Sterling Infrastructure, Inc. Q2 FY2025 Earnings Call

Good morning, ladies and gentlemen, and welcome to the Sterling Infrastructure Second Quarter Webcast and Conference Call. This call is being recorded on Tuesday, August 5, 2025. I would now like to turn the conference over to Noelle Dilts. Please go ahead.

Good morning to everyone joining us, and welcome to Sterling Infrastructure's 2025 Second Quarter Earnings Conference Call and Webcast. I'm pleased to be here today to discuss our results with Joe Cutillo, Sterling's Chief Executive Officer; and Nick Grindstaff, Sterling's Chief Financial Officer. Joe will open the call with an overview of the company and its performance in the quarter. Nick will then discuss our financial results and guidance, after which Joe will provide a market and full-year outlook. We will then open the call up for questions. As a reminder, there are accompanying slides on the Investor Relations section of our website. These slides include details on our full-year 2025 financial guidance. Before turning the call over to Joe, I will read the safe harbor statement. The discussion today may include forward-looking statements. Actual results could differ materially from the statements made today. Please refer to Sterling's most recent 10-K and 10-Q filings for a more complete description of risk factors that could affect these projections and assumptions. The company assumes no obligations to update forward-looking statements as a result of new information, future events or otherwise. Please also note that management may reference EBITDA, adjusted EBITDA, adjusted net income or adjusted EPS on this call, which are all financial measures not recognized under U.S. GAAP. As required by SEC rules and regulations, these non-GAAP financial measures are reconciled to their most comparable GAAP financial measures in our earnings release issued yesterday afternoon. Our discussion of all results today, including revenue and backlog, refer to figures that adjust prior period results to conform to the current accounting of our RHB JV, unless otherwise noted. As a reminder, at year-end 2024, there was a change in the accounting treatment for the JV such that we no longer consolidate revenue and backlog, but it does not change our share of EBITDA that we recognize from the JV. Our press release and filings also include a reconciliation of these adjustments. All comparisons are to the prior year quarter unless otherwise noted. Please also note that our guidance does not include any contributions from the previously announced planned acquisition of CEC Facilities Group, which has not yet closed. I'll now turn the call over to our CEO, Joe Cutillo.

Thanks, Noelle. Good morning, everyone, and thank you for joining today's call. I'm excited to talk about another great performance by the Sterling team as we continue to drive bottom line growth at a rate roughly double top line growth. Revenue grew 21% in the quarter, fueled by growth of over 29% in our E-Infrastructure Solutions segment and 24% in our Transportation segment. We grew adjusted earnings per share by 41% to $2.69 and delivered adjusted EBITDA of $126 million, an increase of 35%. Our gross profit margin expanded 400 basis points from the prior year to reach 23.3%. Additionally, operating cash flow generation in the quarter was again very strong at $85 million. Looking to the future, we remain extremely positive on our outlook. We are in the markets and geographies that we believe have strong sustainable growth that will continue over the next several years. We will further build upon the strong base we have established and remain focused on pursuing the most attractive and highest return opportunities. Our backlog position and visibility support our confidence in the future. Backlog at the end of the quarter totaled $2 billion, a 24% year-over-year increase. E-Infrastructure Solutions backlog of $1.2 billion was up a very strong 44%. Our multiyear visibility is further supported by our pipeline of future phase opportunities tied to our current projects, which remain at approximately $0.75 billion. When you take both our signed backlog and future phase work, we have visibility into a pool of E-Infrastructure revenue approaching $2 billion. Adding to our excitement is our previously announced agreement to acquire CEC Facilities Group. CEC will add mission-critical electrical and mechanical services to the Sterling portfolio. Combined with our best-in-class site development capabilities, this addition will allow us to deliver higher value end-to-end E-Infrastructure solutions to our customers. We believe that this service combination will allow us to capture even more value across the full life cycle of a facility, accelerate project timelines, create stickier customer relationships and expand our geographic footprint. The Sterling Way, which is our commitment to take care of our people, our environment, our investors and our communities, while we work to build America's infrastructure remains our guiding principle as we execute our strategy and grow the company. Now I'd like to discuss our segment results in more detail. In E-Infrastructure, second quarter revenue grew 29% over prior year and over 42% sequentially. The data center market was again the primary growth driver in the quarter as revenue from this market more than doubled year-over-year. Adjusted segment operating income grew 57% and adjusted operating margins reached 28% and an increase of over 500 basis points. This was driven by our continued shift towards large mission-critical projects, including data centers, where our superior project management and ability to finish jobs on or ahead of schedule are extremely valuable to our customers. Mission-critical data centers and manufacturing work continue to represent the vast majority of our E-Infrastructure backlog. However, we saw very strong growth in e-commerce distribution backlog in the quarter. Moving to Transportation Solutions. Second quarter revenue grew 24% and adjusted operating profit grew 78%, driven by strong market demand and the benefit of a mix shift towards higher margin services. We ended the quarter with Transportation Solutions backlog of $715 million, a 5% year-over-year increase. Sequentially, segment backlog declined 17%, which reflects the strong revenue burn in the quarter combined with the seasonally slower awards in the second quarter, which has historically been the low point of the year. Additionally, the wind down of our Texas low-bid heavy highway operation will impact backlog but ultimately benefit segment margins. Shifting to Building Solutions. In the second quarter, segment revenue declined 1% and adjusted operating income declined 28%. Adjusted operating margins in the quarter were 11%. Overall demand for homes has been impacted as potential buyers struggle with affordability challenges. Revenue from our legacy residential business declined 11% driven by softness in the overall housing market. Even with these headwinds in Building Solutions, the strength of Sterling's diversified portfolio and strategy to focus on growth in high-margin end markets enabled us to deliver another record quarter. With that, I'd like to turn it over to Nick to give you more details on some of our financial metrics and full-year guidance. Nick?

