Finning International Inc. (OTCPK:FINGF) Q2 2022 Earnings Conference Call August 3, 2022 9:00 AM ET
Amanda Hobson - Senior Vice President of Investor Relations & Treasury
Scott Thomson - President & Chief Executive Officer
Greg Palaschuk – Executive Vice President & Chief Financial Officer
Kevin Parkes – Chief Operating Officer
Conference Call Participants
Yuri Lynk - Canaccord Genuity
Jacob Bout - CIBC
Michael Doumet - Scotiabank
Bryan Fast - Raymond James
[Call starts abruptly]
Thank you, operator. Good morning, everyone and welcome to Finning's Second Quarter Earnings Call. Joining me on today's call are Scott Thomson, President and CEO; Kevin Parkes, VP and COO; and Greg Palaschuk, EVP and CFO.
Following our remarks today, we will open the line for questions. This call is being webcast on finning.com. We have also provided slides that we will reference during our prepared remarks. The slides are posted on the Investor Relations section of our website. You can also view the slides on our webcast page. An audio file of this call and the accompanying presentation will be archived on our website. Before I turn it over to Scott, I want to remind everyone that some of the statements discussed during this call are forward-looking. Please refer to Slides 10 and 11 for important disclosures about forward-looking information as well as currency and specified financial measures, including non-GAAP financial measures.
Scott, over to you.
Thank you, Amanda and good morning, everyone. On today's call, I will provide some introductory comments. Kevin will then detail important improvements we have made to our value proposition and operating model which have enabled us to exceed our Investor Day commitments. After that, Greg will provide more details on our performance in the second quarter, including regional commentary and outlook.
Please turn to Slide 2. We are pleased with our strong performance in the second quarter. Globally, our teams continue to deliver outstanding results in a very dynamic environment. Through consistent execution of our simple plan to drive product support, reduce costs and reinvest to compound our earnings. We have made sustainable improvements to many important areas of our business and significantly improved our earnings capacity.
Delivering on the commitments we set out at our Investor Day last year, we've accelerated product support growth, we have reduced our cost base to become more efficient and agile in serving our customers. We have reinvested in our business to compound our earnings. From delivering approximately $900 million of free cash flow during very challenging 2020 to delivering $2.66 of EPS over the last 4 quarters, the full cycle resiliency of our business model and successful execution of our strategy has been on full display. There are a number of key building blocks to this success. First and foremost, safety remains a top priority and a key area where we continue to make significant progress. We reduced our total injury frequency a further 11% from Q2 2021. We are driving strong product support growth rates and improving our customer value proposition in close alignment with Caterpillar's aftermarket growth strategy.
We reduced our cost structure through sustainable productivity gains and effective inflation management. In addition, improvements in our inventory management practices and advanced digital capabilities have helped us to capture growth opportunities and service our customers more efficiently. As a result, we have realized a significant improvement in our operating leverage and achieved a fundamental step-up in profitability. These enhancements to our customer value proposition and operational improvements have significantly elevated the return on capital performance across all of our regions.
Redeployment of capital through accretive M&A and share repurchases have also helped drive strong EPS growth. While we are monitoring financial market volatility, we are encouraged by increasing capital deployment by our mining customers, where our quoting activity continues to grow in both Canada and Chile.
During the second quarter, we were pleased to secure 2 important long-term contracts, including an agreement with Artemis Gold to deliver mining fleets to their Blackwater Gold project, a greenfield development in British Columbia with a pathway to fleet decarbonization with Caterpillar and a contract with Codelco to deliver the first fleet of Caterpillar electric drive trucks to their Ministro Hales copper mine. Our customers continue to be busy. We expect that project backlog, healthy customer balance sheets and high machine utilization rates will continue to support strong demand for equipment, parts and maintenance.
Following our strong EPS growth of 52% in the first half of 2022 compared to adjusted EPS in the first half of 2021, we expect demand conditions to remain favorable for the remainder of 2022. Underpinned by our large and diverse backlog, continued growth in product support and disciplined operational execution, we are projecting above mid-teens EPS growth in the second half of 2022 compared to the second half of 2021. We also expect to generate positive annual free cash flow in 2022 with the amount of free cash flow dependent on supply and delivery schedules.
