Earnings Call: Q2 2019

Aug 9, 2019

to the Tecnoglass Incorporated Second Quarter 2019 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Rodney Nacier, Investor Relations. Mr. Nacier, you may begin. Thank you for joining us for Tecnoglass' Q2 2019 conference call. A copy of the slide presentation to accompany this call may be obtained on the Investors section of the Tecnoglass website. Our speakers for today's call are Chief Executive Officer, Jose Manuel Daes Chief Operating Officer, Chris Daes and Chief Financial Officer, Santiago Giraldo. I'd like to remind everyone that matters discussed on this call, except for historical information, are forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding future financial performance, future growth and future acquisitions. These statements are based on Tecnoglass' current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary in a material nature from those expressed or implied by the statements herein due to changes in economic, business, competitive and or regulatory factors and other risks and uncertainties affecting the operation of Tecnoglass' business. These risks, uncertainties and contingencies are indicated from time to time in Tecnoglass' filings with the Securities and Exchange Commission. The information discussed during the call is presented in light of such risks. Further, investors should keep in mind that Tecnoglass' financial results in any particular period may not be indicative of future results. Tecnoglass is under no obligation to and expressly disclaims any obligation to update or alter its forward looking statements, whether as a result of new information, future events, changes in assumptions or otherwise. I will now turn the call over to Jose Manuel, beginning on Slide 4. Thank you, Randy, and thank you, everyone, for participating on today's call. We closed out the first half of twenty nineteen with record levels of gross profit, adjusted EBITDA and backlog. 2nd quarter total revenues increased 28% to $113,900,000 marking our 9th straight quarter of record revenues. This success was largely driven by continued rapid expansion in residential and overall market share gains. The U. S. Continues to represent a larger mix of our business, increasing to 87% of our 2nd quarter revenues. This compared to 79% a year ago. Furthermore, we generated cash flow from operations of $40,000,000 in the 2nd quarter, reflecting increased profitability and enhanced working capital management. On this positive momentum, we increased adjusted EBITDA by 41 percent to $25,800,000 This adjusted EBITDA growth resulted from our continued successful U. S. Market penetration and better product mix. The strength of our low cost efficient and vertically integrated operations was evident. This continues to provide a sustainable platform to drive industry leading margins. In addition, in May 2019, we completed our previously announced float glass joint venture with Saint Gobain. This was a very positive step for our company. We expect the JV to continue to enhance our vertical integration strategy, secure our float gas supply and generate significant synergies over the coming years. The joint venture is already contributing to our results. It added about $1,000,000 to our adjusted EBITDA in 2 months of operation during the quarter. This is an encouraging start. Our joint venture is well timed and we are rapidly expanding backlog and sales. In response to a strong demand, we were also pleased to complete the expansion of our aluminum extrusion facilities in July. This modern state of the art facility will help us to more efficiently serve the incremental aluminum demand throughout our markets. We are now even better situated to advance our competitive position in the U. S. Our additional high return investments to automate key operations at several of our glass and aluminum facilities remain on track to be completed by year end. We expect these capacity upgrades to increase the efficiency of our operations and better position us to generate attractive returns as we execute against our backlog of projects. Overall, we are very pleased with our positive momentum combined with our growing backlog, which provides us with a strong multiyear visibility. We are confident in the strength of our business and expect to continue gaining share in U. S. Commercial and residential construction activity. We are energized by our year to year day progress, which supports our increased full year outlook for revenue and adjusted EBITDA. I will now turn the call over to Chris to provide additional details on our backlog. Thank you, Jose Manuel. Moving to our backlog on Slide 6. We ended the quarter with an attractively positioned backlog across a growing number of U. S. Markets. Our 2nd quarter backlog grew an impressive 6% year over year to a record level of $525,000,000 This reinforced the strength of our strategy, product diversity and broadening customer relationships. Each completed project elevates our reputation for excellence and our business is benefiting as a result. The 2nd quarter backlog level represent more than 1.3 times our last 12 months revenue, which is very encouraging. The U. S. Market continues to represent an increasing portion of our business, comprising approximately 84% of our backlog. This compares to 79% in the Q2 of 2018. We continue to experience favorable residential and commercial construction conditions in the U. S. Our experienced sales teams recently added several