Tennant Co Q3 FY2025 Earnings Call

Good morning. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to Tennant Company's Third Quarter 2025 Earnings Conference Call. This call is being recorded. Thank you for participating in Tennant Company's Third Quarter 2025 Earnings Conference Call. Beginning today's meeting is Mr. Lorenzo Bassi, Vice President, Finance and Investor Relations for Tennant Company. Mr. Bassi, you may begin.

Good morning, everyone, and welcome to Tennant Company's Third Quarter 2025 Earnings Conference Call. I'm Lorenzo Bassi, Vice President, Finance and Investor Relations. Joining me on the call today are Dave Huml, President and CEO; and Fay West, Senior Vice President and CFO. Today, we will review our third quarter performance for 2025. Dave will discuss our results and enterprise strategy, and Fay will cover our financials. After our prepared remarks, we will open the call to questions. Our earnings press release and slide presentation that accompany this conference call are available on our Investor Relations website. Before we begin, please be advised that our remarks this morning and our answers to questions may contain forward-looking statements regarding the company's expectations of future performance. Such statements are subject to risks and uncertainties and our actual results may differ materially from those contained in the statements. These risks and uncertainties are described in today's news release and the documents we filed with the Securities and Exchange Commission. We encourage you to review those documents, particularly our safe harbor statement, for a description of the risks and uncertainties that may affect our results. Additionally, on this conference call, we will discuss non-GAAP measures that include or exclude certain items. Our 2025 third quarter earnings release and presentation include the comparable GAAP measures and a reconciliation of these non-GAAP measures to our GAAP results. I will now turn the call over to Dave.

Thank you, Lorenzo. Good morning, everyone, and thank you for joining our Q3 2025 earnings call. I'm pleased to share our third quarter results, strategic progress and outlook as we navigate an increasingly dynamic operating environment. Our Q3 results demonstrate both the resilience of our business model and our team's ability to execute in a challenging environment. We delivered net sales of $303 million with an organic decline of 5.4%. It is important to note that we're comparing against a prior year quarter that benefited from a $33 million backlog reduction, primarily in our North American Industrial business. Our order rates reflect steady underlying demand. We achieved 2% growth compared to Q3 2024, extending our track record of 6 consecutive quarters with order growth. Let me address the tariff situation head on because I know it is top of mind for all of us. We are clearly operating in a more complex trade environment with the continuing tariff volatility creating cost challenges and heightened uncertainty. This creates both direct cost pressures for us and indirect effects on customer purchasing behavior. Regarding our input costs, we're confident in our ability to address a significant portion of direct tariff impacts through targeted supply chain adjustments and pricing actions in 2025. What's new this quarter is the customer demand impact, where we're seeing some industrial customers in North America specifically citing tariff uncertainty as a reason for delaying planned purchases. We're staying close to these customers, understanding their concerns as they navigate the current economic environment, and we remain committed to serving them when they're ready to move forward. Despite these external pressures, I'm proud of what our team has accomplished this quarter. We expanded gross margin 30 basis points through disciplined pricing that more than offset higher freight and tariff costs. We delivered 120 basis points of adjusted EBITDA margin improvement, driven by both margin expansion and disciplined expense management, including the realization of structural actions we implemented earlier this year. We also returned $28 million to shareholders through dividends and share repurchases, demonstrating our commitment to disciplined capital allocation and value creation. Our regional performance reflects both challenges and opportunities. In the Americas, orders grew 1% in the quarter compared to the prior year. Adjusting for the prior year backlog benefit, net sales would have grown 9% versus Q3 2024, a solid performance in this environment. EMEA shows encouraging momentum from our strategic initiatives with new product launches gaining traction and go-to-market optimization delivering results in key geographies. Orders increased 8% year-over-year in the region with accelerating momentum heading into the fourth quarter. APAC remains challenging, particularly in China, where competitive pressures continue on both price and volume. However, Australia and India continue performing well, delivering sales growth in the quarter. Our enterprise strategy continues advancing on multiple fronts. We launched our latest new product innovation, the T360 midsized walk-behind scrubber, which delivers solid performance at an economical price point, perfect for budget-conscious customers and first-time users. We are growing our AMR robotics business year-to-date with sales increased 9% and unit volumes increased 25%, driven by our new X4 and X6 ROVR products and key strategic customer wins around the world. We've had a major new product launch in each quarter in 2025, demonstrating our strengthened innovation pipeline. Our pricing initiatives delivered 280 basis points of growth through strong realization of beginning-of-year actions plus additional tariff-related increases. Our go-to-market initiatives are progressing well with particular strength in expanding industrial sales coverage and acquiring new strategic accounts, especially in EMEA. One of our key enterprise initiatives is our ERP modernization project. I'm particularly proud to announce the successful go-live in APAC, the first of 3 major regional milestones in our global digital transformation. While any transformation of this scale presents complexities, our teams prioritized customer needs, mitigated disruptions and stabilized operations according to plan. This new digital infrastructure will enable faster decision-making, deliver better customer experiences, enhance cybersecurity and position us to deploy AI capabilities moving forward. We remain appropriately cautious as our teams continue stabilizing the Americas' Q4 deployment and prepare for the EMEA go-live in Q1 2026. I'm confident in both our approach and our team's execution capability. Looking ahead, we're seeing mixed market dynamics that require both strategic focus and tactical agility. Industrial sectors show some demand softening in tariff-sensitive industries, but demand remains robust in core commercial end markets, including retail, health care and education. Our aftermarket demand, both service and consumables, remains strong. We're addressing tariff exposure through pricing actions and supply chain adjustments and expect to mitigate most of the impact within the year. Our targeted initiatives, supplier negotiations, dual sourcing and logistics optimization, position us well to navigate these challenges. Our year-over-year order growth confirms underlying business health. We remain focused on operational efficiency and prudent capital allocation while carefully monitoring customer buying behavior, the tariff landscape and macroeconomic trends. Based on our year-to-date Q3 performance and current outlook, we remain well positioned to achieve our overall net sales, EBITDA and EPS targets. Accounting for the outsized impact of the euro exchange rate on our EMEA results, we now anticipate that organic growth at the enterprise level will be slightly below our initial guidance range of negative 1% to negative 4%. In closing, I'm confident in our strategy, proud of our team's execution and optimistic about our ability to navigate this environment while continuing to deliver value for all stakeholders. Now I'll turn the call over to Fay for a deeper explanation of the financials.

