Cooper-Standard Holdings Inc. (NYSE:CPS) Q4 2022 Earnings Call Transcript

Cooper-Standard Holdings Inc. (NYSE:CPS) Q4 2022 Earnings Call Transcript February 17, 2023

Operator: Good morning, ladies and gentlemen, and welcome to the Cooper Standard Fourth Quarter and Full Year 2022 Earnings Conference Call. . As a reminder, this conference call is being recorded, and the webcast will be available for replay later today. I would now like to turn the call over to Roger Hendriksen, Director of Investor Relations.

Roger Hendriksen: Thanks, Josh, and good morning, everyone. We appreciate your continued interest in Cooper Standard, and we thank you for taking the time to participate in our call this morning. The members of our leadership team who will be speaking with you on this call this morning are Jeff Edwards, Chairman and Chief Executive Officer; and Jon Banas, Executive Vice President and Chief Financial Officer. Before we begin, I need to remind you that this presentation contains forward-looking statements. While they are made based on current factual information and certain assumptions and plans that management currently believes to be reasonable, these statements do involve risks and uncertainties. For more information on forward-looking statements, we ask that you refer to Slide 3 of this presentation and the company’s statements included in periodic filings with the Securities and Exchange Commission.

This presentation also contains non-GAAP financial measures. Reconciliations of the non-GAAP financial measures to their most directly comparable GAAP measures are included in the appendix to the presentation. With those formalities out of the way, I’ll now turn the call over to Jeff Edwards.

Jeffrey Edwards: Thanks, Roger, and good morning, everyone. We appreciate the opportunity to review our fourth quarter and full year 2022 results and provide an update on our outlook for 2023 and beyond. So to begin on Slide 5, I’d like to highlight some of the key data points that we believe are reflective of our continued strong commitment to operational excellence and our core company values. In 2022, we continue to deliver world-class results in terms of product quality, program launches and service to our customers. This is reflected by our 98% green product quality scorecards and 97% green program launch scorecards. Even more importantly, and a shout-out to our plant managers, we had our best year ever in terms of employee safety, which is always our top priority as we come to work each day.

For the full year 2022, our safety incident rate was 0.33 per 200,000 hours worked, well below the world-class benchmark of 0.57. We are especially proud of the 25 plants that completed the year with a perfect safety record of zero reported incidents. In view of continuing industry headwinds, we focused on further rightsizing every aspect of our business and improving operating efficiency. During 2022, our manufacturing and purchasing teams delivered $75 million in cost savings through defined lean programs and other initiatives. We also successfully reduced our SGA&E expense by $22 million compared to 2021 and realized $8 million in savings from our past restructuring actions. So in total, we delivered $105 million in sustainable cost reductions for the year.

By many measures, we had a very successful year, and we’re certainly very proud of our team for their continued commitment, hard work and engagement. Turning to Page 6. Complementing our focus on manufacturing excellence is our commitment to doing business the right way with uncompromised honesty, transparency and integrity. This is one of our core values and an important component of our overall company culture. Frankly, it’s just who we are. A few weeks ago, we were pleased to once again be named to Newsweek’s list of America’s Most Responsible Companies. And we are also named One of the World’s ’22 Most Ethical Companies for the third consecutive year by Ethisphere earlier in the year. We see this type of recognition is an external acknowledgment of the quality of our company culture and how we conduct ourselves every day.

We believe our culture is key to recruiting and retaining the best talent in the industry. And further, when combined with world-class technology and customer service, it’s an important factor in winning and retaining business from our customers around the world. Turning to Slide 7. On this slide, you can see how our customers have continued to support us with significant new business awards, which increased by 32% in 2022 versus 2021. And this increase in new awards occurred at the same time we were engaging our customers in challenging negotiations over cost recoveries and price adjustments. Significantly, our new business awards on EV platforms exceeded awards on traditional internal combustion engine platforms for the first time. We want to thank our customers for their continued support and entrusting us with providing critical components and technology for some of their most important vehicle platforms.

Now I’ll turn the call over to Jon to walk you through the financial details of the quarter and the year.

