Earnings Call Transcript - QUAD Q1 2020

Operator, Operator

Good morning, ladies and gentlemen, and welcome to Quad's First Quarter 2020 Conference Call. During today's call, all participants will be in a listen-only mode. [Operator Instructions]. A slide presentation accompanies today's webcast and participants are invited to follow along, advancing the slides themselves. To access the webcast, follow the instructions posted in this morning's earnings release. Alternatively, you can access the slide presentation on the Investors section of Quad's website under the Events & Recent Presentations link. Following today's presentation, the conference call will be open for questions. [Operator Instructions]. Please note this event is being recorded. I will now turn the conference over to Kyle Egan, Quad's Director of Investor Relations and Assistant Treasurer. Kyle, please go ahead.

Kyle Egan, Director of Investor Relations and Assistant Treasurer

Thank you, operator, and good morning, everyone. With me today are Joel Quadracci, Quad's Chairman, President and Chief Executive Officer; and Dave Honan, Quad's Executive Vice President and Chief Financial Officer. Joel will lead off today’s call with a business update related to COVID-19 and Dave will follow with a summary of Quad's first quarter 2020 financial results, followed by Q&A. I would like to remind everyone that this call is being webcast and forward-looking statements are subject to Safe Harbor provisions as outlined in our quarterly news release and in today's slide presentation on Slide 2. Quad's financial results are prepared in accordance with Generally Accepted Accounting Principles. However, this presentation also contains non-GAAP financial measures including adjusted EBITDA, adjusted EBITDA margins, free cash flow and debt leverage ratio. We have included in the slide presentation reconciliations of these non-GAAP financial measures to GAAP financial measures. Finally, a replay of the call and the slide presentation will be available on the Investors section of quad.com shortly after our call concludes today. I will now hand over the call to Joel.

