HNI Corporation (NYSE:HNI) Q2 2024 Earnings Call Transcript

HNI Corporation (NYSE:HNI) Q2 2024 Earnings Call Transcript July 25, 2024

Operator: Thank you for standing by. My name is Christina, and I will be your conference operator today. At this time, I would like to welcome everyone to the HNI Corporation second-quarter results conference call. [Operator Instructions]. Thank you. Mr. McCall, you may begin your conference.

Matthew McCall: Good morning, my name is Matt McCall. I’m Vice President, Investor Relations and Corporate Development for HNI Corporation. Thank you for joining us to discuss our second quarter fiscal 2024 results. With me today are Jeffrey Lorenger Chairman, President and CEO, and Marshall Bridges, Senior Vice President and CFO. Copies of our financial news release and non-GAAP reconciliations are posted on our website. Statements made during this call that are not strictly historical facts are forward-looking statements, which are subject to known and unknown risks. Actual results could differ materially from the financial news release posted on our website includes additional factors that could affect actual results. Corporation assumes no obligation to update any forward-looking statements made during the call. I am now pleased to turn the call over to Jeff Lorenger. Jeff?

Jeffrey Lorenger: Good morning and thank you for joining us. Our members once again demonstrated the organization’s ability to deliver strong profit growth in the second quarter. Non-GAAP EPS of $0.79 exceeded our internal expectations and was 44% higher than the prior year period and was also a record result for the second quarter. In Workplace Furnishings, the combination of our profit transformation initiatives and the benefits from the Kimball International acquisition continue to deliver strong earnings growth with segment non-GAAP operating profit growing 67% year over year. In Residential Building Products, we drove profit growth and margin expansion despite ongoing housing market challenges. Non-GAAP operating profit increased 17% year over year, demonstrating the strength of our business.

Overall our strategies, our dedicated member owners, our customer first mindset and our proven ability to manage through all parts of the economic cycle helped us drive excellent results in the first half of 2024. Looking forward, we are increasingly optimistic about the future and the opportunities that we see in both segments of the business. On the call today, I will highlight five key points that underscore our positive outlook. First, Workplace Furnishings operating margin reached a multi-decade high for the second quarter, reflecting our continued commitment to improving the profitability in this segment. Second, our combination with Kimball International is generating strong results. Third, our Residential Building Products segment posted profit growth and margin expansion despite ongoing housing-related softness.

Fourth, we expect revenue growth in both segments in the second half of the year and fifth beyond 2024, we have elevated earnings growth visibility, following those highlights, Marshall will review our outlook. I will conclude with some general closing comments before we open the call to your questions. Moving to the first point, Workplace Furnishings operating margin reached a multi-decade high for the second quarter. Workplace Furnishings non-GAAP operating margin expanded 370 basis points year over year to 11.9%. The second quarter level last seen in the late 1990s. This was also the ninth straight quarter of year-over-year operating margin improvement in the segment for 370 basis points of margin expansion was on top of last year’s strong results.

Over the last two years, operating profit margin in workplace is up nearly 9-percentage-points. This year’s second quarter margin improvement was primarily driven by strong productivity gains, driving productivity as a key part of our Workplace Furnishings product transformation plan. Our operations continue to become more efficient across the board, including significant gains in labor and material efficiency. And there’s more to come as we have line of sight to additional margin expansion in the back half of 2024 and beyond. Recall, our profit transformation plan does not require demand improvement, and our recent margin expansion has been achieved without cyclical top-line support. However, as I will discuss later, we believe the market is slowly improving and will add to our future profit growth.

Moving to my second point, our combination with Kimball International is generating strong results. KI continues to be highly accretive and was a major contributor to our record second quarter profit. KI added an estimated $0.15 to our non-GAAP EPS in the second quarter, while generating an operating margin of 13.3% and revenue and accretion surpassed the expectations we shared with you last quarter. Kimball International is providing us with new growth opportunities and strengthening our market positions. We remain very encouraged by the complementary nature and attractive post pandemic positioning of KI’s workplace offering. Additionally, KI’s healthcare and hospitality businesses are well positioned within attractive expanding segments and both generating growth as we announced in May, we now have line of sight to $50 million of cost synergies from the combination.