project wins to our portfolio in the state of New York, Texas and Washington. This reflects our ongoing efforts to diversify our geographic presence and product mix in very good markets with solid economic fundamentals throughout the U. S. Additionally, our alliance with Schuco is allowing us to further accelerate growth in key U. S. Markets. We were recently awarded several exciting projects with Schuco product lines in the Northeast, which are reflected in backlog. Our strategic footprint, penetration into the residential market and structural competitive advantages continue to support our ability to capitalize on strong bidding activity. As a result, our revenues are reflecting record levels of invoicing and industry leading margins. Additionally, the continued outperformance in our key operating metrics is underpinned by our focus on innovation throughout our high return projects, talent sales teams and strategic partnerships and improved productivity. Our performance in the residential market in the U. S. Continues to surpass our expectations and support our upwardly revised growth outlook for 2019. As a reminder, many of our single family projects are typically short cycles and underrepresented in backlog. In conclusion, we are very pleased with our results to date in 2019. We continue to target new customer relationships and leverage our widening U. S. Footprint. We are actively enhancing the quality of our projects to expand our business in a disciplined manner. During our strong pipeline of business, we look forward to several additional catalysts from our discussed partnerships and high return investments. This should support our ability to continue growing our business while providing excellent service and high quality architectural glass products to our customers. I will now turn the call over to Santiago to discuss our financial results and markets. Thank you, Christian. Beginning with our financial highlights on Slide number 8. In the Q2, we substantially improved our results across nearly all metrics, including sales, adjusted EBITDA, margins and adjusted net income. We accomplished this while continuing to rapidly penetrate the U. S. Market, especially in residential, where our sales more than doubled compared to the prior year quarter. We spent $10,100,000 on CapEx in the 2nd quarter, most of it geared towards opportunistic high return investments and efficiency initiatives. Our operating cash flow performance in the quarter of $14,000,000 reflects our efforts to improve our management of working capital and a higher mix of residential revenues, which typically carry a shorter collection cycle. We ended the quarter with a strong cash position of $48,000,000 and a net leverage ratio of 2.4 times, down from 2.8 times last year. This balance sheet strength supports our growth initiatives and operational enhancements as we move forward. Looking at the drivers of revenue on Slide number 9. We reported our 9th straight quarter of record revenues, which were up 28% to $113,900,000 for the 2nd quarter. Continued outperformance in the U. S. Drove the strength in 2nd quarter sales with the U. S. Increasing by 42.2% year over year to $99,300,000 The U. S. Primarily reflected stronger residential invoicing, healthy commercial construction activity, market share gains and some price and mix improvement. Solid U. S. Momentum is more than offsetting the softer demand environment in our LatAm regions. In fact, with the significant shift in our business to the U. S. During the five past years, the United States actually represents a higher percentage of Tecnoglass revenue mix as compared to the percentage mix of revenue generated in the United States by most of our U. S.-based building product peers. On a trailing 12 month basis as of the Q2 of 2019, the U. S. Represented approximately 85% of Tecnoglass total revenues. This compares to an average of 79% for the U. S.-based Building Products peer group. This is an impressive accomplishment for Tecnoglass and further establishes as the premier U. S.-listed building products company. Looking at the drivers of adjusted EBITDA on Slide number 10. Adjusted EBITDA increased 41.1 percent to a record $25,800,000 from the prior year quarter. This produced an adjusted EBITDA margin of 22.6%. Gross profit increased 57.6 percent to a record $38,800,000 in the 2nd quarter, representing a 34.1% gross margin. This compared to a gross margin of 27.7% in the prior year quarter. Our improvement in gross margin primarily reflected greater operating efficiencies and a favorable mix of higher margin products across our footprint. Excluding non recurring costs of approximately $3,600,000 in the prior year quarter, gross margin improved raw material cost increases and labor constraints affecting some of our U. S.