Earnings Call Transcript - TPC Q1 2022

Operator, Operator

Good day, ladies and gentlemen. Welcome to the Tutor Perini Corporation's First Quarter 2022 Earnings Conference Call. My name is Joe and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Following management prepared remarks, we will be opening the call for a question-and-answer session. As a reminder, this conference call is being recorded for replay purposes. At this time, I will turn the conference over to your host, Mr. Jorge Casado, Vice President of Investor Relations. Please proceed.

Jorge Casado, Vice President of Investor Relations

Hello, everyone. And thank you for joining us. With us today are Ronald Tutor, Chairman and CEO, and Gary Smalley, Executive Vice President and CFO. Before we discuss our results, I will remind everyone that during today's call, we will be making forward-looking statements, which are based on management's current assessment of existing trends and information. There is an inherent risk that our actual results could differ materially. You can find disclosures about risk factors that could potentially contribute to such differences in our Form 10-K, which we filed on February 24th, 2022, and in the Form 10-Q that we are filing today. The company assumes no obligation to update forward-looking statements, whether as a result of new information, future events, or otherwise, other than as required by law. Thank you and I will now turn the call over to Ronald Tutor.

Ronald Tutor, Chairman and CEO

Thank you, Jorge. Good afternoon. And thank you for joining us. Our first quarter results were highlighted by a substantial record-setting level of operating cash for our first quarter. Contrary to our typical negative cash flow in almost every first quarter since the merger, we generated nearly $121 million of cash. Driven primarily by the resolution of certain disputes and the collection of certain successfully negotiated and improved change orders that we have discussed during the Q&A portion of our last earnings call, back in February. Gary would provide more details and put it in perspective a bit later, but suffice it to say that it was by far our largest first quarter of operating cash since the merger in 2008. However, our first quarter earnings were significantly reduced by the impact of an unfavorable legal ruling on a completed bridge project in New York, as well as temporary timing impacts related to certain lower-margin, lower-risk change orders that were successfully negotiated and approved for a mass transit project in California. Which, although increasing the project's overall profit, reduced its overall profit margin percentage due to its limitations on subcontractor margin. Consequently, we reported a loss of $0.42 per share for the first quarter of 2022. Regarding the adverse legal ruling, the original project design required us to build a cable-stay bridge for the project in New York. However, after we were awarded the project, the owner changed the design from a cable-stay bridge to a causeway bridge. Ultimately, the courts declined to even hear the merits of our claims for the difference in cost to recover the added costs we incurred to build the alternative bridge. Although we have another avenue of cost recovery we're pursuing, we believe it appropriate to take a $25.5 million charge in the first quarter results of the ruling. Our backlog stands at $8.3 billion. Demand for our services continues to be significant, and we're preparing to bid and hopefully win our share of various large new civil projects in the next 30 days and the balance of the year through the end of next year, some of which I will detail in a moment. We also expect that we will continue to generate even stronger operating cash in the second quarter and throughout the year. We bought $997 million of new awards in the first quarter of 2022, slightly larger than the first quarter last year. Our new awards so far this year mostly come in the civil and building segments and the most significant first-quarter awards included the $260 million Eagle Mountain Wood fire gas pipeline in British Columbia, Canada, and $121 million of additional work for our mass transit California high-speed rail project. In California, we have two healthcare projects, an educational project, and an entertainment venue totaling $251 million. Our new awards are continuing at a steady pace and already in the second quarter we have announced another project for Black Construction in Guam, the $106 million BOQ at Marine Corps Base Blaze, and we have just been awarded an $85 million U.S. Coast Guard family housing project in Alaska. We also anticipate soon booking three new building projects in California, or Rudolph and Sletten totaling nearly $300 million. Therefore, it is evident that even ahead of our bidding, some larger projects in Perini, we continue to be successful in capturing our share of smaller and mid-sized projects. We also have two other pending commitments in the gaming area totaling over $500 million, which we hope to be awarded in the next 60 days. Demand for our services is continuing to increase meaningfully, beginning later this year when the funding from the federal infrastructure bill begins to flow. As I've said previously, that funding is anticipated to be allocated over the next five years and spent over the next ten years. Consequently, we continue to believe this substantial sustained funding will favorably impact our current projects as well as those prospective opportunities over the next five to ten years. Ahead of even the benefits of the infrastructure bill, we have talked repeatedly about tracking tens of billions of dollars of prospective projects that are expected to bid and be awarded over the next couple of years. Next, I will discuss these projects we'll be bidding this month and over the remainder of 2022. In the period of time between May 15th to June 1st, we will be submitting bids for two major highway jobs in P3 programs in Maryland. The two projects exceed $3 billion called the Maryland Express Lanes. We anticipate team selection shortly thereafter and a contract award for the apparent low bidder by the fourth quarter of 2022. Also, in that two-week time period, we're bidding the $350 million Raritan River Bridge replacement in New Jersey with an award to follow shortly. Then on May 26, we will be bidding the $2.5 million Newark AirTran replacement project and anticipate team selection with a contract to follow shortly thereafter. As you can see, May will be an incredibly busy month of bidding. Other significant projects bidding this year are the $1.6 billion Brooklyn Jail, $2.5 billion Navy dry dock job in Hawaii, $800 million JFK Roadways and Ground Transportation in New York City, $1 billion East San Fernando Light Rail project for the Los Angeles MTA, and $700 million Inglewood people mover in Los Angeles. Before I hand things over to Gary to discuss the details of our financial results, I want to be clear that we are confident we will deliver improved financial performance over the rest of this year. Therefore, despite the negative first quarter and its impacts on earnings, we're maintaining our guidance for 2022 in the range of $1.15 to $1.60. As I said previously, we would also add that we believe our operating cash will continue to increase and be strong throughout the whole year of 2022. Thank you. And with that, I'll turn the call over to Mr. Smalley.

