Tidewater Inc Q2 FY2021 Earnings Call

Good morning, and welcome to the Tidewater Reports Results for the 3 Months Ending 6/30/21. My name is Brandon, and I'll be your operator for today. Please note this conference is being recorded. And I will now turn it over to Mr. West Gotcher, Vice President of Finance and Investor Relations. You may begin, sir.

Thank you, Brandon. Good morning, everyone, and welcome to Tidewater's earnings conference call for the 3 months ended June 30, 2021. I'm joined on the call this morning by our President and CEO, Quintin Kneen; our Chief Financial Officer, Sam Rubio; our General Counsel and Corporate Secretary, Daniel Hudson; and our Vice President of Sales and Marketing, Piers Middleton. During today's call, we'll make certain statements that are forward-looking, referring to our plans and expectations. There are risks and uncertainties and other factors that may cause the company's actual future performance to be materially different from that stated or implied by any comment that we make during today's conference call. Please refer to our most recent Form 10-Q for additional details on these factors. This document is available on our website at tdw.com or through the SEC at sec.gov. Information presented on this call speaks only as of today, August 10, 2021, therefore, you're advised that any time-sensitive information may no longer be accurate at the time of any replay. Also during the call, we'll present both GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in yesterday's press release. And now with that, I'll turn the call over to Quintin.

