ATS Corp /ATS Q1 FY2024 Earnings Call

Welcome to the ATS Corporation First Quarter Conference Call and Webcast. This call is being recorded on August 9, 2023, at 8:30 a.m. Eastern Time. I will now turn the call over to David Galison, Head of Investor Relations at ATS.

Thank you, operator, and good morning, everyone. On the call today are Andrew Hider, Chief Executive Officer of ATS; and Ryan McLeod, Chief Financial Officer. Please note that our remarks today are accompanied by a slide deck, which can be viewed via our webcast and available at atsautomation.com. We caution that the statements made on the webcast and conference call may contain forward-looking information and our cautionary statement regarding such information, including the material factors that could cause actual results to differ materially from the statements and the material factors or assumptions applied in making the statements are detailed on Slide 2 of the slide deck. Now, it’s my pleasure to turn the call over to Andrew.

Thank you, David. Good morning, ladies and gentlemen, and thank you for joining us. This has been an exciting and transformational few months for ATS, during which we successfully completed our U.S. IPO and New York Stock Exchange listing. This represents an important milestone and supports our strategic growth objectives while providing increased liquidity in our shares and additional flexibility for M&A. Today, we reported a strong start to fiscal '24, including record revenues, supported by solid bookings, backlog and adjusted earnings. These results reflect our team's disciplined execution of the ATS business model. Our ABM has reached a level of maturity that allows us to refine our approach and add new tools to drive performance for our customers and shareholders. First, I will update you on the business and Ryan will provide his financial report. Starting with our financial value drivers. Order bookings for the quarter were $690 million and included growth in Life Sciences and continued strength in EV and Food and Beverage. Q1 revenues were a record $754 million, up 23% from Q1 last year, including strong organic growth. Adjusted earnings from operations in Q1 were $102 million, up 29% versus Q1 last year. Moving to our outlook. We ended the quarter with an order backlog of over $2 billion. This was anchored by our strong bookings in Life Sciences, partially offset by the expected revenue ramp-up on our EV projects and execution of primary processing projects ahead of the harvest season in Food and Beverage. As a reminder, the timing of customer decisions on larger opportunities can cause variability in order bookings from quarter to quarter. By market, life sciences backlog was $783 million. Of note, our Q1 bookings included several key wins in strategic submarkets, including contact lenses, auto-injectors, and diabetes care, along with pharma and radiopharma. We secured another significant order based on our Symphoni, our innovative high-speed assembly technology. Overall, the life sciences funnel for fiscal '24 remains strong. Transportation ending backlog was $834 million, up 124% year-over-year as we continue to execute on our current EV programs. Our existing programs are being executed well and are on track from a cost and timing perspective. Because of the strategic nature of EV programs and large order values, this can cause variability in bookings. That said, our transportation funnel remains strong, and we remain well positioned given our significant experience and expertise in this space. In food and beverage, quarterly bookings were solid and ending backlog was $188 million, up 15% year-over-year, even as our teams delivered on projects and backlog ahead of the tomato harvest season. Our funnel remains strong. Timing of the summer harvest season drives some seasonality in this vertical. In energy, the nuclear market continues to provide long-term opportunities, including new public sector interest. The focus on clean, sustainable energy to support future subtle needs, including grid requirements for electric vehicles, is a driver for our business as is the adoption of carbon reduction targets. ATS is well positioned to support in several areas as customers add and refurbish nuclear power plants and commercialize small modular reactors. We also have specialized skills in energy storage and continue to work with customers on select opportunities. In consumer products, our backlog and funnel are stable. However, inflationary pressures continue to have an effect on discretionary spending in the personal care markets, which may impact timing of some customer investments. On digital, to create real value out of production, digitization, our customers are looking for a partner who is strong in both automation integration and domain knowledge. Our teams are helping customers understand how to capture data, and more importantly, how to extract value from that data to drive impact. For example, a