Advanced Drainage Systems, Inc. Q3 FY2023 Earnings Call

Good morning, ladies and gentlemen, and welcome to the Advanced Drainage Systems Third Quarter of Fiscal Year 2023 Results Conference Call. My name is Bailey, and I'll be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. I would now like to turn the presentation over to your host for today's call, Mr. Mike Higgins, Vice President of Corporate Strategy and Investor Relations. Sir, you may begin.

Good morning. Thank you for joining us today. With me today, I have Scott Barbour, our President and CEO; and Scott Cottrill, our CFO. I would also like to remind you that we will discuss forward-looking statements. Actual results may differ materially from those forward-looking statements due to various factors, including those discussed in our press release and the risk factors identified in our Form 10-K filed with the SEC. While we may update forward-looking statements in the future, we disclaim any obligation to do so. You should not place undue reliance on these forward-looking statements, all of which speak only as of today. Lastly, the press release we issued earlier this morning is posted on the Investor Relations section of our website. A copy of the release has also been included in an 8-K submitted to the SEC. We will make a replay of this conference call available via webcast on the company website. With that, I'll turn the call over to Scott Barbour.

Thank you, Mike, and I appreciate you all joining us on today's call. As you saw from our press release issued earlier this morning, the demand environment we are facing today is challenging. We're seeing domestic construction demand slow due to rising interest rates and inflation, which in turn is causing uncertainty in the market and slowing the release of projects for shipment and order rates. Before I provide more details on the current environment, I want to talk about the brand promise and value proposition, which have never been more relevant. As you have heard me say many times before, our reason is water. We protect and manage water, the world's most precious resource, safeguarding our environment and communities. This business is driven by water and sustainability as a pure-play water company, the need for ADS and Infiltrator products is as important today as it was a year ago. We have a runway for long-term growth in both the storm water and on-site septic wastewater markets, due to the value proposition and from converting projects from traditional materials to environmentally friendly solutions. We also use a high volume of recycling materials, which allow us to better manage our material costs, and we are the largest consumer of recycled plastics in North America, giving us additional scale to manage cost and financial performance. We are effectively executing our material conversion strategy. ADS and Infiltrator provide superior products and solutions which set us apart from the competition from capture to conveyance, storage and treatment, ADS’ comprehensive suite of products is designed to meet the needs of customers for the entire life cycle of a raindrop. ADS and Infiltrator products install more quickly than traditional materials, saving the contractor labor and time. Lighter weight materials are safer on the job site than traditional materials, which are much heavier and require additional machinery to unload and install. As part of the material conversion strategy and broader value proposition, we have a vast sales and engineering team in the field working with contractors and civil engineers every day to ensure our products are specified on project plans. ADS products go to market through Waterworks distribution partners that extend our sales coverage, thereby ensuring we have great visibility into local construction activity. The value proposition is so much more than simply our superior products and coverage. From a service standpoint, we have internal engineering services and design tools to assist civil engineers in their site design for underground construction. Through ADS’ company-owned fleet, we deliver directly to the job site in fewer truckloads than traditional materials. That's a big advantage for our distribution partners as we enable an asset-light model for ADS products. It is also an advantage on the job site, especially in areas of high security like airports or in traffic-sensitive areas like highways; fewer deliveries means less job site disruption and better logistics costs. Last, effective capital deployment remains a key pillar of our strategy. Because of the long-term opportunity for growth, we will continue investing in growth regions and products, as well as productivity initiatives including automation and safety. We continue to execute our M&A strategy, including tuck-in acquisitions such as Jet Polymer and Coltec, which support our recycling and Allied product strategies. Lastly, we remain committed to shareholder returns as Scott will discuss in more detail. Let me now shift gears to the challenging demand environment we are facing. Through October and November, demand continued largely at the pace we expected after the last time we spoke to you. In December, non-residential and residential demand slowed significantly. In addition to the slowdown in the Northeast and the Northwest that we talked about last quarter, we began to see weakness emerge in other geographies like the Midwest and the West more broadly. From a macro perspective, we look at the same data issue. For example, the Architectural Billing Index has been showing signs of declining for the past few months. Similar indicators are negative and expected to remain weak for most of calendar 2023. Now let's transition to results for the quarter. Consolidated net sales declined 8%; the ADS business was down 3%, primarily due to weakness in the non-residential market and shipments to retail partners. The 30% decline in Infiltrator sales was a result of reduced housing starts and completions and the last of the inventory destocking, which completed in the fiscal third quarter as we previously communicated. As we look at the significant change in market dynamics that impact construction activity since the beginning of the fiscal year, interest rates nearly doubling and significant inflation, there is no doubt this is creating uncertainty in our construction end markets. This combination has slowed down demand for the ADS and Infiltrator products, and we expect this challenging demand environment to persist through the majority of calendar year 2023. This slower market environment creates two key areas of focus: one, lower demand volume; and two, higher absorption costs. Lower demand volume will be partially offset by material conversion and growth strategies, including the priority focused states and new products. We will address the higher absorption costs through headcount reductions, plant closures, and manufacturing improvements. We will continue to hold the favorable pricing we have established for the products and services we provide to our customers. Importantly, we remain committed to the 28% to 29% adjusted EBITDA margin range we communicated at Investor Day in March of last year. We have a number of levers we are working to execute margin performance during this period of slower end market demand. We are optimizing the network, closing three facilities by the end of March. From our peak, we are taking out approximately 15% of the manufacturing and transportation workforce through reduction in attrition. We have also eliminated temporary labor and minimized our overtime. In transportation, we are removing many of our high-cost lanes and reducing the use of third-party logistics services, both of which we used quite frequently during periods of higher demand. We are doubling down on improving productivity through our commitment to continuous improvement initiatives. This includes investment in automation, improvements in downtime, and better training and tools for our employees to drive higher overall productivity. Lastly, we are rightsizing inventory to reflect current demand levels, which is contemplated in the guidance issued today. While we look at all cost control measures, we will also continue investing in our business to ensure we exit the current environment in a stronger competitive position. This includes continuing to invest in high-growth areas in the priority states. The recent Texas Department of Transportation approval for the use of thermoplastic corrugated pipe is evidence of the additional market participation opportunity and the strength of ADS' market leadership. For your reference, Texas is the largest stormwater market in the U.S. We will also continue to lean into markets that we know will grow in calendar 2023, like the infrastructure market, due to the Infrastructure Investment and Jobs Act, industrial manufacturing, such as onshoring EVs and batteries, as well as the agriculture market, which remains strong. In summary, the strength of our model remains intact, and the brand promise and value proposition have never been more relevant. We continue to generate significant cash flow in our excellent financial health. With that, let me turn it over to Scott Cottrill.

