Diebold Nixdorf, Incorporated (NYSE:DBD) Q3 2024 Earnings Call Transcript

Diebold Nixdorf, Incorporated (NYSE:DBD) Q3 2024 Earnings Call Transcript November 7, 2024

Diebold Nixdorf, Incorporated misses on earnings expectations. Reported EPS is $0.53 EPS, expectations were $1.36.

Operator: Hello, good day and welcome to Diebold Nixdorf’s Third Quarter 2024 Earnings Call. My name is Pauli, and I’ll be coordinating today’s call. Following our speaker’s remarks, there will be a question-and-answer session. [Operator Instructions] And finally, I would like to advise all participants that this call is being recorded. Thank you. I’d now like to turn the call over to our host, Chris Sikora, Vice President of Investor Relations. Chris, please go ahead.

Chris Sikora: Hello everyone, and welcome to our third quarter 2024 earnings call. To accompany our prepared remarks, we have posted our slide presentation to the Investor Relations section of our website. Before we start, I will remind all participants that you will hear forward-looking statements during this call. These statements reflect the expectations and beliefs of our management team at the time of this call, but they are subject to risks that could cause actual results to differ materially from these statements. You can find additional information on these factors in the company’s periodic and annual filings with the SEC. Participants should be mindful that subsequent events may render this information to be out of date.

We will also be discussing certain non-GAAP financial measures on today’s call. As noted on Slide 3, a reconciliation between GAAP and non-GAAP measures can be found in the supplemental schedules of the presentation. With that, I’ll turn the call over to Octavio.

Octavio Marquez: Thank you, Chris, and thank you all for joining us today. Now to begin on Slide 4. Our focus on execution, accountability and exceeding customer expectations resulted in another strong quarter. I am proud of the global Diebold Nixdorf team as we have now achieved seven consecutive quarters of margin expansion. Our focus on lean operating principles and continuous improvement is creating a solid operating platform for our world-class products and services. Given our strong year-to-date execution, we are well positioned to finish the year at the high end of our adjusted EBITDA guidance of $435 million to $450 million. We remain focused on continuing our momentum throughout the rest of this year and progressing in our efforts to build a more disciplined, high performing banking and retail technology leader that is strongly positioned for long-term Success.

Moving to Slide 5. The DN’s continuous improvement flywheel always starts with people who make Diebold Nixdorf a great company. We are investing in our people so we can implement world-class operations, create leading-edge products and deliver superior service. To help us achieve our people focused initiatives, during the quarter, we rounded out our executive leadership team with the addition of Kathleen Creech as our Chief People Officer. Kathleen will help drive our people’s strategy forward, ensuring we continue to make DN a great place to work. With Kathleen’s addition, we have built a well rounded and experienced leadership team that is fully aligned and committed to serving our customers and delivering value to our shareholders.

A major component of our continuous improvement journey is the adoption of lean operating principles, which our teams have actively embraced. Over the last couple of months, we conducted three Shingijutsu Kaizen events to improve safety and quality, reduce floor space and inventory, and enhance the flow of people and parts to drive efficiency. As you can see, the impact of these lean activities are reflected in our financials in the form of sequential margin improvement. Slide 6 includes a few photos of the teams in action in our Paderborn, Germany and Manaus, Brazil facilities. We are building a lean operating system enabled by culture, competency and a commitment to drive operational excellence and transformation. I want to thank our employees for embracing our lean and continuous improvement mindset.

I anticipate we will see continued, measurable improvements as we broaden our adoption of lean outside of manufacturing and into our service operations. We are investing to expand the implementation of our cloud-based service suite to further improve customer support. This will help our world-class and dedicated field technicians, dispatch centers and help desks serve our customers more effectively and efficiently. With that, I will turn the call over to Tom to go through the financial results.

Tom Timko: Thank you, Octavio. Starting on Slide 7 with an overview of our non-GAAP results. The third quarter represents another strong performance. Banking continues to generate disciplined profitable revenue growth up 3.8% year-over-year driven by strong demand for our DN Series recycling units and improving service performance. This was offset by the continued challenging macro environment for retail. Total revenue of $927 million decreased 1.7% year-over-year. Gross profit improved 8.2% year-over-year and was primarily driven by the benefits from our supply chain and logistics initiatives combined with our ongoing pricing discipline. Gross margin expanded by 250 basis points year-over-year due to stronger product profitability.

