Cactus, Inc. (WHD) Q1 2026 Earnings Call Transcript

good day and thank you for standing by welcome to the cactus q1 2026 earning call at this time all participants are in a listen only mode after the speaker's presentation there will be a question and answer session to ask a question during the session you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your questions, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Alan Boyd, Treasurer, Director of Corporate Development and Investor Relations. Please go ahead.

Thank you. Good morning. We appreciate you joining us on today's call. Our speakers will be Scott Bender, our Chairman and Chief Executive Officer, and Jay Nutt, our Chief Financial Officer. Also joining us today are Joel Bender, President, Stephen Bender, Chief Operating Officer, and Will Marsh, our General Counsel. Please note that any comments we make on today's call regarding projections or expectations for future events are forward-looking statements covered by the Private Securities Litigation Reform Act. Forward-looking statements are subject to a number of risks and uncertainties, many of which are beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations. We advise listeners to review our earnings release and the risk factors discussed in our filings with the SEC. Any forward-looking statements we make today are only as of today's date, and we undertake no obligation to publicly update or review any forward-looking statements. In addition, during today's call, we will reference certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release. With that, I'll turn the call over to Scott.

Thanks, Dallin. Good morning to everyone. I'm very proud of our team's achievements in the first quarter and the current momentum in the business, which reflects our focus on delivering premium, highly engineered products and services to our customers. Pressure control revenues remain resilient despite the impacts of the conflict in the Mideast and our splutable technologies business outperformed in what is usually a seasonally slow quarter on continued international shipment strength. I'd like to extend a thanks to our team, particularly those in the Mideast, for sustaining a high level of performance during this challenging period. Some first quarter total company financial highlights include revenue of $388 million, adjusted EBITDA of $100 million, adjusted EBITDA margin of 25.8%. We paid a quarterly dividend of $0.14 per share, and we closed the quarter with a cash balance of $292 million. I'm now turning the call over to Jay Nutt, our CFO, who will review our financial results. Following his remarks, I'll provide some thoughts on our outlet for the near term before opening the lines for Q&As.

