Equity LifeStyle Properties Inc (ELS) 2014 Q1 法說會逐字稿

Good day, everyone, and thank you all for joining us to discuss Equity LifeStyle Properties' first-quarter 2014 results. Our featured speakers today are Marguerite Nader, our President and CEO; Paul Seavey, our Executive Vice President and CFO; and Patrick Waite, our Executive Vice President of Operations.

In advance of today's call, management released earnings. Today's call will consist of opening remarks, and a question-and-answer session with management, relating to the Company's earnings release. As a reminder, this call is being recorded.

Certain matters discussed during this conference call may contain forward-looking statements in the meanings of the federal securities laws. Our forward-looking statements are subject to certain economic risk and uncertainty. The Company assumes no obligation to update or supplement any statements that become untrue because of subsequent events.

At this time, I would like to turn the call over to Marguerite Nader, our President and CEO. Please go ahead.

Good morning, and thank you for joining us today. As Paul will more fully describe, our normalized FFO for the first quarter was $0.79 per share, an increase of $0.03 from guidance. Our guidance for the full-year 2014 assumes a 7% growth in normalized FFO.

Our results for the quarter show the strength of our Business, which is supported by our quality real estate locations, stability of our cash flow, and flexibility of our product offering. The fundamental drivers of our Business operated better than our expectations.

For our MH properties, our properties offer value to both empty-nesters and families who desire a quality lifestyle. We continue to see strong demand for our MH product.

We had our 18th successive quarter of occupancy growth. On the operating front, we improved the quality of our occupancy by gaining more homeowners than renters. We have seen more and more customers choosing the option of buying a home from us or a resale as the desired housing choice. They see the value of owning a home in our locations.

For the quarter, we sold 30 new homes in our MH communities, at a price point of around $67,000. We were successful in selling 11 additional homes in the quarter at our 2,000-site RV resort in Mesa, Arizona. This property is a highly amenitized community, complete with a 27-hole golf course and a section of the property that is MH. Late last year, we started developing some vacant land at this property, and have sold 24 MH homes during that time period. We will continue to update you on the demand for this development.

Half of the new homes we sold this quarter in our MH communities was through the joint venture with Cavco. We like the trend we are seeing with this joint venture, and have increased our home orders.

We also had an increase in used home sales of 13%. We have seen a decrease in title turning activity, which is a positive for us, as that means more homeowners continue with us as residents, and result in fewer homes coming back to our balance sheet. Our sales activity comes from both local and national traffic, and we have directed our marketing efforts to account for these types of customers.

In the quarter, we have seen an increase in on-site ownership conversion. This is mainly achieved from a renter living in our community and deciding to buy either an ELS inventory home or a resale home.

Our RV portfolio performed well this quarter, with 6.6% growth from 2013. Our largest revenue segment within our RV revenue is from our annuals. As we have long said, we like this revenue stream because it mimics the MH cash flow, a long-term customer base who has an established home or RV on our property. The growth in the annuals for the quarter was in excess of 5%, which is 100 basis points higher than last year. We believe this shows the strength of the demand for this product offering, and length of residency.

From a marketing perspective, we are driving new customers to our resorts. We have increased our presence at rallies, trade shows and travel websites. We are focused on having a presence wherever an RV-er or outdoor enthusiast is looking for their vacation adventure.

I am pleased to announce that we have signed a marketing agreement with Lazydays RV dealer in Florida. They are one of the nation's largest RV dealers, with locations in Florida and Arizona. We have put together a program that will allow their customer access to our properties, similar to our existing marketing partnerships, just on a larger scale.

We have a continued focus on customer service, including a newly launched customer feedback tool for our RV properties, which provides real-time datapoints for us to gauge the level of satisfaction at the property level. The experience that a customer has at the property will dictate their future travel patterns with us, so we continue to be focused on customer experience. Our strong performance in the quarter reflects the strength of our Business and the hard work of our employees.

Finally, I'd like to comment on the litigation update we disclosed last week. We were very disappointed with the jury verdict. We manage our communities to a high standard, and provide a quality lifestyle to our customers at an attractive value.

Not long ago, we had a similar case that we had disclosed that went to trial in 2010. That lawsuit was filed by the same law firm that filed the case against California Hawaiian. There was a similar set of alleged circumstances and similar length of jury trial. However, the result at trial was the jury rendered verdicts awarding a total of less than $44,000. That case was appealed, and is subject to ongoing resolution.