The third quarter represents the highest product margin in DN’s history. Sequentially, operating expense was down slightly as we maintain our discipline and improve operating leverage. On a year-over-year basis, operating expense is up 8.9%. The increase in the quarter reflects the normalization of stock-based and long-term incentive compensation. Excluding this impact, operating expense would have been flat year-over-year. As a result, adjusted EBITDA of $118 million is up 7.7% compared with the prior year. Adjusted EBITDA margin expanded 110 basis points to 12.7% year-over-year. Looking at free cash flow, third quarter was only a use of $25 million, which was favorable by $70 million year-over-year. This favorable performance was driven by our efforts to have more linear quarterly cash flow combined with higher EBITDA and better working capital efficiency.

Moving to Slide 8, and our year-to-date results. Similar to our update last quarter, higher revenue and gross margin expansion from our continuous improvement initiatives combined with disciplined operating expense is flowing through to the bottom line. This is resulting in strong year-over-year growth in profitability and free cash flow. Adjusted EBITDA of $340 million is up 32% compared with the prior year and adjusted EBITDA margin expanded 290 basis points to 12.3%. Year-to-date free cash flow is a use of $77 million representing a much more linear approach to the year compared to our past seasonality and is the lowest year-to-date cash use since 2019. This positions us well to achieve our full year expectation of plus 25% free cash flow conversion.

Turning to Slide 9. Banking delivered another outstanding performance this quarter. Revenue of $691 million was up 3.8% versus the prior year driven by product revenue growth of 10.1%. Favorable product mix from higher cash recycler deliveries in Europe and North America combined with improved service performance drove year-over-year revenue growth. Banking gross profit increased by $34 million year-over-year to $198 million and gross margin expanded 400 basis points demonstrating improved operating leverage. The significant product gross margin expansion was due to greater supply chain efficiency and continued pricing rigor. Banking service gross margin, which continues to be a focus area for driving improvement was up 110 basis points year-over-year.

Major wins in the quarter include the renewal and expansion of large multi-year product and service contracts in the U.S., Netherlands and Brazil, which we expect to see the benefits of in 2025. Also, our India manufacturing facility has enabled us to win new customers and reestablish our presence in the region. Banking has been performing extremely well this year and is keeping us on track to achieve our full year targets. Moving to Slide 10. The macro environment continues to impact retail product revenue, but the team is seeing early signs of stabilization with a growing opportunity pipeline and slight sequential revenue growth. Retail revenue of $236 million was down 15% versus the prior year. Product revenue declined primarily due to lower self-service shipments.

Service revenue was down slightly year-over-year as growth in contract revenue was offset by timing in the delivery of large projects, which we expect will move into the fourth quarter. Retail profitability was under pressure this quarter from the top-line headwinds with gross margins of 25.7% in the quarter. Product gross margin was up 40 basis points year-over-year as a result of our supply chain initiatives. However, this was more than offset by the decrease in service gross margin due to the push out of project timing. Despite the near term market challenges, we expect sequentially improving retail product revenue and gross margin in the fourth quarter and the long-term outlook in retail remains positive with a recovery in 2025. On Slide 11.

We are highlighting our efforts to drive more linear free cash flow across each quarter. The company is now more efficiently managing free cash flow with improved commercial and operating rigorous. As we pointed out already, you can see evidence of our progress in our year-to-date results. We have a clear line of sight to delivering on our full year expectation of greater than 25% free cash flow conversion. Also as a reminder, looking beyond 2024, we expect to achieve greater free cash flow conversion over the next 12 months to 24 months approaching 50% of adjusted EBITDA by driving higher profitability through continued margin expansion especially in services, lower debt costs with an anticipated refinancing, elimination of non-recurring payments to certain vendors related to our corporate restructuring of over $60 million, continued working capital efficiency and reduced restructuring and professional fees.

Lastly, we end the quarter with cash and short-term investments of $346 million and our net leverage ratio remains stable at 1.6 times. On Slide 12, as a result of our solid performance year-to-date, we expect to finish the year at the high end of our adjusted EBITDA guidance of $435 million to $450 million. This reflects stronger profitability driven by the impact of our lean and continuous improvement actions. We are reiterating our previous guidance of flat revenue and plus 25% free cash flow conversion. In the fourth quarter, we are accelerating banking’s reentry into certain Asia Pacific countries as our manufacturing ramps in the region. This is part of our plan to grow installed base and drive higher recurring service revenue in the region.