Thank you, Scott. As Scott mentioned, total Q1 revenues were $388 million, and total adjusted EBITDA was $100 million. both sequentially much higher than the fourth quarter, largely due to the contribution of Cactus International for our first quarter of ownership. For our pressure control segment, revenues of $300 million were up nearly 70% from the fourth quarter due to the acquisition. Revenues and operating income in the Middle East were modestly impacted by the outbreak of the conflict in Iran, but impacts of delayed shipments were offset by strength in the U.S. market. Operating income decreased $10 million or 20.7% sequentially, with operating margins decreasing approximately 14%. Operating income improved sequentially due to the inclusion of Cactus International, but of course, as reported, it was reduced by approximately $19 million due to purchase price accounting adjustments. These non-cash charges are added back to our adjusted operating results. Accordingly, adjusted segment EBITDA was $12.7 million higher sequentially, with margins decreasing by 930 basis points. The margin decrease was primarily due to the inclusion of Cactus International operating results. For our spoolable technology segment, revenues of $90 million were up 6.8 percent sequentially, reflecting higher customer activity, supported by increased sales across domestic and international markets. Operating income increased $2.6 million, or 12.6 percent sequentially, with operating margins increasing 130 basis points due to improved operating leverage and lower stock-based compensation expense. Adjusted segment EBITDA increased $1.8 million, or 5.9 percent sequentially, while margins decreased by 30 basis points as the improved operating leverage was offset by increased input cost. Corporate and other expenses increased by $2.9 million to $12.7 million in Q1, including $5.8 million of transaction and integration costs. Adjusted corporate EBITDA moved favorably to $4.7 million of expense. On a total company basis, first quarter adjusted EBITDA was $100 million, up $14.6 million from Q4. Adjusted EBITDA margin for the first quarter was 25.8% compared to 32.7% in the fourth quarter. Adjustments to total company EBITDA during the first quarter included non-cash charges of $7 million in stock-based compensation, $10.4 million of inventory step-up amortization due to purchase price accounting, $5.8 million dollars for transaction related professional fees and nine hundred thousand dollars of severance primarily incurred in initial actions to right size the Cactus International Organization total company remaining performance obligations or backlog ended the quarter at five hundred and thirty seven million dollars backlog reflects remaining performance obligations for our global pressure control and spoolable technologies businesses but a significant majority of these obligations are associated with our international pressure control business. As a reminder, our pressure control and spoolable technologies operations are predominantly short cycle businesses where backlog levels at any time may not be indicative of future revenues beyond the near term. Pressure control operations in the U.S. do not contribute meaningfully to our backlog as the business is driven by call-out orders. Backlog in the Cactus International business decreased from year-end as multi-year contract negotiations continued with one large Middle East customer, resulting in lower than normal order activity. And orders were partially impacted late in the quarter due to the outbreak of the conflict in Iran. Backlog could continue to decrease in the second quarter considering the conflict in the Middle East in the impact of contract renegotiation timing. Depreciation and amortization expense for the quarter was $36.8 million, which includes $12.5 million of amortization expense related to intangible assets and $10.5 million of amortization of the step-up of inventory values resulting from the Cactus International and Flex Steel acquisitions. During the first quarter, the public or Class A ownership of the company averaged 86 percent and ended the period at 87 percent. Gap net income was $40 million in the first quarter versus $48 million during the fourth quarter. The decrease was largely driven by purchase price accounting. Book tax expense during the first quarter was $10 million, resulting in an effective tax rate of 19 percent. Adjusted net income and earnings per share were $56 million and $0.70 per share, respectively, during the first quarter compared to $52 million and $0.65 per share in the fourth quarter. Adjusted net income for the first quarter was net of a 22% tax rate applied to our adjusted pre-tax income and now also includes deductions for non-controlling interests related to Baker Hughes' ownership in the Cactus International joint venture, combined with a non-controlling partner's ownership in our business in Saudi Arabia. During the quarter, we paid a quarterly dividend of 14 cents per share, resulting in a cash outflow of approximately $12 million, including related distributions to members. We ended the quarter with a cash balance of $292 million. This amount includes $98 million of cash held to finalize Cactus International legal entity restructuring transactions with Baker Hughes in certain jurisdictions. We expect those restructurings to be completed by Baker Hughes in the coming months. The offset to this cash is currently reflected in our accounts payable balances. These balances and other legal restructuring related items impacted our cash from operations in the quarter. Cash decreased from year end due to the acquisition outflow. Net CapEx was approximately $9 million during the first quarter of 2026. In a moment, Scott will give you our second quarter operational outlook. Some additional financial considerations when looking ahead to the second quarter include an effective tax rate of 19% and an estimated tax rate for adjusted EPS of approximately 22 percent. Total depreciation and amortization expense during the second quarter is expected to be approximately 37 million dollars. Twenty-eight million dollars of this expense is associated with our pressure control segment, including approximately 10 million dollars of expected amortization of the step-up of inventory and eight million dollars of intangible amortization because of purchase price accounting. And finally, nine million dollars of this expense is within spoolable technologies. Our full year 2026 capex outlook remains in the range of 40 to 50 million dollars. Finally, the board has approved a quarterly dividend of 14 cents per share, which will be paid in June. That covers the financial review. I'll turn the call back over to Scott.

