Badger Meter, Inc. (NYSE:BMI) Q1 2025 Earnings Call Transcript

Badger Meter, Inc. (NYSE:BMI) Q1 2025 Earnings Call Transcript April 17, 2025

Badger Meter, Inc. beats earnings expectations. Reported EPS is $1.3, expectations were $1.08.

Operator: Ladies and gentlemen, welcome to the Q1 2025 Badger Meter Earnings Conference Call. As a reminder, today’s conference is being recorded. It is now my pleasure to turn the conference over to Karen Bauer, Vice President of Investor Relations, Corporate Strategy, and Treasurer. Please go ahead, Ms. Bauer. Thank you.

Karen Bauer: Good morning. Thanks for joining us for Badger Meter’s first quarter 2025 earnings conference call and the seventy-second and last quarterly earnings call for me ever with my May second retirement date. Now I’m just two short weeks away. Joining me on the call today are Kenneth Bockhorst, Chairman, President, and Chief Executive Officer, Robert Wrocklage, Chief Financial Officer, and Barb Novarini, Senior Director of Investor Relations. Please note that the earnings release and related slide presentation are available on our website. Quickly, I’ll cover the Safe Harbor, reminding you that any forward-looking statements made during this call are subject to various risks and uncertainties, the most important of which are outlined in our press release and SEC filings.

On the call, we will refer to certain non-GAAP financial metrics. Our earnings slides provide a reconciliation of the GAAP to non-GAAP financial metrics used. With that, I’ll turn the call over to Ken.

Kenneth Bockhorst: Thanks, Karen. Thank you all for joining our call. I’m pleased with our start to the year with another quarter of solid revenue growth, record operating margins, and robust earnings per share improvement, which continues to reflect the durable drivers supporting water industry technology adoption. Our results now include SmartCover following completion of the acquisition in late January. Since then, we’ve been onboarding our new colleagues and setting common goals to capture the many opportunities we have to drive sales and operating synergy. We’ve heard strong positive feedback on our combination from many customers who recognize the value of adding SmartCover sewer and lift station monitoring capabilities to our Blue Edge suite of water management solutions.

I’ll be back to provide our outlook later in the call, which you might expect will also include a discussion about tariffs. But for now, I’ll turn it over to Bob to go through the details of the quarter.

Robert Wrocklage: Good morning, everyone. Turning to slide four, we delivered strong operating performance across the board, with our key financial metrics demonstrating solid improvement in the quarter. Total sales grew 13% year over year in the first quarter of 2025. Excluding SmartCover, sales increased 10%, which, as a reminder, was on top of 23% growth in the first quarter of last year. Total utility water product line sales increased 16% year over year, or 12% when excluding just over $6 million of SmartCover revenue for the two months since acquisition. Year-over-year growth in utility water was again led by cellular AMI adoption, Orion cellular endpoints, and Beacon software. Sales for the flow instrumentation product line decreased nearly 5% year over year as lower demand in the deemphasized array of market applications offset modest growth in water-related end markets.

However, flow instrumentation sales did show sequential improvement of 7% growth from the fourth quarter of 2024. Turning to margins, we were particularly pleased with the record operating profit margins in the quarter of 22.2%, expanding 360 basis points year over year. Gross profit margins came in at 42.9%, a 360 basis point improvement from 39.3% in the prior year comparable quarter and above our normalized gross margin range of 38% to 40%. As we’ve said in the past, customer and product mix can and does vary quarter to quarter, with this being an especially favorable example, in nearly all respects, of a positive sales mix scenario. For example, the first quarter benefited from a particularly attractive combination of customer mix overall.

From a product mix standpoint, software was the top revenue growth contributor, up 25% in the quarter. Similar to the sales unevenness we often discuss, we have variations in gross margins in the short term from various mix elements. While we certainly expect structural sales mix improvements to continue over time, a 42.9% gross margin outcome in the first quarter was a perfect combination of nearly all elements contributing favorably. At the same time, there remains significant uncertainty surrounding the evolving tariff and turbulent macroeconomic situation. Ken will walk through our manufacturing footprint and supply chain exposures to tariffs, as well as our mitigation actions later in the call. In short, we don’t believe it is prudent at this time to guide to a higher range for gross margin performance.