Thanks, Joe, and good morning. First, I would like to say that I'm excited about joining the Sterling team. This is a really great time for the company, and I'm looking forward to helping guide our financial strategy as we continue to grow. Now I'll shift to our consolidated backlog metrics. Our second quarter backlog totaled $2.01 billion, a 23.8% increase from the prior year second quarter. We closed the quarter with combined backlog of $2.25 billion, which was up 17.6% from 2Q '24 and up slightly sequentially. Second quarter 2025 book-to-burn ratios were 0.77x for backlog and 1.03x for combined backlog. Year-to-date book-to-burn ratios were 1.36x for backlog and 1.47x for combined backlog. Moving to our cash flow metrics. Cash flow from operating activities for the first 6 months of 2025 was a strong $170.3 million compared to $170.6 million in the prior year period. Cash flow used in investing activities for the first 6 months of 2025 included $28.6 million of net CapEx and $37.9 million for acquisitions, including Drake Concrete. Year-to-date cash flow from financing activities was a $68.7 million outflow, primarily driven by first quarter share repurchases of $43.8 million at an average price of $128.98 per share. We did not repurchase any additional shares in the second quarter. The remaining availability under the existing repurchase authorization is $85.6 million. We are in great shape from a balance sheet perspective. During the quarter, we announced an amendment to our 2019 credit agreement that extended the maturity of the credit facility to June 2028, expanded the size of the facility, improved rates and provided additional flexibility. We ended the quarter with a very strong liquidity position, consisting of $699.4 million of cash and debt of $298.2 million for a cash net of debt balance of $401.2 million. At close, the CEC transaction is expected to utilize $450 million of cash on hand. Our $150 million revolving credit facility remained undrawn during the period. Now I'd like to discuss our guidance. As we look ahead to the remainder of 2025, the strong tailwinds behind our business position us for another record year at Sterling. We are increasing our guidance ranges to revenue of $2.1 billion to $2.15 billion, which is a slight increase at the midpoint relative to our previous guidance range. Net income of $243 million to $252 million, diluted EPS of $7.87 to $8.13, adjusted diluted EPS of $9.21 to $9.47. This represents an 8% increase at the midpoint of our previous guidance range. EBITDA of $406 million to $421 million, adjusted EBITDA of $438 million to $453 million. This represents a 6% increase at the midpoint of our previous guidance range. Please note that our guidance does not include any contribution from CEC as we continue to work towards closing. Our expectations for CEC's full-year performance are unchanged. From a financial standpoint, we are in an excellent position to continue to take advantage of both organic and inorganic growth opportunities in the years ahead. Now I will turn the call back to Joe.

