Earnings Call Transcript - SPXC Q1 2022

Operator, Operator

Thank you for standing by. And welcome to the SPX Corporation's First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. Please also note the risk factors in our most recent SEC filings, including our disclosures related to the ongoing COVID-19 pandemic.

Paul Clegg, Vice President, Investor Relations and Communications

Thank you, and good afternoon, everyone. Thanks for joining us. With me on the call today are Gene Lowe, our President and Chief Executive Officer; and Jamie Harris, our Chief Financial Officer. A press release containing our first quarter results was issued today after market close. You can find the release and our earnings slide presentation as well as a link to a live webcast of this call in the Investor Relations section of our website at spx.com. I encourage you to review our disclosure and discussion of GAAP results in the press release and to follow along with our slide presentation during our prepared remarks. A replay of the webcast will be available on our website until May 11. As a reminder, portions of our presentation and comments are forward-looking and subject to Safe Harbor provisions.

Gene Lowe, President and Chief Executive Officer

Thanks, Paul. Good afternoon, everyone, and thank you for joining us. On the call today, we'll provide you with a brief update on our consolidated and segment results for the first quarter. We'll also provide an update to our full year guidance, which includes the impact of our most recent acquisition. Now I'll touch on some of the highlights from the quarter. We had a stronger-than-anticipated start to the year, exceeding the overall expectations that we laid out during our last call in February. As expected, we continue to see challenges related to production and labor, but we've also seen improvements throughout the quarter and expect further improvements during the remainder of the year, particularly in the second half. During the quarter, we continued to execute on our value creation framework with another strategic acquisition that further builds and strengthens our age to navigation or AtoN business in our Detection & Measurement segment. We believe that International Tower Lighting, or ITL, is an excellent strategic addition to our existing AtoN platform. Today, we are updating our full year guidance for the acquisition of ITL, which we completed on March 31. We are on track to achieve solid earnings growth for the full year, approximately 16% at the midpoint of our updated range. As a reminder, when we initiated our 2022 guidance, we indicated that Q1 would be low versus the prior year due to the timing of certain project revenue in Detection & Measurement and the impact of a customer rate case on our ULC business. For the quarter, our operational outperformance versus expectations was due to upside in our location and inspection and transportation platforms, including the impact of some earlier-than-anticipated transportation deliveries. Overall, we continue to see strong demand across our markets, and managing production constraints remains a key driver of our full year performance. In summary, I am pleased with our results for the quarter and our positioning for the future with significant capital availability and attractive M&A pipeline and several ongoing organic growth and continuous improvement initiatives. SPX is poised to continue driving value for years to come. As always, I'd like to touch on our value creation framework. We continue to make progress in a number of areas during Q1. Our digital initiative progressed further during the quarter, particularly in our Location & Inspection platform, where the value proposition of our data offerings is gaining significant traction with utilities and other customers. Our continuous improvement, or CI, initiatives remain critical to our management of the current supply chain and labor constraints as well as our integration processes for new acquisitions. Several of our CI initiatives over the last two years have been focused on throughput and sourcing, which have helped us to navigate the current environment. During Q1, we saw the benefit of these initiatives and the ability of our businesses to meet customer demand in the face of continued challenges. Our ESG initiative also continues to gain traction and shares many benefits with our CI initiatives. As an example, our primary U.S. cooling plant drove savings in net input costs when it invested in a recycling process to eliminate 950 tons per year of wood waste from pallets and crates. We also worked with a third party to transform 625 tons per year of PVC scrap into eco-friendly stacking material. We also continue to advance our growth initiatives in Q1, further building out our AtoN platform with the acquisition of ITL. ITL adds approximately $18 million of annualized revenue to our Detection & Measurement segment at accretive margins. It strengthens our terrestrial lighting business, Flash Technologies, with a broader set of high-quality obstruction lighting as well as parts and services, including value-added monitoring and communications. We are very pleased to welcome the ITL team to the SPX family. Since our first acquisition within our AtoN platform in early 2019, we have transformed a roughly $50 million North American obstruction lighting business into a $150 million global end-to-end age navigation market leader. With our enhanced scale, global presence, and broad technology and product expertise we offer our customers greater value-added solutions that are helping us win in our end markets. Before moving on to Jamie's discussion of our results, I'd like to take a moment to review our capital deployment strategy. Since early 2021, when we committed to the process of selling the Transformer Solutions business, we have made four highly strategic acquisitions within our HVAC and Detection & Measurement segments, ECS, Cincinnati Fan, and ITL. These additions expand our market presence and our growth and margin profile while creating significant opportunities to benefit our customers, employees, and shareholders.

