Belden Inc. (NYSE:BDC) Q3 2021 Earnings Conference Call November 3, 2021 8:30 AM ET
Kevin Maczka - Vice President, Treasurer and Investor Relations
Roel Vestjens - President, Chief Executive Officer and Director
Jeremy Parks - Senior Vice President of Finance and Chief Finance Officer
Conference Call Participants
Reuben Garner - The Benchmark Company
William Stein - Truist Securities
Noelle Dilts - Stifel
Steven Fox - Fox Advisors
Mark Delaney - Goldman Sachs
Chris Denker - Loop Capital
Ladies and gentlemen, thank you for standing by. Welcome to this morning's Belden Inc Conference Call. Just a reminder, this call is being recorded. [Operator Instructions] I would now like to turn the conference over to Kevin Maczka. Please go ahead, sir.
Thank you, David. Good morning, everyone, and thank you for joining us today for Belden's third quarter 2021 earnings conference call. My name is Kevin Maczka. I'm Belden's Vice President of Investor Relations and Treasurer. With me this morning are Belden's President and CEO, Roel Vestjens; and Senior Vice President and CFO, Jeremy Parks. Roel will provide a strategic overview of our business, and then Jeremy will provide a detailed review of our financial and operating results, followed by Q&A. We issued our earnings release earlier this morning, and we've prepared a slide presentation that we will reference on this call.
The press release, presentation, and transcript of these prepared remarks are currently available online at investor.belden.com. Turning now to slide 2 in the presentation. During this call, management will make certain forward-looking statements. For more information, please review today's press release and our most quarterly report on Form 10-Q, additionally, during today's call, management will reference adjusted or non-GAAP financial information. In accordance with Regulation G, the appendix to our presentation and the Investor Relations section of our website contain a reconciliation of the most closely associated GAAP financial information to the non-GAAP financial information we communicate. I will now turn the call over to our President and CEO, Roel Vestjens. Roel?
As a reminder, I'll be referring to adjusted results today. Please turn to Slide 3 in our presentation for a summary of the third quarter takeaways. We delivered another outstanding quarter, with total revenues and EPS that exceeded the high end of our guidance ranges. I'd like to thank our global teams for diligently executing our strategic plans to accelerate growth and expand margins.
Demand trends remain robust, and I am encouraged by our order rates. We continue to strengthen our relationships with customers and capitalize on opportunities across our business. We are increasingly benefiting from our focus on solution selling and new product innovation. Our strong financial performance demonstrates that our initiatives are gaining momentum with customers, who recognize us for our design, engineering, and service capabilities.
We are successfully navigating the challenging operating environment. Our teams are supporting our customers and taking proactive steps to expand margins despite the significant inflationary pressures and supply chain challenges in our industry. During the quarter we further strengthened our balance sheet. As we increased EBITDA and generated free cash flow, net leverage declined to 2.8x at the end of the third quarter. We are pleased to report that this is back within our targeted range of 2x to 3x for the first time since the outbreak of the pandemic.
Finally, we are increasing our full year 2021 revenue and EPS guidance once again to reflect better than expected performance in the quarter and an improved outlook for the remainder of the year.
In summary, this was another excellent quarter for Belden, and I am very proud of the achievements of our global teams.
Now, before we review our third quarter performance in more detail, I would like to update you on some important strategic initiatives.
Please turn to Slide 4. As you know, Belden's senior leadership team and I have been pursuing a number of compelling strategic initiatives to drive solid and sustainable organic growth. One key initiative is to enhance our value-added solution selling capabilities. Beyond individual product sales, Belden is uniquely positioned to offer complete and differentiated solutions, including cable, connectivity, networking, and software products and services. Given our product breadth and application expertise, customers are increasingly turning to Belden to solve their complex networking issues and enable them to collect and analyze vast amounts of data. Our sales and engineering teams are engaging with customers to optimize their operations, increase productivity, and improve safety.
I would like to highlight two recent project wins in industrial automation that illustrate our solution selling capabilities. First, in the logistics area, we recently engaged with a world leader in warehouse automation systems that provide conveyors, material handling racks, and other equipment to large warehouse operators. This is a long-time Belden customer that recently expanded our engagement to include a complete factory floor network assessment.