Joel Quadracci, Chairman, President and CEO

Thank you, Kyle, and welcome everyone. The year 2020 will go down in history as unprecedented for our company, our nation and our world. We started the year with a strong first quarter, building on the momentum of our solid fourth quarter performance. However, we started seeing the initial signs of disruption from the COVID-19 pandemic during the last weeks of the quarter which required swift, decisive action to fortify the business. Since then, we have seen a meaningful impact on our business in certain end markets, particularly in retail. As we continue to manage through the pandemic, Quad's main priority is protecting our employees' health and well-being, while also protecting the company's financial health, thereby protecting our ability to perform well for our clients moving forward. Early in the quarter, our crisis management team, along with company leadership, began executing our business continuity plans with a strong sense of urgency. We follow guidance from the CDC and local health authorities as well as federal and state governments and best practices and recommendations from our healthcare subsidiary, QuadMed, which has proven to be a tremendous asset during this critical time. Early on, we shifted approximately 2,000 administrative employees to work-from-home within a very short timeframe to support social distancing while also testing our IT infrastructure. We then quickly ramped up our work-at-home staff, and today we have well over 3,000 employees who work remotely on a consistent basis. In our manufacturing facilities, we launched our Safe-at-Work program to protect the health and safety of our production employees. Our program outlined on Slide 3 includes regular communication and education on how employees can stay healthy, protocols for cleaning and disinfecting equipment, tools and common areas, daily temperature checks which we are in the process of rolling out companywide and guidelines for social distancing. Given the scale of our equipment and our extensive use of automation, our production platform naturally lends itself to social distancing. However, our continuous improvement team modified processes and adapted workspaces where necessary. To complement these efforts, our in-store marketing group produced signage and floor graphics to remind employees how to work safely apart. Our Safe-at-Work program also includes a well-defined process for assessing each potential COVID-19 case, using a rapid response team comprised of our Quad HR professionals. This team helps transition impacted employees to self-quarantine and performs rigorous contact tracing. The rapid response team also reports daily metrics to our executive team, so we understand the real-time impact of COVID-19 on our workforce. To date, the number of confirmed and suspected cases of COVID-19 remains relatively low among our employee base. As this pandemic evolves, we'll continue to take care of our employees to the best of our ability while often taking swift action to mitigate risk and implement cost reductions that protect our balance sheet and preserve cash flow and liquidity. Our leadership team has extensive experience managing through industry and economic disruptions. Our disciplined approach includes treating almost all costs as variable to help offset the impact from volume fluctuations over both the short and long-term. We made a number of tough cost reduction decisions that Dave will detail in his section, and we communicated those decisions to our employees and other stakeholders quickly and transparently. Now, more than ever, communications are important during this disruptive time, and we're using technology to strengthen interconnectivity with each other, our culture and our values. I post regular updates from my home office to ensure all employees hear directly from me on my perspectives and insights into why we're making tough decisions to remind everyone of the good news stories that are happening every day at Quad during this crisis, to encourage employees to use Quad's abundant resources for their physical, emotional, financial and social well-being, and to provide the vision forward in a post-COVID-19 environment where we will be stronger than before the pandemic. Throughout all this, I continue to be impressed with our employees' unwavering spirit of innovation, not only to help our clients solve problems, but also to help each other during this time of crisis. For example, as shown on Slide 4, employees in our CR/T ink manufacturing division began formulating hand sanitizers for use in our facilities across the country. Employees in our direct marketing group designed a disposable non-medical facemask that has been mass produced at our existing printing press equipment. We were able to outfit every employee throughout our nationwide network with a mask in our initial production run. Since then, we have continued to refine the design for easier production, self-assembly, and wearability and are now in our third version, which is starting up production today and