Metallus Inc. (NYSE:MTUS) Q3 2024 Earnings Call Transcript

Metallus Inc. (NYSE:MTUS) Q3 2024 Earnings Call Transcript November 8, 2024

Metallus Inc. misses on earnings expectations. Reported EPS is $ EPS, expectations were $-0.02.

Operator: Good morning. My name is Audra, and I will be your conference operator today. At this time, I would like to welcome everyone to the Third Quarter 2024 Metallus Inc. Earnings Call. Today’s conference is being recorded. All lines have been placed on mute to prevent any background noise. [Operator Instructions]. At this time, I would like to turn the conference over to Jennifer Beeman, Director of Communications and Investor Relations. Please go ahead.

Jennifer Beeman: Good morning, and welcome to Metallus’ third quarter 2024 conference call. I’m Jennifer Beeman, Director of Communications and Investor Relations for Metallus. Joining me today is Mike Williams, President and Chief Executive Officer; Kris Westbrooks, Executive Vice President and Chief Financial Officer; and Kevin Raketich, Executive Vice President and Chief Commercial Officer. You all should have received a copy of our press release, which was issued last night. During today’s conference call, we may make forward-looking statements as defined by the SEC. Our actual results may differ materially from those projected or implied due to a variety of factors, which we describe in greater detail in yesterday’s release.

Please refer to our SEC filings, including the most recent Form 10-K and Form 10-Q and the list of factors included in our earnings release, all of which are available on the Metallus website. Where non-GAAP financial information is referenced, additional details and reconciliations to its GAAP equivalent are also included in the earnings release. With that, I’d like to turn the call over to Mike. Mike?

Mike: Good morning and thank you for joining us today. Throughout the quarter, we continued to navigate challenging market conditions, demonstrating the resilience of our business model and the strength of our team. Our third quarter net sales saw a sequential decrease of 23 percent, primarily due to lower shipments across our markets. During the third quarter, we continued to maintain and invest in our world-class assets aimed at improving safety, efficiency, and quality. Additionally, we continued to offer training and development opportunities for our employees. I believe these two focus areas are the key to our near-term success, allowing us to better serve our customers and quickly capitalize on future demand recovery. Speaking of customers, we recently completed our annual customer survey, and I’m pleased to report that our customers rank us highly in both service and quality.

I’m proud of our team’s outstanding performance on both fronts. This is also the time of the year when we initiate our annual contract negotiations with our customers. Generally, we target around 70% of our business to be linked to annual contracts. Currently, we are still early in this process, but discussions are going well. Turning to safety, in late October and early November, we completed our annual maintenance shutdown at the Faircrest facility. Shutdowns are complex operations that depend on the coordinated efforts of additional contractors and vendors working alongside our teams. The required maintenance, which took us 12.5 days as scheduled, is critical for ensuring the reliability of our assets. Most importantly, I’m pleased to report that we completed the shutdown without any serious safety incidents.

Q&A Session

During these shutdown periods, we take time to further train our people in important safety measures. Starting in October, we begin our Safety Stand-Up [ph] program, where we put an even sharper focus on preventing serious injuries and fatalities. This is about identifying potential hazards and stopping them immediately. This program consists of a series of hands-on stations where we provide our employees with real equipment, tools, and situations to ensure they are just not hearing about safety, but feeling and practicing it, too. Working with operations, our safety team, union leadership representatives, and company leadership, we are demonstrating that safety is a shared responsibility and continues to be our top priority. Our commitment to safety is evident in our investment of $6 million year-to-date.

As a result, we achieved a 29% year-over-year reduction in our OSHA recordable rate for the third quarter. Our investments are paying off, and we look forward to continuing this trend into 2025. Moving to our end markets, shipments decreased by 20% compared with the second quarter. Shipments to our industrial customers declined 6% sequentially, primarily driven by weaker mining and agricultural markets, as well as continued softness in distribution. On the other hand, we’ve seen a slight uptick in sales from our rail customers, although not enough to offset other declines in this sector. As expected, energy customer demand remains weak, as drilling activity is expected to remain flat in the near future. Despite the market being down, we anticipate some additional volume in the energy space going forward, as inventory levels will need replenishing at some point, and that is expected to drive demand for our highly engineered steels.