Thank you, West. Good morning, everyone, and welcome to the Second Quarter 2021 Tidewater Earnings Conference Call. Joining me in presenting our prepared remarks, as usual, are Piers Middleton and Sam Rubio. I will open the call with some general commentary on the quarter. Piers will cover the markets in the various geographies in which we operate and then Sam will wrap up the prepared remarks with an overview of the income statement, OpEx, G&A and the balance sheet. And then, of course, we'll open it up for questions. The second quarter is, on a seasonal basis, a relatively strong quarter, with the third quarter being the strongest in the year. This year's second quarter followed that pattern. Piers and Sam will provide the details, but globally, average day rate was up, utilization was up, gross margin was up, operating profit was up. The increases are never as swift as we would prefer, but the sequential quarterly improvement is a good sign that activities are past the pandemic low. Industry-wide, what we saw in 2020 were activity levels coming down dramatically in the third quarter with a substantial number of vessels going off hire. As a result of this incremental oversupply, day rates around the world reset downward and as pre-pandemic contracts rolled off, new contracts rolled on with lower day rates in the first quarter. Now as activity levels are picking up again, we are beginning to claw back the day rate that we lost in 2020. Cash flow for the quarter was again strong. You may recall that accounts receivable bounced up in the fourth quarter of 2020 just as activity levels were coming down, which is not typical. That was due to payment delays from Pemex, which as of June 30, are trending towards normal levels. In the second quarter, we had strong cash flows from that normalization. We also picked up $18.6 million in vessel and other asset proceeds sales as we continued to high-grade the fleet. Feel free to pick the metric that best suits your perspective, be it cash flow from operations, free cash flow, free cash flow before vessel disposals, it's all there in the press release. They're all positive, and we have designed the business architecture incentives to keep it that way. Net debt is down to $4.5 million. We do have the maturity of the 2022 bonds in August of next year. The principal outstanding on the bonds is $135 million, and we're currently sitting on $151 million of cash. Currently, the prepayment penalty on the bonds is $10 million, so we're going to be mindful of that as we evaluate refinancing opportunities over the next several months. The prepayment penalty goes down approximately $825,000 per month. Free cash flow for the trailing 12 months was $84 million, down from the $87.1 million as of last quarter. The slight decline reflects the decrease in activity as the full impact of the pandemic is now in the trailing 12-month figures, offset by a liquidation of working capital related to a decrease in activity. Quarterly revenue rounds out to $90 million. Operating costs were slightly higher than we were anticipating largely due to direct costs related to the pandemic and vessels reactivated during the quarter. And as a result, margins were 1 percentage point below where we thought they would be for the second quarter, but they still reflected a pickup of more than 3 percentage points during the quarter. We came in at 29% this quarter, but we're still anticipating margins of 30% for the full year. My expectation is that the third and fourth quarters will average just above 30%, but that anticipates a reduction in direct pandemic costs that have proven to be more stubborn than we envisioned at the beginning of the year. We used the cash generated in the quarter to pay off another $11.4 million of outstanding debt, combined with the build in cash, net debt is down another $21.1 million to $4.5 million. We spoke a bit on the last quarter call about this business' significant degree of operating leverage. Once the boats are operating, incremental day rate margins and revenue from incremental days' work should drop 100% to operating profit. This quarter's incremental operating profit was 95%. Operating leverage has cut against us in the past 6 years and particularly the last year as we dealt with the pandemic, but incremental margins this year were a positive 95%. It goes up on the same scale as it's gone down. We've spent an enormous amount of effort to signing a culture and a business model that will be cash flow positive in the worst of times and significantly cash flow positive in the best of times. And I look forward to continuing to deliver these positive incremental margins on an increasing revenue base as we proceed through the recovery. We disposed of 7 vessels and some other assets in the second quarter for $18.6 million, and we have 14 vessels left in the asset held for sale category. We sold one 260-foot U.S. flag vessel that had been in layup and was facing an approximately $3 million reactivation but was not classified in the asset held for sale category; I would classify that sale as opportunistic. We sold that vessel for a $4 million book gain. At any point in time, we're willing to sell any vessel if the present value is in excess of our bull market recovery scenario, which was the case in the sale. Based on the recovery in the market that we see beginning to unfold in the second half of 2021, we don't anticipate reducing the vessel fleet any further than what we currently have in the asset held for sale. After this lot is sold, we still anticipate everything we own being gainfully employed by the end of 2022. I am very much looking forward to getting out of managing a fleet of layup vessels, in addition to the active fleet vessels and layup, give