Carpenter Technology Corporation (NYSE:CRS) Q3 2021 Earnings Conference Call April 29, 2021 10:00 AM ET
Brad Edwards – Investor Relations
Tony Thene – President and Chief Executive Officer
Tim Lain – Senior Vice President and Chief Financial Officer
Conference Call Participants
Phil Gibbs – KeyBanc Capital Markets
Gautam Khanna – Cowen
Good morning, and welcome to the Carpenter Technology Corporation Third Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Brad Edwards. Please go ahead.
Thank you, operator. Good morning, everyone, and welcome to the Carpenter Technology earnings conference call for the fiscal 2021 third quarter ended March 31, 2021. This call is also being broadcast over the Internet along with presentation slides. Please note for those of you listening by phone, you may experience a time delay in slide movement. Speakers on the call today are Tony Thene, President and Chief Executive Officer; and Tim Lain, Senior Vice President and Chief Financial Officer.
Statements made by management during this earnings presentation that are forward-looking statements are based on current expectations. Risk factors could cause actual results to differ materially from these forward-looking statements can be found in Carpenter Technology’s most recent SEC filings, including the company’s report on Form 10-K for the year ended June 30, 2020, Form 10-Q for the quarters ended September 30, 2020 and December 31, 2020, and the exhibits attached to those filings. Please also note that in the following discussion, unless otherwise noted, when management discusses sales or revenue, that reference excludes surcharge. When referring to operating margins that is based on operating income and sales, excluding surcharge.
I will now turn the call over to Tony.
Thank you, Brad, and good morning to everyone on the call. Let’s begin on Slide 4 a review of our safety performance. Our fiscal year-to-date total case incident rate, or TCIR, is 0.6. We have now demonstrated three consecutive quarters of sub-1.0 TCIR performance as an organization, which is exceptional safety performance. However, we do not take these accomplishments for granted and continue to enhance the fundamentals of our program in areas such as hand safety, human performance, leadership development, ergonomics, employee engagement activities and at-home safety programs. I look forward to achieving our next safety performance milestone as we pursue safety excellence on our path to zero.
Now let’s turn to Slide 5 and a review of the third quarter. Our third quarter results were largely in line with our expectations as near-term volume headwinds related to COVID-19 continue to pressure our financial performance. Both our SAO and PEP segments delivered results that were consistent with the guidance we provided on our second quarter earnings call. We have maintained a focus on our key strategic priorities during this challenging period. First, ensure the safety of our employees. Second, drive cash flow generation and strengthen our liquidity profile.
Over the last four quarters, we have generated $189 million in free cash flow and ended the third quarter with total liquidity of $539 million, including $244 million of cash and no near-term financial obligations. And third, focus on the long-term relationships with our customers. During the quarter, we continued to expand our relationships across our customer base and then cover additional areas of value creation. As evidenced, we completed several contract extensions, primarily in our medical, transportation and aerospace and defense end-use markets.
In the aerospace market, customers fully understand that capacity was limited prior to the pandemic and supply of aerospace materials will be constrained again when build rates return to normalized levels. As you know, Carpenter Technology is the only company in our space that has invested in capacity, namely the Athens facility. Qualification efforts have continued through the pandemic as we received a meaningful provisional approval during the quarter. Lastly, the investment made in our hot strip mill on our Reading campus is currently in its final commissioning stages. This advanced mill is a significant addition to our soft magnetics solutions and capabilities portfolio and positions us to benefit from the growing trend of electrification.
Now let’s move to Slide 6 and the end-use market update. Our customers and markets have been heavily impacted by COVID-19, particularly aerospace and defense, our largest market. We have been successful in mitigating a portion of the near-term impact of the aerospace downturn by capitalizing on growing demand for our solutions in transportation and industrial and consumer end-use markets, namely our semicon business. Recently, all of our end-use markets have experienced positive inflections and have moved past their pandemic decline trajectories. All of our end-use markets are in demand recovery, albeit at different rates. We believe the worst is behind us, and we expect to see improving conditions over the coming quarters.
Let’s get into some more detail starting with the aerospace and defense end-use market where sales were down both year-over-year and sequentially. In the third quarter, customer inventories continued to decrease, and we saw some initial replenishment activity. As a reminder, in our recent second quarter, we talked about a variety of onetime customer contract-related items, which represented a positive. When you remove the impact of those items, aerospace results would be relatively flat sequentially. While visibility remains limited, overall sentiment points to incremental improvement through the balance of calendar year 2021 and then accelerate activity in calendar year 2022 and beyond.
