Balchem Corporation (NASDAQ:BCPC) Q1 2023 Earnings Call Transcript

Balchem Corporation (NASDAQ:BCPC) Q1 2023 Earnings Call Transcript April 28, 2023

Operator: Greetings and welcome to Balchem’s First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Martin Bengtsson, Chief Financial Officer. Thank you Martin. You may begin.

Martin Bengtsson: Thank you and good morning everyone. Thank you for joining our conference call this morning to discuss the results of Balchem Corporation for the quarter ending March 31st 2023. My name is Martin Bengtsson, Chief Financial Officer and hosting this call with me is Ted Harris, our Chairman President and CEO. Following the advice of our counsel, auditors and the SEC at this time I would like to read our forward-looking statement. Statements made in today’s call that are not historical facts are considered forward-looking statements. We can give no assurance that the expectations reflected in forward-looking statements will prove correct and various factors could cause actual results to differ materially from our expectations including risks and factors identified in Balchem’s most recent Form 10-K, 10-Q and 8-K reports.

The company assumes no obligation to update these forward-looking statements. Today’s call and commentary include non-GAAP financial measures. Please refer to the reconciliation in our earnings release for further details. I will now turn the call over to Ted Harris, our Chairman, President and CEO.

Ted Harris: Thanks Martin. Good morning and welcome to our conference call. This morning, we reported our first quarter financial results with record first quarter revenues of $233 million, which were up 1.6% versus the prior year’s very strong quarterly results. These higher sales drove higher adjusted earnings from operations of $45 million, which were up 1.2% versus the prior year quarter. Our record first quarter adjusted EBITDA of $56 million was $3 million higher, an increase of 4.8% versus the $54 million achieved in the prior year. And adjusted EBITDA margin was 24.1% of sales, up 73 basis points from the prior year results. Our first quarter net income of $23 million, a decrease of 21.5% resulted in earnings per share of $0.70 on a GAAP basis.

On an adjusted basis our first quarter non-GAAP net earnings were $31 million, a decrease of 8.3% resulting in earnings per share of $0.94 on a non-GAAP basis. Cash flows from operations were $35 million for the first quarter of 2023, an increase of 396% versus the first quarter of 2022 with quarterly free cash flow of $25 million. Overall, another solid quarter for Balchem with performance that highlights the strength and resilience of our business model in a challenging market environment. Before passing the call back to Martin to cover more detailed financial results, I would like to make a few comments about the overall market environment and what we are seeing, provide a brief update on our progress around sustainability as reviewed in our recently published 2022 sustainability report, and also highlight some exciting progress around their commercial and science activities.

The current market environment continues to be quite challenging with a high degree of uncertainty. As discussed on earlier calls, we experienced destocking in the latter part of 2022 and the early part of 2023, with customers adjusting their inventory levels down as supply chains become more reliable and the demand outlook became more uncertain. There is still a high degree of uncertainty around which direction the broader economy will go and we are seeing higher than normal volatility in order patterns, as customers are not really sure what level of future demand they are planning for and perspectives change frequently. From a Balchem perspective, I am pleased with how we have managed through this dynamic environment. Our market positions and value propositions in the various markets we serve have enabled us to maneuver through these volatile times quite well.

While our first quarter revenues were relatively flat compared to the fourth quarter of 2022, we grew our gross margins and earnings from operations sequentially. While it is hard for us to predict the timing of when the markets will truly normalize and reset for continued growth, we do believe, they will improve in the second half of the year, and we believe we are well positioned to benefit when that time comes. Just a few days ago, we published our 2022 sustainability report, which captures the company’s commitment to managing our environmental, social and governance performance. Balchem’s sustainability initiatives are fully integrated into our business strategy and are critical to our vision of making the world a healthier place. We took meaningful steps toward advancing diversity equity inclusion and belonging at Balchem and remain committed to fostering a diverse and inclusive culture, in which everyone feels welcomed, valued and appreciated, while inspiring our external stakeholders to share our vision.

Our sustainability report demonstrates the company’s continuing promise to provide our employees, customers’, shareholders and the communities within which we operate, with information on Balchem’s sustainability initiatives and includes our progress on our 2030 goals and strategies for both greenhouse gas emissions and water withdrawal reduction. In 2022, we exceeded our 2030 greenhouse gas emissions reduction goal and achieved a combined Scope 1 and Scope 2 greenhouse gas reduction of 27% versus the year before. This puts us in a good position to execute on our strategic growth plans and achieve our 2030 25% absolute reduction target. Additionally, Balchem consumed slightly less than four million cubic meters of water in 2022, a level 1% below our 2020 baseline and 5% below our 2021 results.

