activity on the Charleston Port deepening project in South Carolina, where we now have 3 of our largest dredges in operation. And the Ellis Island ATB continues to meet our planned design criteria and we expect her to complete her current project in the Gulf of Mexico later this year. During the quarter, our dredging margins increased over the prior year quarter due to improved freight utilization, cost reductions starting to take hold, enhanced product execution and a different project mix.

We expect this trend to continue in third and the fourth quarter as we now go into the traditionally busiest period of the year. During the quarter, we continued work on our restructuring efforts and we remain on track to recognize the expected $20 million of cost savings in 2018, with our full run rate savings of $40 million expected to be recognized in 2019. In parallel with realizing these savings, we continued to use funds prudently on the best and most productive assets in our reach to keep it operating safely and efficiently.

At the same time, we accomplished a planned reduction in net debt of $35 million this year, and we maintain our priority of decreasing our debt ratios going forward. Finally, we recently announced the award of 7 large dredging projects, including the $70 million San Jacinto Emergency Flood Protection project. Execution of these projects are already underway, and we look forward to the outcome of bids on new, complex, port deepening projects and coastal protection and restoration projects in the latter half of 2018.

Turning to the Environmental & Infrastructure or E&I segment. The focus on this segment is on winning and executing new work for the remainder of 2018. The market in the E&I segment remains robust, but due to delayed bid awards, we have seen slower-than-anticipated revenues and operational results in the first half of the year. With a combined $22 million in projects awarded subsequent to second quarter end and pending awards, we expect the second half of the year to have higher volumes and improved results, in part due to seasonality of the business.

With those updates, I'll turn the call over to Mark to discuss the results of the quarter and for an update on backlog developments.

Mark Marinko

Okay. Thank you, Lasse. Consistent with our two most recent earnings releases, some of the financial results released this morning were in a slightly different format than prior years. The results included the financials as reported, which includes restructuring charges as well as certain financial measures, excluding restructuring charges to allow the reader to better evaluate our financial results as compared to the prior year.

Turning to our financial results for the quarter. I will start with the quarterly consolidated results and then discuss results at the segment level. Please note that all results discussed will be operationally focused and do not include restructuring charges. I will provide specific commentary on the restructuring charges near the end of my comments.

For the second quarter of 2018, revenues were $150.6 million, net loss was $0.6 million and adjusted EBITDA was $20.3 million. Total company revenues for the quarter represented a $26.3 million decrease compared to the second quarter of 2017. The revenue decline was caused by a $17.2 million decrease in the Dredging segment and a $9.4 million decrease in the E&I segment. Total company consolidated gross profit was $23.6 million compared to $20.3 million in the second quarter of 2017.

Gross profit margin improved to 15.7% compared to 11.5% in the prior year quarter. Total company operating income was $8.7 million, which is a $5.8 million increase over the prior year quarter. The increase is driven by increased contract margins in the domestic dredging segment, slightly offset by lower margin in the E&I segment. Lower overhead and general administrative expenses across the company as a result of our restructuring plan also contributed to the increase over the prior year.

Net loss from continuing operations for the second quarter of 2018 was $0.6 million, which is a $3.6 million increase over the prior year quarter. The current quarter net income includes, net interest of $9 million and income tax expense of $0.2 million. In comparison, net loss from continuing operations in the second quarter of 2017 included $6.4 million in net interest expense and a $3.5 million income tax benefit.

The current quarter interest continues to be elevated for 2 reasons. One, in the prior year quarter, we were able to capitalize $2.1 million of interests related to the construction of the Ellis Island. Secondly, the current year quarter interest expense is based on $325 million in senior notes at 8%, while the prior year expense was on $275 million at 3.375%.

Adjusted EBITDA for the quarter was $20.3 million compared to $15.1 million in the prior year quarter. At the segment level, the Dredging segment's revenue decreased from the prior year by $17.2 million. The overall domestic market revenue, excluding rivers and lakes, was flat with the prior year quarter and decreases in the maintenance market being offset by increases in the capital market. Both rivers and lakes in the international markets had decreased revenues in the current quarter as compared to the prior year quarter. Additionally, the Charleston Port deepening project started work 1 month later than expected in the quarter. While we fully expect to make up this delay in 2018, it did have an impact on the quarter.

Gross profit margin in the Dredging segment increased to 17.4% in the current quarter from 10.5% in the prior year quarter and stronger contract margin and operational improvements related to our recently rationalized assets. Dredging's operating income increased by $9.1 million when comparing the current quarter to the second quarter of 2017. In addition to the higher gross profit margins, the increase was also affected by a decrease in general and administrative expenses in the segment.