In addition, future industry capacity and lead time continues to be a focus during conversations with customers as most recall the situation the supply chain was in prior to COVID-19 where lead times were significantly extended. Activity in the defense submarket remains solid, and we continue to see increased demand on select programs. In our medical end-use market, sales were up 7% sequentially.
Elective procedure volumes increased compared to the second quarter as patient sentiment and hospital capacity improved. The recovery of elective surgery volume is expected to continue into the second half of calendar year 2021 as vaccination levels rise to support increased confidence. Based on current conditions, we expect activity levels in the medical end-use market to show further improvement in the fourth quarter as our customers look to support an increase in elective surgeries. As many of you recall, the medical end-use market was one of our fastest growing markets prior to the pandemic.
Today, we remain well positioned to continue supporting the medical end-use market given our expanded OEM relationships, leading advanced materials portfolio and ability to develop new materials solutions that address complex and unmet market needs. In the transportation end-use market, sales were up both sequentially and year-over-year. On a sequential basis, sales increased across all of our submarkets. Demand in the light vehicle market remains solid driven by North America and China, while the heavy-duty truck market has largely recovered and is expected to grow through calendar year 2022. Overall, we are winning share in both the light vehicle and heavy-duty truck submarkets due to the value of our high-temp, high-resistance turbocharger and valve exhaust solutions.
Now moving to the energy end-use market. Conditions in the oil and gas submarket remained challenged and activity levels remain low in the U.S., while international markets have shown some improvement. Keep in mind that prior year third quarter results included our Amega West business that was divested during the first quarter of this fiscal year. In our power generation submarket, we continue to work with customers as the current maintenance upgrade cycle continues. Lastly, for the industrial and consumer end-use market, sales were down year-over-year and sequentially. The slight sequential decline was a function of order flow between the last two quarters as we continue to experience demand pickup, consistent with the general manufacturing recovery.
Now I will turn it over to Tim for the financial review.
Thanks, Tony. Good morning, everyone. I’ll start on Slide 8, the income statement summary. Net sales in the third quarter were $351.9 million and sales, excluding surcharge, totaled $298.1 million. Sales, excluding surcharge, were effectively flat sequentially on 5% lower volume. Compared to the third quarter a year ago, sales decreased 40% on 39% lower volume. As Tony covered in his review of the end-use markets, the year-over-year decline is attributable to the ongoing demand headwinds in our key end-use markets of aerospace and defense and medical as a result of the global pandemic. As expected, the demand was similar to our recent Q2 levels.
Given the current demand environment, we continue to actively manage our production schedules and focus on executing against our targeted inventory reduction program. As we have said on prior calls, while the reduction in inventory drives near-term cash flow generation, as evidenced by our liquidity position, it negatively impacts our operating income performance.
SG&A expenses were $47.8 million in the third quarter, down $3 million from the same period a year ago, reflecting the actions we took to reduce costs, including the elimination of about 20% of our global salaried positions late last fiscal year, managing discretionary spend closely as well as the impacts of remote working conditions that reduced certain administrative costs such as travel and entertainment. Sequentially, SG&A costs were higher by $5.6 million, reflecting incremental costs in the quarter associated with going live with our new ERP implementation as well as the incremental depreciation costs associated with the ERP system.
The current quarter’s operating results include $7.6 million of restructuring and asset impairment charges, including inventory writedowns, associated with our ongoing actions to reduce cost and narrow focus in our additive business unit within our PEP segment. In addition, our results for the third quarter include $2.7 million in COVID-19-related costs, which are down slightly from the $3.9 million of COVID-19 costs incurred in our recent second quarter.
As a reminder, these costs include direct incremental operating costs, including outside services to execute enhanced cleaning protocols, isolation pay for employees potentially exposed to COVID-19 and additional personal protective equipment and other operating supplies necessary to maintain the operations while keeping employees safe against possible exposure. The operating loss was $40 million in the current quarter when excluding the impact of the special items, namely the restructuring and asset impairment charges and the COVID-19 costs. Adjusted operating loss was $29.7 million compared to operating income of $58.7 million in the prior year period and adjusted operating loss of $32.3 million in the second quarter of fiscal year 2021.
