Aecom (ACM) Q1 2014 Earnings Report, Transcript and Summary

Good morning, and welcome to the AECOM First Quarter 2014 Earnings Conference Call. I would like to inform all participants that this call is being recorded at the request of AECOM. This broadcast is the copyrighted property of AECOM. Any rebroadcast of this information in whole or part without prior written permission of AECOM is prohibited. As a reminder, AECOM is also simulcasting this presentation with slides at the Investor section at www.aecom.com. Later, we'll conduct a question-and-answer session. I would like to turn the call over to Paul Cyril, Senior Vice President, Investor Relations.

Thank you, operator. Good morning. I'd like to remind everyone that today's discussion contains forward-looking statements based on the environment as we see it today, and as such, does include risks and uncertainties. Our actual results might differ materially from these projections in the forward-looking statements. Please refer to our press release or Page 2 of our earnings presentation and to our reports filed with the SEC for more information on the specific risk factors that could cause actual results to differ materially. Note that we are using certain non-GAAP financial measures as references in the presentation. The appropriate GAAP financial reconciliations are posted on our website. Please also note that all percentages refer to year-over-year progress. We will start today's presentation on Page 4. Beginning today's presentation is John Dionisio, Chairman and Chief Executive Officer. John?

Thank you, Paul. Welcome everyone to AECOM's first quarter 2014 earnings conference call. Joining me on today's call are, Mike Burke, our President and next CEO; and Steve Kadenacy, our Chief Financial Officer. First, on behalf of myself and the entire AECOM Board, I would like to say how delighted we are that Mike will be taking on the role of CEO in March. Mike's promotion to CEO is part of a long standing management succession plan. I know Mike is well-prepared and he will do a great job taking the Company to the next level. Mike is the right person for the job. He and his leadership team are well-prepared to meet the challenges and capitalize on the opportunities ahead for AECOM. I will remain as Executive Chairman for one year, through March of 2015, to ensure that we have a smooth transition. During that time, I will provide Mike with assistance in key areas and assignments where my experience and relationships can be a benefit to AECOM. On March of 2015, I will retire as an employee and remain on the Board through the end of my current term in March of 2016, when I will be (inaudible). With that, I would like to now turn the call over to Mike and Steve who will take you through our prepared comments and the Q&A session. Steve?

Thanks John. Please turn to Slide 5. Our results for the quarter were varied across our geographies. Some continued to show strong growth while others remained challenged. We experienced declines in revenue in our design business in the Americas and in Australia, which were the primary drivers for our lower net service revenue. Mike will walk you through the actions we are taking to strengthen these businesses. On the growth side, we continue to see strong performance in the Middle East, Europe and Asia and across our global construction business. On a positive note, wins of $3.7 billion and backlog of $18.4 billion were at record levels. We are very encouraged by these new wins, particularly in the MSS segment, across our global construction business and in large civil and social infrastructure project in Asia and in the Middle East. Operating income was $90 million, up 46%, and our operating margin of 7.9% was up 288 basis points. These results benefited from a significant gain in equity earnings from the increase in value of our AECOM-Arabian joint venture. This gain validates our Saudi Arabian strategy and the value created by the joint venture that has blossomed into an integrated multi-service business, capable of delivering very large infrastructure programs. Our tax rate for the quarter was 29.4%. Net income was $56 million, a 48% increase, and earnings per share for the quarter was $0.58. Excluding the nonrecurring items in equity earnings and the tax related impact, our EPS was $0.37. Please turn to Slide 6. Looking at PTS, as I mentioned, the results for the quarter were a mixture of very strong performance and areas of weakness, resulting in flat organic gross revenue on a constant currency basis. While net service revenue was down 4% overall, organic net service revenue was…