Yet, we remain confident in our normalized gross margin range of 38% to 40%, assuming no further changes in global economic and trade policies. SEA expenses increased by $5.4 million, or 13% year over year, to $46 million in the first quarter. The increase included approximately $1.1 million of intangible asset amortization from the SmartCover acquisition, which on a two-month basis is in line with our previously communicated expectation of $6 to $7 million annually. Excluding SmartCover, SEA expenses increased by $2.2 million, or 5%. SEA as a percent of sales was 20.7% in the first quarter, or flat year over year. Excluding SmartCover, SEA as a percent of sales would have declined the pro forma 90 basis points year over year. The income tax provision increased modestly to 24.4% in the first quarter of 2025 from 23.5% in the comparable prior year period.

This remains consistent with our previously discussed 25% tax rate assumption. In summary, our strong operating results in the first quarter drove a 31% increase in consolidated EPS to $1.30 from $0.99 in the prior year comparable quarter. Primary working capital as a percent of sales increased from 20.8% at year-end to 22% as of March 31, 2025, inclusive of SmartCover. We generated strong free cash flow in the quarter of $30 million, up 60% from $18.8 million in last year’s comparable quarter. As is normal, our first quarter reflected typical seasonality, incentive compensation, and retirement plan contributions paid out for the respective previous year. With that, I’ll turn the call back over to Ken.

Kenneth Bockhorst: Thanks, Bob. Turning to slide five and the topic of tariffs. As we’ve seen play out over the past several weeks, what we know for sure is that uncertainty and volatility in the tariff picture remain likely. The key takeaway for Badger Meter is that we will definitely manage what is in our control, just as we’ve done through COVID, supply chain disruptions, inflation, and other challenging macro dynamics that we faced over the past five-plus years. With that in mind, I’ll walk you through our status given the current set of circumstances. As many of you know, we operate a world-class assembly facility in Nogales, Mexico, which we’re proud to say celebrated its forty-fifth birthday last week. The facility essentially acts as an extension of our US operations on Mexican soil.

It’s the primary assembly site for our residential meters and radios, the vast majority of which qualify for exemption from tariffs under the USMCA. The components coming into this Mexico facility for assembly originate from a wide range of countries, and we will continue to manage component sourcing into Mexico, which limits our exposures to a certain degree. For our US-based manufacturing facilities, including our Buy America, Build America compliant assembly line, we could face import tariff exposure on electronics and related components from China, Southeast Asia, and Israel, among others. This means that US-manufactured products are likely to face higher tariff-related input costs under the structures currently in place. We will institute targeted pricing offsets to manage this potential impact.

We could also face tariffs on the finished goods we import from our European manufacturing facilities, which produce certain forms of automation and water quality products for sale in the US. This represents a relatively small percentage of Badger Meter’s overall sales, but targeted pricing actions may also be required for these products. Finally, let me share an example of the knock-on effect of the tariffs that may not be as obvious from the headlines. China has implemented export controls on certain chemical and rare earth elements as part of its response to US tariff actions. Bismuth is an element that’s included in these supply restrictions. While bismuth happens to be a small component of our brass ingot recipe, the price has increased nearly tenfold since early this year.

China produces 90% of the bismuth in the world. A pivot away from bismuth in the recipe is not plausible in the short term, and strategic sourcing initiatives won’t help reduce the cost of a supply-restricted rare element. We will, therefore, need to adjust pricing accordingly. Obviously, copper makes up a far greater percentage of the recipe, and while copper prices have been volatile, current pricing is only modestly higher than it was at the beginning of the year. We will continue to watch this closely as we always do. All told, we believe there’s a level playing field competitively for these targeted mitigation actions. As Bob mentioned earlier in his remarks on margins, the gross margin we delivered this quarter demonstrates that the structural mix benefit of technology adoption within our business is real.

Yet the various cost pressures and lagging impact of mitigation from the tariff situation have informed our decision to maintain our normalized gross margin range, at least for now. Turning now to our outlook. We have a proven history of differentiated operational execution and will continue to focus on controlling what we can control in a turbulent economic environment, particularly in the management of our supply chain, manufacturing footprint, and value-based pricing strategy. Our first-quarter results demonstrate the resilience and durability of our replacement-driven business. As previously communicated, the second quarter represents our most difficult prior year comparison, and we’ve already walked through some of the puts and takes we have on the margin side, especially in the near term as we navigate the evolving tariff situation.

