Watts Water Technologies Inc
NYSE:WTS
Watts Water Technologies Inc
NYSE:WTS
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Earnings Call Transcript
Earnings Call Recording
Other Earnings Calls
Welcome to Watts Water Technologies Inc. Fourth Quarter and Full Year 2024 Earnings Call. [Operator Instructions]
I will now turn the call over to Diane McClintock, Senior Vice President, FP&A and Investor Relations.
Thank you, and good morning, everyone. Welcome to our fourth quarter and full year 2024 Earnings Conference Call. Joining me today are Bob Pagano, President and CEO; and Shashank Patel, our CFO. During today's call, Bob will provide an overview of 2024 as well as an update on our expectations for 2025. Shashank will discuss the details of our fourth quarter and full year financial results and provide our outlook for the first quarter and full year 2025. Following our remarks, we will address questions related to the information covered during the call.
Today's webcast is accompanied by a presentation, which can be found in the Investor Relations section of our website. We will reference this presentation throughout our prepared remarks. Any reference to non-GAAP financial information is reconciled in the appendix to the presentation. I'd like to remind everyone that during this call, we may be making certain comments that constitute forward-looking statements. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially. For information concerning these risks, please see Watts publicly available filings with the SEC. The company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
With that, I'll turn the call over to Bob.
Thank you, Diane, and good morning, everyone. Please turn to Slide 3, and I'll provide a recap of 2024 and an overview of the key drivers for our 2025 outlook. 2024 was a momentous year for us marking the 150th anniversary of the company and another year of record performance. I'd like to start by thanking the entire Watts Water team for their tremendous contributions to these results. We finished the year with a solid quarter that exceeded our expectations, including record fourth quarter adjusted operating margin and adjusted EPS.
We drove record full year sales, operating income, earnings per share and free cash flow. Organic sales decreased by 1%, largely driven by weakness in Europe and adjusted EPS increased by 7%. Adjusted operating margin decreased only 10 basis points versus the prior year despite 60 basis points of acquisition dilution, significant volume deleverage from weakness in Europe and incremental investments in our long-term strategy. We generated record free cash flow of $332 million, an increase of 18%, with a conversion rate of 114%, well above our expectations.
Our balance sheet remains strong and provides us with the flexibility to continue investing for the future. Strategic M&A, high-return investments, competitive dividends and stable share buybacks remain our top capital allocation priorities.
Moving to operations. Over the course of 2024, we were able to drive significant productivity savings through investments in automation, our focus on lean initiatives, both inside and outside the factory walls, leveraging the One Watts performance system and selective restructuring actions. These savings enabled us to mitigate the dilutive impact of acquisitions and the impact of European volume deleverage on our operating margins. We expect to continue investing to enhance productivity in our factories and drive margin expansion.
As previously announced, we closed on our acquisition of I-CON Systems on January 2, 2025. I-CON is a leading provider of innovative plumbing and water management solutions. This strategic acquisition will expand our digital offerings and provide growth opportunities in the correctional facilities niche of the institutional market. Integration is underway and progressing well. We expect I-CON to be modestly accretive to adjusted EPS in 2025 after factoring in incremental interest expense and normal purchase accounting adjustments.
Last week, our Board authorized a restructuring program involving to exit from a manufacturing facility in France. We'll be moving the production from this plant to existing plants in France and other locations. This action will help to simplify our manufacturing structure and provide incremental productivity. The majority of the expected cost for this program will be recorded in the first quarter. Full year run rate savings should be realized in 2026. Shashank will provide more financial details on this in a moment.
As discussed in our last earnings call, we introduced our new intelligent water management solution, Nexa. We continue to work multiple go-to-market strategies and the pipeline is growing nicely. Feedback from customers has been positive with concrete results of value creation from risk mitigation, reduced water consumption and improved occupant comfort. We look forward to continued scaling of our ecosystem of digital solutions in 2025.
As part of our One Watts performance system, we regularly assess our portfolio and phase out low-performing products under our 80/20 model. As part of this process, we have identified approximately $10 million to $15 million of sales we expect to eliminate over the course of 2025, a significant portion coming from our integration of Bradley. We expect these actions will be margin accretive in 2025.