us the ability to take advantage of improving market conditions. It's an investment in those vessels that do not merit reactivation at this time. But based on our internal forecast of the recovery, they should be reactivated in due course and ultimately more than justify this investment. Those vessels that don't meet this criterion are classified as assets held for sale. As our perception of the recovery and the cost of reactivation change, vessels will move in and out of the asset held for sale category. During the second quarter, we moved 1 vessel out of the asset held for sale category into the active category. Vessels in layup cost us $3.8 million in the second quarter, which is down 30% from the first quarter cost, but it's still an annualized cost of $15 million per year. Removing this burden by gainfully employing or disposing of these assets will add that $15 million to cash flow in addition to the operating profit from those vessels that go back to work. As part of this ongoing work to high-grade the fleet, we are also focused on enhancing the connectivity and data capture analysis capabilities of our active vessels, providing our operations team with valuable insight that allows us to operate more efficiently, reducing fuel usage and our Scope 1 emissions. We have demonstrated that shore power systems have also been very effective at reducing emissions while in port. So we are installing several more on vessels operating in ports that offer the necessary infrastructure to support this technology. This operational data and these positive results are enabling closer collaboration with our customers as we work to identify the most effective methods for reducing our joint carbon footprint. This data also provides customers with the justification to increase day rates to support those continued investments. Our G&A costs went up for the first time in 10 quarters. Our annualized G&A expense for the second quarter was $67 million. We mentioned on the last quarter call that G&A would begin to rise a bit as we go through the remainder of 2021 as we have begun to fill some open positions, and we anticipate travel expenses coming back as we get further along into the pandemic recovery. Our big cost focus in 2021 is optimizing the cost of drydocks and minimizing the cost of vessels in layup. As I mentioned earlier, we reduced the annual run rate of vessels in layup by 30% during the second quarter from $21 million down to $15 million. It's a combination of reactivating vessels, disposing of vessels, and reducing the cost per day of the vessels in layup. The cost per day of vessels in layup went down 16% and the reduction in the number of vessels in the layup fleet makes up the remainder to get to the overall dollar reduction of 30%. We now anticipate drydock costs for 2021 to be approximately $24 million as we are planning to reactivate more vessels than we originally thought we would at the beginning of the year. This is a good development, but it brings with it additional cost. In addition, the second quarter drydock costs came in at approximately $4 million, which was less than the $9 million we were anticipating to spend. The drydock savings in the second quarter isn't a cost efficiency; it's just a cost that has been delayed into the third quarter. So the third quarter will now be our heavy drydock quarter for the year as we reactivate more vessels than we originally budgeted and performed more drydocks that were originally slated for the second quarter. We're now anticipating approximately $13 million of drydock costs in the third quarter. Global utilization and day rates are increasing, reactivations are also increasing. The active vessel count prior to the 2020 pandemic, the best quarterly record we had since the 2014 oil price collapse, was the second quarter of 2019. In that quarter, we had revenue of $124 million from 163 working vessels with an active utilization of 79% and an average day rate of $10,442. This year's second quarter, we had 118 vessels working, average utilization of 78% and an average day rate of $10,435. We're definitely off the pandemic lows. But to get back to the highest revenue we had prior to the pandemic, we need to put all the remaining vessels back to work and push day rates up another $1,200 per day, which I feel confident will happen as we go through the next 18 months. When we get there, the high grading of the fleet that we have been doing over the past 30 months should demonstrate the revenue and earnings generation capability of the fleet. Similar revenue with 10% fewer vessels results in a higher overall profitability. I continue to anticipate it will be the first quarter of 2022 before we get back to where we were at from a supply and demand perspective when the pandemic hit and then a year to push day rates and market share. If the market continues at its current pace of recovery, we should see quarterly revenue number by the end of 2022 comparable with that previous record quarter in 2019. Pandemic-driven inefficiencies, which we estimate cost us 5% of revenue, are still impacting us. This is factored into our full-year margin guidance of 30%. Each wave of the pandemic has created different challenges, although they can all be generalized as increased costs associated with safely moving people around the world. The latest challenge is the Delta variant and its impact on the Middle East. Last quarter, it was mariners from India. We continue to respond to the circumstances presented, but that 5% of revenue cost still looks like it to be with us for the remainder of 2021. That's a quick overview of the quarter. I will now hand the call over to Piers for an update on the vessel market and the various geographies in which we operate.