The timing of this regional product mix will lower product margin near term. However, we expect to see our product gross margin in the mid-to-high 20% range on an annualized basis. Turning to early thoughts on 2025, we are still in our annual planning process, but wanted to give you some directional guideposts for next year. We expect low-single-digit year-over-year revenue growth with continued strength in banking and a second half recovery developing in retail. Adjusted EBITDA is expected to grow in the mid-to-high single-digit range year-over-year and we expect free cash flow conversion of plus 40% in 2025, which is a meaningful start on our path to plus 50% conversion longer term. We will provide additional details on 2025 and our longer term industry and financial outlook at our Investor Day on February 26 at the Lotte Palace in New York City.

Please mark your calendars and plan to join us for the morning. Our Investor Relations team will send out a formal save the date and link to that registration. Now moving on to Slide 13. We want to thank all of you who participated in our recent investor perception study. We have taken your feedback and would like to share our foundational building blocks to create significant shareholder value going forward. These building blocks are geared towards implementing best practices from the investment grade companies I’ve worked for in the past. Our goal is to maintain net leverage at approximately 1.5 times as well as further enhance our capital structure and lower interest expense with our upcoming debt refinancing. We understand that we need to simplify the complexity of the past related to non-recurring items.

We expect to reduce professional fees that have been elevated in recent years and return to more normalized working capital levels with a particular focus on payment terms with suppliers. This year clears the deck related to the overhang of our past corporate restructuring and puts us in a strong position to further optimize cash flow. Additionally, we are implementing a balanced capital allocation strategy with a returns based mindset to ensure we unlock additional benefits for our customers and return value to shareholders. We have made early progress on each of these items and will elaborate in more detail at our Investor Day. Now, I will turn the call back to Octavia.

Octavio Marquez: Thank you, Tom. To wrap things up on Slide 14. We continue to have a lot to be excited about at the Diebold Nixdorf. We are a stronger company for our customers and employees and have improved our operational execution. We expect to finish 2024 strong, significantly ahead of our initial profitability expectations entering the year. I am excited about the future of DN as our world-class solutions continue to gain traction with our highly attractive customer base of the world’s leading banks and retailers are over $2 billion in service revenue, mostly recurring and are approximately $1 billion of product backlogs. This shows that we are winning in the market. Additionally, we are only at the initial stages of our lean journey and as you have seen we have made tremendous improvements in manufacturing efficiency.

We are expanding our lean efforts throughout the enterprise going into 2025 with a particular focus on our service business. This year we have strengthened our management team with key additions as well as added expertise to our board. We are all excited about the future of the company and focused on discipline, value creation for our shareholders. And with that operator, please open the call up for questions.

Q&A Session

Operator: Thank you. [Operator Instructions] And your first question comes from the line of Matt Summerville of D.A. Davidson. Please go ahead.

Matt Summerville: Thanks. Maybe first you mentioned, Tom, in your prepared remarks that you have some confidence that retail is going to get better in 2025. I was hoping you guys could expand upon that. What gives you that confidence? What you’re seeing in the funnel and if you could delineate a bit between pause and self checkout with your response? And then have a follow-up.

Tom Timko: Yes, great. Thanks Matt. As it relates to the retail service margins, it was really driven by actually all retail was really driven by a push out of some large projects that we had at some food and convenience customers. So really it’s more of a timing issue from Q3 into Q4. So I think we’re with our customer base beginning to see more stabilization. You’re starting to see that in the revenues up slightly period-over-period, but margin still being impacted by the headwinds of the reduced volumes.

Octavio Marquez: So Matt, sorry to interrupt. Adding to Tom’s comment, this is Octavio, you asked about the pipeline and we do see the pipeline continue to build. We’ve recently made some additional investments in our North America organization, adding more talent to that, to our team there. So again, we continue to see more opportunities and we just need to continue pushing and developing them. But we feel confident that as we look outwards, the pipeline is there. We just need to accelerate converting that into orders now.

