Summit Hotel Properties Inc (INN) 2018 Q2 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Summit Hotel Properties Q2 2018 Earnings Conference Call. (Operator Instructions). As a reminder, this conference call may be recorded for replay purposes.

It is now my pleasure to hand the conference over to Mr. Adam Wudel, Senior Vice President of Capital and Financial Markets. You may begin.

Thank you, Brian, and good morning. I am joined today by Summit Hotel Properties' Chairman, President and Chief Executive Officer, Dan Hansen; and Executive Vice President and Chief Financial Officer, Jon Stanner.

Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our 2017 Form 10-K and other SEC filings. Forward-looking statements that we make today are effective only as of today, August 2, 2018, and we undertake no duty to update them later. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call, on our website at www.shpreit.com.

Please welcome Summit Hotel Properties' Chairman, President and Chief Executive Officer, Dan Hansen.

Thanks, Adam, and thank you all for joining us today for our Second Quarter 2018 Earnings Conference Call.

We are pleased with the strong bottom line performance our portfolio delivered for the second quarter. We reported adjusted FFO of $41.4 million, an increase of 15.8% as compared to the second quarter of 2017. Our adjusted FFO of $0.40 per share grew 10.0% compared to last year, and matched the high end of our guidance range of $0.37 to $0.40 per share.

On a pro forma basis, we reported RevPAR growth of 1.9% for the quarter, which was driven by a 1.5% increase in rate, and a 0.5% increase in occupancy. Our relentless efforts continue to result in gains through RevPAR market share, which increased 1.2% during the quarter to an index of more than 113. When excluding the effect of renovation-related displacement during the quarter, the pro forma RevPAR increased 3.1%.

A few of our stronger markets in the quarter, included Tampa, Minneapolis and Salt Lake City. RevPAR at our Hampton Inn & Suites in Tampa grew by 17.2% in the quarter as the result of continuing revenue management strategies to layer in base business during lower compression periods, which resulted in increased RevPAR market share of 7.7% against the competitive set.

In Minneapolis, market strength has continued well beyond the benefits realized by hosting the Super Bowl in February. Our Hyatt Place and our Hampton Inn & Suites Downtown were particularly strong performers, posting RevPAR gains of 16.2% and 13.8%, respectively. And our 6 hotels in Minneapolis collectively achieved RevPAR growth of 9.8% and EBITDA margin expansion of 170 basis points for the quarter.

Improved transient demand drove overall demand growth of 5.3% in the market and 6.4% in the CBD submarket, which substantially outpaced new supply growth of 1.1%. As you recall, this was a particularly challenged market last year as we faced a difficult year-over-year comparison and the absorption of new supply growth, which has started to abate.

In Salt Lake City, RevPAR at our Residence Inn Downtown grew by 8.3% in the quarter, driven by a 6.2% increase in ADR, and led to EBITDA margin expansion of more than 400 basis points. Like Minneapolis, Salt Lake City experienced a pickup in demand that significantly outpaced supply growth and allowed us to limit discounted room nights, while simultaneously increasing the mix of retail business.

We continued to make progress on our capital recycling efforts during the quarter as we closed on the previously announced sale of 4 hotels in suburban Atlanta and Salt Lake City totaling 440 guestrooms on June 29th. The combined sales price of $43.8 million resulted in a 7.6% cap rate on a trailing 12-month NOI, including estimated capital expenditures for brand-mandated PIPS.

Subsequent to quarter end, we also closed on the sale of 2 hotels located in the Nashville suburb of Smyrna, and one hotel located in North Phoenix totaling 322 guestrooms for a combined sales price of $46.5 million, or $144,000 per key.

Combined, the weighted average RevPAR of the 7 sold hotels was 24% lower than the pro forma portfolio RevPAR for the same period, and the combined hotel EBITDA margin of 34.1% was 290 basis points lower than our portfolio average for the same period.

Our blended hold-period unlevered IRR on the 7 hotels sold was an impressive 16.5%, further demonstrating our ability to execute on a strategy of buying, renovating and selling hotels at attractive returns.

We also entered into a contract to sell our 148-guestroom Hyatt Place Fort Myers, Florida, which is expected to close in the third quarter. The sale price of $16.5 million plus estimated future capital expenditures represents a 7.7% capitalization rate for the trailing 12 months ended June 30th.