Thanks, Jay. I'll now touch on our expectations for the second quarter, our reporting segment, starting with our pressure control business. During the second quarter, we expect total pressure control revenue to be approximately flat from the first quarter, reflecting increased customer optimism in the domestic market, offset by a full quarter impact of the conflict in Iran on our Cactus International JVs results. We assume that the status quo will continue throughout the full second quarter, even considering an opening of the Strait of Hormuz, which is impacting our customer activity and presenting numerous logistics challenges to our Mideast manufacturing operations. I'm extremely thankful that our personnel in the region have remained safe and will continue to prioritize their safety as the situation changes. Our team has done an incredible job mitigating the impacts of logistics challenges and minimizing the impact on revenues so far in the second quarter by utilizing alternative shipping methods whenever possible, while also personally navigating an extremely trying time for them and their families. We remain hopeful for an expeditious and non-kinetic resolution to the conflict soon. Adjusted EBITDA margins in our pressure control segment are expected to be in the 22 to 24 percent range in the second quarter. This guidance excludes approximately $5 million of stock-based comp expense within the segment and the amortization of the write-up of Cactus international inventory due to purchase price accounting. We expect this will be the last quarter for this inventory amortization expense. Margins are expected to decrease slightly as resilience in the U.S. market and increased imports of lower cost goods from Vietnam are more than offset by elevated logistics expenses and lower manufacturing absorption in our Cactus international business due to the conflict. I'm also pleased to announce we're increasing the The expected synergies targets for our Cactus International acquisition by 50% from an annualized amount of $10 million to $15 million. The increase follows our work to further flatten and right-size the organization to match our operating model. The actions necessary to lock in these savings have already been completed, which are expected to support higher profitability leading into next year. Additionally, we are increasingly confident in supply chain-related synergies. however we have much work to do to crystallize the amount and timing of these savings in any event this is a project driven business most at any rate as this is a project driven business most material was ordered was ordered when the orders were received for delivery approximately nine to 15 months from placement as a result we do not expect to see meaningful supply chain related saving before the second half of 27 more to come as we continue to work on this topic. I'd also like to provide a brief update on the tariff situation in the U.S. as it applies to our imports, which remain highly fluid. We still pay a 75% total tariff on the import of most of our goods from China, which consists of 25% Section 301 and 50% Section 232. There were no meaningful changes to the basis of calculations of our rates as a result of the recent U.S. Supreme Court rulings regarding the IEEPA tariffs or changes to the more impactful Section 32 tariffs announced in early April. We are also now paying a 10% tariff implemented under Section 122, which impacts certain goods we import, but not those captured under Section 232. While we've not gained much from tariff relief on China's source product, I'm pleased to share that our Vietnam facility is now tentatively API approved, and we're proceeding to increase shipments from this facility, which will attract a lower 50% import tariff under Section 232 only. Finally, the recent Supreme Court ruling provided that certain tariff payers may claim refunds for IEEPA and other tariffs previously remitted that were ruled unconstitutional. We filed for a refund of such payments, but the amount is relatively small compared to the overall tariff burden that we incurred as a result of Section 232 and Section 301, both of which remain in place. There is no certainty of the amount or timing of the tariff refunds. Shifting to our spoolable technology segment, I'm extremely pleased with the performance in the quarter. We achieved a record quarter of nine U.S. revenues, void by strength in the Mid-East and Latin America. International order momentum is increasing due to our multiyear effort to further develop our global footprint and customer relationships. Domestic activity the first quarter was also higher than expected in what is typically a seasonally slow quarter. Continued growth with midstream customers who demand our larger diameter high specification products was an additional source of domestic strength. This momentum is continuing into the second quarter as we expect revenues to increase mid single digits percentage-wise primarily driven by an increase in North American activity. Recent commodity price strength has increased customer optimism and adoption. We're excited about the trajectory of this segment where bookings have improved sequentially in every month this year. Internationally, we've seen a step change in inbound interest since quarter end, particularly from Latin America, where we were recently awarded several incremental orders totaling approximately $30 million for delivery this year. Further, we shipped our first sour service equipment order to the Mid-East in April as previously shared. We expect spoolable technologies adjusted EBITDA margins to be approximately 36 to 38 percent in the second quarter, which excludes a billion dollars of stock-based cop expense and is increasing modestly on improved operating leverage. With regards to our spoolable technology supply chain, the Mid-East conflict has led to improved commodity prices for our customers, but also to a recent material increase in the price of polyethylene, one of our primary input costs. I'm confident in our team's ability to proactively address these inflationary pressures through cost mitigation and recovery efforts. Adjusted corporate even dies expected to be a charge of approximately $5 million in the second quarter, which excludes $2 million of stock-based copper. In conclusion, the outlook The growth of the oil and gas market has fundamentally changed in the last two months, from one of supply abundance and customer unease to supply concerns and guarded optimism. We are extremely well positioned to capitalize on this momentum shift with our premium global customers once the conflict debates. Although not seen in domestic activity levels as of yet, our customers have increased the pace of their activity and urgency with which they are bringing production online into a highly supportive commodity crisis. As our safe drill and flex steel products are both specifically engineered to allow our customers to drill wells and bring production online faster, we are receiving increasing inquiries for new activity. Although we remain in the early stages of the transformation necessary for our Cactus International business to improve the margins and returns consistent with our long-term expectations, we're very pleased to have the broader geographic footprint and participate fully in the expected upcoming investments required to reestablish supply after the disruption of the Middle East. So with that, I'd like to turn it back over to the operator, and we can begin Q&A.