Thanks, Scott. As Scott mentioned, our sales were down 8% in the quarter due to weakness in both our domestic residential and non-residential end markets. The decline in single-family housing starts that started in May and sequentially worsened throughout calendar 2022 continues to impact demand for our Infiltrator products and is beginning to impact the ADS residential business as well. Looking into ADS’ residential business, as we got into December, we experienced slowing demand for the first time in fiscal 2023. As homebuilders pause on lot development due to the decline in housing starts and the current uncertainty in the market. While we are a cyclical company and as such, are impacted by the lower end market demand, it is important to highlight secular growth trends around the Infrastructure Investment and Jobs Act money that would be coming into play during calendar 2023, onshoring and nearshoring trends, as well as the recent Texas Department of Transportation approval for the use of thermoplastic pipe. As we have consistently demonstrated, we will continue to outperform our end markets due to our material conversion strategy, innovative solutions package, our large national distributor relationships and partnerships, and our national workforce. It is also important that we take appropriate cost containment actions that reflect the lower demand environment we are experiencing. As Scott noted, these actions include: first, optimizing our footprint with the announced closure of three facilities; second, reducing our headcount by approximately 15%, elimination of temp workers, as well as significant reductions in overtime work; third, manufacturing efficiency and productivity initiatives; and fourth, the elimination of high-cost transportation lanes. The majority of the savings resulting from these actions that I just noted will be realized in fiscal year 2024. Regarding our profitability in the quarter, I wanted to highlight that despite the lower demand, we were able to expand our adjusted EBITDA margins by 130 basis points year-over-year. We experienced favorable price cost in the quarter, driven by continued favorable pricing year-over-year, as well as favorable material input costs. Our ability to maintain favorable pricing is something we earn every day through our value proposition to our customers, as well as investments in the business that we continue to make. Moving to slide six. We generated $534 million of free cash flow year-to-date compared to $93 million in the prior year. We had more than $1 billion of liquidity at the end of the quarter, of which over $400 million was in cash. Our trailing 12-month adjusted EBITDA to debt ratio is at 1 times at the end of December. From a capital allocation perspective, we remain committed to investing in the business, strategic M&A, and returning excess cash to our shareholders. Our target leverage ratio is currently 1.5 times, given the current market uncertainty we are experiencing. Examples of investing in the business include debottlenecking our recycling operations, continued automation of our pipe manufacturing plants, accelerating our material science and engineering capabilities through our new world-class engineering and technology center that we are currently constructing in Hilliard, Ohio, as well as investing in Florida and the Southeast, where we continue to see strong growth. As I noted, we are targeting a leverage ratio of 1.5 times, returning excess cash to shareholders through our share buyback program and recurring dividends. Through December 2022, we repurchased 3.8 million shares of our common stock for $375 million. This leaves $625 million left under the current share repurchase authorization as of the end of December. We plan to continue the share repurchase program here in the fourth quarter and based on our current leverage, we look to accelerate the pace of such here in the near term. Moving to our expectations as we close out fiscal 2023. We have updated our guidance based on order activity, backlog, and current market trends. We currently expect our fiscal year 2023 revenue to be between $2.975 billion and $3.050 billion, representing growth of 7% to 10% from fiscal 2022. Based on that revenue range, we expect adjusted EBITDA to be between $850 million and $890 million, representing growth of 26% to 32% compared to last year and margin expansion of 420 basis points to 480 basis points. All in, the strength of our model remains intact, and we remain confident in our ability to outperform our end markets by increasing market share while also remaining committed to the adjusted EBITDA margin target of 28% to 29% we noted at our Investor Day back in March. The investments we are making now will ensure we improve upon our strong competitive position and prepare us to come out of the current downturn in an even stronger position. The most that make ADS the market leader we are today have not changed. Our total installed cost benefit and solutions package continue to make us the premier manufacturer for our large national distribution partners. Our large sales force and manufacturing footprint encompass the entire United States, which are further supported by our distribution relationships and the company-owned fleet. In addition, we can control our costs better than our competitors due to our use of recycled materials and our recycling footprint. With that, I'll open the call for questions.