major global customer utilizing our IoT platform for plant performance management recently awarded us with a global management services contract for digital services. Another life sciences customer recently launched a pilot with us for a global IoT platform for performance management. On after-sales services, we are actively engaged with customers as we leverage both technology and services to provide a better customer experience and outcome. For example, our enhanced remote support platform streamlines the process of contacting ATS support simply by scanning a QR code. With one customer, this ease of contact has led to an annual remote service contract, leveraging the technology and our subject matter experts. Also, on after-sales services, our regional networks and service centers are training and onboarding new resources to support our customers in critical geographic regions. The recent acquisition of Triad provides extended capabilities to support customers with predictive maintenance. On supply chain, material cost and lead time pressures remain and will take time to work through some of our larger projects. We have started to see some improvements in both pricing and lead times in certain areas. Countermeasures that were created to combat volatility throughout much of fiscal '23 remain in effect, allowing us to stay on schedule with our operations. Our ATS business model, our ABM playbook continues to create a competitive advantage. During the quarter, we completed 45 ABM events across all business groups and geographies. We use our ABM tools to drive improvements in all aspects of our business, not just on the shop floor. The ABM itself is also subject to continuous improvement. We constantly challenge ourselves on ABM tools and events to drive impact and stay focused on our value drivers. I'm pleased that our ABM is evolving and improving with time and use. In June, we hosted our annual ATS Leadership Conference. The theme was building the best ATS and was aligned to our 3 core values of people, process, and performance. It provided an opportunity for our leaders to see examples of the ABM in action across our decentralized business as we drive value for our employees, customers, and shareholders. On M&A, we recently announced and closed 2 acquisitions, Yazzoom in Q1 and Odyssey Validation Consultants in early Q2. Both are part of our Process Automation Group and enhance our capabilities in AI, process optimization, and digital services. Our M&A funnel remains active and healthy. And with our recent equity offering and listing on the NYSE, we have the balance sheet and financial capacity to move quickly should a potential opportunity meet our strict acquisition criteria. On sustainability, ATS recently earned a bronze medal from EcoVadis, one of the world's leading providers of business sustainability ratings. This award speaks to our ongoing commitment to improve sustainability within ATS and leverage our solutions to help customers achieve their sustainability goals. Our teams are working closely with our global customers to meet their needs through energy-efficient automation and energy management solutions. We are actively monitoring regulatory developments, including international reporting standards and more specific regional requirements. We look forward to releasing our next sustainability report later this year. On innovation, we continue to deploy capital and leverage talent to create differentiated enabling solutions that generate attractive returns for our customers and shareholders. When customers visit our sites where innovations are displayed, their enthusiasm is clear. In particular, our patented Symphoni technology, on view in our ATS Innovation Center in Cambridge, Ontario is a good example of our investment in leading-edge technology with applications across life sciences, in addition to other possible market applications that we will explore in the future. A few other innovation highlights from the quarter. Our Comecer team launched its MIKROS machine for dispensing microfluid drops of radioisotopes used in the preparation of radiopharmaceuticals and built on its contribution to automating the production of prostate cancer therapies. Our SP team has developed its EZ-2 Bionic automated evaporator for integration into automated chemistry lines, which enables the production of pharmaceuticals that use new approaches to delivering drugs to target cells within a patient. Finally, our ATS Innovation Center developed a novel method for performing ultrasonic welding using our Symphoni platform that we believe has a variety of applications. In summary, disciplined adherence to our Build, Grow and Expand strategy is driving positive results. Our strong backlog and funnel give us confidence moving forward with a focus on operational excellence. We will continue to build the best ATS for our employees, customers, and shareholders. Now, I'll turn the call over to Ryan. Ryan, over to you.