Thank you. At this time, we will conduct the Q question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from Rune J. Rahm from J.P. Morgan Securities. Your line is now open.

Good morning, gentlemen. I'm doing well. Doing well. Team, I wanted to get your thoughts. You've had your hands around the Cactus International assets for four months or so. So, obviously, a very volatile time since late February. But I was wondering if you could frame some of the self-help opportunities you see with that business as we think about, you know, 27 and beyond.

Are you really referring to what we see in terms of synergy opportunities?

Exactly, exactly. as you think about things such as optimizing the supply chain and things like that?

Well, you know, as we discussed, the $15 million in synergies relates primarily to making the organization far more efficient. So I think there was some bloat in the way it was organized, and we're trying to reduce that to be more like a cactus. Potentially, the larger price here is going to be supply chain, and our early indications are that there's quite a bit of room there for improvement, so I would really tell you that it's primarily based upon improving the processes in the business to require fewer headcount and then the supply chain aspect of the business. our supply chain is considerably lower cost.

Got it, got it. And how much time do you think it will take to kind of get the Cactus Cots optimal supply chain kind of embedded in that business?

It won't take it that long. However, it will take a while to get rid of the inventory that has already been ordered in fulfillment of the current backlog. So, you know, our best estimate will be sometime by the end of the second quarter, leading into the third quarter, as we begin to replenish this inventory with lower-cost product.

Got it, got it. And maybe one for Jay, because I did get some questions this morning. You highlighted, and you mentioned this in your script, that the $98 million of cash held for the legal restructuring transactions with Baker, Can you provide a little bit more color? I know that Cactus spent around $355 million for the 65% stake in the JV, and you put $70 million in operating cash in the JV as part of your piece. How does this $98 million compare to that, and maybe just some color around that?

Yeah, Rune, this $98 million is for a couple of legal entities where the restructuring has not been completed, And that's Baker Hughes' responsibility to complete that. So this will be cash that's necessary to execute those transactions and restructurings. And it's really, we're not calling it restricted cash because it's sitting in our bank accounts, but that cash is designated to complete those legal entity restructurings. And we believe it's going to take several more months to complete that.

Okay, but that is being paid for kind of from the Baker standpoint.

Yeah, the cash is sitting with us, and as I point out, we really show that as a payable on our balance sheet back to Baker because that cash is designated for those restructuring activities.

All right, thanks for clarifying that. Appreciate it.

Thank you.

Our next question comes from Stephen Jandaro from Stifle.

Your line is now open. that's only slightly easier than a rune's last name i think um good morning everybody uh so i i think uh two things for me the first when you think about the the u.s land market and you know kind of the the potential for improvement and i i'm thinking at least we're hearing completions probably lead and then maybe drilling activity picks up a bit. Are you seeing, in what you've seen in your activity, that playing out in that manner? And how do you think drilling activity evolves as we go through the year based on what you see right now?

Okay, well, let me tell you that although customers are eager, I mean, I think you've read to reduce their ducks right now and take advantage, we haven't really seen any meaningful or significant evidence of that, although it's expected. But what we have seen is far more optimism on the part of our larger customers in addition to our privates. So if you recall last quarter, I was probably the outlier when I forecasted a U.S. onshore count of 490. And, of course, the world has changed since then. So we're now thinking we're going to be in the five and a quarter range, 525. And I personally believe that we'll get more than our share of that. I think that from what we see in terms of activity increases, many of them are within our customer base. So I feel much better about it. That's the short answer, Stephen.

Great. Okay. No, thank you. The other question I had, it pertains to the selling the safe drill product internationally and how the JV with Baker will potentially help sales of your safe drill product to some of the non-conventional markets, either in the Middle East or in other areas. Can you just talk a little bit about that and how you see that evolving?