Now an overview of the drivers for our outlook for 2025. We believe that price as well as repair and replacement activity will continue to drive growth in 2025. Global GDP, a proxy for our repair and replacement business has slowed, but remains positive in our key end markets. In the Americas, nonresidential new construction indicators are mixed. The ABI remains below 50 implying a slower 2025. The Dodge Momentum Index is slightly more positive, suggesting growth in nonresidential products will continue into 2025, primarily supported by strength in institutional and mega projects including data centers. However, we believe growth in institutional mega projects will be partly offset by more challenged subverticals, including offices, retail, warehouses and recreation.
For residential new construction, we expect single family will be flat to slightly up. Multifamily permits were in decline for most of 2024, with interest rates remaining elevated, we expect multifamily starts to decline double digits throughout 2025. As a reminder, multifamily new construction accounts for less than 10% of our total sales. With the uncertainty surrounding the direction of inflation, and policy under the new U.S. administration, we expect interest rates to remain higher for longer, which may delay construction project. We expect Europe residential and nonresidential new construction to remain weak. In addition, we expect the heat pump destocking that has unfavorably impacted our OEM partners in Germany and Italy to continue in the first half of 2025.
The reduced volume will have a more significant impact on earnings due to our higher fixed cost base in Europe. In addition to the planned closure of the manufacturing site in France, we implemented headcount restructuring actions in the fourth quarter that will help reduce the impact of volume deleveraging. Europe sales represent approximately 20% of our business. We expect growth in the Asia Pacific region with stronger growth in China data centers and in the Middle East with modest growth in Australia and New Zealand. We continue to monitor U.S. policy uncertainty, including potential tariffs and geopolitical uncertainty in the Middle East and Europe.
We expect to proactively address any direct or indirect impacts to our customers and supply chain. With that, let me turn the call over to Shashank who will address our results for the fourth quarter and full year and offer our outlook for Q1 and the full year 2025. Shashank?
Thank you, Bob, and good morning, everyone. Please now turn to Slide 4, which highlights our fourth quarter results. Sales of $540 million were down 1% on a reported basis and down 5% organically. As previously discussed, we had fewer shipping days in the fourth quarter, which unfavorably impacted our sales by approximately 5% across all regions. Americas organic sales were down 3%, and reported sales were up 3%. This was better than expected, particularly with the reduced shipping days. Some of this favorability was a result of several large projects shipping earlier than expected.
Sales from our Josam and Bradley acquisitions added $23 million. Europe organic and reported sales were down 15%, with declines across all geographies due to fewer shipping days, heat pump destocking at our OEM partners in Germany and Italy, and weakness in new construction markets triggering some destocking in the wholesale channel. APMEA delivered 3% organic growth, while reported sales growth of 4% was favorably impacted by 1% from foreign exchange movements. Double-digit growth in China and the Middle East was partly offset by declines in Australia and New Zealand, primarily driven by fewer shipping days.
Compared to the prior year, adjusted EBITDA of $104 million increased 6% and adjusted EBITDA margins of 19.3% increased 140 basis points. Adjusted operating profit of $91 million increased 5% and adjusted operating margins of 16.8% was up 100 basis points. Adjusted EBITDA and operating income benefited from price productivity, favorable mix and cost controls, which more than offset inflation, volume deleverage, investments and acquisition dilution.
Americas segment margins increased 160 basis points to 21.8%. Europe segment margins decreased by 480 basis points to 10.2%, and APMEA segment margins increased 490 basis points to 17.5%. Adjusted earnings per share of $2.05 increased 4% versus last year with benefits from acquisition, operational contribution and reduced interest expense more than offsetting incremental tax expense. The adjusted effective tax rate in the quarter was 24.6%, up 230 basis points compared to the fourth quarter of 2023, primarily due to the recognition of additional R&D credits in the fourth quarter of 2023.
Moving to the full year results. Please turn to Slide 5. As Bob mentioned, we delivered record operating results for 2024. Sales were $2.25 billion, up 10% on a reported basis and down 1% organically. The organic decline was primarily driven by the challenging year in Europe. Acquisitions accounted for 11% or $215 million of incremental sales. Globally, foreign exchange had an immaterial impact. Adjusted EBITDA of $454 million increased 11% and adjusted EBITDA margin of 20.1% increased 20 basis points. Adjusted operating income of $400 million increased 9% and adjusted operating margins of 17.7% decreased 10 basis points.
