Rogers Corporation (NYSE:ROG) Q4 2024 Earnings Call Transcript

Rogers Corporation (NYSE:ROG) Q4 2024 Earnings Call Transcript February 19, 2025

Steve Haymore: Good afternoon everyone and welcome to the Rogers Corporation Fourth Quarter 2024 Earnings Conference Call. The slides for today’s call can be found on the Investor section of our website, along with the news release that was issued earlier today. Please turn to Slide 2. Before we begin, I would like to note that statements in this conference call that are not strictly historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and should be considered as subject to many uncertainties that exist in Rogers’ operations and environment. These uncertainties include economic conditions, market demands, and competitive factors. Such factors could cause actual results to differ materially from those in any forward-looking statement made today.

Please turn to Slide 3. The discussions during this conference call will also reference certain financial measures that were not prepared in accordance with U.S. Generally Accepted Accounting Principles. A reconciliation of those non-GAAP financial measures to the most directly comparable GAAP financial measures can be found in the slide deck for today’s call, which are available on our Investor Relations’ website. Turning to Slide 4, with me today is Colin Gouveia, President and CEO; and Laura Russell, Senior Vice President and CFO. I will now turn the call over to Colin.

Colin Gouveia: Thanks Steve. Good afternoon everyone and thank you for joining us today. Before I discuss the results for the quarter, let me first mention that since our last earnings call, Laura Russell was appointed our Chief Financial Officer. Through our search process, Laura emerged as the clear choice to serve in this position. Since joining the company in 2023, and especially, during her recent service as Interim CFO, Laura has been an invaluable addition to the Rogers’ executive team. She brings significant business and financial expertise developed during her multi-decades experience with other leading global companies, predominantly in the semiconductor segment. I look forward to partnering with her as we execute our strategic objectives.

Now, turning to Slide 5. I’ll start with the key messages for today’s call. Fourth quarter results were in line with our expectations as sales, gross margin, and adjusted earnings were all near the midpoint of our guidance ranges. As anticipated, Q4 sales were lower sequentially due to challenging market conditions, normal seasonality, and successful completion in Q3 of our large wireless India design win. However, our Q4 results benefited from a continuing focus on managing operational costs and expenses. We experienced significant market headwinds in most of 2024, particularly in industrial and EV/HEV markets. The challenges in industrial markets resulted from continued weakness in global manufacturing activity, while global growth rates in the EV/HEV market fell to half the level of the prior year.

The rapid deceleration in EV/HEV production, particularly in Europe, triggered a major inventory destocking among our customers. As a result, our curamik power substrate sales dropped significantly and were the largest reason for our lower 2024 sales. While our customers expect to see a gradual recovery in EV/HEV and the power industrial markets in the second half of 2025, these inventory challenges, as well as uncertainty related to trade policy are persisting into Q1. Customers are ordering cautiously in this current environment and therefore, we expect a relatively flat sales outlook for the first quarter. Laura will provide more details on the Q1 guidance later. In 2024, we further positioned Rogers for market recovery with solid progress on commercial innovation and operational excellence initiatives.

This included securing new design wins in many of our key end markets, launching new products, and advancing our local-for-local manufacturing footprint strategy. Operational excellence initiatives resulted in robust free cash flow conversion in 2024. With a pristine balance sheet, Rogers is in a strong position to continue advancing both our organic and inorganic growth objectives, even as we navigate this dynamic market environment. Turning to Slide 6 and our fourth quarter and full year 2024 results. Fourth quarter revenues of $192 million declined 9% from the prior quarter and were in line with our guidance midpoint. Gross margin of 32.1% was about 300 basis points lower versus Q3 due to volume. Full year sales declined 9%, primarily due to two markets, industrial and EV/HEV.

2024 gross margin was 33.4%, 40 basis points lower versus the prior year. The impact of the lower volume was largely offset by significant improvements in operational excellence, including a notable reduction in our operations spending and procurement costs. Looking at our sales by market. The increase in Q4 EV/HEV sales was modest, as we have not yet seen a meaningful demand improvement from our curamik power module customers. Elastomeric Material Solutions or EMS sales into the EV/HEV market were again solid, albeit flat to Q3. As discussed earlier, EV/HEV full year sales for curamik were significantly lower versus 2023. However, EMS had record revenue in 2024 into EV/HEV, driven by ramping production rates for key programs with critical customers.

