Veritiv Corp

NYSE:VRTV

Good morning, and welcome to Veritiv Corporation's First Quarter 2023 Financial Results Conference Call. As a reminder, today's call is being recorded. We will begin with the opening remarks and introductions.

At this time. I would like to turn the call over to Scott Palfreeman, Vice-President of Finance and Investor Relations.

Thank you. Colby and good, morning, everyone. I am joined on today's call by our CEO, Sal Abbate and our CFO, Eric Guerin. After my remarks, Sal will share an update on our first quarter business performance, followed by Eric, who will provide more details on our financials. Sal will conclude with an update on our initiatives. We will then open the call for your questions.

Before we begin, please note that some of the statements made in today's presentation regarding the intentions, beliefs, expectations and/or predictions of the future are forward-looking. Actual results could differ in a material manner.

Additional information on factors that could cause results to differ from those in the forward-looking statements is contained in the company's SEC filings. This includes the risks and other factors described in our 2022 Form 10-K and the company's other publicly available reports and exhibits filed with the SEC.

Today's call and presentation slides will contain non-GAAP financial measures, the reconciliation of these non-GAAP measures to comparable U.S. GAAP measures are included at the end-of-the presentation slides and can also be found in the Investor Relations section of our website.

At this time. I will turn the call over to Sal.

Thank you, Scott, and good morning, everyone, and thank you for joining us. First, I'd like to introduce Eric Guerin. Eric joined Veritiv earlier this year in January and officially became CFO on March 2nd. We are thrilled to have him on the team as a strategic thought partner. Welcome, Eric.

This morning, we published our first quarter financial results 2023. While we experienced difficult market conditions in the first quarter, there are several highlights that I will speak about that demonstrate the resiliency of our business segments and the continued benefits of our ongoing multiyear strategy.

We achieved record first quarter adjusted EBITDA margin for the company overall, as well as within our packaging and facility solution segments. We also achieved strong first quarter free cash flow driven by our working capital process improvement efforts and robust earnings.

These results demonstrate how our multi-year commercial and operational excellence initiatives helped deliver strong bottom line performance in difficult macroeconomic environments.

While our print business suffered from industry-wide destocking, it generated adjusted EBITDA and adjusted EBITDA margins significantly above historical pre-pandemic levels.

Moving on to our consolidated performance during the quarter. Total organic revenue for the first quarter declined 8% on a year-over-year basis driven largely by the effects of de-stocking within the Print Solutions segment.

First quarter adjusted EBITDA of $104 million declined 13% compared to the prior year, primarily due to the sale of our Canada business last year. The resulting adjusted EBITDA margin was a first quarter record of 6. 9%, reflecting a year over year increase of 50 basis points.

Net income for the quarter was $69 million representing a year-over-year decline of 13% due to the sale of our Canada business and a one time tax benefit in 2022. Despite the net income contraction, diluted earnings per share for the first quarter was $5 and reflects a decline of only 2% compared to the prior year. The combination of solid earnings performance and disciplined management of working capital drove free cash flow of $68 million in the first quarter, which represents significant improvement over the prior year.

Over the past several years, our commercial strategy has centered on foundational improvements that are sustainable without being significantly impacted by market conditions. For example, we made tough decisions to optimize all our segments through actions including divesting certain low margin channels, geographies and products.

Last year, we strategically exited low margin businesses, which included our freight brokerage business and our Canada business. Additionally, our pricing discipline and strategy continued to benefit performance during the first quarter.

We established centralized pricing management across all of our segments, which has positively impacted our adjusted EBITDA margin performance. As a result, we delivered record first quarter adjusted EBITDA margin despite significant challenges in the print industry and a softer packaging market.

Packaging's resilient performance during the first quarter was a direct result of our commercial go-to-market strategies. Industry-wide destocking and softening demand negatively impacted our volume in the first quarter.

However, packaging adjusted EBITDA decreased only 1% compared to the prior year, despite both unfavorable market conditions and the impact from the Canada sale. Our diversified product and industry vertical mix are aligned with leading suppliers to drive best-in-class cost and customer value.

Strength in the heavy manufacturing and healthcare industry verticals partially offset soft demand within consumer electronics and our logistics industry verticals. Our value added differentiators including design, testing, automation, kitting and sustainable solutions continue to enhance the margin profile of the business and create repeatable and more profitable customer relationships.

