Mativ Holdings, Inc. (NYSE:MATV) Q1 2023 Earnings Call Transcript May 11, 2023

Operator: Good morning or good afternoon and welcome to Mativ’s First Quarter Earnings Conference Call. Hosting the call today from Mativ is Julie Schertell, Chief Executive Officer. She is joined by Greg Weitzel, Chief Financial Officer; and Mark Chekanow, VP of Investor Relations. Today’s call is being recorded and will be available for replay later this afternoon. It is now my pleasure to turn the floor over to Mr. Chekanow. Sir you may begin.

Mark Chekanow: Thank you, and good morning. I’m Mark Chekanow, VP of Investor Relations at Mativ. Thank you for joining us to discuss our first quarter 2023 earnings results. Before we begin, I’d like to remind you that the comments included on today’s conference call include forward-looking statements. Actual results may differ materially from the results suggested by these comments for a number of reasons, which are discussed in more detail in our Securities and Exchange Commission filings, including our annual report on Form 10-K and our quarterly reports on Form 10-Q. Some financial measures discussed during this call are non-GAAP financial measures. Reconciliations of these measures to the closest GAAP measures are included in the appendix of this presentation and earnings release.

Unless stated otherwise, financial and operational metric comparisons are to the prior year period and relate to continuing operations. The earnings release is available on our website at ir.mativ.com as are the slides for today’s presentation. You can download the slides and/or click through these slides at your own pace during the call using the webcast interface. To clarify some aspects of how Mativ results were reported and how we will be discussing them, we would first remind everyone that the SWM and Neenah merger closed on July 6, 2022. Thus the first quarter reported results reflect the combined company for the full period. However, the prior year results reflect only the legacy SWM results. On today’s call though and in our earnings release, we will provide some comments referring to comparable performance to illustrate how our results compare to prior year periods on a like-for-like basis.

These figures are shown in tables in our earnings release and the appendix of this presentation as well as full reconciliations. Please follow up with us for any further needed clarifications, as we want to make sure you understand our business trends, financial results and reporting processes. With that I’ll turn the call over to Julie.

Julie Schertell: Thanks, Mark. Good morning everyone and thank you for joining today’s call. As we start discussing our first quarter results, I’d highlight that there are two key themes that encapsulate our financial performance. The first is that strong price increases and easing input costs resulted in a very favorable price/cost spread. We were very encouraged by this result, as it demonstrates our success in addressing input cost inflation, one of the most pressing challenges manufacturers have faced over the past year. However, this very positive theme was more than offset by lower volumes and manufacturing challenges. Some site performance issues stem from strikes in our French facilities. Some were driven by inefficiencies in our US facilities.

And some related to general overstaffing in relation to demand. These issues are improving as we move into Q2. During the quarter, we delivered 1% constant currency organic sales growth. We had strong pricing offset by softer volume. As we discussed last quarter, destocking across our customer base was and will continue to be a hurdle for the first half. Furthermore, our French operations were affected by strikes that continued throughout the first quarter, resulting in lost EBITDA and operational disruption. Of note, most of these issues were in our FBS segment with the most significant impacts in Engineered Papers, which alone accounted for $15 million of our total year-over-year EBITDA decrease. We will elaborate on all these factors but I want to emphasize that we are highly focused on better site operations so that our strong price/cost performance flows through to margins.

Several other positive indications point to improving sequential EBITDA for the remainder of the year including further realization of cost synergies, activation of additional cost reduction initiatives an end to the destocking across our customer base and easing input costs. While the macro environment remains uncertain, we expect strong sequential quarterly EBITDA growth beginning in Q2. We see a path toward $100 million EBITDA quarters in the second half of the year and believe we will exit 2023 with positive traction on many fronts. While we would typically go deeper into trends within our various end markets, we believe our results are currently less driven by specific trends within our categories and more by the broader themes of price versus cost, overall volume and destocking and the manufacturing performance.

Let’s start with price versus input cost. With nearly $40 million of net favorability, we continued the strong momentum from the second half of 2022. Our price increases have proven successful in offsetting inflation, which has been a major focus of our commercial teams across the business. This highlights the stickiness of our pricing and the value of the solutions we provide to the markets in which we compete. These year-over-year pricing gains will start to anniversary and be less pronounced as the year progresses, but given the downward momentum recently seen for many input costs, we expect to maintain a positive spread. I also want to highlight that this price/cost performance was seen in both ATM and FBS. Working with customers through this unusual environment has been a collaborative effort filled with difficult, but productive conversations and ultimately we’ve landed in the right place.