Thanks, Nick. As we look to the future, we remain very bullish on the multiyear opportunity in each of our markets. Our strong backlog, future phase opportunities and discussions with our customers contribute to our confidence. In the E-Infrastructure Solutions, we anticipate that the current strength in data center demand will continue for the foreseeable future. Our customers are discussing multiyear capital deployment plans and are focused on how to align with the right partners to support these plans. We are getting pulled into new geographies by our customers, including Texas, and believe that the pending CEC acquisition will only accelerate our footprint expansion. In the manufacturing market, we're seeing a fairly steady pace of activity in 2025. As we look out to 2026 and 2027, there remains a very big pool of mega projects on the horizon. This would include planned semiconductor fabrication facilities. Given the complexity involved with the development, we believe it will take some time before awards start to flow. The e-commerce market has strengthened significantly in 2025. We have built a sizable level of backlog and believe we could see additional awards in the back half of the year. Together, these dynamics support strong growth opportunities over a multiyear period. For 2025, we expect to deliver E-Infrastructure revenue growth of 18% to 20% and adjusted operating profit margins in the mid- to high 20% range as compared to 23.7% in 2024. In Transportation Solutions, we are approaching the final year of the current federal funding cycle, which concludes in September of 2026. We have built over 2 years of backlog and continue to see good levels of bid activity. For 2025, we anticipate continued growth in our core Rocky Mountain and Arizona markets. The downsizing of our low bid heavy highway business in Texas is progressing according to plan resulting in some moderation of Transportation Solutions top-line and backlog, but should drive meaningful margin improvements as we move through the year. We now expect Transportation Solutions revenue growth to be in the low to mid-teens on an adjusted basis for 2025. We forecast adjusted operating profit margins in the low teens compared to 9.6% in 2024. In Building Solutions, we continue to believe the business is well positioned for growth over a multiyear period. Our key geographies of Dallas-Fort Worth, Houston and Phoenix are expected to see continued population growth driving new home demand. Additionally, there is a significant opportunity for share gain in Houston and Phoenix. In the near term, we are anticipating a continuation of soft market conditions driven by the affordability challenges. For full year Building Solutions revenue, we forecast a mid- to high single-digit decline. We anticipate adjusted operating margins in the low double digits compared to 14.8% in 2024. On the acquisition front, closing the CEC transaction is the top priority, but we are continuing to look for small to midsized acquisitions that are the right strategic fit to enhance our service offering and geographic footprint. The midpoints of our increased 2025 guidance ranges would represent 13% revenue growth as adjusted for RHB, 32% adjusted EPS growth and 30% adjusted EBITDA growth. With that, I'd like to turn it over for questions.

The first question comes from Louie Dipalma at William Blair.

One of the big trends coming out of earnings season thus far has been the major increases in CapEx from the data center hyperscalers. Investors are wondering, is a significant portion of these projects expected to land in your core markets? And in the past, you've provided qualitative color on the data center book-to-burn. Is it fair to assume that the book-to-burn remained above the 1x level?

Yes. So let me start with the first one. We think we're positioned extremely well for a large percentage of the data center capital that's coming out. As we talked about on the call, we are very actively looking at expanding into Texas. We see some very nice opportunities there. And as we go into 2026 and 2027, we'll start looking to expand up into the Northwest. We think there's going to be some sizable projects based on talking to our customers out in those future years up in the Midwest or upper Northwest market by geography. So yes, I think we're positioned extremely well today. And I will tell you, from a strategic planning standpoint and what we're working on, we are following those customers into some new markets. On the data center front, we saw very good bookings again in the quarter. Data centers are now 62% of our total backlog and E-Infrastructure. And that's up a couple of points, but it's even more impressive when you look at the growth of our e-commerce distribution businesses in the quarter. We were up almost 700% in the quarter for backlog in e-commerce.

Great. And related to those comments in terms of expansion into Texas and the Northwest, do you need any additional acquisitions for that to happen? Or is the general blueprint to expand organically?

Yes. I think we'll do both. We've got very nice reach out of Utah. We almost touch some of the far Northwest markets out of our Utah business today. So it's another few hundred miles for us to go. But we're also looking at potential acquisitions in those markets. Similarly with Texas, believe it or not, West Texas is much closer to our Utah operation than people realize with the size of Texas. So we can strike and do work in West Texas and we've bid work and won work all the way over to kind of the Dallas, Oklahoma region. So we have the ability to do that organically. But long term, we either need to establish a beachhead in Texas and up in the Northwest. So we're not traveling quite as far or make an acquisition. So the bottom line is we're looking at both.

