Houlihan Lokey Inc (HLI) 2018 Q1 法說會逐字稿

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Houlihan Lokey Fiscal First Quarter 2018 Earnings Conference Call. (Operator Instructions) Please note, this conference call is being recorded today, July 25, 2017. I will now turn the call over to Christopher Crain, Houlihan Lokey's General Counsel. Please go ahead.

Thank you, operator, and hello, everyone. By now, everyone should have access to our first quarter fiscal 2018 earnings release, which can be found on the Houlihan Lokey website at www.hl.com in the Investor Relations section.

Before we begin our formal remarks, we need to remind everyone that the discussion today will include forward-looking statements. These forward-looking statements, which are usually identified by use of words such as will, expect, anticipate, should or other similar phrases, are not guarantees of future performance.

These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect and therefore, you should exercise caution when interpreting and relying on them.

We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. We encourage investors to review our regulatory filings, including the Form 10-Q for quarter ended June 30, 2017, when it is filed with the SEC.

During today's call, we will discuss non-GAAP financial measures, which we believe can be useful in evaluating the company's financial performance. These measures should not be considered in isolation or as a substitute for our financial results prepared in accordance with GAAP.

A reconciliation of these measures to the most directly comparable GAAP measures is available in our earnings release and our investor presentation on the hl.com website.

Hosting the call today, we have Scott Beiser, Houlihan Lokey's Chief Executive Officer; and Lindsey Alley, Chief Financial Officer of the company. They will provide some opening remarks, and we'll then open the call to questions. With that, I'll turn the call over to Scott.

Thank you, Christopher. Hello, everyone, and welcome to our first quarter fiscal year 2018 earnings call. Our cyclically balanced business model performed well in the first quarter of this fiscal year, continuing a strong trend of year-over-year growth. We achieved another record for the first quarter of the fiscal year, and we have now experienced 5 consecutive quarters of double-digit revenue growth versus the prior year period.

We reported $217 million in revenues this quarter, up 20% from last year and our best first quarter in the firm's history. Our trailing 12-month revenues are now in excess of $900 million. Once again, all 3 of our business segments reported higher quarterly revenues when compared to the same quarter last year.

With respect to earnings, our adjusted earnings per share for the quarter were $0.50, up from $0.35 in the same quarter last year. Our strong earnings were driven by record revenues, decline in non-compensation expenses and an improvement in other income and expenses, slightly lower tax rates, all compared to the same quarter last year.

Overall, a few macro trends continue to affect our results and will likely impact future results. Since the U.S. election, stock prices continue to climb, which bodes well for M&A activity, though many investors are getting cautious about general valuation multiples relative to growth. Corporate executives we speak with still have a positive outlook for their businesses, but continued growth in earnings from current levels is getting harder to achieve.

Access to capital, especially in the middle market remains strong. The number of new providers of debt continues to grow and the availability of capital across a variety of business purposes and transactions remains robust.

However, financiers continue to watch the activity of central banks and their potential negative influence on monetary policy. Currently, the lack of any clarity on U.S. tax reform has not had a meaningful impact on mid-cap M&A activity, but continued uncertainty could influence future activity and valuation levels.

In Corporate Finance, while mid-cap M&A market statistics continue to show declines in activity, Houlihan Lokey continues to report improved results. We closed more transactions at a higher average fee this quarter versus last year. We also saw a slight increase in our new deal pipeline year-over-year.

Financial Advisory Services has recently experienced a resurgence in transaction opinion-related work. And our new intellectual property business, which we bought last year, has been successful on the broader Houlihan Lokey platform.

As previously mentioned in our last few earnings calls, the Financial Restructuring business is expecting less energy-related revenues than in previous quarters. However, we are experiencing a broadening of distressed opportunities across a variety of industries and geography. Now new business was more sporadic than in recent quarters and points to more volatility in future quarterly results for this product line.

Now for some specific comments in each of our 3 business segments. Corporate Finance generated revenues of $124 million for the quarter, up 29% year-over-year and $463 million for the trailing 12 months. Our growth was driven largely by an increase in the average fee size as well as a modest increase in the number of closed transactions. This compares to a continued decline in global mid-cap M&A activity.