will be distributed throughout our network of facilities immediately. COVID-19 has impacted our clients in a variety of different ways depending on vertical market and product type. For example, department stores are having a particularly tough time right now due to closure orders and subsequently to pull back in media spend. Nevertheless, the pandemic has also provided new opportunities to leverage our platform and innovate new solutions to help clients maintain business continuity, and consumer engagement during this period of uncertainty. This is where our Quad 3.0 strategy really differentiates us from other printers and marketing agencies. As a marketing solutions partner, we're focused on solving our clients' marketing and process challenges. Our strategy is informed by listening to our clients' needs and developing solutions to help reduce complexity and costs to improve marketing spend effectiveness and profitability. Because we have always made it a priority to build relationships at all levels within our clients' organizations, we can better understand, anticipate and solve those problems. On Slide 5, we show a prime example of our Quad 3.0 innovation in action. We created our COVID-19 in-store marketing toolkit to help brick-and-mortar retailers provide visual cues on social distancing to keep shoppers safe. The toolkit features standalone signage and displays, floor graphics, checkout protection shields and cart wraps among other products and is packaged by our experts to be installed ready. The toolkit has been an overwhelming success and has been used by retailers at thousands of locations throughout the country, including grocery, home improvement, convenience and drugstores. I'm pleased to share that this effort alone has created over $5 million of incremental revenue for our company. Through our Quad 3.0 strategy, we've also been able to assist our clients in being more efficient and effective at content creation and production at a time when they have faced challenges staffing those critical functions. We were recently engaged by a major clothing and accessory retailer to help with studio photography for its multiple brands. This retailer was experiencing labor shortages due to the pandemic. We were immediately able to step in and start photographing 500 samples per week for the retailer's e-commerce sites. When the pandemic subsides, and clients begin to rethink their operations in the new normal, including what functions should and should not remain staffed in-house, we will be ready and positioned to help offer them a quicker path to success through the use of our content creation and production services. During the first quarter, we're pleased to be selected by the White House and CDC to print a direct mail piece promoting Coronavirus guidelines for America. We printed 42 million postcards for U.S. households in record time. As we continue to manage day-to-day operations, we're also planning for the reopening of the economy under multiple scenarios based on our clients' evolving advertising and marketing plans. Our Quad 3.0 strategy will serve us well especially as our clients rethink how to operate in a new normal post-COVID-19. However, between now and then, and as the economy begins its gradual recovery, we will continue to live in a new abnormal, where economic activity may still be heavily and unpredictably impacted by various hotspots. In this new abnormal, forward-thinking agile companies like Quad will have the advantage. Our Quad 3.0 strategy, which is focused on solving client challenges combined with our ability to move quickly and decisively, will help clients successfully adjust to changing media consumption patterns and consumer buying habits. Until then, uncertainty continues. We will closely monitor the COVID-19 pandemic and its impact on our clients and the worldwide economy while protecting our employees' health and the company's financial strength, thereby serving our clients with high quality, on-time delivery. Before I turn the call over to Dave, I want to recognize and thank employees for going above and beyond during this challenging time when every aspect of their personal and professional lives has been disrupted. I regularly receive client letters and emails praising our employees, and even received a video thank-you from David Remnick, the Editor of The New Yorker Magazine, who said, 'I just want to thank all our friends at Quad, who've done an amazing, amazing job at this very strange and difficult time. The idea that we could put out The New Yorker week-after-week and print moves me beyond measure. And I know that's the case with everybody at the staff. It means the world to us. All the issues of The New Yorker that have come out in the last several weeks are some of the best work we've ever done. But that would be only possible with you.' I too thank our employees who continue to show our clients why we're a true partner in their business, and how they are Quad proud and dedicated to the success of our company. With that, I will now turn the call over to you, Dave.

