Cabot Corporation [CBT] Conference call transcript for 2022 q1
2022-05-03 11:27:07
Fiscal: 2022 q2
Operator: Good day ladies and gentlemen. Thank you for standing by, and welcome to the Cabot’s Second Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation there will be a question and answer session. I would now like to turn the conference over to your speaker host, Steve Delahunt of Cabot Investor Relations. Please go ahead.
Steve Delahunt: Thanks Olivia. Good morning. I would like to welcome you to the Cabot Corporation’s second quarter earnings teleconference. With me today are Sean Keohane, CEO and President; and Erica McLaughlin, Senior Vice President and CFO. Last night, we released results for our second quarter of fiscal year 2022, copies of which are posted in the Investor Relations section of our website. The slide deck that accompanies this call is also available in the Investor Relations portion of our website and will be available in conjunction with the replay of the call. During this conference call, we will make Forward-Looking Statements about our expected future operational and financial performance. Each forward-looking statement, is subject to risks and uncertainties that could cause actual results to differ materially from those projected in such statement. Additional information regarding these factors, appears in the press release we issued last night, and in our 10-K for the fiscal year ended September 30, 2021. And in subsequent filings, we make with the SEC, all of which are available on the Company’s website. In order to provide greater transparency regarding our operating performance, we will refer to certain non-GAAP financial measures that involve adjustments to GAAP results. Any non-GAAP financial measure referenced on this call are reconciled to the most directly comparable GAAP financial measure in a table at the end of our earnings release issued last night and available in the Investors section of our website. I will now turn the call over to Sean, who will discuss the second quarter highlights and provide an update on our progress in the areas of Battery Materials and ESG. Erica will review the Company and business segment results along with some corporate financial details. Following this, Sean will provide some closing comments and open the floor to questions. Sean.
Sean Keohane: Thank you, Steve. And good morning, ladies and gentlemen, and welcome to our call today. I’m very pleased with the results in the second quarter, as we delivered record adjusted earnings per share of $1.69, which was up 22% compared to the same quarter last year. Demand across all businesses was strong and we continue to leverage our global scale, a differentiated portfolio and our strong track record of operational excellence. While geopolitical events, the persistence of COVID-19 and global supply chain disruptions presented execution challenges to industries globally, we demonstrated continued resilience across our operations driving strong earnings and discretionary free cash flow generation. Results across our businesses were very strong, with record performance in both the Reinforcement Materials and Performance Chemical segments, as we delivered volume growth, while mitigating the impacts of rising raw material and energy costs. During the quarter, we made important progress on our Creating for Tomorrow strategy. We completed the sale of Purification Solutions and are now solely focused on growing our industry-leading portfolio of businesses. Central to our purpose and strategy is a commitment to sustainability leadership and during the quarter, we achieved important recognition, earning a platinum rating from EcoVadis. And finally on the capital allocation front, we moved forward with strategic high-value growth investments, while continuing to return capital to shareholders through our robust dividend and share repurchases. I have talked quite a bit about Battery Materials over the last few quarters, as I believe it represents a transformational opportunity for Cabot. Over the past several years, we have been systematically building out the product portfolio, technical expertise, customer support and global footprint required by the leading lithium-ion battery producers. Battery technology is complex and rapidly-changing as manufacturers look to improve safety and battery range, while reducing costs and shortening charging time. Conductive carbon additives are one of the critical ingredients to address these evolving market needs and will be required regardless of whether the battery roadmap evolves from current chemistry to dry process or solid state. Cabot is the only global conductive carbon additive player that has the broad product range of conductive carbons, carbon nanotubes and carbon nanostructures, each of which offers different levels of connectivity and formulation flexibility for battery manufacturers. Our portfolio breadth and ability to formulate blends of conductive carbon additives, allows us to tailor the solution for our customers’ unique Battery chemistries. During our recent Investor Day, we outlined an investment plan that will triple capacity over the next three years across our Battery Materials portfolio. Recently, we completed technical upgrades at our Xuzhou specialty carbons plant with the first unit commissioned in April. This will immediately free-up additional conductive carbons capacity in our global network to support growth of Battery Materials. We have also commenced the debottleneck project to expand capacity at our carbon nanotube plant in Zhuhai, China and have begun the technology conversion of our newly acquired plant in Tianjin, to further add capacity for Battery Materials. This