Additionally, meeting the evolving geographic needs of our customers continues to be an important strategy. Through our operations in Mexico, we continue to reduce our customers overseas risk by supporting their near storing needs and capturing additional share of wallet.

As we look ahead, we expect packaging market demand to remain soft in the second quarter. However, we believe the effects of customer inventory destocking have largely run their course.

We believe our commercial strategy, including strategic sourcing initiatives, alongside our focus on attracting markets such as healthcare and cold chain will offset the effects of recently announced containerboard price decreases and weakened customer demand.

As a result, we continue to expect both packaging, adjusted EBITDA and adjusted EBITDA margins to improve relative to full year 2022. The Facility Solutions segment has been a significant beneficiary of our multiyear commercial strategy. We have greatly improved the profitability of this business through the strategic exits of both our redistribution and Canada businesses.

Our focused efforts on supporting complex customer needs coupled with our broad product portfolio and supply chain expertise contributed to first quarter adjusted EBITDA growth of 15% compared to the prior year. We achieved record adjusted EBITDA margin in Facility Solutions despite comparing against last year's results, which include Canada.

This performance was supported by a complementary product and industry vertical mix and the healthier business we have created as a result of shedding the low margin components I previously mentioned. The strength of our Facility Solutions business demonstrates the value of our balanced and diversified portfolio.

Our outlook for Facility Solutions remains favorable as we build on our strong first quarter performance and continue to execute our commercial strategy. We continue to expect Facility Solutions adjusted EBITDA and adjusted EBITDA margin to improve relative to full year 2022.

Moving to the Print Solutions segment. Market-wide dynamics continued to negatively affect the industry. However, our multiyear transformation efforts contributed to a strong first quarter adjusted EBITDA margin performance of 8.6% in our Print Solutions segment, which remains well above pre-2020 levels.

Over the past several years, we made strategic decisions to rationalize our supplier and product base, exit certain high risk customers and high cost to serve products, consolidate our supply chain network, and build a flexible cost model. All of these efforts have supported the resilient adjusted EBITDA margin profile of the business.

Looking ahead, we now expect destocking across the print market could continue into the third quarter. We also believe pricing could be challenged in the second half of the year if destocking subsides and demand remains low.

While the near term macroeconomic outlook remains uncertain, we believe we have the resources and strategic playbook in place to drive strong earnings performance for the balance of the year.

I will now turn the call over to Eric to provide more detail on our segment level financial performance, as well as the balance sheet and guidance for 2023. Eric?

Thanks, Sal. I'm honored to be here. Veritiv is an outstanding company with significant opportunities for future growth and value creation. I look forward to leveraging my background to help accelerate our position in the market.

Today, I will provide more details on our segment's first quarter performance and updates on cash flow, leverage, capital allocation and our guidance for 2023. Please note that when we speak to organic results, we are referring to reported results excluding the impact of the sale of our Canada business and our freight logistics business, Veritiv Logistics Solutions.

As a reminder, we sold our Canada business at the end of April last year, so we will fully lap the effects of the sale next quarter. On a day basis count, I would note that the first quarter of 2023 had the same number of selling days as the previous year.

Starting with the Packaging segment. Revenue was $895.4 million, representing year-over-year decline of 10.7% on a reported basis. While on an organic basis, revenue decreased only 3.6%.

Packaging volume performance across all of our industry verticals was challenged as the effects of customer destocking and economic uncertainty continued throughout the first quarter.

Volume declines were greatest within our light manufacturing industry vertical, partially driven by weakness in consumer electronics. In aggregate, year-over-year domestic volume declined in the mid single digit range in the first quarter.

While volumes were depressed during the quarter, price resiliency led to positive year-over-year revenue growth in several industry verticals for the quarter, including heavy manufacturing, wholesale and retail and healthcare.

From a product perspective, our corrugated volume declined 6% versus the prior year, which was better than the market decline of 8.5%. Corrugated pricing remained strong and offset most of the volume decline.

Packaging's first quarter adjusted EBITDA was $96.4 million. This represents a year-over-year decline of just $1 million on a reported basis. When adjusted for the sale of the Canada business in 2022, adjusted EBITDA improved 3.4% compared to the prior year.

Continued execution of our commercial strategy drove our first quarter adjusted EBITDA margin record of 10.8%, reflecting an improvement of 110 basis points compared to the prior year.

