Stifel Financial Corp (SF) 2018 Q2 法說會逐字稿

Good afternoon. My name is [Emony], and I will be your conference operator today.

I would like to welcome everyone to Stifel Financial's Second Quarter 2018 Financial Results Conference Call.

At this time I'd like to remind everyone that today's call may include forward-looking statements. These statements represent the firm's belief regarding future events that by their nature are uncertain and outside of the firm's control. The firm's actual results and financial condition may differ, possibly materially, from what is indicated in those forward-looking statements. For a discussion of some of the risks and factors that could affect the firm's future results, please see the description of risk factors in the current annual report on Form 10-K for the year ended December 2017.

I would also direct you to read the forward-looking disclaimers in Stifel's quarterly earnings release, particularly as it relates to the firm's ability to successfully integrate acquired companies or the branch offices and financial advisors, changes in the interest rate environment, and changes in legislation and regulation.

You should also read the information on the calculation of non-GAAP financial measures that's posted on the Investor Relations portion of the firm's website at www.stifel.com.

This audio cast is copyrighted material of Stifel Financial Corporation and may not be duplicated, reproduced or rebroadcast without the consent of Stifel Financial Corporation.

I would now turn the call over to Stifel's Chairman and Chief Executive Officer, Ron Kruszewski. The floor is yours.

Thank you, operator. And for everyone, Jim Zemlyak, who usually joins me on these calls is traveling today. So just make sure everyone doesn't wonder where Jim is. But I'd like to say good afternoon, and thank you for taking the time to listen to our second quarter 2018 results.

Earlier today, we issued a press release with our quarterly results and posted a slide deck on our website.

Before I get into the details of our quarterly results, let me start by saying, I'm very pleased with our performance this quarter and year-to-date. Our corporate strategy has been to build a diversified wealth management and investment bank that will deliver strong results on a consistent basis. And our results over the past few years illustrate the success we've achieved. The growth in our recurring revenue, such as net interest income and asset management fees, resulted in our revenue being less susceptible to the volatility and timing-related issues that impact our transaction-driven businesses.

Our results in the second quarter underscored the impact of this strategy. Additionally, the growth and higher margin business such as our bank has helped us to consistently drive our compensation ratio lower to the point where second quarter of 2018 was our lowest comp ratio in more than 7 years.

As we look to the second half of the year, barring a significant change in market condition, the firm is well positioned for continued growth as we expect investment banking activity to pick up, and we continue to grow our balance sheet and our recruiting strengthen.

Turning to our results. We generated a very solid second quarter as total net revenue came in at $743 million, up 2% from the second quarter of 2017. And when combined with our 59% comp ratio for the quarter resulted in an non-GAAP pretax margin of 18.5%, which was up 220 basis points. Our non-GAAP EPS of $1.22 was up 36% year-on-year.

I'd also note that our non-GAAP return on common equity in the quarter was 15% and our return on tangible common equity was 24%. Both up significantly from the same period a year ago.

So now I'll start with an overview of our revenue and expense items. So starting with brokerage and asset management revenues. Given the market conditions, I'm pleased with our brokerage results as total firm-wide brokerage revenues totaled $256 million, and asset management fees reached a record $200 million.

Global wealth management brokerage and fees of $359 million, increased 5% year-on-year driven by our record asset management results.

We ended the quarter with record total fee-based assets of $91 billion, up 3% sequentially, and total -- and record total client assets which were up 1% sequentially to $278 billion. Although, our asset management fee revenue includes revenues from businesses that included asset management and the Bank Sweep Program, it is the growth in private client fee-based assets that continues to drive this revenue line as those assets are accounted for 99% of the revenue year-over-year increase.

Looking at the third quarter, we'd expect to see further expansion of asset management revenues as private client fee-based assets ended the second quarter up 2%.

Regarding our institutional business. Brokerage revenues were in line with the guidance we gave in late June, down modestly on a sequential basis, primarily as a result of lower trading gains for both equities and fixed income.

Our institutional equity trading revenues totaled $45 million. Commission revenue was essentially flat on a sequential basis, but was negatively impacted by some trading losses during the quarter.

In the second quarter, we benefited from an increase in research related payments following a slower first quarter as this appears to be at least partially related to changes in client behavior associated with MiFID II.