Thank you, Dave, and good morning, everyone. In the third quarter of 2025, Tennant delivered GAAP net income of $14.9 million compared to $20.8 million in the prior year period. Net income for the quarter was impacted by lower net sales, primarily driven by volume declines across all geographies, particularly in North America, where we are comparing against a prior year that benefited from a significant backlog reduction. Also impacting net income performance were increased costs associated with our ERP project, legal contingency costs and restructuring charges. These non-GAAP charges totaled $13.3 million during the quarter. Beyond operating income, interest expense in the third quarter was comparable to the prior year period. Income tax expense in the third quarter was $2.2 million lower compared to the third quarter of 2024, primarily due to lower operating income. Our effective tax rate was 23.2% in the third quarter of 2025 compared to 24.4% in the prior year. The decrease in rate was primarily due to the recognition of discrete tax benefits from additional research credits recognized in the third quarter of 2025. We anticipate that our full year effective tax rate will be within our guided range of 23% to 27%. Excluding ERP implementation costs and other non-GAAP costs, adjusted net income in the third quarter of 2025 was $27.3 million compared to $26.6 million in the prior year period, a 2.6% year-over-year increase. The adjusted net income growth was primarily driven by gross margin expansion and operating leverage on S&A despite lower quarterly volumes. Adjusted EPS for the third quarter of 2025 increased 5% compared to the prior year period to $1.46 per diluted share. The increase was driven equally by operational improvements and the accretive effect of our share repurchase program. Looking a little more closely at our quarterly results, for the third quarter of 2025, consolidated net sales were $303.3 million, down 4% from the $315.8 million in the same quarter last year. Foreign exchange had a positive 1.4% impact, primarily reflecting euro strength against the dollar. Excluding this benefit, net sales declined 5.4% on a constant currency basis. This decline was largely driven by an 8.2% reduction in sales volumes across all geographies, which more than offset a 2.8% benefit from strategic pricing actions and additional tariff-related pricing adjustments. As a reminder, we group our net sales into the following categories: equipment, parts and consumables and service and other. In the third quarter, overall equipment net sales decreased 8.7%. Service sales increased 5.9%, and parts and consumables grew by 2.5% compared to the prior year period. Shifting to regional performance. In the Americas, organic sales were down 7% compared to the same period last year. The decline was primarily driven by lower sales of industrial equipment as we lapped a significant backlog contribution in the third quarter of 2024. These headwinds were partially offset by continued price realization during the quarter. Outside the Americas, organic sales in EMEA were down 0.4%, primarily reflecting lower volumes across most of the region. These declines were partially offset by stronger volumes in the U.K. and Southern Europe, along with continued benefits from price realization. Organic sales in APAC decreased 6.4%, primarily driven by lower commercial equipment volumes in China and reduced industrial equipment volumes in South Korea. Gross margin was 42.7% in the third quarter, a 30-basis point increase compared to the prior year quarter. The margin rate increase was driven by strong price realization, partially offset by lower productivity due to volume decreases. S&A expense totaled $96.6 million in the third quarter of 2025, a $3.9 million increase compared to the third quarter of 2024. The increase was driven by continued ERP spend, legal contingency costs and restructuring costs. This quarter, we have recorded an additional legal contingency expense in the amount of $5.3 million related to the intellectual property dispute that we disclosed in our 2024 year-end results. This amount is comprised of a $2.9 million enhancement of damages and $2.4 million in additional prejudgment interest. We continue to disagree with the verdict and are actively preparing for the appeals process while also continuing to explore all of our other alternatives. As a reminder, this ruling does not impact our ability to sell any of our products and is not expected to affect our long-term financial performance. Excluding non-GAAP costs, adjusted S&A expense in the quarter totaled $83.3 million, a $5.4 million decrease compared to the third quarter of 2024. Adjusted S&A expense as a percent of net sales decreased to 27.5% compared to 28.1% in the