Matt Summerville: And then Octavio, as we typically kind of do on these quarterly calls, if you can maybe take a minute and just kind of do the regional deeper dive on what you’re seeing in the banking business from a demand standpoint, maybe using a baseball analogy, describe what inning we’re in with this kind of refresh cycle. And then I want you to importantly address your strategy in Asia Pacific, specifically India. This has been a market that I’ve obviously covered both you guys and your lead competitor for over 20 years that has been well known as being hyper price competitive on the hardware side, yet pretty lucrative on the service side. Diebold has been in the market, then out of the market, in the market, out of the market, and now you’re getting back in again. So help me understand kind of the logic behind that and why this is the right move. Thank you.

Octavio Marquez: Sure. So Matt, I’ll start preparing better for this question since you asked me every quarter, so I’ll have to remember better the baseball analogy. But, I still think we’re, kind of in the first third of this game, a little, probably getting into the middle of the game. But when I look at the geographies, North America, we continue to see that every unit that, whether it’s a full function machine out there is being replaced with a recycler. So we continue to make significant progress there. As you know, it starts with the large customers. Not all of them are ready for recycling. As you know, it requires some software changes in the infrastructure, but everybody’s buying recycling machines right now as they prepare for that.

That will also translate into our, regional accounts, community banks, credit unions that are also deploying recyclers even as they wait for their network providers to provide that capability. So we see that the continued adoption where customers see the benefits, understand the benefits and are just preparing themselves to turn out that functionality when it’s available. But again, we continue to see a very strong North America market and the refresh cycle, I would say is, midway through. So we are very optimistic about North America. If I go South, Latin America again, last quarter I mentioned Brazil and the importance of some very large government deals. We have now won one of them, we’re now working on winning the next one. So we’re very, very excited that those markets will continue to grow and we’re very focused on them.

Europe has surprisingly been a very pleasant surprise for us as we were expecting it to be more of a flattish market. But it’s, actually continued to grow and some of it is driven by some of the networks in Europe mandating that their customers move to Windows 11. So we’re seeing that in Germany, for example. So again, as you know, a big market for us. So, we’re benefiting from being the first ATM provider certified in Windows 11. So Europe remains a stable market and we see continued success going forward. I’m actually very proud of our European team for what they have accomplished this year. And when we go to APAC, which was a little bit of your question, you are absolutely right, Matt. The Indian market is a very challenging market on the hardware side.

That’s why we decided to invest in an India facility to create a more competitive cost profile to actually be able to compete effectively in that market on the hardware side. It is a journey. We’re in the first iteration of our manufacturing there in India, but we will continue improving our cost profile there. And what we’re trying to do there is, we’ve been shrinking the service base there as we didn’t participate in the market for multiple years. I want to start regrowing that service base. It is very profitable. Once you have the service annuity in India, you’re just or, and I say India and other Asia-Pacific countries, it’s not exclusive to India. The service business there goes to the OEM and it’s usually very profitable and it’s very profitable.

So that’s what we’re trying to do, continue adding to our service annuity globally. And APAC with its high market growth, it’s one that is an attractive area to do it.

Matt Summerville: Got it. Thanks. I’ll get back in queue.

Operator: [Operator Instructions] And your next question comes from the line of Matt Bryson of Wedbush. Please go ahead.

Matt Bryson: Hi, thanks for taking my question. I’m actually going to follow up on some of the questions Matt asked, just with the push out in that retail services revenue. Tom, is there any way you can give us a bit more specifics in terms of how much revenue was impacted and what gross margins would look like if things had closed when you thought they were going to close?

Tom Timko: Yes, look, I think our margins probably were impacted, maybe 50 basis points to 100 basis points, quarter-over-quarter as a result of that push out. Revenue wise not quite sure I have that number handy in front of me. But from a margin perspective it’s probably in that range right now. Sorry, it was probably closer to 10-ish [ph] million on the revenue.

Matt Bryson: Okay. Awesome. And then second question is just with your efforts in Asia, can you talk more broadly around what you see as the revenue opportunity or incremental revenue opportunity that you can see through that expansion. On the cost side, is there anything else that we need to think about kind of added cost to the model into 2025 to support that. And when should we begin to think about any incremental revenues really showing up in the model?

