StepStone Group Inc

NASDAQ:STEP

Earnings Call Transcript 2022-Q1

[Operator]

Good afternoon, ladies and gentlemen, and welcome to StepStone's Fiscal 2022 First Quarter Earnings Conference Call. As a reminder, all participants are in a listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions]

I would now like to turn the conference over to Seth Weiss, StepStone's Head of Investor Relations. Please go ahead.

[Seth Weiss, Head of Investor Relations]

Thank you, and good afternoon, everyone. Joining me on the call today are Scott Hart, Co-Chief Executive Officer; Jason Ment, President and Co-Chief Operating Officer; Mike McCabe, Head of Strategy; and Johnny Randel, Chief Financial Officer.

During our prepared remarks, we will be referring to a presentation, which is available on our Investor Relations website at shareholders.stepstonegroup.com.

Before we begin, I'd like to remind everyone that this conference call as well as the presentation contains certain forward-looking statements regarding the company's expected operating and financial performance for future periods. Forward-looking statements reflect management's current plans, estimates and expectations and are inherently uncertain and are subject to various risks, uncertainties and assumptions.

Actual results for future periods may differ materially from those expressed or implied by these forward-looking statements due to a number of risks or other factors that are described in the Risk Factors section of StepStone's most recent 10-K.

Turning to our financial results on slide 3 for the first quarter of fiscal 2022. We reported GAAP net income of $126.5 million for the quarter ended June 30, 2021. GAAP net income attributable to StepStone Group was $41.7 million.

Fee-related earnings for the quarter was $23.1 million, an increase of 27% as compared to the first fiscal quarter of the previous year. Adjusted net income for the quarter was $40.5 million up 162% from the first quarter of fiscal 2021. Finally, we reported adjusted net income per share of $0.41.

The quarter reflected retroactive fees resulting from additional closes of StepStone's growth equity fund that contributed $0.9 million to revenue and $0.8 million to fee-related earnings and pre-tax adjusted net income. In comparison there were no retroactive fees reflected in the first quarter of fiscal 2021.

I'd now like to turn the call over to StepStone's Co-Chief Executive Officer, Scott Hart.

[Scott Hart, Co-Chief Executive Officer]

Thank you, Seth and good afternoon, everyone. In the first fiscal quarter of 2022, we posted our strongest quarter ever for fee-related revenues and adjusted net income.

We continue to grow assets under management at a robust pace, which helps drive a predictable and recurring stream of fee-related revenue. Additionally, our strong investment performance coupled with a very healthy realization environment led to exceptional realized performance fees and investment income.

Moving to slide 4. We manage $90 billion of investments and advise on an additional $375 billion of assets with a leading market presence in private equity, real estate, infrastructure and private debt.

We have a wide global reach with offices in 19 cities across 13 countries. This global and local approach is a deliberate strategy. Our global scale creates a substantial competitive advantage as it yields unparalleled data, insights and deal flow while our localized presence allows us to provide the personalized attention needed to deliver customized solutions designed specifically for each client's needs.

We are very excited to enhance our capabilities with the acquisition of Greenspring Associates, which we announced last month and which we expect to close by the end of this calendar year. We believe the combination of StepStone and Greenspring will create the clear market leader in venture and growth equity which will be a sector focused within our private equity asset class. Mike McCabe will speak about Greenspring in more detail in a few minutes.

Moving to slide 5. As Seth mentioned, we generated $40.5 million in adjusted net income for the quarter or $0.41 per share up 162% from the prior year's first quarter. We generated fee-related earnings of $23.1 million representing 27% year-over-year growth as our fee-earning AUM grew to approximately $53 billion up 27% from a year ago.

We also expanded FRE margins by 100 basis points year-over-year and by 200 basis points from the fourth quarter of fiscal 2021, which positively contributed to the growth in fee-related earnings. Net realized performance-related fees, which include incentive fees were a combined $33 million in the quarter, our highest ever, up more than fourfold versus the first quarter of fiscal 2021 and double the previous peak of $16 million in the third quarter of fiscal 2021.

We also benefited from strong realized investment income of over $2 million. While these sources of income tend to be less predictable than fee-related earnings, our performance fees have trended steadily up over the last two years and our accrued carry balance of $1.1 billion is more than three times the size it was a year ago, a positive signal for future performance fees. Johnny Randel will discuss the financials in more detail.

