Aug 8, 2013
Executives
William J. Dunaway - Chief Financial Officer and Chief Accounting Officer Sean Michael O'Connor - Chief Executive Officer, Director, Chief Executive Officer of IAHC (Bermuda) Ltd., Chief Executive Officer of INTL Trading Inc and Director of IAHC (Bermuda) Ltd.
Analysts
William R. Jones - Singular Research
Operator
Good day, everyone, and welcome to the INTL FCStone Inc. Third Quarter 2013 Earnings Call.
Today's call is being recorded. At this time, I'd like to turn the call over to Mr.
Bill Dunaway. Please go ahead, sir.
William J. Dunaway
Good morning. My name is Bill Dunaway, CFO of INTL FCStone.
Welcome to our earnings conference call for the fiscal third quarter ending June 30, 2013. After the market closed yesterday, we issued a press release reporting our results for the fiscal third quarter.
This release is available on our website at www.intlfcstone.com, as well as a slide presentation, which we will refer to on this call in our discussions of the quarterly and year-to-date results. You'll need to sign on to the live webcast in order to view the presentation.
Both presentation and an archive of the webcast will be available on our website after the call's conclusion. Before getting underway, I'd like to cover a couple of housekeeping items.
On these conference calls and in the management discussion portions of our SEC filings, we present financial information on a non-GAAP basis in order to take into account mark-to-market adjustments in our physical commodity product lines, which are included in both our CRM and Other segments. As discussed on previous conference calls and in our filings, the requirements of accounting principles generally accepted in the U.S., which I'll refer to as GAAP, to carry derivatives at fair market value but physical commodities inventory at the lower of cost or market value may have a significant temporary impact on our reported earnings.
Under GAAP, gains and losses on commodities inventory and derivatives, which the company intends to be offsetting, are often recognized in different periods. Additionally, in certain circumstances, GAAP does not require us to reflect changes in estimated values of forward commitments to purchase and sell commodities.
For this reason, we believe that the GAAP numbers do not reflect the commercial results of our physical commodity product lines, and therefore, the company as a whole. Instead, we assess all of our businesses, as do our banks, on a fully mark-to-market basis in our daily and monthly internal financial reporting.
Readers of our Form 10-Q filings should review the selected summary financial information within Item 2, Management's Discussion and Analysis of Financial Condition and Results of Operations, for a summary of both GAAP and non-GAAP information. This section also gives the reconciliation between GAAP and non-GAAP information required by the SEC.
Please note that whenever we talk about an adjusted number on this call, we are talking about a non-GAAP number. Secondly, we're required to advise you and all participants should note that the following discussions should be taken in conjunction with the most recent financial statements and notes thereto, as well as the Form 10-Q filed with the SEC.
This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements involve known and unknown risks and uncertainties, which are detailed in our filings with the SEC.
Although the company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the company's actual results will not differ materially from any results expressed or implied by the company's forward-looking statements. The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Readers are cautioned that any forward-looking statements are not guarantees of future performance. With that, I'll now turn the call over to Sean O'Connor, the company's Chief Executive Officer.
Sean Michael O'Connor
Thanks, Bill, and good morning, everyone. Q3 2013 was unfortunately, again, a difficult quarter for us with disappointing results overall.
We were pleased with the revenue gains in our Securities, Foreign Exchange, Clearing and Execution and Other segments business, but this was more than offset by a decline in revenues from our largest Commodity segment. The decline in revenues in the Commodity segment was due to lower activity levels in our ags business and the exit of -- from our physical base metals business.
Our operating costs remained stable. First of all, we are pleased to see double-digit growth in our global payments and FX business, as well as our Securities business.
Our Other segment consisting primarily of our physical ags business and our asset management activities in Argentina nearly doubled with its revenues for the quarter. In aggregate, these segments grew quarterly revenues of 37% or $11 million compared to a year ago and for the 9-month period, the increase was 27% or $24 million.
On the other hand, this good performance was more than offset by a reduction of 22% or $15 million in the quarterly revenues of our Commodity segment. For the 9 months to date, the Commodity segment was down 13% or $23 million.
There were 2 major reasons for this decline in our Commodity segment. First of all, as we usually discuss the last quarter, the drought conditions that have persisted in the U.S.
for the last year have -- year or so have resulted in very lower inventories being held, which required hedging. Additionally, low prices and in some instances, backwardations, have not induced producers to lock in longer-term pricings.