Again, the current quarter’s results were largely in line with the expectations we set at the beginning of the quarter and reflect the impact of significantly lower volume compared to the prior year combined with a targeted inventory reduction, partially offset by the cost reduction efforts.
Although not shown on the slide, in the current quarter, other expense net includes an $8.9 million non-cash pension settlement charge related to our largest qualified pension plan. In addition to recording the charge in the current quarter, we were also required to remeasure the plan’s net pension liabilities. As a result of the remeasurement, we expect pension expense to be lower by about $3 million for the full fiscal year versus what we had anticipated. For clarity, this reduction in net pension expense does not impact operating income. Our effective tax rate for the third quarter was 29.2%. For the balance of the year, we currently expect the tax rate to be in the range of 28% to 30%. Earnings per share for the quarter was a loss of $0.84 per share. When excluding the impacts of the special items, adjusted earnings per share was a loss of $0.54 per share.
Now turning to Slide 9 and our SAO segment results. Net sales for the quarter were $299.6 million or $246.5 million, excluding surcharge. Compared to the third quarter last year, sales, excluding surcharge, decreased 38% on 37% lower volume. Sequentially, sales, excluding surcharge, were essentially flat on 3% lower volume. These sequential results reflect similar weakened demand conditions in our largest end-use market of aerospace and defense as the supply chain continues to deal with near-term reductions in OEM build rates. This was partially offset by stronger shipments in transportation as North American light vehicle production continues to drive strong demand conditions for our materials.
SAO reported an operating loss of $9.9 million for the current quarter. The same quarter a year ago, SAO’s operating income was $76.4 million. And in the second quarter of fiscal year 2021, SAO reported an operating loss of $11.6 million. The year-over-year reduction in operating income primarily reflects the impacts of lower volume as well as the negative income statement impacts of reducing inventory, partially offset by the actions taken to reduce operating costs.
During the current quarter, SAO reduced inventory by approximately $15 million and year-to-date, has reduced inventory by $146 million. Sequentially, the lower operating loss is principally the result of lower volume, offset by a favorable product mix and a less pronounced impact of the inventory reduction relative to the second quarter due in part to rising raw material prices. In addition, the current quarter’s results reflect approximately $2.1 million of direct incremental costs associated with our efforts to protect our facilities and employees in light of COVID-19. This compares with $3.2 million in COVID-19 costs in our recent second quarter. Looking ahead, we expect demand conditions across most end-use markets will stabilize and begin to gradually recover beginning in the fourth quarter of fiscal year 2021. Based on current expectations, we anticipate SAO will generate an operating loss of approximately $5 million to $7 million in the fourth quarter of fiscal year 2021.
For clarity, I want to highlight a couple of key points in this guidance. First, this estimate includes similar sequential COVID-19-related costs in the upcoming fourth quarter. And second, as we continue to reduce inventory, we expect that we will be required to record a non-cash LIFO decrement charge in our upcoming fourth quarter. Given the significant inventory reductions we expect to generate for the full fiscal year, we are liquidating LIFO layers that include inventory costs that are higher than the fiscal year 2021 cost and, as such, a non-cash charge will be recorded to the income statement. The guidance we provided excludes the impact of any non-cash LIFO decrement charges.
Now turning to Slide 10 and our PEP segment results. Net sales, excluding surcharge, were $64.9 million, which were down 39% from the same quarter a year ago and up 20% sequentially. The year-over-year decline in sales was driven by market headwinds, largely due to the global pandemic. Additionally, sales in the energy end-use market declined as a result of our exit of the Amega West oil and gas business in the first quarter of this fiscal year. The sequential increase in sales reflects increasing demand for titanium materials used in the aerospace and defense and medical end-use markets.
In addition, our distribution business drove higher sales due to growing demand related to the strong activity in the automotive supply chain. Lastly, our additive business saw a modest increase in sales as demand improved. In the current quarter, PEP reported an operating loss of $3.3 million. This compares to an operating loss of $7.2 million in the second quarter of fiscal year 2021 and an operating loss of $0.3 million in the same quarter last year. The sequential operating results reflect the favorable impacts of higher volumes across all the PEP business units.
