Dauch Corporation (DCH) Earnings Call Transcript & Summary

Good morning. My name is Rocco, and I will be your conference facilitator today. At this time, I would like to welcome everyone to the Dauch Corporation Second Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the call over to Mr. David Lim, Head of Investor Relations. Please go ahead, Mr. Lim.

Thank you, Rocco, and good morning, everyone. I'd like to welcome everyone who is joining us on Dauch Corporation's Second Quarter Earnings Call. Now earlier this morning, we released our second quarter of 2026 earnings announcement. You can access this announcement on the Investor Relations page of our website, www.dauch.com, and to the PR Newswire Services. You can also find supplemental slides for this conference call on the Investor page of our website. A replay of this call will be available through August 14. Replay details are in today's press release. Now before we begin, I'd like to remind everyone that the matters discussed in this call may contain comments and forward-looking statements that are subject to risks and uncertainties, which cannot be predicted or quantified and which may cause future activities and results of operations to differ materially from those discussed. For additional information, please reference Slide 2 of our investor presentation or the press release that was issued today. Also, during this call, you may refer to certain non-GAAP financial measures. Information regarding these non-GAAP measures as well as a reconciliation of the non-GAAP measures to GAAP financial information is available in the presentation. With that, let me turn things over to our Chairman and CEO, David Dauch.

Thank you, David, and good morning, everyone. Thank you for joining us today to discuss Dow's financial results for the second quarter of 2026. Joining me on the call today is Chris May, our Executive Vice President and Chief Financial Officer. The company's strong second quarter results highlight the continued positive acceleration for the new Dauch Corporation. We are focused on unlocking the full strategic potential of the transformational acquisition as we continue to successfully implement our integration plan to drive value creation and leverage our enhanced size and scale. So far, I'm very pleased with the robust start. As for today's agenda, I'll review the highlights of our second quarter financial performance. Next, I'll touch on our synergy progress, some business updates, commentary about the industry and our guidance. I'll then turn the call over to Chris to cover the details of our financial results, after which we will field any questions that you may have. So let's begin with some of the details. The company's second quarter of 2026 sales were approximately $3 billion, adjusted earnings per share was $0.32 and adjusted free cash flow was approximately $148 million. In the second quarter, North American production was flat year-over-year, Europe was down approximately 1% and global production was also flat. Our quarterly performance reflects continued strength across a number of important customer programs, including BMW's LG platform that underpins the brand's x5 and x7 models. Volvo's SPA crossover utility vehicle platform and GM's large truck program. From a profitability perspective, our adjusted EBITDA in the second quarter was $390 million or 13.2% of sales, driven by mix, business performance, synergies and a solid Dowlais contribution. Chris will provide more details about our overall financial performance during his prepared remarks. On Slide 4, I'd like to share an update on our synergy and value capture progress. We have now been operating for 5 months as a combined company, and we have already realized approximately $70 million of run rate savings to date. We remain on target to deliver more than $100 million in run rate savings by year-end. We have made excellent progress in eliminating duplicative corporate costs, optimizing SG&A and capturing global engineering efficiencies. At the same time, we're advancing initiatives across procurement and operations, which naturally take longer to realize. While significant opportunities remain ahead, I'm proud of the strong progress our team continues to make. As we have previously communicated, we expect to deliver approximately $180 million in run rate savings by the end of year 2 and the full $300 million in run rate savings by the end of year 3. Let me talk about some business updates, which you can see on Slide 5. We want to highlight that our company was named Ford Supplier of the Year Award recipient in the quality category for our outstanding performance dedication and collaboration during the 2025 fiscal year. The recognition reflects a collective effort across our organization to deliver excellence to our customers as they are in the center of everything that we do. We are incredibly proud to receive this award. In addition, in the second quarter, we won numerous awards with major European, Asian and North American customers, supporting not only mainstream vehicle segments but also high-end sports cars and lifestyle offroad-capable vehicles. We are now seeing the strength and the comprehensiveness of our product portfolio. Lastly, we continue to build a strong pipeline of future growth opportunities. Today, we are actively quoted on more than $2 billion of new and incremental business, including capacity uplifts on high-demand programs. Additionally, we are also working to secure next-generation platforms and program extensions. We remain disciplined in pursuing opportunities that align with our strategy and support our long-term profitable growth. Now let's talk about the industry. There are two topics I wanted to discuss with you specifically. First, on the macro environment. In the second quarter, we experienced some incremental costs related to the elevated energy prices, but we did not see any noteworthy impact on our operations nor on our customer schedules. From a high level, we are also not experience -- we did not experience significant mix change, possibly pointing to consumer resiliency, especially here in the U.S. In general, overall production has been stable, and we continue to experience the strength of the North American truck segment. Second, we are actively monitoring the USMCA trade discussions, and we'll react accordingly once discussions are finalized. We understand that the parties are moving into a period of annual review and are currently in active negotiations. This trade relationship is critical to the success of the auto industry and specifically to the North American region. As we have shared in the past, our strategy is to buy and build local in the regions that we serve and we have benefited from this approach, and we'll continue to do so. Now let's talk about our updated full year guidance. We have lifted the low end of our guidance range to take into account our performance through the first half of this year. Additionally, we are managing meaningful launches in the second half of the year. The company now target sales of $10.6 billion to $10.8 billion, adjusted EBITDA range of approximately $1.36 billion to $1.425 billion, adjusted free cash flow of approximately $260 million to $325 million, and our guidance ranges are underpinned by the following production assumptions. North American production at 15.1 million units, Europe at 16.9 million units, China at 31.6 million units and global production at approximately 91.1 million units. As we have shared before, our outlook is based on not only industry production, but also on certain programs that we have meaningful content on. We note that GM is transitioning to its next-generation full-size truck program. We expect the model changeover to begin during the second half of this year. The new truck is very exciting and an important product both for GM as well as for us, and we look forward to successfully supporting our largest customer. Before transitioning to Chris, I want to share with the investment community that we will be hosting a Capital Markets Day on November 17 in New York City. We will provide additional details about the event in the coming months. So please mark your calendars. In summary, we had an excellent second quarter. The integration of Dowlais continues to progress favorably, our synergy achievement is on track, and we're excited about our future and we're built to perform. Now let me turn the call over to our Executive Vice President and Chief Financial Officer, Chris May, for the financial results and details. Thanks.

