Pool Corporation (POOL) — Q3 2018 Earnings Call Transcript

All right. Thank you. Good morning, everyone and welcome to our third quarter 2018 earnings call. I would like to remind our listeners that our discussion, comments, and responses to questions today may include forward-looking statements, including management's outlook for 2018 and future periods. Actual results may differ materially from those discussed today. Information regarding the factors and variables that could cause actual results to differ materially from projected results is discussed in our 10-K. In addition, we may make references to non-GAAP financial measures in our comments. A description and reconciliation of our non-GAAP financial measures is posted to our corporate website in our Investor Relations section. Now I'll turn the call over to our President and CEO, Manny Perez de la Mesa. Manny?

Thank you, Mark, and good morning to everyone on the call. In terms of the 2018 season after a slow start in March and April activity reverted to expected levels since then, with the main constraint being customer capacity and reduced workdays due to higher rainfall in selected markets. We are expecting ongoing growth in the fourth quarter as demand remains strong with builder customers presently working on 2019 contracts. As mentioned in previous calls, we were expecting greater and earlier than normal manufacturer price increases in 2018 given materials and operating cost pressures. Those increases have largely been communicated and are being passed on through the channel. While the impact will be felt primarily in 2019, given the late 2018 season timing, there will be some impact on sales and noise on gross margins in the fourth quarter of 2018 and early 2019. For 2018, the bottom-line impact should be fairly negligible, but it should add to our sales in 2019 and beyond. As I look at our business, we are stronger and better across the board. Our ongoing investments in people, facilities, product lines, fleet, technology, marketing, and service continue to separate us in the marketplace which has enabled us to consistently grow market share and through ongoing improvements in execution also increase our operating margin and ROIC. As I close my prepared remarks for my 80th and last quarterly earnings call, it's important to recognize all of the individuals in the investment community that have contributed to our success with your questions and perceptions which ultimately led us to challenge ourselves to become a progressively better company. Of course, our people are the heart of our business and it is they that have generated our success each and every day. With that, I'll turn the call over to Pete for his business commentary.

Thank you, Manny, and good morning to everyone on the call. As you all saw in our announcement, we had a good third quarter, the overall revenue growth was 9%, with 8% coming from our base business which is encouraging. This is on top of last year's 8% overall and 6% base business growth for the same period. Like third quarters in the past, we had to contend with severe weather this year as our markets were affected by Hurricane Florence in the Carolinas, significant September rains in Texas, and wildfires in California, early in the quarter. In spite of this, the team has performed well delivering strong results for the period. Our four largest markets—California, Texas, Florida, and Arizona—continued to do well with the combined base business growth of 7% for the quarter. Of the four largest markets, Arizona continues to lead the way with an outstanding 13% base business growth rate. Our Green business continues to grow posting a 7% growth rate for the quarter continuing to trend from Q2. Please note that the 7% growth is all organic. These numbers reflect solid demand across both the Blue and Green businesses. Turning to our international business, Europe led the way with 20% sales growth in the quarter with the rest of the country posting results in line with plan. Looking at gross margins, you will note we finished the quarter at 29% overall, down 10 basis points from last year as you have seen in previous years small fluctuations between quarters are normal, this would be no exception. With good top-line results, solid gross profit margins combined with good execution on expenses, we realized a 13% overall increase in operating income with base business realizing a 12% increase. Mark will provide more financial commentary after my remarks. Turning to product sales, we continue to see strong demand for our building materials with sales up 16% in the quarter again reflecting strong underlying demand for our products, equipment sales were up 8% while chemical sales increased 10% for the same period. As mentioned on previous calls, our B2B sales have been a focus area for us; year-to-date our B2B sales are up 11%, but even more encouraging is that sales from our POOL360 app are up 25% for the quarter and 21% year-to-date. We believe this tool provides value to our customers by simplifying the ordering and payment process allowing them to be more productive with less time spent away from the job. This value-added service is a key differentiator for us allowing us to take share in a competitive environment, all together year-to-date our B2B sales make up 12% of total revenue. As mentioned last quarter, we continue to see inflation pressures on transportation, purchase services, and wages, but the teams are working very hard to drive productivity plans that will allow us to see increases that are aligned with volume growth. This reflects the talent and hard work of our team. Of course, our most important asset is our team and we work very hard to make sure that we recruit the very best, inspire them to do their very best, and recognize and reward them for their efforts. The key measure of our effectiveness is turnover and again in a highly competitive environment, our turnover is down. Thank you for your time. I will now turn the call over to Mark for his financial commentary.