The California Hawaiian case is currently with the judge, and we will have post-trial motions over the next month or more. We will continue to disclose all material information as it becomes available, but appreciate for now: this is a fluid situation.

I will now turn it over to Paul to walk through the numbers in detail.

Thank you, Marguerite, and good morning, everyone. I will discuss our first-quarter results, provide detailed guidance for the second quarter, and update guidance for the remainder of 2014.

For the first quarter, we reported $0.79 of normalized FFO per share, $0.03 ahead of guidance. Overall, core income from property operations was better than expected, as a result of increased rental revenues across our MH and RV platform. In the quarter, we realized some savings in property management and corporate expenses, and received a distribution from one of our joint venture properties that contributed approximately $0.01 to our results.

Core MH rent came in better than we had projected, and was 3.3% higher than last year. The base rental income increase includes approximately 50 basis points related to occupancy gains, and 2.8% in rate growth.

We had core occupancy gains of 75 MH sites in the quarter. Our focus on the quality of our occupancy yielded 43 homeowners in the quarter. We sold 45 new homes, including 14 through our ECHO joint venture.

In our MH portfolio, the used-home sales volume increased almost 13% over first-quarter 2013. Our RV business generated core resort base rental income growth of 6.6%. Our annual growth rate was 5.2%, resulting from occupancy and rate gains in Florida and the northeast. Growth in seasonal revenues of 6.4%, and growth of 12.5% in transient income, was driven by rate and occupancy, primarily in Florida. We continue to see strong demand for our cabin rental program across the portfolio.

On a combined basis, our membership dues revenue, and our membership sales and expenses, were in line with guidance. During the quarter, we sold and activated almost 2,800 memberships. Our ZPP membership sales volume in the quarter was 7% higher than last year. We expect to generate 18,000 new memberships this year through sales of low-cost products and activations from our RV dealer program.

Core property operating maintenance and real estate tax expenses were approximately $600,000 higher than expected in the quarter. While we did not see significant impact on our R&M expense, as a result of the unusually cold and snowy weather this Winter, we did see a significant increase in energy costs. Core utility expenses were approximately $1 million higher than expected in the quarter, primarily caused by electric and propane costs. We realized an 8% increase in electric expense, consisting of 5% from usage and 3% from rate. Propane expense represents less than 10% of our utility cost in total, but it was almost 50% higher in the quarter compared to last year, as a result of increased usage and rate.

In summary, first-quarter core property operating revenues were up 3.9%, and core property operating expenses were up 3.4%, resulting in an increase in core NOI before property management of 4.2%. The acquisition portfolio performed as expected, contributing $2.3 million in property NOI. Property management and corporate G&A came in at $15.9 million, less than expected because of timing of certain expenses, including some technology initiatives.

Other income and expenses generated a net contribution of $7.1 million. The positive variance from our guidance results from a $1.2-million distribution related to one of our joint ventures.

We've increased our full-year 2014 normalized FFO-per-share guidance by $0.04. Our range for the year is now $2.67 to $2.77.

Before I review guidance for the second quarter and the rest of the year, I would like to mention our assumptions related to the acquisition of the leased land at our Colony Cove property, as well as the California Hawaiian litigation. As mentioned in our release, during the quarter we closed on the acquisition of the Colony Cove land, resulting in termination of the ground lease. The annual ground lease expense was approximately $1.7 million, and our core NOI guidance has been adjusted to realize approximately $1.2 million in expense savings for the remainder of 2014.

Regarding the California Hawaiian litigation, given the uncertainty related to both the timing and the potential outcome of the litigation, we are unable to estimate the impact on our financials. Therefore, we have not included in guidance any expense related to the recently announced jury verdicts. We have adjusted our guidance to include an estimate of anticipated costs related to the ongoing litigation.

The press release and supplemental package provide 2014 full-year and second-quarter guidance in detail. As I discuss guidance, keep in mind: My remarks are intended to provide our current estimate of future results. All growth rates, and revenue and expense projections, represent midpoints in our guidance range.

We expect second-quarter normalized FFO at the midpoint of our range of approximately $55.8 million, with a range of $0.58 to $0.64 per share. We assume no change in our MH occupancy from the end of the first quarter. Core community base rent revenue is projected to be $104.6 million, a growth rate of 3%.