Great. And are there any expectations in terms of the timing in terms of how long will it take for Sterling to start winning large jobs in the Texas and Northwest markets as you already have customer relationships, but how long will it take to hire the necessary workforce?

Yes. I think the Northwest is further out. The projects haven't come there, they're future projects. So we're, I'll call it, preplanning 12 to 18 months before those projects start to get released. But in Texas, I'd be disappointed if we didn't have some wins for the end of this year with the bid activity that we're seeing and what we're being asked to put project plans together for. So we're excited about the Texas market that will only accelerate with bringing on CEC once we can start talking to customers jointly. I think we're going to see some very nice not only opportunities but some very nice wins in Texas. Similarly, I don't think it's going to be very long before we start pulling them into the Southeast more and more with our existing customer base.

The next question comes from Brent Thielman at D.A. Davidson.

Great quarter. Joe, maybe just sticking on E-Infrastructure, especially the margins just continue to surpass expectations here. Could you talk about how these mission-critical projects continue to evolve for you? Maybe just comparing the work you're doing today relative to the work that you're adding to backlog now. Maybe how that or other factors give you conviction just in sustaining or even expanding out these obviously, really impressive margins?

Yes, to clarify, we are very confident that with our current backlog, future phases, and ongoing projects, we will continue to improve our margins. I want to emphasize that while we're not focusing on our existing backlog today, the upcoming projects make me optimistic about our margin expansion. As power increasingly becomes a limiting factor, we are seeing sites grow larger and consist of more phases. Remember, our ability to enhance productivity increases with the size and complexity of these projects. The first site making progress is in Texas, where they are preparing to implement self-contained power related to some mini reactors. Looking ahead to future sites in the Northwest, our customers are discussing 1,000-plus acre locations, driven by the need for power. We appreciate that larger sites with more phases offer us greater margin opportunities. Implementing self-contained power makes it more cost-effective to expand. Whether it's gas, nuclear, or any other solution, the additional cost to grow a data campus by 40% or 50% does not significantly increase the power expenses. This trend is similarly observed in mega projects, such as chip plants, where the complexity and number of phases continue to present us with significant opportunities to improve productivity.

Okay, that’s great insight, Joe. I appreciate it. Can you provide an update on the e-commerce opportunities that appear to be reemerging in the segment? When did they start to positively impact the bottom line for the segment? Are you already executing on those, or is it more of a 2026 occurrence?

Yes. We're in some of the early phases on a couple of these. Several of them will start in the back half of this year and go into 2026. And we think the bid activity will continue through 2026. We had told everybody, this is back in 2023 that Amazon sitting down with some of their key executives at the time had told us that their program would start back up in 2025. We saw our first bid and activity take place in the fourth quarter of '24, which was exciting. We anticipated 2 to 3 projects in total in 2025 that would fall into our footprint. I think we'll end up by the end of this year having 7, 8, maybe even 9 of these projects. That's the good news. The better news is these projects based on what they're building, they're building a bigger warehouse than they have historically done. They're 4 stories, but it's 90-foot tall. The size and scope of these projects compared to our historicals are almost 2x the amount of revenue per project. So that makes it even better for us. So you put all those together, we'll have very nice margins on those, and it's a nice additional tailwind on top of data centers and manufacturing and everything else that we're seeing.

Yes. Understood. Well, maybe at least one on one of the tougher areas right now just on Building Solutions. Obviously, you've got some more challenging end market dynamics there. Maybe also, I'm guessing some poor weather here in the quarter, which I know you didn't call out, but I will. What is the kind of implied organic for the segment going into the second half? Joe, to the extent that you're getting any other feedback from customers or maybe good guys of that story? It'd be interesting to hear as well.