While activity levels remain robust, we are closely monitoring leading indicators and the impact of ongoing supply chain, labor, inflation and interest rate challenges on our customer activity levels. We remain focused on actively managing these risks and are capturing growth opportunities in a disciplined manner. The sustainable improvements we have made to our business have improved our earnings capacity through all stages of the economic cycle which gives us confidence in our ability to continue successfully navigating a dynamic global business environment.
I’d like to invite Kevin to provide a bit more color on how these structural improvements to our business model have helped us to exceed the targets we set out at our Investor Day last year.
Thank you, Scott and good morning, everyone. I'm happy to be joining the call today to provide an update on our operational improvements. If we can ask you to turn to Slide 3, it shows our execution against the Investor Day commitments we set in June 2021.
Our net revenue of $7.3 billion over the last 4 quarters was at the midpoint range as our product support outperformance was offset by constrained availability on new equipment. Our product support revenue grew by 14% over this period, considerably exceeding our goal. In addition to strong demand for parts and service across all sectors, we have significantly improved our value proposition for construction customers. We are now offering a wide range of customer value agreements and rebuilds for most construction equipment models, providing attractive financing and warranty through the support of Caterpillar and leveraging our to network capabilities for faster turnaround cost efficiencies.
As a result, our construction up support revenue was up 24% in the period. While price increases had a more positive impact on our product support revenue growth than we should a year ago, we are pleased with our aftermarket share gains and improving volumes which drove the majority of our outperformance.
We continue to make progress on improving our cost structure. Our SG&A as a percentage of net revenue over the last 4 quarters was 18.3%. This was above our top upside to stronger product support revenue which is more SG&A intensive, lower new equipment sales than expected and more inflationary pressure than we expected a year ago. Despite these challenges, SG&A in Q2 2022 was 16.9%, driven by higher new equipment deliveries compared to the previous 3 quarters, ongoing productivity improvements and proactive inflation management.
Important progress here. We know we have significant room for further improvement in cost reductions. They will remain a key focus going forward. Our key focus areas for productivity improvements include further deployments of our triple R model across all regions, supply chain and warehouse optimization, back-office consolidation and procurement spend management.
I would like to give you an example from each of our regions now to demonstrate the progress in several key important areas. In Canada, we saw improvements in our technician productivity and service quality following the implementation of our AAA network. We are thoughtfully building our technician take capacity we hired around 250 technicians over the period, mostly in our locations outside the higher cost jurisdictions. Labor company is strong and quality has improved with warranty reducing by 30%. While service revenue is not yet at pre-pandemic levels, our past volumes through service are up 5% from 2019 levels. This is a result of increasing scope of work, such as machine rebuilds which are 4x and faster turnaround. The quality and composition of our inventory has improved meaningfully across all regions. In South America, our age of new equipment inventory is only 5% right now, down from 30% at the end of 2019. We are far more deliberate about standardization and category in the area by using our plan around, we would have repeat our strategies which helps increase philosophy and turns.
In the U.K. and Ireland, we improved our EBIT percentages as a percentage of net revenue by 160 basis points from Q2 2019 to 6.4%. This was driven by product support growth including the addition of the Hydraquip, the addition of cubic revenue, building on a lower cost structure. And important fuel, the EBIT as a percentage of net rent revenue increased by 600 basis points since we acquired the business in 2019. While currently making investments in natural gas, renewable fuels in the distribution capabilities. The last [indiscernible] generated an EPS of $2.66. This significant outperformance was culminated a number of well-executed initiatives and supportive market conditions. The strong margins and operating leverage enhanced by accretive M&A and share repurchases. Our improved earnings capacity and strong balance sheet enable us to reinvest in our business and return capital to shareholders.
During the last 12 months, we have reinvested $341 million, including share repurchases, the acquisition of Hydraquip and the expansion of 4Refuel capabilities into CNG, RNG and hydrogen. Importantly, we also enhanced a 5% dividend increase which marked 21 years of consecutive dividend increases. Our employees be extremely proud of this great performance which allowed us to deliver strong returns to our shareholders. Quarter 2 2022, ROIC reached 17.4% in Canada; 22.3% in South America; and 16.2% in the U.K. and Ireland driven by a significantly improved profitability. South America achieved the strongest improvement in both profitability and investment turnover relative to our targets.