The result of this has been a reduction in overall customer activity in these segments, both on the exchange rate of products and even more so with the structured products, which carry a higher margin. We did see some recent pickup in activity from Brazil as currency devaluation increased the effective local price received by domestic producers.
Volatility around the currency markets was also favorable for us, and we saw a sharp pickup in activity on the OTC side. We anticipate, as does the market, that this might be a record U.S.
grain crop, and which we believe will result to a substantial rebuild of the industry inventory, which hopefully should see a return to more normal levels of hedging activity. Second was the impact of the closure of our physical base metals business.
This has been in the works for 6 months now, and given that we entered into long-term agreements with our customers, it was not an easy business to exit. We have now finally terminated this activity.
We now basically had canceled all the contracts except for 2, which are profitable and we are running off. And we have also terminated all but a couple of the stock as of July 31.
The close out of this business was broadly in line with expectations in terms of cost and timing, but nonetheless, had a material impact on the quarter's results with an adjusted net loss for the quarter of over $5 million. Year-to-date, this business resulted in accumulated adjusted pretax loss of over $8 million.
We still have some stock redundancy cost to realize in the fourth quarter again, which we should realize some revenue on the 2 contracts we are running off. The net result is not expected to be material.
We currently believe that this business will be reported as discontinued operations beginning in our fourth fiscal quarter. We have developed a global infrastructure that is fairly unique, I think, from a midsized financial services firm.
We have regulated operating subsidiaries in all key financial markets and are capable of executing futures, options, securities, swaps and foreign exchange. In addition, we have invested by putting our customer-facing personnel close to key markets base service to enable the effective delivery of our high touch value-added approach.
This has been a sizable investment over the last 5 years or so and is now fully scalable. As mentioned last quarter, we continue to focus on cost and efficiencies and have now seen our cost flattened and even declined in certain areas.
This is despite taking on some small acquisitions and organic growth initiatives and despite increasing regulator-related costs. The management team is acutely focused on becoming an efficient provider and realizing operational synergies where possible.
As we push more revenue through this platform, we should start to realize sizable operational leverage given our gross margins of around 50% in most of our businesses. Finally, I would like to discuss the full process that led to the recent debt offering we priced a couple of weeks back.
We have been trying for many years to streamline our capital structure to make it more scalable to accommodate our longer-term growth objectives. Up until now, we have had a patchwork of specialized debt facilities with different groups of banks in different operating entities, all of these facilities being secured, each with different covenants and advance ratios, short-term in turn up and complex in the operation.
This is becoming both costly and burdensome on a long-term basis and difficult to scale as our business grows. Ideally, our capital structure would consist of the following components in roughly equal tranches: equity, which is used to fund our core regulated capital and long-term fixed assets and goodwill incurred and acquisitions and similar things; term debt, used to fund longer-term expansion opportunities and associated working capital; and third, bank debt to fund short-term liquidity mismatches through the settlement process.
An opportunity arose for us to take the first step into the corporate debt market by issuing a bond for the retail market. Unlike a traditional high-yield market, this does not require a credit rating and also could be executed in smaller size, which for us was an advantage at this early stage.
We would prefer to add this layer to our capital structure incrementally and cautiously. This was the company's first foray into the public debt markets.
The issue was upsized very successfully, and the greenshoe option was exercised, bringing the total issue size to $45.5 million. We may decide to issue further tranches in due course.
The decision to close the physical base metals business and terminate the commodity facility allowed us to combine most of our banking facilities into a 3-year corporate revolver. One of our existing banks in the current revolver had increased their exposure by $30 million, and we are in the process of renewing and expanding this revolver, which should be completed during the fourth quarter.
So we believe we have made good progress on the capital structure side with a better mix of equity, long-term debt and bank borrowings, and also have locked into some fixed-rate borrowings at a good time in the cycle. Compared to a year ago, we have reduced our aggregate bank facilities by approximately $65 million with the termination of the $140 million, 1-year commodities facility, offset by the recent 7-year, $46 million debt issuance and a $30 million holding company line increase.
This resulted in a net deleveraging combined with a significant extension in the tenor of our aggregate facilities. The remaining issue we are faced with on the capital structure side is one of inefficiency.
