Haynes International, Inc. (NASDAQ:HAYN) Q3 2023 Earnings Call Transcript

Haynes International, Inc. (NASDAQ:HAYN) Q3 2023 Earnings Call Transcript August 4, 2023

Operator: Greetings. Welcome to the Haynes International Inc. Third Quarter Fiscal 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded. I will now turn the conference over to your host, Controller and Chief Accounting Officer, David Van Bibber. You may begin.

David Van Bibber: Thank you very much for joining us today. With me today are Mike Shor, President and CEO of Haynes International; and Dan Maudlin, Vice President and Chief Financial Officer. Before we get started, I would like to read a brief cautionary note, regarding forward-looking statements. This conference call contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995 and Section 21E of the Securities and Exchange Act of 1934. The words believe, anticipate, plan, and similar expressions are intended to identify forward-looking statements. Although, we believe our plans, intentions, and expectations regarding or suggested by such forward-looking statements are reasonable, such statements are subject to a number of risks and uncertainties, and we can provide no assurances such plans, intentions or expectations will be achieved.

Many of these risks are discussed in detail in the company’s filings with the Securities and Exchange Commission in particular, Form 10-K for the fiscal year ended September 30th, 2022. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. With that, let me turn the call over to Mike.

Michael Shor: Thank you, Dave. Good morning, everyone. As previously disclosed, on June 10th, 2023, Haynes began experiencing a network outage indicative of a cybersecurity incident. At that point, our incident response team in conjunction with third-party specialists begin to investigate the incident — the termly impact and restore functionality to our systems. On June 21st, just 11 days after the incident, we announced that we were back up and running, and had substantially restored our operations, including our administrative, sales, financial, and customer service functions. I’m very proud of our entire team for reacting communicating and recovering very well as we fought through the incident. Despite our rapid actions and responses, we did incur significant outages in many of outages at our operations.

Approximately 11 days of manufacturing or over one-third of the month of June was impacted. The outage led to an estimated $18 million to $20 million reduction in shipments in June, and therefore, in our third quarter. That reduction in shipments, along with the impact the outage had on efficiency, and the costs incurred related to our investigation and restoration efforts, resulted in an estimated reduction in earnings per share of approximately $0.40 to $0.45. Although it will be difficult to offset the missed third quarter shipments in our fourth quarter, due to our high operating levels. We have regained good momentum with the flow of orders at each of our operating locations and expect our fourth quarter revenues to be the highest of our fiscal year.

Our team is now once again focused on the actions that have resulted in excellent financial performance over the past year. These actions include the following three items: first, a focus on gross margins that when removing the third quarter impact of the cyber incident, and raw material fluctuations continues to be top of class and slice of the industrial. Next, a reduction in our breakeven point that is approximately 25% below where it was when we began this improvement journey five years ago. And finally, our continuing efforts to focus on and improve our core competencies and differentiators, including alloy and application development, the supply of high-value products and services, and outstanding sales and technical service. To illustrate the positive effect of reducing our breakeven point, in Q3, we shipped just 4.4 million pounds because of the impact of the network outage, yet we made $8.8 million in net income.

This is despite being below our previous breakeven point of 5 million pounds a quarter. I will now move on to revenue and market performance in our third quarter. Despite the one-time impact of the cyber incident, the numbers tell a very compelling story. Revenues were $143.9 million, down 5.8% sequentially, but up 10.6% year-on-year. As far as our markets, our sequential and year-on-year CPI revenues were down significantly, because of both the cyber incident and our ongoing mix management, and pricing for value initiatives. Our IGT revenue will be being down sequentially due to the cyber incident but still up 17% year-on-year. This is primarily due to our share gain, excellent sales, technical service, and increasing use of our proprietary alloy Haynes 282 and land-based gas turbines.

Our other markets declined both sequentially and year-over-year due to both cyber incident and our withdrawal from the majority of the low-margin, flue gas desulfurization or FGD market. As far as our aerospace market, our third quarter numbers truly emphasize the strength of the aerospace market for Haynes. Despite the gap in June shipments, our aerospace revenues increased 27% year-on-year and 16.3% sequentially. These increases show the unprecedented demand and growth that we are experiencing in this market. Further emphasizing the strength of the aerospace market, I will touch on the Paris Air Show, which occurred in June, where we met with many customers along with engine and airframe builders. Each meeting was very similar with three main themes: First, the industry’s inability to build inventory in the engine supply chain.