While the new regulation has clearly impacted our institutional equity business year-to-date, I still believe it's a little early to try and draw any specific long-term conclusion. But we'd expect to have a better understanding over the next 12 months. Considering market conditions which includes a relatively flat yield curve and continued trend towards electronic trading, fixed income brokerage posted a solid quarter. Revenues were $51 million, up 5% year-on-year as increase in the municipal debt trading and the pickup in activity in some new products such as syndicated loan sales more than offset declines in our corporate debt and our rate businesses.

Sequentially, commission revenues improved, and total brokerage revenues were negatively impacted by lower trading gains as our first quarter results included a larger-than-normal trading gain.

Moving to the next slide, we take a closer look at our investment banking revenue. Our investment banking revenues totaled $161 million, and came in slightly better than our recent guidance. We generated advisory fees of $87 million in the quarter, which were up 6% from the same period last year. On a sequential basis, advisory fees were down primarily due to lower revenues in our financials vertical. We were able to offset some of the sequential decline with some significant pickup in our health care vertical and continued strength in our Eaton fund placement business.

Capital raising revenue of $74 million was down from the prior year quarter, primarily due to 53% decrease in fixed income underwriting revenue, as we faced a challenging comparison versus what was a very strong quarter in the second quarter of 2017.

That said, we generated a sequential revenue growth as the municipal issuance market continue to improve in the first quarter, and the bulk of our $4 million sequential improvement in fixed income capital raising was the result of stronger public finance revenue.

Equity underwriting revenues were $44 million as we continue to see solid activity in our financials in the health care verticals during the quarter. The declines from the sequential quarter was primarily due to lower activity in our London-based business, that was particularly strong in the first quarter of the year, a quarter in which Stifel ranked #1 in U.K. equity issuance league tables.

The next slide focuses on growth in net interest income, which totaled $117 million. This represented a 27% increase from the second quarter of 2017 as we continue to grow our bank balance sheet and expand our net interest margin.

Our consolidated net interest margin improved reaching 247 basis points, which was up 4 basis points sequentially as a result of our asset composition and an increasing interest rate environment. Like most financial institutions, we are asset-sensitive and benefit from rising rates. In addition, we see an opportunity to expand our net interest margin by changing the composition of our asset mix. The ability to continue to grow assets or reinvest cash flows from lower yielding investments such as our $1.5 billion agency MBS portfolio that lead yields in its low 2% range into higher yielding loans and investments will help drive that growth.

This quarter we grew our loan and investment portfolio by approximately $700 million. Nearly half the loan growth occurred within the C&I portfolio, which has a low to mid-4% yield. Nearly all of the bond portfolio growth was seen in our CLO books, which currently yield just shy of 4%. The majority of this growth is, therefore, short duration. So as we continue to grow our bank balance sheet, the composition of interest-earning assets will help drive net interest margin and offset some of the trends on the liability side of our balance sheet.

Over the past 2 fed fund increases to date, our deposit beta has averaged 54%. As in the past, our increased deposit pricing is in line with broker-dealer, insured Bank Sweep Programs of our competitors, as the current market environment is driving deposit betas some roughly 50% to 60%. So we continue to benefit from deposit betas at these levels. I'll repeat what I've said in the past, which is, competitive pressures will continue to push deposit betas higher industry wide as the spread between yields on money market funds and cash sweeps cannot get too wide as investors have the flexibility to move their cash to higher yielding products.

Lastly, in terms of deposit yields and growth. I'd also note the increased issuance of CDs as a funding source. While CDs provide an additional funding avenue for further asset growth at our bank and add duration to the liability side of the balance sheet, these deposits carry a higher deposit yield and can impact our net interest margin. At the end of the quarter, CDs represented 12% of the bank's deposit mix. As the market for deposit was increasingly competitive, the use of CDs as a funding source could continue as we look to expand our bank and our net interest income.

On Slide 13, we'll review our expenses for the quarter. In terms of our non-GAAP expense results they were below Street estimates. Our comp ratio of 59% was in line with our updated guidance in June at the low-end of our full year guidance of 59% to 60%. The sequential and year-over-year declines are primarily due to the continued benefit of growth and high-margin bank revenues. Based on this, our revenue outlook for the remainder of the year -- based on this and our revenue outlook to the remainder of the year, we are lowering our full comp guidance to 58% to 59%. While we feel that the changes to our revenue mix should enable us to maintain this comp ratio in this range going forward, we will provide updated guidance for 2019 on our fourth quarter earnings call.

