Select Water Solutions, Inc. Q2 FY2025 Earnings Call

Thank you, and welcome to the Select Water Solutions Second Quarter 2025 Earnings Conference Call. Please note that this conference is being recorded. I would now like to turn the conference over to Garrett Williams. Please go ahead, sir.

Thank you, operator, and good morning, everyone. We appreciate you joining us for Select Water Solutions' conference call and webcast to review our financial and operational results for the second quarter of 2025. With me today are John Schmitz, our Founder, Chairman, President and Chief Executive Officer; Chris George, Executive Vice President and Chief Financial Officer; Michael Skarke, Executive Vice President and Chief Operating Officer; and Mike Lyons, Executive Vice President and Chief Strategy and Technology Officer. Before I turn the call over to John, I have a few housekeeping items to cover. A replay of today's call will be available via webcast and accessible from our website at selectwater.com. There will also be a recorded telephonic replay available until August 20, 2025. The access information for this replay was also included in yesterday's earnings release. Please note that the information reported on this call speaks only as of today, August 6, 2025, and therefore, time-sensitive information may no longer be accurate as of the time of the replay listening or transcript reading. In addition, the comments made by management during this conference call may contain forward-looking statements within the meaning of the United States federal securities law. These forward-looking statements reflect the current views of Select's management. However, various risks, uncertainties, and contingencies could cause our actual results, performance, or achievements to differ materially from those expressed in the statements made by management. The listener is encouraged to read our annual report on Form 10-K, our current reports on Form 8-K as well as our quarterly reports on Form 10-Q to understand those risks, uncertainties, and contingencies. Please refer to our earnings announcement released yesterday for reconciliations of non-GAAP financial measures. Now I'd like to turn the call over to John.