As we work to implement intensive water reuse and recycling projects, we are also implementing other efficiency improvements. We are pleased to see a trend of improvement in our absolute water withdrawal result from these initiatives. The combination of these planned efficiencies and significant changes in our use of process water will ensure that we will meet or exceed our 2030 goal. I would encourage you to go to balchem.com to read the recently published report to get a broader perspective on all of the great work we are doing. Turning our attention to our Commercial and Science Activities for a few minutes. Within our Human Nutrition & Health segment, we were excited to recently launch our K2VITAL MCT as USDA organic certified. We are proud to say that it is the first certified organic vitamin K2 MK-7 solution on the U.S. market meeting the ever rising need for organic products.

And further differentiating Balchem in the marketplace. Additionally in support of our Albion branded chelated iron mineral product in February the pooled data from nine randomized controlled trials in over 1,100 pregnant women was published in a systematic review and meta-analysis and showed that supplementation with ferrous bisglycinate including Balchem’s Vericel , which was cited in some of the trials resulted in significantly higher hemoglobin results than all other iron salts, while reducing GI side effects by nearly 69%. This is an exciting study that will provide further support for our efforts to drive increased market penetration with our market-leading chelated minerals. Balchem currently has 16 clinical studies that are active as well as half a dozen studies in various stages of protocol development.

Most of the studies are being conducted by independent world-class investigators in the United States Europe and Africa. This is a significant increase in not only the number of studies being supported by our Human Nutrition Science team but also the Scope. During the first quarter of 2023 the Animal Nutrition & Health segment also continued to advance our strategic priorities with significant progress being made across several areas of the business. Balchem presented the results of three seminal research studies supporting the use of ReaShure our market-leading rumen-protected choline during several key first quarter dairy industry events. The research was completed at the Universities of Florida Wisconsin and Michigan State demonstrating the consistent milk production and immunological benefit of feeding ReaShure, as well as the benefit to the young calf for mothers supplemented with choline.

This research continues to support our value proposition for ReaShure as a required nutrient for all cows no matter their production level or health steps. Additionally, we recently learned that four scientific abstracts supporting research recently completed on our ruminant encapsulated products would be accepted for presentation at the upcoming American Dairy Science Association Annual Meeting in Ottawa, Canada. These presentations will help to demonstrate the superiority of our time to release functionality in products such as NitroShure our precision released urea offering a unique advantage for dairy cows to optimize roman function and efficiency. And lastly, in our pet or companion business, we are recently pleased to learn that a recent study highlighting our PetShure encapsulated acids had been accepted and published in the esteemed Journal of food production.

This research further validated the position that PetShure encapsulated acids helped to reduce the microbial exposure in raw meat-based diet, especially Salmonella when mixed into the formulation along with other additives. This research is some of the first of its kind to demonstrate such strong antimicrobial effect across time due to the unique nature of our encapsulation times release products. So, good progress being made in both our Human Nutrition & Health and Animal Nutrition Health business segments. Building the science behind our products and helping to ultimately drive further market penetration. And with that, I will now turn the call back over to Martin to go through the detailed financial results.

Martin Bengtsson: Thank you, Ted. As Ted mentioned, overall the first quarter was another solid quarter for Balchem, particularly in the context of the very strong first half of 2022. Our first quarter net sales of $233 million were 1.6% higher than the prior year. Sales from our recent acquisitions contributed 6.2% to our sales growth while the impact from foreign currency exchange driven primarily by the weaker euro had a negative impact to our sales growth of approximately 0.7%. Our first quarter gross margin dollars of $73 million were up $2 million or 2.3%, compared to the prior year. Our gross margin percent was 31.5% of sales in the quarter up 22 basis points compared to 31.2% in the first quarter of 2022. The 31.5% gross margin, it’s a significant improvement to the 29.5% we saw in Q4 2022, and the 28% we saw in Q3 2022 and the result of pricing actions taken to recover higher input costs in combination with lower inflationary pressure.