For the second quarter, we anticipate $35 million of rental revenue from our core RV properties, up 5.5% from last year. We expect continued strong performance from annuals and transients, with growth rates of 4.9% and 9.3%, respectively. Seasonal revenues are projected to be up 1.4% in the quarter.

Our second-quarter reservation pace shows we are currently 83% reserved for our expected seasonal revenues, and 53% reserved for our expected transient revenues, ahead of this time last year. Membership dues income is expected to be $11.4 million, and we expect a net contribution from membership sales and upgrades of $600,000 in the second quarter. On a combined basis, these lines are expected to generate approximately $12 million of income, roughly flat to the second quarter of 2013.

Core operating expense in the second quarter is projected to be 1.9%. As I mentioned, we have included savings related to the termination of the Colony Cove ground lease in our guidance. However, we expect continued pressure in utility-related expenses in the second quarter, specifically electric expense, across the portfolio to offset a portion of these savings.

For the second quarter, core property operating revenues are expected to be up 3.1%, and core property operating expenses up 1.9%, resulting in an increase in core NOI of 4.1%. We anticipate that the acquisition properties will contribute approximately $2.2 million of property NOI in the second quarter.

I'll now comment on guidance for the remainder of 2014. For quarters two through four, we assume no change in our MH occupancy from the end of the first quarter, and expect to show core community-base rent revenues of $314.7 million, which is a growth rate of 2.9%, for the remainder of the year.

In our RV business, we anticipate core RV revenues of $110.3 million for the rest of the year, which is a growth rate of 3.9%. We expect annuals to continue showing strong performance, with 4.8% growth projected. It is anticipated that almost 45% of the full-year transient income will come in the third quarter. Total core revenue from dues and net contribution from membership sales in quarters two through four are expected to be $36.2 million, flat to 2013.

Operating expense growth, excluding membership sales and marketing expenses, is projected to be 1.6% for the remainder of the year. This is down from our prior guidance, as a result of the savings related to the Colony Cove ground lease. For the rest of the year, property operating revenues are anticipated to be up 2.7%, with expenses growing at 60 basis points, resulting in an increase in core property NOI of 4.3%. We expect the acquisition properties will contribute about $7.2 million in income from property operations for the remainder of the year, for a total of $9.5 million for the full year.

Property management and corporate G&A is expected to be $52.1 million for the remainder of the year. Our full-year guidance is -- of $68 million is consistent with prior guidance. Other income and expense items are expected to be approximately $9.8 million for the rest of the year, and approximately $16.8 million for the full year.

Interest expense for 2014 is expected to be approximately $113 million. We expect our average debt balance to be approximately $2.15 billion, and our preferred distribution is $9.3 million.

Our 2014 normalized FFO-per-share estimate at the midpoint is $2.72, and our share count is expected to average 91.5 million shares in 2014. We make no assumption related to the use of future free cash flow in our earnings model.

Now some comments on our balance sheet. On April 1, we completed the refinancing effort we started last Summer, and closed on two loans with proceeds of $54 million. These loans have weighted average rates of 4.54%, and weighted average maturities of 22 years. To date in 2014, we have repaid mortgages totaling $52.6 million, with a weighted average rate of 5.63%.

Current secured financing terms available for MH and RV assets range from 60% to 75% LTV, with rates between 4.25% and 4.75% for 10-year money. High-quality age-qualified MH will command preferred terms from life companies, Fannie Mae and the CMBS market. Generally, CMBS lenders and a few life companies are currently offering debt to finance RV assets.

We have recently learned Freddie Mac has received approval from its regulators to provide manufactured home community financing. No loans have closed under this program yet, but Freddie is actively quoting deals. We are pleased to see another source of debt capital enter our space.

Our current cash balance is approximately $50 million, and we have approximately $34 million maturing before the end of the year. We have a $380-million undrawn line of credit, with almost 2.5 years remaining, and a 1-year extension option.

Now we would like to open it up for questions.

(Operator Instructions)

Nick Joseph, Citigroup.

Great, thanks. You mentioned 18 consecutive quarters of occupancy gains, and the expansion that you're doing at an existing site. How many current sites have expansion opportunities in your portfolio?