We continue to believe our market share of mid-cap transactions is increasing, reflecting the same trends that we have been experiencing over the last several years. We remain focused on developing existing staff talents with 6 managing director promotions last quarter, opportunistically hiring new talent, with 2 new MD hires, as well as growing our overall MD productivity by more than 20% in the last 12 months.

Financial Restructuring generated $59 million of revenues for the quarter, up 5% year-over-year and $310 million for the trailing 12 months. While we showed continued revenue growth in Financial Restructuring this quarter, we still anticipate pressure on future quarterly revenues relative to last year as we work our way through the bulk of our oil and gas-related restructurings.

Our Financial Restructuring business remains the most volatile of our 3 businesses, and therefore, the hardest to forecast trend based on early activity. We believe we have one of the premier franchises in the business, and should continue to be a global market leader, future financially distressed situations.

Financial Advisory Services generated revenues of $34 million for the quarter, up 21% year-over-year and $136 million for the trailing 12 months. Financial Advisory Services experienced an increase in fee events as well as an increase in the average revenue per fee event for the quarter. Transaction opinion work was up substantially versus the same period last year. We also saw growth in our portfolio valuation, transaction advisory services and our new IP business.

Recently we have accelerated our hiring efforts in FAS, and now we have a record number of employees and MDs dedicated to this business segment. In the last quarter, we promoted 2 MDs and hired 2 MDs. We believe we are well positioned for future revenue growth as these new employees develop on our platform.

On the Managing Director front, we've remained disciplined in our development and search for talent, either adding new capabilities or strengthening existing capabilities. In this last quarter, we added 13 MDs across our 3 product lines, 9 of these MDs were from annual promotions and 4 were external hires. We are pleased with the quality of talent we've been able to hire, and coupled with our promotions, continue to increase the firm's overall capabilities.

In addition to hiring, we continue to look at acquisition opportunities, both in the United States and internationally, and we are expecting to officially open an office in Dubai in the second fiscal quarter. The Dubai office will expand the firm's geographical footprint and allow it to better service existing and prospective new clients.

In closing, we are pleased with our recent quarter's financial results. However, we've been in this business long enough to know that market conditions change over time, sometimes abruptly. While we see no imminent signs of a change in market direction, we constantly focus on building and sustaining the best business we can, one that will be successful regardless of the business, political or economic business environment that we are in.

With that, I'll turn the call over to Lindsey.

Thank you, Scott. Revenues for the quarter were $217 million, up 20% from the same quarter last year. In addition, adjusted earnings per share increased by 41% to $0.50. In Corporate Finance, revenues were $124 million for the quarter, an increase of 29% from the prior year. This was a record first quarter of revenues for Corporate Finance against the backdrop of a sluggish, middle-market M&A environment.

We closed 52 transactions in the quarter compared to 48 in the same period last year, and our average transaction fee on closed deals was more than 20% higher.

Financial Restructuring revenues were $59 million for the quarter, an increase of 5% from the prior year. We closed 18 transactions in the quarter compared to 10 transactions in the same period last year, but our average transaction fee on closed deals was lower compared with the same quarter last year. Energy restructurings continued to contribute significantly to our current Financial Restructuring revenues.

In Financial Advisory Services, revenues were $34 million for the quarter, a 21% increase from the prior year. FAS saw growth in transaction opinions, portfolio valuations, transaction advisory services and our new IP product line. FAS grew the number of fee events for the quarter by nearly 20% and also saw an uptick in average fee revenue per event for the quarter as compared with the same quarter last year.

Turning to expenses. Our adjusted compensation expenses were $139 million for the first quarter versus $115 million for the same period last year. The increase in adjusted compensation expenses was primarily due to the increase in revenues for the quarter. For the first quarter of fiscal 2018, we had an adjustment of $6.3 million related to the vesting of grants that were issued in connection with our IPO, and we expect this adjustment to continue until our last tranche of pre-IPO grants vests April 2020. This resulted in an adjusted awarded compensation ratio of 65.5% for the first quarters of both fiscal 2018 and fiscal 2017. We continue to target an adjusted awarded compensation ratio of between 65% and 66%, and our GAAP compensation ratio adjusted for pre-IPO grants should be between 125 and 175 basis points lower than our adjusted awarded compensation ratio, which is consistent with the 163 basis points difference that we experienced last year.