Yes. I mean that's certainly the headwind that we have. I think on a positive front, we're going to remain pretty focused on what can we do to maintain margins there. I think we'll see for the year, we will see double-digit operating income in that even being down double digits on the revenue front. Here's the bottom line. That market certainly is softer than we would like. The second quarter was slightly softer than what we saw than the first. We think we're close to bottom on it and will continue through the back half of the year. And the biggest thing for us is how do we maintain pricing and margins on the work that we have. Now the good news is with the model that we have, we talked about our labor is highly variable. Our labor is all subcontracted. So if volume decreases, we eliminate labor. If it increases, we bring them back. We've continued to see price decreases on material, so that certainly has helped. We don't see any major increases coming forward on the material front. So that will continue to help us. On a positive front, we have not seen the developers or our big customers slow down on their land development, which tells us they are optimistic with the pent-up demand out there once interest rates start to drop once the cost starts coming down for a customer in total, that this thing will take off very quickly. So we're kind of fighting the battle. We think organically, through the back half of the year, it will be down kind of low to mid-teens for the back half. But we get some interest rate drops and a couple of positive things, maybe we could see a strong fourth quarter. We're not betting on it, though. We don't have any of that in our numbers. If anything, I think we're probably very conservative in our forecast versus what we anticipate happening.

The next question comes from Julio Romero at Sidoti.

Maybe staying on E-Infrastructure for a little bit. As these E-Infrastructure projects that you talked about, Joe, down the pipe get larger and larger and become more complex, there's only as far as I know on sterling out there. Is it fair to say that the value they place on your reliability to keep the project on time rises with that complexity? And then what's your level of confidence in securing better pricing that reflects that value premium?

Yes, the increased complexity of these projects does bring more risk, which ultimately benefits us. Certainty is crucial for us. In terms of pricing, we currently receive a slight premium and perhaps we should command an even higher premium. However, our intention is not to exploit the circumstances; we aim to be fair in our pricing, remain loyal to our customers who support us, and enhance our efficiency to compensate. As projects grow larger, we will continue to see improved margins through productivity. Strategically, this positions us to deter new entrants to the market and reduces the willingness of customers to take on risk due to our high upfront prices. This approach places the responsibility on us to excel, integrate new technologies, and find ways to boost our profitability. Regarding CEC, we recently had our quarterly management meeting where our Plateau team shared insights on the significant value of the small acquisition we made in dry utilities and the rapid growth we are experiencing. To illustrate, when discussing data centers, we emphasize the critical nature of time management. We believe we can reduce project timelines drastically. Remarkably, we are currently working on data centers where our dry utility business has completed all installations, including digging, pouring concrete, and finishing, even before the electrician is selected. This highlights how much time and productivity we can save. As I mentioned in the last call, we are seeing a 40% improvement in profitability within that business due to our ability to drive efficiency and perform tasks simultaneously. Additionally, during that meeting, we explored other opportunities. Our Building Solutions business is experiencing a downturn, and we have traveling crews from our commercial division capable of performing concrete work. We are considering utilizing these crews in infrastructure projects for duct banks, which offer even better margins than our Building Solutions. This strategy not only adds value for the customer but also accelerates the process. We are continually examining our operations and driving efficiency across various units. When we focus on margins, it’s remarkable how our different business units can collaborate and generate innovative ideas that enhance profitability and leverage our capacity.

Great answer. Really helpful there. And then you touched on it a little bit as data center CapEx and manufacturing CapEx as that opportunity increases. Can you speak a little bit to the competitive environment? Are you seeing any new entrants kind of trying to do what you do? And then also, could you speak to your competitive positioning a little bit more relative to those potential new entrants? And how the tuck-ins like CEC kind of help you stand out?

Yes, we will always encounter new players in the market from time to time. In the Southeast, for example, there were a couple of meta projects initiated by others that we have since completed. Occasionally, new entrants attempt to gain a foothold. Our main competition really comes from local content. This could involve a local agency or contractor who is required to have licensed personnel or a minimum amount of local labor on a job. This situation presents us with our biggest challenge. Looking ahead, as we expand our electrical and mechanical capabilities through CEC, cost remains crucial to our customers, but speed is even more vital. By integrating our businesses, we believe we can significantly shorten project development time and reduce the overall construction cycle. This added value provides our customers with great certainty, justifying the small premium we charge. So what does this mean for competition? If we can offer this efficiency while others cannot, they are likely to find themselves at a disadvantage and can only compete on price. We don't engage in price wars; instead, we aim for a fair price while providing greater value. As a result, we see CEC as an additional barrier to entry in site development, which we believe will also drive more projects towards the electrical side of our business.