Thank you, David, and good morning, everyone. I will cover the financial details of our second quarter 2026 results and our updated guidance with you today. I will also refer to the earnings slide deck as part of my prepared comments. In the second quarter of 2026, our sales were $2.96 billion as compared to $1.54 billion in the second quarter of 2025. Slide 7 shows a walk of second quarter 2025 sales to second quarter 2026 sales. Overall, our sales were flat year-over-year and in line with changes in overall North American production levels. The divisiture of our India commercial vehicle axle business also had a $34 million sales impact in the quarter. This was offset by metal market pass-throughs and FX, which increased sales by approximately $35 million. About 1/3 of this amount was related to FX and was driven by the strengthening of the Brazilian real and the euro. Dowlais contributed $1.45 billion in gross sales for the second quarter. Versus the second quarter of last year, volume mix and other was favorable by $42 million, driven by positive demand for our products that supply BMW and Volvo, which was partially offset by $31 million of lower sales due to the sale of certain businesses. Now let's move on to adjusted EBITDA. For the second quarter of 2026, adjusted EBITDA was $389.6 million and adjusted EBITDA margin was 13.2% versus $202 million and 13.2% last year. You can see a year-over-year walk down of adjusted EBITDA on Slide 8. In the quarter, adjusted EBITDA for legacy Dowlais was lower, primarily reflecting lower volume and mix, the divestiture of our India commercial vehicle axle business and approximately $8 million of EBITDA impact stemming from costs that we incurred during the UAW work stoppage at our Three Rivers, Michigan facility. These headwinds were partially offset by approximately $8 million of continued favorable performance, reflecting our focus on improving our legacy metal forming performance and managing overall costs. Dowlais contributed approximately $180 million of adjusted EBITDA during the quarter were 12.4% of sales. EBITDA benefited from approximately $9 million of volume mix and other as well as $9 million of favorable operational performance. These benefits were partially offset by the sale of businesses that I discussed earlier in my sales commentary. In the second quarter, we realized $15 million in synergy benefits as we eliminated duplicative corporate and SG&A costs and have begun realizing engineering and purchasing efficiencies. As David highlighted, we achieved a $70 million run rate as of today, and we expect this to continue to grow. We have a nice market basket of potential savings that we continue to drive to completion as we target the $100 million plus of run rate savings by year-end. Simply, we are making great progress on our synergy objectives. Let's move on to interest and taxes. Net interest expense was $82.6 million in the second quarter of 2026 compared to $37.5 million in the second quarter of 2025. The year-over-year increase in interest expense primarily reflects the issuance of new and assumed debt in connection with the acquisition. The weighted average interest rate of our outstanding long-term debt was approximately 7.1% at the end of the quarter. As for taxes, in the second quarter of 2026, we recorded an income tax expense of $16 million compared to $28 million in the second quarter of 2025. As we described last quarter, due to the acquisition-related activity this year, our tax rate and impacts remain quite involved in 2026. We expect our adjusted effective tax rate to be approximately 25% to 30% this year. As you may recall, this is somewhat elevated due to the valuation allowances and partial interest deduction limitations in the U.S. As for cash taxes, we continue to expect approximately $160 million to $170 million this year. Taking all these sales and cost drivers into account, our GAAP net income was $1 million, a slight positive earnings per share in the second quarter of 2026 compared to $39.3 million or $0.32 per share in the second quarter of 2025. Adjusted earnings per share, which excludes the impact of items noted in our earnings press release, was $0.32 per share in the second quarter of 2026 compared to adjusted earnings per share of $0.34 for the second quarter of 2025. Let's now move to cash flow and the balance sheet. Net cash provided by operating activities for the second quarter of 2026 was $107.5 million compared to net cash provided by operating activities of $91.9 million in the second quarter of 