portfolio of projects is capital efficient, and we intend to execute these projects with speed to capture the market growth opportunity and meet the needs of our customers. Results in our Battery Materials business have continued to surpass expectations. Year-to-date, EBITDA in this business increased by approximately 80% compared to the prior year, driven by rapid market growth for electric vehicles and continued momentum with customer adoptions for our products. We believe there is tremendous potential to deliver greater perform from lithium-ion battery chemistries, through innovation and optimization of conductive carbon additive blends and we are seeing active engagement with our customers in this area. In the quarter, we achieved a key conductive carbon additive blend win with a top five battery manufacturer that will be utilizing a blend of our conductive carbons and carbon nanotubes. This customer win further supports our belief that blends of conductive carbon additives will play a key role in the future of battery innovation, as the formulations can be tailored to optimize both short range and long range conductivity. Given our strong momentum, we are tightened our EBITDA guidance range to $30 million to $35 million for fiscal year 2022. The midpoint of this range represents a 100% year-over-year growth rate of earnings for Battery Materials. Sustainability is at the heart of our purpose and integral to everything we do. Given that, we are especially proud of the various forms of external recognition that we have received over the years for our sustainability leadership. At the top of this list is the platinum rating, we recently received from EcoVadis the highest recognition available for the second consecutive year. EcoVadis is the world’s largest and most trusted provider of business sustainability ratings with more than 90,000 rated companies. A platinum rating recognizes our sustainability efforts and places Cabot among the top 1% of companies in the manufacturing of basic chemicals group. This prestigious recognition underscores Cabot’s commitment to transparency and provides customers with a better understanding of our sustainability performance. We are very pleased with our progress this quarter, both on the operational execution front and on our strategic priorities. I will now turn the call over to Erica to discuss the financial and performance results of the quarter in more detail. Erica.
Erica McLaughlin: Thanks, Sean. I will start with discussing results for the Company and then review the segment results. We reported record results in both reinforcement materials and performance chemicals with adjusted EPS in the second quarter of $1.69 up 22% compared to the second quarter of fiscal 2021, and up 31% sequentially. Discretionary free cash in the quarter was 96 million driven by strong EBITDA and we ended the quarter with $215 million of cash. CapEx in the quarter was $41 million and year-to-date we are at 71 million. We expect full-year CapEx to be approximately 250 million. The balance sheet also remains strong with total liquidity of 1.2 billion and net debt to EBITDA of 1.8 times as of March 31st. We plan to refinance 350 million in public bonds in the third fiscal quarter. Rising interest rates affecting both our bond refinancing and our short-term commercial paper are expected to increase our quarterly interest expense by approximately $3 million per quarter for the back half of the year. This expectation has been included in our updated adjusted EPS guidance range. Our operating tax rate was 27% for the quarter and we anticipate the fiscal year rate will be between 26% and 27%. Now moving to reinforcement materials. During the second quarter, EBIT for reinforcement materials increased by $12 million as compared to the same period in the prior year. The increase was principally driven by improved unit margins from higher pricing and our 2022 calendar year customer agreements and higher volumes across all regions. This is partially offset by fixed costs associated with increased utilities and maintenance costs. Globally volumes were up 3% in the second quarter as compared to the same period of the prior year due to 6% growth in the Americas, 2% in Europe and 1% in Asia. Higher volumes in Europe and the Americas are largely due to volume gains and our customer agreements and our unique position in Mexico, which is enabling us to capture the strong volume growth in that country. Looking to the third quarter of fiscal 2022, we expect the reinforcement materials EBIT to improve sequentially due to our expectation that strong volume levels will continue with seasonally stronger growth. We also anticipate unit margins to be maintained at healthy levels, and prices will adjust for changing input costs. Now turning to performance chemicals, EBIT increased by $12 million in the second fiscal quarter, as compared to the same period in fiscal 2021. The increase was driven by higher unit margins as a result of improved pricing and product mix in our specialty carbons and Fumed Metal Oxide product line. This included the successful implementation of price increases ahead of rising input and operating costs in the Fumed Metal Oxide product line. Year-over-year volumes in the second fiscal quarter increase by 1% in performance additives, and decreased by 17% in formulated solutions. The decrease in formulated solutions was due to the continued plant downtime at our Belgium specialty compound site. The site came back online in April and is expected to return to full production in the third quarter. We delivered impressive volume growth and product sold of Battery Materials applications as we continue to see growth driven by higher EV demand