So I think that let me tell you that our first shipment of safe drill will be to a historic cactus customer and will be that shipment and the resulting contribution margin will be the property of your old cactus and not the JV. But in terms of the JV's ability to leverage our unconventional, you know, they're very active in areas that you know are going to be active and unconventional, such as Saudi, the rest of Abu Dhabi, that's managed by ADNAC, Kuwait, Algeria. Those areas are where we expect to see the greatest benefit from the JV. They're there, they're approved, and we have the products.

Okay, great. Thank you for the details.

Thank you. Our next question comes from Derek Podheiser from Piper Sandler. Your line is now open.

Good morning. Good morning, everyone. Maybe just sticking on Cactus International, I appreciate all the comments around optimizing the supply chain, driving the efficiencies, you just up the target there. But maybe some comments or your thoughts around what an activity recovery could look like in the Middle East in a post-war environment. I'm assuming that there's been a bit of a de-stocking in Saudi and UAE. But when we think about restocking and going back into the region, how should that impact Cactus International? And what do you see some upside from that?

Yeah, I would say because of the deliveries, the extended deliveries and the de-stocking, I'm thinking, we're all thinking second quarter, third quarter of 27. But I think we're going to see a pretty good increase in what has historically been demand from that area. And, you know, I'm a little concerned about Qatar, frankly, because having lost their, most of their ability to export, and Qatar's been a really good market for us. I'm not sure how much more gas, you know, and I'm, believe me, this is only my opinion, how much more gas Qatar is interested in producing right now with limited avenues for export. But for the rest of the Mideast, particularly, I'm seeing a, we're going to see a lot. Got it.

Okay. That's great. So middle of next year, along with all the efficiencies on the cost side of things so setting up for some good upside um it appears i guess maybe switching over to the free cash flow you know obviously a pretty big quarter obviously a lot of impact from working capital where that ties back to the 98 million payable with baker but i think when when you guys close the deal on spc cactus international there's a pretty high working capital balance particularly on ar and i think you can benefit from harvesting that cash so So maybe just some thoughts around that and when we can really see that showing up in force as we work through this year and into next year, just some call around the free cash flow generation.

Yeah, Derek, you're correct. There was a high level of unbilled AR at the end of year end. We made some progress in Q1, but we continue to have an elevated level of unbilled AR. are. So we're going to work on some processes about improving and accelerating the timing of being able to get that bill to our customers so that we can start increasing the velocity of cash flow. It's going to take a couple quarters to make that happen because we have to work closely with our customers to get them to take invoicing a little more rapidly than what they're used to right now.

Got it. Okay, great. Encouraging. Thank you very much. I'll turn it back.

Our next question comes from Keith Beckman from Pickering Energy Partners. Your line is now open.

Good morning. Thanks for taking my question. Good morning. I wanted to ask around, you know, you guys have been pretty clear, I think, that second, third quarter, 2027 is whenever we can see potentially a little bit of margin inflection due to getting your supply chain. So I think, you know, maybe right now I think you mentioned nine to 15 months. is kind of like the order placement. Whenever you get your own supply chain into place, do you expect that lead time to go down on orders potentially at all, or do you think that that's still the right way to think about it, that 9 to 15 months whenever you get your own supply chain into place?

No, our lead times are much lower than that. So what are our lead times right now? Four to six months depending upon the product. There you go.

Now, that makes a lot of sense, and that's really helpful. And then the second question I wanted to ask around is maybe could you speak more specifically, maybe, you know, you touched on your prepared remarks, just what the particular – some of the logistics disruptions you're dealing with right now as it pertains to the Middle East or potentially, you know, anything on the tariff side of things. I think you highlighted that as well, maybe the potential size of refunds that you think you could see and maybe what goes to the customer versus what you guys could potentially harvest from that.

Well, let me tell you, I'm not going to, you know, I don't want to comment on the magnitude of the potential tariff refund One, just because there's a lot of confusion about the applicability of non-liquidated versus liquidated tariffs, and I can let Joel go into detail about that. It's not an insignificant amount of money, but it is modest in comparison to how much we actually spend on tariffs because it does not impact the majority, which are 232 and 301. It's more related to, you know...