Dave Honan, Executive Vice President and CFO

Thank you, Joel. Good morning, everyone. As Joel mentioned, our first quarter performance was strong and better than expected up until mid-March when we began to feel the economic impacts of the pandemic. We were performing ahead of plan both operationally and financially and were recognizing more and more incremental benefits of our Quad 3.0 strategy, helping to offset organic print decline. Our cost reduction programs and productivity improvement trend from the fourth quarter continue to favorably impact our first quarter results. The investments we made in 2019 to increase hourly production wages and increased investments in automation continue to drive productivity throughout our entire platform. Additionally, customer service performance was exceptionally strong with high quality and on-time delivery metrics, and great safety performance in our facilities. This operational performance was setting the stage to finish the quarter strong. In mid-March, customer demand substantially weakened due to the economic impacts of the pandemic. We estimate that certain print product lines decreased by approximately 30% on average, over the back half of March. Almost our entire customer base has been impacted, but none more severely than brick-and-mortar retailers who closed stores in response to safe shelter-at-home orders. Given the sudden decline in print and print-related demand, the lack of visibility about future demand as well as the speed of reopening of the economy, we withdrew all financial guidance on April 2. We will evaluate providing guidance when we have more visibility into the economic recovery. As Joel shared, we acted with great care and agility to keep our employees safe during the pandemic and make tough decisions associated with protecting our financial flexibility through preserving cash and liquidity. We acted swiftly to align our cost structure to match lower demand for print. Slide 6 details the actions we took to control costs, conserve cash, and protect liquidity. We suspended all domestic and international travel. We delayed most capital expenditure projects and expect capital expenditures to be approximately $60 million now in 2020. This is a decrease of 45% from 2019. We implemented a hiring freeze and established the COVID-19 temporary furlough program through which employees take an unpaid leave of absence. Eligible furloughed employees receive company-paid medical benefits, ensuring no employees are without medical coverage at this critical time. We also implemented temporary salary reductions for more than 750 of our leaders, including a 50% salary reduction for our CEO, and a 35% salary reduction for named executive officers. We temporarily reduced director fees by 50% at the recommendation of our Board of Directors. We suspended the use of vacations and vacation payouts. We suspended production in several manufacturing facilities where the effects of the pandemic impacted our ability to operate. We increased borrowings by $100 million to increase cash on hand to $208 million at the end of the quarter and provide sufficient liquidity to the business over the near-term. This action, combined with up to $636 million of maximum available borrowings under our revolving credit agreement, allowed us to finish the quarter with significant financial flexibility. Lastly, the Board of Directors made the proactive decision to temporarily suspend the company's quarterly dividend. This act conserves approximately $8 million of cash each quarter. We remain committed to paying a dividend over the long-term and will seek to resume a dividend following the stabilization of our operating environment. All told, we temporarily reduced costs by approximately $250 million on an annualized basis, including reducing our largest variable cost category, wages and benefits, by over one-third of pre-pandemic levels to help partially offset the significant reduction in net sales. I'm extremely proud of the Quad team for the speed and agility of the reaction to this pandemic. Most of these actions were implemented in advance of our clients notifying us of their intentions to reduce those volumes. This agility was key to conserving cash and liquidity at an unprecedented time of uncertainty. It helps ensure a stronger financial position as of March 31. Slide 7 provides a snapshot of our first quarter 2020 results. Net sales were $823 million in the first quarter, down 14.4% from 2019. Organic sales, which exclude acquisitions and divestitures, declined 13.3% during the quarter after excluding the impact of the sale of the Omaha packaging plant. The organic sales results reflect ongoing print industry volumes and pricing pressure, including the initial impacts from the COVID-19 pandemic, and a negative 0.4% impact from foreign exchange. Adjusted EBITDA was $75 million in the first quarter compared to $78 million in 2019, and adjusted EBITDA margin improved to 9.2% as compared to 8.2% a year ago. The variance to prior-year primarily reflects the impacts in the organic sales decline of 13.3%, a $9 million decrease in print profits from the reduction in market prices for paper by-product recoveries, and a $4 million increase in hourly production wages due to strategic investments made last year to increase starting wages. These impacts were partially offset by a favorable $9 million net non-cash benefits from a change in vacation policy, an $8 million reduction in workers' compensation reserves from improved safety trends, and savings from cost reductions, many of which I outlined earlier. Free cash flow increased by $116 million in the first quarter. The increase in free cash flow is primarily due to improvements in working capital and a $16 million decrease in capital expenditures. As a reminder, the company generates a majority of its free cash flow in the fourth quarter of the year. Slide 8 includes a summary of our debt capital structure as of March 31. During the quarter, we reduced debt net of excess cash by $49 million due to strong free cash flow and $41 million in cash provided by the sale of our Omaha packaging facility. We also took two specific actions to further reduce our interest expense and net debt. First, we completed a $38 million tender of our private placement notes at par value. We estimate the tender will save just over $1 million in annual interest costs. As of March 31, $31 million of the private placement notes remain outstanding. Second, we repurchased $5 million of our 7% senior unsecured notes at an 18% discount, helping to reduce outstanding debt. As of March 31, $239 million of the unsecured notes remain outstanding. At the end of the quarter, our debt capital structure was 57% fixed and 43% floating with a blended interest rate of 4.8%. We ended the first quarter with a debt leverage ratio of 3.0 times, which improved from 3.12 times as of December 31. While this leverage range is above our long-term targeted leverage range of 2 to 2.5 times, we are pleased with the progress we made to reduce our net debt levels and overall leverage since the end of the year. Our primary use of cash will continue to be debt reduction. We maintained significant liquidity as of March 31, including $208 million of cash on hand and up to $636 million in unused capacity under our revolving credit agreement, which is subject to certain covenants. We have strong and trusted banking relationships that extend to the highest executive levels of our banks. Our top six banks in the credit agreement represent approximately two-thirds of our committed capital. And I'm proud to say that our relationships with these institutions average more than a quarter of a century. We believe our available liquidity combined with the strength of our banking relationships, our agile approach to cost management as well as the success of our Quad 3.0 strategy will help provide substantial financial flexibility to adjust to current uncertainties in the operating environment. We will continue to make the necessary actions to respond effectively to the impacts of the rapidly evolving pandemic. Our Quad 3.0 strategy and integrated marketing offers can help our clients in new ways. We all learn to do things differently during these times. And now I'd like to turn the call back to our operator who will facilitate taking your questions.