Nevertheless, the attractive fundamentals of the water industry and the growing extensibility of our Blue Edge suite of solutions, which now includes sewer and lift station monitoring with the acquisition of SmartCover, continue to support a long-term average revenue growth outlook of high single digits and modest margin improvement over time. Even after the SmartCover acquisition, we have available cash, continue to generate strong free cash flow, and remain debt-free. Our balance sheet has ample capacity to invest in both organic and inorganic growth while we continue to work our way through any further macro volatility. We were proud to be named to the Barron’s list of 100 most sustainable companies for the third year in a row. We take very seriously our role in protecting the world’s most precious resource and believe this responsibility aligns with the creation of shareholder value over the long term.

Finally, as you heard from Karen earlier in the call, this is the last earnings call of her illustrious career in investor relations spanning seventy-two quarters. I know I speak for Bob as well when I say that we have been proud to have her with us here at Badger Meter for the last twenty-six of those quarters. Moving into our first roles as public company CEO and CFOs, we knew it was important to have an accomplished professional with us who could help create and drive a successful strategy, deliver clear messaging that employees and investors alike can rally around, and who also happens to be a great person to work with. The only choice for us was Karen. While she will be missed by all who have worked with her, we are all happy for her to begin the next chapter of her life after leaving a great legacy behind here.

Equally, we’re excited for Barb to step into the role officially and put her own mark on things moving forward. For that, operator, please open the line for questions.

Q&A Session

Operator: Star four zero one one on your telephone keypad now. And the first question today comes from Andrew Krill from Deutsche Bank. Andrew, your line is open. Please go ahead.

Andrew Krill: Hi. Thanks. Good morning, everyone, and congrats to Karen on your retirement. Also, I wanted to ask for just any more color you could provide on the, you know, especially favorable products customer mix benefits. I know you called out SaaS growth, but just anything else would be helpful because the margins are just, you know, so outsized and impressive. And then secondly, you know, if we were to assume the tariff backdrop was somewhat stable from here, you know, should we be expecting gross margins to moderate all the way back to the 38% to 40% range in Q2, or is this more of, like, a worst-case scenario fix?

Kenneth Bockhorst: Yeah. So, obviously, quite a bit to unpack there, and in this pretty uncertain environment, the one thing that I think everyone should be excited about is that even in this, you know, really crazy environment, we feel really strong about the floor of our margins, which we talked about for years now about the durability and realness of the positive structural mix. So going forward, we certainly expect that in a tariff situation that we currently consider manageable, we feel like we’re in pretty good shape going forward. I’ll let Bob give any more detail on some of the mix and some of the particularly favorable things, but overall, feel great about the ability to manage and the state of the business.

Robert Wrocklage: Yeah. Hopefully, you could tell from the prepared remarks that, you know, essentially, a lot of things went in our favor in the first quarter. And so while we’re absolutely proud of the result, we’re in this tenuous or uncomfortable position of almost apologizing for that great margin against the backdrop of potentially increasing input costs. Particularly which in the short term, the mitigation actions that we talked about can’t be implemented immediately. Right? They can be implemented immediately, but the effect will lag essentially the input cost increase, which is near immediate. And so that’s a long way of saying there are certainly aspects of what drove the outcome in Q1, the 42.9% gross margin, that are durable and will sustain.

There are elements that are more episodic and or mix-specific or customer-specific, then we can’t expect to happen each and every quarter. So I think another way of saying that is if we’re not for essentially this backdrop of tariff input cost pressures, I think given our last four quarters of margin performance, we’d likely be re-declaring a new line. It’s just very difficult to do that against this backdrop of uncertainty, particularly in the short term.

Andrew Krill: Very helpful. And then Seth, could you just touch on the, you know, front log of activity you have and, you know, is your core customer showing any signs of potentially pulling back on spending or delaying spending? With all the uncertainty. Or is, again, just the replacement-driven nature of your business and the ROI, you know, still compelling enough that kind of business is usual as much as it can be.

Kenneth Bockhorst: Yeah. So we’re not seeing or hearing from customers any, you know, anything on pullbacks. I think it’s important to, you know, forget the hundred years of history that talk about this being a very durable replacement-driven market. If you just look at the last five years, even in the COVID year, where essentially we lost an entire quarter, we still grew 4% even in the COVID year, and then if you want to consider tariffs maybe against the highly inflationary period, we were up 14% that year. So I think given some of the really difficult environments you’ve seen in the last few years, the customers particularly around these benefits that come from ROI and the technology adoption of our other products. As well as the replacement-driven when the meter is due to be replaced, to replace it.

