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Greetings, and welcome to the Reynolds Group Fourth Quarter 2018 Earnings Results Conference Call. [Operator Instructions] Please note that this conference call is being recorded. I'd now like to turn the conference over to your host, Thomas Degnan. Thank you. You may begin.
Thank you, Matt, and good morning. Today, I'll cover a few changes we've implemented recently and then the chief executives of each business will share more information on their results. First, we've made the decision to do a strategic review of the Closures business. Since this process has just started, there's not really much more I can share at this point. Second, I've asked John Rooney to focus on Evergreen. This business experienced some difficult operations problems last year, particularly in the 2 paper mills. John's experience makes him the best person we have to make the improvements necessary for a more successful 2019. Mike King, CEO of Graham Packaging is responsible for that business and will report to me; and Floyd Needham, CEO of Closures, will also report to me.
Therefore, this morning, I'll make a few remarks on 2018 then ask Lance Mitchell, CEO of Reynolds Consumer, to talk about the 2018 results. Lance will pass the call to John McGrath, CEO of Pactiv; followed by Mike King, John Rooney; and Floyd Needham.
Allen Hugli, the CFO of RGHL, will then address the change in the carrying value of Graham Packaging, followed by the usual financial highlights. And then we'll take your questions.
The group's financial performance in 2018 was disappointing. EBITDA of approximately $1.9 billion was down 10% from the prior year. The fourth quarter was similar with EBITDA of $500 million approximately, down 9% on the prior year. Contributing to this performance was several factors. We were hurt by a national labor shortage, there was tightness in the trucking industry, which caused higher logistics costs, Evergreen's poor mill performance more than offset a good year on the commercial side, Closures was impacted by a divestiture. The bottom line was Pactiv, Evergreen, Graham and Closures were all down on 2017 and only Reynolds Consumer, which was basically flat, did not contribute to the poor result. And you'll hear from each of the CEOs. They will give you more detail on 2018 and talk to why 2019 will be different.
As a group in 2019, we will be spending more on capital, which will be focused on automation, productivity, reliability, quality and safety and then also we will continue to work on deleveraging the group.
I'm glad 2018 is behind us and feel confident that the story in 2019 will be better. Now I'll turn the call over to Lance.
Good morning. Reynolds Consumer Products revenue for 2019 increased by 6% to $3.14 billion. This increase was driven by strong sales volume, primarily in the branded Hefty waste bags, our new tableware products and the Presto Specialty business. Sales volume growth was partially offset by lower Reynolds foil sales volume.
As I mentioned on last quarter's call, we raised prices to offset the higher aluminum costs, which caused us to cross some key price thresholds. Although Reynolds brand share remains strong and our revenue grew, the overall foil category line did not grow. Going forward, in the first quarter of 2019, we've adjusted prices back below these key thresholds. Overall, our pricing actions across all of our product lines has successfully been implemented and, on a run rate basis, offset the higher raw material, logistics and labor costs.
Q4 represents that run rate basis. Our revenue in the quarter increased by 10% to $908 million. Turning now to EBITDA. For the year, we were slightly below prior year by $8 million or 1%. Higher raw material, logistics and labor costs were not fully offset in the calendar year. As you can see in Q4 results, volume growth, pricing and our focused cost reduction and productivity initiatives more than offset raw material, logistics and labor cost increases. Our EBITDA for Q4 increased by 11% or $21 million to $225 million. I'll now turn it over to John McGrath, Pactiv Foodservice.
Thanks, Lance. Pactiv's full year 2018 revenue increased 1% to $3.8 billion. This increase was driven by higher pricing resulting from raw material pass-through and was partially offset by the sale of our European business and lower sales volume in several channels. Revenue decreased by 1% to $935 million in Q4. This decrease was primarily driven by lower intergroup sales volume and the business divestiture discussed earlier and was partially offset by higher pricing from raw material pass-through. Pactiv's full year 2018 EBITDA decreased 16% to $569 million. There were 4 factors that contributed to this decline. Number one, raw materials were up $121 million for Pactiv in 2018. Although we had partial price recovery throughout the year, a large portion will be realized in Q1 when many of our contracts reset. Number two, we struggled throughout the year in many of our facilities with having adequate labor to produce the right product in the right location. This caused a spike in our labor costs as well as incremental freight costs to reposition product throughout the network. We had traditionally relied on large contingent or temporary workforce in most of our facilities to perform many of the unskilled tasks. However, with unemployment at record lows, the availability of these workers has diminished significantly. We are gradually automating many of these tasks and look to take out approximately 2,000 of these temporary positions by 2020, with many positions eliminated in 2019. Also, our total labor management program, which develops a planned specific strategy around recruitment, training and retention, has been implemented in over 30% of our facilities with encouraging results. Number three. The industry-wide transportation shortages continued to impact us throughout the year, although we saw a partial recovery through pricing actions in 2018. A significant portion of the recovery will take place in 2019 when we reset many of our supply contracts with our customers. And finally, we experienced a less than 1% decline in our sales volume across several channels. Quick-service restaurant store traffic continues to be down, and our Canada and Mexico volume was off as well.