As we mentioned last quarter, we have reopened our offices on a voluntary basis and resumed in-person business development and due diligence in a measured way. We are eager to see our existing clients face to face and to resume travel to foster new relationships. We recognize the return to normalcy will not be a straight line and we are closely monitoring the evolution of travel restrictions and how COVID variants may impact the health and safety of our employees and clients. We remain optimistic about the future and our ability to adapt to changing circumstances.

With that I will turn the call over to Mike McCabe, our Head of Strategy.

[Mike McCabe, Head of Strategy]

Thanks, Scott. Now turning to Slide 7, I will briefly summarize the Greenspring acquisition and highlight the financial and strategic merits of the transaction. Greenspring is one of the largest venture capital and growth equity specialist and serves as a value-added, life cycle partner for fund managers and entrepreneurs, investing across all stages of venture capital through a combination of primary, secondary and direct investments.

As of March 31, Greenspring had approximately $9 billion of fee-earning AUM $17 billion of AUM and trailing 12-month fee-related earnings of $28 million. For more details of the transaction please reference the presentation we gave on July 7, and our public filings.

There are several strategic and financial benefits I would like to highlight. Beginning on the financial side. First, the acquisition will be immediately accretive. We anticipate that the transaction will increase adjusted net income per share by the high single-digits during the 12 months following the close of the transaction and by more in the future. To be clear, we do not assume any revenue or operating synergies to achieve this target but we do anticipate benefiting from synergies over time.

Second, the initial revenue stream is all fee-related, providing a highly predictable and recurring source of earnings. Furthermore, since we are buying full ownership of Greenspring, 100% of the fee-related earnings will flow to pre-tax adjusted net income. Third, the addition of Greenspring will be additive to our FRE margin. Even before accounting for any efficiencies or benefits from operating leverage, which may develop over time. As of March 31, Greenspring generated an FRE margin of 40% over the last 12 months, above our trailing 12-month FRE margin of 31%.

And fourth, Greenspring should enhance our pace of revenue growth. Over the last three years, Greenspring has increased management and advisory fees at a 34% compounded annual growth rate.

Moving to the strategic merits. First, the addition of Greenspring makes us the best-in-class player in one of the fastest-growing and best-performing segments within private equity. Over the last decade, venture capital fundraising and deployment have grown at a 15% to 20% pace. While venture capital internal rates of return have outpaced broader private equity by IRRs by approximately 500 basis points.

Second, the combination of the two firms provides the Greenspring team with the resources, reach and scale to deepen relationships with fund managers and further accelerate growth, including an expanded data and technology advantage, greater geographic reach and access to our global marketing, business development and shared services support.

Third, StepStone and Greenspring have limited overlap between existing clients. This provides both StepStone and Greenspring an opportunity to leverage each other's relationships to expand our collective footprint. Finally, the acquisition will expand our assets under management to well over $100 billion, further enhancing the positive network effects we enjoy from being a large, diversified and global participant in the private markets.

As Scott mentioned, we continue to expect the transaction to close by the end of the calendar year. The consent process with Greenspring's LPs is progressing well. We expect to finance the upfront cash portion with a mixture of debt and cash on hand.

Now turning to Slide 8. We generated nearly $13 billion of gross AUM in the last 12 months, with approximately $2 billion coming from our co-mingled funds and roughly $11 billion in separately-managed accounts. Among our SMAs, approximately 90% of assets were raised from existing relationships.

International continues to be a significant source of flows, with over 90% of our gross AUM additions coming from outside of North America. International LPs are still in the early stages of investing in private markets. So we anticipate that this will be a source of outsized AUM growth for the considerable future.

Slide 9, shows our fee-earning AUM by structure and asset class. For the quarter, we grew fee-earning AUM by just under $1 billion with half of the growth coming in our private equity asset class. Growth in assets is inherently lumpy. So we think it is most productive, to look at our fee-earning growth on a longer-term basis.

Over the last year, we have grown fee-earning AUM by 27%. And when looking over the last three years, we have grown fee earning assets by a 30% compounded annual growth rate. As of quarter end, we had $13.6 billion of undeployed fee-earning capital, which we anticipate will generate management fees as capital is deployed into the coming years.