-based peers have still not had a material impact on our manufacturing costs. We were especially pleased to improve our operating expenses as a percent of revenue by 100 basis points year over year to 18.1% in the 2nd quarter. This reflected higher revenues, tight cost controls and strong operating leverage on personnel and professional fees. Excluding one time items, operating expenses will have been 70.8% as a percentage of total revenues compared to 18.9% in the prior year quarter. Looking at our continued expansion into residential market on Slide number 12. As a note, we refer to U. S. Single family residential as a residential business. We classify all other sales including medium and high rise condos as commercial. In 2017, we entered the U. S. Single family market and have rapidly scaled that business. This expansion has far exceeded our initial expectations, representing 16% of our U. S. Revenues in the last 12 months as of the Q2 of 2019. This is up from 3% of U. S. Revenues just 2 years ago. 2nd quarter residential sales more than doubled from prior year quarter. New product introductions, expanded customer relationships and our proven ability to execute with a quality first approach have led to continued share gains in this segment of our business. In the U. S, we still only represent fraction of the approximately $30,000,000,000 architectural glass and aluminum industry, with an estimated 2 thirds of the market opportunity in the residential end segment. We believe that our collective efforts in the residential segment along with our more established commercial reputation will allow us to continue to grow faster than the national average. With this in mind, we see significant upside in our business to capture a rising share of residential and overall market share in the U. S. Moving to our high return investments on Slide number 13. In May, we were excited to complete our Float Glass joint venture with Saint Gobain, which reinforces our Vericli integration strategy. The JV is strategic from an operational standpoint and will drive significant synergies over time. The JV secures float glass supply and improves purchasing economics, while elevating our global profile with customers, suppliers, architects and other industry participants. In terms of financial contribution, the JV tells Floatglass to Tecnoglass and 3rd parties, which allow us to report our pro rata share of profits in net income and adjusted EBITDA. During the second quarter, the JV added approximately $1,000,000 to adjusted EBITDA, representing about 2 months of activity from the early May close of the transaction to the end of the second quarter. Beyond the existing JV operation, we continue to expect to start the construction of a second state of the art plant nearby our headquarters in Barranquilla by the end of 2019. Separately, in July of 2019, we brought online our expanded aluminum production capacity. This is expected to increase our aluminum production capacity by 25% within certain new lines in response to strong customer demand for aluminum products. Our other investments in automation at our glass and aluminum facilities remain on track to be completed by the end of 2019. As of June 30, 2019, we have deployed approximately 60% out of the total anticipated capital investments of approximately $20,000,000 for the capacity automation and expansion. We intend to fund the remaining portion with cash on hand or existing debt capital resources. Moving to our 2019 outlook on Slide number 15. We continue to expect strong top and bottom line growth in full year 2019. Based on solid execution year to date, better end market visibility and continued confidence in the execution of our strategy, we are raising our outlook for full year 2019 revenues to grow to a range of $415,000,000 to $430,000,000 We anticipate the majority of revenue growth to come from the U. S, helped partially by innovated new products, project types, geographic expansion and single family residential. As explained on prior calls, the implied year over year percentage growth in the first half is higher compared to the back half year over year growth based on the anticipated timing of invoicing in 2019 compared to 2018. Q1 2019 revenue was abnormally high and that quarter is typically our seasonally smallest quarter. So the first half had easier comps. Based on our increased sales outlook and anticipated mix of revenues, we're raising our full year adjusted EBITDA outlook to be in the range of $90,000,000 to $98,000,000 This outlook assumes favorable operating leverage on higher revenues and a higher mix of sales from manufacturing operations. Additionally, the outlook incorporates our unchanged share of adjusted EBITDA from the Saint Gobain joint venture, which began contributing to our results in the Q2 of 2019 as contemplated in our original outlook. Furthermore, we expect lower SG and A as a percentage of sales based on incremental revenues and leverage attained with ongoing cost control efforts. In closing, we are well situated to achieve another strong year of growth and improvement in our business. Our high return investments, vertically integrated low cost operations, new partnerships and our proven ability to execute in the U. S. All give us confidence in our ability to meet our revised growth objectives, while maintaining our industry leading margins. We thank you for your continued support of Tecnoglass. We will be happy to answer your questions. Operator, please open the line for questions. At this time, we will be conducting a question and answer session. Our first question comes from Tim Wadges, Baird. Please proceed with your question. Hey, everybody. Good morning. Nice job on the results. Good morning, Tim. Thanks. Thank you. Thank you. So maybe just starting on residential, could you maybe just talk us through the drivers of the strengths that you've seen year to date? Because I know you were maybe a little bit more kind of cautiously optimistic on that business entering the year. So I guess kind of where we were 6 months ago versus where we are today, what's been the upside driver to that business relative to your expectations? Hi, Tim, Jose, Difei