Our E&I segment's revenue decreased in the second quarter of 2018 as compared to the second quarter of 2017 on lower volume of work, as well as a $2.5 million benefit on an improved change order recognized in the second quarter of 2017.

The E&I segment's gross profit margin decreased to 0.7% in the current quarter from 17.3% in the prior year quarter. While the segment did see good margins on its current projects, the lower volume of work continues to impact the segment's profitability. The segment reported an operating loss of $3.4 million in the second quarter of 2018, a $3.3 million decrease from the prior year quarter. The decrease is the result of the lower gross profit margin, including the one-time benefit in the second quarter of 2017. This was offset by a decrease in general administrative expenses compared to the second quarter of 2017.

During the quarter, we also recorded a restructuring charge of $0.5 million. The charge was comprised of $1.7 million of accelerated depreciation, offset by gains impacting cost of contract revenues and sales of assets. We continue to expect our restructuring charge to be between $42 million to $47 million, with $6 million to $11 million remaining in 2018.

Next, we turn to our balance sheet, where at June 30, 2018, we had $13.5 million in cash and had drawn $71 million on a revolver, leaving us with $75 million in availability. During the first 6 months of 2018, we also reduced our net debt by $35 million as compared to year-end 2017. We plan to continue to pave pay down a revolver in the next 12 to 18 months to improve our balance sheet.

Our total capital expenditures for the quarter were $5.8 million versus $12.8 million in the prior year quarter. As noted last quarter, with a primary focus on debt reduction, we also continue to make prudent investments in our fleet to keep it running efficiently -- effectively and efficiently. We expect the overall capital spend to be significantly lower than prior years due to the completion of the Ellis Island in 2017.

The 2018 bid market continues to strengthen. Total bid market year-to-date was $692 million, of which we were awarded 35% or $243 million. Please remember that variability in the percentage of our contract wins is not unusual and the win rate is not indicative of the win rate the company is likely to achieve next year. Specifically, our year-to-date win rate is low as -- is lower as a result of the loss of the Boston Harbor deepening in the first quarter.

During the second quarter of 2018, we were awarded 46% of the overall bid market, comprised of $20.9 million or 36% of capital projects, $130.9 million or 75% of coastal protection projects and $12.4 million or 29% of rivers and lakes projects. Our Great Lakes was not awarded any maintenance projects during the quarter. Two dredging awards, San Jacinto and Delaware River, for a total of $84 million, were awarded subsequent to the quarter and are thus not reflected in these balances I just referenced.

Contracted dredging backlog at 6/30/2018 totaled $506 million compared to backlog at December 31, 2017 of $511 million. The E&I segment's backlog was $28 million at June 30, 2018 versus $35 million at December 31, 2017.

With that, I'll turn the call back over to Lasse for his remarks on the outlook moving forward.

Lasse Petterson

Thank you, Mark. As we shift the focus to the latter half of 2018 and into 2019, I'm excited about our opportunities. As we are returning the company's balance sheet back to good health, we are and will be in a position to take on the multiple opportunities that we expect in the domestic market in the coming years. The combination of the $81 billion storm supplement appropriation, $1.5 billion of which we expect to be allocated to dredging in 2019 and '20 as well as the proposed 2018 water bill and the proposed 2019 budget would provide the domestic market with substantial funding for projects going forward.

Multiple port and harbor deepening programs continue to be realized as federal, state and local governments plan and provide funding for these projects.

International dredging market continues to be slow in 2018. We anticipate now a recovery to gain momentum in 2020. We anticipated the situation last year and consequently moved the Cutter Dredge Carolina back to the U.S. from the Middle East to participate in the solid domestic U.S. market. She's currently working on the Charleston Harbor deepening projects. We also moved a mechanical dredge back from South America.

To conclude, with the second improved quarter behind us, and with a good backlog in hand and a solid domestic market ahead, we expect to perform well in the remainder of 2018 and into 2019.

With that, I'll turn the call over for questions.

Question-and-Answer Session

Operator

[Operator Instructions]. And we have a question from Jon Tanwanteng from CJS Securities.

Peter Lukas

It's Pete Lukas for Jon. Just on the international side. Last quarter you said you had secured projects to keep the fleet utilized for 2018. I know you also mentioned, at the same time on this call, anticipating a weakness and moving some of the dredges. Just wondering what happened this quarter. Is there some macro going on, or something we should be focused on, and talking about a turnaround, if I heard right, not until 2020?