I’ll talk more about this later, but those synergies will continue to fuel profit growth and margin expansion over the next couple of years and again, do not require demand growth. Our confidence in the combination, strategic and financial benefits continues to prove out and accelerate. Moving to my third point, Residential Building Products posted profit growth and margin expansion. Despite ongoing housing-related weakness, our actions to drive productivity and lower costs, expanded operating margin to 13.8%. This was up 260 basis points year over year despite overall housing market pressures. Looking forward, we remain bullish about the intermediate to long-term dynamics for this business, and we expect revenue growth to return in the second half of 2024.

That leads me to my fourth topic. We expect revenue growth in both segments in the second half. I will start with some comments on expected back half Workplace Furnishings demand, then we’ll follow those with some detail on second half Residential Building Products revenue, we continue to see signs. The Workplace Furnishings market is slowly improving. Pre order activities remain elevated, but the translation of orders is continuing to take longer. For the second half of 2024, we expect Workplace Furnishings revenue to increase at a low single digit rate year over year. That outlook is based on the supportive data points in SMB and KI and with contract, our SME business continues to generate growth. SMB orders grew 2% year over year in the second quarter on top of 4% increase in the same period of 2023.

The segment of our business continues to benefit from healthy dynamics, including population shifts to secondary and tertiary geographies and relatively higher average usage in those markets Kimball International continues to perform well. KI orders grew over 3% year over year in the second quarter. As I mentioned earlier, the combination with KI has strengthened our Workplace Furnishings business and giving us access to new growth opportunities with strong market fundamentals, including health care and hospitality. Additionally, KI’s product portfolio is well pospitioned to support the hybrid work environment as companies reconfigure their spaces to better support hybrid, Ki will benefit. In our contract business. We see growth on the horizon.

Our pre order metrics remained elevated, an indication of future growth. Our year to date quoting activity, contract sales funnel and visits during design days to our Experience Center in Chicago all are up double digits year over year. Looking out, we believe we are particularly well positioned to benefit as the Workplace Furnishings market continues to improve. We have unmatched product and pricing breadth and depth. We have products that work for customers ranging from small businesses to the largest multinationals. Our brands are distributed widely across geographies from tertiary markets to the top MSAs, and we can address the needs of all workplaces, schools, health care facilities and hotels. We have adapted our product offering in anticipation of the new ways people are working and will work.

Today, most knowledge worker task supported by six activities focus, mentorship, innovation, collaboration, socialization and learning. And each of these task calls for unique furnishing applications. And design days in June, we introduced the intentional office philosophical approach to addressing the needs of today’s office by designing environments. That’s for each of these six activities. This approach to the market, our coverage of the market and our unwavering focus on the customer have us well positioned to benefit from an improving demand environment. Let’s shift to second half residential building products demand. Overall demand remains choppy, but the trends are improving. The second half, we expect residential building products revenue to grow at a mid-single digit pace versus prior year period.

This outlook is consistent with our improving order trends. When excluding changes we implemented to our early order program. Normalized second quarter orders grew 4% year over year. This is the first quarter of order growth since mid-2022 when the housing correction started. Looking forward, we expect demand to improve from here. The supply demand fundamentals for the housing market remains strong. Although recent housing inventories have ticked up, single-family housing remains massively undersupplied while demographic support additional demand growth. In addition to the improving market dynamics, we continue to invest in unique growth opportunities. These include new product innovations such as electric fireplaces efforts to better connect with builders, homeowners and homebuyers online capabilities and the expansion of our wholly owned installing distributor footprint.

Summarizing my fourth point, we are expecting top line improvement in the second half in both Workplace Furnishings and residential building products that along with continued margin expansion in both segments, it drives record EPS in 2024. Moving to my fifth and final point, we have elevated profit growth visibility through 2026. We expect KI synergies to total $50 million. This is double the estimate we provided when the acquisition closed. Traditionally, the ramp-up of our facility in Mexico is expected to contribute an incremental $20 million to $25 million to the bottom line. Both initiatives are currently underway and provide strong visibility to future earnings growth of the $70 million to $75 million in total benefit, an estimated $45 million to $50 million will positively impact the 2025 to 2026 period.

This is equal to approximately $0.7 of EPS or more than 20% growth from the current year consensus estimate. As we have communicated for several quarters, we continue to grow profit without volume growth due to initiatives like these volume growth will only enhance our profitability. I will now turn the call over to Marshall to discuss our outlook for 2024.