In May, we issued approximately 1.2 million shares of deferred stock as compensation to employees as part of our year-end bonus cycle. Our adjusted non-compensation expenses in the first quarter were $25 million or 12% of revenues versus $26 million or 14% of revenues in the first quarter last year. We experienced a very efficient quarter in non-compensation expenses, with declining TM&E and other operating expenses on higher revenues. Although we welcome this result, it is not typical as there are variable elements in both our TM&E and our other operating expenses line item.

We had no adjustments to our non-compensation expenses for this quarter and we continue to target an adjusted non-compensation ratio of between 12% and 13%.

Relating to our adjusted other income and expenses line item, we experienced a slight gain us a result of an improvement in the financial results of our joint ventures, lower interest expense as a result of the extinguishment of the ORIX note and higher interest income on cash balances. We had 1 adjustment in our other income and expenses line items related to a $1.4 million gain due to the reduction of an earn-out liability from a previous acquisition.

Because we believe this gain is one-off in nature, we have reduced our GAAP, other income and expenses of $1.5 million to $120,000 as if the gain had not occurred. As you know, we are subject to the new tax treatment for vesting shares, which came into effect in December 2016 for companies starting new fiscal years after that date. As a result, during the first quarter of each fiscal year, our effective tax rate will be affected by the positive or negative difference between the current price of our stock that is vesting and our stock price at the time of granting. As a result of the fact that we had several tranches vesting with some of the granted shares at pre-IPO prices, we had a $9.4 million positive impact on our effective tax provision, which lowered our GAAP effective tax rate to 18.9%.

In order to more accurately compare quarterly results and reflect what we believe to be a normalized effective tax rate, we have a adjusted our GAAP effective tax rate as if there was no impact from this new tax treatment. This resulted in an adjusted effective tax rate of 38.3% for the quarter.

Turning to the balance sheet. As of June 30, 2017, we had $202 million of unrestricted cash and equivalents and investment securities and debt of $18 million. In the first quarter, we paid the bulk of our fiscal year 2017 bonuses; we paid the final $15 million on the ORIX note, settled our forward contract with ORIX related to the secondary offering that we completed in February, paid our quarterly dividend and spent $5.8 million for purchasing 168,000 shares at an average price of $34.24 per share as part of our share repurchase program.

With that, I'll turn the call over to Ashley, where she can open the line for questions.

(Operator Instructions) We'll take our first question from Yian Dai with KBW.

First question for you is something from the slide deck. So you guys talk about wanting to expand by increasing deal size and bringing in bigger deal fees. And I guess, I'm wondering if we're already seeing some evidence of that movement this quarter, or if this is more of a longer-term initiative that you're talking about? And then if you could just give some color on your strategy around that: How much bigger are we talking; to what extent can you move up; and what does that mean for headcount?

Sure. Yian, this is Scott. This is something we've been doing for, really, the last decade-plus. I think the average deal size, almost year-after-year continues to increase, but it's in ongoing small measures. It's not a new strategy that we're trying to go after different size businesses, but as the variant increases, as we have more bankers, as we penetrate in more different sub-industries, we continue to find more deal flow and, typically, the average size of the deal continues to increase year after year. So I think the strategy has been ongoing for many years.

Okay, understood. Also, if you could just maybe talk a little bit about the pipeline, I know you alluded to it in your comments, but as you guys discussed, it's difficult for us to see sometimes the pipeline from what's publicly available and obviously, you guys surprised on the M&A side relative to what we thought for this past quarter. So if you just give us some color on your outlook, that would be great.

The outlook, as I mentioned in some of my earlier remarks, still looks good. We are still bringing in business. The number of new projects that we have brought in, generally is slightly up from where it was a year ago. There is some seasonality to our business, so you can't quite look at it quarter by quarter. It still, the vast majority of our Corporate Finance deals are private in nature. And so, when we announced that we've closed the deal, we kind of announced that we took it on and closed it at the same time, which is not the same as some of our other peers who will tend to announce the deal, but it may not close for quite some time. So unfortunately, the backlog data that is out there by the public research houses just may not always be a good indication of really where our business flow is. But right now, it's continued to stay strong and steady and growing.