While we continue to experience net inflation from a year-over-year perspective, we finally did see modest sequential net deflation compared to Q4 2022, as it relates to our raw material purchases which helped support the gross margin improvement. Consolidated operating expenses for the first quarter of 2023 were $39 million, as compared to $33 million in the prior year. The increase was primarily due to incremental expenses and amortization from the Kappa and Bergstrom acquisitions. GAAP earnings from operations for the first quarter were $34 million. A decrease of $4 million or 10.2%, compared to the prior year quarter. On an adjusted basis as detailed in our earnings release this morning, non-GAAP earnings from operations of $45 million were up 1.2% compared to the prior year quarter.

Adjusted EBITDA of $56 million was $3 million or 4.8% above the first quarter of 2022. Interest expense for the first quarter of 2023 was $6 million, an increase of $5 million compared to the prior year. This increase in interest expense is driven both by the increased debt level following our 2022 acquisitions and the significantly higher interest rate environment. Our first quarter ending net debt was $371 million with an overall leverage ratio on a net debt basis of 1.7. The company’s effective tax rates for the first quarters of 2023 and 2022 were 22% and 23.1% respectively. The decrease in the effective tax rate from the prior year was primarily due to higher tax benefits from stock-based compensation an increase in certain tax credits and certain lower state taxes.

Consolidated net income closed the quarter at $23 million, down 21.5% from the prior year, driven primarily by the higher interest expense along with the amortization expenses related to the 2022 acquisitions. This quarterly net income translated into diluted net earnings per share of $0.70 a decrease of $0.19 or 21.4% from last year’s comparable quarter. Our first quarter adjusted net earnings were $31 million or $0.94 per diluted share, down 8.3% compared with the prior year quarter driven primarily by the increased interest expense. Cash flows from operations were $35 million as mentioned earlier, an increase of 396% versus the first quarter of 2022, and we closed out the quarter with $60 million of cash on the balance sheet. In the first quarter, cash flows returned to a more normal level after the cash squeeze we experienced in the first quarter of last year, when escalating inflation and protracted supply chains negatively impacted our cash conversion cycle.

As we look at it from a segment perspective, for the quarter our Human Nutrition & Health segment generated quarterly sales of $133 million, an increase of 8.3% from the prior year. The increase was driven by the contribution from recent acquisitions, partially offset by lower sales within the Minerals and nutrients business and Food and Beverage markets. Our Human Nutrition & Health segment delivered quarterly earnings from operations of $18 million, a decrease of 9.2% compared to prior year. This was driven by expenses and amortization related to recent acquisitions, which were partially offset by higher average selling prices. First quarter adjusted earnings from operations for this segment were $27 million, an increase of $3 million or 10.5%.

As discussed in our last earnings call, we’re experiencing some market demand softness in our Human Nutrition & Health segment, particularly in the dietary supplements market, where demand is normalizing following the very strong demand we experienced during the pandemic, which resulted in particularly strong sales in the first half of last year. Recent US retail sales data provided by Nielsen for dietary supplements still show negative growth year-over-year for the first quarter. But improving modestly sequentially versus the fourth quarter of 2022, and sales levels remain above the pre-pandemic period. Overall sales for Balchem’s Human Nutrition & Health segment were up 1.7% sequentially. Over the course of the year, our expectation is that the supplements market will return to growth in line with its historical growth trajectory.

Our Animal Nutrition & Health segment generated quarterly sales of $65 million, a decrease of 6.4% compared to the prior year. The decrease in sales was the result of lower sales in both monogastric and ruminants market in Europe, and an unfavorable impact related to changes in foreign currency exchange rates, partially offset by higher sales in both monogastric and ruminant markets in North America. Overall sales for Balchem’s Animal Nutrition & Health segment were essentially flat sequentially. Animal Nutrition & Health delivered earnings from operations of $9 million, a decrease of 16.1% from the prior year quarter primarily due to the lower sales. While earnings from operations declined on a year-over-year basis the first quarter of 2023, was the third straight quarter of sequential improvement as we gradually recover margins following the rapid inflationary environment we experienced early last year.

