Teledyne Technologies Incorporated (TDY) CEO Robert Mehrabian on Q2 2022 Results

Teledyne Technologies Incorporated (NYSE:TDY) Q2 2022 Earnings Conference Call July 27, 2022 11:00 AM ET

Company Participants

Jason VanWees – Vice Chairman

Robert Mehrabian – Chairman, President and CEO

Sue Main – SVP and CFO

Conference Call Participants

Greg Konrad – Jefferies

Joe Giordano – Cowen

Elizabeth Grenfell – Bank of America

Jim Ricchiuti – Needham & Company

Andrew Buscaglia – Berenberg

Kristine Liwag – Morgan Stanley

Operator

Ladies and gentlemen, thank you for standing by and welcome to the Teledyne Second Quarter Earnings Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, this call is being recorded.

I would now like to turn the call over to our host, Jason VanWees. Please go ahead.

Jason VanWees

Thank you, and good morning, everyone. This is Jason VanWees, Vice Chairman, and I’d like to welcome everyone to Teledyne’s second quarter 2022 earnings release conference call. We released our earnings earlier this morning.

Joining me today are Teledyne’s Chairman, President and CEO, Robert Mehrabian; Senior Vice President and CFO, Sue Main; Senior Vice President, General Counsel, Chief [technical difficulty] and also Edwin Roks, Executive VP of Teledyne.

After remarks by Robert and Sue, we will ask for your questions. Of course, though, before we get started our attorneys have reminded me to tell you that all forward-looking statements made this morning are subject to various assumptions, risks and caveats, as noted in the earnings release and our periodic SEC filings. And of course, actual results may differ materially.

In order to avoid potential selective disclosures, this call is simultaneously being webcast and a replay both via dial-in and webcast will be available for approximately one month.

Here is Robert.

Robert Mehrabian

Thank you, Jason. Good morning, and thank you for joining our earnings call.

In the second quarter sales increased nearly 21% to about $1.36 billion. In addition, our GAAP operating profit, operating margins and earnings per share were all time or second quarter records. Non-GAAP earnings declined slightly but last year’s non-GAAP margin and earnings resulted in part from a disproportionate amount of sales relative to costs near the end of the quarter at Teledyne FLIR, as well as lower share count, both due to the mid-quarter closing of the FLIR transaction in May 2021.

Including increased foreign currency headwinds, which negatively impacted second quarter sales growth by over 1.7% or approximately $23 million, organic growth was 8.2% and accelerated from the first quarter of 2022.

Our short cycle commercial instrumentation and imaging businesses grew strongly in the quarter, and sales from our long cycle Aerospace and Marine businesses also increased. Finally, our US government sales including Teledyne FLIR increased from last year, despite lower defense department outlays in the second quarter of 2022.

In summary, year-over-year sales increased in all segments and reported product lines. Overall demand remained strong and we achieved record quarterly orders with a total company book-to-bill of 1.08 times. Orders were particularly strong Teledyne FLIR, where book-to-bill was approximately 1.25. Free cash flow improved from the first quarter, but planned inventory levels remained elevated to counter continuing supply chain risk.

Finally, our leverage ratio declined to 2.5 times, and having reached our targeted leverage range, we are again pursuing acquisitions and are pleased to have recently completed our first small bolt-on acquisition of Teledyne FLIR.

Turning now to our 2022 outlook, given the recent and significant appreciation of the US dollar, ongoing supply chain constraints and inflation, we believe it’s prudent to revise our reported revenue and adjusted earnings outlook modestly for the remainder of the year. Foreign currency translation impacts our three largest segment, and approximately 20% of our total sales with digital imaging and particularly, Teledyne FLIR impacted considerably more than other segments.

In addition, supply chain concerns continue to limit shipments. Electronic component and other material shortages negatively impacted second quarter sales by approximately $60 million, and we are assuming that a similar shortfall will continue in the remainder of the year. We have countered both of these headwinds through our various procurement initiatives and strong execution.

Nevertheless, we expect total company year-over-year reported organic sales growth of about 4% in each of the third and fourth quarters of 2022, compared with the prior outlook of roughly 5% to 6% resulting in a few – full year estimated sales of about $5.47 billion.