prior year period, driven by lower variable compensation and reduced payroll costs following last year's restructuring actions. Adjusted EBITDA for the third quarter of 2025 was $49.8 million compared to $47.9 million in the third quarter of 2024. Adjusted EBITDA margin for the third quarter of 2025 increased by 120 basis points compared to the third quarter of 2024, representing 16.4% of net sales. Turning now to capital deployment. Net cash provided by operating activities was $28.7 million during the third quarter, a $2 million decrease compared to the prior year period. Operating cash flow during the quarter was impacted by investments in our ERP project as well as working capital investments. We generated free cash flow of $22.3 million in the third quarter, including ERP spend of $14 million. Excluding these non-operational items, we converted 183.3% of net income into free cash flow during the quarter. On a year-to-date basis, we converted 121.2% of net income into free cash flow, which positions us to achieve our 2025 goal of 100% conversion. The company continues to deploy cash flow toward operational capital needs and to return capital to shareholders in line with its capital allocation priorities. We invested $6.4 million in capital expenditures during the third quarter, tracking to our full year guidance. Additionally, we returned $28.1 million to shareholders through share repurchases and dividends in the quarter. On a year-to-date basis, we returned $72.7 million to shareholders comprised of $56.3 million of share repurchases and $16.4 million of dividends. Last week, we announced a 5.1% increase to our annual dividend, raising it to $0.31 per share. This marks the 54th consecutive year that Tennant has increased the dividend payout. Tennant's liquidity remains strong with a balance of $99.4 million in cash and cash equivalents at the end of the third quarter and approximately $409 million of unused borrowing capacity on the company's revolving credit facility. The company continues to effectively manage debt and maintain a strong balance sheet. Our net leverage was 0.69x adjusted EBITDA, providing the company with continued flexibility and capability to fund growth through M&A and create value for our stakeholders. Moving to 2025 guidance. As Dave mentioned, we are pleased to report third quarter results that demonstrate the resilience of our business model even as we navigate an increasingly complex and uncertain market environment. Net sales of $303 million reflected expected headwinds from lapping last year's significant backlog reduction, resulting in a 5.4% organic decline. We generated 2% year-over-year order growth, expanded gross margins by 30 basis points despite tariff-driven inflationary pressures and managed S&A expenses to grow adjusted EBITDA margin to 16.4%, a 120-basis point increase. Looking ahead, we anticipate sustained macroeconomic volatility and ongoing tariff-related pressures. Based on current tariffs, we project a slight increase in the overall full year 2025 tariff impact compared to our estimate at the close of the second quarter. However, through a combination of strategic supply chain initiatives, targeted procurement efforts and pricing actions, we expect to largely offset tariff-driven inflation in 2025. Turning to our net sales outlook. While we did observe some deceleration in demand during the third quarter, most notably within our Industrial Sales segment in the Americas, we are nevertheless positioned to deliver full year net sales within our previously guided range of $1.21 billion to $1.25 billion through strong fourth quarter performance. This performance is underpinned by several key drivers: continued expansion in strategic account sales, the successful performance of new products like the Z50 Citadel outdoor sweeper and X6 ROVR, a return to historical seasonal patterns and sustained momentum across various geographic markets. It is important to note that while we expect to meet our overall net sales target, we now project organic growth to be marginally below our negative 1% to negative 4% guidance, reflecting a more significant contribution from favorable foreign currency movements. Our focus on diligent cost management will continue across both gross margin and S&A throughout the fourth quarter. This concerted effort, coupled with solid net sales, positions us to achieve adjusted EBITDA within our previously stated guidance range of $196 million to $209 million with an expectation of landing near the lower end of that range. While the fourth quarter will deliver both sequential and year-over-year margin improvement, the margin headwinds realized in the first half of 2025 will create a structural headwind to achieving meaningful full year margin expansion.

