CSW Industrials, Inc. (NASDAQ:CSWI) Q3 2024 Earnings Call Transcript

CSW Industrials, Inc. (NASDAQ:CSWI) Q3 2024 Earnings Call Transcript February 1, 2024

CSW Industrials, Inc. misses on earnings expectations. Reported EPS is $0.59 EPS, expectations were $1.17. CSWI isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to the CSW Industrials, Inc. Third Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Alexa Huerta. Thank you, Ms. Huerta. You may begin.

Alexa Huerta: Thank you, Kat. Good morning, everyone, and welcome to the CSW Industrials Fiscal 2024 Third Quarter Earnings Call. Joining me today is Joseph Armes, Chairman, Chief Executive Officer and President of CSW Industrials; and James Perry, Executive Vice President and Chief Financial Officer. We issued our earnings release, updated Investor Relations presentation and Form 10-Q prior to the markets opening today, all of which are available on the Investors portion of our website at www.cswindustrials.com. This call is being webcast and information on accessing the replay is included in the earnings release. During this call, we will make forward-looking statements. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties.

Actual results could materially differ because of factors discussed today in our earnings release, in our comments made during this call as well as the risk factors identified in our Annual Report on Form 10-K and other filings with the SEC. We do not undertake any duty to update any forward-looking statements. I will now turn the call over to Joe.

Joseph Armes: Thank you, Alexa. Good morning, everyone. Impressively, our team continues to outperform the markets we serve despite challenging conditions and again, delivered record results in the third quarter and year-to-date against strong prior year results. The third quarter results demonstrate our continued ability to grow through the cycle and drive notable operating leverage in our bottom line results. Earlier this morning, we announced record third quarter revenue of $175 million, record third quarter adjusted earnings per diluted share of $1.07, and record third quarter adjusted EBITDA of $37 million. EPS and EBITDA were both adjusted to exclude certain nonrecurring tax items related to past acquisitions, as we indicated they would be, on our last earnings call.

Adjusted EBITDA grew 18% on 2% growth in revenue, delivering 270 basis points of adjusted EBITDA margin expansion up to 21% in the third quarter. On the heels of two consecutive quarters of record results, we continued generating record Q3 and year-to-date results in revenue of $582 million or 3.5% growth, an adjusted earnings per diluted share of $4.97, or 11.4% growth and an adjusted EBITDA of $144 million, a robust 15.7% growth. For the third consecutive quarter, we delivered outstanding cash flow from operations with a record fiscal third quarter total of $47 million. This led to a paydown of $20 million of borrowing under our revolving credit facility in the third quarter and an aggregate reduction of $100 million during the fiscal year.

We continue to reduce our interest expense and fortify our balance sheet to provide significant flexibility to pursue future opportunities as they arise. Over the last few quarters, we have seen ocean freight return to normal levels. We have reduced our domestic freight costs and driven additional operational efficiencies versus the prior year. Recently, we have been monitoring issues in the Red Sea. We have been working closely with our freight forwarders to assess the impact on pricing and transit time for all in-transit and potential future shipments. We are assessing the most efficient delivery routes and options, but there could be some temporary upward pressure on shipping rates. We also continue to see increased compensation expense as we staff up for our continued growth and retain the highest caliber team members.

By successfully implementing new and maintaining prior pricing initiatives and increasing our gross margins through freight expense savings, CSWI has been able to achieve meaningful operating leverage and expand further our already healthy margins. We have always and will continue to prioritize capital investments based on the estimated risk-adjusted returns with the ultimate goal of increasing long-term shareholder value. We evaluate organic and inorganic opportunities for growth that support our generous margins and we continuously maintain a pipeline of potential acquisition opportunities. I’m proud of the execution within each of the three business segments, so I would like to briefly speak about the performance of each segment. Then James will provide additional financial details around the quarter.

The third quarter is seasonally our slowest quarter of the year for our Contractor Solutions segment, but our team did an excellent job by not only delivering another quarter of market outperformance, but also year-over-year growth despite the HVAC/R industry experiencing a decline in residential volumes. Contractor Solutions delivered Q3 net revenue of $115.4 million, an increase of 3% over the prior year period. Our competitive advantage in this segment centers around our distribution channel, introducing innovative high value products and focusing on acquisition integration. The power of our distribution model allows CSWI to acquire, integrate, master distribute, and accelerate growth on newly designed products. This results in faster and more profitable sales because our strong relationships with wholesalers, our sales network, logistics leverage, credit and back-office support, allowing us to focus on serving our customers well.