Additionally, several large customers that bought higher volumes of product in Q4 2017 did not repeat in 2018. We have, however, experienced meaningful growth with our foodservice distributors as well as with several large foodservice package -- or food packaging categories. Early indications would tell us a significant amount of new business will materialize in 2019. Adjusted EBITDA decreased 28% to $131 million in Q4. Many of the same factors that we experienced throughout 2018 plagued us in the fourth quarter. Despite having a very challenging year in 2018, we are very optimistic about 2019. We have secured many new business awards during 2018 that will materialize this year. This, coupled with our organic growth and new product introductions in several categories, will give us a significant EBITDA benefit in 2019. As previously discussed, we are aggressively embarking on an automation strategy that will deliver between $55 million and $60 million in savings when fully implemented. We are also in the process of installing an integrated supply chain solution, with huge upside coming from our new transportation warehouse management system, totaling $20 million in savings when fully operational. Finally, we have begun to implement a factory asset intelligence program and will take this across many of our larger facilities this year. Early results from this program have shown a significant productivity improvement, and we fully expect similar results as we roll out this initiative. These initiatives, combined with full freight recovery through pricing actions and improved operational performance, should enable us to recover a large portion of the shortfall we experienced in 2018. I'll now turn it over to Mike King to discuss Graham Packaging results.
Thank you, John. In 2018, Graham Packaging's revenue decreased by 3% to $2.08 billion. Decrease price -- decreases were primarily driven by lower sales volume, strategic business exits, impacts of the application of a new revenue recognition standard, a decline in pricing due to contractual price movements. And we partially offset that by increasing our pricing from higher resin costs, which we're able to pass through given our contractual agreements with our customers. Moving on to the quarter, so Q4 -- the Q4 '17 to '18, revenue decreased by 6% to $477 million in the Q. These decreases were driven by lower sales volumes, mainly in our oil and laundry businesses, slightly in our food businesses. Strategic business exits. Unfavorable foreign currency impacted us with the real, peso and euro. We had a decline in pricing due to the contractual pricing agreements, similar to the overall annual performance. Partially -- we were able to partially offset this by increasing our pass-through costs from our raw materials, mainly resin. Moving on to adjusted EBITDA. Looking at adjusted EBITDA for the full year, we decreased 12% to $349 million in 2018. These decreases were primarily driven by lower sales volumes; higher manufacturing logistics and input costs, very similar to what you've heard from the other businesses; declining in pricing due to contractual price movements and partially offset that again by lower personnel costs. Quarter-over-quarter for Graham Packaging, our adjusted EBITDA decreased by 25% to $65 million for the quarter and 2018. These decreases were primarily driven by lower sales again, a higher manufacturing inputs and logistics costs, declining in pricing due to our contractual price movements. And again, we were able to partially offset that by flexing down our labor costs.
And with that, looking at 2018. Certainly, our strategy is to insulate ourselves from the global input cost elements around logistics, the national challenge around lowering unemployment rates. And very similar to what you heard in the Pactiv business, we've also implemented projects to take out costs both on the fixed and the variable sides of our business.
So with that, I'm going to pass the conference call over to John Rooney.
Okay. Thanks, Mike. Before going through the specifics in the packet, I want to make some overall comments about Evergreen in 3 areas: year-over-year, quarter-to-quarter and a little bit on 2019. So for year-over-year, our full year EBITDA was $28 million worse than 2017 due to poor operational performance in our 2 paper mills, partially offset by pricing [indiscernible] on our paper markets, favorable SG&A and volume. While 2018 paper mill performance was poor, the rest of Evergreen ran very well, in particular packaging both operationally and commercially and domestic and international, all product lines, carton closures and machinery.