Thanks, Garrett. Good morning, and thank you for joining us. I am pleased to be discussing Select Water Solutions again with you today. During Select's second quarter of 2025, we improved our profitability and cash flow while continuing to advance our strategic objectives around growing water infrastructure, scale, and margin. I'd like to start with some of the key second quarter highlights, an overview of several large contracts and transactions we recently closed, and other strategic and market updates. Then Chris will walk through the second quarter results and forward outlook in more detail. In the second quarter, we increased net income by 22% and adjusted EBITDA by 13%. Importantly, we improved operating margins across each segment, leading to consolidated gross margin gains of nearly 2 percentage points. Supported by our growth in both our recycling and disposal volumes, we achieved strong top-line and bottom-line growth in our Water Infrastructure segment while growing gross margins before D&A to 55%. Since the start of the second quarter, we have signed several new long-term agreements for large gathering, recycling, distribution, and disposal projects. These agreements continue to add scale to our contracted and dedicated acreage position in New Mexico and provide meaningful long-term revenue potential. We also have recently executed and are now underway with multiple strategic opportunities to rationalize our Water Services segment in support of our rapidly growing water infrastructure platform. As we've previously indicated, we have been very focused on assessing our water service portfolio to allow us to concentrate our time and capital on areas that deliver high gross margins, continued growth, and full life cycle water solutions. During July 2025, we closed on a creative transaction with OMNI Environmental Solutions that allowed us to achieve multiple strategic goals at once. In this one transaction, we were able to strategically grow our infrastructure business while monetizing and rationalizing certain non-core parts of our Water Service segment. As part of the deal, we acquired a special waste landfill, a processing and treatment plant, disposal facilities, and an oil reclamation asset in the Bakken region. Now with 4 active landfills in the region and an expanded integration into solids-liquid separation and enhanced oil reclamation, we have established a clear market-leading solids management footprint in the Bakken to pair with our sizable traditional wastewater disposal portfolio. We will spend the back half of the year getting the assets in the facility upgraded and expanded, but we are excited to add additional high gross margin growth potential for the infrastructure business in 2026 through this deal. In exchange for these assets, OMNI acquired Select's trucking operation in the Northeast, Mid-Con, and Bakken regions. We expect this deal will improve our consolidated margins over time, reduce our operational risk profile, and streamline our business in multiple basins. While the OMNI transaction is a strong step towards rationalization in the water service portfolio, we believe more opportunities remain to capitalize on certain strategic assets within our Water Services segment. Accordingly, we are now formally exploring financing and capital structure options to unlock value in Peak Rentals, our equipment rentals business within the Water Services segment. As part of this effort, I am excited to partner with Scott McNeil, a highly respected and proven executive in the energy and power sector. Scott has been instrumental in the formation, leadership, and monetization of multiple successful energy companies and brings deep experience in both operations and capital formation. Scott joins us as the CEO of Peak and will be leading the strategic development and transaction planning for the business. Pat Anderle continues his role as President of Peak, maintaining the operational leadership, execution discipline, and customer focus that has long driven Peak's success. The Peak platform includes wellsite equipment, pressure and flow control systems, and notably an emerging distributed power generation business. For more than 15 years, Peak has been a leader in deploying traditional diesel distributed power solutions into the energy markets. More recently, Peak has capitalized on the rapidly growing demand for its natural gas generators and proprietary battery power systems. Demand for mobile off-grid power is surging as oilfield electrification accelerates. As the power grid build-out lags, these solutions ensure critical energy infrastructure stays online with resilient and reliable backup. We see the impact of this every day as we utilize Peak's distributed power solutions to support the rapid build-out of our own water infrastructure platform in remote regions of West Texas and New Mexico. Peak is scaling into the distributed power sector with meaningful advantages, an established rental platform, a large base of operations, and strong customer relationships across top-tier operators. Furthermore, Peak has secured a long-term exclusivity agreement with a critical supplier of proprietary battery storage solutions, and we believe Peak is the first company to integrate battery power systems alongside generators in the field for both upstream and midstream applications. In order to support Peak's momentum in the distributed power generation business and ensure the business has access to dedicated growth capital that does not compete with our water infrastructure growth needs, we are in the process of evaluating transactions that would establish a standalone capital structure. We completed the formal carve-out of Peak as a stand-alone operating company earlier this year, and we are well prepared for various potential outcomes. While the ultimate outcome is still to be determined, we expect to preserve continued economic exposure to Peak's future growth and value creation in its distributed power space while maintaining long-term strategic alignment to support our core water infrastructure growth strategy. Ultimately, each of the OMNI and Peak initiatives are aimed at focusing Select's near-term priorities around our core strategy of building and promoting ratable, repeatable water infrastructure growth and more directly, the continued build-out of our large-scale Northern Delaware Basin infrastructure network in New Mexico. Now shifting back to our infrastructure build-out in New Mexico. I am pleased to have executed multiple new long-term contracts in the Northern Delaware during the second quarter to expand on our current network in both Eddy and Lea counties, adding approximately 60,000 acres of additional leasehold dedication and 385,000 acres under right of first refusal agreements. These new contracts encompass the full water life cycle, including gathering, recycling, disposal, and treated water distribution, and they underwrite the addition of multiple new recycling facilities and nearly 30 miles of additional dual-line large-diameter pipeline. But what I'm even more excited about is that in each of these deals, our E&P operator partners have agreed to directly convey the ownership or operations of their existing recycling and disposal infrastructure to Select. Select will continue to contractually support each of these customers' core operations, but we will have the opportunity to utilize the assets for a broader systems water balancing and commercialization as well. This is a very strong testament to the economic and operational value that Select provides in the marketplace with our full life cycle water balancing capabilities. We greatly appreciate the trust that our partners have in Select's reliability as a large water network operator and believe we are well positioned for more long-term contracts ahead. We also continue to grow our disposal capacity and takeaway in conjunction with this large network build-out with plans to continue to grow this capacity over time to support long-term network optimization and efficiency. Upon the completion of these recently awarded projects in the Northern Delaware Basin alone, we will have approximately 1.8 million barrels per day of recycling throughput capacity and more than 1 million acres of combined leasehold and ROFR dedicated acres. On a pro forma basis, New Mexico will have gone from contributing 0 to now more than 60% of our total fixed recycling capacity across the Permian in about 2 years' time. To further reflect on this point, across the last 5 quarters, we have added on an average more than 77,000 dedicated leasehold acres and more than 140,000 ROFR acres per quarter, a tremendous pace of contract growth in a short period of time. In effect, we continue to add a significant backlog of contracted future revenues and cash flows underwritten by some of the best geology and lowest breakeven well inventory in the industry. I am confident we'll continue to add more contracts into the portfolio over time, and I am excited about the growth potential this will provide over the coming years. Ultimately, we maintain a high level of confidence around our Water Infrastructure growth potential and believe the segment is poised to see strong 20% year-over-year growth in 2026, building on the double-digit growth we expect in 2025. While the macro activity environment may present challenges in the second half for more of the completions-oriented parts of our water services and chemical businesses, we maintain market-leading positions in each of these segments and expect them to continue to generate strong free cash flow while we focus on growing our Water Infrastructure segment.