Nick, the one I was referring to was ViewPoint, which is an RV property that we own that has a component of MH. I think, as you remember, in terms of the expansion opportunities that we have inside of our portfolio, the vast majority of our vacant land is adjacent to our RV properties. So we were pleased with the development that we have done out there at ViewPoint out in Arizona, and we'll continue to evaluate where we have strong demand and we can develop more sites like that.

So what do you look for before actually deciding to expand at an existing site?

We'll look to what the demand is within the property. As an example, at the sales that have happened so far at this particular property, and in a very short time, 60% of the people that bought homes, bought the manufactured homes, are from within the park. So they are really doing what we talked about before, which is that migrating from a smaller unit or from a shorter length of stay to a -- to having their home -- their primary home at the property, and on a larger footprint.

And the 30% are referral business, so people just in the property area are saying, let's get our friends to come out. And then you have the remaining 10% are new guys just coming through, hearing our ads, and we did a couple TV advertisements to just get and understand what the demand is for the property. So we would -- that's the kind of -- the way we look at is really a localized marketing effort to see where the demand is.

Great, thanks for that. And then in terms of the acquisition pipeline today, can you talk about what opportunities you're seeing, both in terms of MH and RV?

Sure. I think we mentioned last quarter, and then we included it in the press release now, that we bought two RV parks in the quarter at a total of about $25 million. Just as to the general marketplace, the majority of the transactions we've seen are in the all-age sector, which I think I mentioned in the last quarter's call. And then we have seen some transient RV properties trade recently, but we're right now working with interested sellers, and -- but the timing of any transaction is really difficult to predict, as usual.

Great, thanks.

Jana Galan, Bank of America Merrill Lynch.

Thank you, good morning.

Morning.

Following up on the occupancy, I understand there's no change in the MH occupancy in guidance, but the trend has been consistent increases. So is there anything concerning you regarding maybe lower home sales this summer? And then maybe where do you think occupancy can get to over time?

Yes, I think maybe -- in terms of home sales, maybe we'll take this in two parts. And Patrick, why don't we just walk through, just from a home sales perspective, where we stand?

Sure. Let me also touch on Cavco, as it's a critical part of our home sales platform. The improvement of 30 new home sales for the quarter compared to the first quarter of 2013, when we sold 6 new homes, reflects that we're gaining momentum. And we've increased home purchases through the Cavco JV. At the end of 2013, we ordered 81 homes from the JV. We more than doubled purchases by adding 97 additional homes ordered in the first quarter.

So we focused our new home inventory in markets where we believe we can sell, and the increased inventory should help to support additional sales going into the second and third quarters. I would also touch on, for used homes, we did sell 372 used homes during the quarter, which is an improvement of 13% over the first quarter of 2013. Just for perspective on that trend, in 2012, we sold about 290 used homes per quarter. 2013, we sold about 370 used homes per quarter.

So as we move through 2014, we would expect the year-over-year percentage increase to moderate, because the base for comparison increased substantially in 2013, when we started to sell more used homes. So placing new inventory in places where we see demand, and the favorable trend that we're seeing in new home sales, I'd expect that to continue. Difficult to say how we'll finish out the year, but I would say that the trend is favorable.

And then, Jana, with respect to just overall occupancy, we're at 92.1%, and I think our high water mark has been in the 95% range. So in the majority, I think 50% of that vacancy, or those opportunities, are inside our Florida footprint. So that's where we continue to concentrate, to both sell additional homes and get additional occupancies into those properties.

Thank you.

Gaurav Mehta, Cantor Fitzgerald.

Thanks, good morning. You (inaudible) mostly talked about an increasing conversions of renters to homeowners in your properties. Can you talk about what are you expecting for the remainder of the year, more in terms of the conversions? And are you expecting more conversions on the used or the new home side?

Yes. With respect to the trend in renter conversions, for the first quarter, about 10% of the home sales were renter conversions, as opposed to about 5% in the first quarter of 2013. We're focusing our sales staff, onsite managers, on reaching out to renters who have paid timely, our good customers, and offering them an opportunity to buy homes. Difficult to say if we'll have more success on the new or the used; we've seen favorable trends on both.

Okay, great. And second question I have is on [depreciation] on rental homes. It seemed like you raised your guidance for 2014. Can you talk about the dynamics of depreciation?

I'm sorry, Gaurav, which aspect of the rental homes?