For quarter-to-quarter, while the EBITDA decrease was proportionately smaller than our year-over-year EBITDA change, the summary is the same. Both mills ran poorly and the rest of the business ran well.
For 2019, we anticipate our earnings performance to be better than 2018. We're in a very good shape commercially across all of our product lines and all of our markets, and our mill improvement plans are underway and beginning to deliver impact. Turning to the specifics of the packet. Evergreen's revenue increased by 3% to $1.603 billion in 2018. Our increase was primarily driven by market-driven price increases, price increases associated with the pass-through of higher input costs, product mix impacts, partially offset by lower volume. For the quarter, our revenue increased by 2% to $403 million. The increase was primarily driven by price increases, partially offset by lower sales volume. Our adjusted EBITDA decreased by 11% to $230 million in 2018. This decrease was primarily driven by higher manufacturing and logistic costs, partially offset by price increases and lower personnel expense. Our adjusted EBITDA decreased by 2% to $63 million in the quarter, and this decrease was primarily driven by higher manufacturing and logistics costs, partially offset by price increases. Floyd, over to you.
Thank you, John. CSI full year revenue was down $40 million or 4% due to our strategic business exits in Asia. Excluding divested businesses, revenue was up $40 million or 5%. The increase was due to higher sales volume, mainly driven due to increased sales of dairy closures to Evergreen as well as increased resin costs.
Q4 2018 revenue was down $21 million or 10% due mainly again to our strategic business exits in Asia. Excluding divested businesses, revenue was down $3 million or 2%. The decrease was mainly due to foreign exchange rate. Now to EBITDA. The full year EBITDA was down $15 million or 11% due to the strategic business exit. Excluding divested businesses, EBITDA was down $3 million or 2%. The decrease was mainly due to lower pricing, competitive pricing pressure, offset by continued savings in operations and SG&A.
Q4 EBITDA was down $3 million or 12% due to the strategic business exit of Asia, again. Excluding divested businesses, EBITDA was flat in the fourth quarter.
And to you, Allen?
Thanks, Floyd. So in summary, revenue for the group for the quarter was approximately $2.7 billion, up slightly in the same period last year. For the year, revenue was $10.7 billion, up approximately 1%. Adjusted EBITDA for the quarter was $496 million, down approximately 9% from Q4 last year. For the full year, adjusted EBITDA was $1.872 billion, down 10%.
We reported pro forma adjusted EBITDA for the year of $1.882 billion. A full reconciliation is attached with the appendix to this presentation. Capital expenditure for the year at $585 million was up 43% from 2017. The increased spend is because of the large number of small and medium-sized projects, primarily focused on keeping operational efficiencies and meeting customer requirements. During the quarter, we wrote down the carrying value of Graham Packaging by approximately $200 million. This write-down was triggered by the business's performance in Q4 and reduced short-term earnings forecast.
With that, I'll hand back to Tom.
Okay. Matt, we can take the Q&A now, please.
[Operator Instructions] Our first question is from Sam McGovern from Crédit Suisse.
Just with regard to Pactiv Foodservice and the EBITDA decline that you guys saw. I know you guys planned to have some cost savings through automation. I think you said $55 million to $65 million and then I think an additional $20 million on top of that per year. But when you look at the decline, I mean, how much of it are headwinds that you think are going to be sustained? How much of it was driven by the divestitures? And how much do you think comes back with the new business wins and cost pass-throughs as we go into 2019?
So if you look at it in buckets, the single biggest thing that impacted us was around our operations and the inability, as I explained, to get people in the plant. So if we take out by 2020 these 2,000 jobs and replace that with robots, with automation, that will go a long way to solving our problems. On the freight side, even though we wore a lot of those costs this year, as I indicated, a lot of those costs we will be able to pass through, through pricing resets in Q1. And then the other big factor is on raw material. Raw material dropped pretty quickly in Q4, but we don't see any of that benefit until Q1 as that inventory works its way through [ indiscernible ] before it comes on our P&L. So we were actually lowering price in Q4 due to some contract resets that we had based on raw material rising in Q2 and Q3 of 2018 and then raw material now falling towards the end of 2018. We'll see that benefit in 2019, in the first quarter of 2019. The other big issue we had in Q4 was we didn't see the volume increases that we had in the prior year. So prior year, we had a record quarter. We had -- we did $183 million of EBITDA in Q4. And a lot of that was driven by customers buying in to meet some volume attainment programs. That did not happen in Q4 of 2018. So as a result, we didn't get the benefit of volume and we had to actually shut off our production because we didn't have the demands. We had a lot of under-absorbed costs in the quarter. The last part of your question was how much will we recover. We'll recover not all, but we'll recover probably 80% of what we're off this year in 2019.