Jonathan Banas: Thanks, Jeff, and good morning, everyone. In the next few slides, I’ll cover the details of our quarterly and full year financial results, put some context around some of the key items that impacted our earnings and then provide some color on our balance sheet and liquidity before talking about expectations for 2023. On Slide 9, we show a summary of our results for the fourth quarter and full year 2022 with comparisons to the prior year. Fourth quarter 2022 sales totaled $649 million, an increase of 8% versus the fourth quarter of 2021. The improvement was a result of favorable volume and mix in all of our automotive segments as demand for our products remain strong and supply chain issues continue to improve.

Volume and mix also included the positive impact of our ongoing commercial negotiations and cost recovery initiatives. Adjusted EBITDA for the fourth quarter of 2022 was $27.6 million or 4.2% of sales compared to $2 million or 0.3% of sales in the fourth quarter of 2021. The year-over-year increase was driven primarily by favorable volume and mix as well as improved operational efficiency, lower SGA&E expense and the positive impact of our enhanced commercial agreements and cost recoveries. On a U.S. GAAP basis, we incurred a net loss of $88 million in the fourth quarter. This included certain noncash asset impairments, restructuring charges, valuation allowances on net deferred tax assets, and pension settlement charges. Excluding these and other special items, we incurred an adjusted net loss of $31.9 million or $1.85 per diluted share in the fourth quarter of 2022.

This compared to an adjusted net loss of $50.3 million or $2.94 per diluted share in the fourth quarter of 2021. For the full year 2022, our sales totaled $2.53 billion, an increase of 8.4% versus 2021. Again, the main drivers of the increase were favorable volume mix and our enhanced commercial efforts on cost recoveries. These positive factors were partially offset by unfavorable foreign exchange and the deconsolidation of an Asian joint venture at the beginning of 2022. Adjusted EBITDA for the year came in at $37.9 million compared to a loss of $8 million in 2021. Significantly favorable volume and mix included commercial cost recoveries that drove the result, while other positive factors included improved operational efficiency and lower SGA&E expense.

These were partially offset by higher material costs, increased wages and compensation-related costs as well as general inflation. Full year net loss was $215.4 million, including a gain recognized on the sale leaseback at one of our European facilities, noncash asset impairment charges, restructuring costs, deferred tax asset valuation allowances and other special items. Adjusted for the net impact of these items, we incurred a net loss for the year of $171.5 million or $9.98 per diluted share. This compares to an adjusted net loss of $222.3 million or $13.04 per diluted share in 2021. From a CapEx perspective, we spent $71 million during 2022, which is around 2.8% of sales. This compared to CapEx of $96.1 million or 4.1% of sales in 2021.

The reduction in capital spending was primarily due to lower program launches in 2022 and our continued intense focus on cash preservation and improved asset utilization. Moving to Slide 10. The charts on Slide 10 quantifies the significant drivers of the year-over-year changes in our sales and adjusted EBITDA for the fourth quarter. For sales, favorable volume and mix, net of customer price adjustments and recoveries increased sales by $89 million. Foreign exchange was a partial negative offset of $32 million. For adjusted EBITDA, favorable volume and mix, net of price and recoveries added $48 million in the quarter. Manufacturing and purchasing efficiencies accounted for another $13 million of the improved results. SGA&E expense was a positive variance of $5 million and savings from restructuring initiatives added $1 million.

These improvements were more than offset by $20 million in increased material costs and $21 million from wage and compensation-related increases, general inflation and other items. Moving to Slide 11. For the full year, favorable volume and mix, net of customer price adjustments and recoveries increased our sales by $322 million. Unfavorable foreign exchange was a partial offset of $96 million and the deconsolidation of a joint venture in Asia further offset growth in sales by $31 million. For full year adjusted EBITDA, a number of positive factors benefited our profitability, including $167 million from improved volume and mix, including customer price adjustments and recoveries. $75 million from improved manufacturing and purchasing efficiencies, $22 million from lower SGA&E expense and $8 million in savings from earlier restructuring initiatives.

These improvements were partially offset by $137 million in higher material costs and $89 million in higher wages, compensation-related costs and other general inflation. Moving to Slide 12. In terms of free cash flow, we recorded an outflow of $38 million in the quarter. Net cash used in operations was $25.8 million in the quarter, primarily due to the net cash earnings and changes in working capital, which continued to be impacted by challenging industry conditions. As previously mentioned, CapEx came in at just $12.7 million for the quarter, owing to our focus on cash preservation and improving asset utilization. With cash on hand of $187 million, and an additional $155 million of availability on our revolving credit facility, we ended the year with total liquidity of $342 million.