As we look ahead, we believe that demand conditions will gradually begin to improve in the coming quarters, and we currently anticipate PEP will generate an operating loss of zero million to $1 million in our upcoming fourth quarter. Also, as I mentioned for SAO, the PEP guidance includes COVID-19 costs in line with the recent quarter but excludes any non-cash LIFO decrement charges.
Now turning to Slide 11 and a review of free cash flow. In the current quarter, we generated $4 million of cash from operating activities. As you can see within the cash flow generated from operations, we continue to reduce inventory, although less pronounced than we have executed in the last several quarters. Over the last four quarters, beginning with our fourth quarter of fiscal year 2020, we have reduced inventory by just under $300 million, including $182 million of reductions to date in fiscal year 2021.
In terms of other working capital, with the implementation of our new ERP system, we experienced some challenges with customer collections that reduced cash from accounts receivable collections. Those challenges are largely behind us, and we expect to realize the benefits of that catch-up in our upcoming fourth quarter. In the third quarter, we spent $19 million on capital expenditures. We expect to spend about $110 million to $120 million on capital expenditures for fiscal year 2021 depending on the timing of certain projects expected to be completed in the balance of this fiscal year.
The actions we have taken to generate cash in the current environment have been essential. It should not be a loss that we believe in the value of returning capital to our shareholders. And despite the challenging economic conditions, we have continued to pay our quarterly dividend to our shareholders. The quarterly dividend demonstrates the confidence we have in our ability to deal with the near-term impacts of market conditions and the long-term prospects for our business.
With those details in mind, we reported negative $25 million of free cash flow in the quarter. As I mentioned, we dealt with some challenges in the quarter related to cash collections of accounts receivable. As we look at the fourth quarter, we believe we have addressed those challenges, and we’ll continue to execute on opportunities for further inventory reductions. With that in mind, we are targeting at least $50 million of positive free cash flow in our upcoming fourth quarter.
From a liquidity perspective, we ended the current quarter with total liquidity of $539 million, including $244 million of cash and $295 million of available borrowings under our credit facility. Keep in mind, in the current quarter, we amended and extended our credit facility and reduced the size of our facility from $400 million to $300 million, which is reflected in the sequential change in liquidity.
With that, I’ll move on to the next slide, Slide 12, to talk about our capital structure. Over the years, we maintained a balanced view of capital allocation. And as the global pandemic emerged a little over a year ago, we quickly shifted our focus toward building liquidity, which was enabled by our strong capital allocation philosophy. In addition to the actions we took to reduce costs and focus on cash generation earlier this year, we took action to extend our maturity profile and add incremental cash to our balance sheet with our July 2020 notes offering.
This extended our notes due in July 2021 to July 2028. Last month, in March 2021, we executed another important step in our strategy by completing an amended and extended credit facility. The previous credit facility was set to expire in March 2022. The new facility matures in March 2024. With those actions behind us, we have no near-term maturities and have significant liquidity with opportunities to generate even more.
With that, I will turn the call back over to Tony.
Thanks, Tim. As we all know, different demand recovery time lines and customer ordering patterns will continue to influence our shorter-term quarter-to-quarter mix. I want to share a bit more on our enthusiasm related to mid-term and longer-term outlooks in the end-use markets we serve.
Let’s start with aerospace. During the downturn, we continue to improve our already strong position. Most market participants and experts believe that demand will rebound to and through pre-COVID-19 levels which, if you recall, was already exhibiting constrained dynamics. Longer term, the industry will continue to need improved fuel efficiency and emissions, driving the need for better engine materials where we are strongly positioned.
Defense will continue to experience market resiliency on key platforms that require increases in strength, customers and fatigue performance. Longer term, we are monitoring funding patterns as governments reassess their budgets after significant COVID-19-related spending. In medical, as orthopedics and dental follow the cardiology recovery, we continue to secure additional share and identify more upside, largely due to the breadth of the high-value material solutions we offer in support of the industry innovation in this space. Longer term, we see this continuing as quicker patient recoveries and improved patient outcomes will be the key drivers.
In transportation, with the recovery well under way in North America and China, regulations drive the near-term movement to higher efficiency powertrains, which is a positive for our portfolio of high-temperature materials. Longer term, as electric vehicle adoption grows, it is natural they will take more and more share away from the large internal combustion engine base.
