Good morning, and welcome to CCL Industries second quarter investor update. Please note that there will be a question-and-answer session after the call. The moderator for today is Mr. Geoff Martin, President and Chief Executive Officer, and joining him is Mr. Sean Washchuk, Senior Vice President and Chief Financial Officer. Please go ahead, gentlemen.
Good morning, and welcome to our second quarter conference call. I'd like to turn everyone's attention to Slide 2 of the presentation, and you can see our disclaimer regarding forward-looking information. I'll remind everyone that our business faces known and unknown risks and opportunities. For further details of these key risks, please take a look at our 2022 Annual Report under the section Risks and Uncertainties. Our annual and quarterly reports can be found online at the company's website, cclind.com, or on sedar.com. Moving to Slide 3, our summary financial information.
For the second quarter of 2023, sales increased 1.8%, with 1% acquisition-related growth, 5.3% positive impact from foreign currency translation, partially offset by 4.5% organic decline, resulting in sales of CAD 1.64 billion, compared to CAD 1.62 billion in the second quarter of 2022. Operating income was CAD 242 million for the 2023 second quarter, compared to CAD 247.8 million for the second quarter of 2022, an 8% decrease, excluding the impact of foreign currency translation. Geoff will expand on the segmented operating results for our CCL, Avery, Checkpoint, and Innovia segments momentarily. Corporate expenses were up for the quarter due to higher long-term variable compensation versus the prior year quarter.
Consolidated EBITDA for the 2023 second quarter, excluding the impact of foreign currency translation, decreased 7% compared to the same period in 2022. Net finance expense was CAD 19.2 million for the second quarter of 2023, compared to CAD 15.4 million for the 2022 second quarter, due to an increase in interest rates on variable rate debt. The overall effective tax rate was 24% for the 2023 second quarter, compared to an effective tax rate of 24.4% recorded in the 2022 second quarter. The effective tax rate may change in future periods, depending on the proportion of taxable income earned in different tax jurisdictions with different rates.
Net earnings for the 2023 second quarter was CAD 155.9 million, compared to CAD 163.4 million for the 2022 second quarter. For the six-month period, sales increased 5%, operating income increased 5%, and net earnings increased 3% compared to the six-month period in 2022. 2023 included the results from six acquisitions completed since January 1st, 2022, delivering acquisition-related sales growth for the period of 1.9%. Foreign currency translation was a tailwind of 4.9% to sales, partially offset by 1.7% organic sales decline. Moving to Slide 4. Basic earnings per Class B share were CAD 0.88 for the second quarter of 2023, compared to CAD 0.91 for the second quarter of 2022.
Adjusted basic earnings per Class B share were CAD 0.90 for the 2023 second quarter, compared to adjusted basic earnings per Class B share of CAD 0.94 for the second quarter of 2022. The change in adjusted basic earnings per share to CAD 0.90 is principally attributable to an increase or decrease in operating income of CAD 0.09, partially offset by CAD 0.05 positive foreign currency translation. All other items netted to zero impact. Moving to Slide 5, free cash flow. For the second quarter of 2023, free cash flow from operations was an inflow of CAD 120.1 million, compared to an inflow of CAD 115.1 million in the 2022 second quarter.
The increase in cash flow from operations of CAD 5 million is primarily due to improved working capital, partially offset by higher net capital expenditures in the second quarter of this year compared to 2022. For the 12 months ended June 30th, 2023, free cash flow from operations increased approximately CAD 21 million compared to the 12 months ended June 30th, 2022. This comparative improvement is primarily attributable to increased earnings, better comparative working capital management, offset by an increase in net capital expenditures. Moving to Slide 6, our cash and debt summary. Net debt as at June 30th, 2023, was CAD 1.56 billion, an increase of CAD 38.6 million compared to December 31st, 2022. This increase is principally a result of lower cash balances at Q2 2023 versus December 2022.
Although the company's net debt increased, the balance sheet closed the quarter in a strong position. Our balance sheet leverage ratio was approximately 1.24x, unchanged from December 31st, 2022. Liquidity was robust, with CAD 738 million of cash on hand and $0.9 billion of available undrawn credit capacity on the company's revolving bank credit facility. The company's overall average finance rate was approximately 3% at June 30th, 2023, compared to 2.9% at December 31st, 2022, reflecting an increase in variable interest rates on the company's outstanding borrowings under its revolving credit facility. The company's balance sheet continues to be well positioned as we move through fiscal 2023. Geoff?