Next, I can reiterate that our merger synergy plans remain on track. With the actions we took in the second half of last year and the early actions in 2023, approximately $6 million of EBITDA savings were realized versus prior year in Q1. We continue to press forward to maximize synergy realization and continue to identify new opportunities to increase our long-term synergy potential. We said in February that we expect $25 million of incremental synergy realization in 2023 and that remains the case. Most of what is flowing through the P&L right now is the benefit of SG&A actions taken throughout the second half of 2022. While there will be further SG&A synergies we realize over the coming year, the bulk of our current actions are focused on procurement and supply chain.

We are consolidating our purchase activities, leveraging our most favorable contract terms across the combined business and ensuring we are benefiting from our increased scale and centrally led procurement process. While we acknowledge that current pressures across the business are clouding the read-through of synergies, these actions will continue to deliver real savings, decrease our cost structure and be a driving force behind achieving our long-term profitability goals. Moving to destocking. It’s apparent that this trend is widespread across industries and end markets and proved to be more of a first quarter headwind than we originally anticipated. Macro concerns over economic conditions coupled with easing supply chain constraints have led to broad-based customer inventory destocking, unwinding the excess inventories previously built to mitigate supply chain uncertainties.

While this began late last year and was expected to continue into the first half, increased uncertainties have contributed to even tighter inventory management. In general, our best customer indications are that this inventory unwind will carry into the second quarter and that more normalized order patterns will resume in the second half. Visibility however remains limited as to what the normal order pattern implies as there continues to be signals of potential recessionary conditions in the second half of the year. In addition to macro-driven volume softness, we experienced labor strikes at several engineered paper sites in France. As you may recall from our February discussion, there was proposed legislation to increase the retirement benefits age in France which was heavily protested across the country.

This was not a Mativ-specific issue, but resulted in periodic lost days of production at facilities that were fully sold out. We estimate the lost volume impact to be in the range of $5 million of EBITDA. In addition, there are clearly additional operational disruptions, potentially in the range of several million dollars associated with shutting down and restarting facilities. With the legislation recently passed, we expect minimal impact in Q2. Moving to manufacturing. I mentioned the strikes in France and that’s clearly a contributing factor to our results. However, quite candidly, we’re disappointed with our overall operating performance and our focus on productivity, yields and staffing especially at our largest plants in the US. We mentioned this on our fourth quarter call that some inefficiencies resulted in the production of high-cost inventories that would flow through results in the first quarter and there were additional inefficiencies that persisted as we started the year.

We are seeing improvements in early Q2 and expect this to continue. But sustainable operational traction may take another quarter or two to return to historical levels. Both legacy companies have a long history of efficient operations though we believe the labor turnover particularly in the US and the learning curve associated with new operators is a key cause of our recent issues. We have been running at lower yields and generating more waste requiring the remanufacturing of certain products and downtime to correct production issues. We are also comparing to a prior year quarter when the plants were full and absorption was high. In recent quarters, we were staffed for higher volumes and were hesitant to lay off operators when volumes softened given how tight the labor market has been.

Operating labor is ideally something that we flex up or down over time depending on demand. However, the skilled nature required in specialty materials production can make labor reductions a double-edged sword. When demand returns, it could potentially be more difficult than years past to replace skilled labor. So what are we doing to improve operations? Lean Six Sigma operators from across the company have been deployed to sites where we are seeing the most pressing issues. We have targeted productivity improvement plans on specific assets to accelerate progress, and we’re already seeing better results and expect to continue throughout the remainder of the year. Secondly, we are implementing additional cost reduction efforts to rightsize operations and expenses with the near-term demands of the business.

While visibility on second half volumes is limited, margins are a clear priority and we’re taking decisive but measured actions to improve results without compromising the business. These actions are incremental to our existing synergy plans and include reductions in labor, maintenance, SG&A, working capital and tighter controls on discretionary spending and investments. I’m confident we are turning the corner from an operations standpoint and look forward to sharing sequentially higher profit results on our second quarter call. With that, I’ll turn it over to Greg to review the quarter’s financials and comment on 2023.