ADAS sales improved sequentially due to improved automotive volumes and stronger order patterns from some key customers. Aerospace and defense delivered solid growth for a second consecutive quarter in Q4 from higher commercial aerospace demand. For the full year, our A&D sales grew at double-digit rate, led by the Radio Frequency Solutions or RFS business, which saw stronger demand for military radar applications. Portable electronics sales were sequentially lower in the fourth quarter due to normal seasonality and in line with expectations. Full year sales grew only slightly compared to the previous year as we saw a less aggressive refresh cycle for smartphones in late 2024 despite having strong content in high-end AI functional devices. As expected, industrial sales were sequentially lower in the fourth quarter due to customers managing year-end inventory levels.

Although inventory levels have stabilized across most of the submarkets that comprise our industrial sales, demand has not yet improved. This is consistent with U.S. and European PMI data, which has been in contraction for most of the last two years. Wireless infrastructure sales saw the largest decline of all our market segments quarter-to-quarter as shipments to our Indian program were completed. However, for the full year, we delivered strong wireless growth, primarily due to the Indian-based fixed wireless access project. With strong proven technology targeted to this market, we continue to pursue opportunities in our sales funnel, including the next phase of this project in India. Next, on Slide 7, I’d like to spend a few minutes highlighting some of the key accomplishments across our commercial and R&D teams from 2024.

We remain confident in the underlying strength and growth opportunities in the markets we served despite last year’s challenges. We secured a number of significant wins across our portfolio in 2024 and while some of these wins delivered sales in the year, many are wins that are expected to contribute to revenues in the coming quarters and beyond. The most recent of these wins is in the ADAS space. In the fourth quarter, a leading Asian automotive radar supplier selected Rogers Materials for a new 77 gigahertz forward radar unit application. We were awarded this business based on the strong performance and reliability of our laminate materials, where we remain the technology leader in mission-critical applications. Other significant design wins from earlier in 2024 were in key markets such as EV/HEV, portable electronics, renewable energy, and data centers.

Design wins in the EV/HEV space have the largest future revenue potential and included multiple wins in both Western and Asian customers. These wins were in both business segments. In AES, our curamik power substrates were designed in by multiple power module manufacturers and OEMs in China. This provides us increased access to the fastest-growing EV/HEV region in the world and underpins our capacity expansion plans. We also continue to develop strong relationships with our U.S. and European customers and have good exposure to each of these geographies through our customer base. In addition, our EMS business has secured important design wins for our battery cell pad technology with leading global OEMs and their battery suppliers. Our PORON polyurethane products continue to be a leading material of choice for pressure and vibration management solutions that improve EV battery efficiency and reliability.

Additionally, we strengthened our M&A pipeline in 2024 as we identified additional strategic bolt-on acquisition targets. To ensure we maintain our position in high-performing engineered materials, we made advancements across our innovation pipeline in 2024. Starting with our AES business, we launched a new advanced thermoset laminate in Q4 2024 designed for corner radar applications in the ADAS market. For years, our copper clad laminate technologies have helped to enable accurate and timely detection of objects to improve automotive safety. This new product builds on these strengths, while reducing manufacturing costs for our customers. Our R&D team continues to innovate in this space with the next generation of this product scheduled to launch later this year.

We also launched multiple successful products in our EMS business. This includes our PORON polyurethane materials, where we introduced new technology targeted to the semiconductor market. In our curamik business, work continues to develop next-generation power substrate solutions that improve thermal dissipation to enable improved system performance and lower costs for our customers. In EMS, we had multiple engagements with key OEMs and battery manufacturers related to emerging EV battery technologies, where our polyurethane and silicone materials to solve pressure management challenges and other critical needs. In AI, early-stage work on solutions for data centers also continued last year. In both AES and EMS, we are targeting opportunities in the areas of thermal and vibration management and signal integrity.

In 2025, we will build on these achievements as we continue to secure new design wins and accelerate our pace of innovation. Turning to Slide 8. We’ve made good progress executing our local-for-local manufacturing strategy, with the addition of a new curamik power substrate facility and a BISCO silicone line, both in China. Building our geographically diversified manufacturing footprint is key to achieving our near and long-term growth objectives. In recent years, we have focused on selectively adding manufacturing capabilities to position Rogers to grow with existing customers as they expand in new regions, as well as capture business with new customers by accessing these markets competitively. This effort has also improved our operations flexibility with multisite product and supply chain qualifications.