Automotive shipments declined by 16% sequentially. Our customers have faced several issues, including ongoing equipment issues, recalls, and unexpected downtime. Additionally, the third quarter tends to be seasonally weaker in terms of demand. As expected, we saw a sequential decline in aerospace and defense third quarter shipments due to customer order patterns. However, based on our defense customers’ needs, we anticipate an increase in aerospace and defense shipments in the fourth quarter, as well as in 2025. With ongoing investments by our customers to increase capacity and targeted growth in new programs, we expect to grow aerospace and defense sales to over $250 million by 2026. Overall, we are confident in the long-term growth prospects for aerospace and defense, driven by strong customer demand and strategic investments.

In the current market landscape, the influx of SBQ and seamless mechanical tubing imports continues to exert pricing pressure, especially within the industrial and energy sectors. China holds the largest share of seamless mechanical tubing imports to the U.S., and therefore increased Section 301 tariffs may help us moving forward. As background, China’s share of the U.S. seamless mechanical tubing market has grown significantly, rising from approximately 6% in 2021 to 16% in 2024. Regarding our capital investments, we are actively progressing with investments in assets that not only promote growth, but enhance safety, product quality, improve asset reliability, elevate customer service, and optimize our cost structure. During the quarter, we invested over $17 million in capital expenditures.

Investments include the installation of an automated grinding line in our Harrison facility, which is designed to improve safety, quality, and efficiency. This should be operational by the end of this year. At Harrison, we are also targeting the installation of two inline saws in the first quarter of 2025. They are connected to the new grinding line. These new assets will enhance safety and efficiency while also eliminating the need to outsource cutting of certain bar sizes. As you know, we are in the process of installing a Bloom Reheat furnace at our Faircrest facility, intended to significantly increase the ability to serve the needs of the Department of Defense, as well as support our broader customer base. Lastly, we recently approved a thermal treatment roller furnace at our Gambrinus facility.

This investment is another example of our commitment to investing in state-of-the-art technologies while also doubling our heat treating capacity for specialty grade, primarily used in defense-related products. We have received funds from the Department of Defense for both the Bloom Reheat and the Roller Furnace. Chris will cover the details of our government funding in a moment. These efforts align with our overall objectives to drive cost reductions, increase free cash flow, and boost our profitability. Despite challenges in the current market demand environment, we remain committed to our capital allocation strategy, balancing investments and growth with returning capital to shareholders. Looking ahead, we are cautiously optimistic as we see our order book picking up in the fourth quarter and into early 2025.

With a strong balance sheet, an active share repurchase program, and a positive long-term outlook, we remain well-positioned for future growth. Now I’ll turn the call over to Chris, who will provide more details on our financial performance.

Williams: Good morning and thank you for joining us today. Throughout the quarter, we continued to navigate challenging market conditions, demonstrating the resilience of our business model and the strength of our team. Our third quarter net sales saw a sequential decrease of 23 percent, primarily due to lower shipments across our markets. During the third quarter, we continued to maintain and invest in our world-class assets aimed at improving safety, efficiency, and quality. Additionally, we continued to offer training and development opportunities for our employees. I believe these two focus areas are the key to our near-term success, allowing us to better serve our customers and quickly capitalize on future demand recovery.

Speaking of customers, we recently completed our annual customer survey, and I’m pleased to report that our customers rank us highly in both service and quality. I’m proud of our team’s outstanding performance on both fronts. This is also the time of the year when we initiate our annual contract negotiations with our customers. Generally, we target around 70% of our business to be linked to annual contracts. Currently, we are still early in this process, but discussions are going well. Turning to safety, in late October and early November, we completed our annual maintenance shutdown at the Faircrest facility. Shutdowns are complex operations that depend on the coordinated efforts of additional contractors and vendors working alongside our teams.

The required maintenance, which took us 12.5 days as scheduled, is critical for ensuring the reliability of our assets. Most importantly, I’m pleased to report that we completed the shutdown without any serious safety incidents. During these shutdown periods, we take time to further train our people in important safety measures. Starting in October, we begin our Safety Stand-Up [ph] program, where we put an even sharper focus on preventing serious injuries and fatalities. This is about identifying potential hazards and stopping them immediately. This program consists of a series of hands-on stations where we provide our employees with real equipment, tools, and situations to ensure they are just not hearing about safety, but feeling and practicing it, too.