here. Well, we are new in the market. We've been in the residential only for the last 2 years. And our product has had a really good acceptance when people uses our product compared to the competition. They love it. We have a great reputation in high rises and a lot of homeowners have embraced the problem, the quality, the smoothness, the quality of the glass and that's why we're growing like crazy. But that doesn't mean that we can keep growing 150%. When you have nothing, you grow really fast. Then we're going to keep growing, but obviously, we hope at that pace, but I don't think so. It's going to be maybe 20%, 30% a year. Okay. Is it new? Are you signing more distributors and you're seeing kind of an expanded distribution? Or is it really the sell through through your current distribution is really what's driving it? It's both. We are expanding distribution and also we are the actual distributors that we have are growing themselves because we are on time, we're delivering a great product. And like I told you, I mean, a homeowner buys the product and the neighbor comes in, sees the product, loves it and then they buy and word-of-mouth and the acceptance of the product is really great. We have a I believe we have the best product in the market for the money. Okay. And then Santiago, I mean relative to the kind of Q2 run rate in residential, is there anything to be mindful of in the back half of the year? Why that current run rate wouldn't continue into the second half? Well, as you know, Tim, that's more of a spot type of business. We like to remain cautious as Jose Manuel just said in here. Q2 was a very strong quarter revenue wise. We hope the tendency continues, but even at that, we're projecting for the full year a growth rate of 30% to 40%. So if it does continue at this rate, that will be upside to the results that we're not baking into our projections in our updated guidance right now. Okay. So you do expect maybe a little less contribution in the back half of the year and if it continues, there'd be some upside opportunity. Okay. And then I guess just when we think about the non residential backlog in the incremental strength there? Because you've actually seen that business accelerate in terms of backlog growth over the last 3 or 4 quarters now. And so is it more the outside of Florida is accelerating or you actually seeing Florida start to pick up in the backlog as well? Well, most of the growth is coming from outside of Florida. Florida keeps being the majority of our backlog, but every time it's less and less. Before it used to be 100%, and I believe now it's maybe 60%. We're growing in Texas, Boston, New York, Maryland, even in the West Coast, we have a few jobs in California. Okay. Okay. And then I'll sneak one last one and just Santiago on free cash flow. Any change to kind of how your prior free cash flow kind of guidance or cadence was talked about? I think it's supposed to be slightly positive for free cash flow this year. Any improvement there just given the EBITDA raise? Well, yes, if you look at what happened in Q2, we focus on working capital management and we're very successful at managing inventory and getting better terms with our suppliers. Obviously AR continues to be a use of cash when you're growing higher than 25% year over year. But if we can continue the trend, we would expect to certainly provide free cash flow for the full year. We don't give public guidance on operating cash flow or free cash flow, but based on what we were able to accomplish as of Q2, we would hope the tendency continues for the rest of the year. Okay, great. Well, good luck on the back half and congrats. Thanks. Thank you. Our next question is from Alex Rygiel, B. Riley FBR and Company. Please proceed with your question. Good morning, gentlemen. Fantastic quarter. Hi, Alex. Good morning. Couple of quick questions. I know you kind of referenced the fact that Technoglass isn't seeing raw material price inflation like some of the U. S. Peers. But are you seeing any of it or do you see any on the horizon that we should make a note of? We're not counting on that. The main inputs are obviously aluminum and glass. We're not seeing any hike on prices. And what we are kind of seeing in the foreseeable future is that we're going to be able to keep them stable. And remember that we enter into long term invoicing and long term contracts. So we already have a matching on the input and how we quote to the clients. So not for the foreseeable future. Excellent. And then I know a couple of quarters ago you had some inflation in transportation costs that was going through SG and A. Any update on that in the second quarter here and how we should think about it in the second half of the year? Yes, that's actually that was actually a tailwind this quarter and we gained some operating leverage there. There were some things from the logistical perspective that we were able to accomplish in shipping directly to some ports in the Northeast as opposed to shipping through Miami and then trucking to other places. So that's actually helping out and we hope to continue the trend. We haven't seen any material increase on marine transportation, so that's helping out. And last question, given the success of the residential business, can you sort of update us on the breadth of your product line in that category and how it's changed over the last year and your interest in accelerating that growth through M and A? Yes. Well, we designed 2 new lines last year. 