As Bob noted, adjusted operating margin decreased only 10 basis points versus the prior year despite 60 basis points of acquisition dilution and significant volume deleverage from weakness in Europe. Similarly, the Americas segment margin was unfavorably impacted by 140 basis points of acquisition dilution. Excluding acquisitions, the Americas core business operating margin was up 100 basis points and APMEA was up 170 basis points, a very strong performance by both teams. Adjusted EPS of $8.86 increased by $0.59 or 7% versus the prior year. Benefits from acquisition, operational contribution and reduced interest expense more than offset incremental tax expense.
For GAAP purposes, we incurred after-tax charges of $16.1 million in restructuring and acquisition-related costs. These charges were partly offset by $10.3 million of nonrecurring gains on the sale of assets, the settlement of the terminated Bradley pension plan and other investment gains. Free cash flow for the full year was $332 million, an 18% increase compared to 2023 and was a company record. The increase was driven by higher net income, improved working capital and cash flow generated by acquisitions. Our 2024 free cash flow conversion was 114%. We returned $73 million to shareholders in the form of dividends and share repurchases in 2024 and increased our annual dividend return by 20%. Our net debt to capitalization ratio at year-end was negative 13% compared to negative 4% at year-end 2023.
Our net leverage ratio at year-end is negative 0.4%. Our balance sheet continues to be in excellent shape and provides substantial flexibility to fund our capital allocation priorities. Now on Slide 6, let's review our outlook for the full year 2025 and our expectations for the first quarter of 2025. Our 2025 outlook reflects the market factors previously discussed by Bob. Starting with the full year assumptions on both a reported basis and organic basis, we expect sales to range between down 3% to up 2%. Regional expectations are as follows: Americas from down 3% to up 3%. Europe from down 8% to down 2% and APMEA from flat to up 5%.
In addition, we expect approximately $25 million of incremental sales in the Americas from acquisitions to be offset by the impact of 80/20 product rationalization of between $10 million and $15 million and the unfavorable impact of foreign exchange across all regions, which equates to a decrease of $28 million in sales and $0.11 per share in EPS versus the prior year. Adjusted EBITDA margin is expected to be in the range of 20.4% to 21% or up 30 to 90 basis points. Adjusted operating margin should be in the range of 17.7% to 18.3% or flat to up 60 basis points.
From a regional perspective, the Americas segment margin is expected to be flat to up 60 basis points. We anticipate the segment margin in Europe will be down 30 basis points to up 30 basis points and APMEA will be flat to up 60 basis points. We expect the margin improvement to be driven by price, productivity and restructuring savings which will more than offset inflation and volume deleverage. As Bob mentioned, we have completed negotiations to exit a facility in France. Total pretax exit costs are estimated to be approximately $22 million. We will record a majority of the costs in the first quarter and provide more detail during our first quarter earnings call. Most of the costs are severance related and are expected to be incurred in 2025.
Full year pretax run rate savings are estimated to be $3 million, which should be fully realized in 2026. We expect about $1.5 million in savings this year, largely in the second half. We expect to deliver free cash flow conversion of greater than or equal to 100% of net income in 2025.
Finally, a few items to consider for Q1. On a reported and organic basis, we expect sales to decrease between 3% and 7%. Regionally, we expect a low to mid-single-digit decline in the Americas and a high single to low double-digit decline in Europe, partly offset by APMEA, which is expected to be flat. Based on the calendarization in 2025, we'll have fewer shipping days in the first quarter versus last year which will unfavorably impact sales by approximately 3%.
We also expect Europe to remain weak as heat pump destocking is expected to continue at least through the first quarter. We expect approximately $5 million of incremental sales in the Americas from acquisitions to be offset by the unfavorable impact of foreign exchange across all regions, which equates to a decrease of $7 million in sales and $0.03 per share in EPS versus the prior year. We do not expect a significant impact from our 80/20 actions in the first quarter. First quarter EBITDA margin is expected to be in the range of 19.4% to 20% or down 60 to 120 basis points. Operating margin should be in the range of 16.9% to 17.5%, or down 70 to 130 basis points. This is primarily due to the volume deleverage impact of fewer shipping days and continuing European weakness. Other key inputs for the first quarter and the full year can be found in the appendix. With that, I'll turn the call back over to Bob before moving to Q&A. Bob?
