Earnings Call Transcript - NOA Q2 2022

Operator, Operator

Good morning, ladies and gentlemen. Welcome to the North American Construction Group Earnings Call for the Second Quarter Ended June 30, 2022. This company wishes to confirm that today’s comments contain forward-looking information and that actual results could differ materially from a conclusion, forecast, or projection contained in that forward-looking information. Certain material factors and assumptions were applied in drawing conclusions or in making forecasts, actions, or projections that are reflected in the forward-looking information. Additional information about those material factors is contained in the company’s most recent management’s discussion and analysis, which is available on SEDAR and EDGAR as well as on the company’s website at nacg.ca. I will now turn the conference over to Joe Lambert, President and CEO.

Joe Lambert, President and CEO

Thanks, Sergio. Good morning, everyone, and thanks for joining our call today. I’m going to start with the Q2 2022 operational performance before handing it over to Jason for the financial overview, and then I will conclude with the operational priorities and outlook for 2022, before taking your questions. In today’s Q2 operational review, I want to give listeners some clarity on the issues affecting our business, what areas of the business are being affected, what we are doing about it, what progress we have made, and lastly, when we expect to have the issues resolved? On Slide 3, our Q2 total recordable rate of 0.51 was a 40% improvement to our Q1 stand-alone results. But the trailing 12-month remains above our industry-leading target frequency of 0.5, and we will continue focusing our efforts on further developing our green hand new hire training programs, reducing hand and lifting incidents, and prevention of high-potential injury events. On Slide 4, we show the 3 major issues affecting our business. The first is a good issue to have, high demand. I will speak more directly to this when we get to Slide 6, where we highlight fleet utilization. The second issue, inflationary pressures, is due to parts and labor price increases from key suppliers and vendors, which are at historical highs. These inflationary pressures are immediately increasing equipment costs, which are not yet being captured in the contract escalation clauses, which use lagging indices. Third on the list is the skilled labor shortage, which impacts our ability to promptly repair equipment. The skilled labor shortage in oil sands, in particular, has also driven a wage escalation of almost 30% for mechanics as competition for their services increases. The parts price increase impacts all of our businesses, but the oil sands wage escalation is impacting the 50% EBIT of our business, typically generating oil sands. The diversification of our business across increased commodities and customers has definitely helped us limit the extent of the skilled trade wage escalation impacts. However, the cost escalation impacts from 2 and 3 are driving the historically low Q2 margins. Operational execution and safety were in line with our expectations, but the continued increase in vendor parts pricing, our need to match oil sand wage escalation for skilled trades to prevent further quits and the current disconnect between actual costs and lagging indices is the reason for margin reductions. Moving on to Slide 5. Let’s get into our response and how we are progressing against these core issues. First and foremost, we continue to develop, attract and retain our skilled maintenance tradespeople to improve fleet utilization. NACG has an extensive and comprehensive program to expand both our Acheson and field-based maintenance workforce. As an example of this progress on our Q1 call, I noted that we added approximately 20% more employees into our premise program since the beginning of the year. That increase is now over 50%. The total increase in heavy equipment technicians and the premises in Q2 was just over 6%. Our shop expansion with additional remanufacturing capacity and services and a central telematics control room is complete and will allow for continued growth in our Bench Hands program and machine health monitoring for our current around 260 real-time connected assets. Since the start of 2022, our Bench Hands program has grown by 30%, and our telematics program is estimated to have saved just under $1 million through reduced in-house monitoring costs and early machine health issue identification and interventions. I look forward to sharing more of the benefits of our telematics system with you as connected fleet and data increases and our systems are reporting to mature. On the cost control side, we are seeing opportunities to increase in-house component remanufacturing and equipment servicing work and are actively looking at sourcing suppliers and inventory management to reduce costs and increase efficiency in parts delivery. Lastly, we have added senior maintenance leadership to better support the field work. In summary, we are actively addressing all areas of cost and skilled trades development within our control. Moving on to Slide 6. While Q2 financial performance was well below our own expectations due to the previously mentioned market issues, the demand for our fleet remains high. The Q2 utilization of 59% was essentially equal to the previous Q2 high of 60% achieved in 2019. We expect the high demand to remain into and possibly beyond 2023. We likewise expect our progress on increasing the maintenance labor workforce will directly correlate to improved fleet utilization. Between this high demand, our progress on manpower issues, and our in-house maintenance capability, as highlighted in the following Slide 7, we remain confident in our future business success. Slide 8 is a quick snapshot of our current positioning as a company. Our indigenous partners and the contracts and fleet we have in place, coupled with our ever-improving maintenance capabilities, gives us solid and tangible confidence moving forward. I will expand more on our future outlook after Jason reviews the Q2 financials.