Working with operations, our safety team, union leadership representatives, and company leadership, we are demonstrating that safety is a shared responsibility and continues to be our top priority. Our commitment to safety is evident in our investment of $6 million year-to-date. As a result, we achieved a 29% year-over-year reduction in our OSHA recordable rate for the third quarter. Our investments are paying off, and we look forward to continuing this trend into 2025. Moving to our end markets, shipments decreased by 20% compared with the second quarter. Shipments to our industrial customers declined 6% sequentially, primarily driven by weaker mining and agricultural markets, as well as continued softness in distribution. On the other hand, we’ve seen a slight uptick in sales from our rail customers, although not enough to offset other declines in this sector.

As expected, energy customer demand remains weak, as drilling activity is expected to remain flat in the near future. Despite the market being down, we anticipate some additional volume in the energy space going forward, as inventory levels will need replenishing at some point, and that is expected to drive demand for our highly engineered steels. Automotive shipments declined by 16% sequentially. Our customers have faced several issues, including ongoing equipment issues, recalls, and unexpected downtime. Additionally, the third quarter tends to be seasonally weaker in terms of demand. As expected, we saw a sequential decline in aerospace and defense third quarter shipments due to customer order patterns. However, based on our defense customers’ needs, we anticipate an increase in aerospace and defense shipments in the fourth quarter, as well as in 2025.

With ongoing investments by our customers to increase capacity and targeted growth in new programs, we expect to grow aerospace and defense sales to over $250 million by 2026. Overall, we are confident in the long-term growth prospects for aerospace and defense, driven by strong customer demand and strategic investments. In the current market landscape, the influx of SBQ and seamless mechanical tubing imports continues to exert pricing pressure, especially within the industrial and energy sectors. China holds the largest share of seamless mechanical tubing imports to the U.S., and therefore increased Section 301 tariffs may help us moving forward. As background, China’s share of the U.S. seamless mechanical tubing market has grown significantly, rising from approximately 6% in 2021 to 16% in 2024.

Regarding our capital investments, we are actively progressing with investments in assets that not only promote growth, but enhance safety, product quality, improve asset reliability, elevate customer service, and optimize our cost structure. During the quarter, we invested over $17 million in capital expenditures. Investments include the installation of an automated grinding line in our Harrison facility, which is designed to improve safety, quality, and efficiency. This should be operational by the end of this year. At Harrison, we are also targeting the installation of two inline saws in the first quarter of 2025. They are connected to the new grinding line. These new assets will enhance safety and efficiency while also eliminating the need to outsource cutting of certain bar sizes.

As you know, we are in the process of installing a Bloom Reheat furnace at our Faircrest facility, intended to significantly increase the ability to serve the needs of the Department of Defense, as well as support our broader customer base. Lastly, we recently approved a thermal treatment roller furnace at our Gambrinus facility. This investment is another example of our commitment to investing in state-of-the-art technologies while also doubling our heat treating capacity for specialty grade, primarily used in defense-related products. We have received funds from the Department of Defense for both the Bloom Reheat and the Roller Furnace. Chris will cover the details of our government funding in a moment. These efforts align with our overall objectives to drive cost reductions, increase free cash flow, and boost our profitability.

Despite challenges in the current market demand environment, we remain committed to our capital allocation strategy, balancing investments and growth with returning capital to shareholders. Looking ahead, we are cautiously optimistic as we see our order book picking up in the fourth quarter and into early 2025. With a strong balance sheet, an active share repurchase program, and a positive long-term outlook, we remain well-positioned for future growth. Now I’ll turn the call over to Chris, who will provide more details on our financial performance.

Kris Westbrooks: Thanks, Mike. Good morning, and thank you for joining Metallus’ third quarter of 2024 earnings call. During the quarter, we continued to navigate challenging market conditions while ensuring the company is well-positioned to capitalize on future demand recovery. Additionally, we’ve taken advantage of market conditions and our strong balance sheet to repurchase 4.2% of our shares outstanding to date this year. From a top-line perspective, third quarter net sales totaled $227.2 million, a sequential decrease of 23%. The decline in net sales was primarily due to lower shipments, unfavorable product mix, and a 5% market-driven decline in the average raw material surcharge revenue per ton as a result of lower scrap prices.