Tom Timko: Yes. So I’ll answer and kick it over to Octavio. So over the next, you know, think about it as two quarters. We’re accelerating banking’s sort of reentry into those Asia-Pacific countries as our India facility ramps up its manufacturing. So part of our plan to grow the installed base and drive the higher reoccurring service revenue in the region. So the timing of the impact of this regional product mix will lower margin in the near term. However, we do expect to see our product gross margin return to the mid-to-high 20 range on an annualized basis in 2025. So the potential near term impact and on gross margin here is probably somewhere around 100 basis points or so.

Octavio Marquez: Probably important to remember, Matt, that we’re talking about gross margin rate, however, we do see incremental revenue, revenue and margin dollars that will flow through. And our goal is to always be at the margin level that we are right now. So it will always fluctuate a little bit with the regional mix. But we are confident that the margin levels that we have in product are sustainable. And part of the efforts that we’re doing in leaning out our manufacturing across the globe we believe are very, very sustainable. So again I would tell you that you’ll start seeing the revenue lift starting next year. And the, and the margins, kind of fluctuating around where they are right now. Some quarters a little bit higher, some quarters a little bit lower. But we believe that this, that this level is sustainable.

Matt Bryson: Yes, no, understood. And I guess it’s all margin accretive in terms of margin dollars. I guess my question is more do we have to think about there being any incremental CapEx or OpEx that was in the model that isn’t in there yet?

Octavio Marquez: No, Matt there, as our model is very, very light in capital expenditures. We’re, we don’t see any, we don’t require any significant capital expenditures, particularly for the India, India work that we’re doing. And I would actually think that this will be something that will help us significantly as we will utilize our workforce in India and in Asia-Pacific and generally more efficiently.

Tom Timko: Yes, the only thing I would add to that Matt, is as we use the term investment and reaccelerating banking. It’s really meant the investment in some of the margin decrease that we’re seeing in order to begin to build that C base, which will be profitable as we enter into the service periods of those contracts.

Matt Bryson: Awesome. I’ll jump back in the queue. Thank you.

Tom Timko: Thank you, Matt

Operator: And you have a follow up question from Matt Summerville of D.A. Davidson. Your line is open.

Matt Summerville: Just a couple more quick ones. Can you just kind of walk through the kind of the EBITDA bridge down from 3Q to what’s implied in 4Q either. If you can do that either sequentially or year-on-year, that might be helpful. I realize you’re trying to improve linearity and all of that. Nonetheless, fourth quarter is still typically strongest. So maybe with that service pushing out in retail that’s going to hit in Q4 that would be providing some goodness. So help me understand, I guess the context of the implied 4Q EBITDA guide either relative to Q3 or the same period last year. Thanks.

Tom Timko: Yes, Matt, look it, it really comes down to a much more disciplined operating approach running a more normalized linear business as clearly Q3 and Q4 last year benefited from, pent-up demand. This year is more normalized and you know ought to be viewed as kind of the new baseline again driven by the flow through of the pent-up product backlog. Right, that’s come down period-over-period. Q4 2023 was the strongest product revenue quarter post-COVID impacted Q4 shipments to the lower margin countries as well as what we’re seeing next quarter. All that kind of gets up into the mix. But look, I would say again the guidance of $450 million [ph] at the high end, just a more disciplined operating approach to how we’re driving revenues.

And you’re starting to see some of the linearity, take hold as you compare some of the previous quarters to the EBITDA run rates versus where we landed. Again it’s good for the business and we’re just, I don’t want to sound like a, I’m a broken record here, but a more disciplined approach to our operating model.

Matt Summerville: And then as a follow up. How should I be thinking about the go forward? You talked about product gross margins looking ahead. How should I be thinking about services gross margins from here? And when do we see the company start to sustain service gross profitability in excess of 30%?

Tom Timko: Yes. So this is a great opportunity for us in 2025. So the story kind of goes like this. We expect to end the month of December at approximately 30% margin and our efforts are going to be focused on how do we maintain that throughout 2025. You look at the early months of Q4, October, November, we’re really continuing that reinvestment in our customer service levels. However, we’re encouraged by the operational improvement initiatives and what we expect to result in higher efficiencies. So right now our services group targeting the finish of the year closer to 29% service gross margins then this will position us to really drive towards 30% for the full year of 2025.

Matt Summerville: Got it. And then last, why don’t maybe you touched on some of this, Tom, but it would be helpful just to go back and can you provide kind of the more detailed –EBITDA to free cash flow bridge as we should be thinking again, big picture on 2025 driving to that 40% conversion eventually long term to 50%. Help us understand the pluses and minuses, the bigger components of that build and then maybe just touch on why you’re effective tax rate is incredibly high.