Our capital recycling strategy has allowed us to redeploy capital into hotels that we believe have greater growth potential at initial yields in line or higher than recent dispositions. Our 15 hotels currently classified as acquisition hotels have a 38.0% absolute RevPAR premium compared to the hotels we have sold in 2018 and, on average, an EBITDA margin 430 basis points higher.

These recently acquired hotels posted strong RevPAR growth of 6.0% for the quarter led, by the AC Atlanta Downtown, Residence Inn Cleveland, Courtyard Fort Lauderdale Beach and the Courtyard in New Haven. Their success validates our ability to identify and execute on high-quality acquisitions and demonstrates the quality and experience in many of today's premium upscale hotels, which compete with both fullservice and boutique hotels.

During the second quarter, we invested $17.7 million into our portfolio as we completed major renovations at our Marriott in Boulder, and our Holiday Inn Express & Suites in Fisherman's Wharf. The finished product is terrific, and the hotels are well positioned to capture increasing demand in both markets, particularly in San Francisco, where the well-documented reopening of the Moscone Convention Center is facilitating a robust city-wide convention calendar in 2019.

Looking ahead, we expect the effect of revenue displacement related to renovations to be substantially less in the second half of 2018 than in the first half as more than 75.0% of our estimated annual displacement for 2018 is behind us.

In addition to the capital we are investing in our portfolio, on June 27, our Hyatt House in Orlando, Florida, officially opened its doors to guests and is off to a fast start. Since the 4th of July, the hotel has achieved more than 100% RevPAR market share against its competitive set, which is quite impressive having only been open for 1 month. The 168-guestroom hotel is located adjacent to our existing Hyatt Place at Universal Studios, and we believe the 2 brands will provide numerous synergies that did not exist with just one hotel.

The Orlando market has produced incredibly strong RevPAR growth over the past few years and has consistently outperformed. Specifically, annual RevPAR growth in the Orlando market has outpaced the total U.S. and top 25 markets by an average 170 basis points and 150 basis points, respectively, in each year since 2010. We are thrilled to increase our footprint in Orlando as we look forward to ongoing success in the market with the addition of this high-quality, extended-stay hotel.

With that, I'll turn the call over to our CFO, Jon Stanner.

Thanks, Dan, and good morning, everyone. For the quarter, our pro forma hotel EBITDA was $56.9 million, an increase of 0.2% compared to the same period in 2017, and hotel EBITDA margins contracted 87 basis points to 38.3%. When excluding the effect of a 12.0% increase in property taxes, pro forma hotel EBITDA margins contracted only 24 basis points.

Hotel operating expenses increased by 3.2% on a per occupied room basis during the quarter, primarily driven by higher labor costs. During the second quarter, our adjusted EBITDAre increased 17.9% to $55.2 million, which was primarily driven by our acquisition activity over the last 18 months.

Our balance sheet continues to be well positioned, with over $350 million of current liquidity and an average length of maturity of 4.5 years. As of June 30th, we had total outstanding debt of $956 million with a weighted average interest rate of 4.2%.

As Dan mentioned, we have made progress on our capital recycling program with the sale of 7 hotels for a combined sale price of $90.3 million. After completing these transactions, and including the pending disposition of the Hyatt Place in Fort Myers, our net debt to adjusted EBITDAre will be less than 4.5x by year-end on a pro forma basis, which gives us some capacity for future growth.

During the second quarter, we executed several capital markets transactions, which included drawing the remaining $85 million of commitments on our new 7-year $225 million term loan to pay down outstandings on a revolver, which currently has $260 million of availability.

On June 11th, we entered into 2 forward starting interest rate swap agreements to hedge against rising interest rates, with an aggregate notional amount of $200 million. A $75 million swap becomes effective September 28th of this year and fixes LIBOR at a rate of 2.87% through September of 2024. The remaining $125 million swap becomes effective on December 31st of this year and fixes LIBOR at a rate of 2.93% through year-end 2025.

Including these 2 transactions and the expiration of our existing $75 million swap agreement maturing in the fourth quarter of this year, 75% of our debt will be fixed rate, and our balance sheet well positioned for a rising interest rate environment.