Thank you, Pete. I will start with an update to my margin commentary from our second quarter conference call where I viewed our expectations for both gross margins and operating margins for the remainder of the year. As I mentioned on that call and in line with our long-term guidance, our expectation for 2018 has been that gross margin will be relatively flat for the year with some variability by quarter. That guidance remains intact. While we had a modest mix related gross margin decline in the third quarter and for the year-to-date period, we expect to see growth in gross margin in Q4 leaving us flat to up for the year. On operating margins, I discussed our expectation for improved expense leverage in the back half of the year and ending the year with 20 to 40 basis points of base business operating margin improvement. Again, we're very much on track with that expectation. As you've heard already, our selling and admin expenses in Q3 improved 60 basis points as a percent of sales resulting in base business operating margin improvement of 30 basis points for the quarter. This puts us in the bottom end of our targeted full-year guidance with 20 basis points of improvement through three quarters with 12% operating margin compared to 11.8% last year. We expect to make further progress here in Q4 getting us toward the upper end of our targeted 20 to 40 basis points of operating margin improvement for the year. As it relates to expense management, we are right where we expected to be with continued improvement as the year has progressed. We just got some of the factors driving our operating expense results for the quarter in our press release; I won't repeat that here other than to point out that on our Q2 call, I discussed some changes to our incentive compensation arrangements that would shift the timing of expense recognition by quarter. The result of that shift was to provide lower compensation expense in both the third and fourth quarters. That was the case for Q3 and is one of the factors that we believe will help us achieve additional operating margin improvement in Q4. We also covered taxes in some detail in our press release, so I will just reiterate that in Q3 our tax rate excluding the ASC mandate was slightly lower than in other quarters, which is typical and consistent with past years. I will also reiterate that we are on track to hit our previously communicated 2018 full-year tax rate of 25.5%. Also consistent with past practice, we have not forecast any additional benefit from ASC 2016-09 in our guidance range for the remainder of the year. On the balance sheet and cash flow statements, I have one meaningful item to highlight which is the impact of pre-price increase purchases that we began making in Q2 as discussed on our second quarter call and they continued into Q3. As we have discussed, this was a significant departure from the last several years both for us and the industry where we have historically experienced a steady progression of modest price increases for most of the last decade and which were normally passed on after the season in the fall time period. The result of this is that we made significant pre-price increase purchases and along with acquisitions and normal business growth resulted in the $126 million or 26% increase in inventory levels at the end of the quarter as well as our $61 million reduction in operating cash flow. While we will sell off some of this inventory over the next few months, we expect to have higher than normal inventories at year-end and as I mentioned in our Q2 call, our cash flow from operations will very likely be less than our net income for the year. This was a timing issue on cash generation that will reverse by Q2 next year as this inventory results. One of our planned uses of cash this year is for share repurchases. While we did not repurchase any shares in the quarter, we have been active buying shares after the end of the quarter and in October; we repurchased 150,000 shares at an average price of $151 a share resulting in a use of cash of $22.7 million. For the year we've repurchased 400,000 shares at an average price of $144 a share for a total use of cash of $57.7 million. Our goal for the year was to spend $100 million to $150 million in the year for share repurchases and we hope to be in that range by the end of the year. One additional topic that I want to update you on is lease accounting. As most of you probably know the accounting gurus had changed the reporting rules on leases and beginning in 2019, companies will be required to record a right of use assets and a offsetting lease obligation liability on the balance sheet for lease commitments that historically has been unreported but disclosed in the financial statement footnotes. As we lease substantially all of our facilities worldwide, this change will result in a material addition to both assets and liabilities which we estimate will be in the range of $150 million. You'll get to first look at this in our Q1 2019 statements. There will be no material impact from this accounting change to our income statement or cash flow and will have no impact on our debt arrangements which already anticipate changes in Generally Accepted Accounting Principles.

So I want to start with the Hurricanes and the Rain, can you just give us a sense, was there a big impact in September and then how is it looking so far in October, should we expect that it would be bouncing back?

Okay, that two hurricanes one we just had in October, Michael hitting the panhandle of Florida and then Florence that hit the Carolinas, both were destructive but given the timing of the year, given the size of those markets, the overall impact when you factor in the overall company it's fairly muted. No big impact; I mean did it impact us, yes but for example the rains in Texas as an example although wildfires in California impacted us more in the third quarter than Florence did.