Turning to Slide 13. Subsequent to the end of the fourth quarter, we successfully completed refinancing transactions that extend the maturity on the majority of our long-term debt to 2027. The refinancing strengthens our balance sheet and provides us with significant added financial flexibility to grow and further optimize our business. After utilization of cash required in conjunction with the closing of the refinancing transactions and based on our current expectations for light vehicle production, demand for our products and importantly, the sustainable commercial price support from our customers, we expect that our cash balances and access to flexible credit facilities will provide sufficient resources to support our ongoing operations and the execution of planned strategic initiatives.

Turning to Slide 14. On this slide, we provide our initial guidance for 2023 along with our expectations for regional light vehicle production that form the basis for our annual plan. For this year, we expect sales in the range of $2.6 billion to $2.8 billion and adjusted EBITDA in the range of $150 million to $175 million. We believe these estimates are appropriately conservative given the continuing uncertainties within our industry, and the macroeconomic trends in each of our key operating regions. We expect CapEx to be in the range of $70 million to $80 million in 2023, roughly in line with 2022. As a percent of sales, this would put us below 3%. So continuing disciplined investment in the business to support new program launches, while carefully monitoring and managing overall asset utilization.

Cash restructuring in 2023 is estimated at $35 million to $40 million. The majority of this investment will be focused on further rightsizing our operations and fixed overhead in Europe and elsewhere around the world, consistent with the strategy we have laid out to restore profitability and our loss-making segments. In terms of cash interest, we expect to pay $50 million to $55 million in 2023, a reduction from 2022 levels given the flexibility of the PIK Toggle feature in the notes we issued in the refinancing last month. Moving to Slide 15. This chart provides some additional detail around the main factors impacting our 2023 adjusted EBITDA outlook. These are broad estimates based on current market conditions and our own assumptions for the remainder of the year and reflect the midpoint of the EBITDA range we have provided.

We expect improving volume and mix, including customer price adjustments to drive $150 million of improved profitability in 2023. This includes the anticipated further positive impacts of support from our customers in the way of sustainable pricing and recoveries of inflationary cost pressures that we continue to absorb. With improving volume, we also expect our manufacturing and purchasing teams to continue their aggressive lean initiatives in 2023, driving combined planned savings of approximately $60 million for the year. These anticipated gains are expected to be partially offset by approximately $80 million in headwinds from continuing general inflation and higher wages. As mentioned earlier, we believe our initial guidance for 2023 is appropriately conservative given the continuing uncertainties in the marketplace, such as the tight labor market in our key regions, supply chain challenges and erratic production schedules.

We are factoring in the recovery of a fair share of the higher cost being imposed on our business, but there’s no guarantees on the level of recovery or price adjustments we will ultimately achieve. On the other hand, there could be potentially some upside opportunity if production volumes come back stronger than we currently expect. Having said all that, we believe that 2023 will return us to positive free cash flow. That concludes my comments. So I’ll turn it back over to Jeff.

Christian Lagerek/Shutterstock.com

Jeffrey Edwards: Thanks, Jon. Before concluding our discussion this morning, I want to share a few thoughts regarding our near-term and longer-term outlook and why I remain extremely optimistic about our opportunities ahead. Moving to Slide 17. One of the key reasons I’m optimistic is that over the last 4 years, we’ve significantly leaned out our cost structure. On a cumulative basis, we’ve taken out more than $480 million in annual operating costs, and we expect these savings to carry forward into 2023 and beyond. We also expect to continue our laser focus on lean initiatives, manufacturing efficiencies and further optimization of our operating footprint in 2023. We want to ensure that we are aligned with market and customer demand going forward.

And we remain committed to either fix or exit those segments of our business that don’t provide adequate returns. Turning to Slide 18. Another key reason for optimism is the enhanced commercial agreements that we’ve established with our customers over the past year. We are better positioned now to manage through commodity cost fluctuations than we have ever been before. With the majority of our key commodity inputs now under indexed-based agreements, our customers will share in a greater proportion of any further impacts from commodity inflation. In addition, we are working with our customers to adjust pricing to cover other elements of cost inflation that are beyond our control. The second phase of our cost recovery initiative is still underway but we have made good progress.