Non-GAAP operating expenses, excluding loan-loss provisions, expenses related to investment banking transactions were roughly $156 million at the low-end of our quarterly guidance.

To the third quarter, we are guiding to noncomp expenses, ex loan losses and investment banking expenses to remain between $154 million and $160 million. In terms of share count, fully diluted share count came in below our forecast and decreased by nearly 500,000 shares during the quarter due to a decline in our share price as well as share repurchase activity.

In summary, the growth in our net interest income coupled with diligent cost discipline has driven our pretax margin to 18.5%, and our focus on risk-adjusted investments have resulted, as I said, in annualized non-GAAP return on common equity and tangible equity of 15% and 24%, respectively.

In the next few slides I'll touch on the quarterly results from our 2 primary segments. So starting with global wealth management. We recorded record quarterly net revenue of $497 million, up 10% year-on-year. As previously noted, the revenue growth was again driven by record asset management revenue and net interest income.

Total assets were a record $278 billion and were up 8% year-on-year as private client fee-based assets increased 17% over the same time period. Our comp rates on the first -- in the quarter declined 290 basis points to 48%, and our noncomp ratio of 14% declined 100 basis points as growth in bank revenue and our focus on expense management continue to generate positive results. Improved revenue and lower expense ratios resulted in pretax margin of 38%, and it's up 390 basis points year-on-year.

In terms of our advisor headcount. We continue to focus on our recruiting efforts, and we believe we're seeing the results despite headcount being essentially flat. This is the result of continued elevated retirements and nonregrettable departures. While we don't disclose the number of growth advisors that we've added, what I can say is this number is up significantly from the prior quarter's and momentum remains strong, not only as we've been seeing elevated levels of on-site visits by recruits, we're also turning an increasing number of them into Stifel advisors.

On the regulatory front, we are encouraged by the progress being made by the SEC regarding regulation BI, and we will continue to be engaged with regulators to help come up with an effective unified standard for the industry.

In the last several quarters, we've talked about 2018 being a pivotal year for Stifel with respect to our platform and technology investment. In the quarter, we made significant progress with the digital transformation of many of our clients using the system. The pilot of our unique prospecting tool (inaudible) has been a big success, and we expect full launch this fall. Likewise we made significant progress developing our next generation of electronic client platforms both web and mobile. This will enable enhanced security, electronic signing, mobile banking, risk portfolio analytics, financial advisor connectivity, state-of-the-art client reporting capabilities with our [add-or-par] integration. We believe these investments will differentiate Stifel, and help propel our wealth management business through market share gains.

On the next slide, we take a closer look at Stifel Bank & Trust, which drove our 6% sequential increase in global wealth management net interest income as net interest margin and average interest-earning assets of the bank increased from the prior quarter.

Total bank assets increased to more than $15.8 billion as average interest-earning assets increased nearly $450 million sequentially to $15.4 billion. As Stifel Bank comprises 82% of our average interest-earning assets, it generates the vast majority of net interest income.

Total bank loans increased 19% year-on-year to roughly $7.4 billion as mortgage loans of $2.7 billion increased 20%, commercial loans of $2.7 billion increased 30% and security-based loans of $1.9 billion increased 5%.

Investment securities totaled $8 billion and increased 18% year-on-year as growth in CLOs more than offset decline in most other investments securities.

We continue to focus on high credit quality, short-duration assets that provide attractive risk-adjusted returns. The book yield on the portfolio increased 9 basis points to 334 basis points due to the growth in our CLO portfolio. Rising rates as well as an increased investment yield that are tied to the prime rate in treasuries. Duration remained flat at roughly 1.6 years at the end of the quarter.

Bank net interest margin was up 8 basis points from the first quarter to 297 basis points, and was in line with the updated guidance we gave near the end of the second quarter.

In terms of our expectations for bank net interest margin in the third quarter of 2018, we expect it to be flat as a result of a full quarter CD expense and timing of balance sheet growth, I'll discuss later in the slide. The provision for loan-loss expense in the quarter increased sequentially to $4.2 million from $2 million due to loan growth as asset quality continues to be high. As a result of this provision expense, our allowance for loan loss as a percentage of loans increased sequentially to 99 basis points. Overall, our credit metrics remained solid as the nonperforming asset ratio was 12 basis points, which was down 2 basis points sequentially due to a decrease in nonperforming assets.