and adoption of our products by top battery producers. As we look ahead to the third quarter, we expect a sequential volume increase led by growth in Battery Materials applications, and the benefit from our specialty compounds plant being fully back online. We anticipate that unit margins will remain strong, but we do not expect to see the same benefit from price increases ahead of raw materials in our Fumed Metal Oxide product line. This contributed 10 million in the second quarter that we do not expect to repeat sequentially. In addition, we expect fixed costs to increase due to the plant startups and higher utilities. Now moving to capital allocation as we discuss at Investor Day, our capital allocation framework supports our Creating for Tomorrow strategy. Sean has discussed the investments and the acquisition completed this quarter to support the growth in Battery Materials. In addition, we broke ground in our Indonesian capacity expansion to support growth in our specialty compounds product line. These are high confidence, high return projects to support our growth agenda. In addition, we are also focused on providing an attractive return of cash to shareholders. During the quarter, we returned $36 million to shareholders through 21 million in dividends and 15 million in share repurchases. Year-to-date, we have returned $76 million. We are able to make these growth investments and return cash to shareholders while maintaining a healthy balance sheet with 1.2 billion in liquidity and net debt to EBITDA of 1.8 times. I will now turn the call back over to Sean.
Sean Keohane: Thanks, Erica. I will close out my prepared comments today by talking about our outlook for the remainder of the fiscal year. We are very pleased with our momentum coming out of the second quarter and we feel very good about the second half of the year. Based on our second quarter results and the outlook across our businesses, we are raising our guidance for adjusted earnings per share to be in a range of $5.80 to $6.20 for the fiscal year. The upward revision represents a $0.30 increase at the midpoint, compared to our prior guidance, as we anticipate the strength of the first half of the year to continue with second half results, at a similar level to those in the first half of the fiscal year. In the second half, we expect underlying customer demands to remain strong in both segments. We continue to closely monitor the dynamic situation in China, regarding COVID restrictions, and the impact from the war in Ukraine. To-date, our plants have continued to operate with limited impact in China and our local team has done an exceptional job navigating lockdown related supply chain disruptions. However, we are expecting some impact on the economy and our China volumes in Q3 from COVID driven lockdowns, which is included in our fiscal 2022 guidance. Regarding the Russian invasion of Ukraine, we don’t have operations in Russia or the Ukraine and the impact so far on our business has been minimal. Margins are expected to remain strong in the second half, as we realize the full-year benefit from the calendar year 2022 Reinforcement Materials customer agreements and spot market pricing actions remain timely to address dynamic input costs. I continue to be very excited about the momentum across our growth factors, particularly in Battery Materials. We are performing at a very high level and are making the investments necessary to win, as the automotive industry undergoes the transition to electric vehicles. Overall, I’m very pleased with our strong execution and the progress against our Creating for Tomorrow strategy. The long-term fundamentals of our businesses are strong. Our end markets remain robust and we continue to execute at a high level. Thank you very much for joining us today. And I will now turn the call back over for our Q&A session.
Operator: . And our first question is coming from the line of David Begleiter with Deutsche Bank. You line is open.
Unidentified Analyst: Good morning, everyone. This is (Ph) on for David Begleiter. In Battery Materials, will the win you announced impact this year’s results and just as a follow-up, can you maybe give some insight into the pipeline for future Battery Materials wins? Thank you.
Sean Keohane: Sure. Good morning, Anthony. So, certainly, the recent customer win we commented on will have impact in the back half of the year, and is embedded in the tightened guidance range for this business that we provided on the call here. Now, as you may recall from our Investor Day materials, we outlined our strategy here, for this business. It is a very high growth opportunity, really a transformational opportunity as the automotive industry transforms from internal combustion to EVs. And we are making the investments to capitalize on that, and we have outlined I think a pretty compelling strategy and a pretty aggressive set of targets. So, we are working with all the major battery producers in the world and we are making the investments to support their growth needs. And I would say that the value proposition of Cabot is resonating with customers. We, we bring a broad portfolio of winning conductive carbon additives, and ability to formulate blends for optimal performance. We have an unmatched global footprint of manufacturing assets and application labs and the commercial and technical support that our customers need in order for us to work closely with them. And we have built a longstanding culture of operational excellence, and this application is a demanding one and I think our customers value that. So overall, very excited about our progress here and we are performing at a very, very high level and we expect the momentum to continue.