Thank you, Sean. Good morning, everybody. I'm on Slide 7, highlights of capital spending for the year, CAD 252 million net of disposals at the halfway point, excluding right-of-use assets, and we are planning to spend about CAD 440 million for the year as a whole. Slide 8, I wanted to give you a bit of color on some investment highlights of late, partly on CapEx and partly on acquisitions. I wanted to just talk briefly a little bit about CCL Container, which has been sat inside our CCL segment for a number of years now. It used to be a separate reportable part of the business. Revenue in that part of the company is now past CAD 300 million, with 20% EBITDA margins.
We spent CAD 30 million in CapEx in that business in the first half of 2023. We're planning further expansion in 2024, especially in Mexico. I thought that was just an interesting adjunct to give you a bit of color on what's been going on inside the business in that, in those CapEx numbers. The two acquisitions we announced just before the earnings, Faubel in Germany, it's the largest acquisition we've ever made in the healthcare space. It creates global leadership in clinical trial labeling. We've always been in that business in quite a big way in the United States, and this really gives us a clear leadership position as this company is the clear market leader in Europe. Imprint Energy is a technology company that we acquired in out in Silicon Valley, that's developed some interesting battery technology.
It's printed batteries, using the technologies we have in our converting businesses, that allow us to make labels that would send signals without the need for a scanner. Like an RFID label, but, but acting more like as a cell phone without the need for, for any kind of scanning device. Very important to track and trace applications for high value or sensitive goods. Just to point out, the last 12 months, we've completed eight acquisitions for approximately CAD 370 million. To Page 9 , highlights from the CCL business. Start off by saying that comps for this quarter were, were always going to be difficult for us.
10.9% growth reported in Q2 2022, in the middle of the supply chain crisis, a lot of customers ordering excess inventories, and we certainly faced that in this current quarter, 3.3% organic sales decline. Low single-digit gains in Europe and Latin America, but offset by a low single-digit decline in North America and a double-digit decline in Asia Pacific, very much driven by the situation in CCL Design and CCL Secure. We had flat reported profitability in home and personal care and food and beverage spaces. A small decline in healthcare and specialty, versus a very strong prior year, although sales were up in H&S for the quarter, and a slow quarter in currency, part offset by strength in Passport components and CCL Secure.
At CCL Design, we had gains in automotive, they were more than offset by the weak-end markets that have been reported by many electronics OEMs. It especially impacts our business in China. Moving on to Slide 10. Good, good quarter in our joint ventures. I won't say any more than that. Slide 11, results for Avery. We had a repeat of the early back-to-school season in 2023. We enjoyed in 2022, the comps were sort of like for like in that regard. We continued to see strong growth in direct-to-consumer channels, solid results internationally. Our horticultural business is seasonally loss-making in this quarter. Last year we only had one month of one of the acquisitions we made in that space, this year we had a full quarter of losses.
That's the reason why you see some margin erosion at Avery. Slide 12, results for Checkpoint. Good, very good quarter. The MAS business was strong on new business wins, especially in Europe. Price increases we implemented last year to cover the supply inflation definitely kicked in, and we've seen some easing of that this year, particularly in intermodal freight costs from China, which is more or less back to normal life now compared to the challenges we faced this time last year. In the apparel labeling business, our profitability improved. That's despite retail supply chain. Customers in that space focus on managing excess inventory, really all driven by growth of RFID. Slide 13, better quarter at Innovia than we expected. Volume was still down in the pressure-sensitive label materials industry.
There's a number of public companies in that space, been reporting 25%-30% drops in their volume, and we certainly saw that during the quarter. We also had some price-driven deflation, particularly in North America. Not so much in Europe, but particularly in North America, where resins have been dropping faster. There was some price impact in the sales drop there. Profitability improved sequentially on easing inflation, particularly energy inflation, and very good cost controls right across the business. We're quite pleased to see the improvement at Innovia. Slide 14, the outlook commentary. Our core CCL business units face slower volume still at many consumer packaged goods customers. We did see some pickup in orders in July. In Q2, we saw some softening of orders sort of progressively through the quarter.