As you can see from our financial statements, we now sit with more cash on our balance sheet than borrowings, so in net cash situation, which is both inefficient and costly. This is a result of having a number of different activities that were previously unregulated and therefore, housed separately from our regulated activities.
And in some instances, our bank was only wanting to the lend to sweep of our business units, and all of this was further complicated by international tax issues. This has more recently been exacerbated by increased regulation of almost all of our activities, which has restricted our ability to sweep cash into a central treasury.
Our response to this change in circumstances is to consolidate our activities into fewer entities that carry broader regulated commissions. In doing this, we consolidate our liquidity, which should result a natural offset internally between business units with cash on hand and those requiring borrowings.
This is a big task and requires repapering of customers and bank accounts. This process has started and should, over time, result in a much more efficient capital structure.
An additional benefit should be from operational cost synergies, such as consolidated functions, external orders and similar things. I will now hand you over to Bill Dunaway for a discussion of the financial results.
William J. Dunaway
Thank you, Sean. I'd like to start my discussion with the review of the quarterly results, and we'll refer to the fifth page of the slide presentation, entitled Quarterly Financial Dashboard.
This slide lays out the quarterly operating results, as well as some related balance sheet information in comparison to the prior year period, as well as in some cases, the internal target, which management has for our operating results. Adjusted operating revenues were $119.7 million for the current period, which represents a 4% decrease from the $124.7 million in the third quarter of 2012.
Adjusted operating revenues increased 3% from the $116.6 million recorded in the second quarter of 2013. Adjusted operating revenues declined in the core CRM segment.
However, all of the segments of the company experienced growth in adjusted operating revenues in the third quarter as compared to the prior year. Looking at revenues on a segmental basis, adjusted operating revenues in our Commodity and Risk Management Services segment decreased 22% from $67.9 million in the prior year period to $53 million in the third quarter of 2013.
Adjusted operating revenues decreased 4% as compared to the second quarter revenues of $55 million. Our CRM segment is further broken down into 3 product lines: soft commodities, precious metals and base metals.
Starting with soft commodities, operating revenues decreased 18% from $54.6 million in the third quarter of 2012 to $44.5 million in the current period. Second quarter 2013 revenues were $42.8 million.
Exchange traded contract volumes decreased 7% and OTC contract volumes decreased 27%, respectively, over the prior year period. Despite the decrease in exchange traded contract volumes, primarily driven by diminished hedging volume from our domestic grain customers, as well as a result of lower industry volumes following the drought of 2012, commissioning and clearing fee revenues were flat with the prior year period to an improved rate for contract earned, primarily in the food service industry and the Chinese markets.
The decline in OTC contract volumes primarily in the Latin America, Mexican and Brazil the markets contributed into a $10 million decrease in overall OTC revenues. Average investable client balances were flat with the prior year period at $854 million.
Despite a 20% decline in the number of ounces traded primarily in the Far Eastern and in the U.S. markets, adjusted operating revenues in our precious metals product line increased from $2.9 million in the prior year period to $4.7 million in the third quarter of 2013 as a result of widening spreads.
Second quarter revenues were $2.8 million. As a result of our planned exit of the physical base metals business, I want to separate the results of our physical base metals business from that of our nonphysical hedging business on the London Metal Exchange.
Adjusted operating revenues in the physical base metals business declined from $3.5 million in the third quarter of 2012 to a loss of $3.3 million in the third quarter of 2013. Primarily as a result of a $1.4 million in premiums paid to exit forward contracts, as well as the orderly wind down of other open forward contracts and inventory positions.
Adjusted operating revenues in our physical base metals business were $1.8 million in the second quarter of fiscal 2012. The exit from the physical base metals business will leave our LME metals operations unaffected.
Operating revenues in this business increased 3% from $6.9 million in the third quarter of 2012 to $7.1 million in the current period. This represents an 8% decline from the $7.7 million in operating revenues recognized in the second quarter of 2013.
Moving on to the Foreign Exchange segment. Operating revenues increased 15% in the third quarter to $19 million as compared to $16.5 million in the prior year quarter.
Current quarter operating revenues increased 8% over the second quarter revenues of $16.1 million. Operating revenues in the global payments product line increased 11% from $10 million in the prior year period to a record $11.1 million in the -- with the volume of payments made increasing 22% as we continue to add additional commercial banks and following the successful implementation of a new back office platform.