Unidentified Analyst: Thank you.
Operator: Our next question is coming from the line Joshua Spector with UBS. Your line is opened.
Unidentified Analyst: Hi good morning. This is (Ph) on for Josh. So I just wanted to talk about the impact of Russia a little bit if we can. So, I mean, you are a significant exporter of carbon black into Western Europe. So I was just wondering to give us your thoughts on how tire customers have reacted there to any sort of lack of supply. Is that something that is going to benefit you in Europe as the year progresses do you think or has that benefited you China supply in any way?
Sean D. Keohane: Yes. Good morning Lucas. So, certainly it is - let me start with the reality that it has been a very trying time for many of our European colleagues, who are impacted by this war and the Russian invasion in Ukraine and we are fortunate that all of our employees are safe and their families, and we have none that work in Russia or Ukraine. And as I commented, our business has not been materially impacted to-date, as we don’t have operations there. At the moment, we are seeing significant interest from customers and customers that we already serve, as well as some customers that we do not serve that are urgently looking for carbon black supply and I think that links directly to your comment, which is correct that the European market does import a significant amount of carbon black today from Russia and that has suffered significant disruption from the war in Ukraine. I think both in terms of sort of supply chain potential, for sanctions and perhaps, most importantly, I think customers just concerned about long-term reputational impacts of continuing to source from Russia. So our view here, as we go forward is we are trying to work with customers to help them in any way that we can, although, most of our capacity is contractually committed in Europe. So, there are limits to what we can do. We are working with customers to try to help them from the rest of our global network, including in Asia and China if the pricing and logistics make sense for customers here. And then as we go forward, I think, it is more a question of what happens over the longer-term. And again, I think the uncertainty that customers have right now has caused many of our customers to reach out early to begin negotiations for 2023. This is much earlier than typical. And what we are hearing from customers is that they are concerned with the security supply, as well as the reputational risk of continuing to do business with Russian suppliers. And I think given our strong consistent reliable performance customers are definitely eager to secure supply with us. And so we have begun negotiations, given the balanced supply demand conditions and I think the uncertainty around Russia, we feel very good about our prospects and the importance that is placed on the Cabot value proposition by customers here. So I think that is maybe a bit of commentary on the longer term.
Unidentified Analyst: Alright. Thanks. And then within performance chems and specifically in the specialty black business, are you seeing any change in the response to pricing sort of in any region, do you think there is going to be a point here whether either you have to sort of expect or we will start to see some more pushback on that front? Just as, I mean, this seems to be quite different to price cycles, whether usually sort of more of a lag and so why is this time different? Thanks.
Sean Keohane: Yes. Sure. So our team has done an exceptional job here, not only this quarter, but I think this has been a consistent narrative over the last year when we have had more dynamic input cost movements. Our team has done is a great job of moving quickly in the market and getting these pass through to customers through pricing actions. And again, we saw that this quarter. So I think in terms of the execution level, it has been great and we expect that to continue. I think there are a couple of factors here that make me comfortable that what we are executing on right now is a sustainable way of doing business. I think first and foremost the products that we provide in specialty carbon is going to a range of applications, and the loading in those applications while it varies tends to be on the lower end yet the performance requirements in the application tends to be very high. Number one, so there is real performance orientation first and foremost in customer’s minds. Second, I would say is supply reliability, our network of plants, our operational reliability, the fact that we can serve customers all over the world and given the general tightness and the disruptions that are out there in the sort of macro environment. I think all of that is leading customers to place a certain premium on supply reliability. So given the performance and application aspect of this product line and the supply reliability, I think customers understanding of that we are needing to pass on these input costs and I would expect that to continue.
Unidentified Analyst: Great. Thank you.
Operator: Our next question is coming from the line of Lawrence Alexander with Jefferies. Your line is open.
Daniel Rizzo: Hey guys, its Dan Rizzo on for Lawrence. Thank you for taking my call. You mentioned meaning some European demand from, I guess, in your network and other regions. I was on the impression that is kind of difficult to do that shipping across confidence or across oceans is not something that really happens a lot within your products.