Moving to the Facility Solutions segment. Revenue of $180.2 million represents a year-over-year reported decline of 21.4%. While on an organic basis, revenue increased 9.3%, strengthen away from home categories such as entertainment and hospitality continued during the first quarter with volume growth in the mid teens.

We also saw positive volume growth in office like verticals as more employees return to the office. We believe this business is well-positioned to benefit from ongoing shift from goods to services.

Adjusted EBITDA increased 14.9% compared to the prior year, to $15.4 million. Despite the divestiture of the Canada business, the resulting adjusted EBITDA margin was a first quarter record of 8.5%.

Moving to the Print Solutions segment. First quarter reported revenue declined 27.2% compared to the prior year, while organic revenue declined 20.1%. We believe continued customer stocking led to weak demand during the first quarter resulting in volume declines in the mid-30% range compared to the prior year, as customers continue to work through their excess inventory.

Price resiliency continued in the first quarter, partially offsetting volume weakness. First quarter adjusted EBITDA was $37.2 million, representing a year-over-year decline of 31.9%, adjusted EBITDA margin for the first quarter was 8.6%While this represents a 60 basis point decline compared to prior year, adjusted EBITDA margin remains well above its pre-2020.

Shifting from the segment level results to our consolidated free cash flow. The combination of strong earnings and disciplined working capital management drove strong first quarter cash flow from operations of $70.9 million.

After subtracting $2.9 million of capital expenditures, free cash flow was $68 million for the quarter. Strong earnings and healthy free cash flow contributed to record low net debt to adjusted EBITDA leverage ratio of 0.3 times.

From a capital allocation perspective, we returned approximately $8.5 million to shareholders during the first quarter in the form of a quarterly dividend. We believe our favorable leverage ratio, along with an active pipeline of inorganic opportunities, provide to the company with strategic optionality to act on multiple capital allocation priorities simultaneously.

Moving now to return on invested capital. Because of our sustained earnings improvement and efficiency initiatives, as well as improved balance sheet, our ROIC for the 12 months ending March 31, 2023 was 34.7%. This represents a nearly 26 percentage point improvement since 2020.

Finally, given our performance to-date and continued execution of our strategic initiatives, we are reaffirming guidance for the full year. Despite slowing market demand and macroeconomic uncertainty, we continue to expect adjusted EBITDA to be in the range of $430 million to $490 million, and net income in the range of $265 million to $305 million.

We are maintaining diluted earnings per share to be in the range of $19 to $22, based on $13.9 million fully diluted shares outstanding. Our free cash flow expectations of approximately $275 million remains unchanged.

I will now turn the call back to Sal to provide an update on our initiatives. Sal?

Thank you, Eric. As the industry continues to work through the challenging macro environment and the effects of customer inventory destocking, we continue to execute several strategic initiatives that we believe will not only generate top line growth, but will also accelerate our position in the market and support adjusted EBITDA margin stability.

The next wave of our strategic sourcing initiatives continues to progress as planned. We are partnering with strategic suppliers to provide the best combination of quality and price across our full spectrum of packaging and facility solutions products.

These efforts should result in better value for our customers and further contribute to our overall margin sustainability. We continue to make progress on our front and back end technology initiatives.

These investments are expected to improve the customer experience and contribute to top line revenue growth. Additionally, we continue to invest in our next generation supply chain to meet the evolving needs of our customers.

Before we move to the question-and-answer portion of the call, I want to mention that last week, we published our 2022 Corporate Social Responsibility report. We are pleased with the continued progress made on our sustainability journey.

As an organization, we are not just participating in sustainability. We intend to lead our industry by supporting our customer's sustainability goals through value-added solutions and expanded portfolio of products with sustainable attributes.

There are many updates which we proudly detail within the report. Key highlights from last year include that we reduced our combined Scope 1 and Scope 2 emissions and are progressing well against our targeted reduction goal of 50% from our 2020 baseline. We continue to invest in a positive and equitable workplace.

Last year, we conducted an employee engagement survey and received a score of 82 out of 100, which was five points higher than the industry benchmark overall and higher than the benchmark in all 12 categories surveyed.

We also launched employee resource groups to provide employees a way to connect over shared background and experiences and opportunities to learn and grow through Allyship.

I am extremely proud to say that because of these efforts and many others, we were recently recognized as one of Fortune Magazine's most admired companies in 2023. Additionally, we included our first ESG scorecard in the Corporate Social Responsibility report.