Greg Weitzel: Thanks Julie. As Mark referenced earlier, reported consolidated Mativ results reflect the merged company for the first quarter but only for legacy SWM in the prior year thus skewing the year-over-year comparisons. So my comments will focus on current business trends and margins on a comparable basis. Total first quarter sales were $679 million with organic growth at 1% on a constant currency basis and negative 1% with currency effects. The 1% constant currency organic growth was split between 2% growth in ATM and a 1% decline in FBS, with the best sales results coming from release liners. Price was up 8% across the company versus last year and we saw similar gains in both ATM and FBS. Offsetting price was a 7% negative impact of volume and mix.

This was attributable to customer destocking across the business and softer economic conditions. For total adjusted EBITDA, on a comparable basis, we were down 25% to $66 million in the first quarter with margin contraction of 300 basis points. On the positive side, approximately $60 million of favorable price more than offset higher input costs for a net benefit of $40 million. However, the discussed volume decline and manufacturing inefficiencies ultimately drove the profit decrease. Overall, first quarter was encouraging from a price/cost standpoint and disappointing from an operating performance standpoint. And I’ll go a little further into a consolidated EBITDA bridge and key themes on the next slide. Looking at the segments in the first quarter with the same like-for-like view, ATM adjusted EBITDA was down 7% or nearly $5 million with margin contraction of 90 basis points.

For FBS, adjusted EBITDA was down 40% or approximately $19 million with margin contraction over 700 basis points. Engineered Papers accounted for $15 million of the decline with the strike’s direct impact representing about a third and indirect impacts of the strikes and other inefficiencies representing two-thirds of that $15 million. Packaging and Specialty Paper accounted for the other $4 million. We view many of the issues we faced in the first quarter as either temporary or addressable in the near term with productivity actions and labor reductions being implemented at key plants. Unallocated expenses were lower by $1 million, reflecting synergies and partially offset by SG&A inflation. Interest expense was $26 million in the quarter and approximately 75% of our total debt is set at fixed rates.

Adjusted EPS was $0.25 for the quarter. Per the terms of our credit facility, net leverage ended the quarter at 4.1 times. Recall that our credit agreement net leverage includes adjustments for planned synergies on top of our combined trailing 12-month EBITDA. While we had previously communicated that we expected to be within our target range of 2.5 to 3.5 times by the end of 2023, first quarter results and limited near-term visibility make it difficult to maintain that expectation. Leverage is a top priority for the management team and the board, and we are focused on reductions in cost, CapEx and working capital to help bolster EBITDA and cash flow to reduce debt. Beyond those immediate actions, we continue to evaluate strategic portfolio options as well as capital allocation decisions in the context of reducing leverage.

Operating cash flow was negative $21 million. First quarter is seasonally the lowest quarter for both legacy companies mainly due to working capital. We expect increased operating cash flow generation as the year progresses. CapEx was another $19 million, putting free cash flow at negative $40 million for the quarter again, with higher cash flow generation expected through the remainder of the year. We are also rigorously examining discretionary CapEx plans for 2023 and have already actioned working capital improvement plans to further drive cash flow conversion. This next slide bridges our first quarter EBITDA to prior year on the three key components: price, input costs and the combined effects of volume mix and manufacturing performance as they are tightly linked.

First, our price as mentioned was up 8% or nearly $60 million. We will look to maintain the price increases implemented in recent quarters though the magnitude of the year-over-year increases will logically subside as the year progresses and we lap increases implemented in the second half of 2022. Regarding input prices, we project year-over-year declines in the market rates for many materials. For instance, we are currently benefiting from the 2022 decline in polypropylene and continue to expect year-over-year costs to be favorable. And in wood pulp, while the first quarter index prices were up about 10% versus last year, they have retreated from their fall 2022 peak and are projected to continue falling sequentially throughout 2023. From a year-over-year standpoint, the second half should be favorable versus our purchases in the second half of 2022.

Energy costs, especially in Europe have pulled back sharply as well. Going the other direction, we still expect costs for many specialty chemicals we use in our production processes, to rise again in 2023. In the bridge, you can see year-over-year cost increases of about $20 million versus the prior year. This quarterly variance was about half of the year-over-year inflation we experienced in the fourth quarter and we expect this favorable trend to continue. In fact, input costs could end the full year flat to 2022 though we are still early in the year and these projected decreases may not fully materialize. The net benefit of price versus cost was approximately $40 million in the first quarter compared to the prior year. While we expect to end the year in a positive price/cost position, we wouldn’t assume this run rate continues rather that, it moderates and remains a positive offset to soft volumes.