On June 30th, we declared a quarterly common dividend for the second quarter of 2018 of $0.18 per share, or annualized, $0.72 per share. The annualized dividend results in a prudent AFFO payout ratio of approximately 54% at the midpoint of our 2018 outlook.

We updated our guidance for the third quarter and full year in the press release yesterday, which assumes the previously mentioned pending sale of the Hyatt Place in Fort Myers is sold in the third quarter. We revised our full year 2018 guidance for adjusted FFO to $1.30 to $1.36 per share. We also tightened the top end of our pro forma and same-store RevPAR guidance to 0.5% to 2.0%, and negative 0.5% to positive 1.0%, respectively. We updated our full year estimate for capital improvements to a range of $55 million to $65 million.

For the third quarter of 2018, we provided AFFO guidance of $0.33 to $0.36 per share and RevPAR growth guidance of 0 to positive 2.0% for both the pro forma and same-store portfolios. No additional acquisitions, dispositions, equity raises or debt transactions beyond those previously mentioned are assumed in the third quarter or full year 2018 guidance.

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

Thanks, Jon. In summary, we were pleased with the progress in the second quarter as our well-diversified portfolio and our capital recycling strategy continued producing solid results. We continue to be optimistic about the outlook for 2018 and for the future of Summit.

And with that, we'll open the call to your questions.

(Operator Instructions) And our first question will come from the line of Austin Wurschmidt with KeyBanc Capital.

Dan, you highlighted some of the strengths in some of the markets. Could you give us a sense of which markets are dragging on the portfolio and may be a headwind either due to just difficult comps or supply? And then could you also speak to was there any softness in any particular segment of the business?

Sure, Austin, this is Dan. I wouldn't say there was softness in any particular segment. Most of the weakness in the portfolio isolated around a few markets. In Phoenix, Scottsdale, we've got a little bit extra supply in the market from the Marriott-Starwood merger, the Westin Kierland, W Scottsdale and Aloft are all similar, or more competitors than they have been in the past for us with our hotels there. So that's been a little bit challenging. It is the summer months, which is notoriously challenging in Scottsdale as well. Boston, in the suburbs, where we have a Hilton Garden Inn and a Hampton Inn, was more of a supply issue, where we had some supply up in the Waltham market and also in the Norwood market. The 2 that probably affected us the most were Boulder and Baltimore, both markets that we anticipated being soft, and we did renovations in those 2 markets. So it exacerbates some of the softness. So, much of the softness there was a result of renovation of these great properties in these challenging markets.

So it sounds like the renovations, like, as you just mentioned, and then the supply. Anything on the demand side that surprised you, either the, I guess, lack of re-acceleration or improving strength, or even things getting a little bit softer than you would have anticipated?

Well, I think -- it's Dan again. Each market's got its own unique story. I think, in general, demand is good. I think there are always going to be pockets where maybe a small group might not repeat or maybe there is a challenge with a new hotel. But in general, we feel good about the backdrop of the demand in our markets.

And then just a last one for me, on the transaction side. Should we expect that you're going to continue to capitalize, I guess, on the strength in the transaction market and build some capacity through the back half of this year? Or do you expect to be a little more active on the acquisition front in the back half of the year?

I think it's -- will continue to be a balance for us. There's clearly an opportunity to be a seller now. There's a great demand for properties that we own. It does make it challenging on the acquisition side, so I think we've got to focus on some off-market deals, some things that are maybe not quite middle of the fairway that we could still get the above-average returns we expect. But, I think you should expect there to be more of the same dispositions and acquisitions to offset that.

And our next question will come from the line of Bill Crow with Raymond James.

Dan, you've delivered a string of quarterly outperformance when others were struggling a bit. I think it was based on kind of a broad geographic footprint, a lack of exposure to some of the larger gateway markets, et cetera. And I'm just wondering, are we at a point in the economic and lodging cycle where it now favors those that have the bigger group exposure, maybe a more limited geographic footprint? Or can you -- is it just a period of time when you're going to lag a little bit?