Just because it’s also in difficult times. It serves as the cash register, so that’s the last thing they got. If they do have budget problems. So we still feel as positive on the outlook as we did through those other difficult times.

Andrew Krill: Great. Thanks so much.

Operator: The next question comes from Nathan Jones from Stifel. Nathan, your line is open. Please go ahead.

Nathan Jones: Good morning, everyone. And congratulations to Karen for May. I guess the first question I’d like to ask you, so, Bob, are we on the stairway to heaven yet?

Robert Wrocklage: I would say, again, if you track our gross margin over time, so Nathan’s question is referring to a comment that I often make, which is, you know, the margin profile is not necessarily heaven because there’s obviously some of the dynamics that this quarter particularly are favorable. Sometimes are unfavorable. And so and again, that we largely play in a competitive environment that while rational, we’re all trying to steal each other’s lunch to the best of our ability, which is proven difficult over time. That being said, I think, again, we have a great input here of a result. I think, hopefully, the way I answered the previous question rings true here as well is that a lot of things went right in this quarter. There are certainly some of those that are durable and other of those that will be episodic and go the other way next quarter. Yes, there’s definitely a positive trend. That I like how you kind of called the real I guess, the there.

Nathan Jones: I guess a more serious question around the tariffs. Are you guys able to quantify what you think the aggregate impact to your COGS input here is and just confirm that you believe whatever that number is, you’ll be able to cover the price?

Robert Wrocklage: Well, so that’s a difficult question. If you could just tell us how this is gonna play out, we can tell you exactly what it would be. So like everybody else, we’ve watched the It’s gonna stay it’s gonna stay exactly exactly gonna stay exactly where it is now.

Nathan Jones: Okay. If you’re gonna say it’s gonna stay exactly the way it is now, I would tell you that our current situation is not competitively disadvantaged and it is managed. The synopsis for that answer is the title on slide five. Manageable. Some leg effects, contained within our normal range, and competitively level find it.

Nathan Jones: I mean, it sounds like the kind of message I don’t know. I’m maybe I’m making numbers up here, but it’s kind of a less than mid-single-digit kind of impact overall to your costs.

Kenneth Bockhorst: Well, you know, it’s a multi-factor variable question. Right? Because then there’s also the targeted pricing actions that we take to mitigate and all those different pieces. So I think it’s probably prudent to think about the range that we provided and the strength that we feel about the floor and remember that through a myriad of difficult operating environments, we’ve been, I think, extremely you know, our employees around the world have done an extremely great job managing the ups and downs of difficult times, and I think we’re prepared to do it again.

Nathan Jones: Fair enough. Is there any perception that customers might have pulled forward some orders into the quarter in front of potential price increases or in front of potential supply chain disruptions or anything like that? Or did it kind of progress through the quarter, you know, as you would expect it to normally?

Kenneth Bockhorst: So two things to remember is that 75% of our revenue is direct to end users and end users really, in many ways, cannot pull forward because they can’t really put them into meter pits or homes faster, and they don’t have the warehouse space to typically hold it. So a large portion of revenue really doesn’t even have that lever pull. And then, the 25% that goes through distribution, we’ve not seen large pull-forward orders. So it was a pretty normal order environment.

Nathan Jones: Normal is good in this environment. Thanks very much for taking my questions.

Kenneth Bockhorst: Yeah. Thanks.

Operator: The next question comes from Jeffrey Reeve from RBC. Jeffrey, please go ahead. Your line is open.

Jeffrey Reeve: Thanks. First, I just want to say thank you to Karen for all your help and insights and wishing you the best in your retirement. Could you guys provide some comments around the health of municipal budgets today? How are you seeing utilities prioritize AMI investments in the current backdrop? And maybe more broadly, what’s the risk that broader price inflation in other areas of utilities’ budget could crimp meter demand?