First quarter adjusted earnings from operations for this segment were $10 million, a decrease of 13.4%. Similar to what we discussed in Human Nutrition & Health, our Animal Nutrition & Health segment is also experiencing increased demand volatility particularly in Europe. As we shared during the last earnings call, the European food animal feed market continues to show some demand softness, which is in direct contrast to the relatively strong demand experienced this time last year. Lower feed demand in our key markets poultry, swine and dairy across much of Europe has been driven by a combination of factors including the spread of animal diseases, higher utility costs, increasing costs linked to environmental and animal welfare policy measures and the economic impact of the war in Ukraine.

With lower energy costs and disinflation, we believe we will see some stabilizing and normalization in the European food animal feed markets as we progress through 2023. While Europe has been more challenged lately, our larger US market has been fairly stable and has not experienced anywhere near the same type of demand volatility. Our Specialty Products segment delivered quarterly sales of $32 million, a decrease of 3.3% compared to the prior year quarter, primarily due to lower plant nutrition sales and unfavorable impact related to changes in foreign currency exchange rates, partially offset by higher sales of products in the Performance gases business. Overall, sales for Balchem’s Specialty Products segment were up 1.3% sequentially. Specialty Products delivered earnings from operations of $8 million, an increase of 2.4% versus the prior year quarter driven primarily by increased average selling prices.

First quarter adjusted earnings from operations for this segment were $9 million, an increase of 1.1%. Within Specialty Products, we continue to see improvement in our Performance Gases business following the negative impact we experienced during the pandemic. Margins continue to improve as we have taken pricing actions to recover higher input costs and we have also started to see some sequential reductions in raw material costs benefiting the business. With regards to plant nutrition, we experienced some softness in Q1 as sales into the Western United States has been pushed out driven by the unusually wet conditions. I’m now going to turn the call back over to Ted for some closing remarks.

Ted Harris: Thanks, Martin. We are pleased with the solid financial results reported earlier this morning and the year-over-year growth in sales and adjusted EBITDA, particularly in light of the strength of the prior year’s comparable and the continued economic uncertainties we are facing in the marketplace. We continue to show resilience during this time of elevated economic market uncertainty and ability to manage through challenging and dynamic market environment. I’m also very pleased with our progress around our sustainability efforts as detailed in our sustainability report that we published earlier this week. Sustainability is at the heart of our company’s higher purpose of making the world a healthier place and we continue to make good progress toward our goals while acting as strong stewards of all of our stakeholders.

We are well positioned in the markets we serve and remain confident in the long-term growth outlook for our markets, as we continue to focus on progressing our strategic growth initiatives in 2023 and beyond. I would now like to hand the call back over to Martin who will open up the call for questions. Martin?

Martin Bengtsson: Thank you, Ted. This now concludes the formal portion of the conference. At this point, we will open up the conference call for questions.

Q&A Session

Operator: Thank you. We will now conducting a question-and-answer session. Thank you. Our first question is from Mitra Ramgopal with Sidoti. Please proceed with your question.

Mitra Ramgopal: Yes, good morning. Just a couple of things I might have missed if you mentioned it. The impact of FX on the topline in Q1 and also volume versus price as it relates to the growth we saw?

Martin Bengtsson: Yes. So, the impact of FX was about a negative 0.7% in the first quarter Mitra. And I didn’t quite catch the second part of your question.

Mitra Ramgopal: The topline growth, how much of it was say volume versus pricing?

Martin Bengtsson: Yes, it was primarily pricing. Volumes were slightly down. So, really for the legacy business, if you adjust out acquisitions, it was driven primarily by pricing if you sum it up obviously it varies a little bit depending on which part of the portfolio look like and business units et cetera. But if you generalize across it’s mostly pricing.

Mitra Ramgopal: Okay, that’s great. And then it looks like obviously it’s still a lot of challenges in this environment especially on the inflation front. But you’ve done a pretty good job being able to mitigate a lot of that with pricing. And how much room do you think you have on that front without necessarily impacting volume?

Martin Bengtsson: The — I think we’re — I mean we’re priced a lot over the last 18 months as needed to offset inflation. How much further can we go? It varies a little bit on again where in the portfolio you look there are parts of the portfolio where I think we have sort of gotten to the point where further price increases has a direct impact on demand and you would drive demand destruction where there are some pockets where there’s still some more pricing to be had. But I think if you generalize with the environment we’re in right now where we see the raw materials on a sequential basis starting to deflate a little bit there will be less about raising prices further and more sort of capturing the band that’s available to us out there. So, I don’t think we’re going to sort of aggressively pursue a lot of further price increases across the portfolio.