Yes. And Yian, as a reminder, certainly the majority of the transactions that we closed are privately held and often not announced until closed. And very rarely, our transaction values amount to our transaction. So very hard to use some of the information sources to predict revenue in a certain quarter prior to these transactions actually closing. And in even in that case, we have more than a handful of transactions that closed that are not announced. And that's just the nature of our clients.

And we'll take our next question from Devin Ryan with the JMP Securities.

Just a couple here. Maybe first restructuring, just want to dig in the comments a little bit. So it sounds like we're above that $200 million base, but maybe south of the $300 million pace -- $300 million-plus pace from last year. So just trying to think about some of the moving parts of deals that are closing versus new deals that are coming in and some of the themes. And what it would take to get back to kind of, or above, where we were last year?

So the trends that we're seeing in restructuring and pretty much what we have said over the last probably couple quarters, we still have a decent amount of oil and gas-related work that we're finishing off. But we're probably coming closer to the end of that and, therefore, we said we see that our oil and gas energy-related restructuring revenues will be declining in the foreseeable future, relative to what we've had in the last couple of quarters or last couple of years.

On the positive side, we're seeing a broadening both in industries and geographies in terms of where we are finding new opportunities to get hired. And kind of your ultimate question on -- is this a business that does $200 million, $300 million or some different amount of number? Some component of it is just very much market-driven and if default rates start to increase, if we start to see weaknesses in some incremental industries or sub-sectors, we would expect our revenues in this particular area would grow. In this business, as we said, it's the most volatile. We can have some very sizable projects that can close and increase or decrease results much more than what we find in our Corporate Finance or FAS business. And it's a little bit more impacted by where the market default rates are.

Got it. Okay. Helpful color. And then with respect to non-comp expenses, I understand the commentary that this quarter was kind of below the range, but kind of the 12% and 13% range still holds. And I know that can bounce around a bit. I mean, should we expect some catch-up to kind of remain within that range for the year? Or was this just kind of an unusually low quarter, but just on a go-forward quarterly basis, 12% to 13% is probably still just a better way to think about it?

Yes. I think you can either think of it in terms of 12% to 13%, or if you to take a look at, really, what we delivered last year, we were sort of in that range of $26 million to $27 million per quarter. Our headcount has been relatively flat year-over-year. So our expectation is that we're similar to that range on a quarterly basis. I don't think there's necessarily a catch-up next quarter based on this quarter's results. I just think we had an efficient quarter. But I think you're back to what we delivered last year on a quarterly basis, is kind of the expectation and we may or may not have a quarter as efficient as the one we just had, but I'm certainly not counting on it.

Yes. Got it. Okay. Good to see, though. So last one here, just on the buyback. You repurchased $6 million. I'm assuming you'll be opportunistic with respect to future buybacks, but is there -- from a timing perspective, should we think it could be a little bit more front-end weighted just with offsetting stock awards, or how should we think about just kind of the timing from here?

Yes. I think our strategy is to offset the amount of the deferred stock that we provide to employees each year. What quarters we do that in, I think, is going to be driven by sort of opportunistic repurchases. So we don't have a strategy that says we really want to accomplish all this in the first half year. I think we are going to look at the market, look how we're performing and make those acquisitions accordingly. But I do think by the end of the year, certainly, our goal is to offset that dilution. And it could happen in the first quarter. It could happen sporadically throughout the year.

We'll take our next question from Conor Fitzgerald with Goldman Sachs.

Scott, thanks for your comments on the conversations you're having with clients. Just trying to kind of more fully understand some of your comments around the challenged earnings growth and how it's coupled with relatively high valuations and thinking through how that might play out. I'm just wondering if you think these results may be a step-back in M&A activity, particularly on the sponsorship side, or do you think management teams turn to M&A as a solution to grow their earnings?

No, I think my comments are, generally speaking, for most of the executives we're talking to, they still feel optimistic about their business and they still think that earnings will grow on a go-forward basis. I think their comments are, and this has probably been going on for several years, "It's getting harder and harder to continue to grow, or grow at a particular growth rate, just as the absolute earnings increase." I think that tends to sometimes encourage people to do M&A activity to try to bolster growth. So we don't see anything regarding their profile of performance that's impacting M&A activity. And then the comment is we are just seeing -- people are looking at stock prices at the U.S. or across the globe, and it's been a good run for, really, the last call it a year plus. And so some people that's encouraging them to maybe do more deals, some maybe are less encouraged. But in totality, we just don't see any abatement in people's interest in actual activity and doing M&A activity.