Gary Smalley, Executive Vice President and CFO

Thank you, Ron. Good afternoon, everyone. As usual, I'll start with the discussion of our results for the first quarter including cash flow, followed by some commentary on our balance sheet and our 2022 guidance assumptions. Revenue for the first quarter of 2022 was $1 billion, down from $1.2 billion for the same quarter of last year. Civil segment revenue for the first quarter was $391 million compared to $476 million for the comparable prior-year quarter. Building segment revenue was $331 million compared to $407 million for the first quarter of last year. Specialty contractor revenue was $231 million compared to $325 million. The lower revenue in the current quarter reflects reduced project execution activities on a completed building segment technology project and the nearly complete civil segment mass transit projects, both in California, as well as the impact of the adverse legal ruling that Ron mentioned earlier. In addition, we experienced reduced activities on various civil and specialty contractor segment projects in the northeast, as many of them are now complete or winding down. Certain projects in California and the Midwest, however, are in their earlier stages and are partially offsetting the revenue reductions I’ve mentioned. As these and other new projects accelerate and contribute more meaningfully, we expect to more substantially backfill the revenue declines associated with our late-stage or completing projects. We reported a loss from construction operations of $10 million for the first quarter of 2022 compared to income from construction operations of $50 million for the same quarter of last year. As Ron mentioned, our first-quarter earnings this year were significantly reduced by the impact of the adverse legal ruling in New York and the temporary impact earnings associated with the approval of a significant amount of change orders on a mass transit project in California. I'd like to explain why the successful negotiation of significant change orders on the California project resulted in a negative accounting impact for the first quarter. The new work approved was of a lower risk and therefore carried a lower margin percentage than the project's overall profit margin. As a result, even though the total profit in dollars that will ultimately be recognized for the project increased with approval of change orders, the cumulative margin percentage for the project declined slightly. Also, since much of the additional work that was negotiated has not yet been performed, there was a small reduction in the project's percentage of completion. The combination of the slight decline in the project's overall profit margin percentage, and the small decrease in the project's percentage of completion resulted in a $17.6 million decrease in the profit recognized for the project in the first quarter. So, in summary, we had a successful negotiation of significant change orders that increased the overall profit of the project, but the accounting treatment for the change orders resulted in a negative cumulative correction to earnings in the first quarter. Most importantly, the first quarter reduction of earnings is only temporary since it will reverse itself and be recognized in profit over the remaining life of the project. Collectively, the two factors mentioned negatively impacted the civil segment by $43 million, and as a result, the civil segment had a loss from construction operations of $1 million for the first quarter of 2022 compared to income from construction operations of $50 million for the comparable quarter last year. Building segment income from construction operations was $9 million compared to $11 million for the first quarter of 2021, with the reduction primarily due to the segment's lower revenue volume in the current quarter. The building segment's operating margin for the first quarter of 2022 came in at a healthy 2.9%, essentially level compared to 2.8% for the first quarter of last year. The specialty contractors segment had a loss from construction operations of $4 million in the first quarter of 2022, compared to income from construction operations of $1 million in the same quarter last year. With the decrease primarily due to lower profitability and reduced project execution activities in the Northeast, including the electrical, mechanical components of a transportation project