Thank you. The first question today comes from the line of Michael B. Halloran from Baird. Please go ahead, your line is now open.

Thanks. Good morning, everyone.

Good morning.

So a couple of questions here. First, can you just give a little more context to the downdraft that we saw in December here and put it in the context of a couple of things? One, what the backlog looks like? I certainly saw the comments on the order book starting to normalize towards, call it, normal lead times. But what kind of visibility does the backlog give you at this point? Are you seeing any cancellations on that side? And then secondarily, have you seen any shift in that dynamic December versus January or shift in tone in the customer conversations? Can you just maybe help more on the non-res side of the business than the other pieces because I think that's where the more pronounced change was relative to what we would have expected coming out of the last quarter?

Good morning, Michael. As we mentioned, things were progressing well in October and November, but by mid-December, we experienced a halt in shipments across various regions and market segments. This seems to have been influenced by customers hesitating to bring in inventory or place materials on job sites before the year-end. Retailers, in particular, slowed down, dealing with tougher comparisons and a decline in do-it-yourself projects. The non-residential sector saw significant delays in shipments to job sites and distributors during the last two weeks of December. Weather conditions in several key areas also contributed to this slowdown, but it wasn’t the sole reason. In terms of sentiment, it has improved somewhat since December, with January coming in as we anticipated. January is always challenging as it's the start of a new year. It largely met our expectations at both companies. However, I wouldn’t say that sentiment has greatly improved. While it hasn’t worsened, we aren't observing an uptick in order rates or any significant signs of recovery. Projects are still progressing, and we see good quoting activity, but the overall feeling in the industry is that a true recovery isn't on the horizon just yet. That being said, we are encouraged by the strong year-over-year performance in the southeastern U.S., particularly in Florida, Texas, and the Carolinas. The activity we have observed in Texas has been promising, especially since we received project approvals in November. Mike, Scott, do you have anything to add?

Yes, Mike Higgins. I think your question, too, about the backlog, I would characterize the backlog at both companies as coming off to kind of pre-pandemic levels, some more normalized.

Yes, good point.