It's really just, they refer to them as these emergencies, but it's really what you think of as reciprocal tariffs and fentanyl. That's all that is addressed. So, as Scott mentioned, the 50% steel tariff, it remains in place. And the way the process works right now is you're in phase one of what they refer to as a tariff refund, and it would be on entries that have not been liquidated, which essentially means that have not been processed by CBP, and then any that were liquidated in the last 80 days. You submit the list, it's a CATE declaration, you get a confirmation that it was accepted, and then you wait for your claim number, and they, you know, they tell us you can expect something maybe in 90-plus days, but there was no confidence in that particular date because, again, this is just phase one. They expect that there will be at least a second, possibly third phase in which they address liquidated entries, but that has not been confirmed. So, again, it's still very unclear.

Thank you. Our next question comes from Jeffrey. LeBlanc from TPH.

Your line is now open.

Hey, Jeff. Morning, Skonin. Hey, how are you? Good morning, Skonin team. Thank you for taking my question.

How come none of you asked about fly steel?

Ironically, it's going to be about the alternative shipping methods you're using in the Middle East. And then, additionally, how quickly do you think shipping can return to normal means once the straight reopens?

You know, right now we're having to take a very circuitous route around the Arabian Peninsula and trying to get some stuff in by land, but it's incredibly problematic. I don't know how much it's, it's probably, I don't know, you know, I don't want to tell you something that's not true, but it's it's got to be a good 30 days more longer than it had before. When is it going to return? You know you got a huge backlog of vessels like almost 1,600 vessels that have to be cleared and so I think the priority is going to be to try to get oil out of the out of the region and of course get food into the region And so it's going to take months and months. I think during its peak, what did we clear? 100-plus ships a day, 120 or so. And you've got almost 1,600 that have to be cleared. And then on top of that, you're going to have food that's coming in. You know, I just, Jeff, I don't know. It's going to be a good walk.

Okay. Thank you very much. I'll hand the call back to the operator.

Thank you. Our next call is coming from Don Crist from Johnson White. Your line is now open.

Good morning.

Good morning, Scott. I wanted to ask a more macro question because I know you like to pontificate on such things. But just in your conversations with your customers, we're hearing more and more dislocation between the financial oil markets and paper oil markets and the back end of the strip coming up. Is that what you're hearing from your larger customers out there as that relates to activity in 27?

Well, I mean, obviously, they're looking at the forward market much more than the spot market. although their balance sheets right now are blowing up with spot market sales. But you know that. In terms of drilling, they're looking at the market next year. You know, and I think the best way to characterize this is that whatever they were assuming, they're now assuming probably in the neighborhood of at least $15 higher in the futures market. You know, they're always very reluctant to share that with us for fear that we're going to see that as an opportunity to raise prices, frankly. So they, you know, they always, they plead, they're not pleading poverty as they were before, but they're not highlighting how much cash they're building on their balance sheets. So they're unlikely to share that. But, look, I can tell you, from talking to maybe six or seven or eight already, they're feeling a heck of a lot better about 27 than they were prior to this conflict. How that translates, I think, really depends upon people like you. If you're not supportive of these increases, then they won't proceed. It really takes one of the big ones to open up, and I think the rest will follow. So there's no question about mine. They'd all love to drill more wells right now.

I tend to agree with you. And just one on Vietnam, it sounds like you got tentative approval of API. Any parameters around how much that could improve margins once you shift fully out of China coming to the U.S. or shift more out of China coming to the U.S. and more from Vietnam?

Well, we're hoping that Vietnam by the end of the year will be, what, about 40 percent? We haven't really, you know, all we know is it's 40% of it's going to be at a tariff rate that goes from 75 down to 50. But to tell you that we've quantified that, I don't think we've actually quantified it, because what difference is it going to make? We're going to do it, and it's going to benefit us. But, you know, before the next call, Alan, can we quantify that? Yeah, we'll quantify that for you.

I appreciate the color. Thanks guys. Good quarter. Thank you.

Thank you. This concludes the question and answer session. I would now like to turn it back to Scott Fender, CEO, for closing remarks.

I want to thank everybody for their continued support and interest in the company. I think we have a very exciting remainder of the year and although I didn't receive any questions, And I'm particularly excited about our spillable product. I think that we've just had a transformation in that particular area. So anyway, I hope to report more on that next quarter. Everybody have a good day.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.