We have expanded our service to additional commercial costumers as we can process significantly more volumes, including smaller payments, without having to add additional personnel. Operating revenues from customer hedging activities increased 14% as compared to the prior year period to $2.5 million.
Operating revenues in the customer prime brokerage product line increased $300,000 to $2.2 million in the third quarter as compared to the prior year. Finally, the proprietary foreign exchange arbitrage desk, which arbitrages the cash versus the exchange traded markets, experienced a 33% increase in operating revenues to $3.2 million as compared to the prior year.
In our Securities segment, operating revenues increased by 60% from $8.6 million in the prior year to $13.8 million in the current quarter. This represents a 14% decline when compared to the second quarter revenues of $16 million.
This segment includes 2 product lines: the equity market making business and the debt capital markets. Operating revenues in the equities market making product line increased 106% from $5.1 million in the prior year to $10.5 million in the current period.
Operating revenues in our debt capital markets product line, which includes both investment banking activities, as well as debt trading, were relatively flat at $3.3 million as compared to the $3.4 million in the prior year period. This was, however, a $4.2 million decline from the record $7.5 million recognized in the second quarter of 2013.
In the Clearing and Execution Services segment, operating revenues were $27.8 million in the third quarter of 2013, which was relatively flat with the prior year, but represented a 10% increase over the $25.3 million in the second quarter of 2013. Revenues were flat with the prior year period despite a 6% drop in exchange traded volumes as an increase in commission rate per contract offset this decline in volumes.
Average investable client balances in the current period were flat compared to the prior year period at $810 million however they increase of 23% as compared to the $661 million for the second quarter of 2013. Interest income has continued to be constrained by historically low short-term interest rates in this segment.
Adjusted operating revenue in our Other segment, which contains our both -- our asset management and commodity origination and financing product lines, increased from $3.8 million in the prior year period to $6.8 million in the third quarter of 2013. Adjusted operating revenues were $4.7 million in the second quarter of 2013.
Operating revenues in the asset management product line decreased $100,000 to $2.2 million in the current period. Adjusted operating revenues in the commodity financing and origination product line increased 207% to $4.6 million as compared to the prior year period as a result of an increase in both commodity financing arrangements and origination sales.
Back to Slide #5 of the dashboard. Noninterest expenses were $114.8 million for the third quarter of 2013, which is a slight decrease as compared to the $115.3 million in the third quarter of last year.
This is a 2% increase as compared to the $113 million in the second quarter of 2013. Internally, the company targets key variable expenses as a percentage of total expenses in excess of 50%.
During the current period, the majority of noninterest expenses were variable with 56% of total noninterest expenses being variable in nature as compared to 55.9% in the prior year period. Non-variable expenses include fixed expenses, as well as bad debts and impairments.
During the third quarters of both 2012 and 2013, we recorded no significant bad debts or impairments. Fixed expenses were $50.5 million in the third quarter of 2013, which represented a $300,000 decrease from the third quarter of last year.
Fixed expenses were $52 million in the second quarter of 2013. The company targets to keep total compensation expense as a percentage of adjusted operating revenues at less than 40%, and for the third quarter of 2013, we were above this target at 43.6%, primarily as a result of the wind down of the base metals business, as well as the aggregate level of operating revenues.
In the prior year period, compensation and benefits were 43.8% of adjusted operating revenues. Compensation and benefits decreased 4% from $54.6 million in the prior year period to $52.2 million in the current quarter.
The variable portion of compensation and benefits decreased 8% from $26.6 million in the third quarter of 2012 to $24.6 million in the current quarter, while the fixed portion of compensation benefits decreased $400,000 to $27.6 million in the current period. The average number of employees increased to 1,105 in the third quarter as of -- of the third quarter of 2013 as compared to the 1,064 in the prior year period.
Our second-largest expense is clearing and related, which decreased 4% compared to the prior year quarter to $29.4 million. This decrease was primarily driven by a 6% decrease in exchange traded volumes, partially offset by higher ADR conversion fees and increased transactional charges in the FX business.
Second quarter of 2013 Clearing and related costs were $29.1 million. The adjusted net income from continuing operations for the third quarter was $1.3 million versus $5.3 million in the prior year.