No, that's helpful. The margin side, relative to how the revenue shook out, margins were quite resilient. Obviously, the commentary about the sticking to that 28%, 29% kind of range is encouraging. Just a little context on how pricing is tracking? Are you seeing sequential changes in pricing? And then maybe put that in context of how the price cost side of things have tracked because it seems like that's held in very well.

Yes. Hey, Scott C. here, Michael. The pricing resiliency of the company based on that value proposition is truly amazing. And we've proven it over time, but I would say that value prop, the inflationary cost environment really have come into play really well, and we continue to see that. I think we also talk about how much of our quoting and pricing is based on a project-by-project basis, geography, costs, everything else and by product. So again, we continue to see the ability to drive on certain products, in certain geographies, pricing even up sequentially. So it's holding in there. I think on your broader question on price/cost in general, absolutely, the pricing piece is hanging in there and up year-over-year. And we're really starting to see that resi cost come off like we knew it would, and we've got good visibility as to what's on the balance sheet. But again, we saw that starting to come through like we thought. And then we'll see even bigger pieces of that started coming off the balance sheet here in Q4, which again is reflected in our guide. When you look at that midpoint of that Q4 implied guidance, you see that our decremental margins are more in that 25% range as opposed to that 30%, 35% range we normally talk to. And again, it's the strength of that price/cost dynamic.

And then last one for me. Could you put the cost-saving initiatives in context? One, any dollar number you're willing to provide, but secondarily at the Analyst Day, you guys talked about, what was it, 7%, 8% kind of capacity growth type range. I'm guessing some of these capacity reduction moves are in areas that you're maybe considering moves all along. But how does this change the thought of what that capacity curve looks like over time? Or does it even and it's just shifting the timing and shifting the areas?

So Scott B. here, let me address the capacity question. Regarding Infiltrator, we are seeing some stabilization and adjustments compared to what we previously discussed during the March Investor Day or on our recent trip. On the ADS side, we are still adding capacity in Florida and the Southeast, which are areas experiencing significant growth, though there may be minimal adjustments elsewhere. We have also identified facilities for closure that were already on our radar. Would you like to discuss that further?

Yes. On the cost side, we are not providing specific dollar amounts. However, we mentioned the three plants that are closing and a reduction of 15% in our headcount. To provide more context, about two-thirds of the total cost reductions we are aiming for will come from the variable costs in our cost of sales, and the remaining one-third will be from fixed costs in SG&A. Currently, this is based on our observations from December and the trends we've seen in January, which align with our expectations given the current lower demand environment. We believe this is the right amount of cost reductions at this time.

Thank you, really appreciate it.

Yes. Thanks, Michael.

Thank you. The next question today comes from the line of Matthew Bouley from Barclays. Please go ahead, your line is now open.

Good morning, everyone. Thank you for taking the questions. I wanted to stick to the margin side. That encouraging comment you made around kind of committing to that 28% to 29% margin. I just wanted to press on that a little bit. Was that a comment to say thinking about calendar 2023 or fiscal 2024 for you guys? In a scenario where demand is lower, which seems to be what you're alluding to into calendar 2023 that you could still sort of keep margins flat year-over-year? And if that's the case, is that basically reflecting both the cost containment actions, as well as deflation or just any kind of parameters around that and just how you guys are thinking about sort of the calendar 2023 given all that?

Matt, it's Scott here. We're being careful not to provide guidance for next year yet, but you're right. When we think about the 28% to 29%, that's the point estimate for the end of fiscal year 2025, as we mentioned at the Investor Day in March. The midpoint of our guidance for this year is 29%. Considering our cost-reduction efforts and the dynamics of our pricing and product mix, we expect to reach that target over the next two years. We do not anticipate a significant decline in margins followed by a substantial recovery. Instead, we expect a gradual progression from where we are now to maintain margins within the 28% to 29% range. That's our current outlook.

Thank you. The next question comes from the line of Garik Shmois from Loop Capital. Please go ahead, your line is now open.

Hi, thanks. I wanted to ask about a comment made in January regarding improving sentiment. However, it seems your shipments are still reflecting a weakening demand environment. I'm curious if this improved sentiment is mainly on the residential side or if you could elaborate on that observation a bit more.