Despite these headwinds, we continue to see full year organic sales growth which excludes FLIR of just over 6%, and full year sales from Teledyne FLIR slightly greater than the peak sales in 2020, which included over $125 million from cameras for elevated skin temperature testing. Finally, while foreign currency sales and costs are reasonably balanced at Teledyne, there is no delays and impact on earnings.

We also remain a bit cautious regarding cost impact of inflation, therefore, we’re modestly revising our full year adjusted earnings outlook by $0.30 at the midpoint, or approximately 1.7% lower than in April.

I will now turn the call over to – no sorry, I’m going to continue with our performance of our business segments. In digital imaging, second quarter sales increased 32.9%, largely due to FLIR acquisition, but organic growth in our combined commercial and government imaging businesses was also very strong at 10.3%. Sales growth was strongest for industrial and scientific vision sensors and systems, as well as for our low dose high resolution digital X-ray detectors.

GAAP operating margin was 15.2%, but adjusted for intangible asset amortization segment margin was 21.2%. In our Instrumentation segment, overall second quarter sales increased 7.4% versus last year’s. Sales of electronic test and measurement systems, which include oscilloscopes, digitizers and protocol analyzers remained strong and increased 11.3% year-over-year.

Sales of environmental instruments increased 2.4% compared with last year, with greater sales from certain human health and drug discovery products offset by lower sales of industrial and laboratory gas detection devices.

Sales of marine instrumentation increased 9.9% in the quarter due to improved energy [technical difficulty] record sales of autonomous underwater vehicles for both defense and commercial oceanography applications.

Overall, instrumentation segment operating profit increased 13.9% in the second quarter with operating margin increasing 136 basis points, or 108 basis points excluding intangible asset amortization.

In the Aerospace and Defense Electronics segment, second quarter sales increased 10.8% driven by a 3.4% growth in defense, space and industrial sales combined [technical difficulty] 43.9% increase in sales of commercial aerospace products. GAAP operating margin increased 55.2% with margin 749 basis points [technical difficulty]. Finally, in the Engineered Systems segment, second quarter revenue increased slightly, but operating profit and margin declined primarily due to lower sales of fixed price electronics systems.

Before turning the call over to Sue, I want to make a few concluding remarks. We continue to focus on strong execution in order this to minimize ongoing supply chain risk, inflation and now increased currency headwinds. While the operating environment remains challenging, we’re highly confident of our balanced and resilient mix of commercial and government businesses across a broad range of geographies and end market.

Furthermore, uncertain times have traditionally created opportunities for Teledyne, for example, [technical difficulty] the change in interest rates, we were able to repurchase fixed rate debt issued just last year at a substantial discount. And while relatively small, the cash paid for the first acquisition for Teledyne FLIR was negotiated and paid in euros.

Given the strength of our management, operations and balance sheet now, specifically with our leverage ratio at 2.5 times which we expect to be further reduced in the balance of the year, we’re able to continue to seek similar and larger acquisitions in the future.

And now, I will turn the call over to Sue.

Sue Main

Thank you, Robert, and good morning, everyone.

I will first discuss some additional financials for the quarter not covered by Robert, and then I will discuss our third quarter and full year 2022 outlook. In the second quarter cash flow from operating activities was $196.9 million compared with cash flow of $211.3 million for the same period of 2021. The second quarter of 2022 reflected higher purchases of inventories and higher income tax payments compared with the second quarter of 2021.

Free cash flow, that is, cash from operating activities less capital expenditures was $176.1 million in the second quarter of 2022, compared with $190.5 million in 2021, which included $66.7 million of after-tax cash payments related to the FLIR transaction.

Capital expenditures were $20.8 million for both second quarter periods. Depreciation and amortization expense was $82.7 million for the second quarter of 2022, compared with $59.7 million in 2021, which reflected the timing of the FLIR acquisition midway through the second quarter of 2021.

We ended the quarter with approximately $3.6 billion – $3.67 billion of net debt, that is approximately $3.95 billion of debt less cash of $278.8 million. Stock option compensation expense was $3.6 million for both the second quarter periods.

Turning to our outlook. Management currently believes that GAAP earnings per share in the third quarter of 2022 will be in the range of $3.36 to $3.54 per share, with non-GAAP earnings in the range of $4.20 to $4.35. And for the full year 2022, our GAAP earnings per share outlook is $15.13 to $15.45, and on a non-GAAP basis $17.45 to $17.70. The 2022 full year estimated tax rate, excluding discrete items is expected to be 23.1%.