that is nearing completion. Other income for the first quarter of 2022 was $4 million, compared to nearly zero for the first quarter of 2021, with the increase primarily driven by interest earned on federal income tax receivable balances. Corporate G&A expense for the first quarter of 2022 was $15 million compared to $13 million for the same period last year, with the increase largely driven by higher compensation-related expenses. Interest expense for the first quarter of 2022 was $16 million, compared to $18 million for the first quarter of 2021. The decrease was principally due to the absence of amortization of discount and debt issuance costs on our convertible notes that we repaid last year. The income tax benefit for the first quarter of 2022 was $4 million compared to income tax expense of $7 million for the prior year the first quarter. The corresponding effective tax rate was 17.1% for the first quarter of this year, compared to 21.7% for the comparable quarter last year. The lower effective income tax rate for the first quarter of 2022 was primarily due to non-controlling interest making up a higher percentage of earnings for 2022 based on annual projections, as well as share-based compensation adjustments in the current year period. Net loss attributable to Tutor Perini for the first quarter of 2022 was $22 million or loss of $0.42 per share compared to net income attributable to Tutor Perini of $60 million or $0.31 of earnings per share for the same quarter of last year. The substantial decline was principally due to the two factors I mentioned earlier that negatively impacted our operating income this quarter. They had a cumulative negative EPS impact of $0.63. In fact, our first quarter EPS would have been ahead of budget, had it not been for those two negative impacts. Now let's switch the discussion to cash flow, which is certainly the major highlight of our first quarter results. Due to the seasonality of our business, namely weather challenges and some of the markets we serve, our first-quarter operating cash is nearly always negative as Ron had indicated earlier. Last year's first quarter operating cash usage of $47 million was right at the average for the operating cash performance that we typically see in the first quarter. This year is different and much improved. As Ron noted, we generated a first-quarter record operating cash of nearly $121 million this year. This was by far our best first-quarter operating cash results since the merger in 2008 and was also our third highest operating cash of any quarter. Consistent with what we expected and discussed in our last earnings call back in February, we experienced strong cash generation this quarter that was primarily driven by an improved cash collection cycle, including collections associated with the recent resolution of certain amounts that were previously disputed and that had previously required a use of cash. We anticipate continued strong operating cash generation for the remainder of 2022 based on projected cash collections from project execution activities and the resolution of various other outstanding claims and change orders. We still expect that operating cash for 2022 will be well in excess of our consolidated net income. Now let's briefly turn to our balance sheet. Our net debt as of March 31st, 2022 was $687 million, down 13% compared to $791 million as of December 31st, 2021. We remain well within our debt covenant compliance limits and anticipate that this will continue to be the case in the foreseeable future. Our costs and estimated earnings in excess of billings, what we refer to as CIE, declined very slightly during the quarter. We actually made good progress and reduced CIE for many projects, but these reductions were nearly entirely offset by continued growth in unapproved change orders in the Northeast, where we continue to work with our owners to resolve the open issues. As Ron mentioned earlier, we're maintaining our EPS guidance of $1.15 to $1.60 per share. We're optimistic that we will be able to claw back much of the first quarter earnings underperformance from increased project execution activities and the resolution of various disputed balances later this year. Assets and 2022 EPS guidance assumptions also remain unchanged from what we provided during the earnings call in February. Thank you. And with that, Ron, I'll turn the call back over to you.