As a result of this milestone award, we expect to deploy a comprehensive networking solution across more than 20 facilities for this customer. In a second recent project, we engaged with a rapidly growing provider of robotic supply chain systems that utilizes automated guided vehicles, or AGVs, in large-scale warehouses. This application will include the design and implementation of next-generation wireless AGV communication networks, optimizing the operation for hundreds of AGVs at each site. This represents a significant new revenue opportunity with this customer.
These are just two examples of recent customer engagements that illustrate how Belden is transitioning from a product supplier to a value-added partner in the design and implementation of advanced solutions. We are very excited about the progress we are making on this important growth initiative.
Please turn now to Slide 5 for a review of an innovative new product. We are making targeted investments throughout the Company to develop new and innovative products that support our value-added solutions strategy.
One new product that I'd like to highlight in the industrial automation market is a new cellular communications gateway called ProLinx Edge. This product is designed to help customers establish remote connection to their machines and monitor data via a secure cloud-based network. Customers will now be able to use this single integrated device, whereas multiple components were previously required to provide the same functionality.
We expect to continue developing innovative new products and complete networking solutions to support our customers and increase our growth opportunities.
Now please turn to Slide 6 in our presentation for a review of the third quarter highlights. As I mentioned, we delivered meaningful growth and margin expansion again this quarter, with total revenues and EPS that exceeded our expectations.
Third quarter revenues increased 33% year-over-year to $631 million, compared to our guidance range of $590 million to $605 million. Organic growth is a key priority, and revenues increased 24% year-over-year on an organic basis. The better than expected performance was broad based, with contributions from both the Industrial Solutions and Enterprise Solutions segments.
EBITDA increased 54% year-over-year to $101 million. EBITDA margins expanded 230 basis points, from 13.7% in the year-ago period to 16.0%.
EPS increased 82% year-over-year to $1.31, compared to $0.72 in the year-ago period and our guidance range of $1.11 to $1.21.
We are increasing our guidance once again. For the full year 2021, we are increasing the high end of our revenue and EPS guidance ranges by $50 million and $0.20, respectively.
Turning now to our key strategic markets. We had another great quarter in industrial. Industrial Solutions revenues increased 30% organically in the third quarter.
Market conditions remain very healthy, and we continue to see a number of compelling longer-term demand drivers for automation solutions as industrial customers respond to increasing labor costs, increasing capacity and productivity requirements, and other factors. Belden is highly differentiated in the marketplace, and we expect to deliver solid growth in this market going forward.
Turning now to Enterprise. Enterprise Solutions revenues increased 18% year-over-year on an organic basis in the third quarter, driven by improving end market trends and significant share capture in Broadband, 5G and Smart Buildings.
Within the segment, revenues in Broadband and 5G increased 6% organically. We see strong secular trends in this market driven by the ever-increasing demand for high-speed broadband and the desire to provide greater access. We have sustainable competitive advantages in this market, and we are ideally suited to support both MSO and Telco customers as they continuously upgrade and expand their networks.
Revenues in Smart Buildings increased 32% year-over-year and 13% sequentially on an organic basis, substantially exceeding our expectations. We are very encouraged by the improvement we are seeing in this market and the strong execution by our teams.
We are benefiting from our commercial focus on growth verticals such as data centers and healthcare facilities. In addition, our improved operational performance and superior lead times are enabling continued share capture.
To summarize, we had another great quarter. We are committed to driving robust organic growth, and are encouraged that our strategic initiatives are gaining traction.
I will now ask Jeremy to provide additional insight into our third quarter financial performance. Jeremy?
Thank you, Roel. Please turn to Slide 7 for a detailed consolidated review. I will start my comments with results for the quarter, followed by a review of our segment results and a discussion of the balance sheet and cash flow performance. As a reminder, I will be referencing adjusted results today.
Revenues were $631 million in the quarter, increasing $155 million, or 33%, from $476 million in the third quarter of 2020.
Revenues increased 24% year-over-year and 6% sequentially on an organic basis. We have not seen significant restocking by our channel partners, and we believe this revenue performance is consistent with robust end demand.
Incoming order rates remained strong during the quarter, increasing 48% year-over-year and approximately flat sequentially compared to the very strong orders in the second quarter.
This resulted in a book to bill ratio of 1.13x, including 1.20 in Industrial Solutions and 1.05 in Enterprise Solutions.