Lasse Petterson

Yes, I think we earlier have said that we anticipated improvements in the international markets at the latter part of '19 and 2020. It seems like this development is now indicated and it'll probably more in 2020 than '19. So we are adjusting to this new situation -- this situation. We have backlog in hand for our remaining fleet in the Middle East. We've been a little slow to get that revenue realized, but the backlog is there.

Peter Lukas

Okay. And a similar question for the rivers and lakes. The Decatur project is still in backlog and has consistently revenue, call it, $10 million to $15 million. Just wondering what changed in the last quarter there.

Mark Marinko

This is Mark. That project does work only part of the year, demobilizes in the wintertime and then kind of fixed back up in the late spring and summer time. So -- but we will finish that job this year. But as I mentioned, the $70 million San Jacinto job is a rivers and lakes project, so that will be gumming up in the back half of this year and then into 2019.

Peter Lukas

Okay. And for E&I, both revenue and margins continue to be under pressure here, just wondering what we can look for in terms of what should change. Is it just winning more projects here? And how should we be thinking about its contribution this year differently?

Lasse Petterson

Yes. We had a target to bring E&I back to profitability this year. We were impacted of some awards that were delayed compared to our plans. We do expect a better development in the second half of this year, and we are closely monitoring the development in this segment and going forward.

Peter Lukas

Got you. And last one for me. Backlog and bid seems to have picked up since the end of the quarter and be much stronger. You've made some comments previously on utilization. Just wondering, where are the holes and potential pitfalls for the remainder of '18, and on the flip side, the potential for upside this year in '19 if you execute everything according to plan?

Mark Marinko

So a couple of things there. I think the bid market has strengthened. You saw those $84 million of awards in the -- subsequent to the quarter end as well. We have some big port deepening bids coming up that we've mentioned a couple of times, like the Tampa Port deepening, Port Corpus Christi, Jacksonville. A lot of those -- some impact a little bit of this year, but more into 2019 eventually. So that just bodes well for our fleet as those are combined different times of equipment we can use on those projects, where there's mechanical, copper or cutter. So -- and some of them do have a mix of those -- all 3 of those, so it bodes well for our diversity of fleet. And in terms of the utilization you're mentioning -- as you could kind of see in the numbers as we talk about gross profit, even with revenue down, taking out those vessels that were underutilized has vastly improved our utilization. I hope that answered the question.

Operator

Our next question comes from the line of Ben Klieve with NOBLE Capital market.

Benjamin Klieve

So a few questions for me, a couple piggy backing off of the last few questions here in individual segments. First of all, in the rivers and lakes segments, with the San Jacinto award ramping and now in backlog, can we look at the rivers and lakes segment to be kind of flat overall in the year and now the seasonality will be different? But do you think, overall, given that award that there's a potential for that -- for this business to be pretty flat on a year-over-year basis?

Mark Marinko

Yes, you mean from a revenue standpoint? Yes

Benjamin Klieve

Yes.

Mark Marinko

Yes.

Benjamin Klieve

Okay, perfect. And kind of the same question on the international segment. I know there's a lot of moving pieces here, with underutilized assets last year and then rationalizing those assets this year. And then when you look at the international business, last year, was heavily, heavily frontloaded. So I understand why you're down in the first half of this year, but I'm curious the potential of that business, overall, on when you compare fiscal '17 to; fiscal '18. To what degree do you think you're going to -- we're looking at downside on a full year basis from that business, given all the moving pieces that you've described.

Mark Marinko

Yes. So international, Ben, international through the first 6 months of the year, from a revenue standpoint, was down $23 million. That's the largest chunk of the revenue decrease. And you're exactly right, it's related to the first half of last year, we had that Saudi Arabia job. So and now that we've moved, even though we do have some in backlog for the back half of the year, we have moved to, as Lasse said, the Carolina back to the U.S. as well as a dredge from South America when we kind of shut down Brazil, and that's actually work in the U.S. now. So it is a big dropoff when you look at it versus the prior year. I don't have the number right in front of me, but it is a material drop off mostly because we moved two pieces of equipment that should generate revenue out of the international market.

Lasse Petterson

If I could add there. The move back to the U.S. of the equipment is to benefit the very active domestic market as we see this going forward, and the additional capacity, we felt was required here to supplement the fleet and to execute the projects that we see coming up. And that clearly has an impact on the international revenues consequently.

Benjamin Klieve

Right, okay, perfect. Another question. In Q1, you described a mechanical failure on the Charleston project, $11 million to $12 million of revenue misses. To what degree was that business made up during the quarter -- during second quarter?