Regarding volume mix and manufacturing the net effect versus last year was approximately $60 million of EBITDA, which included over $5 million of impact from the French operational shutdowns. And looking at the drivers of the negative variance, we believe destocking will conclude in the second quarter, with higher sequential volumes in the second half. Also as mentioned earlier, we expect French strikes to be far less meaningful in Q2 and would not expect any additional activity at this point. On manufacturing performance, we believe the worst is over. We are starting to see improvements and expect to trend in the right direction as the year progresses, enhancing our productivity and reducing labor to be in line with a more conservative volume outlook.

To quantify these actions on a high level, we estimate the impact of cost reductions and other efficiency improvements in the range of $40 million on an annual basis with benefits beginning in the second quarter. We need to make strong headway on internal execution, so that our price/cost gains drop to the bottom line. While not currently providing guidance for 2023 we do expect strong sequential EBITDA growth approaching $100 million quarters as we exit 2023. Now back to Julie to wrap up.

Julie Schertell : Thanks, Greg. So to recap the key points, before taking questions I’ll just reiterate a few key takeaways as we see it. First, price/cost was strong and this demonstrates the strength and value of our portfolio in the markets in which we compete. Second, synergy execution remains on track and is within our control. Third, our manufacturing performance was frankly unacceptable, and our global teams have made near-term progress their number one priority. We have always been good operators and we will get these issues fixed. And fourth, we have controls and cost reductions activated in all sites and across all SG&A categories to further bolster margin recovery in the short term. Next quarter, we look forward to demonstrating improved operational performance continued strong price/cost benefits and stronger quarterly EBITDA and margins.

I’m confident, we will exit 2023 with our current operational challenges behind us a much stronger EBITDA run rate and be poised to deliver profit growth. This concludes our prepared remarks and we’ll now open the line for questions.

Q&A Session

Operator: Our first question today comes from Jon Tanwanteng from CJS Securities. Jon, your line is open. Please go ahead.

Jon Tanwanteng: Hi, good morning. Thank you for taking my question. Julie my first one is how much do you true end demand has deteriorated since you last reported? Any more color on just weaknesses or even strengths if there is any and how concentrated by regions and markets?

Julie Schertell: Sure. Thanks for calling in and the questions, Jon. I think right now as we’re seeing across different industries it’s hard to pull apart destocking and what normalized volume really is as we go forward. Based on the customer feedback, the insights we have our belief is still that, it is the majority of destocking. So say, if I had to estimate maybe two-thirds of our volume pressure this quarter related to destocking. And I’ll just give you one little anecdote to some of the things we’re seeing. In one of our business units, we’ve had 100-day lead times over the past year. That’s now at a 30-day lead time business. So just think about the vacuum that creates. That’s 70 days of not seeing orders not having visibility and that’s what we’re really trying to work through.

I think the good news in all of that is lead times are getting back to normal, supply chains have stabilized and this is primarily a short-term issue. The question is what does normalized demand look like? Where we’re still feeling strength is in those areas where you would expect our more technical areas particularly in ATM so in areas like filtration and some of our premium films business. Release liners was up 20% in the quarter. Consumer products remained strong. Engineered Papers is very stable. We just were really impacted by our ability to get orders out the door because of the strikes. And it was the impact of lost margins, but also disruption in our facilities and how we operate our facilities. So long story short I guess it’s a little hard to pull apart.

We think it’s about two-thirds destocking. We believe we’ll be through that in the second quarter. And it’s still a little bit of a question mark of what that normalized volume looks like. We’ve put in place additional cost reduction programs that kind of derisk our back half if that volume doesn’t return to what we’re expecting.

Jon Tanwanteng: Okay. Great. Thank you. And then what are your expectations for pricing in the coming quarters, your pricing? Is there still more to recover there, number one? And number two can you hold them assuming the deflation as you expect and maybe prices are flat year-over-year on an input basis? Greg, I don’t know if you have any input, but is that $40 million benefit does that shrink through the coming quarters?