Okay. I'll give it a shot. This is Scott B. December was bad. January came in largely as we expected, not as bad as December, kind of a year-over-year comparison. However, I wouldn't say that sentiment has changed in any dramatic way. I think the outlook remains somewhat cautious and the pace of orders is still muted compared to the prior year. That said, we are still quite active in quoting and pursuing jobs. Things haven't completely stalled, which is what I was trying to convey—that we continue to quote at very good levels. It just seems that even when orders are placed, it takes much longer for them to be released for shipment, which contributes to some of the uncertainty we are experiencing.

Got it. Got it. Helpful.

We have spoken to many of you recently, and it's evident that there was increased demand due to the reopening of the economy after COVID. That heightened demand has clearly subsided, and we have been describing our situation as running at about 20 miles an hour over the speed limit. It's clear that demand has returned closer to the speed limit, where there is still some uncertainty. The question remains whether the pace of activity will stay at the speed limit or drop below it. This analogy seems to effectively capture what we are observing and how we anticipate it will develop in the future. I hope that provides some clarity.

No, it does. I wanted to just follow-up just on the decremental margin comment. The 25% expected versus a more normal 35%. Just recognizing some of the cost outs that you're highlighting today, the price cost is still remaining positive. Just kind of curious as to how sustainable this 25% decremental margin might be when you look out. I know we're not in formal fiscal 2024, but to the extent you could speak to this new decremental margin.

Yes. Normally, what we'll say is that from a decremental margin perspective, take kind of your incremental margin assumption, use it on the way down as well with obviously adjusting because of price cost or any other dynamics that you need to. So I think right now, as we look at Q4 and we look at that decremental margin, you've got continued favorability price/cost. We still have inflationary cost pressures coming through on the manufacturing and transportation side of the house, and we'll continue to deal with that as we round the corner into fiscal year 2024. So again, Garik, the way I'd say it is I would use your incremental margin and then based on your assumption around price cost, adjust that. So that's how we look at it.

Great. And then just last question. Just curious on the slide deck that you talked about the Dodge Start outlook across several different non-residential categories, the commercial institutional and manufacturing side of manufacturing, obviously, looking to be a lot weaker than the other two. Just wondering if you could maybe talk about your mix across those three categories as it stands right now and where you see some opportunities to perhaps outperform the broader Dodge data?

Yes, Garik, Mike Higgins again. So I would say our sales today are weighted heavier towards that commercial and institutional categories. I would in the manufacturing, even though that's down 43%, that's really due to kind of lack of some large petrochemical type facilities that started this year that don't repeat next year. But with that said, I would say we see an opportunity in that manufacturing. That's Scott made the comments on the earnings call, that's where you see a lot of activity. Clearly, chips and EV and batteries get all the headlines, but we've seen a lot of activity projects starting to ship around other manufacturing and industrial type construction and plants. So automotive, food processing, PP&E, in addition to those things like chips, EV batteries, et cetera. But then the other comment I would make, those dollars are a bit offset by the kind of inflation that's rippled through all kind of construction and building products, kind of, square footage next year is expected to be down, kind of, low double-digits. So that puts a little context. And that would be in that commercial and institutional where that kind of dollar volume looks relatively flat on a square footage basis; it's actually down kind of low double digits.

Got it. Alright, thanks again. And best of luck.

Thank you. The next question today is a follow-up question from Matthew Bouley from Barclays. Please go ahead. Your line is now open.

Hey. Thanks, guys, sorry, I think my call dropped during my question previously. So what I wanted to ask was back on the pricing side, and you guys gave really helpful color around sort of your own value proposition and kind of what gives you that pricing power and clearly, what's kind of in your control? And my question is sort of what's out of your control. What are you seeing in the competitive environment, whether it's on the concrete side? Or other producers of HDPE and polypropylene pipe. Just how are your competitors sort of adapting on the pricing side to this end market softness? And what do you think the impact would be to you guys?

We've observed strong discipline, especially where we compete with traditional materials. Demand has been high in areas like Texas, the Southeast, and Florida. Our pricing remains robust, and there hasn't been any significant decline in the pricing of our HDPE products, primarily aimed at traditional materials, which include our higher-performing gray pipe. We're confident about this aspect. While some pricing adjustments have happened with traditional corrugated plastic pipe due to past supply challenges during peak demand, overall, we haven't experienced much price decline. Pricing fluctuations generally occur in more agricultural areas where localized competition exists. We have considered all these factors in our strategy for the fourth quarter and for next year. We can maintain our price-cost balance and the margins we previously discussed. We aimed to provide clarity on our positioning and outlook for the next couple of years. Overall, we're optimistic about our situation and will continue to focus on executing our pricing strategy.