1 is the Elite and the other one is the Prestige. And we designed the lines from what we saw the market needed because our previous line lacked few things that the market was asking for. And they have had a great reception. Like I said before, everybody loves it. We see a lot of growth in that line because after a client tries it, I mean, he feels he falls in love with it and it's easier to install, it's a better looking product, better performance and we see a lower growth in that area in the future. I mean, not at the same rates as before, but it's going to keep growing. Thank you very much. Thanks, Alex. Our next question is from Josh Wilson, Raymond James. Please proceed with your question. Thanks. Good morning, Jose Manuel, Chris and Santiago. Thanks for taking my questions. Congratulations on the quarter. Hey, good morning. Good morning. Thanks. There's been several moving parts and you cited several tailwinds to gross margin year on year. Could you give us some quantification as to what the benefits and maybe any headwinds were to gross margin year on year? Yes. We had certain things here that helped out. We were able to gain operating leverage based on the amount of sales that we were able to invoice in the quarter and the mix of sales that were accomplished on the manufacturing versus installation side. But mainly, we were able to sell as much with the same kind of headcount. We were able to reduce installation costs. If you recall Q2 of 2018, we had one offs related to installation cost on GMMP that we were able to streamline. And the other piece there would be energy cost. We're basically doing more business with the same energy cost. So all of those contributed to the operating leverage as far as gross profit goes. There weren't really any headwinds to talk to speak of in the quarter. And as we look into the back half of the year, any differences between the quarters that we should watch out for? No. I mean, if you look back aside from the pull forward that we had in the Q2, which kind of changes the mix of business, If you look back at the 2 or 3 previous quarters before that, we're kind of running in the mid-30s and that would be the expectation going forward. Okay, very good. And anything we need to be aware of in the cadence of the sales you're assuming? Well, like we said on the call, the first half of the year was going to see higher growth year over year based on the timing of invoicing. And remember that typically the Q1 is normally the lowest one of the year, but this year was abnormally high for us. So we had always acknowledged that the first half of the year was going to have a higher growth year over year, with the second half probably showing still 7% or so growth at the midpoint. So still very strong growth rate for the rest of the year. But what I'm getting is no lumpiness between 3Q and 4Q? No, not necessarily. Not at this point in time. If I could sneak one last one in. What are your updated expectations and guidance for the Latin American sales? We're basically counting on the growth coming from the U. S. Colombia remains kind of muted. Everything from a macro perspective up if that takes place in the second half of the year, that will be an upside to results, but otherwise the growth is going to come from the U. S. As it has been the case for the last few quarters. Got it. Good luck with the next quarter. All right. Thanks. Thanks, Andrew. Our next question comes from Julio Romero, Sidoti and Company. Please proceed with your question. Hey, good morning, everyone. Good morning, Julio. Wanted to piggyback on that last question about Colombia. Understand that your outlook for the year kind of embeds a muted outlook for Colombia through this year. How are you thinking about that business for maybe the next year and beyond? I know last quarter you gave us an update that some projects that were previously put on hold were being kind of reevaluated and you had seen some stabilization now that the election had passed. So if you could speak to that, if you could? Julio, even though the election is gone, there's been a lot of turmoil politics wise in Colombia internally. And the project seems to be keep delaying and construction is lagging, great performance. We hope next year to be a little better than this year, but not so much. We're not counting on a lot. I hope it rebounds and we do better than expected, but I don't see Colombia being a driver for a lot of growth for next year. Just to add to that, Julio, I would imagine the U. S. Becomes more than 90% of our business by year end. And that's really been part of the strategy to continue penetrating the U. S. Market. So we'll serve Colombia and LatAm as he may be fit, but the driver of growth is going to be the U. S. Okay. That's helpful. And you had mentioned that raw material costs that are affecting some of your peers in the U. S. Are still not necessarily having an impact on costs and that's certainly encouraging. How about on the demand side? I mean, we're hearing rising costs are delaying projects and causing some hesitancy kind of across the construction spectrum. So are you seeing that at all in some of your customers? And could you speak to that if you could? No, we're not seeing that at all. On the contrary, we're seeing a strong rebound in Florida, especially Tampa, West Palm Beach. I mean, it's unbelievable the amount of especially for example in the hotel sector in Orlando, even in Miami, there are like 10,000 rooms are being built this