As Sean mentioned earlier, this decline in adjusted net income from continuing operations was primarily affected by the $5.4 million pretax segment loss in the physical base metals business. When taking a longer view, over the trailing 12 months, adjusted net income and adjusted EBITDA increased 96% and 46%, respectively, over the year ago period.
The company looks to achieve a minimum return on equity of 15% or greater on its adjusted stockholders' equity, and for the current period, the company was well below that target at 1.6%. The return on equity for the prior year period was 6.6%.
Total assets on the balance sheet increased 6% to $2.9 billion, while adjusted stockholders' equity closed the period at $335.9 million, a 6% increase over the prior year. Another key metric the company focused on is keeping a 1:1 ratio between revenue-generating employees and administrative or operations employees.
Along these lines, the company targets have at least $500,000 in annualized revenues across the entire employee base. For the current period, this metric is $433,000 per employee as compared to $458,000 for the prior year period.
On November 15, 2012, the company's Board of Directors authorized a repurchase plan in which the company may repurchase up to 1.5 million shares of its outstanding common stock. During the third quarter of 2013, the company did not repurchase any shares of its outstanding common stock at open market transactions.
Finally, in closing, after a review of the quarterly results, the trailing 12-month of results have led to an increase of 5% in the book value per share, closing up the quarter at 17 point -- $17.50 per share. Next, I would like to direct you to Slide #6 of the presentation for a short review of the year-to-date results.
Adjusted operating revenues increased 4% to $352.8 million for the 9 months ended June 30, 2013, as compared to the prior year-to-date period. Adjusted operating revenues in the core CRM segment declined 13% or $23.3 million as compared to the prior year, primarily driven by the decline in revenues associated with our effective lost hedge job on our agriculture commodity business, as well as the $10.4 million decline in physical base metal revenues.
All of the segments of the company experienced revenue growth as compared to the first 9 months of the prior year. Operating revenues in the Securities and Other segments grew at 48% and 44%, respectively.
Total noninterest expenses increased 3% to $331.2 million compared to the prior year and 57 -- 53.7% of total expenses were variable in nature as compared to 54.4% in the prior year period. Non-variable expenses increased $6.3 million or 4%, primarily related to the acquisition of the LME Metals Team, TRX Futures and Tradewire Securities, as well as increased costs related to the current regulatory environment and particularly Dodd-Frank compliance cost.
The adjusted net income from continuing operations increased $3.2 million to $9.9 million for the current fiscal year-to-date period, which represents a 4% return on equity, which is below our stated goal of 15%. The return on equity for the first 9 months of the prior year were 2.9%.
With that, I'd like to turn it back to Sean to wrap up.
Sean Michael O'Connor
Thanks, Bill. Overall, we're pleased with the strong growth we are seeing in all of our business units with the exception of the grains business, which is being subject to unusual cyclical factors.
We believe that these drought-related factors will reverse, and we should see a more normal revenue pattern in the coming year for our core grains business. We have now built out our unique global platform that allows us to provide high-quality execution to midsized customers and list the futures, options, swaps, structured products, foreign exchange, global payments and securities.
Having essentially completed the bulk of this build out over the last 3 to 5 years, we are now seeing our costs flattened and even decline in certain areas, while our core revenues continue to grow, notwithstanding the cyclical factors mentioned earlier. Our businesses' margins in excess of 50%, and we should start to see some real operational leverage as we continue to push for incremental revenue growth and maintain tight controller costs.
With that, I'd like to turn it back to the operator to open for the question-and-answer session, if there are any questions, please.
Operator
[Operator Instructions] We'll go first to Bill Jones of Singular Research.
William R. Jones - Singular Research
I wanted to ask -- you have mentioned the negative impact from the base metals business that was closed? And I was wondering if you could quantify that at all in terms of the results.
Sean Michael O'Connor
Yes. I think we did it at -- and it is in our queue.
So I'll hand over to Bill to give you the exact number.
William J. Dunaway
Yes, for the quarter, it was $5.4 million pretax loss in the base metals business -- the physical base metals business, and that's a little over $8 million for the full 9 months fiscal year.
Sean Michael O'Connor
On a pretax basis.
William J. Dunaway
On a pretax basis.
William R. Jones - Singular Research
Okay, okay. I can do the math there on a EPS basis.