This strategy helps derisk sole supply and mitigates the impact of current and potential future tariffs. Specific to our 2024 investments, the new curamik power substrate factory better supports Western customers who are expanding their silicon carbide power module production in China. We have secured design wins with new customers headquartered in China with more design-in activity ongoing. This facility is scheduled to start full-scale production in mid-2025. These investments provide us with scale and capacity to address this growth market. Our capacity footprint additions are now essentially complete. As we did in 2024, we will continue to drive manufacturing cost improvements and operational excellence throughout this year. This includes reductions in manufacturing and procurement costs, as well as additional yield and throughput improvements.

It also includes ongoing consolidation of our RFS footprint, which we first announced last year. These actions are expected to improve operating profit between $7 million to $9 million annually, with a portion of that benefit realized in the second half of this year once the wind down of our Belgian facility is complete. This self-help will remain our focus for operations in 2025. One final point on additional actions we’ve taken to support Rogers’ growth and that is the implementation of our SAP S/4HANA ERP system. We are currently in the early stages of this implementation, which we expect will lead to more efficient internal processes and improved customer experience and a more flexible and scalable business. The rollout is on track and is expected to continue over the next two years.

Now, I’ll turn it over to Laura to discuss our Q4 financial performance and Q1 2025 outlook.

Laura Russell: Thank you, Colin. I’ll begin on Slide 9 with the highlights of our results for Q4. Our overall results for the fourth quarter were in line with our expectations. Sales of $192 million, gross margin of 32.1%, and adjusted EPS of $0.46 were all near the mid-point of our previously announced guidance. For the full year, sales of $830 million were 9% lower than the prior year. However, with our focused efforts to reduce manufacturing costs and increase efficiencies, gross margin declined by only 40 basis points. Adjusted earnings for the full year were $2.72 versus $3.78 in 2023. As a result of our efforts to reduce costs, control expenses, and manage working capital, we generated free cash flow of $71 million in 2024, similar to prior year levels.

On Slide 10, I’ll discuss our fourth quarter sales results in greater detail. Net sales of $192 million declined by approximately 9% versus the third quarter, primarily due to lower volume, which was slightly offset by favorable foreign currency fluctuation. On a reportable segment basis, AES revenue decreased 9% versus the prior quarter to $102 million. Lower wireless infrastructure sales were partially offset by higher ADAS revenue. As noted on last quarter’s call, lower wireless infrastructure sales were expected as we completed shipments to a project in India in Q3. EMS revenue decreased by approximately 8% to $86 million due to lower industrial sales as customers managed year-end inventory levels and from the normal seasonal decline in portable electronics sales.

Aerospace and defense sales improved sequentially. Turning to Slide 11. Q4 gross margin was 32.1%, a decrease of 310 basis points from the third quarter. The reduction in gross margin was primarily due to lower volume and unfavorable product mix. We achieved further operations and procurement savings in Q4, but these were more than offset by under-absorbed fixed costs. Over the course of 2024, we achieved significant cost reductions from our ongoing operational excellence initiatives, which are focused on reducing manufacturing costs. We executed these savings by driving operations and procurement cost savings, optimizing yield, and enabling throughput improvements. These actions led to a 6% decrease in manufacturing spend in 2024. Even with these reductions, we did continue to carry some excess costs in the fourth quarter in anticipation of a rebound in demand.

We will continue to monitor these costs closely as we work to balance margins and the ability to quickly respond to future recovery in demand. Adjusted net income decreased to $9 million in the fourth quarter from $18 million in Q3. Q4 adjusted earnings per share was $0.46 compared to $0.98 in the prior quarter. The lower Q4 adjusted net income was primarily due to the lower gross margin already discussed and higher operating expenses. The increase in adjusted operating expense was primarily due to additional start-up costs. These items were partially offset by a decrease in other expense and lower income tax. On a GAAP basis, operating expense increased to $67 million in Q4, $7 million higher sequentially. The primary drivers of the increase were higher severance costs related to a global workforce reduction and incremental factory start-up expenses.