2025. Capital expenditures that have proceeds from the sale of property, plant and equipment in the second quarter of 2026 were $91.7 million. Reflecting the impact of these activities, our adjusted free cash flow was $148.4 million in the second quarter of 2026 as compared to $48.7 million in the second quarter of 2025. From a debt leverage perspective, we ended the quarter with net debt of approximately $4.1 billion and a net leverage ratio of 2.6x at June 30, 2026. In the near term, we will continue to focus on reducing our outstanding debt and strengthening our balance sheet. During the second quarter, we voluntarily redeemed $125 million of our 6 7/8% notes due in 2028. Subsequent to the end of the quarter, in August, we voluntarily redeemed all of the remaining 6 7/8% notes due in 2028. This also resulted in a principal payment of $125 million. We now have no major debt maturities until 2029. We ended the quarter with total available liquidity of approximately $2.5 million, consisting of available cash and borrowing capacity on our global credit facilities. Let's talk about our updated financial guidance on Slide 6. Our updated targets are as follows: For sales, we tightened our full year guidance range to $10.6 billion to $10.8 billion versus $10.3 billion to $10.8 billion previously, reflecting our solid performance through the first half of 2026 and our expectations for the remainder of the year. This sales target is based on current global production assumptions and certain assumptions for our key programs. For example, we now anticipate GM's full-size pickup truck and SUV production in the range of 1.35 million to 1.4 million units this year. From an EBITDA perspective, we anticipate a range of $1.36 billion to $1.425 billion versus $1.3 billion to $1.425 billion previously. We brought the low end of our range up to reflect the strength of our first half results, operational performance and continued integration execution. We note included in our adjusted EBITDA is the proportionate share of income from our joint venture in China with HASCO, called SDS. We expect our JV share, which is already included in adjusted EBITDA guidance to be in the range of $70 million to $80 million versus $65 million to $75 million previously. We anticipate adjusted free cash flow in the range of $260 million to $325 million from $235 million to $325 million previously. While we do not provide quarterly guidance, we can offer some perspective on the cadence of the remainder of the year. Relative to the first half, in part due to normal seasonality, North American vehicle production is expected to decline approximately 4% sequentially in the second half, while European production is expected to decline approximately 8%, which is often weighted towards the month of August. In addition, GM is scheduled to begin the phase launch of its next-generation full-size pickup trucks in the second half of this year. As is typical with major product transitions, we expect customer production downtime and related volume impacts during the launch period. Currently, we are expecting this temporary impact to our production for this program to begin in September. Our CapEx assumption is unchanged at 4.5% to 5% of sales as we write the organization for important upcoming launches, including the GM large truck program that I just mentioned. From a share count perspective, please continue to use approximately 245 million shares for the remainder quarters of 2026 for modeling purposes. So in conclusion, the company delivered solid first half results and we have benefited from supplying products to some of the strongest vehicle platforms in the industry, plus the strength of our diversified portfolio and a disciplined operating approach. Our operations delivered performance improvements in the areas of metal forming and in the areas that have received restructuring investments. As we move through the second half of the year, our priorities remain clear: continue executing our integration plan delivering our synergy commitments and strengthening the balance sheet. We believe these efforts will further enhance our financial profile and position us to deliver sustainable value creation. As we progress into 2027, we are excited about the potential momentum we are gaining with new program launches such as GM's new full-size pickup, synergy growth and stronger net cash flow performance. So thank you for your time and participation on the call today. I'm going to stop here and turn the call back over to David, so we can start the Q&A. David?