That did sort of reverse a bit in July, and not, not, not everywhere, but in, but in a number of places. We're still results of many of our customers in that space are reporting low to mid-single unit volume declines, and once we see that, then obviously at some point translates back to us. The CCL Design, we do expect to see some modest improvement by Q4 as comps ease and computer industry demand slowly recovers, and we have some new business wins to kick in. We again, at CCL Design, we saw in the electronic space our first improvement in order intake in, in July versus the prior year. That's quite encouraging.
CCL Secure demand picture remains unchanged for the second half, although again, we have seen some pickup in orders in the month of July, so maybe that'll change by the time we get into Q4. We'll have to wait and see. Avery, we expect to be solid. The only unknown really is the back-to-school replenishment orders. That's always something we wait on every year. We got none last year. We're waiting to see if we get any this year. We find out during the month of August. The Checkpoint favorable inflation recovery will still be our friends for the balance of the year, and we expect RFID strength to continue. At some point, we expect Innovia's volume picture to change as the label materials industry recovers its own volume as they're publicly announcing their plan to do, as the second half rolls through.
We hope to be participating in that, and inflation in that space remains very benign. The FX tailwind is expected to continue at current exchange rates, so that should also be our friend in the second half. With that operator, we'd like to open up the call for questions.
Certainly. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Your first question for today is coming from Ahmed Abdullah with National Bank of Canada.
Yes, good morning. Thanks for taking my question. On the CCL segments volume moderating, are you able, at this point, to offset some of that volume pressure with some pricing?
Well, not really. I think we had pricing benefits last year driven by inflation, but if, if anything, this year, things have got moved deflationary. Most of our raw material procurement costs have declined this year over last year, so it's pretty unlikely we'll get any price benefit. That's different from our customers' experience at the moment, but they're gonna be in the same boat at some point as, as we're in, that's getting more price increases for their goods at Walmart and, and, and so on. It's gonna get increasingly difficult as we go forward. So I think the answer to that is no.
Okay, thanks for that. In the release, you highlighted that you had some productivity initiatives and cost-cutting efforts that would still deliver strong results. Can you just give us some color around what those initiatives and efforts entail?
In which business?
At the CCL segment.
Yeah. We're, we're doing a lot of things to, w hen, when, when, when business slows up, we do a lot of things internally to reduce labor costs, focus on, on raw material input costs, and do all the things you do. It's a self-correcting system we have here, but, you know, you always want volume to come back at some point, and we're quite pleased to see the order intake improved in July versus the prior year. That's, that's the first time we've seen that for four or five months. That's giving some indication that probably this is beginning to bottom out.
Okay, thanks. Just lastly, on the RFID business segment, outside of apparel, have you received any other orders following the first one you highlighted on the last conference call?
Yeah, there's a lot of, there's a lot of interest in RFID outside of the apparel space, both in general merchandise retailing, food industry retailing, freight and logistics, pharmaceuticals. We've got a lot of interest across the board in that, in that space. RFID is an area of encouraging growth.
Okay, I'll pass the line. Thanks.
Your next question is coming from Stephen MacLeod at BMO Capital Markets.
Thank you. Good morning, guys.
Hi, Steve.
All right. Just wondering if you could give a little bit of color on last year's CCL segment growth of 10.9%. How much of that are you able to quantify as price versus volume growth from last year?
Very difficult to do that, Steve, it's, it's, it's a mixture of both, I can say that. There was certainly some price in there, and there's probably some volume, maybe, maybe 60% price, 40% volume, and that's just a pure guess on my part. It's, it's certainly a mix, a mix of the two. It wasn't, it wasn't all volume driven. It was a combination of, combination of price and, and, and some volume. The, the business that grew very strongly in volume last year was CCL Container. That, that certainly had an impact on the, on the CCL segment last year because the, the, the, the volume increase was well into double digits last year.
Okay, that's great. Then just thinking about, you know, Q2, and with the commentary around slower volumes at the core CCL units, Design, Secure, and then your commentary around July sort of picking up, do you, do you foresee organic growth potentially returning back into positive territory in Q2?