I’ll now pass the call back to Robert.

Robert Mehrabian

Thank you, Sue. We would now like to take your questions. Operator, if you are ready to proceed with the questions-and-answers, please go ahead.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Greg Konrad with Jefferies. Please go ahead.

Greg Konrad

Good morning.

Robert Mehrabian

Good morning, Greg.

Greg Konrad

Interesting last name there. But yes, just I mean, I guess it’s uncharacteristic for Teledyne to cut guidance. I mean a lot of times, you have contingency and just low P ratings in your guidance. And I mean the commentary was helpful. But is there any way to maybe parse across the segments? I mean, it seems like A&D might be running ahead of your guidance, digital imaging below. Can you just maybe give us some more color around how you’re thinking about the growth and margin outlook for the segments?

Robert Mehrabian

Right. It is uncharacteristic, Greg, you’re right, and I admit it. There are three things that have happened. Two, we were dealing with fairly successfully, and that would be overall inflation and basically parts shortages. We seem to be rolling $60 million every quarter over and over. So in total, they continue at that level.

The one that just hit us very hard was foreign currency. Foreign currency translation basically affects 20% of our business. And the reason it hit digital imaging the hardest, that’s where we have most of our foreign currency transactions.

You’re right and they did well. Instruments did okay. Engineered Systems was down slightly, but Engineered Systems now is only 8% of our portfolio. It’s foreign currency that hit us about 1.7% in Q2 or about $23 million, $25 million in revenue. And we expect it to continue in Q3 and Q4.

I think that’s the fundamental change that we saw. And it was mostly, of course, in digital imaging. And we have not changed our guidance this is the fourth times in 22 years. And it’s something we do not do, except the three continuing headwinds that we see. We could handle two, but the third one just is too much at this time. Hopefully, we’ll execute better as we move along in the rest of the year.

Greg Konrad

And I appreciate that. I mean, I guess everything you’re saying is more on the supply side, let’s say, rather than the demand side. And you mentioned the book-to-bill, but maybe there are areas that have risk. I mean I’m thinking about tech spending and what we’ve heard from some of the tech companies. I mean anywhere where you’ve seen any demand deterioration or kind of concerns? Or is this really all more supply and FX driven?

Robert Mehrabian

Yes. I think the quick answer is no. Our demand has been very strong. Maybe as a function of time, we may have some demand decline, especially in our discretionary businesses, which are really primarily Raymarine. So there, I think demand was softer. But across the board, the demand has been pretty good.

Greg Konrad

And then just last one for me. I mean you mentioned FLIR bookings, I guess they were 25% above sales. We’ve seen some nice awards there. How does that maybe intersect with the supply chain and kind of ability to deliver on these? And let me just think about defense getting better. Is that more of a 2023 item, just given supply chain? Or how you’re thinking about the kind of the cadence there?

Robert Mehrabian

I think we have supply chain challenges there as we have across our businesses. I think what we’re looking at is improving our revenue there in the fourth quarter – in the third and fourth quarter better than we have in the first two quarters and mostly in the fourth quarter. So we have the same problems across the board.

At FLIR, the unusual situation that we’ve had to slowly – and we’re correcting Edwin Roks, who runs our digital imaging businesses is working very hard on it, is to linearize the sales over the quarters.

And that’s been hard because FLIR has historically always sold more in the last month and the last week of the quarter than early on, and that causes issues, especially if you have some supply chain issues that can cause you to miss last minute revenue. So we’re taking all of that into consideration in what we’ve put out in our earnings release.

Greg Konrad

Thank you.

Operator

Our next question is from Joe Giordano, Cowen. Please go ahead.

Robert Mehrabian

Joe, how are you?

Joe Giordano

Hi, I’m doing well. Thanks, guys. Good morning. Can you just talk a little bit about price and what you guys have been doing in the quarter and maybe more recently, given FX changes? Is this changing the way you’re going to market a little bit?

Robert Mehrabian

Yes. Our price increases for the year, we anticipate it to be about 3% of sales. It’s a little more in the Q3 and Q4 than it was in Q2. In Q2, it was less than 3%, which has not been really – we’re just put in some increases in prices, especially in some of our instrument businesses where we could, and that would be in Q3.