Yes. Thanks for the question, Bill. I think it's fair for us to look at the RevPAR that we've delivered in the past as part of the foundation of our business model that is strong. We did have 2 hotels that we made the commitment to renovate during the second quarter, which is a quarter where we don't usually have renovation displacement. And if you take the Boulder hotel and the Holiday Inn Express in San Francisco out, our RevPAR for the quarter was actually 3.1%, which was even above the upscale average. When you combine that with some delays from some inspectors in the city of San Francisco that runs 90%, that displacement was probably a little larger than we anticipated as well. But I think RevPAR is clearly an important metric, but I think it's important to look at more than that. To be laser-focused on that metric is, in our view, a little short-sighted. I think it's important for us not to just be using that as the litmus test for decisions. It does create a lot of focus on the quarter, and we're not trying to play a game of quarterly numbers. It's important to create transparency and consistent deliverables. But we are focused on creating the best long-term shareholder return, and we've done a great job at that. So the driver really is, as I mentioned before, the business model, which is based on a higher-margin operating model and generally in hotels with limited meeting space and F&B. And there will be moments of time that RevPAR for certain chain scales and in certain markets will outperform. We don't have the exposure to New York or San Francisco that some of our peers do. But many of those moments of outsized growth really come off either an easy comparison from a prior period or -- and even a prior year, when maybe a convention center is offline. I do believe that today's guest didn't just suddenly decide they wanted to stay in a different chain scale of hotel or -- even if they know what those are. I think the metrics may be pointing to that narrative, but I think that's kind of a stretch. Clearly, group has been solid, and spend at those hotels has been good. But I don't think that changes the attractiveness of our higher operating margin model at all. I believe it's really most important to look at the long-term history of creating value, which we clearly showed as we reported mid-teen unlevered IRRs in our release.

Yes, I appreciate that commentary. From a supply perspective, are you still fairly confident that we're at or reaching a peak as you look at your markets?

Yes. Bill, it's Jon. I think, generally, yes. I mean, I think we look at the supply forecasts for the industry. It was -- I think, we finished the year last year at 1.8. The forecast for this year is 2, and we expect that to be kind of peak supply delivery either late this year or early next year. As you know, supply is very much a market by market issue. So we look at markets like Nashville, where we've had a tremendous amount of supply growth in that market and think that supply continues into next year. Most of the supply, as Dan mentioned, that's coming on into markets like Boulder has been delivered, and we've started to absorb supply in markets like Minneapolis, where we had a lot of supply come in last year. So I do think we're kind of seeing peak supply growth. We continue to hear rising construction costs and tighter construction financing markets are what will continue to limit some of the new construction. I think it's getting more and more difficult for developers to pencil new construction. So our belief continues to be that late this year, early next is kind of peak supply delivery.

Great. And then one final question from me, which is just kind of what are you seeing from a cap rate perspective for transactions that you're interested in? Those that fit your kind of more unique portfolio attributes.

Yes, this is Jon. I'll take that one, Bill. Look, I think, as kind of we telegraphed going into the year, we felt like it was an easier market to be a seller in than a buyer, and we'll have sold over $100 million of hotels when we get through the third quarter because of that. So I would have expected, potentially, as we get a little deeper into the cycle and -- that perhaps you'd see a gapping out of cap rates. And I certainly don't think we've seen that. I think, if anything, cap rates have tightened. As we've said over and over, and we feel a little bit like a broken record as we say this every quarter, I mean, we continue to focus on more of the off-market transactions. I think the current transaction market requires us to be a little bit more selective and thoughtful on what we're acquiring. So if anything, and there hasn't been a ton that's traded, but if anything, I believe cap rates have tightened.

And our next question will come from the line of Michael Bellisario with Baird.

Just on the renovation front, as you guys kind of look up to 2019, I know it's still easy, but any big renovations in the planning phase today that we should be aware about, thinking about comparisons for next year?

A big renovation for us is typically $4 million or $5 million. So I wouldn't say that one in and of itself would affect -- is anything people should be looking at. I think it's really the timing of those renovations and how it affects our outlook for the year. We'll renovate a dozen or more hotels every year. That's part of the opportunity of having a strong and diversified portfolio. And I think our run rate on a go-forward basis is probably in the $50 million area. And I don't think -- this year was -- we had some carryover from prior year that will move us a little higher than that. But that's about the best way to telegraph how investors and analysts should expect renovations from us.

And maybe I should ask it in kind of a different way, too. Just nothing of the same magnitude of Boulder and Fisherman's Wharf in terms of dollars or potential EBITDA impact? Is that fair?