Thank you, Quintin, and good morning, everyone. While the supply-demand balance globally remains challenging, primarily due to the overhang of potential vessel supply, we are starting to see some green shoots of recovery in the majority of the regions in which we operate. We continue to see both increased levels of tendering and inquiry from our clients, particularly for our larger PSV fleet, which appears to bode well going into next year. As we move into the second half of the year into 2022, the primary factor for the industry to achieve a long-term and sustainable recovery is discipline, not just from Tidewater, but also from all the stakeholders in our industry. The industry is at an inflection point that will require discipline from a vessel reactivation, commercial and operational perspective to support an economically viable market environment. Tidewater recognizes its place in leading the industry to judiciously reactivate vessels in response to economically attractive opportunities incremental to the current supply-demand balance. Discipline, anchored and responding to improving market fundamentals will allow us to continue to maintain our working fleet and to continue to maintain and take care of our dedicated team of mariners that has enjoyed many challenges throughout the pandemic. We believe that a disciplined approach to responding to market signals will ultimately lead to a long-term and sustainable recovery for the whole industry. Sam will talk in greater detail on some of the numbers. But as we look at the second quarter of 2021 compared to the same period last year, we do believe we continue to see positive trends pointing towards a recovery in rate and utilization levels, although not perhaps as quickly as we would all like. On a global basis, active utilization across the whole fleet was up 4% to 78% compared to the second quarter of 2020, and the average stacked fleet down from 64 ships in Q2 2020 to 44 ships in Q2 2021. Average rates, while slightly down from $10,799 per day in Q2 2020, were still an impressive $10,435 per day in Q2 2021, which was also a $500 per day increase from last quarter. Globally, we had 118 active vessels working in the second quarter of 2021 with a total fleet of 162 ships against 202 vessels in Q2 2020, reflecting our aggressive policy over the last year to right-size the fleet to be best in class for the market going forward. Our Middle East Asia Pacific region continued to deliver consistent results in Q2 2021 with active utilization for the quarter, jumping 13% from 76% in Q2 2020 to 89% in Q2 2021. Our average rates in the region also increased to $8,593 per day compared to $8,009 per day in Q2 2020. Going forward, we still expect to see a continued pickup in demand going into Q3 and Q4 of this year as we start to see a number of new tenders being released from some of our long-term and established clients in the region. To West Africa, where average day rates for the region were $8,521 per day, a decrease of $200 per day from the previous quarter. But active utilization did increase 7% from last year's quarter from 55% to 62%. West Africa continues to struggle with day rates, but we are beginning to see more positive utilization levels, which in turn, should allow us to start pushing charter rate levels as we move into next year. In the Europe and Mediterranean region, Q2 2021 saw an improvement in average rates compared to Q2 2020 from $12,689 per day to $13,005 per day and active utilization creeping up above 90% from 89% for the same period last year. We also decreased the stacked fleet from 17 ships in Q2 2020 to 8 ships in Q2 2021. As mentioned on the last call, we continue to see solid improvements in the region, both in the North Sea and the Med as activity improves. And in addition, by year-end, we will have added another hybrid battery-powered vessel to our fleet in the Mediterranean as we continue to offer our customers around the world, different power and engine options to support all of our commitments towards a lower carbon future. Lastly, in the Americas region, active utilization was down 12% compared to Q2 2020 but average day rates for the quarter were up slightly from $12,865 per day in Q2 2020 to $13,162 per day in Q2 2021. The stacked fleet, however, was reduced from 17 vessels in Q2 2020 to 13 ships in Q2 2021. The region still faces challenges in 2021 but we have started to see a significant tightening in the Jones Act market for larger boats and expect that tightening to help improve utilization and charter rates as we move towards the end of the year and into the first half of 2022. Thank you, and over to Sam.