Second, the anticipated need for increasing of nickel-based superalloys and titanium tube for years to come. And third, the outstanding sales and technical service provided by Haynes, due to our combination of excellent people, unquestioned quality, and outstanding service out of our company-owned, customer-facing service centers. To put some additional color on this, the new out of the aerospace industrial continues to be very positive. For recent communication from — suppliers, there is a backlog of more than 10,000 LEAP engines and their objective is to deliver 50% more LEAP engines in 2023 versus 2022. In addition, numerous published projections show significant commercial aerospace growth, both short-term and through the balance of this decade with passenger traffic returning to peak 2019 levels this year and the commercial aircraft fleet anticipated to double over the next 20 years.

Finally, as far as backlog and book-to-bill, our backlog in June increased for the 27th consecutive month, reaching a new record with our end of Q3 backlog now at $468.1 million. For comparison, before this ramp-up, our prior backlog record was $288.6 million. For Q3, total book-to-bill based on revenue was 1.2 with ARO [ph] at 1.1, CPI and other markets at 1.0, and IGT continuing very strong at 1.5. Our past current and anticipated future work on both cost reduction and our supply of high-value differentiated products and services along with our record backlog, gives us great hope and excitement for the future of our company. Before wrapping up my comments, I have a few additional points to cover. First, I am pleased with the ongoing proactive approach on safety within all of our facilities.

Our most recent accomplishments include the addition of a safety training specialist to our staff, our focus on maintaining and updating key safety procedures within all of our plants, and our safety suggestion system throughout each one of our facilities. In addition, in 2023, our Wire facility in North Carolina received 10-year SHARP recognition. SHARP, which stands for Safety and Health Achievement and Recognition Program, is designed for small and medium-sized plants that have established, implemented, and maintained exceptional workplace safety standards. Next, we are very pleased to announce that, we have reached a five-year agreement with our Kokomo United Steelworkers Union. The agreement has been overwhelmingly ratified by our workforce.

We have a dedicated and talented group of employees throughout Haynes, and we look forward to continuing down our path of further safety, quality, delivery, yield, and cost improvement. The next item I want to touch on is Haynes’s innovative alloy and application development, which are true core competencies that are the heart of our company. Our strength is developing and bringing to market niche, highly differentiated products that are the result of long-term research and application development efforts. Four of our newest alloys, Haynes 233 Alloy, Haynes 244 Alloy, Hastelloy Hybrid BC 1 Alloy, and Haines HR-235 Alloy are at different stages of commercialization and have shown clear initial signs of market acceptance. Our newest high-temperature alloy Haynes 233 was developed with an outstanding combination of temperature strength and oxidation resistance.

Unlike many other alloy’s 233 Alloy is extremely versatile and is currently being tested or has already been selected by some major OEMs in the aerospace, IGT, industrial heating, and chemical process market segments. Finally, my sincere thanks to our Haynes team for their performance and teamwork as we worked our way through the issues and the opportunities of this past quarter. Because of the people of Haynes, our future is bright. I will now hand the call over to Dan for comments on our financial results.

Daniel Maudlin: Thank you, Mike. This has certainly been a challenging quarter. However, the good news is, the underlying fundamentals of the business and our improvement strategy are still intact and in focus. Our Q3 volume shipped was 4.4 million pounds. This volume would have previously resulted in a net loss. However, with our lower breakeven point, we were profitable with $8.8 million net income and with $13.7 million operating cash flow for the quarter. Another telling metric is our average selling price per pound, which in total, including conversion revenue was $32.51 per pound shipped this quarter. This clearly reflects the high-value products we provide and the differentiation of our product mix from others in our peer group.

Combined this, with our company record backlog our investment in inventory puts us in a favorable position as we look to the future. The cybersecurity incident that occurred this quarter caused an impact on sales of roughly $18 million to $20 million, which we expect to make up over the next few quarters. As Mike mentioned, this impacted earnings per share with an estimated $0.40 to $0.45 or roughly $5.5 million. Most of this was attributable to the revenue shortfall, which we expect to recover with the associated incremental margin, but some costs were inefficiencies and cost related to the investigation and restoration efforts that were within our insurance deductibles. Some of these costs impacted cost of goods sold, and some in SG&A. This quarter also included a raw material headwind of $1.5 million.