Thanks Steve. Today, I'm going to talk about how we are going to build on our very strong foundation to position AECOM as the world's premier, fully integrated infrastructure firm. Then I'll provide you with an update on our key markets and our most important strategic priorities. Please turn to Slide 13. First, I want to make sure that everyone understands the value of a fully integrated infrastructure firm, what it is and why it's important. Integrated delivery means that we can deliver on all four components of the infrastructure asset lifecycle anywhere in the world, design, build, finance and operate. This vision is driven by the need to meet evolving client needs for an integrated solution and differentiates AECOM from the competition. Under the integrated delivery model, our clients benefit from increased speed to market, the time it takes from project conception to completion. They also benefit from the ability to work with a single source provider of a broad array of services. In today's environment, many of our multinational private clients are rationalizing their vendors to gain economies of scale and cost savings by focusing on a few key relationships. This trend plays to our strength as an end-to-end provider of a complete set of integrated E&C services with a global [footprint] (ph). Therefore, through our integrated delivery platform, we are able to create a highly compelling and differentiated offering that clearly distinguishes AECOM from our competitors. It is the value proposition that helps us reduce business development cost by combining sales cycles from multiple offerings and leads to higher margins as we transition being the partner of choice for our large clients who require integrated delivery platform. Now, I'm going to talk about the four components of our integrated delivery solution. Please turn to Slide 15. Design…

(Operator Instructions) Our first question comes from John Rogers from D.A. Davidson. You may go ahead.

Couple of things. First of all, in terms of your outlook for the rest of 2014, what specifically are you assuming for the foreign exchange impact?

John, we have about $0.07 of FX headwinds for the full year.

All right, and Steven, you're just assuming the exchange rates stay where they are the rest of the year then?

That's right. We're not forecasting any movements.

Okay. And then just in terms of the EBITDA margin goal of 12%, can you give us an update on how far away we are from that, Mike, relative to being a fully integrated model, is that still the right way to think, is it right [indiscernible] with the goal there?

John, there's obviously a number of components there. I think Steve has explained his thinking on that in the past. Steve, do you want to give a current update on where we're heading in terms of the margin?

Yes. We continue to make progress on the cost side, but that cost savings that we've been taking out has been masked by lower revenue which is offsetting our progress. We still think that's the right number in the long run, despite mix changes, and I think that, and Mike can comment on this, that the movement to a more integrated model actually helps us not only from driving the top line but also we do think some of the SG&A or selling time that's required to get the projects in the door. So, it's still a target but we don't have a timeframe on it.

Okay. And then just last thing if I could, I don't know Mike or John, if you could just comment on pricing in the market?

You know, John, pricing is typical to generalize on that because we are in so many varied end markets and varied geographies, but pricing – in U.S. public sector, pricing doesn't change very much at all in good times and bad times. The private sector market is heating up, and so we start to see better margins in that space than we did from the low points. But as we grow in places like the Middle East, the margins have always been challenged in the Middle East, but the volume is large. And so, the projects are bigger there than anywhere else in the world but the margins are a little thinner. Europe, as you heard and we mentioned in the comments, Europe is coming back, and so pricing power starts to come back slowly. I'm not suggesting that pricing power is dramatically coming back, but I think pricing power around the world is somewhat steady except for private sector in the U.S. where we're seeing the greatest demand and therefore the best pricing power.

So, are the margins in your new bookings better than what's in your existing backlog or comparable?

I'd say it is comparable, John, is the best way to think about it. It depends on the sector. The biggest difference is in MSS and that's been part of our strategy, you heard us talk about that in the past few quarters where we have been strategically repositioning our work away from the high-volume low-margin Department of Defense work into the higher-margin projects that we're doing now for the intelligence community and other agencies, and so as you've seen in our results, significantly improved margins in that space.

Third, also have, John, in the PTS side of the business, significant wins in the construction and management space tends to have higher NSR margins as well.

Yes.

Okay, okay. Thank you and congratulations on the quarter.

Our next question comes from Andy Kaplowitz from Barclays. You may go ahead.

Mike or Steve, I think a fairly obvious question is, you guided 2Q to 15% of your year, so maybe you could talk about that? I mean I think you have your seasonality is at least 20%, but do you have more restructuring costs in 2Q or something else go on, why is the year more backend loaded?

The reason I guess from a quarter, sequential quarter standpoint is that we won't have the AECOM Arabia pickup or the specific project gain within MSS [indiscernible]. So those are two offsets that we have in the PTS business and we expect to ramp back up. Other than that, we expect the Americas design business and Australia to ramp up through the year. So we have a little bit more of severance and restructuring cost in Australia but not too much. So that's the big [indiscernible] on that front.

Steve, maybe you could tell us how much restructuring was in your quarter in Australia? I mean the margin was pretty low in the quarter if I – I assume the Arabian gain was in that margin, so if you take that out, I'm masking out around 6% margin, so how much restructuring was in that number and what's the outlook as we go forward there around the PTS margin in particular?