Makes sense. Last one for me, if I could. Just what's your best guess of when CEC closes? And if you could just touch on the pipeline to maybe add more tuck-ins over the near to medium term?

Yes. We're currently compiling a list of potential candidates and have specific strategic focuses in mind. We are interested in expanding geographically into the Southeast and considering growth opportunities in the Northwest. Our partner is currently active in Utah and we are collaborating on a project in Wyoming, demonstrating their ability to grow in our existing locations. Geographically, we aim to expand into the Southeast and eventually move toward the Northwest. In terms of skill sets and capabilities, they have a strong modular operation in Dallas, and there are additional modular capabilities we can incorporate to streamline processes and alleviate labor pressure at job sites, which is advantageous. Moreover, a critical long-term consideration is enhancing service capabilities for the facilities once they are constructed, ensuring we can retain personnel at those locations for extended periods. On the closing front, we are making good progress. We have completed all the main requirements and are now just awaiting states to return licenses and permits. We have submitted everything, and some processes are moving along well; we're approximately 65% to 70% through the necessary steps and anticipate completing the remaining aspects soon. Progress is steady, albeit not as rapid as we would prefer, but there are no significant obstacles—it's primarily about navigating the timeline set by state and local agencies at this point.

Thank you. The next question comes from Adam Thalhimer at Thompson, Davis.

Congrats on the strong quarter. And Nick, welcome to the call.

Thanks.

Joe, can you comment on. So in the E-Infrastructure business, at one point last year, we were talking about small fill-in projects. And I guess the question is, are we at the point where you're able to just better manage the mega projects, the finish dates and the start dates on the next one? You're just to get better manage the timing...

Yes, we are definitely improving our management capabilities. It's amusing to joke about internally, but it's truly beneficial for us. In the past, we mentioned that fill-in projects were typically in the range of $3 million to $10 million. Currently, our team refers to the e-commerce distribution projects, which range from $40 million to $90 million, as fill-in projects. This illustrates how the size and scope of our business have evolved. These projects are assisting us and will continue to do so as they come onboard, helping fill in gaps. However, we are still looking for a greater number of the smaller $5 million to $10 million projects that are quick to complete, allowing us to operate more effectively and efficiently. This was evident in the fourth quarter of last year when, despite expectations for a decline in margins due to fill-in projects, our margins actually increased. This is largely due to the underutilized assets and capabilities we possess. In the Southeast, our assets are being utilized much more than last year. While we are not at full capacity, they are significantly busier, and we are seeing better margins as a result. Conversely, the Northeast has not rebounded as strongly. However, it is promising that several upcoming e-commerce distribution projects in the Northeast are set to start in the latter half of this year, along with a few substantial projects anticipated to begin towards the end of this year and in the first quarter of next year. We are optimistic about securing these contracts in the next quarter. Therefore, we expect a substantial rebound in the Northeast, which will further enhance our margins as we enter the fourth quarter and into the first quarter of next year.

And is it too early...

Adam, it's really nice sitting at the margins we have, knowing they're going up. It's a very comfortable spot right now.

I'm sure. Is it too early to start talking about E-Infrastructure top line expectations in '26?

Yes, a little bit. And the reason is there's a lot of stuff in the back half of this year that was coming. So I don't want to get over my skis one way or the other. But it's going up. It's not coming down. So I'm confident on that. It's just how much.

I'm a bit confused about how the increase in E-Infrastructure work by your transportation subsidiaries will affect the reported results in the transportation solutions segment.

Yes. None of that work is allocated to transportation; it all goes into E-Infrastructure. The margin improvement we're experiencing in transportation is strictly from transportation operations. As we allocate more resources to E-Infrastructure, it may slow our revenue growth in transportation and could also affect our backlog growth in that segment, but this is a positive trade-off. We're effectively exchanging $3 of earnings for every $1 invested. We will continue to pursue this strategy. If transportation margins are sufficient, we will increase capacity in that area, and we can manage both segments. However, my primary focus is on achieving a higher return from our current personnel and equipment. If that means reallocating resources between segments, that's perfectly acceptable.

Thank you. We have no further questions at this time. I will turn the call back over to Joe Cutillo for closing comments.

Great. I want to thank everybody again for joining today's call. If you have any follow-up questions, please reach out to Noelle Dilts. Her contact information can be found in the press release, and I hope everybody has a great day. Thank you.

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