We continue to make strong progress in CPRIM, our private markets fund for individual investors. Since launching in October of last year, we have grown this fund to approximately $150 million of net asset value and that delivered an exceptional 45% net return for investors.

Slide 10, shows the evolution of our management and advisory fees. Using fiscal 2018 as the base year, our management fees have grown at a 32% compounded annual rate. This is a similar pace as our growth in fee-earning AUM. The blended fee rate of 52 basis points have stayed relatively steady throughout the last three years. While the blended fee rate may fluctuate slightly due to the mix of asset class and account type, the pricing trends of the underlying services remain very stable.

And with that, I'd like to turn the call over to our Chief Financial Officer, Johnny Randel, to discuss our financials in more detail.

[Johnny Randel, Chief Financial Officer]

Thank you, Mike. I'd now like to turn your attention to Slide 12, to touch on a few of our financial highlights. For the quarter, we generated fee-related earnings of $23.1 million, pre-tax adjusted net income of $52.3 million, adjusted net income of $40.5 million and ANI per share of $0.41. Our FRE margin for the quarter was 30% up 100 basis points year-over-year, and up more than 200 basis points from the prior fiscal quarter.

The receipt of retroactive fee payments, benefited both the current and the previous quarter by roughly 70 basis points each while the first quarter of the prior fiscal year benefited from the absence of public company expenses. Normalized for these items, year-over-year margins improved by over 300 basis points.

Backing out noncore items, fee-related expenses were down from the prior quarter driven by the timing of bonus accruals, which were elevated in the fourth quarter of fiscal 2021 and due to slightly lower general and administrative expenses.

Gross realized performance fees were $58.2 million for the quarter our strongest period ever. The environment has been very supportive for performance fees, as positive market performance and robust capital market conditions have elevated realizations. Furthermore, incentive fees paid by certain accounts are tied to the first fiscal quarter each year, which provided a seasonal boost to our results. As a reminder, realized performance fees can fluctuate significantly in any given quarter. So we believe a longer-term view of performance fees is more appropriate.

Slide 26 in the appendix, provides quarterly and last 12 months trends of net performance fees. Turning to Slide 13. I will speak to core revenue trends on a year-over-year basis for the quarter, and on a longer-term basis looking at the trailing 12 months compared to a base year of fiscal 2018.

I'll start with management and advisory fees at the top. Total management and advisory fees were up 23% year-over-year, although longer-term trends shows that such fees have grown at a compounded annual growth rate of 26%. A more detailed breakdown of fee revenue is provided on Slides 27 and 28 in the appendix.

Gross realized performance fees, were up 440% compared to the first quarter of fiscal 2021 and all the longer-term trend shows that such fees have grown at a CAGR of 47%, since fiscal 2018. The bottom chart shows adjusted revenues, which is a sum of the top two figures. Adjusted revenues increased 83% as compared to the first quarter of fiscal 2021 with a longer term CAGR of 31%. Performance fees as a percentage of adjusted revenues was 43% for the quarter and 29% for the last 12 months. This is above our historic ratio of around 20%. We may continue to benefit from strong performance fees in the near-term if the exit environment remains favorable. I would highlight that we generally do not control the exit of these investments there will be variability in any given quarter.

Turning to our core profitability metrics on slide 14. Fee related earnings of $23 million for the quarter were up 27%, relative to the same quarter a year ago. For the last 12 months, we generated fee related earnings of $94 million, representing a CAGR of 53% relative to fiscal 2018. Fee related earnings growth has been driven by higher fee earning AUM, lower travel and entertainment expenses and positive operating leverage. Margins have been offset somewhat by the layering in of public company expenses. Adjusted net income of $41 million grew by 162% as compared to the same quarter last year. For the trailing 12 months, we generated an ANI of $110 million, representing a longer term CAGR of 42% driven by FRE growth and strong net performance fees.

On slide 15, we highlight a couple of key balance sheet items. Gross accrued carry continued to increase driven by strong underlying investment performance ending the quarter at nearly $1.1 billion. This is up 20% from the prior quarter and up over 225% over the last 12 months.