The PTS margin, your math is accurate. There was $7 million of restricting in Australia during the quarter. We expect that to be somewhere between $10 million and $12 million for the full year now at current exchange rates.

Okay. And then maybe moving just step back, can you then change really any of your primary assumption for your FY 2014 guidance, but you started the year with [indiscernible] NSR decline, you contrasted with pretty strong award, especially in awarded backlog, so how do we look at the year? Do you think it's easier or more difficult to make the middle of your revenue range after 1Q's results?

I don't know that we want to give too much guidance within guidance, Andy. I think we feel comfortable with the guidance range that we gave, and based on all the assumptions that Steve [indiscernible]. The big change after you pull out the one-time gains, but the big change is FX, as we begin [indiscernible] dollar, but taking those numbers out, we're still in the range that we were in and we still feel good about that range, but trying to get too much tighter within a $0.10 range is probably too difficult.

Our next question comes from Tahira Afzal from KeyBanc. You may go ahead.

Congratulations on the strong bookings. First question is just a follow-up on strong bookings that you do have. Could you give us an idea of the milestones we should be looking out that could give some confidence that those are now ready to converge and really contribute to the top line, because it seems that's one of your highest book-to-bill for a long time, I would assume that it would potentially have your NSR really in flat notably at some point, so any guidance on what kind of milestones we should look forward, whether those be macro or otherwise?

I don't think there's macro milestones that we could point to that would answer that question, Tahira, but there's a few items to know within that. First of all, we obviously are very happy about the wins, it was a great quarter on wins, we felt really good about the wins in the MSS segment. You heard us talk previously about the budgetary gridlock in Washington and we felt that the drop-off in awards was more dramatic than the drop-off in the budget. So we were waiting for that logjam to break through, and obviously it broke through in the quarter, further broke through with another $700 million of wins in January in that segment. So we're seeing that logjam break through, at first at the federal level due to the federal budget being finalized. We hope to see that as a milestone that will portend well for the rest of our domestic business here. As the federal budget now has created some clarity at the federal level, we're hoping that that clarity now cascades down to the state and municipal level. So that is a, let's call it a catalyst versus a milestone, but a catalyst to start bringing more clarity down through the rest of the domestic civil infrastructure market. With regard to the other large portion of our wins, we have – as I mentioned earlier, we have seen a very nice pickup in the private sector in the U.S. So the U.S. private sector is doing well but much of the opportunity in that sector, much of the wins in that sector is large-scale construction projects that are delivered over a longer period of time. And so, although those wins look great, you're not going to see that revenue popping in Q2. It will start to ramp up but they are much longer-dated projects which – we like the longer-dated projects because of lot more visibility over the coming years, but it doesn't create an immediate catalyst, on a 90 day basis, to revenue. I hope that's helpful.

That actually is very helpful. Thank you, and I just had a slight follow-up on that answer. You know given it cautiously ramps up, I would assume you're going to cautiously manage your personnel and asset into that update and could it be that – could there be a chance that if we do see a better inflection that's been your thinking in the near-term, let's say over the next six months or so, that that could benefit your utilization rates perhaps little more than you anticipate, so we could in essence end up being a nice margin uptick if inflection is stronger?

Clearly if the inflection is stronger, there will be upside to our results, but we still feel good about the guidance that Steve mentioned earlier, but if that inflection happens sooner, there would be upside to our number. But I think you've heard Steve talk about it in the past, both when we gave guidance last quarter and now, that we have some fairly conservative assumptions in that guidance with relatively flat NSR growth, organic growth throughout the year, if that comes back faster than the end of year, there is upside to the guidance.

Our next question comes from Steven Fisher from UBS. You may go ahead.

Just a couple of clarifications. First, what was the organic net service revenue growth in PTS in the quarter year-over-year?

4.3% on a constant currency basis.

And I think it's important just to give one more bit of clarity to that. It's important to point out that if you exclude Australia from that, you get to a flat constant currency organic growth. So, that shortfall is primarily due to Australia.

Okay. And then the JV consolidation at the backlog, so how much?

It's about $200 million to backlog. Is that right, Steve?

That's right.