This was driven by cobalt market prices continuing to fall, causing the headwind. This estimate is derived from a model developed by the company to measure how the commodity price changes flow through net revenues and flow through cost of sales. Fourth quarter earnings are expected to be unfavorably impacted by additional headwinds from the continued reduction in the price of both nickel and cobalt. Raw material price fluctuations can impact our results more sharply than others in our peer group given our product portfolio being solely high-end nickel and cobalt based alloys, remember that average selling price of $32.51. Production of these types of alloys generates a significant scrap stream, which of course is recycled back into the melt, but puts the commodity price risk on the company for that scrap stream and has an impact when market prices change.

Sometimes favorable, sometimes unfavorable. Raw material price risk for the product that’s shipped to the customer is reasonably well managed with our escalators and de-escalators for raw materials, but the scrap exposure is difficult to effectively hedge. Our gross margin for the quarter was 18.1%, including the cybersecurity incident and the raw material impact. Our production momentum is back and we are now producing at very high levels at each of our facilities. We anticipate that our fourth quarter volume ships will be the best of our fiscal year. Our SG&A including research and technical expense, was 8.9% in net sales for the quarter as compared sequentially to Q2 of 9%. Even with lower revenues. SG&A dollars were $12.8 million for Q3.

Operating income was $13.2 million this quarter, which is a sequential decrease driven by the cybersecurity incident. Our effective tax rate for the third quarter was 23.5%, and all of this resulted in net income of $8.8 million and a diluted earnings per share of $0.68 impacted by the cybersecurity incident of $0.40 to $0.45 and raw materials of $0.09 per share. A few additional points regarding our financial position. A revolver balance was $98.7 million, a decrease of $9.3 million during the third quarter of fiscal ‘23, we renewed our credit facility and increased it to $200 million, providing strong liquidity going forward. This amended agreement has a slightly better interest rate grid and is a five-year term, which matures in June of 2028.

Looking to Q4, we expect the revolver balance to increase due to the revenue impact of the cybersecurity incident this quarter, and its Q4 impact, pushing out cash collections on those receivables into later quarters. Our U.S. pension plan funding percentage continues to improve with a quarter-end funding percentage at 94.4% and the long-term liability on the balance sheet at $16.6 million. This was $108 million less than three years ago. Our backlog is at a record level, $468.1 million as of June 30th, 2023, an increase of $21.4 million from the second quarter of FY ‘23 and an increase of $130 million from the same period last year. Our controllable working capital was $426.2 million as of June 30th, an increase of $47.9 million since the beginning of the fiscal year.

This increase was driven by inventory with the June 30th balance of $411.7 million representing a $54.1 million increase this fiscal year, as we grow our production levels and our top-line revenue. Our capital investment in the first nine months of fiscal 2023 was $11.8 million. Our total forecasted capital expenditures for FY ‘23 has been slightly reduced to $16 million to $18 million, adjusting for delays of equipment receipts from supply chain issues. Outlook for next quarter. The cyber-related revenue impact is expected to be made up over the next few quarters into fiscal 2024. The company has regained good momentum with the flow of orders at each of its operating locations and expects fourth quarter fiscal 2023 net revenues and earnings to be the highest of the fiscal year.

Fourth quarter earnings are expected to be unfavorably impacted by additional headwinds from the continued reduction in both nickel and cobalt. In conclusion, while it was a challenging quarter, we navigated it well, as we progress through the fourth quarter of this fiscal year and into fiscal 2024. We remain optimistic with our improvement initiatives still in focus, a strong backlog, a strong work-in-process inventory position, and returning production momentum. These are positive factors to drive shareholder value creation. Mike, with that, I will now turn the discussion back over to you.

Michael Shor: Thank you, Dan. Our team continues to be encouraged by our performance and the future potential of our business. Thanks to all of you for your continued interest in our company. With that, Holly, let’s open the call to questions.

Q&A Session

Operator: [Operator Instructions]. Your first question for today is coming from Mark Reichman at Noble Capital Markets.