That's helpful. And then you had a pretty active quarter on the hiring front. Just wondering how you kind of classify the hiring environment today versus a year ago? And was kind of this quarter more of, I guess, a perfect storm kind of on the hiring front? Or you think some of the dividend that you talked about when you went public in terms of improved brand are starting to come through?

I think we've been pretty consistent throughout the time line since we've been public, in terms of hiring people. Sometimes it changes a little if we made acquisitions and then it just absorbs management's time. But we hired a handful of people this last quarter. There's a couple already where offers are out. They just haven't started yet, and we typically don't announce until they do start. So our pipeline in terms of people that we're looking to hire and where we are, I think, is a very consistent. And we're looking for people with unique skill sets in sub-industries where sub-products or possibly geographies to both expand our capabilities and build the depth of the bench that we have. And so far, I think that we've been very successful in it. And yes, being public and having been successful over the last many decades financially and otherwise has, yes, I think, encouraged people to want to join Houlihan Lokey, and that's been helpful.

(Operator Instructions) We'll take our next question from Mike Needham with Bank of America, Merrill Lynch.

So just first on growth areas outside of the traditional business like the traditional M&A advisory or restructuring, like clearly, you made the acquisition or the team coming in for intellectual property in FAS, it looks like you're growing that business pretty quickly. Maybe if you could drill down on that business, the demand from your clients, how you think the firm is positioned in that area?

And then on the horizon, where else are you looking to expand?

So on the intellectual property side, I mean, it's a unique asset class and we are doing, not only work on the valuation side, but there are businesses where we are, at times, representing to sell those intellectual assets, sometimes it's procuring financing against them, sometimes it comes up in a restructuring. So we think it is something that works in all of our different product lines and it's just a different kind of an asset that is not otherwise traditional cash flow type of asset. So we think it's something that has been growing before we bought it and it has continued to do well and we think it will expand our platform.

And I think there's always areas that we're looking at to continue to grow. They can be ancillary-type items, much like when we bought the intellectual property business or the management consulting business. We've continued to tell people we always look at the fund placement of a business. We look at a variety of sub-industries that we still don't think we're as strong as we'd like, where we can make acquisitions. We're in 2-dozen-or-so different locations. There are other locations across the globe that we can continue to grow into. And I think the key point to us is we always try to be disciplined about what we will either hire or acquire or grow into. You can't be an expert in every single area. And we look where we can differentiate ourselves in terms of all of our growth strategies. But at this point, I think there are still plenty more opportunities that we can grow into relative to the market size. So opportunity is not our issue. I think it's -- you just need to be patient and disciplined in finding the right situations to get into it.

Okay. That makes sense. Just one more on the topic. Just curious how new people have been performing, be it recent hires, promotions, the last couple of acquisitions you've done. I know it's a hard thing to track because the environment drives a lot of it. But just on the organic kind of growth component of the firm, how that's progressing versus the last couple of years?

So the litmus test is our financial results are better today than a couple of years ago with net essentially the same headcount. So therefore, it says for a whole bunch of reasons things are working. But I think with any promotions or hirings or acquisitions, there are some people who don't do as well as we'd hope. And some people do much better than we hope and some kind of as we expect. And I think we get better all the time in trying to screen for those things and find the right attributes. But like I said, I think the litmus test is kind of looking at our results, which is revenues by headcount, whether it's total headcount, total MDs or whatever measure you want to look at, better today than it was a year or 2 years ago.

Got it. Can I just ask 1 more, a follow-up on the restructuring questions. If the oil price stays low, could that cause any incremental restructuring in that area? Or is it the things that would've gotten done are already working their way through a resolution?

So the way -- I think we would describe it as there's certain people who put together business plans at different, make it simple, oil prices. And they put together their business plans in a capital structure that could have had longer-term amortization schedules and some had shorter-term amortization schedules. So there are still businesses that put together a business plan at prices well above where oil is today. They just had a longer time frame to make it work out, but eventually that time will disappear. And if oil and gas prices don't increase, there will likely still be some incremental restructurings to go. We just don't see it -- at least as of today, it's not going to be at the same level of wave that started probably 2 years ago.