Thank you, Chris and David. We have reserved some time to take questions. [Operator Instructions] So at this time, please feel free to proceed with any questions you may have. .

O [Operator Instructions] And today's first question comes from Tom Narayan with RBC.

On the free cash flow bridge for H2 '26, I'm seeing $56 million for cash restructuring in H2, based on my math, I think it was $76 million in H1. Good to see that coming down. I know we'll be getting more details in November. But any color on what we could expect to see in that in '27 on cash restructuring? I think it was mostly Dowlais legacy moving plants, things like that. Can we expect that to come down a lot next year?

Yes. Tom, this is Chris. I'll take that question. Yes, I would expect continued restructuring cash costs this year, as you indicated, and that was, of course, at the midpoint of our current guidance range for that. Those investments that we've been making are a continuation of some of the Dowlais restructuring that has begun over the last year or 2 as well as some, I would call, legacy Dow facilities inside of Europe as well. Those will substantially be complete this year as well. We would expect going into '27 that, that number will reduce meaningfully from its current run rate levels we have here today. We haven't provided a specific number for '27, but we do expect those to drop significantly.

Got it. And then for my second question, I don't know if this is apples-to-apples, but I see equity income of $28 million for H1. The China JV was raised to $75 million for the full year. Just taking that math, it could imply that China JV income is higher in H2 versus H1? I know we're hearing some caution from suppliers this earnings season in China in H2. Maybe I'm just doing the wrong math. But just curious what you're seeing from your China JV implications for H2.

Yes. No, great question. Just I would give you a couple of perspectives on that. Number one, keep in mind also you only have 5 months of that number included in the first half of the year because they were not included as part of our January results. And they are going through some, I would call, new program launches in the back half of 2026 for some programs that they have with some customers so they'll have a little bit of an uptick there. But big picture-wise, think of it you have 5 months versus 6 months.

And our next question today comes from Joe Spak at UBS.

This is on for Joe Spak. You're making good progress on the synergies target. Can you maybe help us better understand the buckets of the synergies you've achieved thus far? Are most of the synergies to date SG&A? Or have you started to achieve some of the synergies on the purchasing and operations front as well? Maybe given how fast you found upside to this year's target, would it be too early for us to expect an update on the potential upside to synergies targets, primarily the operational bucket at the Analyst Day in November?

So this is David Dauch. The three buckets that we had outlined before were SG&A, procurement and operations, 30% roughly in the SG&A, 50% of the procurement, 20% of the operations was the base that we are operating from. As I've had in my prepared comments, we're making great progress across the board, but especially in the SG&A and that's to be expected. It's the lower-hanging fruit earlier things that we can get after but we're making meaningful progress there, but we're also making progress on the procurement of the operations. So as we said, we're highly confident that we can deliver the $300 million over the 3-year period of time that we identified. We're confident we can deliver and hit the run rate of over $100 million this year. At the same time, we're obviously looking to see what we can do to potentially increase that in the future, but we're not commenting at this point in time.

Got it. Maybe as a follow-up, can you maybe just provide an update as to what is embedded in the guide for higher labor? Like how many more facilities do you have for UAW negotiations for this year? And if the remainder of those facilities that go up for renegotiations, signed similar contracts to what was signed at Three Rivers, like is that labor inflation embedded in the guide? Any update you can provide there would be helpful.

In terms of cost perspective, our best estimates of our current labor arrangements are already embedded in our guidance at this point in time.

And our next question today comes from Alex Perry at Bank of America.