James Harris, Chief Financial Officer

Thank you, Gene. As Gene noted, our adjusted EPS of $0.40 exceeded our internal model and previously communicated expectations. As discussed last quarter, our Q1 results were constrained by the timing of project orders in contact and the impact of a rate case in our ULC business. In addition to the segment income drivers, which I will review later, some below-the-line items had a modest impact on our year-on-year earnings, including lower corporate and interest costs and a higher tax rate. Overall, we are pleased with our performance for the quarter and believe we are well positioned for the full year 2022. A review of our adjusted segment results reflect stronger-than-anticipated performance, but as expected, with an overall decline in segment income and margin when compared to the prior year. Revenues increased 6.9%. Revenues from the acquisition of Sealite, ECS, and Cincinnati Fan accounted for 9.9%, while our organic revenues decreased 2.5%. As anticipated, organic revenue decreased due to lower Detection & Measurement revenue, although it was better than expected. This was partially offset by price increases. Price cost was a modest margin headwind for the quarter. For the full year, we currently anticipate price cost to be a modest tailwind. The lower organic revenue, combined with production constraints in HVAC, drove a decline of $7.4 million in segment income and a 350 basis point decline in margins. Segment revenue, income, and margins reflect the blended impact of acquisitions and lower overall organic revenue. Let's now review the details of our segment results. In our HVAC segment for the quarter, revenues increased 10%, driven largely by our acquisition of Cincinnati Fan and a modest organic increase. While overall demand was strong across our end markets, the impact on our results is moderated by supply chain challenges, primarily in heating and labor in both heating and cooling. Organically, cooling revenue declined modestly with stronger pricing offset by a moderate decline in volume. Heat revenue grew solidly with strong revenue and strong growth in revenue largely due to pricing, partially offset by lower electrical heating volume and revenue. Adjusted segment income and margin decreased by $2.4 million and 240 basis points. As mentioned, while managing these constraints remains a critical factor in our full year performance, we have seen and continue to see some improvement in both areas. In Detection & Measurement, revenues were up 2.2% year-over-year. The acquisitions of Sealite and ECS drove a 10.3% increase, while organic revenues declined 7%. We also experienced a higher-than-typical currency impact due to the strengthening U.S. dollar, a 1% translation headwind. As we indicated would be the case, the decline in organic revenue was due to the timing of Comtech project shipments and lower ULC revenues. Even so, the performance for Q1 exceeded our expectations due to strong locator sales and early delivery of transportation projects initially anticipated for midyear. Adjusted segment income decreased $5 million, while margins decreased 480 basis points due to the lower revenue, particularly the timing of contact projects, which carry high incremental margins. For the remaining quarters of the year, we continue to expect higher year-on-year segment income. Overall, we continue to see significant demand in both our run rate and project businesses. We see the primary driver of full year results for the Detection & Measurement segment being the timing of project orders and shipments. Turning now to our financial position at the end of the quarter. Our balance sheet remains strong, and we continue to have more cash than debt. Notable cash uses this quarter included a $42 million acquisition of ITL, strategic investments in inventory associated with managing supply chain constraints, and various other items associated with discontinued operations and reducing our exposure to legacy liabilities. For the full year, we continue to anticipate a solid free cash flow performance with the bulk of cash generated in the second half of the year. Overall, our balance sheet and available liquidity place us in a strong position to continue our organic and inorganic growth initiatives. As a reminder, we have a $100 million share repurchase authorization. We have in place a program under which we may engage in opportunistic share repurchases included on the open market as part of our capital allocation policy. Moving on to guidance. We have updated our full year 2022 guidance to reflect the ITL acquisition, which we anticipate will add approximately $0.05 per share to EPS based on nine months ownership. While our prior guidance included a modest amount of direct revenue exposure, we have removed this from our current guidance, offset by better operational execution trends. We now estimate adjusted earnings per share in the range of $2.55 to $2.85. This represents an increase of about 16% at the midpoint, $2.70 compared with 2021 adjusted EPS of $2.33.