Ronald Tutor, Chairman and CEO

Thanks, Gary. To recap, we're off to a strong start this year from a cash perspective and expect to continue generating very strong operating cash throughout the balance of this year and, if anything, even stronger next year. As we've discussed time and again, all of our disputes are finally coming to fruition with trial dates, arbitration dates, or owner mediations. The end of the argument is this year and next year. Our disappointing EPS was primarily the result of the loss generated by a bad decision that we spoke of previously, and it contributed to the biggest part of our loss as well as the difficulty of settling over $100 million of subcontractor changes at lower margins. We had to take a large loss in the quarter that was really a gain in profitability that will return over the next three years of performance. Our backlog still provides us with good visibility over the next few years, and as I described early in the call, the sheer enormity of all the work we're bidding; $6 billion in the next three weeks and probably an additional $10 billion by the end of the year. We expect and hope to grow that backlog substantially. We already have a substantial volume of projects being pursued and we expect to continue to increase significantly as the funding from the infrastructure bill finds its way to our public agencies. Lastly, as discussed earlier, we believe our financial performance will improve and will be able to absorb the poor fourth-quarter and still deliver the operating results we stipulated earlier. Thank you. And with that, I'll turn the call over to the operator for any questions.

Operator, Operator

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. One moment, please, while we gather questions. Our first question is from Alex Rygiel with B. Riley. Please go ahead.

Alex Rygiel, Analyst

Morning, gentlemen. Ron, I suspect that you didn't anticipate these two items. And so given that you're reiterating 2022 guidance, you're by default significantly raising guidance for the remainder of the year. So, my question here is, what's changed to give you that confidence?

Ronald Tutor, Chairman and CEO

Well, first of all, to be blunt, we had a significant reserve setup for 2022. With so many hundreds of millions of dollars in claims being litigated and negotiated, we set up a significant reserve. We think everything is going very well on all the other major projects. And given our projections, although it's unnerving, particularly the legal loss, which that's the problem with trials, most of the time you get the result you should, but periodically, you get a case like this where the truth is not rewarded, they stopped construction, we never proceeded. They redesigned the bridge in totality, reviews to sit down with us and discuss the added cost, and at the end of the job, they told us to sue. Now, under normal circumstances, you would get paid all of the costs of the redesign. Somehow in New York, the courts found we didn't give timely and adequate notice to the most obvious issue and we lost. We still have one more course of action under our delay claims, which are a substantial part of it. However, I chose to write it off. Although we're still appealing and moving forward, we've chosen to write it off. The other one was particularly unusual because we settled over $100 million of subcontractor changes. The majority of which only carry a 5% markup by contract. It's a large civil job where we typically perform the majority of the work, and we're not only allowed significantly more margin, we typically make significantly more margin, but this was limited. The subcontractor work, although there's nothing negative, and we achieved additional profit for the job. When you understand timing and percentage of completion, a positive change order actually caused a $17 million paper loss for the first quarter, and really is a paper loss. We made money on the change even though it had a horrific impact. So that was the crux of the quarter, and we believe we have enough remaining that's positive that will offset it.

Alex Rygiel, Analyst

And then could you talk a bit about competition? Where do we stand today? Are there more competitors, less competitors? I know you mentioned that you were one of two bidders on a number of projects. But in totality, where do we stand? Because it feels like margins are still somewhat constrained, and that would be in theory, due to the competitive environment but we'd love your color on that.

Ronald Tutor, Chairman and CEO

Well, there's no competitive environment. We have three major jobs in the $1.5 billion to $2.5 billion range we're bidding in the next two weeks. Two of them we're bidding against a Spanish and Italian joint venture. The third one we're bidding against one other bidder of two American companies. So, the $3.5 billion plus jobs, we're bidding with one other bidder each. There is no more competition today than there was a year ago, six months ago. And as I've said previously, we know every major player in the U.S. as well as every major foreign player that wants to come to the U.S. It's not going to be much more competitive at least in the next 12 months because in order to compete on these mega projects, you have to have a major presence here. You can't fly in from Spain or Germany and compete on a $2 billion job and land with 200 engineers and $50 million worth of equipment. So, it still remains that there are very seldom more than two bidders on everything we bid. The marketplace is up significantly, and to put it bluntly, we've raised our margins significantly and if the one other bidder we face doesn't, we'll address it. But we are in a mode that believes that those few of us left should get more reasonable and sensible margins, and we remain committed to it.

Gary Smalley, Executive Vice President and CFO

Alex, if I could just add this, on top of what Ron was saying. A lot of what you're seeing is really timing-related, as the new projects come in, we expect those to be higher margins, so some of the results that you see still reflect the older projects where we haven't been able to get those higher margins.