Kenneth Bockhorst: I’ll start. And I think that was about three questions, so I’ll ask Bob to fill in what I missed. The first part on municipal budgets, to remember is with fifty thousand utilities in the United States and the myriads of different ways that utilities can fund investments, there’s no one size fits all answer to that. But in general, one of the things we feel great about with our sales model is selling 75% of our revenues are active. We talk to customers on a very constant basis, and we’re continually asking them about, you know, their budgeting cycles, whether that’s in the short term this year or the three to five-year outlooks and, you know, what we’re hearing in general. Specific back of the hearing is, if a utility is facing budget issues, oftentimes, they will reprioritize their budget to do their metering replacements.

Because clearly, with it serving as the cash register, if you’re due for your meter replacement, you’re gonna do it for a myriad of reasons. Either it’s an older system and you’re looking for more efficiencies in the reads to capture non-revenue water or eliminate waste and conservation. And then secondly, if you’re into a longer-term drive-by or AMI offering, you know, those are battery-powered devices, and when they go dark, they need to be replaced. So that’s where when I talked earlier about the inflationary period in COVID, I think it’s been proven just within the last, you know, five years twice that when times are tough, this is not the area that utilities cut. Bob’s giving me the got it sign, so I think he thinks I got it.

Jeffrey Reeve: Yeah. No. Thanks. Curious if there’s an opportunity or maybe greater customer reception to alternative pricing models like a meter as a service in this backdrop?

Kenneth Bockhorst: So generally, again, if I compare it to the other difficult times over the last five years, you know, sure, you might have some that would look at that, but I would say in general, the buying habits have not changed.

Jeffrey Reeve: Got it. Thank you.

Kenneth Bockhorst: Thanks, Jeffrey.

Operator: The next question comes from Scott Graham from Seaport Research Partners. Scott, your line is open. Please go ahead.

Scott Graham: Yes. Hey, good morning. Thanks for taking the question. And a hearty congratulations to you, Karen. You’ve done a great job in both of your positions that I’ve known you. I wish you the best of luck. I wanted to ask a couple of questions around some of the statements that you make in the press release and then reiterated here, Ken. Specifically, you talk about the company’s ability to manage certain tariff-related cost challenges, and you’ve amplified on that in the, you know, in the presentation here. I’m just wondering if you can provide some color on what the triggers are where certain becomes no or manage certain becomes well this is more than what we expected. Like, would a trigger be a rollback in the USMCA? Is it steel tariffs? Is it the electronic components piece? What would be the one or two or whatever many triggers that would have you concerned about your ability to manage?

Kenneth Bockhorst: Yeah. So for us, you know, we called out the New Mexico facility by name, you know, so clearly we’re very proud of the operation we have there. We wouldn’t be leaving there. So if there were some change in the USMCA, that would have an impact we would have to consider pretty seriously. And, you know, the other areas that we look at, I think it’s really well known about our linkage to copper, and I called out bismuth. So anything that’s particularly damaging in that area, that would happen in the future would be something that would have to be considered. Those are the two primary ones.

Scott Graham: Okay. That’s very helpful. Thank you. And then my follow-up is simply, you know, really you indicated that you’re talking to customers frequently daily. And you said that we are not looking that you haven’t heard anything about, you know, pauses or delays in deployments and what have you. I’m wondering, though, if on the mix within the orders that you’re seeing right now, you know, whether it’s price, the mix trade-up with AMI, with radio, AMI with communications and software, leak detection, all of these trade-up factors that can go into your sales per unit. Have any of these elements changed? In other words, has something become in this quarter in particular, what was sort of the standout on mix? And then more importantly on the orders, has that changed the mix components?

Kenneth Bockhorst: Yeah. As we’ve talked about for many years, from quarter to quarter, it can be, you know, it’s generally, sometimes a whole different set of utilities. There can be the mix of small versus medium versus large. There’s the turnkey elements. There’s so many factors that you really can’t point to one. One of the things I’m particularly proud of, though, is that, you know, our software business is becoming a pretty meaningful part of the portfolio, and you saw that grow again 25% in the quarter. And, you know, that’s a very positive structural change that provides tremendous benefits for customers and does a lot of good work for us on our continuous improvement, move forward on margin enhancement.

Scott Graham: Okay. So the one I think I hear you. Fundamentally, it’s got no real changes. What I think I No.

Kenneth Bockhorst: Yeah. I’m hearing that. And I get the second quarter guidance. I’m just, you know, the mix components are so important for your sales and earnings that I just had to ask if there was any, you know, specific change that you’re seeing in present order rates. And it sounds like your answer to that is no. And it’s because there are so many factors at play.