Okay. And then I guess in terms of the Australian market, it doesn't sound like anything has changed your view of that market over the last couple of months. So I guess I'm wondering, given your perspective on when you anticipate that will bottom and how you think that infrastructure stimulus program will develop?

I'd like to think it's at the bottom. I've spent some time two weeks ago with our leadership team from Australia and they feel like it's at the bottom, they feel like activity is starting to come back to the market. I don't personally expect to see a recovery there in this fiscal year but I don't expect us to have a decline from last year either on an EBIT basis. But their stimulus program is much talked about and hopefully they will have more success with their stimulus program than we had here in the U.S. in getting it to the right projects where we can participate. But listen, Australia is a strong – has a strong fundamental to the market. They've got very, very great depth in natural resources, they always have, it's always been a strong part of their economy, and I think it just got a little overheated and the air came out of the balloon, but the fundamentals are still there for a strong market, and especially with the Australian dollar coming back to a little more reasonable levels, I think that will portend well for infrastructure investment certainly in the mining sector.

Okay. And just lastly, cash flow was pretty high for Q1 versus your normal seasonality, I'm not sure if I missed it, but what was driving that seasonality and then what is going to make it a little bit softer seasonally in the rest of the year or is that just conservatism at this point?

It is typically a cash burn quarter for us. So we continue to make fundamental progress on DSO improvements despite an increasing mix shift into higher DSO environment. So we have one day overall improvement. If you account for the mix shift, it was actually two days. So the fundamentals are getting better, but we do tend to burn cash for a number of reasons. In Q1 for seasonality and there are some temporary impacts in that number that drove it above our – well above our net income for the quarter. So, I think some of that will even out during the year as we've been trying to do for last couple of years, we'll try and drive a more consistent cash flow throughout the year and this has kind of represented about that.

Our next question comes from Adam Thalhimer from BB&T Capital Markets. You may go ahead. Adam Thalhimer - BB&T Capital Markets: Nice quarter. The MSS project gain you had in the quarter, can you quantify that?

Yes, it's net of – with all the expenses associated with it, it was less than $10 million. Adam Thalhimer - BB&T Capital Markets: Got it. And then, I guess people have asked this question a couple of ways, but all the wins including in January in the MSS segment, does that give you some confidence that the gross revenue level you achieved in December quarter is probably near the low point?

Listen, I wouldn't [indiscernible] much on the gross revenue. As you know, that business has declined from a gross revenue perspective but the margins are up significantly. Even if you strip out the one-time project gain, margins are still up very nicely in that space. So, part of our strategy was to reposition that business. As you know, going back a few years ago, we had 80% of our business with Department of Defense related work, almost all of it was OCONUS work in Afghanistan and Iraq. Obviously we saw that drawdown coming and we have been repositioning our business away from the high-volume low-margin work in OCONUS DoD more towards the intelligence community, stateside work and actually focusing on the Department of Defense strategy with a tilt for the Pacific. We've been focusing our activities in that area. So right now, we are looking at a business that went from 80% in the war effort, in the war theater, to a business that by FY 2015 will have single digit exposure to the war effort. So, a couple of things are going on. One, an enormous repositioning of our business in that space, and these wins are taking us all in the right direction to reposition that business into these new longer-term sustainable areas of U.S. federal government that don't have the whims of a scale-up and rapid drawdown like we see in the war effort. So, the revenue is off 20 plus percent from the peak. We don't expect to recover that real quickly. We're focused on keeping that revenue at the level that it's at but improving the margin significantly, and that's exactly what we are doing. So that strategy has been working, and the specific wins that we had in both December and January were exactly a hit on the strategy that we had deployed to focus on long-term contracts in the intelligence community that aren't subject to big budgetary swings. Adam Thalhimer - BB&T Capital Markets: Okay, that's helpful. And lastly from me, I just wanted – you sounded pretty positive on U.S. commercial construction from the private sector, obviously [we've been getting] (ph) a lot of questions about [ABI] (ph) which dipped in the last couple of months, and is that an aberration in your view?