As I said in my opening comments, our customers have recognized the value that we have provided them over the years, evidenced by the numerous awards they give us and they’ve been supportive, both in terms of awarding us new business as well as in terms of price concessions where necessary. I’m more confident today than at any other time, that we will be paid fairly for the world-class technology, products and service that we provide to our customers, and that certainly bodes well for our future. Turning to Slide 19. Because of our strong customer relationships, world-class service and innovative technology, our customers continue to look to us to supply critical components on some of the industry’s most desirable and popular vehicle platforms and nameplates.

On Slide 19, we provide a list of our anticipated top 10 vehicle programs for 2023. The vehicle images and names reflect the lead nameplate on each key platform. We are proud of the continued strong mix of our top programs, which maintains a heavy weighting on trucks, SUVs and global platforms. This strong mix provides us with maximum opportunity to increase product content per vehicle and sales over time. Combined, these top platforms represent approximately 40% of our planned 2023 revenue. On an unweighted basis, our content per vehicle across these top 10 platforms is expected to be approximately $200 this year. I would also note for the first time, an electric vehicle has made our top 10 list. Turning to Slide 20. Our strategic focus on light trucks and puts us in a great position to benefit from the continuing global light vehicle market trends.

As shown in the chart on the left, growth in the trucks and SUV segment of the market is expected to significantly outpace the passenger car segment over the next 5 years. For Cooper Standard, was 75% of our 2023 global revenue expected to come back — to come from trucks and SUVs and nearly 90% in North America. We expect to benefit from the higher market growth rate. In addition to market volume, we also benefit from a content per vehicle perspective. On average, our content per vehicle on trucks and SUVs is more than double our content on cars, creating significant growth opportunity as the market trends continue. Turning to Slide 21. The trends in electric vehicle segment are also creating opportunities for us. We continue to introduce key innovative technologies, specifically for EV applications.

And these innovations have been well received by our customers. We are currently a supplier on 3 of the top 5 and 9 of the top 15 EV nameplates globally. Over the past 3 years, we’ve been awarded more than $400 million in annualized new business on future electric vehicle platforms. In fact, in 2022, net new business awards on electric vehicles exceeded our awards on traditional drive train vehicles by a factor of 4 to 1. Based on our current outlook, and recent new business wins, we expect our sales in the EV segment will increase at a compound annual rate of over 43% in the next 5 years, significantly outpacing expected growth in total EV production. In addition, we are progressing our product strategy that will provide sophisticated, highly technical solutions for fluid management and electric vehicles that improves the overall efficiency.

The new products also expand our total addressable market in the segment, further adding to our growth and margin opportunities. Turning to Slide 22. To summarize our discussion this morning, we expect to leverage our company culture, our core values and our streamlined cost structure to drive improving results in 2023. Over the longer term, we expect to see incremental benefits from the many customer-focused, value-added innovations that we have introduced and that are beginning to launch into production. This includes innovation in automotive technology, specifically for electric vehicles as well as nonautomotive technology for footwear. We are pleased to announce that our footwear customer has recently launched mass production of shoes using our Fortrex technology and the shoes should be on store shelves by late spring.

Of course, our business is dependent on the continued support of our customers, and we strive to earn their business every day with quality service, technology and innovation. We are proud to partner with our customers to develop sustainable solutions and value together, and we thank them for their ongoing trust and confidence. We also want to thank our employees around the world for their continued dedication, hard work and their commitment to excellence in every aspect of our business. Our company and the industry overall have been through a very challenging period since the pandemic, and our team has stepped up to do a fantastic job despite the difficult circumstances. The good news is that all the hard work is beginning to pay off, and we look forward to a more successful year in 2023.

This concludes our prepared comments, so let’s open up for questions.

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Q&A Session

Operator: . Our first question comes from Brian DiRubbio with Baird.

Brian DiRubbio: Just a couple of questions on my end. First of all, Jeff, with the guidance that you gave, are you anticipating all 4 regions to be EBITDA positive in fiscal ’23?

Jeffrey Edwards: As we sit here today, that’s what we expect. Clearly, we have, as we mentioned, commercial negotiations that have not concluded yet. We expect those will be concluded by the end of the first quarter. But our expectation is those will be completed and result in the significant uplift that we need to make each of the regions profitable. And then I think that the volumes that we’ve used, as Jon mentioned in the call, albeit conservative, reflect kind of what we’re seeing here in the first quarter. So we’re extremely optimistic. I’ll tell you. I think that ’23 is setting up as a year where things have stabilized and we’re able to predict the commercial negotiations that we concluded last year gave us confidence and a real good start to those negotiations here for ’23. So I expect it to be positive, and we look forward to creating the type of sustainable footprint around the world that’s going to continue to deliver financial results well into the future.