Okay, got it. And then, Tom, in your opening comments, you talked about your strategic review of Closures. Could you comment further on that? Is it an operational strategic review? Or is that a potential sale of the asset? What did you mean by that? I just wasn't clear on that.
Potential sale of the asset.
Okay, got it. And then are there any other noncore assets you might potentially look at selling or this is what you guys are focused on for now?
That's where we're focused on for now, Sam.
Okay, got it. And then just last question before I pass it on. You obviously have a fair amount of net debt that's coming due and is currently callable at par. I mean, obviously, you'd have proceeds from the Closures sale. But any thoughts in terms of refinancing or what you guys may do?
No, we're still working our way through that.
Our next question is from Karl Blunden from Goldman Sachs.
Let's talk about deleveraging the group as one of the priorities for the next, I guess, year or more than that. When you think about the mix there between debt reduction and EBITDA growth, is there any color you can provide?
Can you repeat the question?
You mentioned deleveraging as a strategic goal. How should we think about that broken out between EBITDA growth and debt reduction?
I think the comment I was trying to make was we've been talking about deleveraging out for a couple of years, and we actually have been. We intend to continue to focus on that and we are probably not going to be looking very hard at acquisitions. That's what I was trying to say there.
Okay. That's helpful. On the CapEx front, you mentioned a lot of these cost savings will come into play by 2020. So should we think about the CapEx for automation and efficiencies as being concentrated in 2019? In other words, that elevated CapEx should drop off post-2019? Or what should the cadence look like there?
I mean, the CapEx has already started. And it isn't just automation. It's -- the term is digitization. It's actually trying to figure out exactly what's going on in your equipment as to where things might be going wrong, predicting when maintenance needs to be done. Things like that could make your plant run more often, less downtime, more productivity and more stuff to sell. We're doing a lot of that. And then we're doing the warehouse management system. We're doing a lot of things to address costs that have surprisingly grown on us over the last few years. All those stuff was in play last year. We're going to keep doing it. And I think the answer to your question is, it isn't a program. It's just the way we're going to do things going forward. I think the heavy CapEx to get us caught up will probably be next year. I'm not too sure we have the same level of CapEx the following year because we would have invested in a lot of these things, but I really can't predict for sure.
Okay, that's helpful. On a segment level, Evergreen, a lot of the EBITDA downside there was from mill performance. Can you quantify that? How much was lost because of the mills? And it sounds like a lot of improvements are already in place. When will you get the mills back to a level that you're happy with and presumably recapturing some of that lost EBITDA this year?
John, do you want to take that?
Yes. So $46 million specifically. And of that, $16 million is the outage differential.
Got you. Is that all -- most of that can be recaptured kind of from here on out? Do you feel like you've resolved the issue that led to the disappointing performance?
We're beginning -- we have begun to resolve the issues. It would be a lot of work, but we've begun to resolve but definitely not done.
Our next question is from Roger Spitz from Bank of America Merrill Lynch.
Staying with the Evergreen mills, can you talk about what was going on with that running poorly? It sounds like there was some outage related. Is this new problems that were occurring this year? Or is this problems that you've had for years and it reached -- got worse and reached ahead? And what do you mean by reviewing the mills? Are you looking to do something with the mills from an M&A standpoint? Or are you looking to just whether you should be pouring money into the mills to improve the operations?
Yes. As you go through that, I don't think anybody mentioned, I think, about reviewing the mills. I'll defer that to Tom. But I certainly didn't. I don't think Tom did. So I'm not sure what that means. As far as the operational performance in the mills, over the last 18 months or so, the mill performance has begun to decline. It's typically not any single event, but it's summation of events. Some of it due to losing skill sets to retirement, things like that, but nothing singular in nature, just a number of things we'll get back in and do. Some of it is capital jobs. Some of it's training and hiring. But it will be a bunch of pieces to it but no singular thing jumps out.