Sean Keohane: Yes. Good morning, Dan. No, you are absolutely right. This business, particularly in Reinforcement Materials tends to be make-in region, sell-in region business for a whole host of supply chain reasons. It is a pretty low bulk density products, our shipping costs are high, most of these volumes tend to be shipped in bulk. And so, that means rail and alike rather than in bags, which is what typically international shipping is done by. So there are a whole bunch of reasons why it just makes sense this business is a regional one. I think right now, given the stress that the industry is under because of the lack of Russian supply, customers are certainly reaching out and having to entertain a range of different options including importing from other parts of the world. So the stability of that from a logistic standpoint, given the global freight challenges that every company is facing, that is a real issue and then the costs are not a material leader. But, we are working with customers to try to help them out from our network to the extent that the cost and the supply chain, the lead time makes sense. But I think it is more of an urgency issue Dan than it is anything else.
Daniel Rizzo: Alright. Thanks. That actually makes sense. And then within Battery Materials, you seem to be growing fairly well organically and taking advantage of opportunities. But, I was wondering if there is other, I don’t know, small companies out there that might be a target I mean, because of the technology that they have or something they can offer just to kind of broaden our portfolio and if you are thinking about growing in that direction.
Sean Keohane: Yes. Well, definitely very pleased with the performance here in Battery Materials. And as I said, I think our value proposition with customers in terms of conductive carbon additives is definitely resonating here and we think we are in a great spot because the market is growing and we are growing much faster than that market because of the value proposition. Now, with respect to M&A, it is definitely something that we are actively evaluating. In fact, it was not long ago that we made an acquisition to buy a carbon nanotube player in China to do exactly that, to broaden our portfolio and support our growth strategy. So, things like that are very much in scope and we are actively looking for opportunities that would make sense for us. And so, we think about what makes sense through a couple of different lenses. One is that, it has to be a material where we really feel that we can bring some value to that. It is complementary to our existing chemistry, and where we really feel that, we would have a right to win. And so, but I would say this is very much in scope, because I think this is a transformational opportunity here, as the whole industry shifts from ICEs to EVs.
Daniel Rizzo: Thank you very much.
Operator: . Our next question, coming from the line of Chris Kapsch with Loop Capital Markets. Your line is open.
Christopher Kapsch: Good morning. Thank you. Just wondering if you could elaborate a little bit more on the situation in China, in wake of these - the COVID lockdowns. You mentioned that your operations hadn’t really been impacted that much. So I’m curious if you have seen some impact at your tire maker customers. And if that represents some risk for, I don’t know, like a lag demand sluggishness into the second - I’m sorry. Into of the June quarter at all.
Sean Keohane: Yes, good morning Chris. So yes, as we commented in the prepared remarks so far, we have only seen minimal impacts to our business, maybe very immaterial. And as I think you know, we have a number of manufacturing sites, China, but we have one in Shanghai and thanks to the extraordinary performance of our staff there, we have been able to operate during the entirety of the Shanghai COVID lockdown. Now currently logistics are becoming a little bit of a bigger challenge for companies. So simply, moving rawer materials or feed stocks in and getting finished product out is becoming a little bit more of a challenge, although we are navigating that and again, so far have not had any material impact. As we look forward though, we have adjusted down our forecasted Q3 China volumes and this is implied in the guidance range that we gave on the call here today. For exactly that, we do expect that there will be some impact to economic growth, and we expect that there will be some impact to our customers and then on our volumes. So, we have taken that down ranges by specific business, but we have taken down the Q3 expectation in the 5% to 15% range in China. Again, depending on the specific business that we have and we think this is appropriate based on the best information we have at this point.
Christopher Kapsch: Okay, that is helpful. So basically softening is - some sequential softening is in your guidance, so sounds like correct.
Sean Keohane: Correct.
Christopher Kapsch: Yes. So, and then just following-up on. So, to the extent that, European tire makers are relied on Russian carbon black, and to the extent they can - are able to I guess transition away from that, that carbon black presumably the Russians will still want to find a home for it and someone suggested that they will look to maybe China as an end-market. I’m just curious if there is any evidence of a much Russian carbon black finding its way into the Chinese market currently, it seems like that also would be somewhat logistically challenged and not necessarily cost competitive with established and operations in China and including yours obviously, which is probably produce much more in a sustainable manner than the carbon black that is produced in Russia.