Brian DiRubbio: Got it. That’s helpful. And just one of the issues that you faced last year and the last couple of years has been the lack of a steady production cadence on your end given the changing schedules that your customers have. Do you expect that — so what are your customers saying on that end? Is most of the supply chain issues from your perspective and customer perspective — has that been fixed already? Just love to get a sense of how that’s developing.

Jeffrey Edwards: Well, I guess, in comparison to ’21 and ’22, significantly improved. I think the forecast between North America and Europe still shows vehicles being missed between Europe and North America anyway. Just under 1 million units are being predicted for the chip shortage, if you will, that hurt us significantly the last 2 years. So while that’s still a large number of vehicles that they’re forecasting to be missed, it’s a whole lot better than it was. And then the scheduling and their ability to get closer to the releases, I would suggest is also dramatically improved. So not perfect yet, but I think that as we go through the year, we’ll continue to get better at both.

Brian DiRubbio: Two final ones. First, just on the future restructuring actions, you laid out what you want to do in ’23. Do you see further restructuring occurring in 2024? Or do you think you can wrap most of that up in 2023?

Jonathan Banas: Brian, it’s Jon. I’ll take this one. We’re currently in flight on programs that we’ve already announced in executing on in 2022 mainly in the way of headcount reduction initiatives and rightsizing there. But — so our first line of sight going into ’23 and beyond will be on the on the overall price discussion to make sure we’re getting fairly compensated as we’ve been talking about here. And that will help optimize profitability in all those regions, as Jeff just described to you a minute ago. If those things don’t happen, then we’ll continue to look at the footprint to see if there’s anything significant that needs to be done. But at this point, we don’t have any major plans in ’24 that would significantly cause us to spend a lot more money than we’ve otherwise predicting right now.

Brian DiRubbio: Fair enough. And then final one for you, Jon. Just post the recap of the new debt that was placed on board. What is liquidity looking like today?

Jonathan Banas: Brian, we typically don’t give intra-period liquidity updates. But like I said in my prepared remarks, with the cash balance that we did have on hand and the availability under our ABL facility, we’re pretty comfortable with the current liquidity situation and we’ll be able to give you some deep dive details come our Q1 call as we always do. But we’re feeling no good about our overall balance sheet, certainly getting the refinancing behind us was a good milestone. And now we can go back to focusing on running the business and executing in terms of value creation.

Operator: Our next question comes from Ben Briggs with StoneX Financial.

Ben Briggs: So going through your guidance a little and listening to the prepared remarks, I’m just curious what percentage of revenue do you guys think that the footwear manufacturer is going to contribute in 2023? And can you give any more kind of concrete details on kind of how that footwear contract is going to impact the financial performance of the business.

Jonathan Banas: Sure, Ben. It’s Jon again. If you recall, in Q4 of 2021, we actually recorded some revenue from the footwear deal. It was a guaranteed minimum under that contract, around $12 million that we booked in Q4 of last year. So at this point, it’s a minimum volume commitment. So we’re not anticipating any significant material change from that in 2023. It’s certainly all volume dependent into the future. And if they exceed the minimum order quantities on the volumes, then there’ll be upside to what we’ve already recorded. So at this point, it’s just once the shoes start leaving the factory and people start buying them, then we’ll start seeing the cash come in on that guaranteed minimum. But at this point, nothing material incrementally for 2023.

Ben Briggs: Okay. So about $12 million of revenue is the right number to think about?

Jonathan Banas: Yes. But again, already recorded last year, 2021.

Operator: . Our next question comes from Patrick Sheffield with Beach Point Capital.

Patrick Sheffield: Just a couple of housekeeping items. One, could you kind of share how much the refinancing costs and fees in the first quarter?

Jonathan Banas: Patrick, Jon again. We haven’t gone through in the disclosed fees and other costs to affect the refinancing but however, when you think about taking out the previously existing senior secured notes, we did have to incur that prepayment premium and then as also disclosed, there were discounts on the newly issued notes, the backstop fees and the customary fees, I’ll say, for advisories in the way of financial and attorney bills and the other customary closing costs. So most of those fees are already publicly out there, and we’re racking up the rest of those costs, and we’ll have those in our Q1 cash flow that we’ll talk about here in a couple of months.