Mark Marinko

So well, yes, we started the Charleston project really in the month of June. So when you look at the quarter, you have 1 month of impact in the month. So that and then as I mentioned, just on this call today, that we started the second quarter later than we anticipated. There was Charleston, there's a Charleston I and a Charleston II, they're really 2 Charleston projects. So first part, we mentioned that Q1 was really related to Charleston I. So there -- and the impact on the quarter for us was around $15 million in revenue. So that we do have the opportunity to make that up this year because of the way the windows are because we did that. We have now, right now cutters and mechanical dredges there, and then the back the year, the hopper is coming in for the hopper window. So they're going to come out. So we have an opportunity to make that up but it was -- yes, we expect to make it all up, but not -- we didn't make it up in the second quarter.

Benjamin Klieve

Okay, perfect. And then last one for me. I'm trying to get a better idea of gross margin potential, particularly from the Ellis Island. I know you're not going to give any specific numbers here on the margin of that vessel. But I'm wondering if you can elaborate a bit on the gross margin ramp of that vessel. How did it -- can you describe how it improved from the first quarter to the second? And then, at this point, what potential is therefore gross margin from that vessel to continue improving or the rich kind of a high water, sustainable mark from that vessel?

Mark Marinko

Yes, I won't give gross margin now because first of all, depending on the project that works on, we'll impact what that margin is, right? So that's important to call out. But yes, no, there is room for improvement in the margin impact on the Ellis, moving forward. It continues to improve. It is, as Lasse said, working at our design criteria. We still do -- it still has periodic times where it's not working, where we're fixing something, improving something a little bit, but those days continue to get smaller. So that it does have more upside from that aspect for sure. So you haven't seen the full impact of the Ellis in the numbers yet.

Benjamin Klieve

Do you have an idea of when you think that may be?

Mark Marinko

I'd say kind of the back half of this quarter.

Benjamin Klieve

Okay, so back half of this quarter, and then Q4 on a full quarter basis you think?

Mark Marinko

Right, yes.

Operator

We have a question from DeForest Hinman from Walthausen & Co.

DeForest Hinman

A few questions, starting off with dredging. It looks like we have pretty good quarter. I think the margins were pretty good, surprising sequential improvement. In the last question just gave us -- the question that you answered and it looks like there's even room for further improvement on the margin side. Just helping people understand how things can progress potentially going forward and some of the actions that we've taken to rationalize the fleet and lower the SG&A. Is this a business that -- whatever that EBITDA number is, $22 million, $23 million, $25 million of EBITDA, and there's really strong outlook we have going forward. Is this kind of the -- a new norm for that business, and we should be looking for that to continue to improve going forward?

Mark Marinko

Yes. So I think that's a good take on it. We do expect the back half of the year to continue to improve from a revenue and a margin perspective. As I mentioned just a minute ago, the Ellis Island, that is part of it. But what you're really seeing in this quarter, as we mentioned, you kind of only have the Charleston working in June, so you get a full quarter of Charleston as we move forward. And so we do foresee or expect improvements in the back half of the year compared to the first half of the year, as I said from a revenue and a margin perspective. And then with the robust bidding market with these additional port deepenings we expect that to continue into '19. So we do see some more improvement and then leveling off. But as you get into '19, we have additional cost cuts related to our rationalization that will improve the margin.

DeForest Hinman

So good bit of environment. It's kind of a little bit of a refreshed fleet with Ellis Island and kind of some of the vessels that maybe were less active. I don't know if you'd use the term deadweight, but these are older units, not as profitable, doesn't make sense to do more maintenance capital on them. They're out of our book, I guess, in terms of our fleet mix?

Mark Marinko

That's right. And you are seeing that not just on the P&L side in terms of the improved gross profit, with the lower margin, but as I mentioned on the CapEx, we're down. We spent $5.8 million in the quarter, did $12 million last year. That included $5 million for the Ellis. So you can kind of take that out as plus $7 million. We were down a couple of million in CapEx in the quarter. I'm more of an apples to apples basis so yes, that rationalization is definitely up in the P&L side, but also there's less CapEx spend for us.

DeForest Hinman

Yes. And just building on that, you keep saying CapEx is going to be down, and we're seeing that in the first half. But are we going to put a firm number on that? Because if we kind of annualize the first half, you're only like $26 million. Is that realistic? Or is that too old?

Mark Marinko

There's a little bit more in the second half for some drydocking we have to do. So it's kind of -- right now it will be in the low 30s. As I've said, on a prior call, we're kind of going -- we intended to go back to our kind of $40 million regular CapEx spend, but I did say I expect it to be lower than that. I expect it to be in the low $30 millions this year. So a little bit more in the back half than the first half.