Our Specialized Reliability Solutions segment revenue decreased $2.6 million in the quarter driven primarily by a temporary shipment delay at the end of the quarter, which we expect to recover in full during this fiscal year. The temporary shipment delay was offset partially by pricing initiatives. The SRS team continues to make improvements in operational efficiency and quality. Strong oil and gas drilling and mining end markets showed growth, but we saw a bit of softening in industrial end markets. Despite passenger rail being down in the third quarter, the outlook remains good and the team continues to introduce new innovative products. Revenue in our Engineered Building Solutions segment was up with an increase of 13% in the quarter due to the conversion of bookings into revenue benefiting from our record backlog as well as positive pricing initiatives.

For the eighth consecutive quarter, this segment’s backlog reached an all-time high with our aluminum railings business continuing to drive most of the growth. We continue to see strong growth from multifamily housing in the Canadian market. Project mix and our record backlog continues to skew toward larger jobs which may take two years or more to turn into revenue. Our sales and estimation teams continue to focus our bidding and booking on institutional and multifamily projects with the highest quality developers to ensure the greatest likelihood of closing. And I’m proud of the performance of the EBS team. Before I turn the call over to James, I’d like to take a moment to brag on our team for delivering growth through pricing initiatives and even volumes during a period when some of our end markets are declining.

The vigor of our business model includes the diversification of our product portfolio, the resilience of the end markets we serve, and the repeatable consumption of many of our products that are used either in maintenance, repair and replacement applications or to enhance the reliability, performance and lifespan of mission-critical assets. The products we sell in Contractor Solutions and Specialized Reliability Solutions, and the value they provide are often nondiscretionary. Fundamental necessities for both homeowners, businesses and the utility sector. We have outperformed the markets we serve all year long while expanding margins, strengthening our balance sheet and reducing our leverage ratio. CSWI is positioned to overcome market headwinds and pursue growth opportunities that arise across our entire portfolio.

At this time, I’ll turn the call over to James for a closer look at our results and then I will conclude our prepared remarks.

James Perry: Thank you, Joe, and good morning, everyone. During the fiscal year-to-date period, we delivered record year-to-date revenue of $582 million, representing growth of 3.5%. Most of the growth has come organically, but $7.5 million came from the acquisitions of Cover Guard, AC Guard and Falcon in fiscal 2023. Operating leverage on this revenue drove nearly 16% growth in adjusted EBITDA and over 11% growth in adjusted earnings per diluted share. Our consolidated revenue during the fiscal third quarter of 2024 was $175 million, a 2.3% increase as compared to the prior year period. This growth was driven organically through pricing initiatives and increased unit volumes. Consolidated gross profit in the fiscal third quarter was $74 million, representing more than 12% growth over the prior year period.

Gross profit margin improved to 42% compared to 38.5% in the prior year period, driven by revenue growth from pricing actions, increased unit volumes, and lower ocean and domestic freight costs. As mentioned on our last earnings call, as a reminder, we are presenting the fiscal third quarter’s profitability figures on an adjusted basis due to the $8.5 million or $0.48 per share release of tax indemnification assets related to TRUaire and Falcon acquisitions and the related uncertain tax position accrual for Falcon. This amount is in the Contractor Solutions segment and consolidated results as other expense. Our consolidated adjusted EBITDA for the third quarter increased by $6 million to $37 million or 18% growth when compared to the prior year period.

Our adjusted EBITDA margin improved to 21% as compared to 18% in the prior year quarter, driven by revenue growth and gross margin expansion partially offset by incremental employee expenses and increased travel to drive revenue growth. We continue to strive for additional EBITDA leverage as we grow revenue and prudently manage expenses. Net income attributable to CSWI in the fiscal third quarter was $17 million as adjusted or $1.07 per diluted share compared to $16 million or $1.01 per diluted share in the prior year period, representing growth of 6%. Our Contractor Solutions segment with $115 million in revenue accounted for 66% of our consolidated revenue and delivered $3.5 million or 3% total growth as compared to the prior year quarter.