Thank you, Fay. In closing, I want to emphasize that while we're navigating a challenging macroeconomic environment with significant tariff volatility, our team has demonstrated focus, execution and discipline. We've delivered solid order momentum, meaningful gross margin expansion and strong adjusted EBITDA growth, all while making strategic investments in our digital transformation. The successful APAC ERP go-live represents a critical milestone in our enterprise evolution, positioning us to enhance customer experiences, drive operational efficiency and unlock AI capabilities across our organization. We've targeted investments and rigorous execution across a robust set of growth initiatives, including new product innovation, go-to-market expansion and strategic pricing. We have clear line of sight to mitigating tariff impacts through targeted supply chain adjustments and pricing actions in 2025, and we're confident in our ability to manage near-term uncertainties while capitalizing on the opportunities ahead. I'm really proud of our team's commitment and focus on value creation for all stakeholders, and I'm optimistic about our path forward. With that, we'll open the call to questions. Operator, please go ahead.

Your first question comes from the line of Steve Ferazani with Sidoti.

I appreciate all the detail on the call. Dave, the one number that sort of concerned me a little bit was the order growth. I think you covered that a little bit. But through the 3 quarters this year, your year-over-year order growth was slower each quarter. Is your expectation that turns around? Or is the tariff uncertainty likely to continue to pressure the order book?

I think the order book is partially due to the prior year comp. Obviously, we're comping a more difficult second half. I think I'd answer the question this way. We've had strong order momentum. Our orders are up 6% year-to-date. And although it's been declining by quarter, I think that's largely driven by the comp. Maybe I will shift focus to Q4 and just talk about what has to be true to deliver on the quarter because I think that really gets at the heart of the orders question. So thinking about Q4 from an order perspective and from a sales perspective, we need about $318 million in sales to deliver on Q4 midpoint guidance. And if you adjust Q4 of 2024 for the backlog reduction benefit, we did $328 million in Q4 of '24, less $17 million in backlog reduction benefit. So without backlog in 2024, the baseline is – I'll call it $311 million. So in Q4, we need to grow orders and sales by $8 million or about 2.5%. So when I think about the order momentum year-to-date of 6%, putting up 2% in Q3 – and Q3 also reflects a return to normal seasonality. Q3 is usually a light quarter for us. And then the need to drive a 2.5% increase in Q4, we think it's within reach. And actually, we have a fair amount of confidence we can deliver on that kind of order growth. So I think it's important to dimensionalize the decreasing year-over-year order trend in terms of year-over-year comp, return to normal seasonality and kind of what needs to be true to deliver on Q4.

And what are you hearing from customers now? Obviously, I'm not going to ask you about next year, but a lot of the analyst focus here is going to be on how this drives what next year starts looking at and what's your feeling based on what you're hearing from customers right now?