We'll take our next question from Brennan Hawken with UBS.

I just wanted to follow up on the point that you made, Scott, earlier on geographic and industrial expansion for the restructuring business. Appreciate that it's hard to try to forecast that, but you -- could you maybe give us a sense of some of the specific areas and businesses that you think could present interesting opportunities for this business for you?

So on the geographical site, I think we've done restructurings now on several dozen countries, really, all over the globe. So we effectively have and will continue to follow people who are making investments and or the distressed debt players. And that just continues to grow year by year. So our business, which used to be almost excessively U.S., maybe a decade or 2 ago, has gone very much international and will continue to go international.

And then we do find, in any given time, there are certain industries, and if it was a couple of years ago, it was oil and gas. Obviously, right now, there's some distress going on in the retail sector and it feels like it will be for quite so many years. And there's just always a subset of businesses, they put together the wrong business plan, maybe they have the wrong management team, maybe they've gotten hit with certain litigation, they had the wrong capital structure, just missteps. But there's always a certain subset of businesses regardless of how healthy the economy is that are just going to not perform as well, and that's what we have found even in this lower default environment, where we still continue to have, I think, good restructuring revenues. And how and when it can get up to new record highs, the potential is there. There's a lot more high-yield debt out today than there was before and default rates are still pretty low. And as we all know, things will cycle. But those are some things that we look at in growing both geographically and looking for unique industries or unique issues going on with management or other kinds of business plans that just aren't working.

No, that's fair. I noticed that the segment profitability actually declined year-on-year despite lower MD headcount and higher revenue. Was there something specific? I know the commentary said that it was due to the comp ratio moving up, but could you help us understand then why that would be if the MD headcount is going on?

And is your question specific to restructuring?

Yes.

Go ahead, Lindsey.

Okay. So Brennan, I think what we do when we allude to it in the footnotes that we include in our earnings release and in our 10-Qs, is we always track our revenues according to the product line. So if it is a financing, it is included in our Corporate Finance business. If it's a restructuring assignment, it's included in the restructuring regardless of who works on the transaction. We had a large fee transaction this quarter that was essentially executed by a combination of Financial Restructuring employees and Corporate Finance employees. And as a result, that fee, which happened to be a financing, showed up 100% from a revenue standpoint in our Corporate Finance business. But the compensation that will be paid to employees as a result of that fee was split between Corporate Finance and Financial Restructuring, and the compensation generally follows the segment. So you'll see relatively higher compensation expenses in Financial Restructuring and relatively lower compensation expenses in Corporate Finance, which happens to have 100% of the fees. And so you'll see that dynamic in our business through the years and through the quarters. It was a little bit more pronounced this quarter because of the size of the mandate.

And then last one for me. You guys made a reference to the fact that the slower policy movement on the tax front you think could end up holding back -- you haven't seen it hold back transactions yet, but the expectation is that easily could happen. Is that as a result -- or is that expectation as a result of specific conversations at you're having with some of the clients? Is that mostly in the mid-market deal marketplace for M&A? Or is that just based on your experience on tax-related activity levels?

I think the comment regarding tax policy isn't necessarily what impact it may have per se on M&A activity. So we're not hearing people saying, "I'm purposely trying to accelerate a transaction or hold off on a transaction." It's more a commentary that, I think, most people, whether they're business owners, whether they're investors, financiers, all expected or believe that there would be some kind of tax reform, all which would point to lower taxes to some extent. And therefore, that -- therefore, going to increase people's earnings and therefore, people's valuations. Obviously, we've not had any tax reform yet. Whether we will or when it will be, it's just an issue, I think, that is in the back of certain people's minds, which is at what point if we don't get any change in tax policy, will the stock market take a different view on what assets and businesses might be worth? And it could -- in certain cases, it could be positive or negative to people. But it's just -- we've been 7, 8 months since all of this came up. And so far, we have no tax reform or changes in tax policy, but the administration is still talking about it.

And if there are no further questions, I would like to turn the conference back over to Scott Beiser for any additional or closing remarks.

I want to thank you all for participating in our first quarter call, and we look forward to updating everyone on our progress when we discuss our second quarter results for fiscal 2018 in the fall. With that, thank you, everyone.

And once again, that concludes today's presentation. We thank you all for your participation, and you may now disconnect.