Jason Veenstra, CFO

Thanks, Joe. The financial review begins on Slide 10 with a few of our key performance indicators. Combined revenue of $228 million represented a strong quarter for us and was generally consistent with the last two quarter revenues of $237 million and $235 million, respectively. This revenue consistency highlights our diversification and has culminated with trailing 12-month revenue now exceeding $900 million over the last 12 months. From a combined gross profit margin perspective, we generated 9.6% based on inflation factors that are much discussed throughout this quarter’s materials. As referenced on this slide, the 9.6% can be split into our wholly-owned businesses, which were significantly impacted by cost inflation, and, ended up posting a 7.4% gross margin. That said, our joint ventures were much better positioned to manage inflation, and based on their specific situations and strong operating performances, achieved a steady and impressive 15.7% gross margin in the quarter. Getting back to revenue. And on Slide 11. Total combined revenue for the quarter of $228 million was 30% ahead of Q2 2021. Revenue achieved in the quarter was driven by a broad listing of mine sites and business lines, which all show strong demand for our services. The remobilized fleet at the Fort Hills mine had a full quarter of operations compared to a partial quarter in Q2 2021, which was a key driver of the positive revenue variance. As you are likely aware, the commercial posture in the oil sands region is robust, and we experienced this firsthand this quarter as the focus on production means our equipment is critical to our customers’ success. DGI Trading, which we purchased in Q3 2021, as well as the sale of Haul Trucks into one of our joint ventures also boosted revenue this quarter. Revenue from our joint ventures of $60 million was identical to Q1 2022 as continued volumes at the gold mine contract in Northern Ontario were coupled with the increasing prominence of our Mikisew joint venture and progress being made on the Fargo-Moorhead flood diversion project. Combined gross profit margin of 9.6% was influenced most notably by the workforce shortages in the skilled trades, which has the combined impact of lessening top line potential while increasing the need to implement less effective measures, including reliance on third-party providers and rental equipment. Other notable drivers impacting this quarter’s margin included supplier and vendor cost increases, primarily related to parts and components, which we conservatively estimate to have directly impacted Q2 costs by around $5 million. And secondly, the timing impact of rate escalations, which lag based on published index values. Moving to Slide 12. Adjusted EBITDA of $42 million was identical to last year, but the lower margin of 18.3% reflects the harsh cost impacts previously mentioned. Included in EBITDA is general and administrative expenses, which were $6.9 million in the quarter, equivalent to 4.1% of revenue. As always, we pride ourselves on G&A discipline and Q2 was no different in that regard. Going from EBITDA to EBIT, we expensed depreciation equivalent to 12.7% of combined revenue, which reflected the depreciation rate of our entire business. When looking at just the wholly-owned entities, and our heavy equipment within them, the depreciation percentage for the quarter was 15.7% of revenue and reflected an effective, albeit less than planned use of our fleet this quarter. Adjusted earnings per share for the quarter of $0.17 was driven by $12.8 million from adjusted EBIT net of routine interest and taxes. Our overall effective interest rate year-to-date is now 4.8% as we trend up from the 2021 effective rate of 4.3% from the well-known interest rate increases. Our credit facility, which currently has drawn $140 million and makes up approximately 35% of net debt, is the only instrument directly impacted by rate increases. Moving to Slide 13. I’ll briefly summarize our cash flow. Net cash provided by operations of $35 million was produced by the business with the difference between this figure and the $42 million of EBITDA being cash interest paid in the quarter of $5.8 million. Sustaining maintenance capital of $22 million was primarily dedicated to maintenance of the existing fleet as we invest in the fleet that drives our core business. Working capital was flat for the quarter and similar to last year’s Q2. I’ll end on Slide 14. Total capital liquidity of nearly $200 million reflects our strong position as we benefit from our disciplined approach in years past. On a trailing 12-month basis, our senior leverage ratio, as calculated by our credit facility, remained steady at 1.6x. Net debt levels increased $10 million in the quarter as free cash flow of $10 million was more than offset by the purchase and subsequent cancellation of over 1.1 million shares or $17.4 million in the quarter. And with those summarized the financial comments, I’ll pass the call back to Joe.