Marshall Bridges: Thanks, Jeff. I’ll start by quickly summarizing the outlook for demand and profit that Jeff just covered. Beginning with demand. Second half revenue in Workplace Furnishings is expected to increase at a low single digit rate year over year. I’ll note that our new outlook represents a reduction from what we provided in our April earnings release. That release implied Workplace Furnishings would grow at a mid-single digit rate in the second half. The change primarily reflects timing in the contract space. As Jeff mentioned, we continue to see elevated pre order metrics and a healthy sales funnel, both of which point to future growth. However, our contract business has a heavy mix of projects. The timing of when those projects ship and install can cause variation in our growth rates.

This type of variation is not new. We’ve seen timing impact the contract business in the past and the business order trends have been volatile this year as well. Moving into residential building products, we expect second half revenue to grow at a mid-single digit pace versus the same period in 2023. I’d also like to note that year over year trends in both segments are expected to improve from the third quarter to the fourth, which means that most of the growth that we are expecting the second half is going to be in the fourth quarter. Shifting to our profit outlook, we expect margin expansion in both Workplace Furnishings and Residential Building Products to drive continued earnings growth in the second half, our expectations for 2024 profit have increased compared to the outlook we provided in April, specifically, and we expect that our outperformance in the second-quarter will more than offset the impact from lower second half top line growth in Workplace Furnishings.

I’ll wrap up with a few comments on our balance sheet. We maintained our strong financial position. Gross leverage at the end of the quarter was 1.5 times as calculated in accordance with our debt agreements. That ratio was down from 1.9 times in the first quarter due to higher profit and modestly lower down. In addition, during the quarter, we accelerated our share buyback activity with more than $10 million of repurchases. Combination of our strong balance sheet and consistent cash flow generation provides a high degree of financial flexibility and capacity for capital deployment. Our current priorities for cash deployment remain reinvesting in the business funding dividends, pursuing buybacks and M&A opportunities. I’ll now turn the call back over to Jeff.

Jeffrey Lorenger: Thanks, Marshall. We remain committed to expanding margins in Workplace Furnishings and driving long-term revenue growth in residential building products. We had an excellent start to 2024, delivering record first half earnings, and we anticipate record EPS for the full year 2024. Beyond this year, we are positioned for continued success. In summary, we have elevated earnings growth, visibility, broad and diverse product and market coverage in Workplace Furnishings, a market-leading position in residential building products and a strong balance sheet and the ability to drive continued free cash flow. I want to thank all of our HNI members for their continued hard work and dedication to deliver these results. I will now open the call to your questions.

Operator: [Operator Instructions]. Your first question comes from the line of Budd Bugatch from Water Tower Research. Your line is open.

Q&A Session

Budd Bugatch: Jeff , Marshall and McCall, congratulations to you and your team on that strong performance in the quarter and on the guidance as well, I would like I think, to go right to talk about a little bit about revenues. I think that’s the major changes that you’re expecting from what you been doing some talk a little bit more in color of what you’re seeing in each of the segments, if you will. I say you talked a little bit about a longer cycle in contracts and what’s driving that and done, though, and the relationship to the overall economy, which if you look at some of the other reports this morning, maybe showing a little bit of a kind of a weakness and certainly some of the hard areas like cars or automobiles.

Jeffrey Lorenger: Yeah, but that’s look, we see a lot of activity that you talk about the cycle and we’ve been through this before you’ve been around you’ve seen this, and it does feel like customers are active. I mean, look, we’ve been kind of the space itself has been kind of bouncing on the bottom for a bit here. So, you know, I think what we see is that people interested in getting, you know, reconfiguring looking at their office space trying to figure out what they’re going to do. And what I would say is strategically, a lot of people are starting to figure out that they have a you know they have a position, the strategic position of what it needs to look like in the post-pandemic work model. But a lot of companies just haven’t yet reconfigured theirs, their offices to support, for instance, their particular hybrid model and but we do believe we see reality as soak.

And a lot of companies are saying we’ve now studied this long enough, and we need to we need to move out on this. And so even though it’s elongating and there’s still a little bit of hand-wringing about exactly how to execute there’s a lot. There’s a lot of interest in that in doing so and that’s what we’re seeing as we’re feeling. That’s what our customers are saying.