All growth in the quarter was organic, came from all end markets and was a result of pricing actions and increased unit volumes. Segment adjusted EBITDA was $33 million or 29% of revenue compared to $28 million or 25% of revenue in the prior year period as our margin growth continues. The increasing margins resulted from the company’s ability to maintain and even increase some pricing while leveraging the lower year-over-year freight costs. Our Specialized Reliability Solutions segment revenue decreased 7% to $34 million, primarily due to a temporary delay in shipments at quarter end. We expect to fully recover this missed revenue in our current fiscal fourth quarter. We were able to leverage the segment EBITDA and EBITDA margin of $5.2 million and 15% respectively in the fiscal 2024 third quarter, compared to $5.1 million and 14% in the prior year period of managing expenses and driving operating efficiencies.

Our SRS team remains focused on top and bottom line growth as well as offering the right mix of high-value products to our customer base around the world. Our Engineered Building Solutions segment revenue increased to $28 million, a 13% increase as compared to $25 million in the prior year period. Bidding and booking trends remained solid. In fact, we ended December with our eighth consecutive quarter of record backlog in this segment. At the end of the fiscal third quarter, our book-to-bill ratio for the trailing eight quarters was about 1.2:1. Segment EBITDA grew 49% to $4 million, or 14% EBITDA margin in the third quarter compared to $2.7 million and an 11% EBITDA margin in the prior year period. Transitioning to the continuous strengthening of our balance sheet and cash flow, we ended our fiscal 2024 third quarter with $25 million of cash and reported record fiscal third quarter cash flow from operations of $47 million compared to $37 million in the same quarter last year.

For the current year-to-date period in fiscal 2024, the company had a record cash flow from operations of $142 million, or 69% growth compared to $84 million in the first three quarters of the prior fiscal year. Our free cash flow, defined as cash flow from operations minus capital expenditures, grew 31% to $43 million in the fiscal third quarter as compared to $33 million in the same period a year ago. That resulted in free cash flow per share of $2.76 in the fiscal third quarter as compared to $2.13 in the same period a year ago. This impressive level of free cash flow fuels our capital allocation strategy and ultimately enhances shareholder value. As Joe mentioned, as part of our broad capital allocation strategy, during the quarter we paid down $20 million of our outstanding debt.

We ended the fiscal third quarter with $153 million outstanding on our $500 million revolver. Our bank covenant leverage ratio at quarter end was 0.69 times, an improvement from 1.3 times at the end of fiscal 2023 due to our strong EBITDA growth and the $100 million paydown of our revolver in that time frame. As a reminder, at the end of the fiscal 2024 second quarter, our bank coverage leverage ratio was 0.85 as the company has been in the lowest tier of our revolver pricing since reporting our fiscal 2024 first quarter, reducing our interest rate spread and creating interest expense savings. We continue to maintain strong liquidity in a tough financial environment. To remind everyone once more, in February of 2023, we entered into an interest rate hedge for the first $100 million of borrowings under our revolver.

During the fiscal third quarter and the first three quarters of the year, the interest rate hedge saved us approximately $400,000 and $1.1 million, respectively in interest expense. Our effective tax rate for the fiscal third quarter was 43.2% on a GAAP basis and 32.5% as adjusted. The higher-than-normal 32.5% effective adjusted tax rate was driven by the finalization of the international tax deduction and credits for the fiscal 2023 US federal tax return and the effect of seasonality of revenue on our fiscal third quarter. We expect our adjusted effective tax rate to be between 27% and 28% for fiscal 2024. As we look out to the rest of fiscal 2024, we anticipate delivering full year record revenue growth with continued meaningful operating leverage.

We also expect the current full fiscal year to close with record adjusted EBITDA and adjusted EPS as well as record cash flow. With that, I’ll now turn the call back to Joe for closing remarks.

Joseph Armes: Thank you, James. To summarize, during the third fiscal quarter of 2024, we continued to deliver on our commitments by posting record results across the board, highlighted by organic revenue growth, expanded margins and robust cash flow. While there has been uncertainty in certain key end markets all year long, we still expect to outperform versus the end markets we serve. We will focus on leveraging our strong distributor relationships and delivering earnings growth through expense optimization. We will continue to demonstrate capital discipline, drive cash flow conversion, and deliver sustainable growth in shareholder value. Because how we succeed matters, CSWI will continue to focus on our most important asset, which is our people.