Thank you, Andrew, and good morning, everyone. This was a productive quarter for ATS that included solid and diversified bookings and continued good execution across our business. Beginning with orders. Bookings were $690 million, down 6.3% compared to Q1 last year, which included a $70 million EV order. Our trailing 12-month book-to-bill ratio at the end of the quarter was 1.18:1. In a broader context, our Q1 results rank among the 5 best quarters for order bookings in ATS' history. Moving to revenues. Q1 revenues were $754 million, up 23.4% over Q1 last year. Organic revenue growth was 15.4% year-over-year and was primarily due to increases in transportation related to EV battery projects. Recently acquired companies added approximately 3% to revenue growth and foreign exchange translation added a 5.5% benefit compared to Q1 last year. Our Q1 ending backlog of just over $2 billion was 30% higher than Q1 last year, providing good revenue visibility for the fiscal year. Our revenue conversion for Q2 is estimated to be in the 34% to 37% range of backlog based on revenue expectations from existing backlog and new orders booked and billed within the quarter. As a reminder, we do tend to experience seasonality in our business in the second fiscal quarter due to seasonality in our food business and higher vacation periods in our European-based businesses. Moving to earnings. Q1 adjusted earnings from operations were $102.1 million, up 29% from last year, primarily due to revenue growth. Adjusted earnings from operations margin was 13.5% in the quarter, up 58 basis points compared to last year, reflecting higher operating leverage, partially offset by lower gross margin. Our Q1 adjusted gross margin was 28.2%, down 50 basis points from Q1 last year. The year-over-year decrease primarily reflected the execution of higher margin programs in the prior period due in part to supply chain cost inflation and lead time impacts in current programs being executed. In supply chain, we have seen improvement in specific cost categories such as raw materials and freight and cost inflation has stabilized. Despite some improvement, overall volatility remains in the supply chain environment. Lead times remain extended in key areas, primarily electrical control components, which impacts our ability to drive efficiency in our supply chain in the short-term. Our global supply chain teams are focused on countermeasures to help mitigate these challenges. Moving to SG&A. Expenses were $11.5 million higher than Q1 last year. This quarter's cost included $18.6 million of acquisition-related amortization and $0.1 million of acquisition-related transaction costs. Excluding these comparable items in both periods, Q1's SG&A was $105 million, $13.5 million higher than Q1 last year, primarily reflecting foreign exchange translation, incremental SG&A expenses from acquisitions and increased employee costs. Stock-based compensation expense for Q1 was $10 million, an increase of $14 million from last year's recovery of $4 million. Excluding the mark-to-market impact related to changes in our share price, stock-based compensation expense was $5.6 million in Q1 compared to an expense of $4.3 million last year. Moving to the balance sheet. In Q1, cash flows used in operating activities were $107.8 million, primarily driven by an increase in working capital on our large EV programs. Noncash working capital as a percentage of revenue was 15.6% at the end of Q1, up from 10.1% at the end of Q4, primarily reflecting the timing of progress and milestone billings on our large EV programs. As I've noted previously, cash generation and period-end working capital values can fluctuate depending on timing of billing milestone payments and execution of work on our larger programs. In the short-term, we continue to expect working capital to remain variable and could exceed 15% in certain quarters as was the case in Q1. In the first quarter of fiscal '24, total investments in CapEx and intangible assets were $23 million. This is in line with our expected fiscal '24 CapEx spend of $80 million to $100 million, which is supporting our organic growth. On leverage, our net debt to adjusted EBITDA ratio was 2.0:1 as of the end of Q1, down from 2.7:1 at the end of Q4 and in line with our target leverage range of 2 to 3x net debt to adjusted EBITDA. Our lower sequential leverage reflects net proceeds from our recently completed equity offering that we have used to initially pay down amounts outstanding on our revolving senior secured line of credit. We ultimately intend to utilize capital from the offering to pursue strategic opportunities, including acquisitions. As noted previously, we are willing to temporarily increase our leverage beyond our target leverage range to support short-term working capital requirements or for an acquisition that fits within our framework and creates long-term value for our shareholders. In summary, ATS delivered solid results for the quarter, again highlighting the strength of our strategic end markets and the value of the ABM in driving disciplined execution across all parts of the business. Our teams remain focused on serving our customers and delivering value. Going forward, we expect supply chain challenges will take some time to abate, and we are continually driving existing and new countermeasures to address inflation and other persistent supply chain issues. Strong order backlog supports our immediate growth plans. And with the additional financial flexibility gained from our recent U.S. IPO, we have additional capacity to pursue organic and acquisition opportunities that meet our disciplined investment criteria and create value for our customers and shareholders. Now, we will open the call to questions from our analysts. Operator, could you please provide instructions? Thank you.