is going to be built for next year that we are negotiating the projects. We hope to increase the backlog if we close at least half of those projects. Got it. Maybe my follow-up to that is just, are these rising material costs that are causing hesitancy to others, causing maybe an uptick in inquiries on your side? Have you been seeing that at all? No, no. Okay, very good. Thanks very much. Thanks, Julio. Our next question is from Dan Karimiem, D. A. Davidson. Please proceed with your question. Hey, good morning. This is Zane on for Brent. Congrats on the quarter. Hey, Zane. Thank you. So first off, on the backlog increase, I know you kind of touched to it a little earlier, but what segments of the U. S. Market are you seeing the most improvement, low or mid rise? And then on top of that, with regards to weather through the Southeast as well as the Northeast, can you quantify any sort of impact you saw there? We are growing a lot in the Northeast because remember that we are new. I mean, we've been doing business outside of Florida for maybe the last 3 or 4 years. And from the day that you get a job until you finish it, it takes at least 2 to 2.5 years. So now that the customers are seeing that we perform and that we are on time and the quality of the product, then we're getting new repeated and more jobs. For example, the other day, we were in Chicago and we did a hotel and we did a great job in that hotel and we went to a customer and the customer said, I want the windows the same that are in the Hotel X. And we said, well, those are our windows. We did that hotel. And the train just passes like a couple of meters by it and you don't hear any noise. The windows are great, the quality of the glass. So we are growing there because of our performance and that's why we believe we're going to keep growing outside of Florida more than in Florida because in Florida where you have a lot, when you have a lot, I mean, there's not that much room to grow. Just to summarize and add to that to your question, the Northeast is the area of greater growth beyond what Jose was talking about Chicago, Texas and the West Coast. Okay. Thank you for that. And then kind of thinking about any sort of the aluminum capacity in particular And when do you expect more meaningful contributions from the expansion? Or how long until you get to a full production capacity there? Well, finally, I got to answer the question. Thank you. We are fully operational today. We have a new line in place that is actually as of the 1st August is in full production and also new paint line. So we expect to see heat on EBITDA right away because aluminum is an incremental business. We have plenty of orders for the new line. And also, the glass sorting system and everything that we're doing on that side and the aluminum sorting system is coming along. We expect to be also on time by late September, beginning of October running, and that will bring a lot of efficiencies. And actually, we are, I mean, doing everything that it takes to be a more profitable company even if we stay with the same sales. If we are able to increase sales like we are doing, thanks to the good job of my brother, we are going to be able to see a lot more benefits for the company in the near future. Thank you for the color there and congrats and good luck for the next quarter. Thank you. Our next question comes from Miguel Aspina, Compass Group. Please proceed with your question. Hi, Tim. Thank you for the presentation. I would like to know your outlook for free cash flow generation and what are you going to do to improve it? Just because when I see EBITDA, it grows a lot, but free cash flow continues to be very low. So for example, you have generated close to $50,000,000 in EBITDA, but free cash flow has been only being close to $5,000,000 Thank you. Thanks, Miguel. We do not provide guidance on free cash flow, but I'll answer your question. If you look at the growth year over year, it's above 25%. And when you're growing 25%, your working capital demands are substantial. So when you look at EBITDA, obviously working capital is not included in there. However, if you look at what we did in Q2, we were able to greatly improve inventory management and get better terms from suppliers. So we're getting there, but growing 25% is not an easy profitable, You're not going to see that realized right away, but once the investments that you make start getting realized. So that's some color. We hope to continue basically the working capital management as efficiently as we were able to do it in Q2 and increasing profitability, which will drive cash flow in time. And if at some point the growth tapers, then you don't have as much of a use on AR as we have in the past. Thank you, Santiago. But would you say that CapEx could be lower next year? Does it make sense Or it could be similar to 2019? No, no, no. It will be significantly lower unless we find new opportunities. But if you ask me today, it will be probably 1 quarter of what it was this year. So we certainly don't expect to be even close to half of what we did this year. So we're definitely it will be lower. Thank you. We have reached the end of the question and answer session. And I will now turn the call back over to Jose Manuel, Daes' Chief Executive Officer, for closing remarks. Thank you everyone for participating in today's call. We hope to keep working for our shareholders and keeping the good news coming. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.