Budd Bugatch: We’ve heard the phrase top of the funnel in a couple of different calls and has the top of the funnel translated so far into reflect requests for proposals or refresh RFQs and are we seeing competitive bid situations that are in increase?

Marshall Bridges: Yeah but let me let me just maybe take a step back. So we’re expecting Workplace Furnishings to be up low-single digits in the back half on that. That’s really led by the SMB business and KI, those are performing above average and in the contract business is performing below that number. So your question is sort of aimed at the contract business. I would say that the contract business, as Jeff mentioned in his prepared comments, the pre order metrics are very healthy. We’re seeing double digit increases in the funnel. We’re seeing double-digit increases in quoting. Our design days visits were very strong. So all indications that that has just said that people are looking to reconfigure their office and make some moves.

However, it is being elongated, as you said, and we think that revenue is pushed out subsequent quarters. So I think what we’re seeing here is the shorter-cycle businesses continue to do a little better than the longer cycle business, but we’re encouraged by all of it.

Budd Bugatch: That’s really very helpful, Marshall. Thank you. On in the RVP, are you talking about kind of, again some growth there, and that’s been a segment that’s been under some pressure with a higher mortgage rates and lower housing activity more recently, what are you seeing that’s giving you the comfort there? Your businesses is strong. You’ve got a large market share in the in the hearth side. So is it really from the market share perspective or some of the initiatives you’ve had, like I think Jeff mentioned online and an electric furnaces, are they really what’s driving the better expectations?

Marshall Bridges: Yeah, if you look at what happened in the second quarter from an order perspective, in Residential Building Products, we showed 4% growth in orders on a normalized basis. And what really drove that was the remodel retrofit side of things and new construction was roughly flat. So the turn of remodel retrofit is very encouraging to us. That’s something that’s been soft for well over a year, really going back to 2022. Now that’s a pretty seasonally low order period for remodel retrofit. But we did see growth on a low base as we look forward, we think we’ll see growth in both new construction and remodel retrofit and be up in that mid-single digit rate in the back half.

Budd Bugatch: Got it, that’s pretty exciting because as you say on one of the one of the issues and pushbacks that you and I you and I have discussed over the last number of years is the issue of incidents and new housing of fireplaces. And I know that there’s a psychographic one of fireplaces, but some of the numbers haven’t shown that. Are we seeing any improvement in incidence in single-family housing from a standpoint of fireplaces as part of the new homes.

Marshall Bridges: Yeah, it’s hard to measure that. But what I would say is that our new construction business being flat. That’s maybe a little bit disconnected from what we’ve seen in new construction of single-family homes. And I think that reflects the affordability pressures, the mix of housing pressures that we see.

Jeffrey Lorenger: Yeah, I think we’ve got a combination right now, but it’s not it’s kind of it’s flattened out a bit on the incident rate. We’ve got a combination of affordability, spec homes and construction lags that are kind of all meeting up at the same time period. We think that will start to unlock, as you say, we’ve got a lot of investments pointed at this space as well relative to educate homebuyers and homebuilders, remodelers on the electric units are taking off a bit. And so, you know, as interest rates, we see some relief there on. We believe we’ll be able to gear up the growth. Again, like Marshall said, the turn and remodel is very encouraging. As the first in both our businesses, but we’ve been we’ve kind of been riding a little bit, you know, on the on the lower side.

And so as you said in the prepared remarks. I mean, you know, we believe we can continue to expand our margins without growth. And now that we’re starting to see some signs of growth that really that’s just add to what we’ve got going on.

Budd Bugatch: No doubt. I mean, the performance of the company and the performance of your team has been superb and remarkable. And you’re all to be congratulated on that, and I’ll look forward to seeing the results as they come forward for the balance of this year and into the into the upcoming years. Thank you.

Jeffrey Lorenger: Great. Thanks, Budd.

Operator: Your next question comes from the line of Greg Burns from Sidoti & Company. Your line is open.

Greg Burns: Good morning. When we look at the profit visibility and some of the numbers you gave around the cost savings, the $45 million to $50 million that you’re projecting for 2025 and ’26. Is that incremental? Because I think some of the KIs, I’m assuming have been realized. I just want to understand the buckets and if that’s all incremental or have you already realized the piece of that the total is going to be that over the course of the next two years.