Gene Lowe, President and Chief Executive Officer

Thanks, Jamie. We continue to monitor and manage through macro risks, including supply chain, input cost inflation, labor, and the exacerbating effects of geopolitical tensions and regional pandemic restrictions. We also remain encouraged by the strong level of demand and the positive trends we are seeing in our end markets. These include growing opportunities related to spending on infrastructure and digital offerings and the efficiency benefits they provide in the skilled labor shortage market. In HVAC, several macro indicators point to continued strength in non-residential activity, particularly in the U.S. as they pertain to our cooling and commercially focused heating businesses. In our boiler business, which encompasses both residential and non-residential products, we continue to see strong order demand across the board. In Detection & Measurement, locator demand continues to reach new levels of strength and to benefit from our internal growth initiatives. Overall, AtoN demand remains steady. We're also seeing growing interest in our innovative communications intelligence solutions. We're assessing the timing of potential customer needs. In summary, I am pleased with our better-than-expected Q1 performance and proud of the way our team has continued to execute on our initiatives for future growth. I'm excited about our recent acquisition of ITL, which further extends our AtoN platform and creates additional growth opportunities and value for our customers. I'm also encouraged by our setup for the remainder of the year while remaining vigilant in addressing the current macro risks. With a strong balance sheet and a highly capable, experienced team, I'm looking forward to the opportunities that lie ahead as we continue to create and deliver value for shareholders. And now I'll turn the call back over to Paul.

Paul Clegg, Vice President, Investor Relations and Communications

Thanks, Gene. Operator, we are ready to go to Q&A.

Operator, Operator

Our first question will come from the line of Damian Karas from UBS. Your line is open.

Damian Karas, Analyst

Hi, good evening, guys.

Gene Lowe, President and Chief Executive Officer

Hey, Damian.

Damian Karas, Analyst

Gene, you mentioned that you're still facing challenges in the supply chain, but you're noticing some signs of improvement. Could you elaborate on that? Where are you seeing the improvements, and where do you still find it difficult?

Gene Lowe, President and Chief Executive Officer

Yeah. I think at a high level, what I would say is internally what we've done and how we've managed, I'd say that we feel very good about the actions that we've taken and the countermeasures we're putting in place from a whole host of different levers we've been pulling from investing in some safety stock, engineering alternative component solutions, looking at our reorder rates in terms of how we manage our orders with data and analytics across all of our businesses. There's a lot of levers that we have pulled. And I'd say that combined with what we're seeing is just a little bit of modest improvement in the market overall. I'd say the one item that would be a headwind that we are seeing right now would be some of the China lockdown in Shanghai. But Jamie, you spent an enormous amount of time on this. Do you want to give some color here?

James Harris, Chief Financial Officer

Yeah. Thanks, Gene. Yes, we are seeing some modest improvements. If you look back, we really felt supply chain more prevalent in our cooling, which I'll include some labor there, as well as some stainless in our heating with just general components. On the D&M side, we have managed it very well. It really hasn't caused any disruptions. We continue to do that. Gene mentioned some of the kind of operational steps that we've taken. You'll notice on our balance sheet an investment in some safety stock. Year-over-year, we have about $22 million, $23 million more investment in inventory. That was intentional to try to get ahead of some of the areas that we saw some potential shortages coming in. We have not had a lot of disruption from an availability standpoint from Russia-Ukraine situations. You mentioned in China. We are experiencing some slowness in ocean freight. And so that's something we have to be very diligent on in our order times and our lead times, have to go out further than what would typically be the case. But overall, I think we're seeing, again, some modest improvement. If you look at it from a year ago, it's clearly challenged. If you look at it from last Q3 when we first raised this issue in the call, we have seen some improvement there.

Gene Lowe, President and Chief Executive Officer

And I'd also say somewhat correlated, Damian, on the labor side, we are seeing some improvement across our facilities. And a lot of our countermeasures have been making some impact. So yeah, we're also seeing some modest improvement there as well.