In summary, we have built our business to drive improved outcomes for our customers and higher returns for our shareholders. Q2 was yet another strong quarter which demonstrates we have the right strategy to execute on our goals and deliver great service to our customers in most efficient and innovative way possible.
I will now hand you over to Greg.
Thank you, Kevin. I'll talk about our strong performance in the second quarter, our growing backlog, regional highlights and outlook.
Our consolidated second quarter results are summarized on Slide 4. Net revenue of $2 billion was up 18% from Q2 2021, driven by strong market conditions, backlog deliveries, successful execution of our product support growth strategy. EBITDA and EPS were up 27% and 43%, respectively, from Q2 2021. All our regions delivered strong operating leverage in Q2 which demonstrates successful inflation management and continued disciplined execution of our productivity initiatives. We're very pleased to have built our earnings at the up to the $0.80 level this quarter, while our [indiscernible] benefit attributed $0.05; tax and inflationary headwinds for a similar value. This brings our EPS growth for the first half of the year to 52% compared to adjusted EPS in the first half of 2021. And we look forward to continuing our strong execution and momentum in the second half of 2022.
Slide 5 shows changes in our net revenue by line of business compared to Q2 2021 as well as more details on the growth and composition of our equipment backlog. The ongoing supply challenges, our new equipment sales were up 24% year-over-year driven by mining deliveries in Chile and construction deliveries in the U.K. We're seeing continued momentum in our consolidated backlog which was over $2.1 billion at the end of June, up 4% from March, 15% for December and 56% year-over-year. Mining order intake more than doubled in Q1 2022, over 1/3 of our backlog is now mining equipment and includes 798 truck orders for Codelco but does not yet include recently announced Artemis Gold.
Depending on supply and delivery schedules, we expect to deliver roughly 7% of our backlog this year. We're pleased to have already secured a backlog of over $600 million of new equipment for 2023. With strong quoting activity, particularly in mining, the 2023 backlog will continue to grow from this very solid base through the second half of the year. We saw strong demand for rental equipment and high rental utilization in Q2 and supply challenges persistent. Product support revenue increased across all regions, led particularly by strong growth in Canada.
Turning to Slide 6. We delivered significant growth in EBITDA and EBIT compared to Q2 2021. An increase in gross profit was in line with growth in net revenue, with higher rental utilization and competitive pricing for used equipment, offset by a higher proportion of new equipment in the sales mix. SG&A was up 8% or on 18% higher net revenue, an increase in SG&A from additional workforce, higher variable cost to support. Revenue growth was partially offset by all different recovery and lower quality expenses. SG&A as a percentage of net revenue in Q2 2022 was 16.3%, a 140 basis point improvement from 2021. We look back to pre-pandemic levels 3 years ago, compare our Q3 2022 results to Q2 2019 which had similar revenue level. EBITDA as a percentage of net revenue was up 250 basis points. ROIC was up 520 basis points. EPS is up 48%. Order intake is up 45% and equipment backlog has more than double that of 2019.
Turning to Slide 7 which summarizes our Canadian results and outlook. Market conditions are strong in Western Canada. Net revenue increased by 15% from Q2 2021, driven by product support, while higher rental and new equipment revenue. Product support revenue was up 23% from Q2 2021 which increased spending by mining customers and increased volume in construction reflect higher machine utilization, consistently strong execution to capture growth. New equipment sales were up 3% from Q2 '21, largely due to mining deliveries. Construction sales were below Q2 2021, impacted by supply constraints and delivery delays. Rental revenue was up 30% -- 32% year-over-year, reflecting strong customer demand across all sectors and high utilization rates in the constrained supply environment. EBITDA as a percentage of net revenue was 10%, up 70 basis points from Q2 '21, mostly due to a higher proportion of product support in the revenue mix.
As we look ahead, we expect mining customer balance sheet health and steady increase in capital budgets to drive product support opportunities, renewal of aging fleet and greenfield project development. The construction, private sector investments in infrastructure and energy continue to support robust activity including demand for heavier rentals [ph].