Yes, I think it is. I mean I saw the same dip numbers in [ABI] (ph) which seems like everybody got stirred up quickly on that number, but that is not – we are not seeing that in the marketplace. So, I'm not sure how the [ABI] (ph) calculates their numbers but we are seeing more activity in the private sector than we've seen in a long time. You heard me mention earlier in my comments that the New York construction market is just below its 2007 peak. And so, in the major markets in private sector construction, it's higher than it's ever been. Miami is back at peak levels again. There's more construction cranes in Los Angeles than there has been in 10 years, and as I said, New York is just shy of the peak. So, all the touch points that we have are very positive. I mentioned the amount of capital that's coming into the private sector market from the Chinese developers. It's quite significant and we stand to participate in that influx of Chinese capital because of our strong foundation and relationships in China. Adam Thalhimer - BB&T Capital Markets: Okay, great. Thanks Mike.

Our next question comes from [Justin Hawkey] (ph) from Robert W. Baird. You may go ahead.

I guess my question is, I'm just trying to understand how the $3.7 billion in gross revenue awards compares to historically how you've reported awards? The reason why I ask that is, you mentioned the mix shift more construction management that has more of a gross content, also just kind of the pickup of all this government work that was logjam, but I guess I'm just trying to understand how comparable is that awards number to kind of historically how you've reported it.

There's no difference in how we reported it. I'm not sure I completely understand the question, Justin.

I guess the question is, on a net revenue basis, would the growth in backlog be comparable to the growth in gross revenue?

I mean it probably wouldn't be exactly comparable. The more construction wins you have, you've got pass-through cost in that. So, I wouldn't call it exactly comparable but difficult to parse out when we look at the numbers this day. It depends on the particular project.

Okay. And then I guess my other question, just more of a clarification on the guidance, but you did note in the guidance that you now assume margins are up slightly year-over-year at the midpoint, previously it was flat. I guess the question is, is that just a function of this one-time gain from the JV consolidation or is your operating guidance actually assuming that margins improve year-over-year as well?

The gain [indiscernible] impact that drives it up farther, but on a core basis, we haven't changed our assumptions. We're effectively assuming our EBITDA margin consolidated are flat.

Our next question comes from Chase Jacobson from William Blair. You may go ahead. Paul Dircks - William Blair & Company: Hi, this is Paul Dircks in for Chase. Just following up on a couple of questions that were asked previously, first of all in MSS, honestly the reported backlog was up considerably sequentially, but given the fact that MSS's contracted backlog was down 14% sequentially and continues to trend downward. When should we expect some of that pickup in profitability certainly on the gross margin line in MSS?

Listen, some of these were one week before the end of the quarter. So you're going to have movements from awarded, then contract, et cetera, and then of course we mentioned the big win that we had in January, also will first go into awarded and then move to contracted. So that's the natural progression of big wins, first of all. But in terms of the improved profitability, our profit will be slightly up this year over last year, which frankly we're happy with because of the repositioning. When you're trying to reposition your business with the Iraq business disappearing and the Afghanistan work disappearing, if you go back a year ago, we had 65% of our revenue in that space was in Afghanistan. So obviously that's coming down. So we feel good about this repositioning and the wins that we're getting in this new space, but I wouldn't expect this to be a dramatic pickup in profitability in FY 2014. This is more of a repositioning for the future, but profits will be up slightly for FY 2014. Paul Dircks - William Blair & Company: Okay, great. That's helpful color. Steve, for you, was there any factoring in the quarter, and if so, what was its impact both on a gross and net basis?

Gross was $66 million or so and the net basis was less than $10 million. Paul Dircks - William Blair & Company: Great. With the JV and the foundation of AECOM-Arabia, how long have you guys been considering this consolidation and maybe you could talk about some of the specific benefits to AECOM now?

I don't know if it's – how long we've been considering it, it came about through the renegotiation of our operating agreement with our joint venture partner there, which goes back many, many years which increased the level of operating controls that we have and that triggered the accounting rules for us to consolidate it. I think a couple of things that it does for us on a macro basis is, it gives you on the street and our investors a lot more clarity into the revenue backlog of that JV and the growth rates that you'll see there, and that is a business that has just been growing terrifically for us in large infrastructure projects over the last few years. So I think that's kind of at the positive of it, and we intend to spend more time with it as we go and the operating agreement allows us to bring it into our systems and processes, we put it on our Oracle system so that we can manage that business as we manage the rest of our business and integrate it into the integrated delivery model like the rest of our business, and it's responding quite well to that. Paul Dircks - William Blair & Company: That's helpful. And the final question for me. Mike, with you taking over CEO next month, maybe you could talk a little bit about AECOM Capital and particularly the $900 million plus of projects that have come from AECOM Capital investments, can you talk about furthering that strategy and how we can get comfortable perhaps with some of the other risk or execution issues that could come about from the AECOM Capital model?