Operator, Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question today will come from James Clement. Please go ahead.

James Clement, Analyst

Hey, gentlemen, good morning. Can you hear me okay?

Joel Quadracci, Chairman, President and CEO

Yes, Jamie, how are you?

James Clement, Analyst

Yes, I'm doing okay. Thanks for asking. So Joel, first question for you. I think I looked this up, I think it was Winston Churchill who said, and I'm paraphrasing a little bit, never let a crisis go to waste. And obviously, you discussed adjustments to the capital spend and that kind of thing. But can you take us kind of through, with that said, some of the things strategically where you might have said, you know what maybe now's the right -- not the right time versus some other kind of strategic directions where you said, you know what, now we've got to redouble our efforts. This is extra important right now. We're going to come out of this stronger than ever.

Joel Quadracci, Chairman, President and CEO

Yes, well, I think first of all, whenever we see a crisis coming, we've learned; I’ve been in this job since 2006. And you think about the first two years of fun, and then you had the Great Recession kick-in, and then you had all this stuff that's going on with the print environment. But I'll kind of answer that in two ways, both internally and externally. What happens in normal times is lots of good ideas get formulated and implemented, but it tends to be more incremental. In the past year, we've made some significant investments in our IT infrastructure because I wanted to effectively use more video conferencing, enabling video blogs without putting stress on the network. We completed that, probably perfect timing last fall, so that now we pushed literally with a three-day notice 2,000 people who work from home to really test it before we go further. It worked out remarkably well. Most of the world is figuring out that video technology has changed so much that you don't need IT people standing over your shoulder to get a videoconference going. Internally, we're pushing that very hard. I'd also say that we end up making tough calls on cost reduction and capacity planning when the crisis is here, and we tend to find out that it worked better than we thought, or we can do more than we thought we could before. As we see the economy open up, we won't be bashful about managing that capacity on a go-forward basis. On the external side, what I'll tell you is the 3.0 strategy. I've been saying this for years; working is really about Quad transitioning from selling print products to solving problems in media planning and placement, campaign design, and then execution across all channels in media. In the past decade, media spending has been very fragmented with the advent of the big holding company model. While we've made huge headway in normal times with our client base on how we participate with them, I've talked about the 80 plus locations we now have, where we have over 1,200 people working within customers' marketing departments. However, some of those conversations tend to get lost in incrementalism. Now with many people sent home to work, every business is reevaluating when the economy opens up; it’s not about when we bring things back, but what do we decide not to bring back. I see opportunity in terms of being that partner to manage execution in planning and media planning for various customers so that they don't have to do it anymore and can focus on merchandising and overall strategy. I see this as a time where we can leap forward and accelerate the transformation in 3.0.

James Clement, Analyst

Okay, Joel, I appreciate that. Can you help us understand a little more about the seasonality of the business lines that you provided, solutions that you provide brick-and-mortar retailers? I’m trying to get a sense of like, if we assume when the economy starts to reopen again and people can go back to stores and that kind of thing, how much business was at stake in the first half of the year versus the second half?

Joel Quadracci, Chairman, President and CEO

Yes, let me start and say that clearly the most impacted has been retail. I mean, one day you could get a phone call from a huge retailer for the next day every store in the country will be closed. It creates a rapid pullback. So in the first half, as you know, we're a second half seasonal company for retailers, while catalogers and magazines tend to be a little bit more spread out throughout the year. The reason I kind of refer to everyone is that we're transitioning toward a new normal. Until we achieve this new normal, we're in a new abnormal where the economy is trying to open up. Things will happen in fits and starts. We are already seeing some major companies such as Kohl's and Dick's Sporting Goods starting to open their stores. However, what we hear from our clients is that there's concern about the potential for a spike in cases as the economy reopens. Therefore, they are cautious about aggressively marketing during this time. I would say that there's trepidation as we move toward the new normal. Until we get a clearer grasp on safety procedures across the country, it’s tough to gain visibility.

James Clement, Analyst

Okay. Let me ask you quickly, Joel, on the Inserts business. I've noticed here in New York that most of the grocery stores, while still open, have largely suspended their circulars. I've asked the managers and they said, 'the reason we're doing this is because we don't want to promote products that we don't necessarily know we can keep on our shelves.' So, any sense, first of all, do you think that's an accurate statement? And second of all, any signs of improvement there?

Joel Quadracci, Chairman, President and CEO

Yes, I mean, I think it's kind of all over the board when you talk about the grocery sector. They have had a tough time predicting what they can have on their shelves. Only recently do you see shelves full of toilet paper. In the last month, it’s been empty. We have had a lot of that now. The next phase is what we're hearing through multiple partners is a shortage of meat products. Some major groceries that carry a wide variety of goods informed us that when people began receiving the $600 checks, they started seeing flat panel screens flying off the shelves. The recent financial incentives might be fueling some growth. It’s very hard to accurately predict for the next month how people can forecast their products or how quickly their stores will recover, but it will start happening. My big concern on retail inserts is the pressure the newspaper industry faces as a result of this. Decreased circulation is concerning, as that typically serves as the carrier for the retail insert. Although, we have been dealing with that decline anyway, along with adjusting our platform, we have been growing our direct mail product to fill in the gaps. Ink on paper is still important. Marketers have a strong sense that offline and online needs to come together. We know that shifts will occur for various structural reasons, but we know how to manage that. We continue to pivot wherever value can help our clients market effectively and efficiently.

James Clement, Analyst

Okay. So, as part of the 3.0 strategy, let’s say a grocery store chain in a city where a newspaper is closed. Can you give us a little bit more specific details in terms of what that strategy session might look like?