Gross profit margins in the quarter were 36.1%, increasing 80 basis points compared to 35.3% in the year ago period. As a reminder, as copper costs increase, we raise selling prices, resulting in higher revenue with minimal impact to gross profit dollars. As a result, gross profit margins decrease.
In the third quarter, the pass through of higher copper prices had an unfavorable impact of 210 basis points. Excluding the impact of this pass through, gross profit margins would have increased 290 basis points year-over-year. We are especially pleased with the performance given the current inflationary environment.
We expect that inflationary pressures will likely persist, and we are proactively addressing this through additional price recovery and productivity measures to support gross profit margins.
EBITDA was $101 million, increasing $36 million, or 54%, compared to $65 million in the prior-year period.
EBITDA margins were 16%, increasing 230 basis points compared to 13.7% in the year ago period. Excluding the impact of higher copper pass through pricing, EBITDA margins would have increased 310 basis points year-over-year, demonstrating solid operating leverage on higher volumes.
Net interest expense was consistent with the year-ago period. At current foreign exchange rates, we expect interest expense to be approximately $62 million in 2021.
Our effective tax rate was 18.5% in the third quarter, as we benefited from incremental discrete tax planning items. We expect an effective tax rate of approximately 20% in the fourth quarter and 19.1% for the full year 2021.
Net income in the quarter was $60 million, compared to $32 million in the prior-year period. Earnings per share were $1.31, increasing 82% compared to $0.72 in the third quarter 2020. We were very pleased to deliver such robust growth and margin expansion in the third quarter.
Turning now to slide 8 in the presentation for a review of our business segment results. I will begin with our Industrial Solutions segment. As a reminder, our Industrial solutions allow customers to transmit and secure audio, video and data in harsh industrial environments. Our key markets include discrete manufacturing, process facilities, energy, and mass transit.
The Industrial Solutions segment generated revenues of $345 million in the quarter, increasing 40% from $247 million in the third quarter of 2020. Segment revenues increased 30% organically, with broad based strength across each of our primary market verticals.
Non-renewal bookings for our integrated cybersecurity solutions increased 10% year to date in industrial markets.
Industrial Solutions segment EBITDA margins were 17.3% in the quarter, increasing 170 basis points compared to 15.6% in the year-ago period. The year-over-year increase primarily reflects operating leverage on higher volumes.
Turning now to our Enterprise segment. Our Enterprise solutions allow customers to transmit and secure audio, video and data across complex enterprise networks. Our key markets include broadband, 5G and smart buildings.
The Enterprise Solutions segment generated revenues of $286 million during the quarter, increasing 25% from $229 million in the third quarter of 2020. Segment revenues increased 18% organically.
Revenues in Broadband and 5G increased 6% year-over-year on an organic basis due to healthy end market demand and solid share capture. As a reminder, Broadband and 5G revenues increased in the third quarter 2020, and revenues are up double-digits compared to the pre-Covid period.
Demand for our broadband fiber products remains strong, with orders increasing 28% year to date. Revenues in the Smart Buildings market increased 32% year-over-year and 13% sequentially on an organic basis, substantially exceeding our expectations. Improving market conditions and strong operational performance resulted in further share capture during the quarter.
Enterprise Solutions segment EBITDA margins were 14% in the quarter, increasing 250 basis points compared to 11.5% in the prior year period.
If you will please turn to Slide 9, I will begin with our balance sheet highlights. Our cash and cash equivalents balance at the end of the third quarter was $458 million compared to $423 million in the second quarter and $391 million in the prior year period.
We are very comfortable with our current liquidity position. Working capital turns were 7.8, compared to 7.6 in the prior quarter and 6.6 in the prior-year period.
Days' sales outstanding of 56 days compared to 53 in the prior quarter and 58 in the prior-year period.
Inventory turns were 5.2, compared to 5.1 in the prior quarter and 5.0 in the prior year.
Our financial leverage improved significantly again this quarter. Net leverage of 2.8 times net debt to
EBITDA at the end of the third quarter is back within our targeted range of 2x to 3x. This compares to 3.3x in the second quarter and 4x in the first quarter. We expect net leverage to trend even lower in the fourth quarter, which is seasonally the strongest quarter of the year for free cash flow generation.
Turning now to slide 10. I will now discuss our debt maturity schedule. As a reminder, our debt at the end of the third quarter was entirely fixed at attractive interest rates. We have no near-term maturities and no maintenance covenants on this debt.