Patrick Sheffield: Okay. And then on working capital, do you — is there any framework you can share about whether you think that’s going to be a source or use of cash in ’23?

Jonathan Banas: Yes, Patrick, in my prepared remarks, I indicated that we think free cash flow is going to be positive with all of the current assumptions that we’re operating with. And a part of that free cash flow positive will be further optimization of our inventory balances. Jeff described things looking more stable this year. That will help us manage inventory a little bit better. We only need to have as much safety stock on hand and we’ll be able to have a better minimum order quantities once those — the release schedules and EDI schedules stabilize. So that will be a component of positive working capital. And also, we are looking to continue to drive our tooling balances down. As a reminder, we spend tooling dollars on behalf of our customers and get reimbursed once those tools are ultimately built and PPAP and approved by the customer.

So we’re — in part of our ongoing conversations with our customers, we’re looking for more progressive payments on tools rather than waiting until the end and tying up Cooper Standard Capital and using our balance sheet to fund those tools. Instead, we’re looking for assistance from our customers to help foot the bill on the tools they ultimately own. So we think there’s opportunities to drive the tooling balances down and as a frame of reference, we ended 2022 with about $100 million of tools on our balance sheet that somebody else owns. And with our current cost of capital, not the most efficient use of our resources, hence, the hike conversations with our customers there. So between those 2 working capital line items, we see a lot of benefit.

With a rising sales environment, and of course, you always have the offsetting effect that accounts receivable will go up and tie up some working capital at year-end. But net-net working capital should be a positive for us.

Patrick Sheffield: Got it. Okay. And then on the 2023 bridge — EBITDA bridge, you have $150 million benefit from volume mix and price. And I was just curious how much of that $150 million is still subject to finalizing commercial agreements in Q1? In other words, does that reflect what you’ve already achieved? Or is that taking in some assumption on incremental positive progress in your Q1 commercial discussion.

Jonathan Banas: Yes. It is forward-looking on our expectations. As Jeff described a couple of minutes ago, we’ll have better line of sight as Q1 closes here, and we have a lot of those customer agreements negotiated and locked up. So the $150 million includes our expectations about how those will go, but not solidified as of yet. So we’ll have a better update for you here once again, we close Q1.

Patrick Sheffield: Okay. And it’s hard to probably quantify the stuff, but how much of that number is already kind of locked in? Or how much was at play in 2023 versus had already been agreed to in ’22? And just broadly, is this something that every year you have you are going to do negotiations with your customers? Or is this just trying to — just like the final strokes of your broader effort to get greater indexing across your entire — across your commodity cost structure?

Jeffrey Edwards: Patrick, this is Jeff. I’ll try to answer all of that here succinctly. So point one, we’ll — we are in negotiations virtually with every customer in the world. Per my prepared remarks, we are confident that those are going well. I think we’re very transparent with them, and we’ve been going through those discussions really since probably November. So we got an early start. And we expect that the outcome is going to be positive for us. And we believe that the relationships that we have today will continue to be preserved going forward. That’s our expectation. Related to how we’ll quantify that, we’ll just wait until the closing in the quarter, and then we’ll give you a summary on that when we report out our first quarter results. I think it’s the best way to deal with it.

Patrick Sheffield: This is something you do every year or — it seemed like there’s a big change last year and the year before to try and change the later contracts work? And is this more like just an annual discussion that you have? Or is it a continuation of the efforts from the last couple of years?

Jeffrey Edwards: It certainly seems like it’s an annual discussion, I agree. But the intent this year is in the discussions that we’re having right now, we intend to create sustainable businesses in each region. And where we do, we’ll stay. Where we don’t, we will leave.

Operator: It appears that there are no more questions. I would now like to turn the call back over to Roger Hendriksen.

Roger Hendriksen: Okay. Thanks, everybody, for joining our call today. We appreciate your continued interest. If you didn’t get a chance to ask your questions this morning, please reach out to me, and we’ll be in touch. Happy to engage in whatever questions or comments you’d like to share down the road. Thanks again for participating. This concludes our call.

Operator: Thank you. This concludes today’s conference call. Thank you for participating. You may now disconnect.