I'm not providing guidance on 2026, but I can share what we're hearing from customers as we finish this quarter. We're currently experiencing a higher level of uncertainty than usual at this time of year. Overall, order rates appear solid, but we have noticed some softness in North America Industrial demand. Specifically, our orders in North America Industrial are up double digits year-to-date, but they haven't met our expectations for the year. This trend began in July and August, with customers in some manufacturing and warehousing sectors deferring planned purchases and freezing automation budgets, which is slowing down our opportunity funnel. Upon digging deeper, we found that many customers are citing tariff uncertainty as a key reason for these delays. The effects of tariffs are finally beginning to impact their financial results, as the lag from when tariffs were enacted is catching up. Q3 was the first significant period where this impact became apparent to customers. As we project our year-end results, customers are also reassessing their capital expenditures and preparing for 2026, mirroring our own planning and that of many peers. For the fourth quarter, we anticipate stabilization in North American Industrial demand, accounting for some softness but expecting no further decline in order demand in that segment. Outside of North America Industrial, there are still strong areas in the business, including our commercial and service sectors, as well as parts and consumables. We're effectively maintaining our pricing power and our new products, including AMR, are performing well. The noticeable dynamic affecting one segment of our North American Industrial business in Q3 is the impact of tariffs, which we're monitoring closely to see if it spreads to other market verticals.

I appreciate that. That's helpful. And seeing the benefits of the cost outs in 3Q, which you had talked about earlier in the year, I mean you had EPS year-over-year growth despite you still had a chunk of backlog to lap and margins improved on lower revenue. Is there more to go on the cost outs?

We experienced a 30-basis point improvement in margin compared to the prior year, primarily due to pricing strategies, including regular and tariff-related prices. This improvement offset the impact of tariff input costs, inflation, and reduced productivity from lower volume. We anticipate sequential improvement in Q3 and Q4, as well as margin enhancements compared to the fourth quarter of the previous year. However, on a full-year basis, we initially projected a 30-basis point improvement. In the first half, mix was a significant factor affecting gross margin performance, particularly from sales to strategic customers and commercial equipment sales. By the end of Q2, we expected to see margin improvement in the second half of 2024 based on market signals and a predicted increase in industrial sales. Unfortunately, as Dave mentioned, we are encountering some softness in this area, which means we won’t achieve the gross margin improvement we expected for the full year due to the mix shift. We are actively addressing inflation and the changing tariff situation, which will also have a negative impact on our gross margin for the year. While we anticipate margin improvement in Q4, we will fall short of the 30-basis point improvement we had hoped for at the start of the year.

Got it. That makes a lot of sense. If I could squeeze one last one in here. When I look at that capital deployment slide, what stood out to me was you took on $25 million in debt to repurchase $23 million in shares. You did more than just offset dilution, which is more typical. Are you open to getting more aggressive on the repurchase program given the strong balance sheet and where the stock is right now?

Yes. In our prepared remarks, we mentioned how we've deployed capital this year, successfully offsetting dilution. We remain active in Q4 and expect to buy approximately 4.5% of outstanding shares by the end of the year, which totals around 840,000 shares on an annual basis. That’s our current position, and we have the flexibility to make adjustments if necessary.

Your next question comes from the line of Tom Hayes with ROTH Capital.

Maybe just one follow-up to Steve's question. I just want to make sure I had it right. As far as the comparison in 4Q for the backlog drawdown from last year, it's a $17 million bogey?

Correct.

Okay. All right. And then maybe on the ERP, congratulations on getting the first region under your belt. I was just wondering, could you just remind us what the timeline looks like for the balance of the business?

Yes, I'd be happy to. We mentioned in the script that we started operations in the APAC region in the third quarter. We are now over 60 days in with really solid early results. North America has already begun, and we are working through that in the fourth quarter. For the EMEA region, we are preparing for a go-live in the first quarter.

Okay. Appreciate that. And then, Dave, we didn't have a chance to discuss previously, but I just wanted to circle back on the rollout of the Z50 Citadel unit. Maybe just some additional color on the end markets and initial customer reactions. I think it's a pretty revolutionary product.

I appreciate the question. We are very excited about the Z50, which represents our entry into a new sector for outdoor sweeping applications. This offers a potential market of approximately $400 million that we can now tap into since we have the product to meet these customers' needs. It naturally extends our global sales and service capabilities because we are familiar with these clients. Some of them already purchase other products from our range, and we are well-positioned for these high-demand applications where customers depend on reliable service for uptime. We have collaborated on a product designed specifically for our market. The initial feedback from customers has been very positive, and we are pleased with the early outcomes. As you can imagine, these machines cost around $250,000 each, leading to a typically long sales cycle. However, I have been impressed by how quickly we have secured some orders this year. We anticipated a sales process lasting around 6 to 12 months, but we converted some customers swiftly. This gives me confidence that this segment is attractive and that we will have a unique offering to deliver. The Z50 has significantly contributed to our new product sales in 2025, and we have ambitious plans for it in 2026.