Finally, I would note that we now expect business bank transaction to close during the third quarter as we receive regulatory approvals sooner than originally anticipated.

Moving on to the next slide. Institutional business generated quarterly revenue of $253 million. As you can see from the table on the right of this slide, revenue on our equity business was $170 million, which declined sequentially due primarily to the timing of investment banking transactions. Our advisory business remain strong. During the quarter we saw an increased contribution from our London-based business as well as from Miller Buckfire restructuring practice. However, as I stated earlier, this was not enough to overcome the negative impact and the timing of the deal closings during the quarter, and lower activity in our financials and industrial verticals. However, our pipelines remained strong. And assuming no material change in market environment, we continue to believe that the second half of the year will be stronger than the first with usual seasonality driving more activity to the fourth quarter.

For equity underwriting, our outlook is similar to our advisory business as our pipeline remains healthy across a number of verticals and we're seeing activity pick up across a number of verticals in the third quarter. Our fixed income business improved 14% sequentially as public finance activity picked up from a weak first quarter and brokerage revenue was down modestly.

Debt underwriting improved sequentially as industry-wide municipal finance improved from a very weak first quarter. However, volumes remained depressed versus the same period last year. Despite the weaker market environment year-to-date, Stifel ranked #1 nationally in the number of senior managed negotiated new issues, and our market share was 11.1%. Our backlog appears stronger. And much like our equity investment banking business, we expect the second half of 2018 will be stronger than the first half.

In terms of our institutional brokerage results, we expect the challenging market conditions we've seen so far this year to continue into the third quarter, in addition to the typical seasonality of the summer months.

I want to be clear though. Our institutional brokerage business is an important component to our overall institutional product offering. While the market environment for this business seemingly becomes more challenging each and every year we have and will adjust our business to meet these new operating conditions. We continue to rollout new products and services that differentiate us from our peers and we constantly strive to better align our existing businesses to ensure that we continue to be compensated to the value we create.

Lastly, the table on the bottom of the slide adjusts our institutional results to exclude the impact of roughly $7.5 million of investment banking deal-related revenues and expenses that can no longer be netted against one another based on recent changes to accounting rules. We provide these comparative numbers in the table as we transition to this new rule throughout this year.

Moving on to the balance sheet. I already discussed our bank and the asset growth we generated there, but on this slide we'll look at our consolidated balance sheet and our capital ratios. We finished the quarter with $22.6 billion of assets on our consolidated balance sheet, which was up $900 million from the prior quarter, and up nearly $3.1 billion from the second quarter of 2017.

Our firm-wide average interest-earning assets increased by $600 million to more than $18.7 billion due primarily to the growth in the average bank assets during the quarter. As I said in our last call, our asset growth isn't linear, and we expect the growth at the bank in the second quarter will exceed that in the first quarter. The stronger growth in second quarter -- sorry, year-to-date total asset growth of roughly $1.2 billion, which is about the midpoint of our target range for the year of $2 billion to $2.5 billion.

Given the expected close of Business Bancshares acquisition in the third quarter, we would expect total assets of the bank to grow by approximately $800 million in the quarter.

We finished the quarter with Tier 1 leverage ratio of 9.5%, and Tier 1 risk-based capital of 18.4%. Our Tier 1 ratios were impacted by our share repurchase activity during the quarter and continued balance sheet growth. While we will continue to look to rebuild our capital ratios back to historical norms of 10% and 20%, we have some flexibility to take advantage of acquisitions in share repurchase activity as we look to deploy excess capital to generate the best risk-adjusted returns.

Our book value came in at $39.34 per share and increased by $0.85 in the quarter. In terms of share repurchases, we continue to opportunistically buyback shares when we feel the value is compelling. As such, we bought back 800,000 shares in the quarter at an average price of $56 a share. I've said in the past, that returning to our historical capital ratios was a priority in 2018. But given our improved result in the pullback our share -- in the pullback in our share price, to valuation levels well below historical average, we would expect to make greater use of our share repurchase authorization at these prices as we currently have 6.3 million shares remaining on our existing repurchase authorization.

So before I open the call for questions, let me conclude by saying, overall, I'm very pleased with our business. Our results in the second quarter underscore the importance of our focus on increasing our recurring revenues as record results for net interest income and asset management fees helped to offset some of the natural quarterly variance in transaction-driven businesses like investment banking and brokerage.