Marshall Bridges: That $45 million to $50 million is all incremental comparatively, $45 million to $50 million is all incremental relative to 2024. So Greg, you’re right in that some of the benefits from those initiatives have been realized. Those two initiatives in total are about $70 million to $75 million of benefit on. So we’ve got a little bit of that already realized, but about $25 million of it.

Greg Burns: Okay. And I guess it doesn’t include you’re just ongoing on your maybe efficiency or cost initiatives. Do you have a number around that? Like how much that could be on an annual basis?

Marshall Bridges: You’re right on certainly a lot of organizational resources are focused on delivering that $45 million to $50 million incremental, but we will still be driving daily weekly annual productivity gains. Just to give you some color where we don’t necessarily have a forward looking guidance on that. But if you look back historically in a couple of years before the pandemic, we were averaging 1$10 million to $11 million of annual productivity gains. So I’d expect that we’d be able to deliver something in that neighbourhood.

Greg Burns: Okay. And really strong performance on the workplace margins on getting to that double digit range, it’s faster than we expected. Or do you have a target on where you think that segment can operate on a recurring basis or on an ongoing normalized basis?

Jeffrey Lorenger: Yeah, it’s a good question, Greg. And we have talked about that a lot. And I will point out that our operating margin in this segment is now 10% when you look back the last four quarters. And I would also point out there’s nothing abnormal in those in that time period. So over time, as a reference point, it averages. Just kind of how it gives you full philosophically how we think, in 2009, our operating margin in Residential Building Products is in the low single digits. Now is consistently in the high-teens. So I would tell you I don’t know that we’re blessed to be in the high-teens in the mix, but I can confidently say we’re not satisfied with 10%. And so we will continue to we’ll work on that and push that margin.

Greg Burns: All right. Great. Thank you.

Jeffrey Lorenger: Thanks.

Operator: Your next question comes from the line of Reuben Garner from The Benchmark Company. Your line is open.

Reuben Garner: Good morning, everybody. So just a follow-up on the workplace top line. Marshall, I think you referenced I believe it was quoting activity and the funnel being up double digits. I think that’s the first time I’ve heard you guys sort of reference those two and put any numbers around it. Is that a pretty clear acceleration in the second quarter? Were you seeing growth? I’m just trying to gauge one, is that directed specifically at specifically the contract piece of workplace and two, how long has this been going on? How close are we to where those kind of transition to the actual order on the order growth side?

Marshall Bridges: Yeah, those metrics are a mix of contract and other parts of the business as well, though may be a little more weighted toward contract. And what I’d tell you for me is that they’ve been elevated for some time we’ve seen this cycle where things take longer to continue. I think we’re starting to see that slightly improve. I think it’s consistent with our outlook that things are slowly turning. We’re expecting to be up in the low single digits in the second half. That’s really driven by the fourth quarter. We’re expecting the third quarter to be nearly flat and it’s really being driven by strength in SMB and KI and the contract side of things is below average right now, but we are very excited about the growth we’re seeing on the horizon contract.

Reuben Garner: Okay. And then on the margin side on Eve, if my math is right, you’ve got somewhere in the range of 350 basis points, maybe 400 basis points of margin sort of within your control in the office or workplace segment over the next few years? I guess my question is, Jeff just mentioned the last four quarters, you’re at 10%, obviously quarter in particular you were at 12%. What’s kind of the baseline that was sort of adding those incremental savings too in other words, was there anything seasonal seasonality wise on mix-wise or anything else in the second quarter that makes that number, not the right one to build off of.

Marshall Bridges: Yeah, I think we’ve been there’s nothing unusual, but we do have seasonality. So I think if you look at the last four quarters, Jeff mentioned that we’ve been at 10%. That’s probably a good number to start from, but we are talking about $45 million to $50 million incremental from 2024. So I think that’s maybe a good baseline to move from.

Reuben Garner: Okay. And then last one for me, that I don’t want to beat a dead horse, but I just wanted to clarify on the residential building products side. We’ve heard recent months, the past couple of few months, some areas are seeing a little bit of a slowdown from maybe what was expected earlier in the year. And your outlook seems to be largely unchanged. And I recognize that you have maybe easier comps because of that some dynamics going on last year. But have you seen any material change in demand or conversations with your customers that gives you any kind of concern about them where things are headed in the second half?