Okay, got it. And then obviously you mentioned you thought you'd have a nice fourth quarter, so should we assume that organic growth is sort of continuing at a similar pace as the third quarter?

Yes.

Okay. And then Manny going back to last quarter, you mentioned some possible noise on gross margins as potentially there would be some gamesmanship on supplier price increases. Can you just give us an update there on what have you seen and should we be worried about gross margins in the fourth quarter?

Well, you should not be worried first of all. The increases have been announced, communicated and are largely now effective on the part of the manufacturers certainly on the equipment side, they've been effective now for one to two months, one to two-and-a-half months. And we have been contacting those on, so the noise here is that as Mark indicated we buy into these price increases depending on the velocity of the individual SKU, depending on the amount of the increase, and other considerations, we determine how far we buy into an SKU level. And therefore the noise is what we do vis-à-vis what others do in the marketplace. Typically, the order of magnitude of these increases are less than they were this past couple of months and therefore the impact is negligible. Here there may be a little bit of a pickup in gross margin in the fourth quarter and first quarter which is when Mark talks about getting back to flat margins for the year as our expectations is that we'll have a little bit of a pickup in the fourth quarter from these inventory gains on the fact that we bought into these increases and will have a little bit of a benefit as well in the first quarter.

Got it. Okay and then just lastly on price inflation, can you just give us a sense what was price in the quarter, what do you think it will be in the fourth quarter and then any update on 2019, now that you have seen a lot of the price letters at this point?

Sure. It’s a big for example in equipment certain product categories and equipment have gone up, several percent more than normal. In other product categories, pricing is flat or maybe down. So I would say that at this juncture for 2018 collectively, the price increases will be in the normal 1% to 2% range and given the timing of the impact of the increases that have just been communicated and we are passing through, it will still round down to probably 1% for the year. In terms of next year, the expectations at this juncture is that overall price increases will be roughly 2% more than normal, so that will certainly affect our sales growth and your model, when you do that for 2019.

Right, normal being 1%?

Yes, exactly.

Yes, okay, very good and I think Manny this is your last live conference call.

This is my last live conference call.

Well, congratulations, it's been a great run, best of luck and I know this isn't goodbye forever; you're still going to be involved. So appreciate it and thanks, thanks for over the years.

Thank you, sir. Appreciate it.

Hi good morning and I'll add to that Manny thanks for your comments with that we'll miss your presence on this call for sure.

Okay.

As it relates to the commentary here, Mark, I believe that you said year-to-date you're on the low end of the 20 to 40 basis point operating margin improvement which is true. You also made some comment about a better fourth quarter and then expecting to get to the high end of the year overall did I hear that correctly?

Yes, you did.

Okay, that's good. Second could you break down the base business growth I'm not sure if I missed that but between Green and Blue business and if you can also talk about price and volumes in each of those as well?

Sure, in the Green business we said that the organic growth was 7% and then in the Blue business we said it was 8% to 9% within the quarter.

And the price?

And price on that was about 1% on both sides, so it's mainly volume driven.

Okay, all right and then final question I will give you a softball here. You saw recently that Zodiac is prohibiting the sale of about 400 SKUs of their Pro Series or the Jandy Pro Series on the Internet any thoughts you have on that move and anything else that might emanate from that?

There has indeed been a natural progression in the industry, and we are acutely aware of it. Some might even say that's an understatement. Manufacturers in the swimming pool sector recognized some years ago that while the Internet provided another avenue for pool owners to purchase certain Do-It-Yourself products, the selection was quite limited. We have concerns about individuals buying items online and failing to install them correctly. As a result, most manufacturers have revised their warranty policies to reflect this reality, acknowledging that pool owners often attempt installation without prior experience, which can lead to unfortunate mishaps. Over the past four to five years, manufacturers have introduced products targeted specifically at the professional trade. Zodiac has taken a significant step forward by recognizing that their online sales are minimal and that it has created ongoing complications with customers who think they can install a pump themselves, only to face issues later on due to improper installation. This disruption does not benefit the industry, so it's commendable that Zodiac is leading this initiative and making these necessary changes.

And very well received by the dealers.

All right, okay, thanks again, all the best Manny.

Thank you, sir.

Yes, good morning guys. Thanks for taking my question here.

Good morning, Blake.

I know you don't have a crystal ball but with all the talk in the market about the cycle and housing I was hoping you guys could kind of shed some light on what you're hearing in the field and I guess maybe touch on where it is you would expect to really drive growth whether it's the major versus kind of more small or all in all work or discretionary versus non-discretionary just any color there.