Ronald Tutor, Chairman and CEO

That's accurate because we haven't signed a major project in the last two years. Everything we're discussing is highly profitable work from three to four years ago. Due to a lack of competition, especially for large projects, there were only two or three bids in the fourth quarter of last year, and the entire industry was affected by COVID. Now things are reopening, and we've increased our prices while it seems our competitors have not. The coming weeks will reveal what happens with these three major projects, and the remainder of the year will indicate whether we're the only ones adjusting our costs compared to the few remaining peers. However, it's still rare to see more than two bidders on any major project. I can mention projects where owners are cautiously not receiving any bids.

Alex Rygiel, Analyst

Helpful. Thank you very much.

Brent Thielman, Analyst

Hey, great. Thank you. Hey, Ron, is it fair to say that any kind of new work you could got term here as more of that, 2023 revenue opportunity, or is there still something you can grab here that guide fell in the back half?

Ronald Tutor, Chairman and CEO

It may hit the fourth quarter if we were fortunate enough, for example, to be awarded one of these four major projects bidding in May. I think we probably see an impact in the fourth quarter, but no earlier.

Brent Thielman, Analyst

Okay. And are you expecting to sort of claw back some of that $17.6 million for that mass transit project over the course of this year, or is that spread out over the course of the next few years?

Ronald Tutor, Chairman and CEO

It's this year in the next two years to follow up. Because again, if added to our margin, but because it was a $100 million of work at a significantly lower margin than the job was earning, it created this paper loss, which will offset back-end. Because in the final analysis, we paid more money on the change we didn't lose. But if you understand percentage of completion accounting, it had that dramatic impact on the quarter.

Gary Smalley, Executive Vice President and CFO

Brent, the situation will depend on the remaining volume rather than a specific time frame. As Ron mentioned, it will unfold over the rest of this year and the next couple of years as we continue to recognize the earnings from that project.

Brent Thielman, Analyst

Yeah. Got it. That answers my next question. I appreciate that. Just last one. I mean, any update on the plan for the cash generated, expect to generate here from the course of the year.

Ronald Tutor, Chairman and CEO

When we accumulate $5 to $600 million of cash through resolves, we will discuss it with our board, but there's no commitment to what we're going to do. The obvious is we will reduce debt with some part of it. There's no question about that. I'm not supportive of stock repurchase. However, we've discussed dividends at some point. But our primary focus is this intense commitment to resolve all lease disputes and get our CIE account from a billion dollars down, to where it ought to be in the $300 to $500 million, collect that cash, and then that's a decision we will have to make. And as we continue to earn as well as collect that cash, we will obviously reduce debt as we pay off our convertible bonds.

Gary Smalley, Executive Vice President and CFO

If I could just add this on stock buybacks. Right now, the question might be, why in the world wouldn't you buy back stock at the low price that it is, but when we collect these hundreds of millions of dollars that we're talking about, the stock price better not be where it currently is. We would expect the stock price to rise substantially, and then a stock buyback makes even less sense then.

Ronald Tutor, Chairman and CEO

Not only that, we're undergoing what we think is going to be a huge surge in new works and new contracts and I don't want to spend the money, although it might be advantageous to buy back at these ridiculous prices. I think the money is best committed to a major new program with a significant increase in backlog and let's reserve the money for the performance of the work because we're looking at billions of dollars worth of work to bid, and it would not be inconceivable to almost double our backlog by the end of the year. That will require that cash to be utilized. So that's where we are with cash. We just like to see it accumulate for a while, taste it, feel it, and let it hang around before it goes back out the door.

Brent Thielman, Analyst

Okay. Very good. Appreciate it. Very helpful.

Steven Fisher, Analyst

Thanks. Good afternoon and congratulations on the cash collections.

Ronald Tutor, Chairman and CEO

Thanks, Steven.

Steven Fisher, Analyst

So since it sounds like you do assume in your full-year guidance the $0.42 loss, it looks like you're assuming you're about a $1.80 or so at the midpoint for Q2 to Q4, can you just maybe help us with what's the cadence of that? Is that through normal seasonality or are there different reserves that you talked about that may be coming in or out at different times due to normal construction seasonality?