Not sure yet. We've only got July is a short month because of the July the 4th holiday. You can't really make any predictions in Q2 in the month of July. August is a bigger month, there's more work days in it, so we'll have to wait and see how things unfold. The comps are much easier this quarter than they were for Q2. That's certainly the case also in Q4, so we'll have to wait and see how things unfold. Currently, I'd be a bit surprised if we would have the same degree of shortfall in Q2, but we'll have to wait and see how things unfold.
It's a summer quarter, so I, I, I certainly wouldn't be making any decisions on the long-term health of the business based on what happens in that quarter. But by the time we get into Q4, we'd have, we'd have a different viewpoint of that because in October and November, we would actively expect volume to be quite strong.
Right. Okay, that's, that's helpful. Thank you. Then just on the, I just wanted to ask about the, the Faubel, if I'm saying that right, the Faubel acquisition.
Yeah.
Can you just talk a little bit about, what the sort of how that's complementary to your business and, and what that does for you strategically in the healthcare segment?
Yeah. Well, we, we've, we've been in the clinical trials labeling field. These are labels that are used by, by drug companies as they're getting drugs approved in the, you know, in the, in the field for, for eventual use. It's a very high-margin business, and we've, we've been in it in the U.S. for a number of years. Never found a way to get into it in Europe because this company's, you know, been the strong market leader in, in Europe for, for a long, for a long time. We've been trying to buy it for about 15 years, and we've had two or three attempts at it at the past.
Bringing the two sides of it together, it really gives us global leadership with, with the drug industry in Europe and the drug industry in the U.S., and those two continents really, really drive most of the world's drug use. If you're, if you're not with the, the R&D labs in, in AstraZeneca and Hoffmann-La Roche in, in Europe, then you're, you're missing out. We, we have those relationships with the, with the U.S. drug companies, and now, and now we'll have it in Europe, too. We're, we're very pleased with it. We think we paid a, a good multiple for it. It was a competitive situation, so indication of multiples coming down a little bit. We're very, we're very pleased to have finally, finally, finally got the, the deal through.
Great. Then maybe just finally, just along those lines, you talked, you've talked in the past about acquisitions and multiples coming down. Sounds like you're seeing some of that. Would you still characterize the landscape as being quite ripe in terms of your pipeline for acquisitions and multiples being in areas where you'd like to pay?
I think the multiple situation is better, but, but of course, if you're a seller, you may not think the time is right at the moment. This particular situation in Germany, we had a family, a family who had reached, reached a date where the, the founder of the company was at an age where he simply had to sell. You know, was, was just, was so concerned about that. But, but there are other sellers who maybe look at the, the, the market to sell right now and think it's not so good because the multiples are down. It's, it's a mixed source. When, when multiples come down, sometimes so do opportunities.
Great. Thanks, Geoff. Appreciate it.
Your next question for today is coming from Michael Glen at Raymond James.
Hey, good morning. Geoff, can you give an indication about how the pricing mechanisms work if you're thinking about a deflationary environment with label materials?
Yeah.
How that works with customers?
Yeah, well, it's the label industry is highly transaction intense, so, so pricing is dynamic all the time. We don't really have any fixed price contracts for, in labels because the designs and what we're making are, are changing in some cases, two or three times per year. There's always, there's always repricing opportunities to finesse those things through, and that's, that works in an inflationary environment and also works in a deflationary environment. The volume drop in the HPC space was not very dramatic in, in labels in Q2. Most of the volume drop actually was in tubes, and there we certainly saw a lot of people advancing purchases last year to make sure they got what they needed.
The tube business was one of, in the HPC space, was probably the business that where we, where we saw the biggest volume drop.
Okay. Can you provide some color or thoughts surrounding the CCL Secure business and your outlook and view on what's happening in the polymer currency market right now and, and the longer-term outlook for that business?
Yeah. Well, it's still growing. We still see a lot of opportunities there because we've got a single-digit market share globally, so a lot of paper still to convert to polymer. Use of currency, maybe counterintuitive to a lot of people listening to the call, is still growing despite electronic payment systems. Banknotes have survived credit cards, they've survived electronic funds transfers, survived checkbooks, check cards. The iPhone was launched in 2007, and since 2007, currency in circulation in the U.S. has almost doubled. The use of currency isn't really driven by the retail payment systems. It's driven by broad use of cash in society, and it's still going up. It's very lumpy. It depends on whether you've got new issues.