Please turn to Slide 8 for our South America results. New equipment sales increased by 66% from Q2 '21 in functional currency, driven by deliveries to Chilean mining customers. Demand for products was strong, especially in the mining sector. However, the growth rate was constrained by a challenging supply environment, product support revenue increasing 2% in Q2 '21 [ph]. Despite the shift in revenue mix to new equipment sales, EBITDA as per of net revenue was up 30 basis points year-over-year, driven by operating leverage from our improved cost structure as well as favorable impact of Chilean peso devaluation. In the near term, we have stable mining activity in Chile to continue to drive demand for maintenance and replacement of maturing equipment fleet. Delivery activity remains strong, including Protech's QB2 mine as they approach first production as well as Codelco, where we have won several trucks and sport equipment packages.
We continue to closely monitor the constitutional reform process in Chile and the recently proposed tax reform bill, including the proposal for a revised mining royalty framework. These proposals have been under discussion. Until this process is completed, the timing of investment decisions related to incremental greenfield and new expansion projects will remain uncertain. Despite these uncertainties, we still see strong levels of quoting and order activity for fleet replacement and technology areas by mining customers and contractors.
Our long-term outlook for copper mining in Chile remains constructive and we expect Chile to remain an attractive place to invest in the long term as is electrification trends drive growing demand for local copper. While mining remains strong, order intake in the construction side of the Chilean business has softened, impacted by higher prices, rising interest rates and peso devaluation. However, we expect construction machine utilization remains strong, driving continued product support opportunities. In addition, we're monitoring Argentina closely and actively [indiscernible] our currency exposure. The devaluation of the official exchange rate is becoming increasingly likely.
Turning to U.K. and Ireland on Slide 9. The U.K. and Ireland delivered very strong results in Q2. New equipment sales were up 23% in functional currency driven by the construction, including HS2 deliveries, with higher activity in construction and the contribution from Hydraquip. Product support revenue was up 25% in Q2 2021 in functional terms.
EBIT as a percentage of net revenue up 110 basis points in Q2 2022 from Q2 of 2021 to 6.4%, reflecting operating leverage on strong revenue growth and structural profitability improvements, including through the acquisition of Hydraquip. We continue to be excited about the Hydraquip acquisition. The integration is going very well. The cultural fit is excellent and the immediate positive financial impact is very helpful to the U.K. business. We continue allocating capital towards the business, highly attractive bolt-on acquisitions starting in the U.K.
Our outlook for the U.K. and Ireland business remains optimistic, delivery HS2 customers, investments and other infrastructure projects, the high machine utilization hours are expected to continue to drive strong construction equipment sales prior [indiscernible]. We also have a solid backlog of Power Systems projects for deliveries in the second half of 2022 and into 2023 and we expect demand for our power system solutions in U.K. and Ireland to remain strong.
Our balance sheet remains healthy with net debt to adjusted EBITDA of 1.8x end of June. We've built a very solid inventory position to support the delivery of our backlog and strong product support for upgrades. We're closely monitoring leading indicators, taking a low-risk approach on incremental inventory addition and being very disciplined about how we capture growth offers.
Operator, I'll now turn the call back to you for questions.
[Operator Instructions] The first question comes from Yuri Lynk with Canaccord Genuity.
Congrats on a nice quarter. Scott, last year, you talked about coming up on mid-cycle economics for Finning over the ensuing 12 months which we did and maybe even surpassed mid-cycle on some measures. And I’m just wondering how you would characterize or how you view the next 12 months? Do you view them as – do we say the word peak? Or how are you looking at that just given all the uncertainty in the market?
Why don't I make a couple of comments and then Kevin, you can add on. So I actually think we're pretty well positioned right now. I mean you obviously see a lot of uncertainty in the market. And frankly, even in some of our construction, so U.K. as an example, we're seeing a little bit of slowing order intake. And construction, we're seeing a little slower order intake. However, in our big engines of Western Canada and Chile mining, we see a lot of great activity, a lot of quoting and backlog build and I think it's underpinned by the commodity price. So, we are really encouraged about the rest of 2022 and then going into 2023. Growth will probably slow a bit going into 2023 but we will still grow in my mind. And that's, I think, an important differentiator for us relative to some of the other folks out there who may have a little bit more construction exposure.
Do you have anything to add on that?
Yes, surely, the recent uncertainty -- look, we feel we're really improved about the rest of 2022 and into '23. Why? We've got continued momentum and great progress in our product support growth [ph]. Our backlog is strong and as Scott mentioned, we're somewhat sheltered on the construction headlines because of our exposure to mining. The commodities are still strong. We see that the order take in South America. We also believe we've got a very strong inventory position. The inventory quality is very good in regions and gives us an ability to sell that through. Over the period, we're talking about it right now. We've got great contributions from our rental business and 4Refuel fuel and the regional hydro acquisition which we're adding to our performance and providing some diversification, I guess, in our business operations.