Do you see it as a global opportunity? I'm just wondering if you have rolled it out globally or if you are starting in specific markets.

Yes, we did a staged rollout, but we are globally deployed with that product. And what that means is we're trained and capable of selling it as well as servicing it with aftermarket parts and consumables. And it is a global opportunity. When you think about these heavy industry applications, they're very similar everywhere around the world. So we think we've got some really great opportunities to take this product into new and existing customers and serve those heavy sweeping applications.

Okay. Maybe just lastly, kind of circling back, again, one that you talked about a little bit, I just want to make sure I got it down right. As far as the North American Industrial segment that you saw the weakness, it was primarily in manufacturing and distribution-based customers?

Yes, manufacturing and warehousing customers.

Your next question comes from the line of Iva Prcela from Northcoast Research.

I am asking questions on behalf of Aaron Reed today. And you guys earlier highlighted strong year-to-date growth in both the units and net sales within the AMR business. So could you maybe just share some more detail on where you're seeing the most traction and maybe what factors are driving that growth?

Yes, I'm happy to provide that information. We're very pleased with our results in the AMR segment so far. To recap the data we've shared, year-to-date sales have increased by 9% and unit sales are up by 25%. There is a mix shift occurring due to our new product launches. The demand is primarily driven by a couple of key factors. One is the release of our X4 and X6 ROVR, which are purpose-built machines designed for outstanding performance. We are utilizing our exclusivity agreement to enhance our sales efficiency, deployment capabilities, and alignment with our product roadmap. It's worth mentioning that we are introducing new products to the market more quickly than before in the AMR sector. We are also making use of the new Generation 3 autonomy package, which significantly enhances performance for our customers. To specifically address your question about where we are succeeding and what is contributing to our growth, we are achieving success with large strategic accounts in our direct selling channels, mainly in mature markets such as North America, EMEA, and Australia. These customers appreciate superior cleaning performance and manage multiple locations that require consistent cleaning. They value our deployment support and training to ensure their teams make the most of their automation investments. Our aftermarket service is essential for these customers to maintain uptime and achieve a return on their investment. I believe we have a strong product portfolio, which we are continuously expanding not only through new products but also by introducing new business models like our Clean 360 offering. This provides customers with a bundled solution at a single monthly price that covers equipment, service, and autonomy subscriptions. There is a lot of innovation happening in this area. We are very satisfied with our achievements so far, but there is a significant opportunity for growth in the market as we transform traditional cleaning methods. We are dedicated to fostering this growth and transformation as we move into Q4 and into 2026 and beyond.

Perfect. That was super helpful. And then obviously, tariffs have been a headwind. But I was just curious, is there any maybe silver lining in that they might be slowing cheaper Chinese imports or maybe easing competitive pressure in certain categories at all?

Yes, great question. We're on the lookout for it. I wouldn't say we've seen any material shifts from competition in terms of sort of their price competitiveness in the market. I do think there was some lead lag with people buying ahead of tariffs and forward stocking inventory in anticipation of prolonged tariffs. So we'll see as kind of the year shakes out here in 2026. But we can't bank on that. We've got to be out growing our business and selling our customers and reaching new customers with our value prop rather than sort of bank on having a competitive advantage because of tariffs. If there were to be an advantage, I think it would show itself over the longer term. And from a tariff impact perspective, I think we're still kind of early days.

If there are no further questions at this time, I would like to turn the call back over to the management team for closing remarks.

Thanks, John. If you'd like to learn more about Tennant, we will be participating in the following conferences: Baird's 2025 Global Industrial Conference in Chicago on November 13, the 14th Annual ROTH Technology Conference in New York City on November 19, Oppenheimer's Winter Industrial Virtual Summit on December 11. Thank you for your continued interest in our company. This concludes our earnings call. Hope you have a great day.

Ladies and gentlemen, that concludes today's conference call. You may now disconnect your lines. We thank you for your participation. Have a good day.