Marshall Bridges: Even though our outlook, mostly unchanged, there’s some moving parts in there. I think the new construction side has been a little bit slower. And while retrofits been a little bit more encouraging, if you look at the second quarter, Reuben, we expect it to be on down low single digits and we were down a little more than really reflected some softness in new construction that was partially offset by less decline than expected remodel retrofit. I think our outlook in average more or less unchanged, but there are some moving parts there that may be more consistent with what you’re hearing, and, I’m going to remodel retrofit for us is pretty noisy year over year, so it’s difficult to get a good trend on. I think we’re finally starting to get there.

Reuben Garner: Okay. I’m going to sneak one more in the how much multi-family exposure do you have within, hard business and because that’s been another concern from investors as we work through this record backlog of units under construction, it kind of leaves like an air bubble at some point maybe going into ’25. Is that a risk for you or is that a relatively small business?

Jeffrey Lorenger: So it’s relatively small Reuben, but it’s relatively small. That’s not growth. We don’t view that as a risk.

Reuben Garner: Got it. Thanks, guys. Congrats on the strong results and good luck.

Jeffrey Lorenger: Yeah, thanks.

Operator: Your next question comes from the line of Steven Ramsey from Thompson Research Group. Your line is open.

Steven Ramsey: Hi, good morning. But I’m curious about on workplace with SMB and KI outperforming currently, it kind of looks like through the balance of the year. Do those customer groups have better margins than contract. So that looking out a little bit further when contract does come back, is that a negative mix impact to the margin story there?

Marshall Bridges: Steven, there’s not much difference between the margins on an incremental basis. So I don’t know that it’s a tremendous headwind or tailwind and probably not something we spend a lot of time on.

Jeffrey Lorenger: Yeah, plus even I would just say as contract as we talk about as contract comes back, kind of the way the offices are configured, you know, I think plays to our benefit relative to the types of products we can put in there and the even the types of products that KI is brought to the table. So I mean, make you know, we don’t really view that as a downside, but it’s really just about the revenue. And we think the margins will come up as we’ve talked about where we want to continue to lean into expanding those margins and even as contract comes back up.

Steven Ramsey: Got you. Okay. And then thinking about workplace margin a little bit more with the new cost structure coming into play over the next six months to two years. If volumes do grow in 2025 and 2026 in that segment, does that change the new cost structure change, the incremental margins you would get over that timeframe. Maybe just help us think about what margins could do and as or if volumes grow?

Marshall Bridges: Yeah, that’s a good question. A clearly the change in our efficiency is going to benefit our incremental margins. I mean, in workplace, those typically run kind of the mid-30s. So we’re probably trending a little bit above that when we come back right now, there’s a lot of variables that can go into that incremental margin, which probably are equally as big as the recent progress we’ve made on average that mid-30s numbers, it was historically a good number, so we’d be two points above that.

Steven Ramsey: Okay, helpful. And then switching to the M&A pipeline. It’s been a part of the story over the past mid years. Can you describe where that pipeline is now? And is there real potential for things getting done second half of this year or early 2025?

Jeffrey Lorenger: You know, like we said, it’s a great question, Steven. We’re always kind of taken a look out there and we’ve also said, we’re not in any hurry. We kind of let the game come to us. But, you know, suffice to say, we’re always saw in the market, you know, in that space. So I don’t have anything no M&A by any means, but we will stay we will stay active at least at a strategic level.

Steven Ramsey: Okay. And then one other thing on on the distribution side, I think you clearly have some owned distribution and then I guess sell through other third party distributors and the building product landscape as for distributors is consolidating. I’m curious how you look at that strategically and if it’s presenting any upside or challenges as you as you adapt to this changing building product distribution landscape?

Marshall Bridges: Yes, we primarily sell to specialty dealers and installing distributors. So I’m not saying that that overall trend doesn’t impact us, but maybe a little less so than some of the other categories. I of course, we do own about 25% about what we do flows through distribution we own. So that’s that also helps us.

Steven Ramsey: That’s great, thank you.

Marshall Bridges: Thanks.

Operator: Thank you, and with no further questions, I’ll turn the floor back over to Mr. Lorenger.

Jeffrey Lorenger: Great, thanks for joining us today. Taking the time and have a good day.

Operator: Thank you. That does conclude today’s conference call. You may now disconnect. Have a great day.