Thank you, John, and good morning, everyone. In the second quarter, Select had a strong performance in light of varying activity levels and made great progress in advancing strategic objectives during the quarter. During the second quarter, we achieved 22% sequential growth in net income, 13% sequential growth in adjusted EBITDA, higher gross margins before D&A across each segment, growth in both our recycling and disposal volumes, and continued water infrastructure long-term contract wins. Looking at our second quarter in more detail, Water Infrastructure produced a strong quarter with revenues increasing 12% and gross profit before D&A growing 15%, well ahead of our expectations. The segment also generated a strong 55% gross margin before D&A during the period, up 1.5 percentage points from the prior quarter and more than 4 percentage points compared to the prior year. Looking ahead for our Water Infrastructure segment, we expect overall activity in Q3 to be relatively steady with our anchor tenant customers with some modest variability in interruptible activity, resulting in revenues that are relatively steady to potentially slightly down low single-digit percentage points in the third quarter relative to what was a very strong Q2. We should also maintain gross margins before D&A above 50%. However, based on our current customer schedules and new projects coming online, we anticipate a strong Q4 for infrastructure with revenue and gross profit expected to increase double-digit percentages sequentially, resulting in a 2025 exit rate that remains in line with our prior guidance. Importantly, with our latest contract awards, we are adding new capital projects that should continue to provide growth for this segment into 2026 and beyond, a testament to our water infrastructure strategy overall and the strength of its future earnings potential. While we will continue to closely monitor market conditions in partnership with our key customers with a strong 2025 exit rate and new projects expected to come online throughout 2026, we believe we are on track to deliver 20% growth in Water Infrastructure in 2026 compared to full year 2025. We also remain on target to well exceed our previous goal of achieving 50% or more of our consolidated gross profit coming from water infrastructure on an exit rate basis in 2025, particularly in light of the OMNI transaction. While we've achieved much in the past 2 years, we anticipate this contribution trend to continue into 2026 and beyond. Switching to the Water Services segment, in the second quarter, we saw revenues decrease by approximately 4% sequentially, driven primarily by weakening activity levels in the latter part of the quarter. This decrease, however, was below the low end of our prior revenue guide of an expected 5% to 10% decline, and our gross margins before D&A and services held relatively flat at around 20% during Q2. I believe the Water Services segment performed favorably compared to the market activity overall in the first half of 2025. However, we should experience further reductions in the second half of the year attributable to both activity and the larger rationalization efforts mentioned earlier. Immediately after the quarter end, Select closed on the aforementioned OMNI asset swap transaction that resulted in the divestiture of certain trucking and related operations in the Northeast, MidCon, and Bakken regions, along with modest cash and stock consideration. Additionally, and separate to the OMNI transaction, Select also exited the remainder of its trucking operations in the MidCon and Haynesville regions for cash consideration. These combined actions significantly reduced our remaining trucking footprint to just the Permian, Rockies, and Eagle Ford regions. To put that into context, for the trailing 12-month period ended June 30, 2025, the divested trucking operations represented more than 1/3 of the revenue and more than 1/5 of the gross profit before D&A of Select's trucking business unit and approximately 10% and 5% of the total revenue and gross profit for Water Services as a segment as a whole. Additionally, as previously noted, and as part of our broader efforts to focus Select around our core infrastructure and full life cycle water solutions thesis, we recently stood up the Peak Rentals business within the Water Services segment of Select to be a stand-alone operating company and have begun evaluating strategic alternatives for this business. As part of the structured carve-out, we have incurred certain incremental costs at both the cost of sales and SG&A levels in order to ensure that Peak is well positioned to operate independently, leading into any potential strategic opportunities. While we expect some impact from weakening activity levels, these rationalization efforts represent a sizable portion of the approximately 25% revenue decline we anticipate in the third quarter for Water Services. However, even with the meaningful expected revenue reduction, we expect margins to remain relatively flat to Q1 and Q2 levels of approximately 19% to 20% in the third quarter of 2025. Moving on to the Chemical Technologies business, this segment saw a sequential revenue decline of approximately 11% during the second quarter in excess of our guided expectations, driven primarily by pullbacks in activity levels associated with some of our pressure pumping customers. However, gross margins before D&A of 17.5% in the second quarter exceeded our guided range of 14% to 16%, resulting in modestly higher gross profit before D&A in the second quarter of 2025 as compared to the first quarter. During the third quarter, we expect revenue to decrease low to mid-single-digit percentages, outperforming the overall activity environment on the heels of continued success with new product development initiatives, while holding relatively steady at 15% to 17% gross margins. Looking back on a consolidated basis, in the second quarter, SG&A increased to $39 million or just under 11% of revenue, partially impacted by incremental SG&A costs incurred as part of our Peak carve-out. We expect SG&A to hold relatively steady on a gross dollar basis during the second half of the year. Though over time, we will continue to look for opportunities to rationalize the cost structure of the business in conjunction with the ongoing rationalization efforts in Water Services. Altogether, we saw solid consolidated adjusted EBITDA of $73 million during the second quarter of 2025, above the high end of our previous guided range, largely resulting from the stronger-than-expected margin performance out of our Water Infrastructure segment. For the third quarter of 2025, we expect consolidated adjusted EBITDA of $55 million to $60 million as softening activity in the U.S. Lower 48 impacts the more completions-oriented Water Services and Chemical Technologies segments, along with the immediate impact of the OMNI transaction. While activity declines will impact the short-term outlook of our Water Services and Chemical Technologies businesses, we are confident in the continued long-term growth prospects for our Water Infrastructure segment and the additional resilience that our growing contract portfolio will bring over time. And as we've outlined, with new projects coming online through the back part of the year and into 2026, the Water Infrastructure segment is poised for continued sequential growth with 10% quarter-over-quarter growth in Q4 of 2025 and 20% year-over-year growth during 2026.