And the last thing I would say is that from a mid-cycle perspective, it is hard to predict where you are in the cycle but what I really want to make the point is, this cycle is a term we've used internally to increase how thoughtful we are about how we make investments and how we manage the cycle internally. It's not necessarily a term that we use to describe the core part of the cycle but it is something of discipline we have installed internally to manage the trough for these and the troughs in our business.
Okay. That makes sense. And maybe just a follow-up to that. On the above mid-teens EPS growth for the back half of the year, is it fair to say that that’s going to be mostly top line driven? And if so, I’m assuming you’re comfortable with your inventory position to be able to get that iron in the hands of your customers?
Yes. Thanks, Yuri. Yes. We feel solid about the second half of the year. As we discussed last quarter, we saw a step-up coming out of Q1 in revenue which you saw. We see a continued step up in Q2 and Q3. I see the backlog of $2.1 billion was 70% for this year. A lot of that is on the ground or on a site. So we feel confident in that step-up. And so that continued momentum at a little higher revenue level is what we're expecting.
And I’ll just add to that. [Indiscernible] backlog there is in mining products. And whilst we still see some challenging and constructive lead times in construction in our mining backlog, we have sort of build slots and factories and contracts in place to those. So that backlog is fairly secure and we’ve already got $600 million in backlog in '23.
The next question comes from Jacob Bout with CIBC.
My first question is on supply chain disruption. I know Caterpillar saying yesterday, they haven’t seen much of an improvement. What are you seeing? And how are you thinking about supply chain disruption? What have you baked into your second half guidance? More the same or?
Yes. So we don't see the supply chain getting any better and we don't see it getting any worse. And we've built a solid inventory position. We're effectively using rental and use and rebuild in that cycle. We're taking control of the situation, using the tools and how available on what is still a challenging supply chain environment that has no real indications of improving like that would we don't believe the impact our second half execution and we're already thinking about how we manage it through 2023. Like I said, our backlogs, our order intake in mining [ph]. Mining is the key differentiator here. The supply chain constraint are not great to the mining product. Like I said, we've got converted build slots. They are sending out to [indiscernible] but we feel that supply chain constraint won't impact our delivery and earnings capability in the second half of the year.
Okay. And then maybe just going back to the backlog. So it does appear that the growth is slowing. Just this – just on the duration, the 70-30 split, I guess, back half 2022 versus ‘23. Is this more front-end loaded than normal?
It's interesting for middle of the year, there's always going to be some mining or power orders that extend into the next year. So I'd say 70-30 is -- would be kind of typical for a midyear of backlog.
The only thing I would add to that is in the U.K. which is our most -- our largest construction market, we have seen some of the onsite move to the right. So I would suggest that that's backlog right now. And as those customers manage through proven uncertainty and lead times -- going to feel the lead time. So the construction in the U.K., I would say that maybe it's moved to the right.
Okay. But are you expecting in 2023 year-on-year growth in backlog, is that what you’re saying?
Sorry, say that again, Jacob.
In 2023, is your expectation today that you’re going to see growth in backlog year-on-year?
Our expectation is we're starting from over 600 and we'll continue to build that strongly in the back half of the year. We'll ultimately have to see where we get this time next year. But order intake is strong. Mining quoting is strong and so that's encouraging. We saw that level of backlog already for next year but we'll have to see ultimately where we build in the back half that's through the first half of next year.
The next question comes from Michael Doumet with Scotiabank.
I think you get a version of this question each call. I’ll ask it again anyways. You’ve seen – or you’ve shown us, I guess, how this business can take on more revenues just less cost. And Kevin, specifically spoke to some of the structural improvements that we’ve all been tracking. Market conditions have been very favorable. On gross margins, are you expecting pricing discussions to become a little bit more challenging in the near term? And maybe are you seeing any signs of that at all today?