Yes, sure. So, our first year into this endeavour, we are delighted with the success that we've had. We have been able to access many more projects than we thought we would in the first year and generate significant projects for our design and construction business at the same time. Each of these projects that we are involved in, we are always at least a 50-50 partner with a very [strong] (ph) developer and you'll see some of the deals that we have announced previously, we are partnered with Toll Brothers, one of the largest developers in the United States, we are partnering with Mack Urban out of New York, it's one of the more significant developers in New York. And each of these, to mitigate our risk, we are partnered with very, very strong developers. Secondly, on all of these projects, we are the contractor, so we are building the projects. So we feel comfortable that since we are building the project, we've got control over the costs associated with it. But from a long-term strategy perspective, we do not anticipate deploying our own capital and using our own balance sheet to grow this business. The markets that we participate in and we desire to participate in are so large that our balance sheet cannot and will not support the amount of projects that we would like to pursue. So, over the long term, our strategy is to bring in outside capital. We have a large number of outside capital providers that are very interested in putting their capital into AECOM Capital to deploy to our clients. So, we see ourselves going forward as much more of a fund manager and facilitator of capital to bring to our clients. Our clients are looking for us to bring the integrated solution to them. They want us to design it, build it, finance it, and operate the asset, and they are indifferent whether the capital is coming off of our balance sheet or we're facilitating the flow of that capital from an institutional investor. So, over the long term, we anticipate to being a large provider of capital but not off our own balance sheet. Paul Dircks - William Blair & Company: Very helpful color. Thanks guys.

Our next question comes from Sameer Rathod from Macquarie. You may go ahead.

I think you just talked about how projects were being delayed last year due to uncertainty with the budget and what have you and I would expect some sort of buildup is being released. I guess my question is, how much more of the last year's delayed still may be awarded or when do you expect order rates from the government to normalize?

I mean that's the $64,000 question. We saw it just in the past two months. So we've done a couple of very sizable projects for us in the federal government sector right through. We saw, as we said on our last earnings call, we saw a disproportionate slowdown in awards. We know what the federal budgets are, we know what we're targeting, but the awards were just not coming out. And then all of a sudden in a four, five week period, we won $1.3 billion of wins from the federal government. So that budgetary, the finalization of the federal budget allowed those numbers to break through. But now, we're hoping that that moves down to the state and municipal level where we start to see the awards coming out and start to see that converting to NSR. So that's on the U.S. side. But where we are seeing very good conversion is in the strong markets, Asia and Middle East and Europe. You have heard us talk about the double-digit growth in the backlog across Europe, especially in Eastern Europe, the Middle East and Asia. So, those markets are converting much more quickly and we're cautiously optimistic about the long awaited breakthrough in the U.S. civil infrastructure market, but we hope that that's in the near future because if we can build on that growth in addition to the growth we're seeing in Asia and Middle East and Europe, all the cylinders start to fire at the same time.

Great. I guess [indiscernible] there seems like a handful of the emerging markets had tied in perhaps prematurely to the foreign currencies. Do you see higher rates being a headwind to construction globally next year or how do you think this plays out?

It depends on the size of the rate increases. Right now, rates are at an all-time low, clearly help to pry that development market but if they move up modestly, as everyone expects, I don't see it being a big deterrent. But if they ever did move dramatically, obviously that would be a macro economic condition that would not be in favor of global construction spend, but we're not anticipating that kind of movement.

Okay. I guess lastly, it seems like the average repurchase price of the stock was $3I.25. However, if I look at the stock price during your first quarter, [indiscernible] [stock was at that price] (ph) for majority of the quarter, so can you talk about the cadence of repurchase or how it's implemented?

Our general philosophy is to buy on an opportunistic basis against other capital investment opportunities. For the first quarter, we tend to burn cash throughout the quarter which is why we slowed down the repurchases during the quarter but really no other reason.

Okay, thanks.

Okay. Well, thank you. It looks like there's no further question. So thank you, operator, and I would like to thank all of you participating on the call today and I look forward to providing you updates on our progress over the course of the year. So thank you very much.

Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.