I would like to share one safety metric that is extremely important to our management team. That is our TRIR, the Total Reportable Incident Rate. The final TRIR for the entire enterprise for calendar year 2023 was 0.9, down significantly compared to 1.9 for the calendar year 2022. Our continued commitment to keeping our team members safe on a daily basis has reduced our TRIR by over 50% for the calendar year. I want to thank everyone at CSWI for contributing to our continued success and achieving this meaningful milestone for the company and all of our employees. Continuing with our theme of people, you may have seen in a separate news release this morning that we announced the appointment of Jeff Underwood to Senior Vice President of CSWI and General Manager of the Contractor Solutions segment.

Jeff will succeed Don Sullivan in his current role as the Head of Contractor Solutions. Don will remain with CSWI as an Executive Vice President and assume the new role at Corporate of Chief Strategy Officer and ensure a smooth transition of leadership. Very happy to welcome Jeff to the executive leadership team and especially pleased that Don and I will continue to work closely together. As we approach the end of a record fiscal 2024, we expect a solid fourth quarter, and we’re off to a good start with what appears to have been a strong January for our businesses. We are now preparing our budget for fiscal 2025, and while there’s still much work to be done as we finalize the budget, we recognize there are variables that can change throughout the year.

We do expect to show revenue growth and to maintain or expand our operating margins. We also expect to pursue attractive acquisition opportunities that would supplement our organic growth. We believe that the future is very bright. While we do have temporary headwinds from time to time, the fundamental investment thesis for our business remains firmly intact. We remain focused on the long-term growth of the company while delivering year-over-year growth in revenue and profits. In our largest end market, HVAC/R, we offer innovative, high-value products that our customers prefer, and we remain focused on the products and subcategories that are growing faster than the overall industry. We continue to experience rising temperatures, higher homeowner expectations for comfort, and a growing installed base, driven in part by a housing shortage.

We believe these dynamics provide a backdrop where we can deliver long-term value for our shareholders. Now, as always, I want to close by thanking all of my colleagues here at CSWI, who collectively own approximately 5% of CSWI through our stock — our employee stock ownership plan, as well as our shareholders for their continued interest in and support of our company. With that operator, we’re now ready to take questions.

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Q&A Session

Operator: Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Jon Tanwanteng from CJS Securities. Please proceed.

Jon Tanwanteng: Hi. Good morning, everyone. Thank you for taking my questions and really nice job on the margins, especially given that missed shipment. I was wondering if you could tell us what was actually delayed and what was the actual impact on the quarter. Number one. And number two, if you’ve already seen that ship out in January, or if that’s still in the common, and when you expect to make that up.

Joseph Armes: Hey, Jon. It’s Joe. It wasn’t one shipment. It was a series of shipments. Just missed opportunity at the end of the quarter. There were some packaging shortages. There were some staffing shortages and things that did that. Yes, we are already seeing that flow through in January. And as James and I both mentioned, that should be fully realized in the final quarter here. So the back half of the year, the full year, is still completely intact.

Jon Tanwanteng: Got it. Okay. And was it in just the SRS segment or was that in multiple segments?

Joseph Armes: No, only in SRS.

Jon Tanwanteng: Got it. Okay. Could you also quantify the strength you’re seeing in January? Is that because of the shipment pushouts or is that on an organic basis excluding that effect?

Joseph Armes: I would say excluding that effect.

Jon Tanwanteng: Okay. Got it. And then you mentioned shipping costs going up even despite all the freight improvements you made in the last year. I was wondering, one, how much do you ship through the Red Sea today, if that much at all? And how much do you expect to see inflation in that shipping and freight for you guys this year?

James Perry: Yeah. Jon, good morning, it’s James. Thanks for being on as always. Yeah, we do have some shipments from our Vietnam facility that will travel through the Suez Canal normally. Those shipments have all been rerouted so they’re all going south around the south tip of Africa as most shipments are. We have other shipments that go in different directions, of course, but those have been rerouted. You have seen an increase in pricing. As you know, pricing was down a couple thousand dollars a few years ago, we got up to $20,000 plus back to a couple of thousand. We’re seeing rates out there, call it $4,000 or so. You’ve seen things pop. We expect that this is rather temporary for now. We’ll see. It’s only been a few weeks.