Thanks, Sashank. On Slide 7, I'd like to summarize our discussion before we address your questions. We delivered a strong 2024 performance with record sales, operating income, EPS and free cash flow. While we expect mixed global markets in 2025, our portfolio is agnostic to end markets, and our teams will pivot to the growing sub verticals. Our business model, which includes a large repair and replacement component, provides a durable base that drives a steady revenue and cash flow stream. We continue to invest in our digital strategy, including the recent introductions of Nexa.
We look forward to growing this solution to expand our suite of offerings for our customers. We believe our highly experienced team is well positioned to proactively navigate current market conditions by controlling costs and driving productivity through our One Watts performance system while capturing our fair share of demand and positioning us to capitalize on long-term secular trends. Our balance sheet continues to be strong after our strategic acquisition of I-CON and provides an ample flexibility to support our balanced capital allocation priorities. Our acquisition pipeline remains active, and we'll continue to pursue attractive opportunities to expand our solutions, geographic presence and growth.
With that, operator, please open the lines for questions.
[Operator Instructions]
Your first question comes from the line of Andrew Krill with Deutsche Bank.
I wanted to ask on the 80-20 actions, which I believe are new for the company. If you do the math, it's like they're about 1 point of a sales drag for the company. this year, which seems relatively normal with 80/20. So can you touch on the margin profile all of what you're exiting? Is it fair for us to assume these can be breakeven margin businesses? -- do you expect this -- the sales drag to be done in 2025 or does dynamic happen again in 2026?
Andrew. Yes. So 80/20 has been part of the One Watts performance system since I got here 11 years ago. So if you remember, we exited about $175 million in undifferentiated product. So it's in our -- it's in our arsenal of tools that we use. We called this out specifically because Bradley was a larger acquisition, it's a midsized acquisition. And part of our overall process when we do acquisitions is to really look at their profile and focus on improving margins and eliminating products that don't make a lot of money for us or have low margins. So that's all we're trying to do is call that out. these are niche accessory type products and that we're just exiting because it doesn't make sense to do it.
So they're basically breakeven products. There's probably another incremental $5 million or $6 million of Bradley that moves into next year, but we called it out just because it was a bigger item this year.
Okay. Great. That's helpful. And then just on the -- I think you noted in the prepared remarks some sales shifted a bit earlier in 4Q. I just pea-sized that and which segments that impacted.
Yes. It's primarily in the Americas, it's Shashank. It's probably in the Americas, and it was some project pull-ins we had in our commercial business on the boiler side. Approximately $4 million is what was pulled in.
Your next question comes from the line of Nathan Jones with Stifel.
I guess I'll start with the topic -- with the U.S. administration imposing 25% tariffs on aluminum and steel. What has had a very good track record in inflationary periods over the last several years of being able to pass inflation through to customers. maybe we're in a little bit weaker demand environment now. So I mean, just any color you can give us on what your exposure is to those tariffs, how you would plan on dealing with them -- and whether or not you think the market is in a position to bear cost increases, not just from you guys but across suppliers?
Well, Nathan, it's always top of mind for us to stay in front of these type of tariffs, et cetera, and we'll continue to do that. We will be raising prices as soon as we see these, and we'll be passing them on. Certainly, we don't know the implications of -- on the construction industry. related to tariffs, if that eventually slows things down or not. But I think we'll continue with our track record. We'll continue to push and offset those costs.
So it would be your intention that you would fully offset any tariff impact with price.
Yes.
Okay. Cool. That's the answer I was looking for. I guess maybe on the product rationalization side at Bradley. I'm hoping that you could give us a little bit more color on on how you're using 80/20. I mean you guys have -- as you said, Bob, you've been using these tools for 10 years. But it is the first time you actually called out 80/20 and attributed lost products out or product access to it. Is this something that you're a tool that you're looking to use more over the next few years? Or is this just maybe just because it was $15 million this year, it was warranted calling out?