The company reported a net loss in the third quarter of $5.9 million, or a loss of $0.13 per diluted share. On an adjusted basis, the third quarter net loss was $4.4 million, or a loss of $0.09 per diluted share. Adjusted EBITDA was $6.1 million in the third quarter, a sequential decline primarily driven by lower shipments and unfavorable product mix, partially offset by an increase in melt utilization. These drivers of sequentially lower adjusted EBITDA are consistent with our third quarter earnings guidance. On a year-to-date basis through September, the company reported net sales of $843.5 million, a decline of 18% from the prior year driven by softer market demand. The benefits of our strategic imperatives and cost reduction actions are proving out in this challenging demand environment, as evidenced by year-to-date net income of $22.7 million on a GAAP basis and $28.4 million on an adjusted basis.

Additionally, year-to-date adjusted EBITDA was $69.4 million, and the company has generated $26.4 million of operating cash flow. Our previously communicated objective was to deliver sustainable profitability and cash flow in all business cycles, and 2024 is proving out the business model in a challenging market environment. The company remains well-positioned for profitability improvement in the future, and we remain on track to achieve our through-cycle adjusted EBITDA margin and return on capital employed targets. Turning now to the details of the financial results in the third quarter. Shipments were 119,900 tons in the quarter, a decrease of 30,200 tons, or 20%, compared with the second quarter. Mike covered the drivers of third quarter shipments by end market in his comments.

Elaborating further on the aerospace and defense end market, or A&D for short, fourth quarter A&D shipments are expected to increase from third quarter levels, but not quite to the level of the first half quarterly average, as the first half of 2024 was positively impacted by an acceleration of customer orders. In 2025, A&D customer shipments are expected to increase from 2024, as defense industry capacity and demand continues to ramp up. Turning now to manufacturing. As expected, manufacturing costs decreased sequentially by $13.9 million in the third quarter. The sequential decrease in manufacturing costs was a result of improved fixed cost absorption from higher production levels, as well as a continued focus on process improvement to reduce variable costs.

Partially offsetting these decreases were $6 million of annual shutdown maintenance costs in the third quarter. The melt utilization rate improved to 60% in the third quarter, compared to 53% in the second quarter, while the company continued to balance production with demand. As mentioned earlier, the company’s manufacturing assets and operations team are well positioned to run at a higher rate of utilization as demand recovers. Now switching gears to pensions. In the third quarter, the company made $3.2 million of required contributions to the bargaining pension plan. The company also made an additional required contribution of $5.3 million to the plan during October, resulting in total pension contributions of approximately $43 million this year.

No additional required pension contributions are expected for the remainder of 2024. With the benefit of the previous annuitization activities, as well as asset returns and cash contributions, the total pension and retiree medical benefit liability has declined by approximately $800 million since the end of 2021. As of September 30, 2024, the underfunded position of the company’s pension and retiree medical plans totaled $168 million. The current estimate for required pension contributions in 2025 is similar to 2024 levels. This estimate will be firmed up following the close of the calendar year and will provide an update in next quarter’s report. Moving to cash flow and liquidity. The primary uses of cash during the third quarter included share repurchases of $20.1 million, capital expenditures of $17.6 million, and an increase in working capital of $15.1 million primarily driven by higher inventory to support customer requirements in the fourth quarter, given the milk shop’s annual shutdown maintenance in October.

As it relates to government funding, earlier this year, the company received a funding commitment of $99.75 million from the U.S. government to support the Army’s ramp up of munitions production, as well as a grant of $3.5 million from JobsOhio to support the related capacity expansion and employee training. During the third quarter, the company received $35.5 million of cash funding from the government. When combined with $10 million of initial funding received in the second quarter and $7.5 million received in October, the company has received a total of $53 million year-to-date through the end of October of the approximately $103 million of total committed funding. Receipt of the remaining $50 million of committed funding is expected throughout 2025 and into 2026 as mutually agreed upon milestones are achieved.

As Mike mentioned, this funding will substantially pay for both the new Bloom Reheat Furnace at the company’s Faircrest facility, as well as the new roller furnace at the Gambrinus facility. Once commissioned, these investments will support the company’s targeted growth in aerospace and defense product sales, as well as support all customers with more efficient and modern assets. As previously mentioned, capital expenditures totaled $17.6 million in the third quarter, of which $5.8 million was related to spending on projects supported by the government funding. In total, we estimate full-year CapEx to be approximately $65 million in 2024, inclusive of approximately $15 million of CapEx supported by government funding. The base CapEx forecast of $50 million in 2024 net of investments supported by government funding is a $5 million reduction from our previous guidance.