The first question comes from Cherilyn Radbourne of TD Cowen.

This is Patrick Sullivan on behalf of Cherilyn Radbourne. As it relates to bookings backlog in the Transportation segment specifically, previously you mentioned a few ongoing pilot projects with new EV customers. Are you able to provide any updates with respect to those pilot projects and whether or not there are indications for further follow-on orders?

Yes, Patrick. So we've talked about pilot and then going to production. I would say, we see the same as we've seen in the past where customers are aligning their solution set with the launch of EV vehicles. And we do view the pilot moving to production, whether it's in the short-term or long-term. So I would say no change in the dynamic with customers around this taking from an identification to a solution set in full automation.

And Patrick, just as a reminder, these programs usually last longer, typically 12 to 18 months. That gives you an idea of when additional opportunities might arise.

Okay. Great. Switching over to the topic of M&A. The most recent group of tuck-ins seem to support building out the process automation platform further. One particular acquisition, Yazzoom, which you talked about, is bringing more expertise in the areas of AI and ML. Can you discuss how those capabilities may be integrated across the larger process automation portfolio? And then whether or not there are other AI machine learning tools that ATS is either evaluating in the market or working on internally?

Absolutely. And Patrick, I'll take this in a bit of kind of answer your question as it was asked. So Yazzoom, I'm really pleased with this addition. And as a reminder, to set the framework, our PA business has really aligned itself with the ability to pull information and data from customer sites to then bring it so we can take action or provide insight on set data to drive improvements in the process. And we've been continuing to build out and really enable this transition. And as a reminder, because ATS has a strong position in integration and automation and domain expertise, it really enables us to support our customers to drive actionable insights because customers look for just beyond a dashboard on how they can really improve their process to then improve their output. And so PA has really been enabling this and has positioned themselves as a strong leader in this space, which then positions for more data analytics and more AI. And that's where Yazzoom really comes in. And in this business, we identified one of their AI-based detections of anomalies in the data, where it allows us to assess and do more predictive so we can start to understand when things get out of sequence or out of spec and take action before the machine goes down. And you’re going to see PA and our total business continuing to build out capacity around solution sets around capabilities in this space around specific actionable insights, and we have launched PA Facts, which is a cloud-based solution set where customers can now be part of. If you step back, ATS as a whole, we've made a shift to enabling our solutions, our products to be digitally enabled in the field, and we're continuing down that progress. If you then step back and look at AI within the business, it’s impacting every aspect of our business. And I can talk about it from how we operate to how we innovate to how we launch solutions. And as a case in point example, we are now doing incoming inspection utilizing AI, where we're testing incoming products or parts. We can understand are they having abnormalities or they started to get out of spec, so we can notify the supplier that they're having an issue. So not only going to our auditing process to identify where we might want to go deeper in auditing and really enabling our ability to maximize data, maximize the impact to then innovation and launch. Just a couple of examples. We're very excited. And one of them I'll highlight is our Raytec business. They are now working with 2 customers in Italy and have highlighted this at a trade show, FRUIT LOGISTICA, where they're now doing a 360 scan on peeled tomatoes. The challenge here is not a defect in the tomato. That's usually something that's fairly easy to identify. They're looking for peel fragments where it might not have gotten all the peel off the tomato itself, and then it will kick it off to reprocessing. This really enables them to become higher value to customers, higher on the quality chain, higher on the impact and utilizing technology and innovation with AI to bring a full solution set to market. So it is certainly something that we're invested in, focused on and really maximizing the impact in the space that we have, but it's early maturity. And while we’re pleased with our progress, there's a lot more to go here, and we're excited about what the opportunity might present in the future.

Excellent.

The next question comes from David Ocampo, Cormark Securities.

I think everyone knows that GM raised some automation supply chain concerns with their battery pack assembly. And I think you guys touched on it briefly in your prepared remarks. But I was hoping you guys could share a little bit more details on how you've been able to mitigate supply chain issues, particularly as it relates to delivering EV projects on time, which you alluded to in your remarks.

Our business is seeing some improvements in the supply chain, with lead times decreasing. We've identified supply chain as a significant focus area for several years now, and our teams have proactively addressed potential gaps to minimize their impact. We implement daily visual management to analyze the business at various levels to understand and reduce the influence of any issues, whether related to electronic or mechanical parts. Our teams have excelled in minimizing these challenges, turning them into a competitive advantage for ATS. While the supply chain is starting to improve, we are not yet back to pre-pandemic levels, but the direction is positive, especially regarding lead times. In the electric vehicle sector, we are a recognized leader with a proven track record, having completed over 100 battery lines. We continue to deliver high value to customers launching new EV solutions, maintaining a strong focus on monitoring these developments closely.

Got it. That's perfect. And then just maybe a quick one for Ryan. If I take a look at your working capital, it's above that 15% threshold. Should we be thinking about any big cash flow collection milestones in the next quarter or maybe even 2 quarters from now to drive that lower?

