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Envestnet Inc
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Good day, everyone, and welcome to the Envestnet Fourth Quarter 2017 Earnings Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Mr. Chris Curtis, Division CFO and Head of Investor Relations. Please go ahead, sir.
Thank you, and good afternoon. With me on today's call are Jud Bergman, Chairman and Chief Executive Officer; and Pete D'Arrigo, Chief Financial Officer. Our fourth quarter 2017 earnings press release and associated Form 8-K can be found at envestnet.com under the Investor Relations section.
During this conference call, we will be discussing certain non-GAAP information including adjusted revenues, adjusted EBITDA, adjusted net income, and adjusted net income per share. This information is not calculated in accordance with GAAP and may be calculated differently than similar non-GAAP information for other companies. Quantitative reconciliations of our non-GAAP financial information to the most directly comparable GAAP information appear in today's press release.
During the call we will also be discussing certain forward-looking information. These discussions are not guarantees of future performance, and therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause them to differ materially from what we expect. Please refer to our most recent SEC filings as well as our earnings press release, which are available on our website for more information on factors that could affect these matters.
This call is being webcast live and will be available for replay for one month on our website. All remarks made during the call are current at the time of the call and will not be updated to reflect subsequent material developments. We will take questions after our prepared remarks.
And with that, I will turn the call over to Jud.
Thank you, Chris. I add my own welcome to everyone. Thank you for joining us today.
The fourth quarter completed a year of solid organic growth in revenue, adjusted EBITDA and earnings for Envestnet, and it was driven by strong execution and a healthy market environment.
As a result of our strong performance in the fourth quarter, we delivered 17% growth in adjusted revenue, 27% growth in adjusted EBITDA and adjusted earnings per share increased by 25% over the prior year's quarter.
For the full year, adjusted revenue increased 18%, adjusted EBITDA grew 30% and adjusted earnings per share increased 34% over the prior year. As we expanded our margins through operating leverage and benefited from the cost synergies realized from previous consolidating acquisitions.
For the full year of 2017 advisors with assets under management or administration, grew 11%, accounts per advisor increased nearly 12%. This resulted in an account growth of 24%. By the end of 2017 our wealth platform supported nearly 60,000 advisors and increased more than 5,000 during the year, almost 7 million investor accounts. And nearly 1.4 trillion in advisor supported assets.
These metrics drove record results in revenue adjusted EBITDA and adjusted net income per share. Our results were strong across our business with the net segment which includes our enterprise and advisor wealth management offerings, growing revenue 18% over the prior year.
The Yodlee segment performed equally well, growing revenue 19%, both segments expanded margins meaningfully.
A year ago, we introduced our goal of making Envestnet, the preferred operating system for financial wellness. And how Envestnet can help advisors and enterprisers deliver better outcomes through this broader lens of opportunity.
Financial wellness is a logical extension of the value we have been providing to advisors since day one. We began as a turn-key asset management platform, providing the software, services and access to investment solutions, necessary for fee-based advisors to better serve their clients and for those same advisors to compete effectively against larger firms.
We later unbundled our investment management offerings from our platform technology and even later began unbundling certain components of our platform. For example, performance reporting becoming in the process the leading unified open architecture wealth management platform serving the independent advisor as well as advisors at larger broker dealers banks, insurance companies and other financial services firms.
Today, thanks to years of effective innovation, and deliberate strategic activity, we are offering far more than investment management technology to advisors. Our technology, our investment solutions, data capabilities including analytics, financial planning and other applications and the services we provide enable us to deliver on this very important financial wellness opportunity.
We believe that for the advice driven individual, financial wellness has five main components; planning, budgeting, investing, managing credit, and protecting. To describe each briefly, planning starts with gaining a deep understanding of the clients and their long-term and current situation. It includes developing financial plans that achieve short and long-term goals.
Budgeting is about evaluating spending pattern relative to income, including understanding sources and timing of cash inflows and outflows. Investing, is the central action – from a robust financial plan, aiming to have sufficient income in the long-term to achieve our client’s goals and allocating investment assets among various asset classes, seeking to maximize returns, net of costs, for a given level or risks.
Managing credit, is essential to a client's financial health, when appropriately and opportunistically deployed through a long mortgages or other sources, to help achieve goals in the areas of education, real estate, or business.
And finally, advisor assisted guaranteed income and protection products that ensure the security of assets and personnel data, can play a very key role in meeting long term goals.
Now, we are currently and already delivering on much of this financial wellness vision, including the planning, budgeting and investing portions of it. And much of this we've built from the ground up, some of these capabilities we've acquired through transactions like Yodlee or Finance Logics.
One example of a customer embracing a broader set of opportunities to serve their clients is Edelman Financial Services. -Edelman is one of the nation's largest independent financial planning firms, providing planning and investment management services to nearly 36,000 individuals and families, and managing more than $21.7 billion in assets.
Envestnet's platform will support the Edelman managed asset program by providing advanced technology integration, that includes comprehensive financial planning tools, unified managed account technology, and access to Envestnet's award winning quantitative portfolios.