We have a good view of the life cycle decline of those products and are balancing our focus accordingly. As I mentioned earlier, our new hot strip mill brings capability and capacity to support significant future electric vehicle volume growth. Moving to energy, which experienced a significant decline in demand this past year. Oil prices have increased by 50% in calendar year 2021, and we have seen limited capital expenditures released for some major projects that offer up specific opportunities.
With that said, there will likely continue to be a supply and demand imbalance over the next couple of years. Longer term, we expect to see continued emphasis to move away from oil to natural gas and other alternative fuel sources. In industrial submarkets, specifically with semiconductor and fluid control products, the relatively steady demand we experienced through the pandemic is expected to increase driven by manufacturing for 5G, Internet of Things connectivity and more efficient power plants that require better-performing materials.
The consumer submarket is expected to continue its seasonal cyclicality. However, we’re seeing more and more applications that have tighter design envelopes that require the removal of wave interference and that make use of our materials to offer automated sensory feedback responses. Longer term, with the proliferation of digital and data management, we expect to see more devices with more sensors requiring exponentially more connectivity.
I’ve spoken in prior quarters about our soft magnetics products and their relevance within increasing electrification trends. We believe this capability will well position us in the long term to capitalize on the growth in these areas. In the electrification space, we are participating in an increasing amount of prototype and initial low rate production initiatives that utilize our products to provide power dense propulsion in a manner that relies upon reduced mass or where there is limited space for the motor.
And we see current drone, air taxi and other related applications becoming more and more relevant, especially where our options to extend range or boost performance are being exhausted. And lastly, in additive manufacturing, while we’ve seen some projects cancel or delay indifferently, along with some industry consolidation, we believe the competitive space has been narrowed, thus providing a focus on the value of our quality and life cycle management platform where data and knowledge management will be vital to the success of any additive program.
Now let’s turn to Slide 15 and my closing comments. Despite the challenges the pandemic has created, we have continued to strengthen our foundation for long-term profitable growth. I’m proud that we continue to drive toward a goal of a zero-injury workplace and that all of our facilities have remained open during the pandemic. The efforts have demonstrated a resiliency and commitment to our fellow employees, our customers and our communities. We have adopted to new working conditions, aligned our cost structure and our manufacturing footprint to rapidly changing market conditions.
We have taken a series of steps to enhance our capital structure, drive strong liquidity and extend our debt maturities. We ended the third quarter with $244 million in cash and over $539 million in total liquidity. Our capital structure activities combined with our targeted cost reduction initiatives place us on solid ground to not just manage through the downturn but emerge on the other side a leaner, more flexible and more productive company.
We have also deepened our relationships with our customers. Recovery across our end-use markets remains in varying stages. But we expect overall market conditions to continue to improve as we move through the rest of calendar year 2021 and into 2022. Some markets will recover faster than others. And we are laser-focused on capitalizing on the recovery as opportunities arise. This includes our largest end-use market, aerospace and defense, where the recovery is beginning to show signs of life. We are working daily with our customers to align our production schedules with their material needs as overall sentiment begins to trend upwards. Our core business is established and built upon 130 years of metallurgical expertise, manufacturing and processing experience and a commitment to delivering mission-critical solutions to customers in some of the largest industries in the world.
This strong core business will be supported over the long term by the targeted investments we have made in critical, emerging technologies, including electrification and additive manufacturing. Taken together, we believe our core business and next-generation capabilities position us to deliver sustainable, long-term growth and value creation to our shareholders for years to come. Thank you for your time.
And now I’ll turn it over to the operator to take your questions.
[Operator Instructions] The first question is from Phil Gibbs from KeyBanc Capital Markets. Please go ahead.
Hi. Good morning.
Good morning, Phil.
Tony, can you give us an idea of what the overall backlog looked like this quarter versus last and then also what your jet engine sales did either year-over-year or quarter-over-quarter, please?
Yes. So I’ll start with the last one first. Remember, you asked me that question last quarter as well, and engine sales were up 19% sequential quarter. And I said not to get too excited about that just from a timing standpoint. So this quarter, they were down about 18%. So over the last two quarters, you’ve seen it relatively flat on the engine sales, maybe a little bit of an increase. So that’s in line with what we expected. From a backlog standpoint, overall, our backlog was up about 6% sequential quarter.
Thank you. And then on the LIFO liquidation piece in Q4, any sense you got in terms of what we should model in terms of an impact from that?