Julie Schertell: Yes. I’m really pleased with our discipline on pricing and I think it is an indication of the value of the solutions we provide in the marketplace. The teams have done a great job. We’ll continue to hold onto pricing. I think we’ve demonstrated in both legacy companies we have pretty sticky pricing. That spread will continue throughout the year between price and input costs, but it’ll start to moderate a little bit as we go through the year and start lapping some of our price increases last year that happened in the back half of the year. I would also say that synergies really start to amplify and read through in the back half of the year, synergies related to procurement. And so that helps accelerate or amplify that spread a little bit and gives us more support for holding onto pricing because those are our synergies.

Not that we could give away the marketplace on pricing and our commercial teams are very clear on that. So I’d expect to have a spread but it’ll moderate a little bit as we work our way through the year.

Jon Tanwanteng: Okay. Great. One more for me and I’ll jump back in the queue. Just any update on the stance on the dividend just given the pressure you’re feeling in the business? Are you still feeling comfortable with where it is right now?

Julie Schertell: Yes. I mean are we comfortable from a cash flow standpoint with where it is right now? I’m comfortable from a cash flow standpoint. I would say, the bigger question for us is right now historically our dividend’s been important to our shareholders in this environment. I’d just say, the bigger focus right now is on leverage and we’re getting that feedback from our investors. So with EBITDA softer than we had anticipated this year reducing our leverage remains a top priority. And so that capital allocation those levers all of those options are on the table. But we feel very comfortable with our current cash flow and dividend today.

Jon Tanwanteng: Okay. Great. Thank you. I will jump back in queue.

Operator: The next question comes from Daniel Harriman from Sidoti. Daniel, your line is open. Please go ahead.

Daniel Harriman: Hey, guys. Good morning and thank you so much for the color. A couple questions starting off. Looking at ATM, obviously, you’ve made the point that release liners were the strongest performer I think up 20% over the past year. At a category level do you expect that to continue to be the top performer, or could you provide some more color on the other categories?

Julie Schertell: Sure. I think we’re seeing different levels of destocking by category. So release liner had a lot of strength in Q2. That is a business that has grown historically — upper-single digits low-double digits for the last 10 years. I’d expect that to continue. Healthcare is showing nice resilience and we’re seeing solid demand there as well. Strong demand in water and industrial filtration industrial process filtration, a little bit softer in transportation filtration, but believe the majority of that is destocking and that we’ll get to a more normalized back half view. I’d say where we feel softness in ATM is more in our industrials business. And so that’s made up of things like tapes — tape backings and abrasive backing and some of those less technical applications.

And so that’s where we’re feeling a little bit of softness. But overall, from a performance standpoint, the more technical our products that require qualification, I’d say, the more solid they’re performing.

Daniel Harriman: Okay. Thanks. And then just one more if I can. In the release and obviously in your prepared remarks, you very clearly laid out, the positives and the back half of 2023 destocking, synergy execution and easing input cost. And which one of those three if you had to, would you say, you have the least amount of visibility or the most concern?

Julie Schertell: I’d say, probably it’s the destocking and the normalized volume. I mean, I just think right now, it’s difficult to have that visibility. We’re working very closely with our customers, but it’s difficult for many of our customers to have that visibility. They’re working through inventories and getting inventories down to where they’ve been historically. Maybe, even a little bit lower than where they’ve been, historically. So I think the biggest question, as we think about the back half is, how we pull apart what’s destocking and what’s really demand normalization. And then, I think the important part for us is, that we’ve identified and actioned incremental cost reduction efforts, that will basically derisk that back half plan, if the volume doesn’t return to what we’re expecting in the back half.

And that’s a combination of reduced staffing, operating labor, maintenance, marketing, advertising. All that valued at about $40 million annualized has been put in place.

Daniel Harriman: Okay. Great. Thank you so much. I’ll get back in the queue.

Julie Schertell: Thanks, Daniel.

Operator: We have a follow-up from Jon Tanwanteng from CJS. Jon, your line is now open. Please go ahead.

Jon Tanwanteng: Hi. Thanks for the follow-up. Just to clarify on the former question. Are those efficiency and cost reduction plans already being implemented, or is that something that’s going to happen, if you don’t see volumes pick up?

Julie Schertell: They’re already being implemented. So we’ll, accelerate them in the back half, go even deeper than what we currently have in plan, but they’re already being implemented in Q2 today.