During the quarter, we took steps to further strengthen the balance sheet and extend our maturities. Specifically, in July we issued EUR 300 million in new 10-year notes maturing in 2031. The interest rate on these notes is 3.375%. We were very pleased with the transaction.
We used the proceeds from this transaction during the third quarter to redeem the full EUR 300 million outstanding on our 2025 notes.
As a result, our debt maturities now range from 2026 to 2031, with an average interest rate of 3.6%. This provides significant financial flexibility as we execute our strategic plans.
Please turn to Slide 11 for a few cash flow highlights. Cash flow from operations in the third quarter was $75 million, increasing 47% compared to $51 million in the prior-year period.
Net capital expenditures were $25 million for the quarter, compared to $15 million in the prior-year period. The year-over-year change primarily reflects the timing of capital projects.
And finally, free cash flow in the quarter was $50 million, increasing 41% compared to $36 million in the prior-year period.
We are pleased with the year to date free cash flow generation of $50 million, which is approximately $65 million better than the year ago period.
We now expect free cash flow of approximately $175 million for the full year 2021, compared to $86 million in 2020.
That concludes my prepared remarks. I would now like to turn the call back to our President and CEO, Roel Vestjens, for the outlook. Roel?
Thank you, Jeremy. Please turn to Slide 12 for our outlook. Demand trends remain encouraging, and our global teams are executing at a high level. We are increasing our full year 2021 guidance to reflect better than expected performance in the third quarter and an improved outlook for fourth quarter, while considering the challenging operating and supply chain environment.
We anticipate fourth quarter 2021 revenues of $615 million to $630 million, and EPS of $1.21 to $1.31.
For the full year 2021, we are increasing the high end of our revenue guidance range by $50 million. We now expect full year revenues of $2.385 billion to $2.4 billion, compared to prior guidance of $2.32 billion to $2.35 billion.
Our revised full year guidance implies consolidated organic growth of approximately 19% to 20%, compared to our prior expectation of 15% to 17%.
We now expect full year 2021 EPS to be $4.67 to $4.77, compared to prior guidance of $4.37 to $4.57.
Our revised guidance for the full year implies total revenue growth of 28% to 29%, and EPS growth of 70% to 73%.
Please turn to slide 13. Before we conclude, I would like to reiterate that I am optimistic about our future. As we align our business around secular growth markets, we are taking bold actions to drive substantially improved business performance. Our much better than expected results this year show the benefits of our investments in solution selling and new product innovation.
I am confident that our team will continue to execute our strategic plan to deliver robust organic growth and margin expansion, driving significant value for our shareholders.
That concludes our prepared remarks. David, please open the call to questions.
Your first question is from Reuben Garner of The Benchmark Company.
Thanks. Good morning, everyone. Congrats on the strong results and outlook. I know it's not the easiest environment out there. I'm going to save some of the, I'm sure there's supply chain questions I do, I am curious about the current price cost setup. Maybe if you could just talk about copper, how passing that through is going and then any other any other material cost inflation that you're facing and how the pricing environment is.
Okay, so first of all, thank you for the kind words. Secondly, yes, obviously we're seeing those pressures. We're seeing input costs rise, but I've been very pleased with our ability to pass those costs on to our customers whether it is copper or all the other material that we're seeing that are global shortages of enhance increased pricing. And I think that illustrates the value that we provide to our customers. I think it illustrates our position in the value chain. And how we are perceived our value is perceived by our customers. So as you saw, by the additional revenue, but more importantly, by the margin that is created of the revenue growth, we're doing a pretty decent job at passing all of it on to our consumers.
Perfect, and then I've heard some comments about the commercial world running into some issues. It doesn't sound like you guys are seeing that in your smart buildings business, maybe just an update there. What you're seeing from a demand perspective, is there been any broader indications that we're going to see a slowdown? Or do you expect we'll continue to see growth going into 2022?