So overall, I’d say, Joe, it’s about 3%. The flip side is that the cost increases due to inflation and also wages that we have exceeded that, I’m going to say, by 0.5%, 0.6%, and that’s causing some issues. But we kind of knew that would happen and we kind of worked on that very hard. The thing that kind of suddenly came out of at us was the change in the exchange rate starting in April, and that was the hard part.

Joe Giordano

So when I look at margins, running hot in AD&E just on the mix with the lower OE content and then running now lower than people would have thought in imaging. As you start thinking about the next couple of quarters, what’s like a good – none of those are probably totally representative of like the normalized. So like [technical difficulty] we think about margins coming out of this in a more normal situation?

Robert Mehrabian

Well, let me start with versus April, which would be a good way to go. As I said before, in instruments for the full year, we expect margins to improve about 50 to 55 basis points. In Digital Imaging now, we expect it to be lower by 130 basis points from what – for the full year. In Aerospace and Defense, we have a good run there, primarily because you know commercial aerospace is coming back, and so we expect improvements in margin of 150 basis points.

And lastly, as I said, in a smaller segment, which is our Engineered segment, maybe 60 basis points decline. When you add all of that up, it’s about 45 basis points decline across the company. That’s – I think that’s versus April, that’s what the summary is.

Joe Giordano

And if I was to think about coming out of this, though, like I know it’s too early to look at ’23 guidance. But like if I was to think about coming out of this versus the second half run rate that Imaging in Aerospace, specifically are going to have. Like is the Aerospace margins a level from which to grow from? Or is that like too hard of a comp? And vice versa, does the Imaging second half provide a pretty attractive like exit rate for you to improve on? Thanks.

Robert Mehrabian

I think you’re correct on Aerospace and Defense. It already has full year margins of 25.5%, which is pretty high. It could go up a little bit. I think there are opportunities going to be in Digital Imaging and also in Engineered Systems. The margins in instruments are already pretty healthy approaching 25%.

Joe Giordano

Thanks, guys. I’ll pass along.

Operator

Our next question is from the line of Elizabeth Grenfell, Bank of America. Please go ahead.

Elizabeth Grenfell

Hi, good morning.

Robert Mehrabian

Hi. Good morning, Elizabeth.

Elizabeth Grenfell

Hi. As we think about things that have slipped to the right because of supply chain challenges, are those going to be able to be shipped later at a later date? Or…

Robert Mehrabian

Yes. Good question. Very good question. First, let me back up a second. When we started Q2, we had supply chain challenges. We have a very strong program in procurement. And we were able to offset about $120 plus millions of supply chain challenges by buying through brokers, by buying our own buyers in Asia by a variety of techniques.

And so we offset the $120 million plus of revenue that was in danger. That left us with $60 million that we couldn’t. But that $60 million is rolling in a way quarter-to-quarter, it’s not additive. And what happens is that we think that right now, that’s going to continue for the next two quarters and that’s where our estimates are coming from.

But having said that, because we have elevated our inventory over time that this is going to dissipate. There’s no question about that. Whether the over time is going to be early next year or later next year, but over time, this is going to – it’s not lost revenue and it’s not lost inventory. It’s just lost revenue for the time being. So it’s going to improve.

Elizabeth Grenfell

Great. Thank you very much.

Robert Mehrabian

Thank you.

Operator

Our next question is from Jim Ricchiuti, Needham & Company. Please go ahead.

Jim Ricchiuti

All right. Thank you. Good morning. Robert, I could appreciate the sudden change in currency. But I wanted to go back to supply chain. Have you guys perhaps underestimated the impact of supply chain or in that maybe you thought it would improve a little sooner? Or is this just something that you’ve been tracking and it’s just not getting better and this was in line with what you’d expected?

Robert Mehrabian

Jim, yes, it’s improved only because we’re able to find more parts. We have, for example, if you look at year-to-date, we have about – we’re missing about 900, what we call, important critical parts. They range from computer chips that go into our vision systems to FPGAs et cetera. And out of the 900, we’ve actually located 800 through the various processes.

Sometimes, we redesigned the product, if we can, if it’s very easy to redesign. Sometimes we buy a part and we have to obviously qualify it. So – and sometimes, we just buy parts through brokers. What I didn’t estimate within the estimate was that the broker purchases would be as expensive as they are. We’re paying sometimes as much as 70% premium for the same part when we buy through a broker because they’re going out and finding the part.