Mike, it's Jon. I think that's fair. I mean, I think part of what made this quarter unique is we don't normally have a history of going out and calling out lumpy displacement numbers. We did renovate 2 of the larger properties, as you alluded to, one of which is in San Francisco, which is a 90% occupancy market. That was on top of the second quarter of last year, where we didn't have any displacement. Typically, it's fairly balanced. So it was a little bit of the combination of renovating 2 of our larger properties in the second quarter of this year over a quarterly comparison with very little to no displacement in it.

Got it. Okay, that's helpful. And then, in the second half, based on your implied guidance, where are you seeing margin growth shake out? And then is there any moderation there that you're forecasting on the cost side?

Yes. I think that we'd still expect there to be some slight margin contraction. As we've mentioned in previous calls, the difficult year-over-year property tax increase comparisons abate in the second half of the year. What is a headwind in the second half of the year is more of a top line, particularly a very difficult comparison in the fourth quarter from a RevPAR growth perspective. So I would expect there to continue to be, based on those top line results, a slight margin contraction in the back half of the year.

Got it. And then last one from me. Last quarter, you talked about hurricane demand, and then you were encouraged by the pickup in corporate transient business that you were seeing throughout the portfolio. Kind of what did you see in 2Q? And did that normalize relative to your expectations from the beginning of the year?

I do think -- our -- in the second quarter, our weekend RevPAR growth was a little bit higher than our weekday RevPAR growth. Although our corporate-negotiated weekday RevPAR growth was up about 7.0% in the quarter, which I think is a continuation of some of the stronger trends that we saw in the first quarter. As Dan said earlier, I don't know that it was necessarily one particular segment that either -- that underperformed relative to expectations. It was more of a market-driven and displacement-driven issue in the quarter.

And then, on the hurricane side, any continued lift in your markets or your properties? Or has that completely abated at this point?

I think, for the most part, it's abated. I do think that southern -- South Florida and Houston continue to be very strong markets. I think the issue with Houston is, in particular, that you just have a really, really difficult fourth quarter comparison. That's a -- in late third quarter, fourth quarter, that's a 60%-ish-type occupancy market that ran 85% last year. So the Houston market has certainly maintained it's strength. I think that has less to do with residual hurricane demand and more to do with recovering oil prices and just a general strengthening of that market.

And our next question will come the line of Wes Golladay with RBC Capital Markets.

Maybe going back, just to follow-up to that last question. The taxes this year are quite high. Are you guys actively appealing some of those assessments?

Yes, Wes, this is Dan. That's something we go through on virtually every tax bill we get to ensure we're challenging everything and monitoring that for sure.

Okay. And then, the comment about Phoenix, about the Marriott disruption, part of the -- not from you guys, but from the industry was that, the Starwood guests would have more options with the Marriott for select service. Are you just not seeing that out there?

I think -- this is Dan. It's a more of a market by market phenomenon, I believe. I don't know that North Scottsdale is the mecca of corporate travel. So I think there's a high level of leisure demand. So in more of a corporate travel market, we'd expect to be more of a beneficiary of the combined Marriott-Starwood. In a leisure market, when somebody can choose maybe at the same level to stay at the Westin Kierland, we may lose out a little bit there. So I think it's a pretty good balance. We used to get, in Phoenix, a fair amount of overflow from the JW Marriott, and some of that is going to some of the other former Starwood properties at this point. So I think that is more market specific than anything we're seeing across the portfolio.

Okay, that makes sense. And then looking at the guidance this year, you have essentially 2.0% at the high end and built-in, in the first half results. And the fourth quarter is going to be a difficult comp from renovation -- or from the hurricane demand, but maybe easier comp on renovations, but is there any other offsets that can help absorb some of that 5.5% comp from last year?

Yes. I think the underlying fundamentals are good. I don't want the guide to imply lack of enthusiasm or optimism. It's just a big number. Even without the hurricane effect, our RevPAR would have been 3.8%, which is still a big number. So I think they're definitely going into -- overhill, trying to climb a big hill, so to speak like that warrants some conservatism. But yes, we think the underlying fundamentals are good, demand is strong. Group seems to be solid. So yes, I think there's some good underlying fundamentals that certainly give us some optimism.

Okay. And then what about maybe your -- some of your volatile markets like New Orleans, would that be a good one for 4Q or 3Q? What's the seasonality this year?