You know, the timing of orders is always challenging, so it's a, it's a lumpy business. In, in, in total, it's up CAD 200 million for us in revenue. Has premium profitability, so when we have a quarter like we had last quarter, so it's probably CAD 6 million-CAD 7 million of the, of the delta difference in profitability in Q2 was driven by the shortfall in CCL Secure.
The inventory dynamic, can you just hash that out in a little more detail? Like, how much excess inventory is being held, essentially?
Yeah, well, a lot, a lot of banks, so there was a run on cash in the pandemic. A lot of banks, so banks are the most conservative, central banks are the most conservative organizations on earth. If they ever see any risk in not being able to have cash when, when consumers want cash, they, they always overorder them, and particularly in the developed world, United States, Australia, U.K., Canada, all these, all these central banks fill their vaults full to overflowing and then, and then put the, put the, put the, the brakes on the ordering in particularly in the last year or so.
Okay, thanks for the information.
Thank you.
Your next question is coming from Walter Spracklin at RBC Capital.
Yeah, thanks very much. Good morning, everyone. So I, I guess going back to, first of all, the, the container business and, and the decision or, or, or that's my question. Was this a, an organic process where it just, it just was growing well and has now developed into a, a larger segment? Would you say it was, on the part of a, a strategic decision that you made to grow that segment and, and through either acquisition and, and internal expansion efforts, that it, it, it got to the size that it, it, that, that it did?
Well, there are no acquisitions in the CCL Container space. It's all internal growth. So, and aluminum aerosols have been a, an area of growth in the consumer goods space, as, as have aluminum bottles. So the, the, the move away from plastic has benefited the aluminum bottle growth in the food and beverage space and then in the home and personal care space. So they, they've been the two main drivers of growth there, and we decided to, to invest in, particularly in our operations in Mexico, to take advantage of that and and and grow, and grow organically. Historically, this is a business that underperformed in the CCL segment.
Today, it's above par compared to the other businesses. Returns on capital in the CCL Container are better than in many other parts of that business today.
That's encouraging. Correct me if I'm wrong, I think in one of our meetings, it was mentioned by on your team that, that in fact, containers is a good leading indicator of how the economy is doing. Am I right in remembering it that way? If so, are you.
Well, I think.
Are you seeing any evidence of it?
Yeah, I think what we said, Walter, Container was, i n historically, in the past, if, if there was a downturn in the economy, the salon business always suffered, and the, the, the aerosol containers we make for that segment are typically, you know, like in 2008 and 2009, we saw significant drops in salon demand. The salons, as a percentage of the total of that space, has declined quite significantly. Even if that occurred, I think the growth in aluminum bottles is more than enough to offset it.
I guess, are you getting any indications from the sales patterns within your Container division to suggest, yes, we are going deeper into recession, or we are, you know, maybe bottoming, coming out? Is there?
Uh.
Any indicator or, and it doesn't have to be just container, anything in your business to suggest, and I think I heard you say a few times that, you know, July is looking a bit better, but it's tough to look at July as a, as a good indicator. Just any indicators.
Yeah.
From your, yeah, yeah, that might suggest some bottoming here.
Yeah, I, I, I, I hope so. You know, probably the best indication we saw in July was a pickup in orders relative to July last year. The first half order intake in 2022 was very strong. We saw it, it tail off in July last year. This year it's, it's better, it's better than it was in July last year, so that we take some encouragement for that. We, we know, we know in some categories, our plastic tube business, for sure, gained the benefit of supply chain stopping this time last year and we're paying the paying for that in, in, in the current quarter. I would say bottoming, bottoming out, hopefully. We'll have to wait and see.
I think the next couple of quarters, it'll, it'll bump along the bottom a bit. Then we'll see what 2024 brings.
Last question here on CapEx, I know the number you quoted. Is there anything, you know, I know we're in a different environment now that, we're still looking at the path toward normalization. Is that a good number as a normalized number to look at going forward, or is there, is there anything?
Yeah.
That suggests that, that, that would be, you know, larger or smaller than what we'd expect going forward?
Certainly not larger.
Okay. Okay, excellent. Thank you very much. That's all my questions.