James Harris, Chief Financial Officer

And then another thing I might add, if you look at cost, if you go back and look at the items that are prevalent in our supply chain, the year-over-year costs are still up quite significantly. But if you look over the last 90 days, we're seeing some pricing of the underlying commodities go down, with the exception of those items that have been impacted by Russia and Ukraine. Nickel doubled quickly after the first invasion. It's back down. It's up about 20% since that time. Of course, crude oil is up. So those things are directly related. We're seeing some continued price increase. But in many other areas, we're actually seeing some prices come down over the last 90 days, which is encouraging.

Damian Karas, Analyst

That's helpful. This leads to my next question. You mentioned earlier that you expect price cost to be a positive factor for the year, which is interesting given the ongoing inflationary pressures. Have you been aggressive with your pricing, or are you anticipating lower material costs for the remainder of the year? Is this reflected in your updated margin guidance?

James Harris, Chief Financial Officer

I would say we have been aggressive on price. Last year was challenging for everyone in terms of keeping up with rising costs, but we have found a solid rhythm. We have been proactive in addressing costs with our customers, especially since highly engineered products are often custom ordered. This situation gives us some enhanced pricing power in the market. However, we have noticed some declines in costs over the past 90 days, even with base commodities. We still have some backlog to navigate, but the positive aspect is that our backlog has increased significantly year-over-year. There is still backlog to address that carries some pricing pressure. Regarding costs decreasing, we are considering that in our guidance. We are aware of the factors that could cause price increases and availability, as well as the potential for cost reductions, and all of that has been factored into our guidance. I would say we are optimistic, but there is still a lot of work ahead.

Damian Karas, Analyst

Great. Thanks for the details. I’ll get back in queue.

James Harris, Chief Financial Officer

Thank you.

Operator, Operator

Our next question will come from the line of Bryan Blair from Oppenheimer. Bryan, your line is open. Bryan Blair from Oppenheimer. All right. Our next question will come from the line of Steve Ferazani from Sidoti. You may begin.

Steve Ferazani, Analyst

Hi, good evening, Gene, Jamie. I wanted to ask. It sounds like demand remains very healthy. I'm trying to think about risks of a rising rate environment and impact down the road on demand. I know you have significant aftermarket exposure, significant infrastructure exposure, which helps into 2023. But how are you thinking about the demand equation and maybe particularly on non-resi construction in the environment where you appear to be anchoring?

Gene Lowe, President and Chief Executive Officer

Yeah, sure. Steve, I'll take that. I think, as you know, if you think about our HVAC business, I would say it's in a very healthy position. So this is approximately a $900 million business. More than $700 million of that is non-resi, and all of the submarkets that would be a part of that, hospitals, data centers, commercial. If you look at the Dodge Index, the latest projections are about 9% growth in '22 and around 11% growth in '23. Additionally, some of the more leading indicators, the more canary in the coal mines there also look positive. That would be the Dodge Momentum Index, the ABI, the architectural billings. So overall, I would say we feel good. Obviously, we have to keep our eyes on the macro. But if I look across our HVAC businesses, we feel very solid. The other question that we always look at on our hydronics side, our boiler side, is the stocking of the channel, is the channel overstocked, understocked. And we actually feel like we're in a good position there. The channel is very much wanting more of our product and to be ready for this year. That's something we have to keep our eyes on in 2023 to make sure the pull-through demand is there. But as you know, a good chunk of that, a big portion of that business is largely replacement. So when I sit and look at the HVAC segment, I actually feel really good about what we're seeing over the next 1.5 years with how things are forming in front of us. On the D&M side, I would say it's overall very healthy. The run rate is very solid. Our projects are strong and our backlog supports '22. And I would say what I see today sets us up very well for '23 and beyond. Some of the project businesses, I'll call out transportation and context, specifically have a higher amount of activity. And we have some larger wins and also some impacts from the infrastructure bill that we see starting to manifest. So I think when I look at D&M, I actually feel very positive about where that's going. Now I'll caution all of this with if everything were to slip into a recession, that's something we have to keep our eyes on. As you know, from when COVID hit, also when we've looked at this in 2008, our businesses tend to be more resistant to recessions because a lot of our products are safety products, are mandated by government regulations. And so the products are less discretionary. That's not the case across all of our businesses, but there's a substantial amount. So as a reminder, when we went through the first year of COVID, actually, our earnings were flat despite a lot of markets facing some real headwinds. So where we sit today, we feel good. And we are keeping our eyes on if there is any economic impacts and smartly managing that if that were to happen.