Joe Lambert, President and CEO

Thanks, Jason. Looking at Slide 16. This slide summarizes our priorities for 2022. I’ve addressed Item 4 as part of our response to the current macro environment. Now looking at Item 1, we are and will continue to be laser-focused on contract administration in regards to the application and accuracy of contract escalation clauses and, in particular, the local oil sands maintenance wage increases and the impact of OEM and vendor equipment parts price increases. As I’ve stated previously, we are confident that our transparency and long-standing client relationships will result in mutually acceptable resolution. We have four oil sands customers, and we’re in active daily discussions with all of them, and we fully expect to achieve resolution within Q3. Of the two remaining priorities, Item 2 detailed on Slide 17, is our ongoing efforts to ensure a well-planned and smooth start-up of our Red River Valley Alliance, Fargo-Moorhead project. The project is progressing well, and we expect to commence earthwork as planned in Q3. The equipment fleet has been procured, design work and planning are rapidly approaching construction-ready status and hiring remaining field staff and workers has commenced. We are eager to get going and look forward to the latter half of the year when we can start providing progress reports on the actual construction activity. Moving on to Slide 18. This bid pipeline slide highlights our remaining Item 3 from the priority Slide 16. Our bid pipeline remains strong, and we expect to win our fair share of their large Red Dot regional oil sands tender and believe we will see another blue dot win outside oil sands before year-end. Demand continues to grow and the number of projects in the active tender stage, that is the second row of the bid pipeline, has doubled since Q1 for both oil sands from 1 to 2 projects, but more impressively, outside oil sands from 5 to 10 active tender projects. On Slide 19, our backlog sits at $1.6 billion, and we continue to replenish and win our fair share of work across all resource sectors. What I believe are key takeaways on this slide is that our backlog is roughly proportionate to our diversification target, demonstrating both confidence and sustainability of our diversification efforts. And lastly, but possibly most importantly, if we achieve the bid wins noted on the previous slide, we expect our backlog to exceed $2 billion before the year is out. On Slide 20, we have provided our revised outlook for 2022. As I stated in my shareholder letter, while lowering guidance is neither enjoyable nor something we want to be seen as common in our business, the fact that our business can withstand such unusual inflationary and market pressures and still produce a free cash flow that enables reductions of debt and common shares by 7% to 8% and allows modest growth investment gives us confidence in the business core strength and resiliency. On the upside, we see Slide 21 as a reasonable projection of our business based on high demand, modest growth, improved utilization from our expected stronger maintenance workforce and increasing margins as we continue to lower costs and advance operational efficiency. Combined, we see these last two slides as showing a business with the core strength to endure high near-term inflationary impacts while maintaining a strategy and execution to provide consistent long-term growth and returns in shareholder-friendly ways. With that, I’ll open it up for any questions you may have.

Operator, Operator

Your first question comes from Yuri Lynk from Canaccord.

Yuri Lynk, Analyst

Joe, I wanted to circle back on your discussions with your customers on the contract escalation clauses. Assuming you’re successful, will those be retroactive at all? Will they go back into, you say, the spring, when you started to see these really higher costs? And the second part of that question would be, what’s assumed in your guidance for these discussions?

Joe Lambert, President and CEO

So we’ve got an estimate on the resolution, and I think we’re conservative on that. I really want to tell you specifics. We’re in negotiations. And I’d like to think that we might be able to improve upon that. But essentially, the reason for the drop down in the guidance is we believe there’s a timing gap. It will then have an overhang when there’s deflation, if you would. But roughly, we think we’re probably about two months of overlap on that, that we aren’t going to be able to recover and that would be predominantly as we incurred it in Q2. So we do think the Q3, Q4 numbers and our projection for the outlook are in line with the timing and what we think we’ll get. Does that cover it off, Yuri? I’m sorry, it’s a little bit vague in that.

Yuri Lynk, Analyst

I understand you’re currently in negotiations. However, it appears that there is no catch-up payment for Q2 that would potentially elevate Q3 beyond what it might otherwise be. It seems you are working to adjust the costs so that the latter half of the year returns to more normalized margins. Is that correct?