Additionally, the growth in higher-margin revenues enabled us to continue to being down our compensation rate -- ratio, which reached their lowest level in the second quarter of more than 7 years, and result in a pretax margins that were our second-highest over the same time period.

While we are not immune to some industry-wide headwind, particularly in our institutional sales and trading businesses, I believe we are well positioned for a strong second half of 2018, as our investment banking revenue should improve from first half levels, our bank assets should continue to grow and barring a significant market correction, our fee-based assets should continue to drive our wealth management revenues.

With that outlook in mind, we'll look to take advantage of the flexibility in how we deploy excess capital in order to generate the best risk-adjusted returns for our shareholders.

That said, I believe that our current share price, which I know is below the average price where we recently bought back stock does not reflect the strength of our operating performance. We continue to see our PE multiple decline to current levels of roughly 10x consensus estimates versus our historical average in the current average of some of our peers, which is more like 13x. Consequently, at these stock prices, I'd expect our repurchase activity to be at more significant near-term focus of our strategy regarding excess capital deployment as we strive to generate the best returns for our shareholders.

So with that, operator, I'd be pleased to take some questions.

(Operator Instructions) And we have our first question from Mr. Devin Ryan with JMP Securities.

I guess first one here. So on the capital ratios, in the comments that you just made at the end of the call. Just trying to think about if you can help us, so you had a modest step back in the capital ratios. I think previously we've spoken about getting back to those targets by about year-end, but I heard you, kind of, loud and clear that there's opportunities for the balance sheet growth, and given where the stock is that you want to put some of the capital to those uses immediately. So I know they're not hard targets, and so I'm just wondering how we should think about where you would be comfortable letting those levels go in the near-term, especially if you can continue to buy the stock back at these, kind of, well below historical levels? I'm just trying to think about where it might go to the extent you can be opportunistic?

Well, look I think -- Devin, we're generating a lot of cash, all right. And if you look at our cash flow and just our growth and earnings and some of our stock-based compensation which goes toward equity, we have a lot of flexibility to grow our bank even more than our targets or to buyback more stock. I'm just trying to point out that given where I believe is the opportunity that the market's giving us in terms of where I see our relative valuations that, that's where our focus was going to be. It would be a lot just to be taking our -- all of our earnings and buying back our stock. That will be a lot of stock repurchase activity. But that may get a little bit more focused than incremental bank growth.

Got it. Okay, that's helpful. And then some of the commentary on FA headcount and the moving parts there. So you're up modestly in the first half. You mentioned, kind of, retiring advisors were offsetting new additions and we don't get the gross number. But there's been a lot of headlines in the press around Stifel adding advisors throughout the year. And then there are some websites that aggregate it, and you guys were ranked very high in those in terms of the amount of assets and advisors coming in. So I'm just trying to get some of the moving parts here. And just if you can, since it sounds like the retirements have been a pretty big level, like do you a sense of that slowing, so we're, kind of, running our course there and we'll get to see some of the benefit of some the gross hires that you've brought in. And it sounds like that could continue into the back half. So just also anymore color on that backlog and the tone? And just -- that would be helpful.

Well, look I think of the things, Devin, if you're -- and you've seen and I won't cite them here. But there are services and aggregate net new assets versus departures that people leave, and we rank very high. I'm very pleased with our recruiting efforts. I believe that we have had some retirements that got accelerated because of DOL. But net-net, I think what you'll see is increase in client assets, increase in revenues, increases in productivity. All of the things that you'll see based on what's going on. We don't disclose gross and net numbers. But I would expect our net advisor headcount to increase from what been relatively flat levels. And again it's more from some of the retirements. And I would note that those assets are reassigned within the firm. And so I'm pleased with our recruiting efforts. And I think you'll see those results flowing through our Wealth Management segment.

Got it. Okay, very helpful. And maybe one just on the customer cash balances and the decline that we saw this quarter, which obviously we saw across the industry. And then -- and I get it that some of it's probably seasonal, some of it's money going into the equity market, and some of it's yield seeking into cash alternatives, and so -- it sounds like you guys are going to diversifying your deposit base a bit more with more CDs, so -- and will, kind of, watch that trend. But I'm curious if you have any sense of or historical perspective of some of the yield-seeking behavior that we've been seeing. Because obviously cash balances as a percentage of overall client assets are at pretty low levels. And do you try to think about whether this time's different for that? And if you have any sense of, if we continue to have more rate hikes from here to the expectation that yield-seeking behavior will just continue?