Mark Reichman: Good morning, and thank you for taking my questions. The first question I have is, Dan mentioned insurance deductibles, and I was going to ask what — which of your policies might apply to business interruption, and will you be able to make any recoveries through your insurance policies?

Daniel Maudlin: Yes. We did have specific cybersecurity insurance. So, there are coverage. There is coverage related to that. So, the cost that you see kind of flowing through June is really within those deductibles of that policy. There is business interruption insurance, but the deductibles on that are quite high as far as the number of days you were down. We were down 11 days. So that’s, not a big amount versus the deductibles within those particular policies, but we do have cyber security insurance that will cover the balance.

Mark Reichman: The second question is that, when you look at the backlog and the sequential increase, is one way to look at that that maybe $18 million to $20 million of that build is due to the build-up from the cybersecurity incident or is that not the right way to think about it?

Daniel Maudlin: Mark, yes, the $18 million to $20 million is clearly related to the 11 days that we did not operate. The plant going down and then coming back up in the 11 days in between is the reason for that.

Mark Reichman: Okay. But did that impact? Is that what drives kind of — does that, how much of the backlog increase was driven by that? In other words, the $446.7 million to the $468.1 million is…

Daniel Maudlin: I will answer it this way. Our order entry without that material in there is greater than what we are shipping, which is causing the backlog increase.

Mark Reichman: Okay, great. Now that’s very helpful. And then just lastly, just looking at kind of the trends and the shipments by markets, you had kind of pivot away from chemical processing in the third quarter. Looking out at the fourth quarter, would you say that, the third quarter are kind of good markers for chemical processing in other markets? In other words, would you say that, those are kind of normalized volume for those two segments or just some commentary there?

Daniel Maudlin: In general, obviously, we are expecting across the board increase volume in Q4 versus Q3. But the chemical processing market is really two markets. It’s the high-end special projects and other high-end businesses, which we continue to pursue and are very good for our company. But there is also the lower-end alloys that are more commoditized and we look to continue to apply our capacity to those markets as to the aerospace and power generation market, as opposed to the chemical processing market. We don’t say no to our customers. We just tend to price it in a way that we are pursuing what makes the most sense for the company. Some of that results in order, some of that does not.

Mark Reichman: Okay, that’s very helpful. And thank you very much.

Daniel Maudlin: Thank you, Mark.

Operator: Your next question is coming from Steve Ferazani at Sidoti & Company.

Steve Ferazani: Good morning, Mike. Good morning, Dan. Obviously a very successful Paris Show. All the way around aerospace demand still seems like we got a multiyear runway. I think about your backlog, which is almost a year’s worth in a more normal year, and way above what you have seen before. You have noted in particular in response to the previous question, the fact that you have moved away from that lower-margin, fluid desulfurization. Is there more customer rationalization you can take? I’m sure, love to have huge backlog, but I’m sure you would like to see more higher margin going through your plants. Is there more rationalization to come, given the runway we are expecting in aerospace?

Michael Shor: I’d say instead of customer rationalization, it’s all about individual products and what we do within those products. I want to be clear, there is some outstanding portions of business for us in the chemical processing market. What we are doing is our customers are looking at what’s happening with the Geared Turbo fan builds the leap, builds, the A320 builds and the 737 builds and they’re layering in their orders based on that. And we have done, because the combination of our mill and our distribution centers a very good job of supporting them and will continue to do that. So, to me, it’s just making sure our customers and therefore we understand what’s coming and making sure we layer that in to be able to supply the supply chain with what they need.

Steve Ferazani: Any thoughts at capacity expansion and or use of third parties to meet? What’s certainly a very, very strong demand at strong margins?

Michael Shor: Sure. When we — I’ll go back to the last cycle, in the 2015 to 2018 timeframe, we saw significant growth coming in aerospace and therefore we expanded fairly significantly our key product, our cold finished products, our cold finish flat, and our titanium capacity. So that has us in pretty good shape with where we are. The issue that we’ve talked about before is vacuum induction melting, which is very, very tight right now. And we have begun to use outside conversion where needed to supplement our VIM melting. So, we’re looking at that. We also look at the future on what’s needed related to, again, a core aerospace product, titanium tube. And we’re looking for ways to also, through internal actions expand our capacity there.