Gary Smalley, Executive Vice President and CFO

Steve, as we would normally see, the seasonality does have an impact on us, and so we would be as the year progresses, building earnings, so I think you'll see strength as the year progresses with the back end of the year more heavily weighted.

Steven Fisher, Analyst

Okay, but with the fourth quarter then be a bit lower than, say the third quarter, so we build in the second and third and then down a bit in the fourth, or do you think you could build sequentially?

Gary Smalley, Executive Vice President and CFO

We expect the fourth quarter to be stronger than the third quarter, but historically, there's some variability; sometimes the fourth quarter is lower than the third and sometimes it’s not. It's difficult to predict, but we're optimistic about this year's fourth quarter.

Steven Fisher, Analyst

Okay. And Gary, I think you made a comment about timing of revenue growth or return to it. Could you repeat which quarter you think that will occur, and what has to happen for that to happen at that time?

Gary Smalley, Executive Vice President and CFO

Yeah. What I was saying is by the end of the year. So, look at the fourth quarter and then on into next year. I think for it to happen this year, we will need to get some of the work, the large work that Ron had spoken of earlier, some of it will say mega work. There is also a lot of other projects that are not in the billion-dollar range that will support that, and a lot of those projects we're very well-positioned for, and some of those are quicker burning. So, it's really getting our fair share of the work, getting it quickly. And that should be the sooner we get it, the sooner we're going to see that materialized. So, I would say no earlier than the fourth quarter, but certainly in 2023, we should see it.

Steven Fisher, Analyst

Okay. I guess maybe just a follow-up on that question. Do you still need some of these big bookings that you have bid now to hit the guidance for this year? Or you think you have pretty much all of that in backlog already? Maybe plus or minus some smaller work here and there.

Gary Smalley, Executive Vice President and CFO

It’s not all in backlog. In fact, when in our industry, when we always put together our plans, there's a certain amount of, let's call it stretch, with respect to earnings that occurs based on bookings during the year. As we are in the beginning part of the year, there's a greater chance that things that we would record in this part of the year will have an impact on the year. So, there is an element of that, but it's not a disproportionate element; it's an amount based on history that we think is achievable.

Steven Fisher, Analyst

Just lastly, yes, it does thank you. And then just lastly, in terms of how to think about segment margins, maybe, focused on Specialty and Civil, how should we think about those for the rest of the year?

Ronald Tutor, Chairman and CEO

Civil is expected to remain strong, and I anticipate it will maintain its high margins. The building business will likely remain consistent with margins around 2.5% to 2.75%. However, we've faced challenges in our New York specialty business. Our western electrical and mechanical operations are stable, but the issues in New York with WDF mechanical and Five Star Electric persist. There isn't a quick fix, and while I hope for improvements, I am uncertain that this year will bring about a turnaround. They continue to struggle, negatively impacting our earnings. Ideally, we should be generating $30 million a year from that Specialty group, but we're currently only achieving ten. There's nothing more I can change; their execution is critical, and they've been significantly affected by rising material costs and supply chain delays, more so than us as general contractors. Nonetheless, there are no excuses for their underperformance. I remain hopeful they will recover and reach their potential. Despite the challenges, the limited competition in the market still presents them with opportunities. The last two years have been focused on smaller projects, but they will also be involved in major civil jobs with us, and I hope they will benefit from those opportunities as we do. However, their struggles are evident and undeniable.

Gary Smalley, Executive Vice President and CFO

To add a note, the two projects we discussed, the adverse legal decision and the successfully negotiated change order, are both civil projects. If we normalize the results and exclude the impact on the quarter, we actually saw slightly improved margins in the first quarter of this year compared to the first quarter of last year. This is a positive trend, and we expect to continue to build on that margin percentage throughout the year, as we did last year.

Steven Fisher, Analyst

Okay. Yes, I think about 30 basis points year-over-year. Are you expecting that we should be modeling a loss in Specialty in the second quarter?

Gary Smalley, Executive Vice President and CFO

We hope not. That's not what we have in the budget now.

Operator, Operator

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I'd like to turn the call back to Mr. Ronald Tutor for any closing remarks.

Ronald Tutor, Chairman and CEO

Thank you, everyone. Once again, our quarterly call is done. We look forward to the next one.

Operator, Operator

Thank you. This concludes today's conference. Thank you for your participation. You may now disconnect.