Congrats on a strong quarter. I guess just first, you took the guidance up despite your sort of global production coming down a little bit. What are you seeing that sort of allowed you to do that? And any thoughts on the type of sort of growth versus market you may see next year sort of based on current schedules?

Yes, this is Chris. I'll take that. Clearly, when we reflected upon our guidance update for this call here today, the strength in the second quarter, we benefited from a very strong sales. We benefited from good operating performance. Those are one of the main drivers of our support an adjustment for our guidance going forward. Obviously, the second half, I talked about in some of my prepared remarks, we do have some reductions in overall production, primarily due to seasonality, but also, of course, for the exciting new GM pickup truck that's going to launch. . And that actually correlates a little bit to your second part of your question, we think about next year, what's coming at us. Obviously, we do many parts of our business move with just overall production. But some of these new critical vehicle programs that are launching, such as GM's full-size truck generally, we see capture share, early stages of those new platforms when they're out in the market. So we're certainly very excited in watching that element very closely. The key new programs will be a driver for some of that growth.

Perfect. Really helpful. And then I know you had some initial thoughts on sort of USMCA in your prepared remarks, but I'd love to just hear about sort of the impact in the scenario analysis that you guys are thinking about internally as -- in regards to USMCA?

Yes. This is David, Alex. As I said in my prepared remarks, obviously, it's something that we're monitoring closely. We understand the status of where things are at this point in time. But until we get clarity, it's really hard to forecast what that impact will be on the overall business. I mean, our policy, as I said, is always to buy and build local. So we try to minimize the impact as much as we can. Clearly, with the USMCA set up, we'd have to rebalance or reshuffle some things between the U.S. and Mexico, if things go a different direction. But we've got the flexibility to do that and expanded flexibility, especially taking over some U.S. facilities from Dowlais as well as some Mexican facilities from Dowlais. So -- too early and too premature, I guess, really to comment on the cost implications. But at the same time, we will adjust our footprint and be flexible based on the regional footprint that we have in place.

And our next question today comes from James Mulholland with Deutsche Bank.

Maybe just to piggyback on Alex's question for this year's guide. Nice to see it was raised on the low end, but what would it take realistically for you to reach the high end? Do you need LVP to remain steady where it currently is? Or retooling to go a bit faster, maybe ramp heavy duty comes a little bit stronger in the back half? Just some thoughts about the drivers for the rest of the year, how you would get to that high level.

Yes. This is Chris. I'll take that. Look, there's obviously many moving pieces to the back half of the year or the full year, as you would know. But first and foremost, clearly, production is one of the top drivers of within some of those ranges, high or low end. So to the extent production is as strong as we expect or stronger for certain platforms that we would supply that would obviously push you towards the higher end. We do provide ranges, for example, on our JV equity income, our ranges on our synergy achievement those clearly, as you're within those ranges, if you're performing at the higher end of those drive you to the higher end of the range. . Some of the things we look at in terms of puts and takes, overall, productivity is critical to our success as well. You have a lot of activity in the back half of the year associated with that. But you also have a little bit of, I would say, macro pressure on I'll use inflation for things like oil and freight costs. We're sort of counterbalancing some of that productivity to support and work towards mitigate some of those impacts. So those are some of the moving pieces we think about when we're inside of that range.

Great. And then I guess on the $2 billion of active quoting for new and incremental business, can you give us a sense of whether or not the breakdown of quoting there is for new platforms that you're already on or Conquest awards? And then are these products really being quoted more aligned with the legacy DAC business? Or is it more related to the acquired GKM businesses?

This is David. I mean the good news is this balance between the two companies, that being legacy AM and legacy Dowlais GKN. So that's good news. That's the comprehensive portfolio that we want to have in place, so that's critical there. In regards to the makeup, probably 85% of the business we're quoting today now is ICE and hybrid related, where several years ago, was flipped the other way with electrification. So it plays right in the sweet spot of our portfolio. So we're pleased with that. At the same time, the $2 billion that we identified is just new and incremental business. It includes a little bit of capacity uplifts on the existing platforms, but all the replacement or extension programs are outside of that.

And our next question today comes from Nathan Jones at Stifel.

I guess also the question on the energy and steel price or still cost increases that we've seen out there, some related to tariffs, some related to the wall. Is that something that impacted the second quarter for you just in terms of EBITDA generation, maybe it's delayed a little bit getting to inventory? And -- then can you talk about the customer recoveries that you get from that and the timing on those, please?