Well, so a couple of things. I mean, you're right. Our goal is to maintain that below 15%. We've talked about these large programs causing variability. And certainly, we've seen that in the uptick in this quarter. I would say, we're going to continue to see variability in this metric at period end. I mean, cash flows are coming in on these projects, but there was large project come large billing milestones. And if they fall in the week after quarter end or the week before, that can drive a pretty dramatic difference. But all to say that the cash collections are ongoing, and we don’t see any issue, but variability, we will continue to see, just given the size of the programs.

Got it. That's helpful. That's it for me.

Thank you, David.

The next question comes from Michael Doumet of Scotiabank.

Just to follow up on the supply chain discussion. I wonder if you can maybe talk about to what extent it's still weighing on margins. Any way you can help us understand how much they've improved so far, again versus last year? And then how much more to go kind of get back to that desired margin level?

Yes, Michael. There is still an impact. It's important to remember that many of our projects take 12 to 18 months to complete. The supply chain issues we've experienced over the past year, including inflation and lead times, are reflected in the work we are currently doing. Our team has done an excellent job of implementing mitigation strategies and addressing these challenges, but they are still part of our current portfolio. While we have seen some incremental improvements, we are still not operating at pre-pandemic efficiency with respect to lead times. As improvements continue, it will take a quarter or two to see the benefits in our margins as we transition back to a normal supply chain environment.

That makes a lot of sense. It seems your peers are also discussing a reduction in lead times, similar to what you mentioned, which I assume benefits the supply chain and the margin profile. I'm curious if the adjustment of lead times indicates we might see a normalization of your backlog and burn rate in the next couple of quarters, as customers may not need to place orders as far in advance as they previously did.

We haven't really noticed that impact in our business. Most of what we're doing for customers involves projects where they're launching new products or increasing capacity, so double ordering isn't a concern. While we've experienced some extensions in project lead times due to supply chain issues, we've managed to mitigate much of this by utilizing the tools Andrew mentioned. By having daily visual management of lead times on specific components and gaining that insight early in a project, we can place orders accordingly. However, this approach affects our ability to drive efficiency in the supply chain, though it doesn't significantly impact the schedule.

Perfect.

Our next question comes from Justin Keywood of Stifel.

On the comments surrounding digital, which I assume involves the PA business, are you able to characterize the percentage of total revenue that would be classified as digital? And also, if I heard correctly in the opening remarks, ATS is searching for a partner in digital. If that is true, what would the criteria be? And what type of form could that look like?

Yes. I guess I'll start and Ryan can add. When we look at digital, it really is going to be in line with not only our PA business, but also our services impact. One of the challenges that we've often looked at is how do you characterize revenue from AI to digital to offer full services. So we do characterize this within our PA and services business, and we continue to see real opportunity for growth here. We've had nice progress throughout the year. We also see real potential for the future. As far as partnering, we often look for partners around digital. We also look for future adds like Yazzoom and others to bring that value to the market. And we have a focus around owning the floor. And how we mean around that is the ability to extract, bring the data to an area where you take action on the inside and then bring that value back into customers. And as a reminder, most sites with our customer base are brownfield sites, meaning they've been in existence, and they look for solutions like what PA can bring to market, where they want to digitize a production floor that maybe doesn't have the ability to have a digital output, and we bring that to market.

And Justin, just on the first part of your question. So in terms of software digital revenues, it's in the low single-digit percentage of our overall revenue base today.

And would that be close to Software as a Service revenue or SaaS?

Yes, the short answer is yes.

Okay. Great. And then just on M&A, if you can provide us an update on the funnel target segments that you're looking at, any changes in multiple. And then also, I believe Ryan mentioned the net debt to EBITDA and bringing that up potentially for a quarter or 2 on M&A and what that could look like?

Sure. I'll take the first part, and then Ryan can walk through the second. Look, our funnel remains healthy, and it has a good mix of small, medium, and large deals. One of the things that we've really been lining up and the ABM has helped here is our process around when we identify to drive the ability to either move forward or not and really enabling that continuous improvement on cultivation as well as assessment. Our funnel remains healthy. As you know, we have a focus on always cultivating. We are always cultivating and looking for technologies and IP in the spaces that we view are high consequence of failure, whether it's life sciences or digital or capabilities that go across platforms. We are actively continuing to look into the market and continuing to build relationships. That said, we're disciplined, and we're going to continuously be disciplined around ensuring that has high value for our customers and our shareholders and making sure we maximize that value.