But number one, our cargo is safe. It’s being rerouted. Things take a little longer to get here. This is also the time that we’ve spent the last couple of weeks as a lot of manufacturers have been stocking up because you have the Tet holiday when all production shuts down for 10 or 12 days in Asia, us being no exception. That starts, I think on Saturday in fact. So we kind of get ahead of that. So we’ve had some shipments come through. So you really have a couple of weeks here where things — you won’t see that impact in that respect. There was a lot of media in the last couple of days around this seems to be somewhat temporary. It’s not fully baked into supply and demand. So we’ll see. I’ll remind you, however, that when we do put something on a boat and as you know, we ship a few dozen containers over every week from our facility, it takes several months for that to flow through our cost of goods sold.

So you’re still seeing this last quarter, Q3, the current quarter Q4, still working off of a lower freight rate. So we’re still experiencing that year-over-year delta in the pickup. This fourth quarter, last year this time rates had come down, so that delta is starting to minimize. So you’ll see this temporary pop more in the first part of next year. We’re monitoring it closely, working hard on efficient rates, alternative routes, and those kind of things with our shipping partners, but still feel good where we are. But that’s one of the elements, as Joe talked about as we go through our budget, how that will impact things. And most importantly, we want to be sure we preserve margins so we’ll take the actions we need to do to be sure that we stay intact from our expectations.

Jon Tanwanteng: Got it. That was kind of a follow-up. What do you expect to do on pricing, I guess to reflect these rates? Is it going to be like a surcharge? Is it just part of your normal pricing increases as you go through the year? And does that also incorporate the increased retention compensation that you were talking about earlier?

James Perry: Yeah, that’s dynamic. We’ve already put through our normal annual seasonal price increases. We announced those a few weeks ago, and those go into effect here pretty soon. And so that’s normal. And we achieved the normal kind of back-to-normal prior to hyperinflation pricing increases that we would normally see. Do we need to adjust things to account for shipping rates? We’ll see. If this becomes a permanently higher rate, then our team is certainly ready to look at that and what the market will bear and what’s appropriate. We always, like I said, maintain our margins. Do a good job with that. I think we assume labor costs are going to be up. That’s already baked into our expectations, those kind of things. But the dynamic around shipping rates, how long that lasts, and what the impact really looks like it will be, will determine if we need to take action going forward.

Jon Tanwanteng: Okay. Great. Thanks, guys. I’ll jump back in queue. Appreciate it.

James Perry: Thank you, Jon.

Operator: Our next question comes from Julio Romero from Sidoti & Company. Please proceed.

Julio Romero: Thank you, and good morning, Joe, James and Alexa. Maybe to start on Contractor Solutions. Nice job. Once again, growing unit volumes there. I wanted to ask what the first month of calendar ‘24 has kind of told you about how the remainder of the calendar year will shape up in regards to HVAC/R demand, what you’re hearing from customers, and what your boots on the ground are seeing.

James Perry: Sure, Julio. This is James. Good morning. Thanks for being on the call, as always. Yeah, we wanted to give you a little peak into January to give you a sense of what Q4 looks like. It’s just one month. We’re literally starting to close the books today. But across the board, we felt really good about January. And as Joe mentioned earlier to Jon, that’s not just on the heels of making up for the lost shipments in SRS in December. Right now we feel good. We’re at the very beginning of the early buying season for Contractor Solutions. That HVAC market will start really stocking up the next couple of months. A lot of us were at the industry show just last week. A lot of people reported it was record attendance. A lot of mixed conversations when you talk to folks.

But we continue to outperform the market. We are indexed to the subcategories, as Joe mentioned, that grow faster than the unitary ducted HVAC OEM market. There’s some expectations that could be down this year, some relatively flat. But like we said, we expect growth. The ductless market continues to grow as a percent of share and the number of products, as you and our shareholders know that we have tied to that ductless market continues to grow. Areas like search protection continue to grow and we’re indexed to that space more and more as we go along. So our commercial team continues to find products to introduce and innovate that will outperform the market. So it’s hard to say that January, the strength that we’ve seen, is a precursor to an entirely great season.