Steve Ferazani: Great. Thanks. If I could just get one more in, obviously we saw some reduction. The revolver second half cash flow tends to be much stronger with the first-half working capital build, am I thinking this right? Probably a pay down in 4Q and then first-half you’re going to see the build again. Because it’s hard to bring that down when you book. The bill continues to be over one times, right?

Michael Shor: Yeah. One issue with the revolver, with the cybersecurity incident happening in late June, as that gets — that revenue gets pushed out, those receivable collection on those receivables get pushed out as well. So, I actually mentioned in my prepared remarks, we expect the revolver to increase over the fourth quarter. As we catch up on the cyber incident over the next few quarters, we’ll regain that cash back of course. But the timing of that will just be pushed out a bit more. So, we expect an increase in the revolver from where we’re at the end of June at by the end of September. And then is…

Steve Ferazani: Is that part of the reason to have expanded the size of it?

Michael Shor: Sure. I mean, we wanted to have strong liquidity going forward. We look at our backlog at record levels and it’s continuing to grow. So certainly, wanted to be prepared to engage in that and grow the business. And the risk of — if nickel goes crazy again, if nickel skyrockets up, we want to not have to slow anything down and be able to absorb that within our revolver as well, if needed. Just the risk prevention.

Operator: Your next question for today is coming from Samuel McKinney at KeyBanc.

Samuel McKinney : Good morning, Mike. I wanted to ask, as we look forward, the next few quarters you mentioned you plan to make up the $18 million to $20 million in revenue from the cybersecurity incident, but I didn’t hear anything on the $0.40 to $0.45 in EPS. So, just wondering what the margins are behind that lost revenue? Is it lower margin business that you may have shifted away from? And just how do those margins relate to the overall company margin?

Michael Shor: I think it’d be very similar, to the overall company margins. I mean, we pushed out potentially $18 million to $20 million. And I mentioned that as we recover that revenue — we’ll recover that incremental margin as well. So that is not lost, it’s just going to be pushed into later quarters. But I did mention that, there are some costs related to this — related to the inefficiencies, related to the restoration efforts, and the costs when you have a cybersecurity incident like this. Those of course, would not be recovered. But the incremental revenue certainly will as we catch up on those lost shipments.

Samuel McKinney : And then what are the current bottlenecks in your operations today? And how have some of the VIM melt constraints that you’ve had in the past, how have they improved over the past few months and where do you see the biggest opportunities to further improve bottlenecks?

Michael Shor: I think there’s two — actually three areas that we’re working to improve. As our manpower has been applied to our cold finish flat manufacturing. We see an opportunity to relieve the backlog, and in fact, we’re seeing evidence of that and be able to manufacture more cold finish flats. In addition, on the aerospace hydraulic tubing side with titanium tubing, we are currently looking and we have people in place now looking at what we can do to not relieve a current bottleneck, but anticipate what could be coming as far as a bottleneck with increasing demand there. And so, we’re looking on how to further expand that. And then the obvious one is what we’ve talked about with vacuum induction melting and using outside conversion to supplement. We’re doing that. We continue to — we expect to continue to do that for a while as we move forward. So those are the three, they’re all aerospace focused and we feel good about getting after each one of those.

Samuel McKinney : And then where do you see inventories in — as we move forward? You kind of mentioned it, but just wondering if that could be a source of cash in the fourth quarter or into fiscal ‘24, or you kind of need to maintain the levels you’re at to support the strong demand.

Michael Shor: Yes, in the short run. I would expect we would maintain the levels we’re at, if not a small increase, potentially as we continue to invest in the melt. Certainly, over FY ‘24 as that revenue picks up, then that would stabilize and more than likely a decrease in inventory levels at that point, and a cash generation that comes with it. So, FY ‘24, yes, I would agree that would probably decline, but in the short run in Q4, no, not necessarily.

Samuel McKinney : And just lastly for me. Do you have any raw material price expectation for the fourth quarter if, because you had mentioned it may be a headwind, but just given what nickel and cobalt has done, all else equal, what are your expectations for the coming quarter?

Michael Shor: We expect let’s take a step back. Nickel was at about $13 a pound in December, 960 pound in June, cobalt was at $39. We have a fair amount of that material going through. It’s now at $16 a pound. So, we expect unfavorable headwinds in Q4, no doubt about it, both from nickel and from cobalt. And this particular quarter Q3 I mentioned, really that was just driven by cobalt. So now in Q4 it’s cobalt plus nickel that we’re expecting in Q4.