Maintenance and repair is consistently performing well and is expected to grow as the installed base increases, along with some inflation and our market share. While there is some variability in remodeling and replacing, replacements generally require less labor than remodeling. This segment is likely to continue its positive trend. Regarding new pool construction, which faces significant labor constraints, the combination of lost workdays due to weather has also impacted this area, resulting in a year-on-year flat performance. However, the demand for new pools remains very strong. If you were to reach out to local builders for quotes, it's unlikely that more than two out of five would respond, and those that do would likely schedule for 2019. The issue is not demand, but rather capacity constraints that impact contractors and home builders alike, as evidenced by the recent market dynamics in home construction. Labor availability is also a critical challenge affecting our customers' ability to meet the strong demand.

Got it, thank you for that and then just one more I guess is probably for Mark on the base business OpEx growth last quarter you kind of walked us through a bridge with some of the moving pieces like FX, new locations, the performance-based comp that kind of stuff, do you have those numbers again?

I don’t have that specifically; the FX was really no impact on the quarter so the rate changes occurred was called early in the second quarter and then kind of settled out there. On the new locations we do acquisitions, base business versus acquired that’s in a table in the back of the press release and there is a little bit of additional impact from new locations that we don't break out there but that was relatively small so most of that you'll see in the back. And then the other piece was really on changes to our incentive plans which impacted timing of recognition not so much the total expense. For the year we are down a little bit year-over-year which really in the incentive compensation which was really the third quarter and then will be down again a little bit more in the fourth quarter as I mentioned so that will be helpful for us as we look to increase our expense leverage and grow our operating margin in the fourth quarter to getting back up in that range that I mentioned in the 20 to 40 basis points for the year.

We previously discussed the changes we made to the bonus programs for the majority of our hourly employees and some management staff. Specifically, for hourly employees, we transitioned their bonuses from a quarterly basis to five key months of the year. This is the main point Mark is referring to. We also adjusted a small portion of management bonuses in a similar way, which means that instead of recognizing these incentive compensations quarterly as we did in the past, we will have minimal recognition in the first and fourth quarters, with the focus now on the second quarter and to a lesser extent the third.

And that simply just aligns everybody together.

Got it. That’s helpful. All right that's it for me and kind of like everyone else congrats Manny and best of luck in the future.

Thank you, Blake.

Good morning and thank you for your question. Manny, it has been a pleasure working with you over the years, and congratulations on your upcoming retirement. I look forward to collaborating with you, Pete. I’d like to follow up on a previous question to get your perspective, Manny. Regarding the rise in interest rates, do you believe this will pose a challenge for Pool construction going forward?

Not at all. For context, looking back at the history of this industry from the 1960s, changes in interest rates did not affect the demand for Ingram Pools. Similarly, GDP and unemployment had no impact on demand. The two factors that most severely affected demand were the decline in single-family home values that occurred 10 or 11 years ago.

11.

Yes, 11 years ago. And second was the financing markets not being available. So even when interest rates were well into the teens back in the late 70s or 80s that did not deter the ongoing growth of new Pool construction then. Because financing was available albeit at those levels. I frankly believe that and this may be a little bit counterintuitive, but I think that higher interest rates within reason not to go from five to 15% but interest rates at 6%, 7%, 8% from a Pool standpoint are fine because it is what it will do, it will attract more lenders to a market. That has been stay on the sidelines because didn't get the returns on lending given what the interest rates were.

So one additional point is that just keep in mind we're still 60% below what we consider to be kind of normalized level Pool construction somewhere in the 75,000 Pools a year so they're relatively small part of the business today.

Sure, yes and thanks for that perspective certainly very helpful, so looking forward how are you guys thinking about the new sale center growth whether it's organic or through acquisitions both the Green and Blue side of the business?

I believe we will maintain our historical approach of opening four to six centers each year, and you can expect that to continue. We always consider acquisitions, and when we identify one that aligns with our goals, we are ready to pursue it, but we are continually looking for opportunities.

Got it. Okay and then this far as the share repurchases so I was a little bit surprised by the third quarter lack of purchases was that just really a function that you were spending money on inventory and now that you have out of the way you'll be more sounds like you'll be more aggressive in 4Q.

No independent events. We have a strong financial capacity and could have pursued both options. However, as many of you are aware, we have a set price grid for share repurchases, and when the price temporarily exceeds that grid, we pause. Once the price falls within our grid, we are able to proceed with purchases under the repurchase rules. It was just slightly above our grid, and once it started to come down, we began buying.