Joel Quadracci, Chairman, President and CEO

Yes, it’s a combination of things. With our IV acquisition, they do a lot of media buying. We had those capabilities and have only strengthened them. It really comes down to finding the right mix. If you have a fall-off in one area, it’s possible to make up for it elsewhere, even if it may not be the perfect mix. This could involve direct mail, shifting to other papers, and partnerships with companies like Valassis who do a lot of couponing through the mail. We print a lot for them and place it through them. We also work on digital strategies as well. The focus is ROI—when I spend a dollar on marketing in a region, does it produce five or six dollars in revenue? If it's trending the wrong way, we need to adjust to make up for it. It’s a whole portfolio of strategies that we continuously work on with the client; it’s always evolving.

James Clement, Analyst

Okay. And then lastly, Joel, if I may, Dave, I don't know if you want to chime in here at all. What do you all need to see to think about reinstating the dividend?

Joel Quadracci, Chairman, President and CEO

Well, Dave really wants to chime in here. I'll turn it to Dave.

Dave Honan, Executive Vice President and CFO

Thanks, Joel. We mentioned in our comments just about stabilization in the operating environment. As we currently see our operating environment, there's a lot of uncertainty, and as I noted in my prepared comments, we have seen volume impacts. The back half of March was down approximately 30%. We've observed a similar trend into April. The most impacted of our customer base, as we've noted, are brick-and-mortar retailers who had to close their stores. Those stores start to reopen, and while we believe the near-term impact on our demand will lessen, we’ll keep adjusting our cost structure to manage this, but that will only partially offset the volume impact. We are acutely aware that cash flow and liquidity management are paramount, and our primary use of cash will continue to be on debt reduction.

Joel Quadracci, Chairman, President and CEO

Hey, Jamie, I also wanted to add that during these fits and starts, when we indicate that we are managing most costs as variable, we really mean it. We've even furloughed entire plants during this COVID-19 situation. For instance, we closed three book plants temporarily due to COVID-19 related issues in those states. We’re now hoping those plants will come back online soon. We’ll continue to manage the platform aggressively. The ability to furlough a plant in a crisis situation as opposed to just individuals within it is crucial.

James Clement, Analyst

Okay. Lastly, Joel, through QuadMed, do you have any insights to share regarding observations on the spread of the virus? Here in New York, it seems there's reason to be a bit more optimistic over the last couple of weeks. Is that consistent with what your medical professionals are telling you?

Joel Quadracci, Chairman, President and CEO

Yes, look, my brother-in-law is the Head of Thoracic Surgery at Mount Sinai in New York. He is on the front lines of this situation. Both he and my sister, who is a trained physician, and our QuadMed team have been managing our cases extremely well. We have about 20,000 employees across our facilities, and we have a thorough tracking and tracing program in place. We categorize our situations into different groups: confirmed positives, suspected positives, symptomatic individuals, and so forth. To date, we have seen less than 20 positives among our employee base, and we've had one unfortunate COVID-related death. Companies need to take it upon themselves to track and trace their employees actively. We've shared our plan with the Greater Milwaukee business community and the Governor of Wisconsin. The key message is that you can manage the situation if you take the time to do it. Companies must adopt a multi-layered approach—it's about more than just masks or hand sanitizers; all of these measures together will be effective. Many organizations are starting to embrace this, and we need to restart our economy.

Kyle Egan, Director of Investor Relations and Assistant Treasurer

Operator?

Operator, Operator

This will conclude today's question-and-answer session. I would now like to turn the call back over to management for any closing remarks.

Joel Quadracci, Chairman, President and CEO

All right. Thank you, Sean. Quad has successfully faced adversity before, and at this time it's no different. We have the team and a time-tested disciplined approach to navigate change and ensure we transition into a post-COVID-19 environment as a stronger company. As the economy starts to turn back on, marketing and advertising investments will be reprioritized. Due to our impactful client relationships, leadership expertise, Quad 3.0 strategy which is our unique integrated marketing platform, and financial strength, we stand to benefit whether this is a gradual or rapid recovery. In the meantime, we continue to live in uncertainty, and therefore, we will continue to strive to create a better way for our employees and clients every day. Thank you all for joining us. We'll see you next quarter.

Operator, Operator

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.