Thank you, Piers, and good morning, everyone. I would like to take you through our financial results and discuss some important points contributing to these results. My focus will primarily be on comparing the second quarter of 2021 with the first quarter. As mentioned in our press release yesterday, we reported a net loss for the quarter of $29.5 million, or $0.72 per share. Our revenue for the second quarter of 2021 was $90 million, which is an increase of $6.4 million or 8% compared to the first quarter. Active utilization rose to 78%, slightly above the previous quarter, and average day rates increased by 4% to $10,435 per day. Additionally, our active vessel count for the quarter grew by 2 to 118. The gross margin percentage for Q2 also increased to 29%, up from 26% in Q1. While we are still experiencing the impacts of the COVID-19 pandemic across our operations, the rise in overall commercial activity signals a positive outlook for the second half of the year. The vessel operating cost for the quarter was $64 million, which represents an increase of $3.2 million from Q1, primarily due to higher mariner salaries, travel expenses, and elevated supplies due to the reactivation of 7 vessels. We also incurred more than $600,000 in mariner severance costs related to our operations in Brazil, where we are winding down activity as several vessels were decommissioned. In the second quarter of 2021, we recorded a $1 million credit to our net due from affiliates accounts receivable balance related to our Angola joint venture as part of the expected credit loss evaluation. Furthermore, we had no vessel impairment charges in Q2 2021. We sold 7 vessels and other assets for proceeds of $18.6 million, with a net loss of $932,000 on these sales. Year-to-date, we have sold 13 vessels and other assets for proceeds of $29.6 million, resulting in a net loss of $2.9 million on those sales. Our operating loss for the quarter was $20.2 million, a $6.1 million improvement from Q1, mainly attributed to the rise in revenue, the affiliate credit, and decreased losses from asset sales, partially offset by increased operating expenses linked to vessel reactivations and ongoing COVID-related costs. General and administrative costs for the quarter came to $16.8 million, an increase of $700,000 from Q1, driven by higher professional fees and salaries as we filled previously vacant positions. G&A cost control remains a key focus for us, with annualized expenses rising from $64 million in Q1 to $67 million in Q2. We still have a target of $68 million for G&A costs in 2021. The quarter witnessed $4 million in deferred drydock costs, up from $2.7 million in Q1. Although Q2 was expected to be a heavy drydock quarter, some projects will now shift to Q3, which we anticipate will be the busiest quarter for drydock activities this year. We expect Q3 drydock costs to reach $13 million, raising the full-year estimate to $24 million, up by $4 million from previous forecasts, largely due to accelerated vessel reactivations in regions like West Africa and Europe. Additionally, we spent $700,000 on capital expenditures in the quarter, with full-year spending expected at $7 million. Free cash flow remains crucial, with $26 million achieved in Q2, continuing an upward trend due to $4.9 million generated from operations and the proceeds from asset sales. Since the pandemic began on April 1, 2020, we've generated over $113 million in free cash flow. We've previously mentioned collection challenges with a key customer in Mexico. Our outstanding balance with Pemex was approximately $26 million at the end of 2020, but we're pleased to report improved payment patterns in 2021. Their accounts receivable balance dropped from $24 million at the end of Q1 to $15 million by June 30. While the outstanding amount remains relatively high compared to their normal levels, we are closely managing these balances to facilitate collection, which is vital for maintaining our free cash flow goals. We are optimistic about normalizing this balance in the coming months. In Q4 of 2019, we began reclassifying vessels from property and equipment to assets held for sale, initially reclassifying 46 vessels. In 2020, we reclassified another 30 vessels and sold 53, leaving 23 at year-end. In Q1 2021, we sold an additional 3 vessels and 3 from the active fleet for about $11 million. In Q2, we sold 5 vessels and 2 more from the active fleet for $18.1 million. We also reactivated 1 vessel from our held-for-sale category, leaving us with 14 vessels valued at $17 million. In 2020, we repaid nearly $100 million of debt and removed the EBITDA to interest covenant in our indenture and Troms loan for 2021. In the first quarter of 2021, we bought back another $11.8 million of bonds in the open market and paid down $14.6 million of our Troms debt. In Q2, we further reduced our Troms debt by $11.4 million, bringing our net debt balance down to $4.5 million, a decrease of $21.1 million from Q1 2021. We continue to assess refinancing options for our bond maturity set for 2022. As of June 30, our current balance is $135 million, but we have more cash on hand than this maturity amount, and we fully intend to maintain positive free cash flow. We are confident in managing our debt maturities adeptly. Now, turning to regional performance, our Americas segment reported an operating loss of $4.9 million for the quarter, compared to a loss of $1.7 million in Q1, with revenue dropping from $26.2 million in Q1 to $23.5 million in Q2. The region had 3 fewer active vessels, and active utilization fell to 76% from 80% in the previous quarter, though day rates improved from $11,865 to $13,162 per day. As previously mentioned, the region incurred over $600,000 in mariner severance costs while winding down activities in Brazil. Our Middle East Asia Pacific region reported operating income of $266,000 for the quarter, a turnaround from an operating loss of $1.9 million in Q1, with a revenue increase from $24.4 million to $25.6 million and 1 less active vessel. Active utilization rose to 89% in Q2 from 84% in Q1, and day rates slightly increased from $8,506 to $8,593 per day. Additionally, G&A costs decreased due to adjustments to bad debt expenses. The Europe and Mediterranean region reported a loss of $2 million in Q2, less severe than the $8 million loss in Q1. It generated a 52% revenue increase to $22.5 million in Q2 from $14.7 million in Q1, operating with 4 more active vessels and increasing active utilization to 91% from 81%. Day rates also spiked by 9%, from $11,960 in Q1 to $13,005 in Q2. Our West Africa region saw an operating loss of $5.4 million in Q2, an improvement from $6.8 million in Q1, with revenues rising from $15.6 million in Q1 to $16.9 million in Q2. This region operated 2 more active vessels in Q2, with active utilization increasing to 62%, though day rates fell by 2% from $8,711 in Q1 to $8,521 in Q2. Overall, there were improvements across regions except for the Americas, where several vessels were taken off contracts early in Q2, particularly affecting Brazil and the Caribbean. As we continue to wind down operations in Brazil, it has impacted the region's results. However, we observed notable improvements in the Europe and Mediterranean region, as anticipated, along with positive developments in West Africa and the Middle East Asia Pacific regions. Though we remain affected by ongoing COVID-related challenges, we are encouraged by the positive commercial signs emerging in each of our markets, and we expect activity to strengthen as we progress through the year.