Jon Tanwanteng: Okay. Great. And then, is any thoughts on the cost to implement them just from a cash perspective?

Julie Schertell: Very minimal, if any cash cost to implement them. It really is about deferment of costs like maintenance. It’s about derisking, taking out marketing and advertising costs, some SG&A and then programmed specifically around working capital like inventory, and deferred CapEx. So, there’s really no incremental cash cost for implementing them. These are really operating type of levers we’re pulling.

Jon Tanwanteng: Okay. Great. And then just maybe a sense of how you’re tracking Q2, what kind of sequential EBITDA improvement you’re expecting, just based on the trends that you’re seeing today and through April and May.

Julie Schertell: Yes. As I think about Q2, I mean the manufacturing performance that we had in Q1, we’re seeing that continue to improve in late Q1 and early Q2. And then specifically, we talked about the strikes in France. We said that’s $5 million just related to lost EBITDA. But I would tell you there’s up to $5 million more inefficiencies that that created, distraction and running different products on different assets and having employees staffed on different assets. So, that’s all behind us, as we move into Q2. We’re not seeing any incremental strikes in France, at this point. That’s the biggest singular change. And then, from a manufacturing performance standpoint, we’re seeing nice improvement in our work order variances in our productivity speeds and yields.

So, just as you said, I’d expect strong sequential improvement, actions in place around synergies additional cost-out programs maintaining pricing. And then, we need to see — it’d be great to see a little bit of market stability in the back half. We expect destocking to continue in second quarter and to be at similar levels of revenue in the second quarter, but improved EBITDA.

Jon Tanwanteng: Okay. Great. Thank you. And then, maybe more color around the potential divestiture of the EP business. More specifically, does the current financing and economic environment and maybe the performance of the business support a sale at a reasonable value today?

Julie Schertell: Yeah. I mean, we’ve not announced anything. What we’ve said is we’re always considering our portfolio options and that this is the one that most commonly comes up as far as how it fits into the portfolio. As I think about that, the environment we’re in today it’s not ideal obviously for M&A. It’s also dependent on the size of the asset you’re selling or buying and if you really need to go external for financing and I think we’re seeing that opportunity. I think the opportunity for us with Engineered Papers is we had a tough Q1. It is all really transitory in nature. And so we have the opportunity for that to rebound in Q2. The strategic rationale of the merger the identification of what makes sense in our portfolio all of that still makes sense. If we were to exit any part of our portfolio, it helps us delever even, if it’s modestly and helps us continue to get focused on our strategic growth platforms.

Jon Tanwanteng: Okay. Fair enough. Thanks, Julie.

Julie Schertell: Thanks Jon.

Operator: We have a follow-up from Daniel Harriman from Sidoti. Daniel, your line is open. Please go ahead.

Daniel Harriman: Hey guys. Thanks. Greg, this is probably a little bit more for you and I know you went through this earlier. But could you just shed a little bit more light on, the capital allocation priorities? And what you see as the biggest focus right now assuming, cash flow sequentially moves up the rest of the year?

Greg Weitzel: Yeah. Sure. I guess, first and foremost is, we’re really working on getting that EBITDA up to those $100 million quarters that we’ve been talking about. As far as the rest of the capital, working capital we know that there was a use of cash of $50 million in the first quarter which is very in line with normal seasonal expectations. And we’d expect that to drop off as we work through the year. Leverage, continues to be an extremely high, high priority. And as I mentioned EBITDA is the primary driver to that that we’re focused on. But then, in addition, when it comes to working capital working that down CapEx we have plans in place, we initially planned for $90 million of CapEx. Currently have that down to $80 million and are continuing to look through discretionary capital to lower that a bit further, while still focusing on our major projects like our growth projects, in the release liner business in the filtration melt-blown line.

Those are really the primary drivers, but again, EBITDA is by far going to be the most important driver to leverage.

Daniel Harriman: Okay. Great. Thanks. And thanks for all your help. And best of luck in the quarter.

Julie Schertell: Thanks Daniel.

Operator: As we have no further questions, I’ll hand it back to the management team for any concluding remarks.

Julie Schertell: I’d just like to thank you for your time today. And we look forward to our next call.

Operator: This concludes today’s call. Thank you very much for your attendance. You may now disconnect your lines.