Well, it's good that we're having yield-seeking behavior, okay. It's -- we went through 10 years where -- of almost 0 bond rates. I would say that in my experience that we're getting back to more normal times in terms of cash balance. Remember markets are at high levels. Usually when equity markets are at these levels, your cash balances are the lowest. If you have a market correction your cash balances will go up. That's all historical. I think if anything in the 0 times cash balances got higher than historical because of low rates. And today, these are normal times. I expect that what the industry needs to focus on a little bit is that the competitive aspect for deposits will come back in. I've been saying that. I believe deposit betas are going up industry wide, not just with Stifel. And I think that will get back to -- what I remember when fed funds were 2.5% to 3%, which is where -- so this feels normal to me. But I feel there's a lot of cash around the entire financial system, and a lot of deposits where people are turning away deposits, when we had a lot of liquidity. But there's a number of things -- the fed decreasing the balances. A lot of things that are changing liquidity in the financial system. And you're going to see an increase in the competition for deposits.

Yes. Okay, great. And one on investment banking here. I appreciate the commentary on the back half expectations. If you, kind of, drill into that a little bit more. You look at M&A advisory ECM, DCM. All 3 businesses, kind of, poised for, kind of, that better potentially back half, assuming market conditions remain reasonable here. And what factors are, kind of, driving the better activity? And then I guess just on within this fixed income capital raising. More broadly, just given that we had, kind of, the pull-forward into the end of last year than the, kind of, softer start to this year. Is the expectation that we, kind of, get back to something more normal in the back half like we should, kind of, be there by then?

Yes, look, Devin, I think that I'm optimistic about all of those businesses. I think M&A, capital raising, public finance, underwriting all of those businesses are poised to have a good second half, which is traditionally what happens in our business. Public finance is traditionally a back-half weighted business. It has been for years. But considering what happened -- the pull-forward you talked about, I would think that it would as a percentage over the first half could even be greater than what it has been in the past. So I feel good about the business. There's normal caveat as of course market conditions and any geopolitical things that could happen can change things quickly. But as I look forward today, I think things are -- we're well positioned as a company for an improvement of what otherwise has been a very good first half of the year as well.

Got it. Okay, great. I believe I'm the only in the queue here. So I'll ask one more. Just on the retail commission to principal transactions line. That's being impacted by the migration to fee relationships, where you guys are having a lot of success. So I think we have to look at it more holistically. But it also does seem like the transactional activity has been lighter. But I know that can, kind of, bounce around and investors can, kind of, move through engagement cycles. So is that the right read that just the level of transactional engagement is less, if I can strip out that migration to fee-based? And is it just a function of the markets are more complacent right now? Or I guess what else could drive an improvement just in the level of, kind of, the transactional activity there?

Well, first of all, fixed income was lower. And that's all flows through that line item for the most part, okay? This is was lower and in muni finance in that area in terms of just muni secondary. And so that's lower. And you're going to see that. But in general, and here at Stifel, I think where we're seeing, in general even the transactional aspect of stock picking is being done in fee-based accounts. Even where advisors are talking with our clients and doing individual stock selection. It's been done more and more on a fee basis versus a -- on a transaction basis. And I would -- and that not all of those always have to be -- that you can be talking to your clients in terms of discretionary versus nondiscretionary. So what I'm trying to say, because I think it's hard to look at that 1-line item, commissions in wealth management to get a sense of retail engagement. I'll caution you not to do that. I would say that you should look at fees and commissions together. And that will give you a better sense of retail engagement.

Yes. Got it. Okay. And then just one just to clarify for the model. On the comp ratio guidance you provided. Is that just the new full year guidance for this year? Or are we just talking about the back half of the year for the comments...

No, no. We're saying that we're 58% to 59% full year. So you can do that math.

Are there any other questions?

There are no further questions at this time. Mr. Kruszewski, back to you for closing comments.

Well, thank you. I have no closing comments other than to wish everyone a enjoyable end of the summer. Again, I think that our company is in a good spot, and look forward to a good second half of the year. Thank you very much, and goodbye.

This does conclude today's conference call. Thank you for your participation. You may now disconnect.