But we will certainly take a good January. One thing I will say without getting too deep into it. We’ll report back in May when we have a good sense of how the start of the year looked out. We can never predict the weather, but we talked a lot the last couple of quarters about destocking. And we’ve said that generally it feels like that’s behind us. And I think the fact that we saw in Contractor Solutions and nice January tells us that folks are stocking up for what they anticipate to be a good season.

Julio Romero: Thanks very much. That’s really helpful color there. And you talked about your efforts to outperform the market on the HVAC side. Some of that’s related to your efforts to increase sales of some previously acquired product lines, taking them nationwide. Can you just speak to that and maybe how much more runway you have with that?

James Perry: I still think there’s runway. It’s a great question. We — you go back to even TRUaire over three years ago now. We’re still introducing that product to some new customers because we want to be really sure that when we introduce a product and they’re going to displace a competitor, that we’re going to give them the highest level of customer service, the highest availability of inventory, the pricing, that makes sense for us and them. So we’re still converting customers from TRUaire and Shoemaker from three years and two years ago, respectively. One example I’ll give you, though, of a recent one is Falcon. That’s now organic because Falcon is more than a year old. So we call that organic. That was a West Coast centered product for the most part under marketed, under commercialized, because of — the ownership team did a great job innovating and selling the product, but they were somewhat limited.

And it’s a great example of our model of shipping that out to more distributors. That was a slow introduction. We got the product in our catalog immediately and moved the inventory over. It was literally a couple of hundred-mile move. But we now have introduced that nationwide. Now it’s in all of our warehouses. Now the customers are more aware of the product. So our ability to now kind of own the water heater, so to speak, and have a full package of things around the water heater that the Falcon connectors attach to is now a full product. We had a whole part of our booth at the show last week, in fact, around the water heater, and Falcon is prominent. So it takes time. So there is certainly runway for those acquisitions we made about 18 months ago, as well as still runway for TRUaire and Shoemaker.

So, yeah, I appreciate you recognizing that. You don’t get all that day one, you don’t get it all quarter one or year one. It is a long cycle of introduction and continued opportunity for growth.

Julio Romero: Very helpful there. And then just wanted to ask about the other press release you had this morning regarding the appointments. Can you maybe talk a little bit about Jeff’s background and what he brings to the role of GM of Contractor Solutions? And same question about Don and what he brings to the Strategy Officer role.

Joseph Armes: Yeah. This is Joe. I’ll start with Jeff. I mean, Jeff’s been here for five years now, charge of sales and marketing. And when we talk about the professionalization of our go-to-market strategy for the Contractor Solutions segment, that’s been Jeff’s initiatives and the growth and really the increase in size and scale of that business has been in large part attributable to those initiatives and the great work that’s been done there. So a real strong track record here. Jeff comes from — came to us from Goodman, where he’d worked with Don before. Before that, Jeff had been at Bain. And just a really strong background, a lot of experience, well known in the marketplace, in the industry, has been very, very integral to our acquisition strategy for that business.

And so a perfect kind of transition from Don to Jeff there, just the way you’d like to have it internal. Somebody who’s been here had a lot of success internally, well known by our team and by our customers, and really expect just a completely seamless transition there on April 1, Don being a big part of that as well. It takes both of them to have a seamless transition. Don has been the most senior operating exec that we’ve had around here for a while and has just a tremendous track record of success. We have leaned on him to integrate these acquisitions and to make them successful, and he has done a phenomenal job with that. So just expanding the opportunity here for him to work across the segments. But really, I think Don’s going to spend a lot of time looking for that next meaningful acquisition and hopefully having an opportunity to integrate another high-profile scale acquisition that will be really, really accretive for our shareholders.

Julio Romero: Helpful. Well, congrats to Jeff and Don, and I’ll pass it on.

Joseph Armes: Thanks, Julio.

James Perry: Thanks, Julio.

Operator: This concludes our question-and-answer session. I would like to turn the floor back over to Joseph Armes for closing comments.

Joseph Armes: Great. Thank you everyone for joining us for this Q3 call. We appreciate your interest and look forward to speaking to you again in May. So, thank you.

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