You also have mentioned how the corn, the drought had impacted results and that I think we all -- you had mentioned how the corn crop is supposedly much better this year. When do we start seeing -- when does that start impacting aggregately the business?
Sean Michael O'Connor
Yes. Well, just to be clear, there are, I guess, 2 parts to the revenue source we get in the grains business.
The first part is when the grain hits the elevator network, they have to hedge -- and so they buy all the grain then they're sitting on it, and then they kind of sell it over time. So at the moment, the inventory levels in the grain elevators are at kind of historic lows.
So there's just nothing to hedge, right? The timing of when that comes in is obviously normally around the harvest season, which is the fall.
But the farmers often can sit on the crop if they don't like where current prices are. So if they are not desperate for the cash, they can sometimes hold that corn back a little bit.
So there is a fair amount of variability as to that exact timing. All things being equal, if the farmers do not have a lot of liquidity and the prices are at the high side, they would basically deliver all that corn in pretty quickly in the fall.
If the farmers are very flush and they don't like the prices, they may hold on to that through winter time. So that's kind of the timing on that part of it.
Additionally, through the grain elevator network, the end producers will sometimes hedge forward their prices even though they haven't delivered in, and that's the second source of hedging revenue for us. So irrespective of what the kind of inventory levels are, the grain elevator just can do some hedging with us that they in turn are doing with the end farmers.
And that is typically induced by forward prices. So the farmer may start to hedge even this next year's production if he likes the pricing.
And that really is driven by price levels and also driven by whether future prices are higher than current prices. So it is the market in a "tango of backwardation."
And again, in that part of the business, we're kind of also having a tough time because grain prices are way off where they were with last year. Everyone's memories are short, so they kind of warned for us ahead last year.
And in some instances, the markets been in a backwardation, so our forward price is actually lower than the current price. So in both instances, we've had a lot of headwinds in terms of the revenue that's coming through.
Now moving on to the next side, the general opinion in the market, including from our analysts, it is that -- and borrowings sort of some unforeseen seasonal impacts here in the late summer. This could be the record U.S.
cropable time. And basically, once that crop hits the elevator network, we will then have a substantial flow of business and hedging that inventory.
So that's kind of where things play out, hard to estimate what the direct impact of that is, but those are the variables that drive that side of the business. So it's kind of complicated because it's a lot of psychology on does the farmer hold on, does he deliver his grain in.
But eventually, at some point, that grain does have to hedge. It just depends when.
Does it hedge in the fall, or does it hedge in the winter? Does that answer your question?
William R. Jones - Singular Research
Yes. All indications are for a record crop, as you mentioned.
So I mean, generally speaking, that should reverse that backwardation, which is certainly a positive for the coming year.
Sean Michael O'Connor
And that could be, for us, the big swing factor. You've gone from a situation where you've had the lowest inventory of all time to potentially as having the highest inventory of all time, potentially so...
William R. Jones - Singular Research
Right, makes sense. And then finally, in terms of -- I know with just overall volatility impacts the business, are you seeing more or less volatility currently, say, than the last quarter?
Sean Michael O'Connor
I would say first, it's sporadic by market. I would say, I mean, softs have the -- with the run our structured products and swaps business.
But I'd say, generally, commodity levels are probably a bit higher than they were [indiscernible].
William J. Dunaway
Looking at the third fiscal quarter, certainly, April and May, from a volatility perspective, were relatively quiet. And June, there was across-the-board, in most markets, more volatility.
And we saw that coming through in our revenue stream. I mean, June was by far the best month of the quarter for us.
So you're right about that correlation. The market volatilities have probably continued in July to be better than April and May, but not as strong as June.
And nobody knows what it looks like in the next couple of months. It's part of the business.
Sean Michael O'Connor
The part of the volatility that helped our grains business, and I mentioned this in my part of the call, was the exchange rate movement down in Brazil. That's become a very volatile market for us, and a weakening of the Brazilian currency has helped our producers in Brazil because they're effectively achieving a higher price.
So they have now started to lock in to some forward pricing. So that was helpful to us.
Sean Michael O'Connor
All right. Operator, let's take any other questions, are there?
Operator
We have no other questions.
Sean Michael O'Connor
Okay. So let's wrap it up then.
So thanks very much for calling in. We appreciate it, and we will speak to you again in 3 months or so.
Thanks.
Operator
This does conclude today's conference. We thank you for your participation.