Tom Timko: Sure, I’ll take, I’ll take the free cash flow one first. Matt, thanks. Look, this is my favorite story here at the end. Directionally, if you take the high point now, right of the 2024 guide as the starting point for the bridge, just some favorability. Right. And these are all sort of directionally correct. But if you think about EBITDA next year, right which we had in the remarks, mid-to-high single-digit growth year-over-year for EBITDA, that’s probably a plus 30-ish lower interest expense, at least 400 basis points in the rate. And right now as everybody’s aware that prepayment penalty expires in Q1 to 2025. So conservatively think about that as, plus $30 million of additional cash flow. And then look our focus and this came up in the perception study as well.

And we tried to hit that on Slide 13 in the prepared remarks. Just really focused on lower professional fees. Right. Driving that down. That to me is kind of in the range of 20-ish, if not more during the year. And just because we’ve had such a push and you’ll see that in the AR and the DSO as we look to conclude the year here, even with just flat working capital, that those elements alone kind of float you right up into that plus 40% range.

Matt Summerville: Thanks, Tom.

Tom Timko: Yes, you’re welcome, Matt. And as it relates to the effective tax rate. Yes, you’re right. Extremely high rate for the quarter. But look, it was opportunistically done. Our income tax rate higher in the third quarter obviously compared to the last two as we recapitalize certain entities and higher tax rate jurisdictions to save on cash taxes. So what may be a little bit of pain in the quarter and a slightly higher rate for the year really works out well for us in terms of cash taxes and savings on that. So we would expect our non-GAAP effective tax rate for the full year to be approaching 45-ish percent, which would imply a Q4 rate of 35%. And for next year, it’s probably a little bit premature as we’re going to obviously continue to be laser focused on what our EPR is and how we can get to a more normal rate for a company like ourselves, we would expect it to be in line, if not slightly favorable to fiscal year 2024.

Matt Summerville: Understood, thanks.

Tom Timko: Yep.

Operator: And you have a further follow up question from Matt Bryson of Wedbush. Please go ahead.

Matt Bryson: Thanks for taking my question again. I’m going to follow up on Matt’s questions again, actually the first one, and I’m going to be a bit more pointed. So you’ve done $340 million in EBITDA so far. So to get to the high end, your EBITDA has got to be down sequentially around so to around $110 million. But given your revenue guidance, the flat, you’ve got to see a pretty nice uptick in revenue. I know you talked about gross margin maybe coming down a little bit because of your efforts in Asia. But I mean, it seems to me you’re really well positioned to come in above the high end of that number unless there’s some other offsets. Is there anything else you call out that is potentially an offset so that you wouldn’t see a sequential increase in EBITDA alongside revenue?

Tom Timko: It’s really what we articulated earlier. It’s mostly just product mix and the acceleration of banking. Right. I mean we’ve had extraordinarily high product revenues, sorry, product margins throughout the year. Right. Q3 sort of being the highest ever for us. And it really comes down to a little bit of geographical mix and volume. That’s the simplest answer, Matt.

Matt Bryson: Got it. I guess just, just my last question. Tom, we can take this offline if that’s better. But EBITDA and operating profit were nicely stable despite the slight decline in revenues, I guess. Can you walk me through what the delta was in net income? I think a bit of it was currency, but I still that, I was a little bit surprised that net income dropped as much as it did sequentially when operating profit was relatively stable.

Tom Timko: Yes, a lot of that was driven Matt by tax. Right. As we discussed, our ETR jumped up pretty significantly in the quarter to, on a non-GAAP basis, 65-ish percent. Right. So that’s a big driver of the difference, I would say primary driver.

Matt Bryson: Got it.

Operator: Thank you. At this time, we have no further questions. I’ll now turn the call over to Chris Sikora for his closing remarks.

Chris Sikora: Thank you again for participating in today’s call and your interest in Diebold Nixdorf. As Tom mentioned, we will be sending around more details on our upcoming Investor Day in February. If you have any follow-up questions to today’s call, please feel free to reach out to investor relations. Thanks and have a great day.

Operator: This concludes today’s conference call. Enjoy the rest of your day. You may now disconnect.