As we look towards 2025, we anticipate base CapEx to be below 2024 levels. However, CapEx spending on investments supported by government funding will ramp up in 2025. We’ve included a slide in the third quarter investor presentation available on our website to show the timing of anticipated government funding in advance of related CapEx spending. Switching gears to shareholder return activities. During the third quarter, the company repurchased 1.2 million shares at a cost of $20.1 million. To-date in 2024 through the end of September, 1.8 million shares were repurchased at a cost of $34.1 million. In total, as of September 30th, the company had $106.3 million remaining under its authorized share repurchase program, and we remain committed to exhausting this authorization as we progress forward.

At the end of the third quarter, the company’s cash and cash equivalents were $254.6 million, and total liquidity was $496.8 million. We expect the strength of the balance sheet combined with expected through-cycle profitability and cash flow to enable the company to continue to execute its capital allocation strategy. This includes investing in profitable growth, maintaining a strong balance sheet, and returning capital to shareholders through continued share repurchases. Turning now to the outlook. Fourth quarter shipments are expected to increase slightly on a sequential basis, driven by higher A&D shipments. The order books support shipment levels between second and third quarter levels. However, we are awaiting input on customer operating schedules in December around the holidays, which may impact the timing of shipments leading up to year end.

Lead times have extended in recent months, with bar product lead times in late December and two product lead times in January. Operationally, planned annual shutdown maintenance was recently completed in the fourth quarter at a cost of approximately $6 million, consistent with the level of annual shutdown maintenance completed in the third quarter. Additionally, the fourth quarter melt utilization rate is expected to be similar to the third quarter, given the impact of the recently completed annual melt shop shutdown maintenance, combined with continued balancing of production with demand. Fourth quarter CapEx is expected to be approximately $16 million, inclusive of approximately $9 million of CapEx supported by previous funding from the government.

Given these elements, the company anticipates fourth quarter adjusted EBITDA to modestly increase compared with the third quarter. To wrap up, thanks to our employees for their daily collaboration while focusing on finishing each and every day incident and injury free. We remain committed to controlling what we can control in a challenging market environment, ensuring our assets and teams are prepared when market dynamics shift, and continuing to invest in the business while returning capital to shareholders. Thanks for your interest in Metallus. We would now like to open the call for questions.

Operator: [Operator Instructions] We’ll go first to John Franzreb at Sidoti and Company.

John Franzreb: Good morning, everyone, and thanks for taking the questions. I’d like to start with the sales profile in the quarter and the shipments. Certainly, we had some unexpected weakness in the automotive cycle, and it seems like it’s continuing to the fourth quarter. But I guess the drop in the aerospace and defense business was more considerable than I was looking for. Has that mix played out or that demand played out as you expected? I know you certainly signaled that it was going to drop, but was it to that magnitude?

Mike Williams: I think that, yeah, we’ve been expecting this because of the significant ramp up in demand in the first half and some of the delays in their capacity expansion, John, from the downstream customers. So, as that capacity continues to ramp up, demand is going to increase slightly in Q4. We already have those orders on hand, and we expect to continue to ramp up in demand in 2025. But I think we’ve been saying for two quarters we’ve been expecting a decline in A&D shipments because of the accelerated ordering that happened in the first half of 2024.

John Franzreb: Okay, and on the flip side of that, the target that you put out there for $250 million in 2026, can we just speak to the cadence of that ramp? What does it kind of look like? And that 2026 number, is that a full year number or is that a run rate that we’re thinking about?

Mike Williams: No, that’s a run rate number. What’s driving that is not only the known demand for the munitions contracts that we have going into 2025, but we are working on new defense programs with some current customers and existing customers into other aspects of defense products not necessarily focused on munitions. I don’t want to get into the details of those right now because we’re in the negotiations on those potential future programs, but that’s what’s going to drive the increasing demand over what’s already been publicly stated about the munitions demand required over the next several years by the Department of Defense, particularly the U.S. Army.

John Franzreb: Makes sense. Plus, we don’t want the bad guys to know. One of those questions…

Kris Westbrooks: John and Mike, sorry to interrupt. This is Kris Westbrooks. I just wanted to clarify on that 2026 target. We do expect a steady increase into 2026, but Mike that was a full year estimated total sales number for 2026. It wasn’t a run rate as you get to the fourth — for example. It’s a full year. Expect to realize that in 2026.

Mike Williams: Thanks for the clarification.