Thank you.
Your next question is coming from David McFadgen at Cormark.
Hi. Yeah, a couple of questions.
Hey, David.
Hi. How's everybody doing?
We're good.
Just on, just on the CCL segment, and apparently, she called out significantly lower demand for labels and tubes in North America. I was just wondering, is that the primary driver for the organic decline in CCL, or are there some other big factors?
The two big drivers in the CCL space was the decline at CCL Design. They were down organically about in the high single-digit zone. The declines in the home and personal care and food and beverage space were very small, you know, very low single digits. Healthcare and Specialty was up low single digits, and CCL Secure was down in the mid-teens.
Okay. Do you know when the banknote inventory will normalize, so CCL Secure would?
It's very, very difficult to call out that. It's, they make their own decisions, so we just, we just have to be ready when they're ready.
Okay. Then just on Avery, am I, am I correct to understand that Q2 benefited from the back-to-school ordering? It was like last year, what took place earlier?
No, I think what happened, it's just a repeat of last year. We had the same experience in 2023 that we had, so they're like for like. We thought.
Mm-hmm.
That we thought this year that the, the order pattern would go back to the normal pattern, which is more in the July, August time frame. The retailers were taking a lot of stuff in, in the month of June, as they did last year, and even started at the back end of May. It was, it was basically a repeat of, of what happened in 2022, which was a surprise to us, but a, a pleasant one.
Okay.
The question really is about what happens in August with the replenishment. That's, that's the unknown. Last year, we got no replenishment orders. We're waiting to see what happens this year. There's no point in asking the retailers, they simply don't know. We'll find out, we'll find out the answer to that when we close the month of August.
Okay. Then on Innovia, you know, obviously, tough quarter. Do you expect that repeat in Q3, or is it improving at all so far in Q3?
Well, we're very pleased with the sequential improvement at Innovia. We called it, it's better than we thought it might have been going into it, particularly in the American space. But we, we're really waiting to see what happens in the pressure-sensitive label materials industry. There's a couple of public companies that have released drops of, you know, in the 30% magnitude in that industry, and that's our largest customer segment at Innovia. Until they improve, we can't improve. I think that's really all about pressure-sensitive materials that are in the label converter channel in inventory. Until that gets used up and the replenishment orders come in on a more normal basis, we'll be, we'll be suffering along with them.
They're all calling out, that they expect that to gradually improve in the second half of the year, and that seems to make sense, resonates with us.
Mm-hmm. Okay. All right, thank you.
Thank you, David.
Your next question is coming from Ben Jekic at PI Financial.
Good morning. Most of the questions have been answered. I do have two, and the first one is just on Faubel. Is there any growth angle to that story, or is it sort of a more presence, market presence for you?
Yeah. Well, clinical trial labeling is, is an area of growth in that industry because obviously, the pharmaceutical industry grows by inventing and innovating new drugs. The billions of dollars spent every year on R&D, and that eventually translates into clinical trials processes that fuel growth. We, we get better growth rates in, in the clinical trials area than we do over time than, than the core business. It, it, it can be slightly volatile, driven by the number of studies. If you have big, big studies going on one year, they, they, they don't repeat every year. A little bit of volatility. You can have 15% growth one year and 3% the next.
It's a bit more volatile in that respect, but if you look at it over a five-year time frame, it's typically growing faster than the core healthcare industry is growing at. More importantly, it's very profitable.
Yes, that was, that was indeed a great multiple for such a profitable operation. The second one is much smaller, and the question is: last couple of quarters, I've noticed that depreciation for Avery is probably twice as high as the CapEx. Now, that is an asset-like business, but is there anything sort of to read into that, or?
You sure that's the right number, Ben?
I think I'm reading from the capital spending on the slide.
Yeah.
That's okay. I can call after the call.
You go ahead, and we'll get you an answer for that.
Exactly. Exactly. Thank you. Thank you so much.
Yeah.
Once again, if there are any questions or comments, please press star one. We have reached the end of the question and answer session. I will now turn the call over to Geoff Martin for closing remarks.
Okay. Thanks for joining the call so early this morning, and we'll look forward to talking to you again in November when we'll be calling you in from our Board Meeting, which will be taking place in Europe. We'll look forward to that. Thank you very much.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.