Third quarter is a good market for New Orleans. So that's definitely positive. I think, while just having one hotel in Pittsburgh, that's got a good outlook. And as we've talked about before, both South Florida and Houston, despite having difficult comps, seem to be fairly solid in demand. You've got some recovery in oil, and then a strong leisure demand in South Florida. So I think there's definitely some bright spots as well.

Okay. And the last one from me. When you're looking at your mezzanine book, you have a -- it's hard to source acquisitions, but you have a few assets tied up that you can exercise early next year. Can you comment on whether those are in the money now, likely to be exercised? Or you just want to let the call option go as long as you want -- to expiration on those?

Sure. We're -- we've got -- we're fully funded on those hotels, so we're watching them very closely. We do think they're hotels that it would be attractive for us to own, and it does fit within the notion of having a strong shadow pipeline. We do believe, clearly, they're in the money. When we started these projects, it was prior to the continued escalation of not only labor but construction costs and material costs. So we feel these are good spots to be in, and at this point, want to make sure that we've got -- can maintain the optionality to execute if the underwriting comes in as expected.

And our next question will come from the line of Chris Woronka with Deutsche Bank.

I wanted to ask, as the Marriott-Starwood loyalty program merges a little later this month, I know you probably don't have a ton of necessarily redemptions, but your guests are obviously earning the points. Do you expect any benefits there on the cost side or any other kind of impact that would impact your margins?

We do. I don't know that it's enough of a positive effect to overcome rising labor costs, but Arne and his team have been delivering on their promise of using the size and scale to deliver cost savings, whether it's through negotiated credit card commissions and fees, so it's hard to really quantify that immediately our numbers. But it is a tailwind as opposed to a headwind. And we think it does benefit us going forward. It's been a great partnership for us.

Okay, great. And then, I think you mentioned a 3.2% number on cost per occupied room. Is that -- is there a point later this year maybe or early next where you cycle a bigger increase that you saw this year? Or do you think that 3.2% is kind of a -- more of a run rate?

Chris, it's Jon. I think, given the labor environment that we're in, I mean, that's mostly driven by labor. I think, in the 2.0% to 3.0% range from an expense perspective is the right range for growth going forward -- for -- at least for the foreseeable future.

Yes. If I could just add, it would be easy to be draconian and start to cut things just for the purpose of hitting a number. Unfortunately, in the past, we've experimented with things that end up affecting guest experience and the quality of your property, and sometimes postponing investment ends up creating more challenges than it is worth. So hiring and recruiting and maintaining a quality staff is something that's very much top of mind, and being too aggressive, I think, damages the integrity of the portfolio and the quality that we deliver. So I think, to Jon's point, that run rate is what we would expect.

Okay, fair enough. And just finally for me, we've heard some pretty bullish things about the Hyatt development plans in the pipeline. You guys have -- probably own more than some of your peers. Does their outlook make you want to potentially acquire more Hyatt branded stuff?

This is Dan. I think, our thesis is we're big believers in the loyalty and distribution of the brands. For us to lean into a hotel, whether it be a Hyatt or a Marriott, a Hilton or IHG, whatever, I think is more opportunistic insofar as the underwriting has to make sense. We're not trying to build a portfolio and put dots on a map. To the extent we can find great opportunities that are Hyatt, we've had a great partnership with them for a lot of years, and to grow with them is -- would be terrific. But it still has to make sense from an investment standpoint. But it is nice to see the brand expanding in some of these higher barrier to entry markets with quality product that competes very well. So we're pleased to see that they're making progress to that end, and to the extent we could be a part of that, it's certainly an opportunity for us.

And I'm showing no further questions in the queue at this time. So now, it is my pleasure to hand the conference back over to Mr. Dan Hansen, Chairman, President and Chief Executive Officer, for some closing comments and remarks.

Well thank you all for joining us today. We continue to work hard for our shareholders to create value through thoughtful capital allocation and also operational enhancement. Our portfolio of high-quality hotels that today's guests love continues to grow, and we see great things in the future for Summit. I hope you have a terrific day, and I look forward to talking to you again next quarter.

Ladies and gentlemen, thank you for your participation on today's conference. This does conclude our program, and we may all disconnect. Everybody, have a wonderful day.