Steve Ferazani, Analyst

Fantastic. And if I could then use that as the framing device for the question in terms of pipeline. What's out there? And do you see any impact on maybe lower prices for certain acquisitions given the environment or certainly the idea that there's more risks out there?

Gene Lowe, President and Chief Executive Officer

That's a good question. Overall, we feel really positive about our growth strategy. We completed ITL, which is our 11th deal and a great strategic fit due to their strong technology and monitoring capabilities. Our average valuation across these 11 deals has been 10.5 times pre and 8.5 times post, and we feel good about that pricing, having maintained discipline. I don't anticipate any changes below what we've observed. In fact, in our Detection & Measurement businesses, particularly for larger sizes, we see significantly higher multiples. We are careful and focused in our platform development. When I look back, our HVAC and Detection & Measurement businesses were valued around $700 million at the time of the spin, 6.5 years ago, and today we stand at approximately $1.4 billion, supported by a remarkably strong balance sheet. We have a great opportunity ahead of us. The areas with significant activity appear to be in the Location and Inspection platform, where we see potential for continued development. Our cooling and engineered air quality segments also present promising growth opportunities. Additionally, our Comtech business, which completed its first acquisition last year, is opening up new possibilities, and we are noticing synergies there. Overall, these three platforms represent attractive prospects for us. We are confident and believe we are just beginning to realize our value creation potential.

Steve Ferazani, Analyst

Great. Thanks for the color, Gene.

Gene Lowe, President and Chief Executive Officer

Sure.

Operator, Operator

Our next question will come from the line of Walt Liptak from Seaport. You may begin.

Walter Liptak, Analyst

Hey, thanks. Good evening, guys.

Gene Lowe, President and Chief Executive Officer

Good evening.

Walter Liptak, Analyst

So I would like to ask first about the HVAC business. It sounds like the macro is going in the right direction. So at this point, now that we've got three-four months under our belt, how are you feeling about the guidance range? Is there enough macro out there, enough projects that are filling up the queue that you could be towards the mid-range or high part of the range? Any thoughts there?

Gene Lowe, President and Chief Executive Officer

And you're talking about engineered quality or Cincinnati Fan? Is that what specifically you're talking about?

Walter Liptak, Analyst

I’m referring to the HVAC segment overall, specifically the $855 million to $890 million in sales. How are the projects progressing? It seems like the macroeconomic situation is improving. My question is, what could lead us to the lower end of that range, and what factors could push us toward the higher end of the HVAC guidance range?

Gene Lowe, President and Chief Executive Officer

Yeah. Why don't I start there? I would say on the demand side, and as you'll see in our bookings and our backlog, we are winning in the market. And we feel very, very good about the demand profile as well as the value proposition of our products. And I thought you said EAQ, engineered air quality, our newest product line, where we're also seeing very strong demand there since we've taken them over the past quarter. So I would say the constraining factor for us is not going to be orders. It's going to be getting the product out the door.

James Harris, Chief Financial Officer

I agree with Gene that the potential for us to hit the low end of our range could be due to a slight slowdown in the macro economy. However, we have a substantial number of orders booked, which we can fulfill. The challenges lie in securing labor to enhance productivity and issues within the supply chain, which could bring us down to that lower end. On the other hand, positive developments in these same areas could drive us toward the higher end. If we can maintain the upward momentum in labor availability and see improvements in the supply chain, that would elevate us. Additionally, if we experience a decrease in prices for some of our key components, it would be beneficial. Currently, we are facing margin constraints due to a backlog that includes existing pricing and costs set last fall. A reduction in some of our costs would certainly aid us in reaching the upper end of our range.

Walter Liptak, Analyst

Okay. Great. Thanks for that. And switching over to the D&M segment. What do you attribute the locator growth to? And is that something that's sustainable in the second quarter, second half?

Gene Lowe, President and Chief Executive Officer

I feel very confident about the Location & Inspection platform, which is our leading platform in Detection & Measurement, accounting for over half of our segment. Our locators, including ground penetrating radar and our Shanstead brands, have performed very well. They've shown great innovation and made significant progress in digital solutions. We launched a new digital tool for our largest customer that is performing excellently, generating strong interest and activity with other potential customers. Regarding our CUES brand, particularly in underground robotics, we introduced a cloud offering last year that has attracted double-digit customers and continues to grow even faster this year. Overall, I am optimistic about our current position and the opportunities ahead.