So the answer is not today. I think we've probably want both interesting parts in terms of management in place environment, certainly. But I'm really pleased with that. We've progressed part as a team. We've built capabilities 2 years ago in the [indiscernible] and certain fee to develop the wind of pricing discussions. We were proactive and we work closely with our teams to educate them on the path of data about what we were seeing in the price environment right now. So obviously, those conversations we had were very conservative. There were some challenges around climate as it relates to these times and perhaps moving into a new pricing period. But we managed through those and we had conversations with our major customers. And I feel we're well positioned for the second half of the year but we still remain very thoughtful about the price environment moving forward.
Got it. And then maybe just switching gears here. At the Investor Day, Greg, I think you called out $250 million of capital deployment through Q2. You’ve exceeded that just by a bit. Do you look – should we expect maybe a little bit of a pullback in terms of capital deployment? Or is this something that you think is a repeatable annual kind of reinvestment number, something that you – the pace of reinvestment and capital deployment that we can expect through the cycle.
Yes. Thanks, Michael. So yes, we had some a couple of acquisitions we're very pleased with as well as we're buying about 1% of our [indiscernible] each quarter in terms of share buybacks. So as we highlighted at Investor Day, we'll have approximately $250 million as a starting point. We'll look at the size of opportunities available to us. But ultimately, it's going to be a competition between share buybacks and acquisitions. We've got a really long checklist for things that went from an acquisition that I think we got all of the Hydraquip that we're pleased; they're hard to find. And so we'll look at one-off versus the other. And certainly, at the moment, it's really hard to find acquisitions that would compete with the accretion of our share price.
So as of right now, we're broadly balanced towards share buybacks but we'll continue to evaluate the company.
[Operator Instructions] The next question comes from Bryan Fast with Raymond James.
Just to maybe piggyback on that last question. And understanding it’s still early days but could you discuss some of the learnings from Hydraquip? Maybe how that business has performed relative to expectations?
Yes, I'll take that one. So we're really pleased with it. We had a joint meeting right out that with the team, great cultural fit, desire to work together on a lot of back office functions and really free that business up to go get more growth. It's a business that can do smaller bolt-ons really on a really attractive basis and they've actually already executed a couple of those. So really excited about it. I think there's good synergies with customers. There's already been a number of integral that have helped. So actually, May was an all-time record financial performance of the business and we continue to work collaboratively to drive that forward. So pleased with that. We expect that this points EBIT margin the U.K. business and we're at the higher end of that this quarter. And so we're really pleased with it. The business.....
Yes. And Bryan, I've been really encouraged by my interactions with the U.K. team and the Hydraquip management team. And we've got a really strong growth deliver that U.K. growth. Lots of size and opportunities is supporting the dealership business model and adding our services we provide to customers. Of course, a geographic expansion opportunity that we'll continue to expect delivering the business case and making sure that we're accretive to the U.K. And I think we learned some great things from 4Refuel acquisition model. The actual Hydraquip team and the 4Refuel team are active on what it's like to join us in an organization and we have this philosophy of protecting and making sure the acquisitions and deliver their business plan and remain true to their value proposition and their success.
In both cases, we're really happy with how those acquisitions have landed, how they've integrated. We supported and supported them to the organization. And they both have exciting opportunities in the future to expand and grow.
Okay. That’s helpful. And then maybe just switching gears. Could you provide some color on customer sentiment, I guess, around the proposed mining royalty framework in Chile? I mean, are you starting to see a higher interest in quoting as we get closer to a resolution? Or is it just kind of status quo?
Yes. Thanks, Bryan. I think it's been interesting. I mean we're monitoring closely. It's been going on for quite a long time. So there's been many waves of news. But ultimate customers are busy. Copper prices remained attractive at $3.50. It's a lower pace so their cash margins continue to be strong and their fleets are aged. So we've been encouraged that we've had a lot of order intake on kind of a what I call partial fleet replacement. So those are related to long at quite a good pace. But interestingly, the reaction hasn't been quiet. The reaction has been more quoting and frankly, more discussions about technology packages and how do we lower our costs in any [indiscernible] because if royalties are medium, need to reduce costs, they're high, you need to reduce costs. And there's a lot of new technology and fleet that can help people reduce their cost per ton. And so we've been pleased by the number of conversations that continue in some cases stepped up.
And this concludes the question-and-answer session. I would like to turn the conference back over to Amanda Hobson for any closing remarks.
Thank you, operator. This concludes our call. Thank you for joining us and have a safe day.
This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.