The scorecard measures our performance against key targets across our multiple ESG work streams. I encourage everyone on the call to read the report available on our website sustainability section.

You can learn more about the great work we are doing to support our employees and the communities where we live and work, reduce our carbon footprint and help our customers meet their sustainability goals.

Finally, I want to thank our employees for their passion and dedication to supporting our customers. Every day, our approximately 5000 employees go above and beyond to delight our customers. Thank you for all your hard work.

Colby, this concludes our prepared remarks. We can now open the call for questions.

Your first question comes from the line of George Staphos from Bank of America. Your line is open.

Hi, everyone. Good morning. Can you hear me okay?

We can. Good morning, George.

How you doing? Thanks for the details. I guess, the one thing I want to start with is the question of destocking. We hear a lot of our companies say they expect destocking to be done by first quarter or second quarter or third quarter. And on the print side, you're now saying third quarter, we appreciate that detail. Where are you ultimately being able to figure that out?

At the end of the day, it's very difficult to know what's in inventory. It's very difficult to parse what true, if you will, sell through is or decline in sell through relative to destocking. So what informs that view, and in particular as regards print, why the move now to destocking inning by third quarter as opposed to I think it was previously second quarter.

Yes. Thanks for the question George. When we originally announced the destocking and/or what we had anticipated in first quarter. We said toward the end of this quarter. So we did expect it to continue into the May, June time frame. Well, we're in May now. And what's informing our outlook now to be into the third quarter are a couple of factors, mainly our suppliers. So our suppliers are hearing and signaling that they see their shipments in their business being sort of pushed into the mid to latter half of the third quarter with their inventory levels.

And the second informing point is our own inventory. We have a significant amount of our inventory that comes from Europe. And as we look at our days inventory on hand and the buildup, that has occurred as a result of the whiplash in inventory last year. Our calculations say it's going to be more into that mid to late summer timeframe. The third point maybe not as technical. Would be our customers themselves indicating that. The demand is healthy. That's a subjective word. But the demand is healthy. And they expect that when their inventory does start to decline in this third quarter, we would expect shipments to pick up. So those are kind of the three points we're using to hone in on a very imprecise timeframe.

No, that's a great rundown, Sal, we appreciate it. Are there particular – I'm sure there are. The question is whether you'll be able to share them. Are there any particular end markets or products within print where the destocking may be a little bit more challenging or farther out in terms of progression?

Yes. I would say that it's really a customer and channel mix issue for us. And so, if you recall George, we combined our print and our publishing segments last year. And so, we've been reporting them in tandem now. Our publishing segment, which is really geared more toward advertising and promotion is seeing a softer demand than our traditional printer business. And so, I would say that that destocking is taking longer in those grades, and with those customers.

And then, some of our – frankly, again, the customer mix, some of our larger customers who had the ability in the capital to store inventory last year, which we're finding out that most people did just because of the stark availability of inventory in 2021, those larger customers are still burning through inventory. So it's really a large customer issue combined with a mix issue toward our publishing business and their advertising companies and customers.

Understood. And second question, and I'll have one more and I'll turn it over to see if there are any other and come back in queue, please. But one, I know the company doesn't like to talk too much about this. But how much should we expect that your result can benefit from relatively controllable actions, self help measures. If we hold demand relatively constant from a seasonal standpoint aside from the destocking that you had. And we assume nothing more for new, if you will, market pricing. What will you generate and add to your earnings all else equal from your self help measures on centralized sourcing, centralized pricing and so on.

And then second question, you're maintaining guidance for the year and that's terrific. We appreciate that either or. And you're doing that even though destocking in print is worse. So that would argue that other things are going better. So what's been better than expected within the segments and if you will, in terms of categories driving earnings within those segments? Thank you.

Okay. Thanks, George. I'll try to break those down one by one. The first question around what you're titling self help. And so we refer to our centralized pricing as one key metric. I would tell you -- that's certainly a driver of the resiliency of our margins that we're projecting in our guidance. The other mechanism that we are very flexible with is our supply chain. So we can flex our supply chain based on demand. And so, we're looking at that ratio of spend of operating expense to sales and we – ebb and flow.