As a reminder, changes in our accrued carry balance reflect our share of the unrealized gains or losses of our client portfolios on a one-quarter lag. On the bottom chart, our own investment portfolio ended the quarter at $83 million, up 11% from the prior quarter and up 64% over the prior year, reflecting both market appreciation and net contributions. Unfunded commitments to these programs are $54 million as of quarter end.

Moving to slide 16. We manage a large pool of over $43 billion in performance fee eligible capital. Importantly this capital is widely diversified across approximately 130 programs with about 90 of these programs, reflecting an accrued carry position as of June 30th. Nearly 70% of our unrealized carry was tied to programs with vintages of 2016 or earlier, which means that these programs have entered harvesting mode. 65% of this unrealized carry is sourced from vehicles with deal by deal waterfall, meaning realized carry may be payable at the time of investment exit.

This concludes our prepared remarks. I'll now turn it back over to the operator to open the line for any questions.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Alex Blostein from Goldman Sachs. Please go ahead.

[Alex Blostein, Goldman Sachs]

Thanks. Good afternoon. Thanks for taking the question. I wanted to start with the performance fee dynamic, obviously, very strong in the quarter and accrued carry balances continue to improve here, not surprisingly I guess given the backdrop in the market. How are you guys thinking about the cash flow utilization of the business given the pickup in performance fees, which is likely going to continue here?

[Scott Hart, Co-Chief Executive Officer]

Sure. Thanks Alex for the question. This is Scott. I'll probably start with just a quick comment on the continued trend in performance related earnings that you referenced and then I'll maybe ask Johnny to comment on the cash flow dynamics that you referenced. But look we would agree and I think that trend that you referenced is one that we've talked about over the last couple of quarters. I think it really reflects a few different things.

One, is the market activity. And as we've talked about in the past the fact that all exit routes really have been open and available to us here. Two, is just the continued maturation of our carry programs and we show the breakout by vintage year of some of those programs and how they've developed over time. And third is performance that we've experienced both in terms of the realized performance fees but also as -- accrued carry balances.

But with that Johnny maybe I'll turn it to you to comment briefly on the cash flow utilization there.

[Johnny Randel, Chief Financial Officer]

Yeah. Sure Scott. I think as Mike mentioned with the closing of the Greenspring transaction, we do anticipate using some cash on the balance sheet. As we've talked about before, we'll continue to look at dividend levels and just making sure we're using the cash in the most strategic way. But I think in the near term, it will be -- some amount will be used for Greenspring and just continue to make sure we're prepared to support the growth of the business and anything else we may need to pursue. I think we talked before we do have a fair amount of GP commitment that will need to be funded over time. So we're conscious of making sure we have the right liquidity profile as well.

[Alex Blostein, Goldman Sachs]

Got it. That's helpful. Thanks. And then secondly, I was hoping we could just get an update on sort of conversations you guys have with the partners and principals of your other subs where StepStone doesn't own 100% of the economics. Obviously, it's great to see Greenspring coming in with no NCI. You guys will own 100% of that capital stream given that StepStone share price had a nice move here. Does that at all accelerate the equity swap perhaps with some of the partners from those subs? So maybe just a rough sort of understanding kind of how those conversations are going and the timing of anything sort of potentially happening? Thanks.

[Scott Hart, Co-Chief Executive Officer]

Sure. Mike McCabe, do you want to take that one?

[Mike McCabe, Head of Strategy]

Yeah. Thanks, Scott. And thanks for the question. As we've discussed in the past, we remain actively in dialogue with the various teams, infrastructure private credit and real estate. And as we discussed in the past, they are all experiencing significant growth in various levels. And I think as the passage of time continues that conversation will continue. And when the time is right, I think you can expect to see integration conversations picking up. You raised a good point about the value of our stock and certainly it is a very attractive currency to utilize something like that. At the moment, the teams are still growing their businesses and we'll keep you posted as and when the timing should change there. But at the moment there's nothing really to report that's actionable Alex.

[Alex Blostein, Goldman Sachs]

Got it. Thank you very much.

[Operator]

The next question comes from Ken Worthington with JPMorgan. Please go ahead.

[Ken Worthington, JPMorgan]

Hi. Good afternoon. With your -- thank you for the additional comments on Greenspring. Maybe some additional color there. Since the deal was announced, what have been the incoming LP communications been like since the deal was announced? And then, if you could remind us again I think the VC community is pretty small and many of the highest regarded managers are closed. So how many of those top managers does Greenspring really have access to as their new products come out?