Yes. So I’ll take that one. Just a couple of comments there. One is, most of SAO’s inventory is on LIFO, Dynamet as well as in PEP, so there’s a bit in both segments. As we’ve taken inventory down, we’re going to eat into – I mentioned in my comments, eat into some higher cost inventory. So we expect that it’s – certainly, it’s an estimate that’s very sensitive to where we wind up in ending inventory, but we’d expect that to be somewhere in the neighborhood of $40 million to $45 million, and most of that being in SAO with maybe $1 million or $2 million in PEP.
Now is that, in your mind, a one-time thing, meaning we – meaning is there any recurrence or bleed into fiscal 2022?
No, we wouldn’t expect it to bleed into 2022. It’s – I don’t want to say one time but non-recurring non-cash special item in Q4.
Okay. And then last one for me. The COVID cost of $2.7 million, did you say that, that was – there was about $2 million in SAO and the rest in PEP?
Yes, it’s $2.1 million in SAO and $600,000 in PEP.
And then your inventory writedown and restructuring impairment that you called out in your releases, where did those flow through?
That shows up in corporate costs, in the corporate cost number when you’re looking at the breakdown.
Thanks. I appreciate it, guys.
[Operator Instructions] The next question is from Gautam Khanna from Cowen.
Yes. Thanks. Good morning. Following up on Phil’s question, I wanted to ask what the visibility – as you’ve mentioned on the engine side, how far out can you see in terms of delivery requirements of customers since they are asking about lead times? Or do you have visibility into calendar Q4 at this point? And if you could also talk about the other aerospace subsegments and how they fared sequentially in the March quarter, so fasteners and other structures.
Hi. Good morning, Gautam. We can see into our fiscal fourth quarter on aerospace. In fact, on a bookings standpoint, our bookings for aerospace were up 60% this past quarter, and we see that trend continuing. So pretty good visibility there in close contact with our customers. From a sales standpoint, overall aerospace, as you could see on the slide, was down 8%. Fasteners were up a couple of percentage points. Structural was up about 7%. Distribution was up three or four percentage points as well.
So all of the segments were up quarter-over-quarter. Engine is the only one that was down, and that’s just because you had the balancing with the quarter before. And as I said, in the second quarter, we were up 19%; and this quarter, 18%. So if you balance that out, maybe a point or two improvement. So all the segments were up quarter-over-quarter. I should say that’s on the aerospace side. Defense was down just a little bit, just to be fair, quarter-over-quarter.
Got it. And then I was more curious about the engine visibility beyond fiscal Q4 into the end of the calendar year, so just so what we can expect. Normally, we have a big seasonal dip in the second half of the year versus the first half. I’m talking of the calendar year. Do you expect that we’ll see – I mean do you have visibility into the second half of the calendar year right now on the engine supply chain – on the engine demand environment?
Yes, we do. And as I said, we’re very close to our customers and trying to capture that in my remarks that the discussions are really around lead times and availability and where we see it through this calendar year and maybe a bit into calendar year 2022 as we start to stack those orders up, a lot more discussion around Athens. You saw we had one provisional approval, so wanting to understand and get those qualifications complete.
So from an overall standpoint, of course, I’d like for the visibility to be sharper. But I think right at this point in time, we have a pretty good idea of where our customers are at and, as I said in the comments, very bullish going forward. We do believe that we hit the bottom. Much like many of the other companies that have reported so far have had the same type of message, and now we’re looking forward to coming out of this.
And could you speak to the seasonality we should expect in the second half of the calendar year? Should we see still expect there’ll be some decline?
I’m not so sure – yes, sorry for interrupting. I’m not so sure about that. I mean that’s been a bit muted the last couple of quarters and in the last couple of years as well as we come in. There’s always summer shutdowns maybe in the transportation side, but I think you’re going to see a lot of those manufacturers shorten those summer shutdowns just because of some of the shortages they’ve had with chips that they’ll run maybe stronger than what they had in the past. So at this time, I don’t see a material impact because of seasonality.
Okay. Thank you very much.
This concludes our question-and-answer session. I would like to turn the conference back over to Brad Edwards for any closing remarks.
Thanks, operator, and thanks, everyone, for joining us today for our fiscal third quarter 2021 earnings call. We look forward to speaking with all of you in the near future. Thanks again, and enjoy the rest of your day.
The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.