And that's not through layoffs or anything draconian as much as it is just watching natural attrition in times of decline and then obviously ramping up when we need to. So, our operational flexibility is one area that really drives that. Our centralized pricing as you mentioned is a second area. And the third area is really our diversification not only by business segment, but even within, let's talk about packaging for a moment inside of packaging our value added solutions. So, the fact that we really are cradle-to-cradle or designed to delivery in the front end of the business around design solutions, kitting, testing, that all helps create frankly stickiness with our customers and more resiliency in our margins.

To the second part of your question around why hold guidance when the destocking seems to be a little more pronounced? Well, a couple of things. One is we provided a relatively wider range this year than we typically do. And we're holding that wider range given the uncertainty. And so, we believe that range is absorbing the uncertainty, particularly in the packaging and print markets. So, if you think about what – if we were talking about the bottom end of the range, that does assume greater deterioration in pricing or volume in packaging and print, and that would be offset by further cost cutting actions.

Towards the higher end of the range, we're assuming that the market rebounds slightly better than projected at this point in packaging. So, we don't have a large upside baked in to the print business in our guidance, but there is some signs that packaging could improve toward the latter half of the year and that is in the guidance. Specifically around the question around what are some of the surprises or things that the positives that can offset that, our Facility Solutions business is one. I mean, it is definitely performing at an accelerated rate this year. The first month of the quarter is strong, and frankly stronger in both packaging and FS been in the first quarter. So, we're seeing some resiliency there.

And then, the other piece is our North America. Our North American – our core North American packaging business is better than our international business. We've cited the European business and the Asian business is being soft for the better part of 12 months now. Our core U.S. business is performing I think better than market and better than our international businesses both in the first quarter and now into the April timeframe. And so that is something that we're counting on to continue to be strong. And again, that is a function of our balanced product category. Back to the third part of your question around the categories, we are seeing and I'll talk a little bit about verticals.

Eric mentioned that our corrugated business seems to be a bit stronger than the market. Still negative volume year-over-year, but a little bit better than the market. And we're still seeing our E-commerce type products and packaging stronger than the balance of the portfolio along with our cold chain solutions in healthcare. And so, those are areas where we've seen resiliency the product lines over others. On the facility solution side, it's really our food service, products are doing well, and really a return to our traditional products like Tow and Tissue as, again, as Eric mentioned, the office like environment seems to be settling in this new normal of 60% to 70% of pre pandemic level. So those are a couple areas of strength that that point us to the confidence we have in our range for guidance.

Hey, Sal. I'll try one more time. And I respect whatever answer you can give me. So, is there -- I recognize the cost reduction in self-help [ph] is going to be somewhat of an accordion based on the market that you're in. With that said, is there a baseline to self-help that you'll generate this year that you could share with us in dollar terms?

Yes. I'm trying to triangulate that question in dollar terms. And George -- Eric, do you have a sense of that?

Yes. I think, George, from that perspective, I don't know if we're going to give a specific number, but what I would say is if you look at our margin performance from last year, you should see that continue for the front half of the year on the pricing side and then we're being very disciplined on the cost side and going to market with our suppliers and partnering with them. I don't think we're ready to give a specific number. But if you look at how our performance and our margin expanded last year and started the front half of this year, the first quarter, we're continuing that type of approach on the cost and pricing discipline. Does that help you George?

A little bit. I appreciate the thoughts. I'll come back in queue.

Yes. Thanks.

At this time, I'm not showing any more questions in the queue. Disregard, I apologize. We have George Staphos from Bank of America. Your line is open.

Yes. Hi, guys. Thank you. So, can you talk a bit about near-shoring and how that is in real practical terms right now, helping results and what it might mean say as we look out to call it 2024?. Additionally, can you talk about what you mean by the next generation supply chain? I think, Sal, it was one in your comments. But what does that mean and how does it actually benefit your results in 2023 and into 2024? And then, I'll ask some of my other follow-on on this one as well, after doing this.

Sure. Yes. On the first question around near-shoring, and specifically, I would say, George that it's not a meaningful factor in our 2023 performance. While our while our Mexico business performed quite well not only this year, but last year, and we're seeing the migration to more and more business coming from our international Asian business to Mexico. It's still a relatively small part of our business. Overall, our international business including Mexico is roughly 10% to 15% of our packaging business.

So, it's not going to have a meaningful impact in 2023. But we continue to gear up toward the back half of your question there around 2024, we continue to make sure that our resources in Mexico already -- we've expanded facilities. We've expanded our labor force there to be ready. And we're working actively as our customers are thinking about transitioning to Mexico. So I would tell you, it's more of a forward looking preparedness than it is a media impact in 2023?