Yes, I appreciate the question. So our results were better than anticipated. But specifically within the enterprise solution segment, and then smart buildings, they were especially strong. And we're seeing, the two - there's two drivers. First of all, the overall ABI index, right that we carefully watch is still above 50. It's about 56, I think, the most recent number out there. So the core business, if you will, is growing. But I think more importantly, as you may remember, Reuben, we said I think it was the beginning of the year, it could be end of last year that we are reallocating resources from commercial real estate to some of the faster growing verticals within smart buildings, most notably healthcare, and data centers. And I think we're doing a good job. So I'll give you one data point, our data center revenue in the third quarter grew 52%, and is now approximately 12% of Belden revenues. So we're doing a good job at helping our customers design data centers, and allocating resources accordingly.
Our next question comes from William Stein of Truist Securities.
Great, thanks for taking my question. Can you talk to us about the current state of the supply chain? I do want to ask that question. Remind us as to whether shortages are or lack of capacity is hurting your business internally or relative to your suppliers, and what effect that's having on your revenue and bookings. Thank you.
Well, thank you for the question. Well, so first of all, as we've as Jeremy explained, our bookings were extremely strong. I think it's the second quarter in a row in a book where we had a book to bill that's above 1.1. So our backlog has never been so high, to be honest. But secondly, I think we're doing a good job at securing the materials that is required, and hanging on to the labor force. And hence the reason why we can guide so strong Q4, relative to Q3, for example. So yes, we're not immune to the challenges. But as we've demonstrated now for three quarters in a row, where the teams are doing a pretty good job at securing the material and labor so that we can - that we're able to satisfy our customers.
And maybe along the same lines, I understand that book to bill is very strong I forget for Belden, how meaningful that is. Can you remind us of the duration of your backlog? Perhaps typically, and what it looks like today?
Yes, I will. Excuse me, this is Jeremy. So you're right, the backlog generally not that significant for us. We're typically operating at a backlog that's maybe four to eight weeks' worth of demand. For now, it's more significant than that. So the backlog is up significantly versus where it was a year ago. And we are seeing more ordering earlier by customers. So customers are placing orders for the next quarter, maybe even two quarters out. So that phenomenon is taking place with us, which is part of the reason that orders are so strong at the moment. But it's still by enlarge the backlog is not the most meaningful metric for us as a company.
Our next question comes from Noelle Dilts with Stifel.
Hi, guys, and congratulations on the strong quarter. I was hoping if you could kind of just touch on your longer term margin expectations. I know, last year in the December kind of outlook period, you talked about the long term 20% to 22% goal. I think now with more copper with the $200 million of lower margin cable, former portfolio, it seems like that's kind of a stretch target. But maybe you could give us an update on how you're thinking about margin targets over the next few years. Thanks.
Yes, thank you, Noelle. I appreciate the kind words. So that is still our role, our forefront enter roles. So including the longer term EBITDA margin of 20$ to 22% goal has not changed. We feel good about achieving that goal. A copper it has indeed, an effect. So when we published that goal, copper was at a certain rate, and now copper being significantly higher than that has an effect of at least 100 basis points. So if we report 16%, approximately this year, it's 17% compared to the 20% to 22% goal that we published, but we're well on our way. And we feel good about achieving that goal.
Okay, great. And then obviously, I think you'll probably talk more about 2022 in a month or so. But any kind of initial thoughts on how you're thinking about growth for the year. And if you look back at sort of where we were last year, where you're feeling incrementally more positive, and maybe a little bit more cautious as we look out to next year.
Yes, I appreciate the question, Noelle. But it's obviously still a little bit early days. It's still pretty murky out there. We feel good about our results this year, we feel good about the investments that we've made. As I mentioned in my prepared remarks, I think it's fair to say that they're paying off. But we will provide guidance for 2022 when we announced our Q4 results in February.
Your next question comes from Steven Fox of Fox Advisors.
Hi, good morning. A couple questions. First of all, from an outsider looking in, it seems like you're almost seamlessly passing on a lot of inflation pressures to your customers. I was wondering if you could dig into that. I know it's obviously a margin hit. But if you're not, it doesn't seem like you're absorbing much inflation. So can you just sort of work through why that's the case you're outperforming some of the other players in the field. And then secondly, you mentioned market share gains a bunch of times, I was curious if you could dig into some of the whys behind that especially in industrial and broadband. Thanks.