In Q4, we also incurred an $8 million impairment related to our ERP system, which is in development. This was largely offset by a gain of nearly $8 million in connection with an agreement to separate from our existing joint venture relationship. As Colin referenced, we continue to make progress on our ERP deployment plan and expect to achieve significant synergies when the implementation is complete. Turning to Slide 12, I’ll next discuss some of the highlights from our capital allocation priorities in 2024. Cash at the end of 2024 was $160 million. For the full year, we generated solid operating cash flow of $127 million and free cash flow of $71 million. We allocated $56 million to capital expenditures to fund organic growth initiatives, which included new manufacturing and business process improvement activities.

In the first quarter of the year, we repaid the remaining $30 million balance on our revolving credit facility and continue to carry no debt. Share repurchases in 2024 totaled $20 million, with $12 million repurchased in the fourth quarter. As we move forward through the year, we will continue to prioritize actions to maximize cash generation. With our favorable cash position and a clean balance sheet, we continue to be in a good position to allocate capital consistent with our priorities of funding organic growth, pursuing synergistic M&A, and returning capital to shareholders in the form of opportunistic share repurchases. In 2025, capital expenditures will begin to decrease as we complete the current power substrate expansion in China. For this reason, we expect full year CapEx to be in the range of $40 million to $50 million.

Next, on Slide 13, I will discuss our guidance for the first quarter. Before discussing the specific ranges for the quarter, I’ll provide some context to our current expectations for 2025. First, as Colin touched on, customers remain very cautious and there is a heightened level of uncertainty related to trade policies and timing of a market recovery. Customers, particularly of our curamik business are signaling that recovery will be gradual and second half weighted. For that reason and due to the normal seasonality in our portable electronics business, we expect the second half of the year to be stronger than the first half and with Q1 likely the low point for the year. As sales improve, the higher volumes will naturally bring up gross margins to levels more in the range of what we achieved in 2024.

Now, turning to the ranges for the first quarter. We expect Q1 sales to be between $180 million and $195 million. The midpoint of this range is a decrease of about 2% from Q4 sales. The decline is due to an expected unfavorable foreign currency impact of 1% to 2% and lower portable electronics sales due to normal seasonality. We are guiding gross margin to be in the range of 29% to 30.5% for Q1, with the decrease a result of both lower volume and unfavorable product mix. This guidance range also incorporates a small impact from our new silicon manufacturing line, which will continue until we reach a more normalized utilization rate. As noted earlier, we will continue to carefully monitor demand levels and will pursue further actions to flex our cost structure should we not see meaningful top line improvements in the coming quarters.

First quarter adjusted operating expenses are projected to be slightly lower versus Q4. EPS is expected to range from a loss of $0.26 to $0.04 of earnings. The adjusted EPS range is $0.10 to $0.40 of earnings. Our Q1 EPS range includes $0.25 of restructuring-related expenses, with most of this associated with the wind down of our AES operations in Belgium. Lastly, we project our full year tax rate to be approximately 27%. I will now turn the call back over to Colin.

Colin Gouveia: Thanks Laura. In summary, we had solid execution in Q4 to deliver results that were in line with our expectations. We focused intently on what we can control in 2024, including securing new design wins, continuing to innovate new materials and solutions that meet our customers’ needs, and delivering cost savings. Looking ahead to 2025, we expect the market-driven challenges from last year will continue. While it is difficult to predict the timing of a market recovery, we will continue to execute aggressively on our commercial, innovation and manufacturing footprint priorities. We are confident that our focus and discipline will position Rogers to win when market conditions begin to improve. I will now turn the call back over to the operator for questions.

Q&A Session

Operator: Thank you. We’ll now be conducting a question-and-answer session. [Operator Instructions] Our first question is coming from Bob Labick from CJS Securities. Your line is now live.

Unidentified Analyst: Hi. This is Jeremy on for Dan Moore with CJS. Thanks for taking the time. Q1 guidance implies a 12% revenue decline year-over-year at the midpoint, albeit a more modest decline sequentially. How should we think about revenue on a segment basis, as well as an end market basis for Q1 relative to Q4? And then what end markets are you experiencing further sequential softness in?