Those customers, do they say, okay, we're doing in aggregate, I'm making the number up, $10 million in total across all your customers and based on what they're saying, the exit rate on 2024, and their revenues is going to be $20 million, 30 million, $50 million, is there a way to equate what that opportunity might look like 2024, 2025?

Yes. That's a difficult question, because it's really customer-by-customer. If I had to put a rough approximation on it, I would say more the 15% to 20% ramp up than 50% or double, it just takes a while to migrate that over.

Understood. And on the supply chain?

Yes. So, when we speak to next generation supply chain, one is just, I would say more tactically and more traditionally our footprint. And so, where should we be positioned? Should we continue with our? We have roughly 100 locations across the globe that serve within a certain mile radius and that has served us well in the past. Now we're looking at, should there be a combination of that combined with mega centers that help with our pick pack and ship and small order format.

And really what role does automation play in the future? You might have seen that we did experiment and are experimenting with driverless truck routes in between our facilities when we do our overnight transport runs. So, items like that around automation inside the box as well is what we refer to as next generation supply chain, really to be ready to face this continuing labor challenge in the market.

Understood. Thank you for that, Sal. You talked about the pipeline on, I mean, ultimately M&A opportunity is being positive. I forget the exact wording you used, but certainly it's active, I think is what you said.

Active is right. That's right.

So, again, to the investor and analyst, what should we take away? What does that mean? Is the pipeline larger than last year, smaller than last year? If we see you make an acquisition whenever that might be, whether it's next month, yet tomorrow or three years from now, is that going to be something that is immediately accretive to earnings and return? Is there a three-year sort of dig out period before it becomes that. How would you have us think about the activity? What it means, the comparison? And what it might mean for you're very good at right now, earnings and returns?

Yes. So you're exactly right, George. The word we use is active pipeline with respect to the question around, is it more or less active than this year? I would say, it's slightly elevated this year toward the last half of the year, last year. As everyone knew, the debt markets became really expensive. That seems to be opening up a bit. And so, I think there are more potential sellers coming on recognizing that the environment might be a little more conducive for transactions in this middle half of the year toward the end of the year.

So, I would say our pipeline is active and slightly more robust than last year. We continue to look at scope and scale opportunities, scoping those things that could enhance our capabilities or be additive to our capabilities, scale being those things to your second part of your question around leverage and accretion. So scale would be size and folding it into what I would call our traditional model.

We are focused primarily on packaging acquisitions. As we look at the pipeline, I would not say that it's – you mentioned time frames. I would not say that we're looking at things that would be a three-year runway for accretion. So, we are looking at things that we could immediately benefit from and deploy our strategic and commercial and operational playbook more quickly so that we can reap the returns of that acquisition much more sooner in the process. And Eric, anything you kind of add to that?

No, I think you covered it nicely, Sal.

And how attractive are the valuations relative to last year? If -- obviously the credit markets tightened up a bit. Has that brought more realism to valuation expectations on the sell side? And within that, what -- I know there's not going to be an average. So I kind of gave you the answer to the question. You can back out. But what kind of size on average acquisition are you looking at in terms of revenue terms?

Yes. So maybe George, the first part your question first. As far as the markets, we still see that there's an elevated expectation on sellers. It's not caught up to the tightness in the market. And now, we're actually starting to see the market loosen up a bit. So I think there's still high expectations from multiples as you look at the market. But we'll continue to be disciplined in our approach and how we look at the M&A activity. And what was the second part of your question, George, I may have missed it?

Just size. So you looking -- what's the average size? $10 million, a billion dollars, so somewhere between.

Yes. I'd go back to Sal's answer to the question. We're going to continue to look at scope and scale. As you know, we have our ABL. So, maybe scope size would fit right in there nicely and we're at $0.3 net debt to adjusted EBITDA, we could execute those relatively quickly. But as we've talked about, scale is an option for us as well, and we look at alternatives there as well. So as we look at the pipeline, we are looking across that broad array of both scope and scale.

Appreciate your answers. I'll turn it back. Thank you.

Okay. Thank you, George.

At this time, I'm not showing any more questions in the queue. Thank you all for joining today's conference call. This concludes today's events. You all may disconnect.