DeForest Hinman

Okay. And then going back to the bidding -- domestic bid market, the rivers and lakes, not just that we get that win, it sounds like it's a rush job and that's usually two good words, rush job, so should we be thinking about the profitability profile that we're being better than average to do that work in the back half of 2018?

Mark Marinko

Yes, that's a good project for the rivers and lakes fleet to work on so I would say that's correct.

DeForest Hinman

Okay. And then this is kind of a big picture question as a shareholder that's been involved with the stock for some period of time. We just had this good conversation about how good the dredging business is doing, and I think the dredging business did a little bit better than we thought from a margin perspective. So that's very good. Your stock is down 4% today and really good news. And as a shareholder kind of looking through, I think, the problems in the E&I, which is our smallest business are overshadowing the positive work that we're doing in the dredging business. So obviously, it's frustrating for shareholders, but probably frustrating for you too. So big picture question, what are we going to do with E&I? Because I believe this performance is fairly unacceptable.

Lasse Petterson

Well, let me address the dredging business first. The dredging business is solid. We have, this year, seen some delays in realizing the results from getting the Ellis Island out in operation. We first said it was 3 months running period. We had some problems there, which has been corrected. And since she's up and operating at a design criteria, we still have had some smaller issues that had needed to be corrected. So as we go forward, with the major port deepening projects coming to bid and being executed, I see a very good development for domestic dredging over the next months and next year. When it comes to E&I, as I said in my remarks, we have been disappointed by the -- our ability to get bids into backlog and to execute that as revenue. And that delay has impacted us in the first half year. The second half of the year is traditionally better, and we have 1 new work since the completion of the second quarter. And as I also said here on the Q&A, we are closely monitoring the development in this segment, and we expect better results from our businesses than we do see on E&I currently.

DeForest Hinman

When you say you're monitoring it, is the business actively for sale? Are we giving them 6 months and then wind it down? Or how are we looking at this business, because I think if we don't get to profitability positive in 2018, you're looking at -- and my model might be off but 1, 2, 3, 4, 5, you're looking at 6 years of losses in that business.

Lasse Petterson

Well, we have taken steps, as you know, to turn the E&I business around, and Chris and his team is working hard on that. Unfortunately, we have been somewhat slower to get the EBITDA to a positive contribution for the company. We are optimistic about the second half of the year. And as with all assets in the company, last year, we spent a lot of time and effort in getting the fleet, call it, focused on the new project opportunities that we saw in the market for the next 3 to 5 years, and then rationalizing the part of the fleet that was not contributing to our results. And in the same way, we're looking at all the assets that we have in our portfolio and monitoring the development in these segments. And we need to have a business segment to contribute positively to our bottom line.

Operator

[Operator Instructions]. And we have a question from [indiscernible].

Unidentified Analyst

Just looking at the numbers, and we've talked about this a lot, that kind of reduction of revenues in dredging accompanied by a what appears to be a 70% increase to Delta in the gross margin, could you just kind of drill down a little bit and list in order of importance what the factors are that led to that Delta? So it's good to see higher margins on lower revenues as far as I'm concerned.

Lasse Petterson

Yes, no, higher margins is roughly our fixed on. I think in the past, in the company that we kept a lot of assets around because we were focused more on revenues. My philosophy is that we need to focus in on our margins and seek out the projects that if we are uniquely qualified to execute, and then focusing our fleet on those projects. And with the rationalization that we did last year, there was clearly assets in our fleet that were not contributing to the results of the company, and we took the consequence. And the combination of that rationalization and the delays that we had on the Charleston project have been -- we've seen that in the revenue decrease from last year. Going forward, our focus will be on margin and make sure that the projects are rebid and that we execute and deliver a high-quality margin to the company.

Unidentified Analyst

I think you took G&A down to a couple of million. What was involved there?

Lasse Petterson

Well, as we announced last year, we took a $15 million cut in overheads in SG&A, and we realized that saving and that is also contributing to the increased margins as we see them today. And it will contribute to our margins going forward.

Unidentified Analyst

All right. We'll stay tuned. I hope you guys some operating leverage in 1 revenue start to compare favorably.

Operator

There are no further questions at this time. I'll turn the call back to you.

Abigail Sullivan

Okay. We appreciate the support of our shareholders, employees and business partners. And we thank you for joining us in this discussion about the important developments and initiatives in our business. We look forward to speaking with you during our next earnings discussion in November.

Operator

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.