I'll now hand it over to Chris to speak about our financial results and the outlook in a bit more detail.

To further reflect on this point, across the last 5 quarters, we have added on an average more than 77,000 dedicated leasehold acres and more than 140,000 ROFR acres per quarter, a tremendous pace of contract growth in a short period of time. In effect, we continue to add a significant backlog of contracted future revenues and cash flows underwritten by some of the best geology and lowest breakeven well inventory in the industry. I am confident we'll continue to add more contracts into the portfolio over time, and I am excited about the growth potential this will provide over the coming years. Ultimately, we maintain a high level of confidence around our Water Infrastructure growth potential and believe the segment is poised to see strong 20% year-over-year growth in 2026, building on the double-digit growth we expect in 2025.

Hey, good morning. Nice quarter. And John, you talked a bit about this, but you guys continue to sign new contracts with duration, with acreage dedication and you even have customers giving you their assets now for you to run. Curious, as you look at the market and the opportunity set, what inning do you think we're in from an opportunity perspective as far as that goes? And is the macro on the oil side having any impact on kind of the pace of desire to do that? Or is it just the magnitude of the water challenge really superseding that?

Yes. Thanks, Jim. As far as where we are in the inning of the build-out, I think our team has really put some major contracts in place and some dedication, and as far as the big projects, the 2 that we just announced and a few we still have in the pipeline that we haven't announced yet. I would tell you that we're pretty far into the build-out now. We have to physically put the plants and the pipe in place. But the major wins, I think we've got that done. What isn't done and what is starting to happen now is as you put this network together, you cross either that ROFR acreage or you cross undedicated positions. What we're having happen now is we're receiving the calls of add-ons, people that want to come into the network that could service their acreage and be an economic value in a meaningful way. And that's just starting to happen now.

I would say that the backlog is strong, and it's flat despite converting these projects from opportunities to signed contracts, and that removes it from the backlog, but we're continuing to backfill for them so that it's relatively flat. And I don't see the near-term macro headwinds changing that. I think we will be able to continue to deliver projects as we have on a quarterly basis moving forward.

Got it. As you evaluate the acreage that isn’t secured and crosses pads, I’m interested in understanding the relative size of what you have secured compared to your right of first refusal acreage, which is currently larger than your dedicated acreage. When considering this along with potential opportunities from those not yet involved, how much opportunity does that present?