Joe Lambert, President and CEO

Yes, you said that spot on, Yuri.

Operator, Operator

Your next question comes from Jacob Bout from CIBC.

Jacob Bout, Analyst

I wanted to go back to the escalation costs. How much of these contracts can be negotiated versus just systemic, and we just have to deal with these indices?

Joe Lambert, President and CEO

We have consistently managed this over time, both when prices rise and fall, especially in oil sands. The contracts we hold in oil sands have been adjusted outside of the usual terms based on market conditions. When oil prices were low, we sought ways to cut costs and pass those savings on to our customers, which we achieved. Conversely, in situations where prices are rising, we anticipate that during any unusual market conditions—whether increasing or decreasing—either our clients or we will initiate discussions for contract amendments outside the regular cycle.

Jacob Bout, Analyst

So, to be clear, in your view, all of these contracts should be negotiable?

Joe Lambert, President and CEO

Yes. And I would say we’ve probably done this in the order of half a dozen times in the last 6 or 7 years.

Jacob Bout, Analyst

Okay. And then just on the technician shortages. What’s your equipment utilization baked into the second half guidance if things return to normal?

Joe Lambert, President and CEO

It actually starts to return to normal over Q3, and we believe we can possibly improve upon that come Q4. So it’s a return to normal. We really just started gaining, I’d say, in May and June. That’s where we picked up that 6% of the workforce during the quarter. It was predominantly in the latter half. So based on our projections, which I believe were reasonably conservative, we would get back to a more normal utilization over Q3. And then we’ve got kind of normal into the forecast, but I do believe there could be some upside in Q4 if we’re able to progress in some of the areas better. It’s a direct correlation between manpower and utilization right now.

Jacob Bout, Analyst

And I’m assuming there’s a cost associated with attracting that new talent, like how are you competing against guys like Finning?

Joe Lambert, President and CEO

It’s market wage for us. One of the things we've developed, such as our Bench Hands program, is not something many others can replicate. It relies on a shop-based setup and requires enough scale. Our apprenticeship program is designed for individuals to grow, and we currently have around 70 total apprentices. This doesn't happen overnight, especially since they are distributed evenly over the years. We estimate that about a quarter of our apprentices will become full HETs each year. This is not something everyone can achieve; I've noticed some of our vendors have no apprentices at all, while others have a considerable number. The Bench Hands program is not widely adopted by different companies. Our ability to rotate employees, the working environment here compared to fieldwork, and the job options available cater to various preferences. Some individuals may prefer longer hours, more opportunities for overtime in living camps, while others prefer to be home every night and work more in a shop setting. We certainly have work offerings that accommodate many people's work-life balance, which I believe is not something many others, including vendors, can offer.

Jacob Bout, Analyst

The last question is about the 6% increase in hiring. Could you please comment on the attrition rates during the first half of the year?

Joe Lambert, President and CEO

We had about 20 people in Q1 heading into April of Q2, and we've managed to recover more than half of that in May and June. This was a result of our decision not to succumb to wage increases, as we noticed that rising wages were not attracting more skilled trades to the region. If the only thing happening is people moving from one place to another, we aren't actually increasing our resources. The situation changed when we started to see people leave due to significant wage increases—some were receiving pay hikes of $15 an hour rather than just $0.50. Ultimately, we had to adjust our wages to avoid losing more employees, and once we did that, we were able to begin recruiting again.

Operator, Operator

Your next question comes from Bryan Fast from Raymond James.

Bryan Fast, Analyst

Yes. Maybe just some comments on DGI. How has that part of the business performed of late? And are you seeing an increase in interest as we continue to see that tight equipment in parts market?

Joe Lambert, President and CEO

Yes, it has performed as expected, maybe even a bit better, which is a significant achievement, especially during the pandemic when travel was limited. Much of this work involves locating assets and cores globally, so travel is essential to the business. However, the demand for new equipment and the desire to extend the life of used equipment, including from us as one of DGI's top internal customers, looks promising for their future. We are also considering expanding their operations into Canada due to considerable market potential, and we plan to establish a presence there to facilitate business growth. While it may not be a large revenue generator, it has proven to be resilient and steady, offering excellent growth opportunities.

Bryan Fast, Analyst

Okay. And I know you provided some color, but is there any reason to believe that technician availability is different from prior cycles? I mean, is this a tighter environment where your available talent pool has actually shrunk as people have left the industry?