But it’s – that’s not unusual. If you create a vacuum eventually, air comes in, right? So you got these brokers that are doing pretty good work and making a lot of money. When that happens, supply chain is going to change eventually, and it is. The only places that I would say we may be underestimated is that some of the very high-end and complex components where the orders that our suppliers are quoting are 12 to 24 months out. And they’re also asking to – for us to put in noncancelable orders.

So you have to be very helpful in the latter, of course. So I don’t think we underestimated it. It’s just that things didn’t get better at all. And we’re not counting on it getting better in the rest of the year. I think 2022 is going to be different. If some of this stuff continues the way it is, we’ll redesign more products. I mean, just the way it is, we’ll redesign and eventually come out of it. I don’t think it’s going to go way beyond 2023.

Jim Ricchiuti

Got it. And one of the things that struck by – I – was the Defense business. I thought you might have shown a little bit more growth in Q2. Is this just more indicative of the pattern we’ve seen at FLIR over the years, where it’s just going to be skewed more toward the Q4 period?

Robert Mehrabian

Yes. Here’s the problem, while Defense budgets are up, the outlays are not. It’s kind of like a constricting a dam that’s constricting the flow. The flip side of it is that if you look at the second quarter and you look at FLIR particularly, the defense side of FLIR actually increased 8%. It’s the commercial side of FLIR that was flat or just slightly down primarily due to Raymarine, the maritime that I mentioned, which are discretionary.

But the defense side increased year-over-year. Actually, if you looked at FLIR Q2 of last year, full Q2 of last year versus Q2 of this year. That is look at how much they sold before we acquired them, how much they sold after we acquired them, versus how much they sold this quarter. Overall, FLIR’s revenue was up 2.8% primarily because of their defense business being up 8%.

So with this recent awards, we feel very good about that. And we have very strong leadership in our defense businesses under JihFen, who used to be with us, went to Department of Defense ended up at the very end of her career there to be acting Deputy Secretary of Research and Engineering. So we feel good about that. And we are expecting things to improve there.

Jim Ricchiuti

And last question from me, and I’ll go back into the queue is just you mentioned Raymarine potentially as the macroeconomic environment deteriorates that could be impacted. But just given the way the portfolio has changed now with FLIR. As you look at the broader portfolio, which areas of the business might potentially be precursors of some change in demand that you might see if the economic environment changes more quickly?

Robert Mehrabian

I think the canary in the mine, if you want to say put it that way, is going to be some of our commercial Digital Imaging products. We saw some declines in certain areas. There are different reasons for it, for example, in our health care, Digital Imaging because the COVID things went soft. But now it’s growing very fast and doing really well and taking market share.

But I would say some of our commercial Digital Imaging would be a good signal for us from a market perspective. But we have – because we – overall, because we have relatively small, very limited exposure to consumer demand, we don’t see that affecting us. We’re not – 50% of our portfolio is Defense, Aerospace, Medical, Energy. Those markets are going to be fine.

Jim Ricchiuti

All right. Thank you.

Operator

And our next question comes from the line of Andrew Buscaglia, Berenberg. Please go ahead.

Robert Mehrabian

Good morning, Andrew.

Andrew Buscaglia

Good morning, guys. Good morning. So last quarter, you guys sounded a little bit more net positive on the outlook in Defense, obviously, with what’s going on in the world. What is your view at this point? And do you foresee some potential awards or projects that aren’t currently embedded in your guidance moving awards maybe before year-end?

Robert Mehrabian

Well, yes. So, as you know, Andrew, we’ve had a succession of awards recently in the Defense that have been – and we put news releases out on most of them. And most of them by in the FLIR area. We think some of our European awards are a little delayed. As you know, to get, for example, if you were to get things to Ukraine, you have to go through one of the other NATO countries. And some of those are taking time.

The flip side is that some of the larger awards that we’ve had, for example, US Army’s family of weapons site for individuals, which are mounted devices that go in rifles, that’s a $500 million reward. But we’re in the early phase, so we expect that the increased revenue for that will come in future periods rather than immediately.

We’ve had a major award from the Danish Ministry of Defense for mobile sensor systems. And we also had, as we announced, we had a really nice award for our very small AUVs, which are Black Hornet from the Norwegian government. And those awards, while they’ve been made, the shipments are starting to come now. And we expect those awards will lead to more revenue in the future as we move forward from small prototype production or small-scale production to full rate production. So we feel very good about that. But the worst that we’ve had and some that we’re going to get especially in Europe.