Thank you, Sam. Brandon, let's just go ahead and open it up for questions.

And on the line from Evercore ISI, we have Andres Menocal.

So this is more of a high-level question. I appreciate all the color you provided on the call. Many thanks for that. I guess, qualitatively and quantitatively, what are you seeing from your customers in terms of activity levels and conversations that's given you confidence in the outlook for 2022? Just saying that just given that budgets are looking to be solidified towards the back half of the year. So just curious to understand what's informing your view that the end of the year into next year might be a little bit better or significantly better?

Certainly, I'll start off, and then I'll let Piers follow up with some more details. But really, I haven't seen this much tendering activity in about 18 months. Tendering activity does not always mean that it's going to end up being new work. Sometimes they're tendering for vessels that are already in the market and trying to reprice. But I would say that the pickup that you saw in the numbers in the second quarter for the North Sea is a good demonstration of the pickup that we're seeing in Africa as we go through the second half of '21 and into '22. The U.S., I'm starting to see a bit more improvement, but it's probably about a quarter behind that in Africa. Piers, why don't you provide some more direct color with some of the contracts that you have.

Yes, certainly. In Africa, we have openly discussed the challenges faced by the region over the past 12 to 18 months. However, we are witnessing a significant increase in tender inquiries from our customers, which are resulting in long-term charter opportunities. This includes not only the renewal of existing contracts but also new contracts in different areas, which is positively impacting the market. Additionally, we are seeing considerable activity in the Mediterranean and Africa concerning larger platform supply vessels. We are also starting to observe a rise in activity in the Caribbean, Guyana, and Suriname for the upcoming year. Overall, the indications from our team on the ground are quite encouraging regarding the level of activity.

Great. Another question in terms of efficiency gains in your fleet, I know you've put a number of investments and time and after these past couple of years into your systems and infrastructure and on to get the fleet operating at a higher level. What innings do you feel like you're in, in terms of getting to that target statement? And what's in the pipeline for the kind of initiatives you can further implement to continue increasing those efficiency gains that we've seen this past 1.5 years?

That's a good question. I would suggest that we're in the sixth inning. The majority of our efforts in recent years have focused on enhancing shore-based infrastructure to improve efficiency and scalability in our G&A footprint. We are just starting to explore the vessels themselves. On the vessel side, it's not only about operational efficiency; it's also about fuel efficiency and the clarity and transparency of data related to vessel performance. This data enables us to provide insights to our customers on reducing Scope 1 emissions based on how they operate their vessels. We can show them actionable steps to improve their emissions and our own. Therefore, I believe we are in the sixth inning, with most of the shore-based work completed, but still only about 20% of what we can achieve on the vessel side.

It's encouraging to see older vessels being sold, and that the cash flows are beneficial for you. Can you share your observations regarding the asset and divestiture market? Also, are you worried that some of the vessels being sold might return to operation in a market that has traditionally been considered oversupplied?

We sold one vessel opportunistically in the second quarter. It was a good vessel, but it required a $3 million reactivation. We were waiting for the market conditions to improve for that boat to be reactivated. I've observed that reactivation costs for vessels in layup, especially those that didn't operate during the pre-pandemic period after 2014, have been significant. Most of those vessels have been disposed of since the reactivation costs are nearing $5 million or more per vessel. Reactivating vessels remains a concern in this industry, but the costs for those that were inactive before the pandemic are so high that I doubt many of them will be reactivated. We'll have to see how it unfolds. We're definitely concentrating our fleet on more modern, higher-end vessels, which we believe will yield higher day rates overall, be more fuel-efficient, and incur lower costs in the future.

Understood. I have two additional questions, mainly regarding the financials. As we approach the repayment of the 2022 notes next year, what do you believe is the appropriate amount of capital or cash required for the business to operate? Do you feel adequately prepared in that regard? Is there a possibility that you might need to access capital markets to achieve the desired cash level on the balance sheet?

Well, the frictional amount of cash that we need in order to run the business is about $30 million, okay? So that's the base level we need for working capital and general purposes. What we've been doing with our existing cash balance is just having a backup of liquidity. And so we'll continue to have backup liquidity sources, whether that's going to be in the form of revolving debt capacity or just cash on the balance sheet; it all depends on what the capital markets are open for. Historically, the bonds haven't let us have a revolver with its own collateral. So we've been using cash on the balance sheet as our liquidity source as we retire bonds, and we may refinance into something else or we may go into a revolving debt capacity for liquidity purposes. But the absolute question is how much cash do we need to run the business, Sam, about $30 million or so?

That's correct. Right.

And then I'd want a minimum of about $70 million worth of liquidity just in case.

Understood. And then just the last question, if I may, and this just pertains to taxes. How should I think about cash taxes going forward for the company? Is there anything that I should be aware of there?

No. I mean, I would say that they're going to remain relatively flat. I mean, currently, our cash tax is about $12 million to $13 million a year, and I don't see that changing.

Okay. Looks like there are no further questions at the moment. I will now turn it back to Quintin for closing remarks.

Well, thank you, Brandon. Everyone, I appreciate your participation in the call today. We will update you again in November. Goodbye.

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for joining. You may now disconnect.