Joe Lambert, President and CEO

I believe that the demand for equipment has actually increased, leading to more operating hours for the equipment with the same number of people. We aren't attracting more workers, which has increased the value of those who are already employed. We're exploring ways to recruit talent from outside our current regions. Historically, we have been able to attract workers from other areas that were experiencing downturns, particularly in various commodities. However, there aren't any major downturns in those areas right now, so people aren't inclined to move from their current locations. That’s why we emphasized the apprenticeship program, as we need to develop our own talent instead of relying on recruits from regions with weaker resource markets.

Operator, Operator

Your next question comes from Aaron MacNeil from TD Securities.

Aaron MacNeil, Analyst

Joe, I’m sure you’re dying to answer more questions about inflation. So figure I’ll add one. What are you doing to ensure projects like Fargo-Moorhead or some of the other diversified projects don’t experience the same inflationary pressures that you’ve seen in your oil sands operations? And I can appreciate the oil sands are its own unique animal, but I mean inflation pressures across parts and people are pervasive across sectors. So I just want to get your sense of what you’re doing now to ensure that you don’t see these pressures elsewhere?

Joe Lambert, President and CEO

In the areas where we are actively bidding, such as the large regional oil sands contract, we are incorporating clauses that allow for reopeners based on the unusual market conditions. This makes it more of a contractual right rather than just a mutually agreed amendment, thereby giving it more strength, and we are also aiming to increase the frequency of these adjustments. During high volatility, we want to ensure the timing aligns as closely as possible. When the difference in indices is 3% and your actual costs are 4% or 2%, it’s not a significant issue. However, when that variance becomes larger, it becomes a concern. We are including these provisions in our contracts. Locations like Fargo-Moorhead likely face fewer issues since they have long-term profiles. With 6 years of construction and 29 years of operation and maintenance, the results tend to average out over time, so short-term inflationary pressures may not have a lasting impact. My expectation is that in 10 years, the inflation in Fargo will resemble average inflation, although it might create some pressure in the first year of operation. Therefore, the key for us is to ensure that what we learn about the disconnect between indices and actual costs is directly reflected in our contract language, establishing it as a contractual right rather than a point of negotiation.

Aaron MacNeil, Analyst

Okay. Understood. I’m done on the inflationary thing. Maybe a couple of more follow-ups. Could you maybe walk us through your slate of projects for Nuna this summer, given that it’s the seasonally strongest quarter? And how does the job mix, I guess, compare year-over-year?

Joe Lambert, President and CEO

The main factor is the Northern Ontario gold mine. Looking at the bid pipeline, it reflects a combined Nuna North American pipeline with an even distribution. It includes a wide range of projects represented in the 10 or 12 entries in that central section. Some projects are easy to identify, such as a few oil sands, infrastructure, as well as various minerals including gold, potash, iron, platinum, nickel, and diamonds. This bid pipeline is likely the most diverse and active we've encountered in quite some time. A significant portion of it involves Nuna, particularly in areas outside of the oil sands, where we aim to collaborate with Nuna on larger asset opportunities. These projects also entail substantial terms and job prospects.

Aaron MacNeil, Analyst

The last question I had. It looks like there’s a lot of diversified projects on the radar. A lot of them being smaller. Like how many of these smaller projects could you reasonably execute on before it kind of becomes too cumbersome for a company of your size? And I guess, like the context of the question is just the oil sands operations were so efficient because they’re all big and they’re all in the same area. So I guess I’m just wondering if you’re worried about losing some of those efficiencies if you were to take on a lot of those little projects?

Joe Lambert, President and CEO

These projects are significant in terms of duration and scale. Out of the 12 projects, 7 exceed $100 million. They are not short-term, temporary jobs like a $10 million project for a couple of months in the summer. Many of these contracts span multiple years, offering substantial volume and dollar value. This not only enhances our diversification but also targets areas where we typically have underutilized equipment, such as the 100 and 150-ton trucks in oil sands. These trucks usually perform well in winter but see low activity in summer. This situation allows us to achieve consistent year-round utilization over several years with these long-term agreements. These projects are not merely short-term distractions; they represent meaningful opportunities for increased utilization and diversification.

Operator, Operator

Your next question comes from Maxim Sytchev from National Bank Financial.