Sean Keohane: Yes. So, you know exactly what plays out longer-term from this Russia invasion of Ukraine. This whole situation I think is still to be determined. But I think at this point, customers are I think rightly earned about long-term supply reliability. And I think the reputational impacts of sourcing, even if you can, the reputational impacts are becoming more pronounced certainly for the global tire customers. So, now, they are going to need carbon black, and so how the rest of the world kind of adjusts course here to flow some carbon black to meet their needs and is - I mean that will, that will happen likely yet much higher costs landing carbon black from a place like China, which is where some excess would be available, trying to land that into Europe is pretty expensive. You have got logistics costs, that are very high, there is an export duty on carbon black. I think it is 17% or something like that, it is pretty high. So by the time you do the landed economics plus coal tar prices are pretty high in China right now. So I think it is a tough proposition from an economic standpoint, but there will be some flows that will have to happen and we are working with our customers to try to help them from our global network. Now does Russian material flow other places. I don’t think we have seen any evidence that it is flowing into China and that would really surprise me, my own personal perspective. I doubt that that would happen. I think China, has its own material to support its own supply chain and I don’t think that would happen. So does some Russian material flow into some other smaller markets in the world? It is very possible that that happens, but it is quite a disruption here for the tire and the industries that use carbon black.
Christopher Kapsch: Thanks for that. If I could just sneak in one more about the Battery Materials business, currently the lithium-ion battery industry is sort of Asia, really China centric, and even you or assets are there, but if you look at the bigger picture and the pipeline of gigafactories globally, there is a tremendous ramp of gigafactories under design in both Europe and North America. And you flagged your sort of global network as a commercial advantage in terms of I guess positioning yourselves to those customers. I’m wondering if the engagement with these downstream battery customers is - if you are seeing evidence that your global footprint and scope is translating into an advantage dialogue with those potential customers as those pipeline gigafactories come into greater visibility. Thank you.
Sean Keohane: Yes, well, definitely you know Chris, our view in terms of how this industry plays out in the long term is that supply chains, will regionalize. And you are exactly right, there are significant plants that are either coming on or under construction right now. In Europe companies like Northvolt and others, and some of the Asian players are building plants in Europe and those will be coming on here. So I think the regionalization in Europe will occur first in a little faster than the U.S., but the U.S. will follow, certainly Tesla is leading the way in the U.S. So I think regionalization of supply chain is very much, our view on this one. And I think our network of assets positions us very well here. We have assets in the U.S. that produce certain Battery Materials grades today. And we would expand and broaden the product portfolio as those plants come online. And then, the same is true in Europe. We produce battery material grades in Europe today, and would expand and broaden the product portfolio as those plants come online. I think, is the Cabot network leading to advantaged conversations? I would say the Cabot value proposition is resonating very well with customers. And as a result, you are seeing us outpace the market by a significant margin in terms of growth and I think it is because of that. And I think there is a few things I would just underscore, one is the portfolio of products that we have the broad range of conductive carbon additives, and the ability to formulate blends. I think our view on this one is right, and there is evidence that that is the way this industry will go over the longer-term. And then a second is our unmatched global footprint. I think people in the battery space right now are really trying to work with suppliers that can provide long-term supply reliability and move with speed to meet their needs. And I think we are best positioned to do that. And then finally, it is one thing to develop the product that works and build the capacity, but the culture around operational excellence, this is a demanding application, but we have a lot of experience in demanding applications like this from CMP back some years ago selling directly to fab - chip producers, a very demanding application, Inkjet is a very demanding application. So our ability to dial in the operational excellence that these battery customers needed or need is not trivial. So, I think all those things are coming to light for customers and it is part of what is driving our significant outperformance in growth relative to the market.
Christopher Kapsch: Very helpful. Thank you.
Operator: Thank you. I would now like just to turn the call back over to Mr. Keohane for any closing remarks.
Sean Keohane: Great. Well, thank you. Thank you again for joining the call today. As I said at the end of my prepared comments, very pleased with our performance in the quarter here, both at the operational sort of execution level, but also on the strategic front. And we believe we are well-positioned to deliver on our Creating for Tomorrow strategy and to grow the Company in a differentiated way and we appreciate your support and look forward to speaking with you on future calls. Thank you, and have a great day.
Operator: Ladies and gentlemen that does conclude our conference for today. Thank you for your participation. You may now disconnect.