It seemed like you raised the guidance to $11 million from $6.6 million for the depreciation of rental homes. Is that -- does it really reflect the number of home that you're going to sell in -- rent in 2014?

Gaurav, I think with respect to the rental homes, and we're just looking at page 10 of the supplemental, it's consistent with what we had previously, in terms of our expectations on where we're going to take the rental program.

I guess if the look on page 12, you have depreciation of rental homes, $11 million, versus in your last guidance, it was $6.6 million?

Depreciation, I'm sorry. (multiple speakers) Depreciation on rental properties. Okay.

Yes, I'm sorry. In the depreciation, in the quarter, we made an adjustment to our depreciation policy on new and used homes. And essentially reviewed, over the past few years, the values of the homes and adjusted our depreciation schedule. So you can see the incremental in the quarter was roughly $1 million. And that's the driver of the adjustment and guidance impacting both new and used.

Great, thank you.

You're welcome.

Todd Stender, Wells Fargo.

Hi, good morning.

Morning, Todd.

Just to stay on that theme, on the rental side. Within your guidance, looks like rental home income and expenses both are expected to increase above previous expectations. Can you just comment on the -- on I guess the general demand for rental housing, and your current thoughts on whether or not, is that a concerted effort? Or is there such thing as a concerted effort to deemphasize the renter model? Just considering whether rental housing is mutually exclusive from rising home sales?

I think that the change in guidance is small. It's a very small dollar amount. I think on a percentage change, it has -- it's at 1% or something. But the small dollar amount, relative to where we think we're going to be for the year. But what we're concentrating on is, I think as Patrick has touched on, is converting those renters into owners. And how do we attract somebody that maybe comes down, and can rent those for the year, and then decide that this is the place he wants to stay. And maybe he doesn't buy that particular home, but he may buy the home across the street.

And so we're seeing that, certainly from a rental demand, we have high demand for rentals. We have waiting lists at properties. People are interested in staying with us. And so we see that there's an opportunity right now that -- and we can be a little bit more picky, I guess, as it relates to our occupancy. And be able to say, we'll take the next guy down who's interested in buying a home. And so that's how we see it, and it's really location-driven, property-based as to what the -- what we see as the demand. There are certainly still some properties where we don't see a sales program coming back. And we're still on the -- headed into the increasing of rentals.

That's helpful. And are you able to quantify what the price to own versus price to rent cost differential is for that particular candidate?

Yes. Basically, it's similar. As you would imagine, a customer who is making the decision to either rent or buy a home looks at a number of factors. The cost of the house, and the all-in monthly payment, in order to occupy that home on that site. One of the pricing mechanisms that we use in order to incentivize home buyers is to make sure that that value proposition is in line with the rental alternative.

And what are those numbers? Do have an average number of what the cost is to rent per month?

It's about $850 for a rental.

Okay, that's helpful. And I think, Marguerite, you gave a new home sales figure of 67,000?

Right.

And do you have a number for used homes in the quarter?

Used homes is really -- there's a couple different ways. We have the resale activity, and that's the majority of what happens at our properties, because there's about a 10% resale activity that happens at the properties. And that number is about between $18,000 to $20,000. Our used home number is lower than that. It is somewhere around $10,000, in terms of the sales that we're brokering, or that we're selling from our used inventory portfolio.

And then on the new home, and the reason I highlighted it, in terms of the sale price, was that that's just in comparison to last year at this time. I think it was somewhere around $53,000. So we're seeing an increase in that new home -- that ability to push a new home price.

And do you have a breakout of the percentage of folks that buy it outright in cash, versus those that need to finance it?

Yes, that was -- it was an interesting thing for us. On the resale and the used homes, it is -- 98% is all cash buyers, throughout our portfolio. And again, that's a large transaction base, because you're counting all the third-party resale transactions. And then with respect to the new, that was really why we set up the venture with Cavco, to try to -- we understood that there was a need for financing.

And we thought, frankly, that we were going to be utilizing that financing source. And I believe, in the quarter, we financed two or three, is that right? Something along those lines, in terms of the deals that we did with the joint venture. So it is a nice tool to have, and it is something that we're able to say that we have financing, but we have been able to have primarily all-cash sells.

Okay, thanks. Just last question. Any color you can provide on how the spring selling season is coming along? Whether you want to comment on March, and then maybe how April is trending?