Walter Liptak, Analyst

Okay. Great. Okay. And also in D&M, you mentioned the project work that there's a good funnel there for projects. If we do see orders come in, would those be for shipment at the end of the year, 2023? What do you think the timing could be?

Gene Lowe, President and Chief Executive Officer

Some of the larger opportunities we are observing, and those we are advancing well with, include an increased demand for transportation, which has raised the run rate. We are also noticing a rise in mid-sized projects, typically ranging from $1 million to $5 million. Additionally, there is increased activity in very large projects, those over $15 million, which we categorize as mega projects. We feel optimistic about several of these. Specifically, we are in the process of pursuing several mega projects that we expect to be awarded and booked this year. However, the revenue from these will likely span across 2023 and 2024, providing a significant boost to our transportation business. Conversely, our Comtech business has experienced stagnant growth. Nevertheless, we have observed a positive shift with larger projects recently. Overall, we are confident about the projects lined up for 2022, and looking ahead to 2023 and 2024, we believe these will serve as a strong tailwind for us.

Walter Liptak, Analyst

Okay, fine. Okay. Thank you.

Operator, Operator

Our next follow-up will come from the line of Damian Karas from UBS. You may begin.

Damian Karas, Analyst

Hey. I have a few follow-up questions. In the last few quarters, you mentioned the backlog. Could you provide us with an update? Are you starting to reduce that backlog or still expanding it?

James Harris, Chief Financial Officer

We are addressing the backlog sequentially. Our organic backlog has increased by 10% to 15%, which is encouraging. We have been able to reduce some of the backlog, and the positive news is that we have replaced it with new orders. For instance, our order base on the heating side of the business remained relatively stable. Transitioning from a strong demand quarter to a strong order quarter in the first quarter gives us confidence in the demand. Overall, our order book is in good shape. While we are reducing the backlog, it's not happening as quickly as we would prefer due to labor and component constraints. However, we're seeing good growth primarily driven by demand, and our production remains solid.

Gene Lowe, President and Chief Executive Officer

There was a significant impact from COVID in January, causing disruptions due to quarantines and related challenges. However, our current tracking for February, March, and April shows we are reducing the backlog. We believe we are on a more positive trend. We continue to succeed in our markets and are starting to address the backlog, which did increase. The good aspect is we are winning more business, but we still need to ship those orders. We are making progress in speeding that up.

Damian Karas, Analyst

Got it. Makes sense. And then, Jamie, you mentioned if you pay down the debt, that's $0.11 of additional EPS. And then you kind of dangle this carrot out there on the $100 million of share repurchase authorization when you deem appropriate. So I'd just ask you guys, when is the appropriate time? Stocks corrected a good bit. You've got net cash on the balance sheet. When would be an appropriate time?

James Harris, Chief Financial Officer

That's a great question. We've received a lot of feedback about share repurchases, and we are paying attention to that ourselves. The stock is down about 25% to 30% from its peak. We believe the stock has solid value. We have not only received the authorization but also established the mechanisms for execution. We have certain price targets in mind for this, and we will monitor the situation closely and participate in the open market if those targets are reached.

Gene Lowe, President and Chief Executive Officer

And what I would add, Damian, is that our focus since the spin has been on investing for growth. We believe we have a strong momentum here. With the completion of our power asset sales, we have some appealing segments. However, we have over $1 billion on our balance sheet. I believe that share repurchase is a sensible addition to our capital allocation strategy. While the majority of our investments will continue to focus on growth, given our current share price, incorporating share repurchase into our capital allocation program makes a lot of sense.

Damian Karas, Analyst

Thanks again. Have a great evening.

Gene Lowe, President and Chief Executive Officer

You too, Damian.

James Harris, Chief Financial Officer

Thanks, Damian.

Operator, Operator

Thank you. I'm not showing further questions in the queue. I'd like to turn the call back over to Paul Clegg for any closing remarks.

Paul Clegg, Vice President, Investor Relations and Communications

Okay. Thank you, everybody, for joining us. And we look forward to catching you up again next quarter. Have a great evening.

Operator, Operator

This concludes today's conference call. Thank you. You may now disconnect. Everyone, have a good day.