Got it. All right well thank you for the clarification best of luck.

Thank you, Anthony.

Hi good morning guys. Maybe a couple of new bag questions if I might you talked about the impact of the sort of the pre-buy on your gross margins in 4Q and 1Q. Are you willing to put some sort of bookends around what impact that might have?

It would be when you look at the overall numbers fairly diluted right because there are a lot of product categories that are operating in the normal course. So I would just say context for the year it will be a little bit of a benefit in the fourth quarter and obviously hold costs on a year-on-year basis for the year and maybe get us from the down 0.1 to the hopefully down to flat year-on-year that's the kind of a somewhat of the expectation. And then when you look at the first quarter of next year again there will be a little bit of benefit in the first quarter but when you look at the full-year, it's going to be fairly diluted and probably more looking that flat year-on-year by the time year is done.

Okay, great that's helpful and then the final one nobody has brought it up so maybe it doesn't matter but are tariffs if we go to 25% on the Section 301 tariffs do you have anything to worry about here?

There’s no need for concern; it’s just a bit of confusion. Most of our products add significant value, and while raw materials play a role, nothing of that magnitude affects the overall package. However, there are certain parts of the business, approximately 1% or 2%, where the added value is less substantial, resulting in a more direct impact. If we experience a price or tariff increase in those areas, we will adjust accordingly based on the market dynamics.

Thank you, most of my questions have been answered, but I wanted to ask about the full-year guidance in Q4. I noticed the wide range of $0.20 between the upper and lower ends of the guidance range, yet the base business growth continues at high levels. You have visibility on gross margin improvement from pre-buys, and you're guiding towards the upper end of the operating expenses margin for the year. I'm curious about the reasoning behind that wide range of guidance for Q4 and what factors could influence the upper and lower limits.

Sure, we look at it two ways Garik; one way is from an absolute number $0.20 represents a 2%, 3% on both sides of the midpoint. And second, what's still open is how well the weather holds up so our customers involved in new construction, renovation, and replacement how long they're able to work and you can basically look at it from this standpoint if the season were to shut down today we probably going to be near the low end. If the season is normal will be more like toward the midpoint and if you can be out there without a sweater on in New York City and on Christmas Day we're probably going to be at the high end.

Okay, that's make sense. I just wanted to ask a follow-up on any pent-up demand for some of the weather disruptions that you saw in Q3 that have contributed to some of the strengths earlier in the quarter.

The impact is not limited to the recent hurricanes; it’s a widespread issue. Labor is in short supply, which you might have heard from other companies that are directly hiring. In our case, we’re selling to distributors who are trying to attract and retain labor to grow their businesses. This is the main limitation we face, and while it's not a new challenge, weather-related impacts have pushed everything back a bit further.

Peter, if you could I'll make the suggestion if you guys could put your repurchase graph in your Investor Relations deck that would be insightful first of all I think. And Manny hopefully you can learn how to install a pump since you're going to have some more free time.

Yes.

So my first two questions are Arizona 13% growth put some context around that in terms of that categories that were growing or is it just a comp issue and why did chemicals grow so strong?

Arizona they didn’t have any weather issues, so there was less inhibitors from a weather standpoint to enable our contractors to meet demands together with our naturally growing share. And in terms of chemicals, there was some catch-up in the third quarter from the second quarter of the year.

Okay. And then in terms of the pricing that was mentioned around here you guys buy-in is it going to be any impact that you will see in terms of gross margin and or any other costs, are you guys still structurally looking for that give or take 15% incremental EBIT, just trying to figure out if you're going to model gross margin next year or we can just stick less incremental EBIT margin?