Samuel McKinney : Got it. Thank you, guys.

Operator: Your next question for today is coming from Chris Olin at North Coast Research.

Chris Olin: Good morning, guys. Wanted to ask about the GE-9X engine, because I believe there has been some pull forward of 777X production. Is there any opportunity or I guess I should say, are you changing the way you think about, supplying that engine now or any kind of pull-forward contribution to think of?

Michael Shor: We have two proprietary alloys that are going into that engine. We have all shown great patience for this to come to fruition. We have seen activity from our customers as far as components. So, we are well prepared for when the demand comes in for the 9X that we will be ready for it.

Chris Olin: So, it’s predominantly next year, is how I should think about?

Michael Shor: This process is not going to be a quick process. I think we have learned that based on what we’ve seen over the last year or two. But the key for us, Chris, is these proprietary alloys. And so, we want to make sure that, whatever is required out there from us, we are well ahead of that, which we are.

Chris Olin: Great. Can you talk a little bit about the special project pipeline? I’m wondering if you have seen any change in the environment, given the rise in interest rates or kind of the macro concerns out there?

Michael Shor: We continue to see progress with special projects. We have actually seen an increase in special projects over the past year. However, as everyone knows in this industry, there are long lead times. So, some of our most recent wins will be shipped fiscal 2024 and beyond. We do expect to see continued growth here. It’s what we do with our application development efforts. And what’s great about these projects, all of the things I love alloys, I love talking about, HAYNES 182 Hybrid BC 1, G35, they are all involved in strong contributors to special projects.

Chris Olin: One of your competitors recently talked about a slowing industrial and energy shipments in the current quarter related to inventory destocking or macro issues. I was just wondering if you see anything like that when you think about like transactional volumes or maybe the tolling business. Is there anything near-term that’s been negative out there?

Michael Shor: No. On the energy side, when we talk energy, we talk power generation. And what we see in power generation is demand for our Alloy 282 continues to climb. Business is still strong out there, to say the least. We have got share gain in IGT. We have new alloy initiatives. And from our view, in power generation, long-term trends are very positive because of coal being retired and natural gas being one of the choices out there. So, no, we have not seen any decline at all.

Chris Olin: Thanks, so much.

Operator: Your next question for today is coming from Sam Douglas at Mara River Capital.

Sam Douglas: Hey, guys. Good morning. A couple of questions. During the cyber outage, were you guys still manufacturing, but not shipping or not manufacturing at all? Just trying to think of…

Michael Shor: Majority of our operations were not able to operate because of the lack of access to our shop floor system. So, we had — and some of our hot end operations, we operated for a little while, but the majority of our operations were down.

Sam Douglas: Okay. All right. Thank you. And then I guess adjusting for the cyber outage impacts you outlined. I mean, is there anything that gives you pause in the previously 15% to 20% revenue and EPS guide that you gave last quarter?

Michael Shor: I think I’ll start and I’ll let Dan that wrap it up. We’ve had two issues that we’ve dealt with here. One is the cyber incident and the impact of the cyber incident. The second is the ongoing decline of raw material prices. Beyond that, we feel great about where our business is. We continue to focus on what’s gotten us to this point, high value, differentiated products and making sure that they are valued by our customers the way they should, and significant and relentless focus on variable cost reductions. So, feel very good about that.

Daniel Maudlin: Yeah, I would echo that. I think our strategy is very much intact. The cyber incident obviously had an impact on that guidance and raw materials. Keep in mind the raw material impact. Last year, we had year to date through the third quarter about $8.4 million of a tailwind in raw materials. And we highlighted that and pointed that out. This year that is about an $8.8 million headwind. So, a difference of over $17 million swinging from a tailwind to a headwind this year. And that has surprised us a bit in the later quarters here. So, the 15% to 20% guidance that we had provided this is just a prize additional headwind that we weren’t expecting.

Sam Douglas: Got it. Thank you, very much.

Operator: We have reached the end of the question and answer session, and I will now turn the call over to Mike for closing remarks.

Michael Shor: Thank you, Holly, and thank you all for your time today. We as always, appreciate your interest and support of our company and we’ll talk to you again next quarter. Thank you.