Colin Gouveia: Well, I can start, Jeremy, and then Laura can answer. If you think about sequentially, what we see is a slight decrease related to portable electronics, which — it’s our highest — the highest quarter for portable electronics for us in terms of revenues is Q3, decreasing a bit in Q4 and Q1 is the low point. So, I would say that would be primarily the major issue there. And then if you look at year-over-year, that’s related primarily to our curamik business. So, that curamik business — our curamik business is a very important business for us. It did have five years of record growth all the way through 2023. But 2024, it decreased substantially, primarily due to inventory and the slowdown in EV/HEV. One thing to note, though, in 2024 was that we had a reasonably good quarter with curamik in Q1.

The pushouts and the challenges didn’t really start until the beginning of March when we saw a lot of orders from basically our entire customer base get pushed outwards. So, those would be, I would say, the two biggest impacts from a sequential and a year-over-year basis. I’d ask Laura to add anything that I might have missed.

Laura Russell: No, I think you’ve covered that carefully, Colin. And the EV impact was really the big one on a year-over-year basis. And as you said, from a portable electronics perspective, we’re facing another challenge in the first quarter from the fourth.

Unidentified Analyst: Awesome. Very helpful. Thank you. And then I know you don’t provide guidance beyond the next quarter, but given the implied year-over-year decline in Q1, do you expect to get back to positive top line growth on a year-over-year basis, at least by the second half of 2025? And if not, are there further cost reduction actions you’re thinking about to protect margins and cash flow?

Colin Gouveia: Jeremy, I’ll start, and I’ll talk about revenues and top line and then I’ll ask Laura to make a few comments maybe on gross margin. But just to reemphasize what we just mentioned, that self-help was a top priority for us in 2024 and remains so in 2025. There’s still much more we can do in terms of controlling costs and more importantly, improve efficiencies. So, that remains one of our top focus areas. And although we don’t give guidance beyond one quarter, here’s a general comment on the full year. We do expect Q1 to be the low point, and we see a much stronger or a stronger second half. The drivers for that, that are driving our assumptions are a few things. First, when you look out at the curamik market, those curamik customers, which sell — which buy our materials that go into power modules that go into EV/HEV and industrial, those customers are pretty much pointing to a gradual recovery in the second half of the year.

The second thing is that as the portable electronics season hits and that seasonality comes along in Q3 as OEMs begin to build for the holiday season at the end of the year, we have good content across the patch in terms of Western OEMs, South Korean OEMs, and Chinese OEMs. So, there’s been several good design wins. So, we believe we’re positioned for growth there when that seasonality hits. And then finally, we’ve got some new manufacturing capability coming on in China for a few different product lines. And we have some design wins in those product lines that are enabled by this new manufacturing capacity. So, we believe that will also help us in the second half of the year. The curamik business, for example, is still in qualifications, and those will be wrapping up around mid-2025.

And then the BISCO brand silicone line, that is active, but we’re in the middle of qualifications now with customers as well, and that will be sorted out second half of the year. So, I think overall, we do see some growth, especially in some of our key segments, but we have some pretty strong headwinds coming from FX, which will temper that growth. So, self-initiatives remain a top priority and that improved Q2, we think, will get us to a relatively flat year, driven by FX, tempering some growth. And then Laura, I’d like to turn it to you for some comments on gross margins.

Laura Russell: Sure. So, if I could just augment Colin’s comments from a margin perspective. You’ve seen the dilution that we saw into the fourth quarter and what we just posted, which was really driven by predominantly volume as we saw the top line dilute $18 million quarter-on-quarter and also a mix headwind. We posted the 35.1% in the third quarter. But we did highlight at that point in time, we did benefit from mix there with the portable electronics peak quarter. And in addition to that, the conclusion of the program that we had in the wireless space, which was favorable for us. So, with those rolling off into the fourth quarter and the top line dilution, we saw some pressure. Now, when we roll forward into the first quarter, as Colin said, we expect this to be the low point of the year in 2025.

And in that low point, we’re dealing with the continued suppression in the top line, so an underutilization overhang. And we have another adverse impact in mix. We highlighted portable electronics and the lowest quarter of the year being in the first quarter. The last thing I would say about the first quarter margin guide is that as we ramp the new silicones line in China, we need to qualify our customers from that line. So, in the first quarter, we’re going to face some margin headwind that’s incremental to Q4 because the line is new for us. So, that causes some incremental pressure there. But if we look forward to some of the expectations we have through 2025, the biggest thing that will benefit us is a recovery on the top line. And the expectation there is driven by some of the information that we’re seeing from our customer base, a gradual to improving outlook through the year should facilitate recovery in our margin.