Ted Harris: Yes. Let me just kind of add Mitra that we were really pleased to see our overall adjusted EBITDA margin back in the 24s. And as we look at our overarching financial strategic goals it’s really to get back to the 25s let’s say and so I think that we’re very focused on regaining that lost margin that we’ve experienced over the last two or three years with all the inflation, despite having raised prices dollar-for-dollar for costs we’ve lost a little bit of margin. But we’re really pleased that the sequential improvement get back in the 24 I think is a good milestone and we’re focused on getting another let’s say 100 basis points or so back into the 25s over the course of the next year. And we believe we can do that based on the price increases that we’ve already announced and some reduction in the inflation or the stabilization, if you will of cost.

Mitra Ramgopal: Okay. Thanks. And the increase in operating expense, is that pretty much related to Kappa and Bergstrom, or is there any big driving that?

Martin Bengtsson: 100% related to the acquisitions.

Mitra Ramgopal: Okay. And I know it’s still very early, regarding both acquisitions. But if you can just give us an update in terms of how the integration is going along, the sales force reorganization, cross-selling opportunities, et cetera.

Ted Harris: Yes. Maybe I’ll kick it off and Martin, you can chime in. But we really are excited, to have both Bergstrom and Kappa and their respective teams a part of our company. I think we are in various stages of integration. I think we would say that the Bergstrom integration, is essentially complete. It was a little bit easier. It was all in the United States. It was one single facility, but their commercial team has been integrated with our commercial team and we’re starting to see the call reports come in, from the sales organization, talking about the portfolio of products that we have including MSM and the legacy products. So, I would say, that integration is largely a complete and going very well. Obviously, that business along with Kappa is also susceptible to some of the destocking and dietary supplement slowdown.

And so, that’s impacted both of those businesses. But from an integration perspective, long-term growth perspective, we remain excited and feel good about the integration. Kappa is a little bit slower, just because of the complexity of the international reach of that business, but it’s also going very well. We have one organization now. We have leaders in place, clarity around the organizational structure. We’re going through training, and we’re focused on really operating now as one company. And again, that’s going very well as well. And I think we mentioned on the last call, that we’re now all on one ERP system. So we’ve — we have both Bergstrom and Kappa, on our Microsoft Dynamics 365 and that certainly simplifies the back office activity, and helps that integration.

So, so far so good relative to the integrations, we feel good about.

Mitra Ramgopal: Okay. And just as it relates to capital allocation, I’m assuming acquisitions are probably not a focus right now, on more debt reduction. Is that fair?

Ted Harris: Yes, maybe I’ll chime in, again Martin, you can join for some color. But, I wouldn’t quite say, it just like you said, but I think thematically, you’re not far off. We clearly, are focused on investing in our organic growth, investing in our plant and equipment where needed. We still are very actively managing our acquisition pipeline or portfolio, if you will. But we would like to get a little bit further along relative to the stabilization, and full integration of the acquisitions and pay down some debt. So we would like to make some further progress there. Although, being at 1.7 times net debt leverage ratio is a pretty good place to be. And we do see that coming down as the year progresses. So we can do strategic acquisitions and we continue to look at some and remain active there.

But as you pointed out, I think our preference right now is to invest in our organic growth and pay down a little debt. But we’re still keeping an important eye on really good strategic acquisitions.

Mitra Ramgopal: Okay. Thanks for taking the questions.

Ted Harris: Thanks, Mitra.

Operator: Our next question is from Bob Labick with CJS Securities. Please, proceed with your question.

Bob Labick: Good morning. Congratulations on the strong quarter and particularly the gross margin sequential rebound.

Ted Harris: Thank you.

Bob Labick: Yes. I kind of wanted to start there. You gave us some nice color there on the EBITDA margin kind of expectations goals and whatnot. Maybe just taking that back to gross margins as well. Are we kind of back to normal now? How much more room is there? Obviously, there’s — you’ve made a few acquisitions. So it’s changed the composition. It’s hard to look back historically entirely. So maybe just kind of give us a sense of where we are in this gross margin recovery and how you see that playing out over the next six to 18 months?