The other thing we've seen, Matt, is that the concrete guys have gone up a couple of times with price increases of their own this year like we knew they would.

Got it. No, that's really helpful. And just one more on the resi side. Obviously, you spoke at length about the infiltrator resi piece, but just in legacy ADS on the land development side and given everything that's going on with homebuilders here. Just what are you seeing and thinking about over these next couple of quarters on the land development business within legacy ADS?

Matt, it's Mike Higgins. To echo what Scott mentioned earlier regarding our geographic strength, we're observing solid activity in the Southeast and decent activity in Texas. However, we've identified some weaknesses in regions such as Northeast New England and the Northwest. Throughout the third quarter, we noticed a broader decline in the West and certain key states in the Midwest. As we progress, we will monitor the situation closely. While predictions indicate a slowdown in housing starts for next year, our current analysis suggests that areas which have shown consistent strength over the past couple of years, such as Southeast Texas and Florida, will likely remain resilient compared to more established regions like the Midwest and the Northeast.

Got it. Well, thanks, Mike. Thanks everyone. Good luck.

Thank you. The next question today comes from the line of John Lovallo from UBS. Please go ahead, your line is now open.

Hey, guys. Good morning. This is actually Spencer Kaufman on for John. Thank you for the question. Maybe the first one, net sales were down 8% year-over-year. Can you guys kind of give a breakout of the contribution between price and volume on a consolidated basis? And what was the impact in the quarter from the destocking at Infiltrator?

So I think if you turn to our bridge, what is it there, Mike?

Page eight.

Yes, Page eight. So what's the volume?

I think when you look at the revenue, pricing was up on a year-over-year basis; drag in volume created that negative downdraft, which led to the down 8.

Okay. And any additional color on the impact from the destocking Infiltrator?

I would say it was relatively minor. It was over kind of by the end of October, early November like we communicated on the previous earnings call.

You know, most of that down in Infiltrator for the quarter was just the completions slowing down year-over-year, not a lot of destocking left in the third quarter. So it's 90%. 90% is driven by those kinds of completions of homes and all the stuff that they go into.

Okay, that makes sense.

So I think if you turn to our bridge, what is it there, Mike?

Yes. No, it was purposeful, right? Obviously, sensitive to kind of the uncertainty in the dynamic market. With some of that resi weakness spilling over in the non-res, it just felt like the right thing to do to be prudent to have a little bit broader range. But I think the color that Scott gave earlier, January, the way Q4 unfolds for us typically is 30% of the quarter is January, 30% of the quarter is February, 40% of the quarter is March. So the context that we gave with January on the revenue side coming in largely as we expected gives us confidence, at least in the range that we've gone out with and where we are. But it was purposeful to leave it a little bit broader range right now and thought that was the best thing to do.

Okay. Makes sense. And if I could just squeeze one more in here. I mean you guys have talked about that you expect demand to be a headwind for the majority of calendar year 2023. And you on the call earlier, you reiterated your margin targets from the Investor Day, but more curious on the sales side of it. You laid out the 10% CAGR; is that still on the table? And if so, what's going to sort of cause the reacceleration in demand to get there?

Yes. I think the 10% plus CAGR is still on the table. I wouldn't say that it's off. Obviously, as we've talked about our comments related to calendar 2023, you have to remember our fiscal year begins on April 1. So when we see kind of this trend through Q4, which takes us through March, we see certain of those trends continuing at least through kind of our first and second quarter, which takes us all the way to the end of September. So that's kind of how we look at it, how we think about it, which takes us to most of the way through calendar 2023. Again, it goes back to the breadth and depth of this lower demand environment that we're in. It depends on your forecast and how you currently view that. Our view is that it's going to continue, like we said, through those first two quarters and potentially a little bit longer, but that you'll start seeing kind of a recovery as you get toward that back end of calendar 2023. At least that's the way we're currently looking at it today.

Okay, thanks guys. Good luck going forward.

Thanks very much.

Thank you. There are no additional questions waiting at this time. So I'd like to hand the conference over to Scott Barbour for any closing remarks. Please go ahead.

Alright. Thank you. And we certainly appreciate all the good questions today and your participation in the call. We look forward to catching up with you as we move on into the latter meetings today and at the upcoming conferences. So thank you.

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