Andrew Buscaglia

And how much of this new activity is solely dependent on the Russia and Ukraine conflict continuing? Or put another way, if that dives down, do you see some of this activity or interest in your product evaporate?

Robert Mehrabian

No. I think the programs we’re participating in they’re really just greater budgets in the US and NATO countries. And I don’t think that’s going to go away in any foreseeable future. As you can judge, the invasion of Ukraine has been a lesson to everybody that you cannot be in a situation where you are liable. And I think those budgets are here to stay.

And the NATO alliance is getting tighter and their budgets are going up, US budgets going up in all domains. There are programs in the US that we participate in related to high-performance infrared sensors in space to track missiles. There’s – I think that’s here to stay.

Andrew Buscaglia

Okay. And maybe one more, if I may, just because on this topic, you talked a little bit more positively about M&A now that your leverage is at a target. What area is interest to you? Is it going to fall under – are you targeting areas in defense? Or is that more outside of Digital Imaging to broaden your – the balance of your portfolio?

Robert Mehrabian

I would say in all areas, I would probably exclude strictly government services businesses, type businesses. We’ve seen things across our segments. So it’s not necessarily pure one segment or another. Our emphasis has been Digital Imaging will continue, and we like instruments. But there are certain areas of aerospace and defense like in our connector businesses where our margins are superior to everything else. So we would not exclude that. We won’t buy something. We will not participate in something in the government services business, for example.

Andrew Buscaglia

Okay. Thanks, Robert.

Robert Mehrabian

Thank you.

Operator

[Operator Instructions] Our next question is from the line of Kristine Liwag, Morgan Stanley. Please go ahead.

Kristine Liwag

Hi, good morning, everyone.

Robert Mehrabian

Good morning, Kristine.

Kristine Liwag

You’ve mentioned to return to M&A now that you’ve hit your target leverage range. With a sharp increase in interest rates, have you seen asset prices come down to preserve your return thresholds?

And also, in terms of timing, there’s a lot of economic uncertainty. Do you think now is the time to look at these assets or wait and see how the economic environment unfolds?

Robert Mehrabian

Great question, Kristine. Let me first go to the first part of the question. I think some of the expectations out there have moderated, and will continue to moderate, especially with the stock market down, S&P is down almost 15%, 16% this year. So expectations are moderating somewhat.

Let me go to the second part, which has to do, if we don’t do anything, our ratio which is now 2.5 times will continue going down. By year-end, it’ll be 2.3 times. If you don’t do anything by the end, the next year you’ll be 1.7 times and so on and so forth. So we do have, by the way, the liquidity to buy things. Right now, if we look at our liquidity, we can buy things from our line of credit going over $1 billion.

Having said that, we’ve always been very careful not to overstretch ourselves and not to overpay for things. So I think things are getting better. We’ll look at some bolt-ons. But if you look at further forward 12 months or so, what happened last time when the markets and the economy declined, same thing is happening now. We come out of this stronger. Some people don’t. And that’s when we are able to buy them because their market prices have declined. So it’s a continuing process.

We – right now, if we look at our debt profile, we have almost no exposure to increased interest rates at this time, because 93% of our debt is fixed, the other 7% that’s floating. We have cash against that, which is also floating. So we have 100% fixed debt at this time. So – and we have a good line of credit.

Kristine Liwag

Thank you for all the color.

Robert Mehrabian

Thank you, Kristine.

Operator

And at this time there are no other questions in queue.

Robert Mehrabian

Thank you, operator. I would now ask Jason to conclude our conference call.

Jason VanWees

Thanks, Robert. And again, thanks everyone for joining us this morning. If you have follow-up questions, please feel free to call me at the number on the earnings release or email me directly.

Maxine, If you could conclude the call and give the replay information, we would appreciate it. Thank you.

Operator

Certainly, ladies and gentlemen, this conference will be available for replay after 1:00 P.M. Pacific Time today through August 27, 2022, at midnight. You may access the AT&T replay system at any time by dialing 866-207-1041, and entering the access code 3867531. International participants dial 402-970-0847. Again the numbers are 866-207-1041 and international is 402-970-0847, and the access code is 3867531.

That concludes our conference today. Thank you for your participation and for using AT&T conferencing service. You may now disconnect.