[Scott Hart, Co-Chief Executive Officer]

Sure. Thanks, Ken. On the LP communication front look clearly there's been a tremendous amount of communication with both the existing StepStone clients as well as the Greenspring LPs. I would say that communication has been quite positive, I think similar to the conversations that we've had with many of you, the strategic rationale for the combination is well understood, I think is viewed as being consistent with the track record of M&A and really bringing on experienced sizable teams to really build out or accelerate the build-out of our capabilities. They certainly understand the fact that this creates a market leader in the venture capital and growth equity solutions space and understand that this will allow us to do some things that neither of us would have necessarily been able to do individually prior to the combination. So that's sort of from the StepStone angle I think from the Greenspring angle as well again very well understood in terms of the rationale for the transaction. And I think we're making good progress in conversations with LPs there.

To the second part of your question just around the VC community and the GP relationships. Clearly, one of the things that this combination does is it significantly expands the number of GP relationships. You can imagine that Greenspring having been in this business for the past 20 years, does have relationships with many of the leading venture capital managers. Similarly, StepStone has been able to build a number of important relationships really on behalf of many of our clients over the last 14 years here and when put together have multiples of the number of relationships. Even that Greenspring had on its own here. And so as we think about the growth in the venture opportunity again in some ways it has gone from purely being an access game to a much more sizable, scalable opportunity given some of the trends we talked about during the announcement call around just companies staying private for longer. And as we think about the importance of having a sizable global platform. So, on that front I think we'll be very well positioned given the GP relationships across the combined business.

[Ken Worthington, JPMorgan]

Okay. Great. And then just on CPRIM I think you were at maybe $135 million of assets in March $150 million now so we're growing nicely. How is that pace of interest in CPRIM growing? I think you were on maybe 50 platforms last quarter. How is that continuing to build out? And how is that education process ramping? And then lastly here I think these products get to a certain size where they can really start to take off. Merrill wouldn't want to be 50% of any given fund. So there -- is there a size where the growth on this fund would -- might really start to inflect and just go completely ballistic or vertical? If so what might that level be?

[Scott Hart, Co-Chief Executive Officer]

Sure. Jason Ment, do you want to take that one?

[Jason Ment, President & Co-Chief Operating Officer]

Yes Ken. This is Jason. So in terms of the number of platforms we are on -- including RIAs and the IBDs here in the US and then the non-US platforms we're now pushing 60. In terms of the education process and the ramp the number of meetings we're getting with new platforms has continued a pace with that education process as to why private markets? If private markets why StepStone? If StepStone why CPRIM? Those conversations have continued to be very positive as evidenced by the growth in the number of platforms that have approved us.

We are now at a scale where the IBDs are generally going to be on side from a size perspective. And so, we've kind of reached that critical mass and we're excited about that. And the post-period flows have been strong this past month as well evidencing the beginnings of some inflection. I'm probably not going to use the word ballistic on any earnings call ever. But we're certainly excited about where we are now. And then in terms of the wires as you note there is kind of twofold to the matrix. One how big is the fund and then two what are the monthly flows. And so I would say we're now thinking about that in terms of months rather than years in terms of when we're eligible for those platforms.

[Ken Worthington, JPMorgan]

Outstanding, okay. Thank you so much.

[Operator]

[Operator Instructions] The next question comes from Michael Cyprys from Morgan Stanley. Please go ahead.

[Michael Cyprys, Morgan Stanley]

Hey good afternoon. Thanks for taking the question. Just as we look at your fee-earning capital that continues to grow nicely year-on-year. And if I recall correctly your fee earning capital you get paid based on invested or deployed capital if you wouldn't mind just confirming that? And just in the context of looking across the industry we've seen a lot GPs, put capital to work here in the June quarter. And I think there's some expectations for that to continue at a very strong pace into the end of the year.

So I guess when I look at your gross contributions one might have expected it to be perhaps a little bit higher than what you had put up. So maybe you can help a little -- help unpack some of the moving pieces within the contributions in your separate accounts this quarter. And if looking back at the March quarter where it was substantially higher was that any sort of pull forward or anticipatory of large deployment expectations into the June quarter? And how are things looking as you look out to the September and December quarter for gross contributions?