Maxim Sytchev, Analyst

Just maybe the first question for you. Do you mind just reminding us how we should think about the revenue ramp-up at Fargo because I presume it’s going to be some JV accounting, can you just remind us how we should be thinking about this?

Jason Veenstra, CFO

Yes. Next year, 2023 is the big year, 2023 and 2024, with $650 million of our backlog is Fargo and about $150 million of that per year is in ‘23 and ‘24. And that comes through in our combined revenue. So it won’t be reported revenue, but it shows in our combined revenue. And that’s quite a steep ramp from this year. Year-to-date, it’s been very modest in the kind of $15 million year-to-date and a little higher than that through Q3 and Q4, but that’s kind of the ramp. We’ve always said 2023 is going to be kind of a step change for Fargo.

Maxim Sytchev, Analyst

Okay. Okay. That’s helpful. And then another question for Joe. Some of the clients in the oil sands have been facing some management changes and some pressure. Just wondering, in terms of what you’re hearing in relation to the trends to in-source versus outsource work, what is your sense right now from some of these bigger clients, if you can maybe comment?

Joe Lambert, President and CEO

Yes. I guess I don’t have much of a change in sense until I get a better understanding of what may happen with those executive teams. Generally, the people we deal with are the guys with P&L responsibility that are overseeing the mine sites. They’re generally those VP of Ops or GMs of sites that are usually the decision-makers and the ones we’re very much engaged with. And then ultimately, they get approval from whatever level in their organization. But I don’t think any of the changes that are occurring or may occur in any of our clients are going to affect our abilities and our negotiations are ongoing. I really don’t have a sense before if it’s going to change perceptions and give us better opportunity to in-house some of the work that they’re doing. But I guess I really lack a good answer on that for you, Max. I’ll wait to see what happens and how if there’s any change in strategy from those clients.

Maxim Sytchev, Analyst

Right. And I guess, are you seeing any changes from your other three key clients on that front? Or it’s sort of business as usual?

Joe Lambert, President and CEO

I believe one area, and I do believe this is an area we’ll continue to make inroads on is our maintenance and our maintenance rebuild and component remanufacturing capabilities. I think there’s certainly opportunity to do more of that for our clients. And I think there, we’ve shown more of them and done more of that work for them. I think near-term, we’re really focused on getting our own gear fixed and running. So it’s hard to put much time into others right now until we have more capacity built up, but I do think that’s an area that we could easily grow, and our clients are showing more and more interest in that. So in-housing some of the maintenance that they may be doing or may have other vendors doing and bringing it to us, I think that’s a very real possibility.

Maxim Sytchev, Analyst

Could you provide an estimate of how many people you need to hire in absolute numbers or percentages to have the capacity to take on work outside of your own fleet? Is it around 15% to 20%, or is it significantly higher?

Joe Lambert, President and CEO

We expect to return to our anticipated levels with an additional 5% to 6% increase, which we anticipate will happen in the next quarter. As we grow, driven by high demand, our focus will be on improving utilization. This 5% to 6% increase translates to about 11 additional positions, so once we add around 9 to 11 employees, we will reach the headcount we had in Q1. Beyond that, which I believe we can achieve, we will aim to enhance our utilization with these new hires and begin taking on more work for others. While we have been providing some services externally, our priority is to focus on our own fleet before extending maintenance services to others. Additionally, our Acheson facility has excellent capabilities and is conducive to attracting talent, allowing us to increase capacity and move equipment more efficiently. I believe we will be able to maintain this progress.

Maxim Sytchev, Analyst

Yes, yes, for sure, for sure. And then just I think in the past, you said the goal is to get to $25 million of external maintenance. Is that kind of still the number that you’re working towards? And where are we right now as a run rate relative to those numbers?

Joe Lambert, President and CEO

I believe we are likely to slightly exceed that target mainly due to the rebuilds we completed for our joint venture partner. Additionally, as I mentioned, this is while we are scaling back some capacity to focus on our own fleet. Therefore, I anticipate that we will surpass the numbers mentioned for this year. Moreover, as we acquire more manpower, we will be able to increase our external maintenance work.

Operator, Operator

This concludes the Q&A session of the call, and I will pass the call over to Joe Lambert, President and CEO, for closing comments.

Joe Lambert, President and CEO

Thanks, Sergio. Thanks again, everyone, for joining us today.

Operator, Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and ask that you please disconnect your lines.