John Franzreb: Thank you. Also, Kris, I appreciate that. One last question. I’ll get back in the queue. I’m just curious, given the downtime we’ve had in the third quarter and we’re seeing again in the fourth quarter, have you pulled forward any maintenance or cost saving actions that you might have been considering in the first quarter of 2025 into the 2024 calendar year?

Mike Williams: I would not know because where our significant cost saving opportunities are coming is these investments. We commented in our earlier presentation about the automatic grinding line that’s going to provide significant safety, cost reduction, efficiencies, improvements, as well as quality. We didn’t really pull anything forward from Q1. We’re pretty — with the market demand as soft as it’s been, we’re just very focused on cash flow, conserving it, taking opportunities to reduce our costs by reducing our outside spend, trying to bring everything inside as much as possible, where our cost structure is lower than outside suppliers we may be using. We’re very focused on what we can control. Right now, the big focus outside of safety is really delivering on the significant investments we’re making to improve our safety, quality, enhance efficiencies, reduce costs, and improve reliability.

John Franzreb: Okay. Thank you, Mike. I’ll go back to the queue.

Mike Williams: Thanks, John.

Operator: We’ll move next to Robert Lynch at Stonegate Capital Partners.

Robert Lynch: Hey, good morning, guys. I appreciate you taking my questions today. Can you provide me some more details on the current bidding environment in the aerospace and defense sectors and any significant trends you are observing in the macro space?

Mike Williams: Well, I think as I said to John earlier, we expect the munitions demand to continue to improve because of the capacity investments downstream to manufacture our steel into munitions is increasing and will continue to increase, and it will ramp up throughout the rest of this year and in 2025. So we expect that demand to continue. We are also negotiating longer-term agreements with certain defense customers because they want to guarantee that stability of long-term supply. And as I said, we are pursuing new programs in other areas within the defense end markets to continue to improve our participation in those markets, which we see strong, growing demand over the next several years.

Robert Lynch: Got you. I appreciate the color there. Second, is there any other green shoes other than A&D and lead times moving out a little bit, thinking downstream in terms of inventory levels?

Mike Williams: Well, again, the biggest softness we see is really in the distribution that serves energy and the industrial end markets. The month of supply has slightly ticked up, even though from a tonnage perspective, the inventories are reducing but not as fast as the demand has softened. So our lead times have gone out because we’ve seen a better order book development over the last five out of six weeks, and that gives us a view that demand is increasing in Q4 slightly or modestly. And then we also, as we are negotiating our annual contract, we expect higher demand in 2025. But again, there’s a lot of moving parts here. We’ve talked about trade. We’ve seen a lot of trade import increases in some of our end markets, particularly around our tubing markets.

And we expect, with this administration that’s coming in, that maybe we expect them to be tougher on trade. We’ll wait and see who they put in these specific positions in the administration. But we think that’s a positive thing for how our market will develop in 2025 and beyond.

Robert Lynch: Okay, great. I appreciate the color again. I think that’s it for me, and good luck in Q4.

Mike Williams: Thanks, Robert.

Operator: And that concludes our Q&A session. I apologize. We do have a follow-up from Robert Lynch at Stonegate Capital Partners.

Robert Lynch: Apologize, guys. That was a mistake.

Operator: And a follow-up from John Franzreb at Sidoti and Company.

John Franzreb: Yes, I guess relative to the change in mix as we start to look to 2026 and assume a normalized automotive market and a recovery in the energy market with the change of administration, how does that kind of an outlook reconcile with some of your long-term targets that you’ve kind of outlined, being utilization rates or adjusted EBITDA margins, return on capital? Do you think you’ll be able to hit those kind of targets by the 2026 timeframe in that kind of environment, and on top of that, I guess, the A&D mix?

Mike Williams: Well, again, if you look at the investments we’re making, particularly in the roller furnace and the Bloom Reheat furnace, that’s all targeted to provide that increased capacity that we pretty much are working to get under contract right now. So we’re pretty positive about being able to deliver those kinds of higher levels of demand because those investments are going to drive that capability. Now, if you assume other markets go back to their historical demand patterns for whatever cycle period of time, that’s very positive for us.

John Franzreb: Okay. Just wanted to check that out. Thank you, Mike. Appreciate it.

Mike Williams: Sure. Thanks, John.

Operator: And that concludes our Q&A session. I will now turn the conference back over to Jennifer for closing remarks.

Jennifer Beeman: Thanks all for joining us today, and that concludes our call.

Operator: And this does conclude today’s conference call. Thank you for your participation. You may now disconnect.