To reinforce what John said, some of the capital we're looking at increasing this year is addressing, and we did some in '18 also, addressing some equipment issues that have occurred in the mills. These are big monsters. The equipment, some of it's old, and we weren't always predicting when something might happen and there might be a breakdown. And the other big thing, I think, that's happened in Evergreen with the mills last year, as John talked to, is we had retirement, so a lot of retirements and we lost a lot of talent. And we were slow to backfill for that, and John's all over that now. In terms of review, we're not selling the mills.
Okay. And for Graham Packaging, can you comment on the Q4 and/or full year 2018 volume decline percentage in units?
Mike, do you know that?
No, units off the top of my head, in pounds?
Pounds, sure.
So pounds was roughly 20 million pounds.
What is that as a percentage of your -- or what's your total pounds, just to get a sense of it?
I don't know if I have our total pounds.
Let me get back to you on...
Sure, sure. Yes, I'll move on. Staying with Graham Packaging. I'm trying to understand, did unit -- did your unit margins, and by that I mean price less resin raw material spread or raw material margin, if you will in 2018, what did that do? I mean, historically, pre-acquisition, Graham did a good job of passing resin raw material prices through monthly. They changed their prices monthly. So unit margins were, at least to my memory, fairly constant with not even much of a raw material lag. Is that still the case and that the margin compression related to other variable nonraw material variable costs and fixed costs?
Mike, let me take a shot at this. Yes, that is still the case in terms of raw materials and pass-through. I think the thing that has changed is that the -- when a contract is up right now, it's bid out, and we're having to give price back to retain business. The only business that we're actually winning more than losing, I think, is Graham Packaging. And we've got a lot -- the last couple of years, we've done a lot of things to fix the service issues and the equipment issues. And we have -- as you've heard before, we have one major customer who is moving to self-manufacturing. If you take that out, we have been winning more than losing for, I don't know what it is, 6 quarters, John Rooney, something like that might or, Mike?
Yes, that's right.
Yes. So I think it's really just a -- it's a competitive world out there. We have a lot of cost competitors. There's less conversions happening from glass to plastic, and our contracts are up. And if we want to get a competitor's business, we have to offer a lower price, we've got to match it to keep. We're on the same boat.
Got it. Lastly, in Closures, what was the organic volume growth in 2018 in however you want to portray it, units or pounds? And if -- I presume CSD volumes were lower. So what was the markets that were up that offset -- that gave you growth, offsetting the lower CSD volumes?
Yes. Our volume was actually up 1%, about 900 million units. And we did have growth in CSD, contrary to the market declines.
Our next question is from Richard Kus from Jefferies.
So just on Graham Package again. You talked about how competitive the environment is and how you -- when you go back for contracts, you have to kind of be a lot more competitive on price. Do you have a sense of what that hit is on contract renewals going into 2019, how much price you had to give away and how that will negatively impact you?
Yes. I'll answer that, Mike. The answer is no. We think every time a contract comes up, it's a different situation, who's competing with you, what is -- how bad do they want the business, that type of thing. And so I would say that we're not going to be able to predict. We could probably tell you what kind of -- how many contracts is coming up. Mike would know that.
Yes, it would be good if we could get a sense.
$16 million in 2019.
Sorry?
$16 million in earnings.
Okay. And then with respect to the $65 million or so of EBITDA that you did in the quarter, does that represent kind of a new baseline run rate for that business given your commentary around the goodwill impairment that you took?
No. We fully would expect we will do better than quarter -- fourth quarter of 2018 going forward at the Graham Packaging.
Okay, okay. I got you. And then just in terms of the total negative EBITDA impact that you had for the full year in 2018 relative to 2017, how much of that decline is just simply as a result of under-recovery of raw material cost that you would expect to get back otherwise?
None of it. I think we passed through fairly athletically.
I mean, on the Reynolds business overall.
Yes, I was trying to get a handle on that number. Just give us a minute.
Yes, no problem.
I guess, it's probably -- it's not a simple answer, so if you like we can come back to you.
That's fine.
Our next question is from Brian Lalli from Barclays.
A lot of a good high-level questions. Maybe if I could -- just maybe some -- a few on the strategic side. Is there anything -- obviously, Graham and Evergreen and Closures were -- if were operationally brought together, I don't think we've ever gotten a sense for exactly what the strategic view on that would be. But is there decision now with Closures that changes some of the thoughts around that as you think forward? And then I have a couple of follow-ups.