Colin Gouveia: Just one quick add to that for everyone. There’s been several questions on the RFS wind down in Belgium. And we did announce that and that is underway. But it really doesn’t begin helping the P&L until probably very much at the back end of this coming year and it will help both in gross margin. There’s also some OpEx help that we’ll receive as well combined in that range previously mentioned of $7 million to $9 million. And then you really get the full run rate and benefit of that in 2026. So, thanks, Jeremy, for that question.

Unidentified Analyst: Awesome. Thank you. Super helpful. I’ll hop back in queue.

Operator: Thank you. Next question today is coming from Craig Ellis from B. Riley Securities.

Unidentified Analyst: Hi. Yes, it’s [Indiscernible] on for Craig. And thanks for taking my question. I wanted to ask about the A&D business, and you guys have kind of characterized that as a high-growth business for some time now, and you’ve been seeing some improvement. I think now it’s about 14% of your total revenues. I just wanted to get a sense of, is this improvement sort of quarter-to-quarter? Or is this the base being lifted? And is this something that we can look forward to long-term?

Colin Gouveia: So, A&D is a core business for us. It really breaks into two pieces. The aerospace piece, which is our EMS technology going to the major aircraft OEM, gasketing, and ceiling. We also have some EMS business in defense where its improving the ruggedability of whatever product is being produced for the Defense Department. From a RFS solutions business, we make the precursor for radars and antennas and we have multiple program wins across many different programs and with many different primes. So, this is a solid base business for us. We had a good year in aerospace and defense. We anticipate that to continue going forward. And we see the aerospace and defense business for us as a mid-single-digit growth business in the near, medium, and longer term.

Unidentified Analyst: Okay. Thanks so much. And then sort of shifting over to some of the geopolitical uncertainty that you guys were pointing at, in part, I think, due to tariffs. I’m sure some of that is due to the restriction uncertainty. Can you guys help me build up some color on that and then kind of point to where you’re seeing that most and which end markets you think might release the quickest or might last longer?

Colin Gouveia: So, it’s a very dynamic landscape. The tariff situation is changing almost on a daily basis. We’re paying very close attention to it based on the geographic dispersion of our revenues. We’ve got 44% in Asia and the rest split almost evenly between North America and Europe. Our mitigation for what might happen from a tariff perspective is this local-for-local strategy. So, we, with a few exceptions, can make all of our products in Asia and supply the Asian market, and we have the same capabilities to supply most of our products and produce them in either North America or Europe and can sell in those geographies. So, bottom-line is, we can’t predict what’s going to happen with tariffs. We pay attention and monitor it every day, but we feel like we’ve got a very strategic footprint in terms of manufacturing to support our customers going forward in terms of if something happens, which, again, we can’t predict.

Unidentified Analyst: Okay. And if I can just follow-up with that for that really quick. And then since you guys are so positioned well with the local-for-local, is it fair to think about it as any sort of hesitance would be sort of downstream of you guys in supply chain and you’re sort of waiting on other players to sort of break the hesitance rather than your direct relations?

Colin Gouveia: I’ll try to answer that. The hesitance from downstream related to — I might not — let me try this answer, and then we can always circle back in the queue. We see a lot of customers who we’ve spoken to, especially in Q1, who are just unclear of what’s going to develop in terms of the macro economy. It’s been difficult macro headwinds in a lot of different segments. Inflation is still a bit higher than what people are used to, and our customers are extremely cautious in terms of building inventory and feeling comfortable about the year. So, we anticipate things to settle down as there’s more clarity on some of these geopolitical issues, and that would lead to a settling of the macro environment. And we think things would then get back to a more reasonable cadence in terms of orders and also confidence in the economy across the different regions.

Unidentified Analyst: Got it. Thank you so much.

Operator: Thank you. [Operator Instructions] We reached the end of our question-and-answer session, I’d like to turn the floor back over for any further or closing comments.

Colin Gouveia: Just wanted to say thank you for joining our call and we look forward to following up with many of you with callbacks over the next several weeks. Thanks again for attending.

Operator: Thank you. That does conclude today’s teleconference webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.