The first thing I'd point out is that the ROFR acreage is twice what we have under dedication. There is a meaningful growth impact there that hasn't been fully developed, but we certainly think we're well positioned to capture it. In terms of new acreage out there, I'd really look to the expansion that we have in Eddy County, which the deals we announced largely allow us to continue our expansion in Eddy County backed by long-term contracts. We're traversing a lot of acreage that is not tied into our system and much of which, frankly, isn't committed, which John alluded to. There's a real opportunity there for us to connect it and tie it into the system. We're building a system of size and scale in New Mexico, and it uniquely positions us to solve the localized imbalance of produced water and completion water, allowing for continued growth.

Got you. As a follow-up, John, there's an interesting development on the Peak side of things. I would love to get your perspective on framing the market opportunity for that business, as it will involve a unique strategy to carve it out while still maintaining economic benefits.

I think Peak, because of where it's been since really the beginning of what is Select, has a very unique position, but it always participated in the drilling and completion side of the business. So when you think about temporary housing, potable water, wastewater, communications, and power generation, we were really around drilling rigs and completion frac crews. However, the 350-plus MSAs we got are with companies that are in the production business as well. The lack of electrical grid generation and the way that continues to grow in length of time before it gets put in place allows Peak to have an opportunity of which it's now taking advantage of taking those MSAs and going into the production side of the business in a meaningful way. This gives it a really good position. What advanced that position is Select and these contracts that Michael and the team have put together are in the same area and that same electric generation problem is real. The other thing I would tell you is that we were very early in establishing a relationship with a battery company. We did our own investigation of applying that battery technology along with our diesel power generation in the same application we've been doing for many years now. We found that you could apply that battery, and the generator would run roughly 20% of the time versus generator direct, burning about 20% of the fuel. You can size the battery for the peak demand position and not have to size the generator for the peak demand. It's really an economic value. It really cleans up the electricity currency going into the job, makes a quieter workplace, and allows automation application around that electricity that is harder to do with full diesel power generation 24 hours. So we're excited about it.

Just to follow on Jim's question with Peak rentals. Maybe if you could just help us provide just some further details around the kit, maybe how much capacity Peak has right now from a megawatt perspective? What's owned, maybe what's deployed on an active megawatt perspective? Just maybe some more color on the actual fleet size and type of kits.

So the current fleet size and the space we have participated in since we started Peak back in '07 is the smaller portable diesel power generations. So definitely the smaller units. The units that we're deploying today, both in the midstream and production sides of what we’re doing are still the smaller reciprocating units. They're bigger than what we've done in the past, so they're around 400 kW type stuff on electric submersible pumps or midstream application of water movement, but they are still smaller portable reciprocating units.

On the growth side, Derek, the focus around the natural gas units is definitely growing to larger scale units focused more on the production side and the infrastructure application build-out. Regardless of the unit type, they fit within our existing production and refurbishment capabilities from the business to date. We're going to continue to look at scaling up appropriately, particularly on the natural gas side.

Got it. That makes sense. And maybe just like total size of the fleet megawatt like today and where you think it can go next year?

We haven't put anything out specifically on the total fleet size, and we're investing in it, I would say, robustly this year. The ultimate scale of the fleet over the next 12 to 24 months will probably be somewhat dependent upon the ultimate outcome of what we're able to accomplish here because there's clearly growth in demand and opportunities to deploy units. We're focused on what the scale of that backlog can look like and what our order book can grow into. It's a good question, Derek. One thing to be clear on is that the current outlook of 20% or so is based on the projects we have underwritten via contract today. We've got about $225 million of capital deployment between the second half of '25 and the first half of '26, probably about $75 million to potentially $100 million of which is in the first half of next year. We expect to continue to add new contracts into the portfolio over the back half of '25 and across the full year '26. Our expectation is that capital deployment over the course of 2026 will look more like the capital deployment of 2025.

So the 12-year contract within Eddy County announced on today's release, it was specifically mentioned that it will connect to the ongoing Eddy County network expansion that was announced on the 1Q call. This would lead me to believe that this new contract announced would materially accelerate the payback on this capital project that is currently underway without much additional CapEx. Is my logic here fair? Or is there something maybe I'm missing?