The answer is yes. So if Closures were sold -- the fact that we decided to investigate that, it brought into view should GEC still exist. If you add to that the mill issues at Evergreen, and John was at Evergreen for, I don't know, 20 years and doing everything there for a long time. He's a very experienced guy. He's the best guy we have to address the mill situation. We really wanted him to focus hard on getting that squared away. And Mike King has relatively been doing a lot of good stuff at Graham Packaging. So the decision was made that GEC would -- what we're doing is we're retaining some of the shared services we've put together at GEC and keeping some of the synergies. And the rest we're splitting out and, again, back to separate businesses, Closures, Evergreen and Graham, and that's why I made the comment that each of those 3 guys are now reporting to me.
Got it. That's helpful. And I apologize, I may have missed some of that. I got on the call a little late. If I could then -- and I appreciate that it's sometimes difficult to answer for Rank Group and ultimately the owners. But what's the -- at this stage, as you enter '19, what's the current thought process? And maybe some commentary around leverage targets and then, I guess, the obligatory what's the current restricted payment capacity is as you think about -- if there is even a thought about potentially using capital in the future for dividends. I'd love to hear sort of the thoughts around that strategically over the next few years as you think about the capital structure.
Well, I just -- I think the leverage target we're thinking about right now is about 4.5. And to answer the rest of your question, I don't really know what strategically we'll be doing next year or the year after. I don't think -- I haven't spent enough time -- or Graeme hasn't spent enough time with us to say what's on his mind outside of this review for Closures and get these other businesses back to where they were before 2018. And 2018 was a big disappointment. So to me, rather than think about what I'm going to be doing in 2020, I want to get 2019 back on track.
Our next question is from Mack Fuller from GSO Capital Partners.
Many of my questions, I think, were answered. I guess just maybe 1 or 2. In terms of -- one, just a clarification on consumer. Did you say that you reset pricing backed down in that division? Or did I just mishear you?
It's Lance Mitchell. Yes, we took prices back down on Reynolds Wrap on some key price thresholds. And aluminum has come down, so the margins stayed intact.
Okay, got it. And then, I guess, in terms of free cash flow given you're going to be in -- if I hear you correctly, you're going to be investing a bit more in CapEx. And it sounds like on the EBITDA front, you might be down year-over-year because -- I'm just taking your comment about 80% of -- we might get 80% of the recovery of what you've lost. And I'm not sure -- the automation issues in Pactiv might not be until 2020. So is there some way that we could like sort of think about quantitatively what the free cash flow profile might look like in 2019? Or are there any offsets that I didn't mention?
Yes. I mean, first of all, we are going to spend more capital on the things we've said and why we've said them. Some of that's going to improve the EBITDA, but the EBITDA is not going backwards in 2019. I think John's comment about 80% was whatever went backwards in '17, he expected at least 80% of that would be recouped in '19. So he's not saying that it will be backwards in '19 either. So I think -- I don't know what the number free cash flow is going to be, but it's going to be better, I assume. Do you have other comments?
EBITDA and the revenue [indiscernible] give or take $600 million, the CapEx give or take is $650 million. [indiscernible] of 150. I don't see much changing working capital if everything stays as it is today in terms of raw materials. So...
Our next question is from James Yoon from Citi.
Can you guys just touch on the Reynolds Consumer Products segment a little bit, some price increases there? What are some of the puts and takes that we should be thinking about heading into 2019 as we think about this segment of the business.
Well, this is Lance Mitchell. Overall, we're growing across all of our segments, so we've got good, strong volume growth. We've taken prices up that will more than offset raw material, logistics and labor costs. And we've seen some backwardation in some of the resin costs like John indicated. So we've got a very positive outlook for 2019.
And then -- so how many of those price increases should we -- have not been recouped yet that we can expect to see show up in the 2019 EBITDA?
If you look at our fourth quarter run rate, that is indicative of our current 2019 run rate.
In terms of price reduction, not in terms of EBITDA...
Yes, not -- in terms of revenue, right. In terms of revenue rec, above raw materials. Is that clear?
[Operator Instructions] If there are no further questions, I'd like to turn the floor back to management for any closing comments.
All right. Well, thank you, Matt, and thank you, everybody that called in and asked the questions and everything. And I look forward to having another call with everybody in 3 months. Goodbye.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.