With respect to new home sales?

Yes.

I think it's trending in line with what we've seen in the first quarter. We're just starting out. Obviously, we had a -- we're getting out of the deep thaw. The northern properties are now -- they're starting open houses that we frankly thought we were going to start that March 1. That didn't seem to work very well. And so I would just look for an update, as we get out a little bit more into the spring season here.

Okay, thank you.

Dave Bragg, Green Street Advisors.

Thank you, good morning. My question is, in the transaction market, over the last year or so, it's been reported that a number of new entrants have pursued the age-restricted manufactured housing space. To what extent has that increased competition for you?

I think that there have been a couple on the age-restricted side. I think, as we have mentioned, or maybe we have talked about before, that Carlyle just bought a couple of properties on the age-restricted side. I think that there is a heightened demand for our product. Private market transactions, I think, are being supported by low interest rates, and just a high demand for a quality product. So we are seeing more people showing up at what -- at potential acquisitions.

Would you expect private market buyers to adjust their underwriting yet, in reaction to the improved quality of occupancy that you're seeing in your communities?

I think that's hard, when you put someone who hasn't really been operating in our space for awhile. We all -- we often talk about it. We talk about the difference between occupancy, rental occupancy and homeowner occupancy. And the effect that that has on just the bottom line, not necessarily FFO, but just the bottom line, and just the churn within a rental program. So I'm not really sure how they're thinking of it. I think we've made it clear our view on the quality of occupancy.

Last question relates to your note that Freddie is entering into the space. What share of the manufactured housing mortgage market does Fannie have today? And what are your expectations for Freddie?

I think in terms of overall share, I think they represent somewhere in the neighborhood of one-quarter. I think that Fannie Mae has had a difficult time. The bulk of that financing activity that Fannie Mae generated was in the, call it, 2007 to 2010 timeframe. They have had a bit of a tough road in the past couple of years, obviously. And MH borrowers have had a couple of places to go, either like companies or, more recently, CMBS, at better pricing than Fannie Mae. I think that, as it relates to Freddie Mac, a couple of things, just on overall view.

We've watched, in the multifamily space, the benefit that they have been able to take advantage of over the years, just in terms of the competition between Fannie Mae and Freddie Mac when they are bidding on deals. And so I think that that will be a nice option for us to have available to us.

I will say that it took quite a while for Fannie Mae to develop their program. And to -- for us to originate any loans with them. I think that Freddie Mac is -- we know the people that are at Freddie, and think that they are headed down a right path. But it may be a bit of time before we see a significant amount of activity running through that program.

(Operator Instructions) Paula Poskon, Robert W. Baird.

Thanks, good afternoon, everyone.

Hello, Paula.

Just to follow up on the rental versus ownership discussion. Given the high percentage of sales that are cash buyers, what now is driving most renters? Is it that they're just seeking flexibility and optionality? Or are you still seeing folks that just can't afford to buy?

I think what's driving the renters is the ability to have -- come down, visit us for a year, and not have to commit. So they will take a look around, not just the community, but the general area. And they feel like they can make that decision from afar. They can make it from Chicago or New York. They come down, they spent a year with us, and then they know, okay, this is where I want to stay. And I was -- I am a home buyer up North -- or I am a homeowner up North, and I want to own my home in the South. I want to own my little slice of paradise in the South.

So I think that's been a focus for the renters. And for us, as we see renters, and we see that they are there for a year, we know where their primary home is. We have conversations with them about, maybe now is the time for you to convert and become an owner and stay with us in a longer-term basis.

And Marguerite, how often would you say you lose those renters to other competing properties nearby?

We have the average length of stay for our renter in our portfolio is about 18 months. And the reasons that they're leaving is, in some ways, they have just said, Florida or Arizona is not for me. I wanted to try it, and I'm leaving. And then there's some -- there is a portion, then, that make a decision to go to a different community. But I would say the majority are staying inside. They understood what being in a lifestyle community means, and they're staying within those parameters.

That's all I have. Thanks very much.

Thanks, Paula.

Thank you very much for your questions, ladies and gentlemen. I would now like to turn the call over to Marguerite Nader for the closing remarks.

Thank you very much. Paul will be available after the call with any questions.

Thank you for joining today's conference, ladies and gentlemen. This concludes the presentation. You may now disconnect. Good day.