Yes, I think it was a little later. It was just a bigger amount, and we inherited some backlog from Bradley that went through and stuff that on a go-forward basis, we're going to do it. We're also looking deeply inside of Europe right now given the market conditions and relooking at that in our product portfolio as well as our our footprint. So as we always do. So as we take advantage of opportunities where we see it, when there's sound volume continue to look at optimizing, as discussed in the closure of this recent France facility. So -- we're always looking. We're always improving, always looking at 80/20 and profitability by customer and channel all the time. So it was just a bigger number, and I thought it was important to call that out and you'll probably see more work inside of Europe as we head into 2026.
Okay. And then maybe just one on I-CON. You talked about that adding to the digital capabilities of the company. But it sounds like a pretty nice end market going into correctional facilities. Maybe any information you can give us on valuation of the business and then how you think you can leverage I-CON's technology into the rest of the portfolio?
Yes. I mean we've agreed not to discuss the purchase price. But I can tell you, it's EBITDA neutral for the company. It's clearly less than 9 multiple we paid on it. So it was a good acquisition. We really like I-CON because it's a growing market. It's a niche market, but they have controls on the front of the wall products, and that's something we're very interested, we could leverage through our Nexa system. So that was the appeal to us. It's a growing market and a profitable market. So it's a nice acquisition.
Your next question comes from the line of Bryan Blair with Oppenheimer.
I wanted to circle back to Bradley and Josam. And maybe offer a little more of an update on the integration there, how the P&L contribution is tracking relative to deal model. And if you're willing to disclose, you'd say accessory type products kind of breakeven. Are you willing to note which product line specifically your exiting -- this year.
Yes. So the acquisitions are going really well. They exceeded -- both exceeded our profit and synergy targets this year, which is great, and the teams are off to a good start. If we get into the very detailed it's noncore safety products, lockers and accessories, basically. So those are niches, not all lockers, just a portion of the lockers of items. So those are the niches that we're looking at. But clearly, a focus on growing profitability is our focus.
Understood. Appreciate the detail. And it would be great to hear more on the rollout of Nexa, the opportunity to view the dashboard in person yesterday. It's -- that's actually quite impressive. Just curious how that impacts your digital strategy now, what you're hearing from customers and obviously, the early stages of the rollout any results you can speak to in terms of value add on the customer side? And then perhaps remind us of your run rate SaaS revenue and how Nexa's should influence that going forward?
Yes. We're really excited about Nexa I'm glad you had the opportunity to take a look at it. It's early stages. We just launched it in August, a lot of trials out there, but many savings from customers in hospitality. If you go on our website, you can see the customer testimonials and case studies. But like any new product, people got to test it, they got to try it. they got to appreciate it. But what's even more important about this product, it protects our core products. And as you know, we've been driving a Smart & Connected initiative for a long time and all of our products are going to be integrated by the end of this year into the Nexa platform. So we continue to add scale, capabilities and I haven't heard one customer that has disliked it. So where our track record is really good, and we're looking forward to scaling it.
I appreciate the color. And then just ask again, what is current SaaS revenue for?
It's not a lot at this point in time. It's a growing part of our business. Our leak detection group has some of that. Some of our other products, but it's negligible, and we'll be trying to continue to grow that leveraging the Nexa platform.
Your next question comes from the line of Mike Halloran with Baird.
So just on the demand outlook, nothing seems overly surprising there. So just kind of a twofold question. One, has the thought process changed much in the last quarter, 90-plus days here -- and then secondarily, what are you hearing from the channel? Is the channel saying something similar, more or less optimistic? And any signs of some of those distressed markets from the channel perspective. might see a little bit more of a turn at some point this year?
I think generally, as we saw in the last quarter, it's carried through to the fourth quarter and probably into January. I think as you know, uncertainty in the market pauses new construction. So there's been a bunch of uncertainty recently. But I think in general, there's optimism at this point in time. There's some -- the multifamily. It's going to take a while for that to come back. We saw that really hit us in the second half of the year. And as we said, we're going to see that at the beginning of the year. Institutional is still strong. We're monitoring that, driving that. But Mike, I would say it's kind of same. There's some optimism at the recent ASH ratio, there's some optimism in the commercial markets. But let's see, let's watch how interest rates go, and we'll follow through on that.
And then just thoughts on the European margins. And once you get through the restructuring piece here and on the mix normalized a little bit with the heat pump side and some of the OE pressure. How should we think about the sustainable margin range for that region? Is this getting back to kind of that historical range the pressure points that would keep you below to these restructuring moves help maybe nudge you above? Just kind of a generic thought process, please?