We will see additional capital deployed with the new projects recently announced, give or take, around $40 million. That said, anytime you're adding on to an anchor build-out asset, the economics do have the ability to improve off that kind of base build-out. So both the capital economics around the interconnection between Eddy and Lea County, as well as the expansion now into the second big contract off that system, do give us the opportunity to further commercialize that.

We're really excited that the 2 systems match up together because, again, we think creating one large network is very important. It helps us balance out longs and shorts and create stability.

Having our customers willing to convey some of their existing infrastructure to us is obviously a much more efficient capital deployment opportunity. You're not duplicating capital in the ground. You're not duplicating or conflicting assets with our customers or others in the basin. We've seen a willingness from our customers to convey that operatorship and ownership over to us, which is a good outcome for both us and them.

Very helpful context there. And just to follow up on the customers conveying assets to you, what is the economic benefit for them doing that? Do you offer them better pricing on these contracts, or is it simply a matter of having this asset and knowing they can utilize it better?

From a deal-making standpoint, it’s clearly part of the discussion and negotiation when we think about terms and pricing and all of that. The real value here is around the network effect that it creates. It's less about the assigned value of that asset and more about what putting it into our system allows us to do and how it allows us to serve them better than if they owned it.

When I take your comments for 4Q '25 revenues up 10% to about $85 million, combine that with your comments on the expectation for 20% year-over-year growth in 2026, that implies water infrastructure revenues on a quarterly basis exiting '26 are above $100 million. So is it right to think that as you see it now, Water Infrastructure on a run rate revenue basis yearly is going to be $400 million plus exiting '26?

Yes. Certainly, from a trajectory standpoint, you're thinking about it correctly based on the current projects and schedules that we have in hand and the backlog opportunity. We expect to see a trajectory over the course of '26 with, as Michael mentioned, projects building out through the first half of the year and partly into Q3. So that should drive continued trajectory with an exit rate in '26 materially above, obviously, where we're going to be in the first half of the year.

I would expect to continue to see new long-term commitments that will have additional volumes on the system, building for the back half of '26. But my hope is that when we talk again in 3 or 6 months, we're building for the front half of '27.

It's important, and Michael and Chris both really touched on it; these assets allow us to put a network together. These contracts allow us to put a network together the interconnect of this system travels through basically 3 pieces: the dedication piece, the volumes, the ROFR piece which is twice the dedication, and the undedicated or not ROFR piece. That is upside. The network brings real value to that upside.

I appreciate the asset rationalization and selling of some trucking assets. But are there other assets in the portfolio besides Peak that you're currently looking at? Would you sell the rest of the trucking assets? Would you cut deeper and go toward chemicals, or is there anything else that we don't know about in the portfolio today that could be a divestiture candidate?

Yes. Good question, Don. As we look at the Services segment here forward, with the OMNI transaction completing here in July, we significantly rationalized that trucking footprint. I would say those areas have more strategic interaction with our existing infrastructure portfolio and support a steady state of produced water delivery to those assets. We view that as having a good strategic relationship and a production base stability to it with a better margin profile than the assets we've divested to date. Peak, with an ongoing process here, represents a good opportunity to continue to rationalize the portfolio with about 20% of the Services segment P&L. We have a very strong balance sheet and strong cash flow-generative capabilities out of both the current services footprint and the chemicals business that helps support growth trajectory within Water Infrastructure. We'll maintain a disciplined balance sheet overall. Beyond that, what you have left in the services business fits well with our infrastructure ambitions and our full life cycle water solutions thesis.

Don, we think about rationalization with Peak; there is a large opportunity in the power generation piece of Peak and the expansion into the production side and the midstream side. It is a need for capital for a very attractive opportunity. It is not the full life water cycle thought process. We want to ensure that we can bring value to our infrastructure customers, and if we have pieces of our business that integrate in a manner that allows us to bring that value, both in utilization to us and revenue dollars and profits, and also in economic value to our customer, we are really focused on what fits with that infrastructure piece.

We continue to see great progress in Colorado, developing a reliable, efficient water network that will support all of the stakeholders in the region. We have made material progress even in the last quarter. We've completed a landmark engineering study, providing justification on how unique our system already is and will become. We're pushing engagement and commercial efforts actively every quarter.

Thank you everyone for joining the call. We appreciate your continued support and interest in Select Water Solutions, and I look forward to speaking to you again next quarter.

Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.