Yes. So appreciate the question. So first of all, I think it's a testament of the value. So and I think the perceived value and the increased value that we provide to our customers, goes hand in hand with our solution selling approach. So if we sell, if one of our competitors sells merely one component, I think it's harder to pass on the price increase, as if they provide a complete solution that expect in with an end user, whether it's a machine builder, whether it's somebody that owns a factory floor, or the two examples that I gave in my prepared remarks. So I think it's that, our purchasing teams work hard. Our supply chain teams work hard, and our sales people work hard. But I think ultimately, it's how we are being perceived and the value that we generate for our customers that derive that ability to pass on inflationary pricing. On the market share side, I think we gain - we've gained quite significant market share in our smart building segment. And I think that's the reason for that is our operational performance. That's at least what we hear from our customers and our channel partners. We're doing a fairly decent job at keeping the factories running and maintaining lead times and doing a better job, I suppose, on delivery performance.
In broadband and 5G, I think it's our competitive advantage, the sustainable capital advantage that we have in terms of our intellectual property protection and in terms of the customer intimacy that we have. So we're very, very tied to our customer base, develop solutions jointly with our customers, and hence do a pretty decent job at executing and growing the business.
And how about industrial?
So on the industrial side, it comes down to, that's why the two examples that we gave in our prepared remarks were industrial automation examples to our solution selling approach. We've made the appropriate investments in our customer innovation centers, we've made the appropriate investments in R&D, to make sure that we remain highly innovative, and develop the solutions jointly with our customers. So that's how I would attribute the success in industrial automation.
Your next question comes from Mark Delaney of Goldman Sachs.
Yes. Good morning. Thanks very much for taking the questions. First on data center, the company called that out as an area of strength. I was hoping you could provide some more details on that? Is that more of an on-premise part of the visit showing strength, some hyperscale? Just more details on that business would be helpful to start. Thanks.
Yes. Thank you, Mark. Appreciate the question. Indeed, we were very pleased with the success. And we are getting more involved. And the customers asking us more early on in the cycle, to add value in terms of design of the data centers. And then the type of data centers are virtually all enterprise data centers. So the hyperscale is not an area that of strategic importance to us. It's not an area that we focus on.
Understood. And my question was on the broadband business, there's some potential stimulus money tied to broadband projects. And the infrastructure bill, I realized hasn't passed yet. But you had to bookings have been very good. I'm curious, do you think you're potentially seeing some of that bookings come in was potentially customers anticipating more support for broadband projects if that bill passes? Or would you think that those bookings are mostly still to come? Thanks.
Mark, I really appreciate the question. So those bookings are still to come. That's the good news. All of that tailwind is yet to come. As you rightfully pointed out, the bill has not passed. And secondly, the RDOF, fund to Rural Development Opportunity Fund that was passed earlier, those funds have not been distributed yet, either. So there's a lot of tailwind that is still to come.
Your next question comes from Chris Denker of Loop Capital.
Hey, good morning, everyone. Again, appreciate the slide deck, I guess you highlighted we are seeing nice organic growth here. Obviously, solution sales folks are a big part of that, the uptake R&D, obviously having impact here, but out of curiosity, when we think about R&D spending going forward, are we comfortable at this level? Do we need to take up a little bit further, just seeing success there? How do we think about R&D spending kind of over the next couple of quarters? Or just there's any color that'd be helpful?
Sure. Yes, I appreciate the question. Well, it is indeed very rewarding to see that the investments are paying off. So thank you for noticing that. And we're comfortable with the current level of investment as a percentage of revenue. So we've made the investments. We're tracking the productivity of the R&D investments, I think the teams are executing, they're utilizing the funds effectively. And as a percentage of revenue, this is probably the level that we feel comfortable with.
Got it, no, thank you for that. And I'll try and take a slightly different tact on this. Understand too early on '22. But just given the booking strength and the order strength that you've got kind of across the business, it's fair to assume maybe a better than seasonal start to the year.
Yes, as I said, we feel good. We feel good about the company. We feel good about what we're doing. But it is still murky out there. So I want to make sure that when we provide guidance and that we make comments that we actually are able to follow through on them and deliver in accordance to the expectations that you all should have and that our shareholders should have of Belden. So we'll wait until February to provide guidance for 2022.
Kevin Maczka, there are no further questions at this time. Please continue.
Okay, thank you, David, and thank you everyone for joining today's call. If you have any questions, please reach out to the IR team here at Belden. Our email address is email@example.com. Thank you.
Thank you ladies and gentlemen. This concludes our call for today. You may now disconnect from the call. Thank you for your participation.