Kenneth Bockhorst: That’s right. So, you know, the thing that I would hope to have people take away from this is that as we’ve talked about the structural mix for years, and we’ve kind of stubbornly stayed in our range, this at least gives you a view into what’s possible here, because all of these levers continue to be strong and we continue to take our, you know, one step forward at a time approach to how we manage and how we communicate that these drivers are real, this is a quarter where you just saw more of them come together than it does in many.

Scott Graham: Appreciate it. Thank you both.

Operator: Just a reminder that The next question comes from Rob Mason at Baird. Rob, your line is open. Please go ahead.

Rob Mason: Yes. Good morning. And my congratulations to you, Karen, as well. Certainly appreciate all the help over the years. Hey, Ken. I just I want to maybe clarify. Have you already notified customers of price increases that you plan to take, or is that forthcoming?

Kenneth Bockhorst: So that’s still forthcoming. So we’re being very, very prudent in making sure we understand the situation, making sure that we’re being very fair with our customers. I mean, I just want to be clear. This isn’t something that we’re happy about or trying to do price grabs or trying to be the first in the market. Your question, yeah, some competitors have notified customers that we’ve heard of. Many of our distributors are hearing from several of their other suppliers of other things that they sell, whether that be piping or valves or those types of things. So it’s getting out into the market, and this is, you know, one of those things where that’s why we’re confident that our ability to recover price is manageable because it’s already happening. It’s just we haven’t been on the lead of raising people’s prices.

Rob Mason: Understood. Well, maybe as a follow-on to that, I know, you know, frankly, inflation risk and, you know, the ability to handle that is always a consideration for you. But when you think about, you know, some of these AMI projects or multiyear deployments, and contracts, does it require you do something different, or are the customers asking for anything different? In terms of allowing those to go forward? I guess I’m thinking of the upfront decision. Around those to make sure that both sides are, you know, protected in that sense. Does that is that changed?

Robert Wrocklage: Yeah. I would say there was an evolution with the inflationary pressures of 2021 and 2022 where, you know, multiyear price hold requests were very common from utilities in the past. And I think, you know, we learned from past as well as navigating that inflationary environment to push back on that more aggressively, and I would say competitors have done that as well. I would say that the benefit of the current situation is some of that historic practice or request or common understanding changed two, three years ago. But absolutely, we’ve got the lesson learned from past cycles as well as the ongoing desire to keep as much flexibility as we can, realizing that not all customers are created equal and nobody difference among customers.

Rob Mason: Understood. If I could sneak in one more real quick, Bob, just, you know, on the I know you said that didn’t really notice a change in customer order patterns, cadence. Beyond the normal. But your receivable line was up a fair amount. Sequentially. I was just you know, what would have caused that? I understand acquisition probably contributed some, but just curious.

Robert Wrocklage: Yeah. So a small piece of that is the addition of SmartCover, as you just alluded to. I would say the remaining amount is simply, I would say, a timing difference between the half of sales in Q4 versus Q1. Nothing there in terms of kind of a risk element or anything like that. It’s simply timing as the sales fell in the quarters respectively, Q4 versus Q1.

Rob Mason: I see. Okay. You.

Kenneth Bockhorst: Yeah. Thanks, Rob.

Operator: Just want to remind that staff follow-up by one to ask a question today. We have no further questions, so I hand the call back to Karen for some closing comments.

Karen Bauer: Thank you for everyone, everyone, everyone, for joining the call. For your planning purposes, this second quarter 2025 call is scheduled for July twenty-second. I will obviously not be on that call, so let me take a minute to first thank Ken and Bob for giving me the opportunity to lead IR at Badger Meter. Along with their unwavering support to drive ESG and strategic planning initiatives here in recent years. I also want to thank all of my Badger Meter colleagues. You’ve given me the easiest job on Wall Street with your world-class execution supporting our customers, and delivering phenomenal results after day, quarter after quarter, and year after year. And finally, a thank you to our analysts and investors, past and present, for the many interesting and informative discussions over the years.

The diversity of your styles, viewpoints, and questions ensured I was never bored. So with that, I’ll wrap up the first quarter call. Barb and I will be around to take your follow-up. Thank you.

Operator: This concludes today’s call. Thank you very much for your attendance. You may now disconnect your lines.