Yes. So the margins in Europe, as you know, have been lower than the U.S. primarily because we have more of an OEM channel there. So it's going to be lower. Our goal and drive is to get it back up to where it was pre all this decreasing. So we'll continue to do that. And the team's focus on that. We'll be adjusting our footprint as we talked about with France, and we closed a facility a couple of years ago in France. So we're continuing to go after that fixed cost base. As you know, it's very costly, high payback, but our teams are working it real hard, and we get a little volume behind us. We'll start seeing some margin drop through. So teams focused on that, and we'll be watching closely on that.
Your next question comes from the line of Jeff Hammond with KeyBanc Capital Markets.
This is David Tarantino on for Jeff. Sticking with the margin line. Could you just walk us through the puts and takes on the company level margin line, particularly given it looks like volumes are expected to be down at the midpoint. -- what are the key buckets driving the improvement this year?
Yes. So it's a combination of -- there's a little bit of price in there, right? So we announced price increases in January, February, March. So those price increases are baked in productivity is another big piece of it. And as you know, in productivity, it's global sourcing savings. It's -- we did quite a bit of restructuring last year. its productivity in the factories outside the factory. So it's a combination of all of that. And that obviously pays for the incremental investments as well as inflation and the net result -- and we do have volume deleverage at the midpoint, slight volume deleverage compared to last year. And with all of that is what's driving the net margin expansion.
Okay. Great. And then maybe to get a bit more color on Europe, I guess was surprised by the degree of remaining pressure coming into 2025. So maybe could you walk us through what are the puts and takes here? How should we expect the implied weakness to progress through the year? Yes. At least for the first half, we believe heat pump destocking will continue -- it's just not a lot of new constructions happening right now, given the uncertainty in the marketplace with the war and funding of the war, et cetera. So I think we're -- the first half will be probably the most challenged, and we'll be looking to pick it up in the second half. But as you know, I'm usually cautious on Europe. So we're going in with low assumptions, so we can make sure our cost structure is in place. and we'll take any upside with volume if it happens, but we're not planning on it at this point.
And as you see in the full year guide, the midpoint minus 5%, most of that minus 5%, as Bob said, is happening in the first half. Q1 is -- the midpoint is like 10%. So second half, we do get easier comps with the big declines we had in second half last year.
Your next question comes from the line of Joe Giordano with TD Cowen.
This is Dan on for Joe Giordano. I want to touch on tariffs again. Just wanted to touch on tariffs again. If we see a scenario of reciprocal tariffs in Europe, does that impact your competitive positioning at all? I'm assuming that's not the case since you manufacture there as well. But if you could comment on that?
Yes. For the most part, our model is manufacturing where we sell. Certainly, like in North America, we do get some components from China. But in Europe, for the most part, we are manufacturing in the Europe base -- so if there are tariffs on imports from the U.S., the impact will be minimal.
Got it. That's very helpful. And you mentioned the correctional facilities is as a growing niche that will be an attractive one. And obviously, I understand the fundamentals of that market will be unique, but is there anything specific from a water product standpoint that is unique in that market that you would want to call out?
I think it's just a refurbishment. Many of these facilities are very old. So their plumbing system inside of the cells need to be refurbished, and it's a unique specialized product from a safety point of view that's in there. So a lot of renovation in that market.
Your next question comes from the line of [ Nik Cash ] with Goldman Sachs.
This is Nick Cash on for Brian Lee. Can you hear me?
Yes.
Just wanted to touch back on the ICON acquisition. I guess question. One, is that going to be, I guess, going through wholesale distribution channel into if it is or if not, is there any other -- I know you mentioned Nexus, but are there any other cross-selling opportunities there?
It's primarily a direct customer model. There are opportunities to leverage some of their products through the Bradley rep channels, and we're evaluating that at this point in time. So synergies, but on the sales side, but Macemainly cost synergies, leveraging our global sourcing and capabilities.
[Operator Instructions]
As there are no further questions at this time, I would like to turn the call over to Bob Pagano for closing remarks.
Thank you for taking the time to join us today. We appreciate your continued interest in Watts, and we look forward to speaking with you again in May to discuss our first quarter results. Have a good day, and stay safe.
That concludes today's conference call. Thank you for joining. You may now disconnect.