[Scott Hart, Co-Chief Executive Officer]

Great. Thanks, Mike for the question. This is Scott. So we had about $1 billion of additions in terms of fee-earning AUM for the quarter. And maybe, first, let me address your question around whether we paid on invested versus committed capital. Just as a reminder, it's a mix of both.

We certainly have a number of both commingled funds and separate accounts where we paid on committed capital. But the driver of the undeployed fee-earning capital that we talk about is, commitments to accounts that are going to pay on invested capital and will therefore convert into fee-earning AUM, as that capital is invested.

But of the $1 billion of fee-earning AUM additions in the quarter, that was a combination of about $700 million of deployment and a couple of hundred million dollars of additions on the commingled fund side. Part of that was driven by our growth equity fund, which closed on incremental $130 million and also commitments to CPRIM and deployment from our private debt funds.

Certainly, when you look at that relative to the $5 billion of fee-earning AUM additions in the prior quarter, it is a bit more modest. But I think, in our view, a solid quarter on the back of that very strong quarter, one quarter ago.

And I think that highlights a bit of the lumpiness that can take place from quarter-to-quarter, which is really one of the reasons that point to the longer-term trends, whether you're looking at fee-earning AUM or management advisory fees or fee-related earnings, when you look at it on a year-over-year basis continue to grow at mid-20% to high 20% rates.

Now, all of that being said, from a deployment standpoint, this quarter, I would say, private equity continued to be quite active, really across all different strategies. Although, some of those strategies, like secondaries may have been more activity in funds that pay on committed capital as opposed to invested.

Private debt which is another of our asset classes that tends to have accounts that pay on invested capital, had a slightly slower quarter relative to the prior quarter, where we had been quite active, as we highlighted during our earnings call last quarter.

And we saw an uptick in activity across both real estate and infrastructure -- real estate in particular is one we had highlighted in past calls, as having seen a slower recovery. We have now seen that recovery start to take place. But again, not all of that activity takes place in accounts that pay on invested capital.

So we do continue to think that there is an opportunity to continue to be quite active on the investment front here. We feel very good about the pipeline of opportunities that we continue to work on here. In fact, some of them have -- we expect will or in some cases already have closed.

So, for example, our private equity co-investment fund recently held its first close on approximately $500 million of capital. Now that happened subsequent to quarter end and will be activated as that fund has started to be invested. But again, it does come down to timing in certain cases here.

[Michael Cyprys, Morgan Stanley]

Great. And if I could just ask a follow-up question on the fee-related earnings margin that continues to come in ahead of expectations, about 30% or so in the quarter. I guess the question here is, how much of the new public company costs would you say are in the run rate at this point?

What's left in terms of what might be coming in, imagine, with eventual some normalization in T&E coming through, maybe into the second half, or into calendar 2022? Just how much pressure could we see from here on the FRE margin? How do you see that trending? And maybe you could talk through some of the puts and takes.

[Scott Hart, Co-Chief Executive Officer]

Sure. So, certainly, at this point, the bulk of -- the public company expenses are incorporated there, but I might just turn it to Johnny to comment in more detail there.

[Johnny Randel, Chief Financial Officer]

Yes, sure. Thanks, Scott. Yes, we believe most of the public company expenses have made their way in. We do expect some increases to come on from SOX compliance, other things you need to do and D&O insurance is still showing meaningful increases. But for the most part that has worked its way in.

As you mentioned, we do expect T&E to return. So I think when we kind of normalize this year, this quarter versus a year ago quarter, there was about a 300 basis point improvement that kind of gets masked.

And it's hard to say when that T&E comes back, but we do think there is pressure as we kind of get out into the back half of the year and start traveling again. So I think we've said before, kind of, high 20s seems to be where we think we likely are, when things kind of get up and running, but the timing of that is still unclear -- in the near term -- sorry, high 20s in the near term.

[Michael Cyprys, Morgan Stanley]

Great. Thank you.

[Operator]

This concludes the question-and-answer session. I'd like to turn the conference back over to Scott Hart for any closing remarks.

[Scott Hart, Co-Chief Executive Officer]

Great. Well, thanks, everyone for joining the call. We certainly appreciate the continued interest and the questions and we look forward to updating you in future quarters. Thank you.

[Operator]

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.