Martin Bengtsson: Absolutely, Bob. Yes, I mean, we’re very pleased with the gross margin performance here in Q1 of the 31.5%. And as I mentioned sort of that was 29.5% in the fourth quarter and it was 28% in the third quarter. So sequentially improving and getting back. And we’ve talked before around sort of where was normalized gross margin for Balchem and we often mentioned somewhere in that 32% range is, sort of, where it’s historically been and that we want to make sure it gets back to. I think we have taken the pricing actions to get back towards that. There were further price increases in parts of our portfolio here in Q1. But, obviously, the other side of that equation is, what’s happening to the raw material cost and other input costs.

And if we see a continuation of the current trend with sort of sequential deflation, we should be able to restore our margins over the coming quarters. I don’t want to give an exact timing, but sort of over a couple of quarters to that 32%. But, obviously, if we see sort of a plateau in the input cost and it really doesn’t deflate anymore in just days where it are, then there’ll be more actions needed in our end to get the margins back up there. But right now we sort of think that they will restore over a few quarters, just based on the current trends and the actions we’ve already taken. Okay. I think the last thing I would add, Bob, is that it was also nice to see that the margin improvement was not just in one spot. Actually, all three segments improved their gross margins nicely, sequentially, versus the fourth quarter here in the first quarter.

Bob Labick: Yes. No that’s great. Very encouraging obviously agreed there. And then you talked a bit about a difficult macro environment et cetera. Can you — where are we — as it stands or where is your visibility into kind of customer inventories? Are most of those normalized? How is your demand matching end market demand? And where do you have the most visibility? And where are you still searching for a little visibility?

Ted Harris: It is as we said in our prepared remarks it is difficult to really assess. But we do think the worst of the destocking is behind us. But there is still some of that element going on. But the worst is really behind us in Q1. And we do see some normalizing of orders as we kind of ended Q1 and headed into Q2. But there is just general uncertainty. I think our customers are unsure as to what demand scenario to plan for. And so we really feel like that’s impacting kind of the order pattern in a pretty unusual and uncertain way. So it isn’t as clear as we normally would say it is and we’re just watching it very, very closely. But certainly the worst of it we believe is behind us.

Bob Labick: Okay. Great. And then one for me. Really interesting information you gave on the kind of the study with actuated iron and the benefits. And then the 16 trials you have going on as well is I think new information and exciting as well. So maybe how do you take that kind of stuff? And can you talk about your marketing and you’re driving away the fits of your products and where you stand now in that effort and how you expect that to play out and drive market adoption and size over time?

Ted Harris: Yes. I think it’s a great question Bob. Driving awareness is a significant strategic pillar for us really in both of our businesses Human Nutrition Health and Animal Nutrition Health. But that — those comments earlier were specific to Human Nutrition Health. And by and large while we’re continuing to invest in new studies and new science because we do think it helps support the overall growth, at the end of the day we have a lot of claims. We have a lot of studies behind us and it is about investing in marketing and driving awareness. Unfortunately, our products, whether it’s choline or K2 or even the idea of chelated minerals is not as well known as it needs to be. And so we are in the midst of building a marketing team and capability to help drive deeper awareness.

And the acquisitions of both Kappa and Bergstrom are helping from that regard because Kappa in particular was very good at this and has done a great job of driving K2 awareness albeit still not where we would like it to be but driving K2 awareness up. And so we’re really leveraging the skills and capabilities that came from Kappa in order to accelerate our kind of marketing prowess if you will to drive that. But it does come down to building that marketing capability in the marketplace and driving that awareness. And it’s a little bit less about needing that perfect new study or one more study. Again, we’re going to continue invest in studies but we need to build that awareness through social media, traditional advertising, targeting influencers and real advocates in the marketplace.

So we’re very focused on that and getting better every day at least in part because of the talent that came to us from Kappa and Bergstrom.

Bob Labick: Okay. Super. Thank you.

Ted Harris: Okay. Thanks, Bob.

Operator: Thank you. There are no further questions at this time. I’d like to turn the floor back over to Ted Harris for any closing comments.

Ted Harris: Great. Thanks, Paul. And once again thank you all very much for joining our call today. We really appreciate your support as well as your time today and look forward to reporting out our Q2 2023 results in July. In the meantime, we will be presenting at Wells Fargo’s Industrial Conference in Chicago on June 13 as well as the Sidoti Virtual Small Cap Conference on June 15. So we hope to see some of you at one of those conferences or elsewhere. So thanks again for joining today. Appreciate it.

Operator: This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.