Sure. This is Chris. I'll take that. From an energy cost perspective, we had, I would say, a relatively minor impact in the second quarter, maybe the tune of a few million dollars. Right now, I would expect that to continue into the second half of the year based on current environment. You indicated sort of a second part of that question related to steel costs. We typically do not buy steel or those type of commodities on a spot purchase, so we're under long-term contracts. So in many cases, we see no variability in the short term for that. To the extent it's driving commodity costs that go into the components we buy, we generally pass those up to our customers mechanically and contractually. And those get passed up every 30, 60, 90 days depending on the customer. And that would be all various inputs that you would see into the products that we buy. But in terms of energy cost recoveries from the customers, those would be separate discussions and we do not have automatic pass-throughs for those, in most cases, some in Europe, but not overall generally not.

Fair enough. The new GM pickup truck, is there a difference in content for you guys on that platform versus the one that it's replacing?

Yes, it's relatively similar to the one we we're placing, generally same features. There's some little small plus and minuses as they have engineering changes on to support the characteristics of the vehicle. But big picture, you should think it's principally the same.

And our next question today comes from Rajat Gupta with JPMorgan.

Congrats on the strong execution. I just want to follow up on the $2 billion quoting activity comment. Obviously, pretty strong progress there. I'm curious, any progress you're seeing on just the cross-sell opportunities between legacy Dauch and Dowlais that you're starting to see. Just curious how those conversations might be going with customers? And -- should we expect to see any new awards in the near term or wait to hear more in November in our portfolio?

Yes. And that was one of the things we're very excited about as far as the cross-selling opportunity here. Again, Dowlais GKN had some very strong relationships with, obviously, the Europeans but especially the Asians. We are obviously very strong with the C3 year, but both companies had active relations with all the global OEMs. It's just a matter who had a stronger relationship. But collectively, we're much stronger across the global OEMs. What we're doing is we're having strategic meetings and reviews with those OEMs so that they understand the comprehensiveness of our portfolio and then find to identify opportunities where we could help them, not only initially right now, but more importantly, mid and long term as they look at their long-range product plans going forward. Part of it is just an educational process with the customers. But we are seeing an uptick in regards to the market basket and new and incremental opportunities. Because of the relationships that the combined business has, and we hope to convert on those as we go forward, and we'll announce it appropriately at the right time.

Got it. That's helpful. And just wanted to follow up on CapEx. Is the first half to second half uplift, I mean, pretty significant, like less than $200 million to greater than $300 million implied in the second half. Is that all tied to GM? I'm just curious like about the back -- just the second half weighted nature of that? Or is that just a conservative number out there?

Yes. Based on the midpoint of our guidance for that range, we are second half weighted in terms of CapEx. We do have program launches GM, of course, is one of them. Some of that has already been spent, but we'll continue to have some more investments associated with that program, but also getting ready for some launches into next year as well. Look, we look to optimize our spend. Look to optimize timing associated with that to the best we can. We'll continue to push on that, but it is second half weighted at this point in time, driven primarily by launch activity.

And our next question today comes from Dan Levy at Barclays.

Wanted to first start with a question on metal forming. So best margin you've had in quite some time. Maybe you could just talk to what happened in metal forming that the margin recovered as much as it did. And then broadly, is the form of metal forming structurally where you need it to be? Or is there stuff that needs to be done within the portfolio to further clean it up?

Dan, this is Chris. I'll take the first half of that question, talk a little bit about the margin profile. And you can see it is actually over the last couple of quarters, legacy Dow and then transitioning to the combined company has been on a nice steady cadence of improvement. You really had two things happening here. Number one, with the combination with Dowlais brought in, of course, the powdered metal portion of Dowlais into our metal forming operations. They had a slightly higher margin. So you are getting some uplift associated with that when we combine that up. And of course, you pick up an extra month in the second quarter versus the first quarter associated with that. . I think maybe more importantly and twice as exciting, certainly, as it relates to operational wise, we're seeing improvements that we've been discussing over the last well, quite frankly, 3 or 4 quarters in our core metal forming operations continue to take hold. We're not where we need to be yet, but we are seeing continued positive performance also giving uplift in that margin.