The expectation is that the gross margin percents will remain intact and the contribution margins will be intact albeit on modestly higher numbers. And since you have been there a while and this will be the last time you are speaking. Is that a decade ago we were really entering the deep, deep grows of the economic cycle which go back another 10 years we had been kind of during the Clinton times late 90s because people are so concerned about the cycle affecting your business which on the Blue side you would obviously not agree with but what is if you could use when you started 10 years ago today, just as a kind of handoff or the question potentially, I guess, figuratively, asked about why your business isn't as cyclical if you could just give us that broad perspective I would appreciate that, realize it's a broad question but we need to understand why it's not as cyclical as it was in the past. Thank you very much. Sure. So, thank you, Ken. If you go back to 2006 and you look at the makeup of the products that we sold and where they went, at that time 35% to 40% of our sales were tied to new Pool construction. And then the remainder were reasonably split a little bit more for maintenance and repair and then remodel and replacement. So the dynamics there is that 35% to 40% is now between 13% and 15% of our business. So and that's the one that is most exposed from a discretionary standpoint as Mark mentioned earlier from an industry standpoint, we're still running about 65%, 70% below 2005, 2006 new Pool build volumes. So the market really hasn't recovered because of the things you talked about, the financing market is not being as open at any interest rate to lending for home improvement like they were historically pre-2008 before the regulations came on and had a significant dampening effect on that. Together with the fact that there was the decline of single-family home values which essentially recovered plus. But I think at this juncture, the main constraints are the financing markets as well as the lack of available labor for contractors to be able to build those Pools; it's very, there's no crystal ball here but I would say that this year domestically the industry is going to have like 75,000 new Ingram Pools built. Given some of the comments we get from our customers that number could easily probably be north of 100,000, so it's not a demand issue whatsoever. But in context to your question and overall business it's simply a matter of mix with a much smaller percentage of our total business being subject to that level of discretion and therefore and even then there's other factors that tell me that the adverse impact even in a normal recession would be fairly new on that sector.

Hi, thank you for taking my question. I wanted to ask about the building materials, which continue to grow very strongly this year. Are you seeing any margin pressure in that category potentially related to higher transportation costs?

That's a very good question very perceptive question because certainly third-party freight rates have gone up in the mid-teens from a market standpoint. We pass those on and certainly there's no competitive pressures everywhere but given that the cost inputs are the same for our competitors there's no way that anybody could eat that and absorb that and so that those are generally passed on in the marketplace.

Thank you very much. I wanted to ask about international expansion. How are you thinking about that in the long term? Is it more opportunistic, or do you believe it could accelerate in the coming years?

Well, that’s another very good question. We have just for color and context approximately 9% of our sales are outside the United States. That’s primarily weighted towards Western Europe and Canada as well as Australia. Those are long-term investments we consider those markets to be markets we should be and in fact when you look at as an example Europe given proportionately smaller installed base in the U.S. the organic growth in Europe is from an industry standpoint as wants to present better than the United States more like from a proportionate standpoint it was in the U.S. back in the 80s and 90s. And part two is we continued to grow share in those markets and in fact our organic growth on the profitability side is very strong internationally. So very important but it's all part of a certain discipline and we're not going to just do things and jump on bandwagon because a particular economy is hot mean there are countries that we have looked on would looked at and passed on because of our longer term view of things and weighing things in a risk-weighted basis, so I think you're going to see growth maybe a fraction higher, but when you look at that being 9% of our sales could it be 10% of our sales in three to five years yes it's going to be 20% of our sales in three to five years I strongly doubt it.

Okay, thank you very much and then just I have one more question for you. You did a great job of talking about how there's a downturn and how you're relatively better than previously. But I guess considering the scope of competition, I would think that you guys would be significantly better positioned than other competitors. And as you think about that, if there were a downturn, could you see one, an opportunity to maybe purchase more of some of the faltering competitors? Or do you think there could even be greater some of these margins dependents just decides to shut down and you guys would come out of it with an even greater share of the market?

Well, in the last downturn from a market share standpoint it worked out well for us because our ability to serve our customers was not impeded whatsoever by the downturn and some of our competitors certainly were impeded, so that enabled us to have a further separation in terms of our level of service. The fact that we continued to invest in a number of tools and programs during the downturn that further served to distinguish ourselves. I think I don't know that we necessarily will be opening up our checkbook and buying guys up. During the next downturn I agree with the pieces that we're much well-positioned than anybody else as we have been historically as we are today and will continue to grow share doing a downturn. But I do see that opportunistically I rather grow organically the general capital there is a factor or better and the acquisitions do provide some speed and sometimes in some cases an entry into a market that otherwise we would take us longer to build a presence in. But I'd say the bottom-line yes my better than our competition yes grow share faster but I would say the only twist there is the lion's share of that growth would be organic.

Thanks. Hey Manny I just wanted to offer my thanks as well. Thank you for your operational and financial stewardship. You've helped make our clients a lot of money and I appreciate it so thanks again and good luck.

Thank you Tony very much.

Thank you all for joining us today. Our next call will be on Valentine's Day, February 14, mark your calendars when Pete and Mark will discuss our full-year 2018 results. Thank you all very much.