And Justin, in terms of leverage, we've talked about a 2x to 3x range for leverage. We would be open to exceeding that in the short-term. It's potentially 3.5, but that would really depend on the asset and their profile and where we see short-term working capital needs for our business. I don’t want to put a definitive number out there, but it's something we would consider in the right circumstance.

Understood.

The next question comes from Sabahat Khan of RBC Capital.

Great. I guess just a question on kind of the larger push towards after-sales service and Illuminate. In the current environment, can you maybe talk about your go-to-market strategy with getting more customers to activate that software and how you're pushing the after-sales service element? Just broadly, and does that evolve as the macro backdrop evolves?

I'll answer that by starting from the end. We believe that uncertain times actually amplify our value. By enhancing our services and digital capabilities, we help our customers maximize their assets in the field. We see this as a significant and ongoing opportunity to deliver high value. Regarding our digital strategy, we have introduced tools for demand generation and lead generation, as well as value selling, focusing on where customers find their greatest value. In my experience on customer calls, we've heard them express a desire for more than just dashboards; they need help with implementation. We address this effectively, and we've even acquired a company, which I mentioned previously, that assists in implementing those insights. I want to clarify about Illuminate; it is an on-premise solution, while our PA Facts operates in the cloud. We are committed to expanding our cloud offerings, recognizing the substantial potential there, but we also provide options for customers who prefer on-premise solutions, ensuring they can optimize performance and leverage data to enhance their processes.

Great. I have a question regarding end markets. Transportation has become a significant part of our portfolio, but we're also seeing growth in areas like life sciences. Looking ahead 12 to 24 months, how do you see your end market mix changing? Do you think it will evolve significantly, or is it still uncertain at this point? I’m interested in your thoughts based on current discussions and demand indicators about what that mix might look like in 1 to 2 years.

Yes. So it's always hard to predict the percent of ATS. We like the spaces we serve. We like the areas we serve. If I can just walk through them, life sciences, I'd characterize as a strong funnel, and we're seeing real opportunity in areas like auto injectors, contact lenses, pharma, and radiopharma, and we're continually launching new solutions in this space that have real value and high value to customers. Sorry not to reference the Symphoni platform. I was with the innovation team yesterday going through, and they're using AI to bring solution sets around in area of auto-injectors where they can identify defects early on, so you don't continue to add value in the production process. We see a lot of areas that we can continue to expand, and we see growth in the market itself. So life science is going to be a continued focus for us. EV or transportation, more specifically EV. This is an area that we continue to see opportunity, and I've talked about this with the demand and need for production to meet the market space and launching new vehicles. We see our funnel is healthy here. It is going to be more variable in that these are large programs, large projects often starting with a pilot going to production over a period of time. In food and beverage, pleased with the progress. We like this space. I talked about our business Raytec with optical sorting. We see continued opportunity here. Just to round this out with energy and nuclear, the change for nuclear being a greener energy and alignment to not only refurbishment but small modular reactors is seeing real opportunity for ATS. It is a niche capability within our group. It is one that we view we can offer high value for our customers, both on the initial as well as serving and supporting them. So overall, we like the mix. We like the area of focus, and we're going to continue to drive both organic and potentially inorganic growth in the spaces that we view have long-term value for our shareholders.

Great.

There are no further questions. I will turn the call back to Mr. Hider for closing remarks.

Thank you, operator. We look forward to pursuing ongoing value creation in fiscal '24. We believe that our capabilities align well with the long-term trends driving the need for our solutions on a global basis. If you haven't already done so, I encourage you to register for our Institutional Investor Day on September 6 in New York. There, you will hear directly from members of the ATS executive team on corporate strategy, our growth opportunities, key business groups, and our financial value drivers. More immediately, we also invite you to participate in our Annual & Special Shareholders' Meeting, which will be held virtually tomorrow, beginning at 10 a.m. Eastern Time. Otherwise, I look forward to speaking to you on our Q2 call in November. Thank you for joining us today. Stay safe and goodbye for now.

Ladies and gentlemen, this does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.