In addition, the broad capabilities we've already providing customers like Edelman, another example is I Envestnet Envision our data management solution for enterprises that will be launch at our Advisor Summit this coming May. This offering combines investment data, aggregated consumer data, analytics and performance measurement and enables large financial institutions to better serve their clients.
Also, we are beginning to develop solutions that help enterprises and advisors to execute on the managing credit and protection areas of financial wellness. As we look to the future, we're specifically beginning to invest in these and other areas of financial wellness to position ourselves to realize the long-term growth opportunities we see. And this investments activity we expect will begin in the second half of the coming year.
Before I turn over to Pete, I do want to comment on some client loss activity. In the fourth quarter, we began to see the effects of some recent client losses, which appeared in our redemption activity. Absent those losses redemptions would have looked quite typical during the quarter at about 2% per month.
In our experience in the rare cases where we do lose customers, it's usually due to one of two reasons. First, it is as the industry consolidates, it's sometimes results in a customer being acquired by another firm, that does not use our solutions. Now these consolidating transactions can go either way, quite often we are the beneficiary as an existing customer of the acquirer. But in a couple of cases recently, the other was the case, where an existing investment client was acquired by an acquirer that does not use investment technology.
And a second type of customer loss are with customers obtained through consolidating acquisitions. When we model consolidating acquisitions, we do not expect the 100% client retention. The majority of the value created from consolidating acquisitions comes from the operating efficiencies and incremental cash flow and not the revenue growth at least in the first few years post-integration. This was the case with FundQuest, with WMS and with PlaceMark.
Net of client losses we have delivered a return on invested capital that met or exceeded our identified targets for each of these acquisitions. We had client loss activity that falls into both buckets during the fourth quarter, and we expect to see some carryover effects in early 2018 and our guidance fully incorporates the expected financial impact in the coming year.
At this point, I'll turn it over to Pete and then I'll cover our priorities for 2018.
Thank you, Jud. I'm going to review our fourth quarter results and then spend some time on our full year and first quarter guidance for 2018.
Briefly summarizing investments results comparing the fourth quarter of 2017 to 2016, adjusted revenue grew 17% to $183 million, recurring revenue was 96% of the total during the quarter and revenue from subscriptions and licensing was 36% of adjusted revenue, both of which are consistent with last year.
This growth and composition of revenue is consistent with our expectations. Adjusted EBITDA was $38.7 million a 27% increase over last year, as we continue to manage the business to balance profitability with reinvestment and growth. Adjusted earnings per share, was $0.40 in the fourth quarter, $0.08 or 25% higher than the fourth quarter of last year.
Before I summarize our outlook for the first quarter and full year of 2018, I'd like to provide some context as there are few items which effect comparability to our 2017 results. As we build up the guidance there are four steps. In particular we start with the growth in the core business, to that we add the impact of the FolioDynamix acquisition and consider the overall effects of the new revenue recognition accounting standard and finally incorporate the impact of the new tax law and income taxes.
Starting with the core business, we expect growth to be consistent with our long-term targets and we expect to maintain the 1.2 times relationship between growth and revenue and adjusted EBITDA within our base of operations.
Our outlook for 2018 is consistent with our approach to guidance last year. Today's guidance remains market neutral using December asset values, although we acknowledge an environment we have increased volatility, can have a negative impact both on redemption rates and on growth sales.
Our full year guidance is for 12% to 14% revenue growth and 15% to 17% adjusted EBITDA growth, from the core business. Second for FolioDynamix, given we close the transaction on January 2, will include Folios results for all of 2018.
As we noted on our prior earnings call, we expect FolioDynamix to be marginally accretive to adjusted earnings per share in 2018, this is a function of adjusted EBITDA exceeding our interest costs to finance the transaction.
FolioDynamix adds 9% to 10% in revenue growth and 5 to 6 percentage points in adjusted EBITDA growth as we began the integration process of this acquisition business.
Third, the new revenue recognition accounting standard will impact our financial statements, while the rule will have no material effect on our operations revenues and costs to revenues will be lower under the new rule. Beginning in the first quarter of 2018, due to the treatment of certain third-party fees both revenue and costs of revenue will decrease equally with no effect on profitability or operating leverage.
The net impact of the new revenue recognition rule, is to reduce revenue by 2 to 3 percentage points in 2018 with not impact on EBITDA. Also, we are incorporating the investment in financial wellness growth initiatives, Jud mentioned, which reduces consolidated adjusted EBITDA between 2% and 3%. Adding all of that up for 2018 we expect revenue will grow 18% to 20% to a range of $808 million to $823 million compared to 2017.
We expect adjusted EBITDA will grow 17% to 20% to a range of $151 million to $155 million and adjusted earnings per share to be up 36% to 40% to a range of $1.78 to $1.83. This is all summarized in a table in the earnings release.
With the passage of the Tax Cuts and Jobs Act there are also be changes in the way we present income taxes. As we have noted for some time investment is currently not a significant federal cash tax payer, and we expect to full utilize our net operating losses, this situation is unchanged with the new tax law.
For purposes of calculating and reporting adjusted net income and adjusted net income per share, we are reducing our estimated normalized effective tax rate from 40% to 27%, which reflects the new 21% federal rate under the new law and an incremental 6% for state taxes.
Turning to the first quarter, we expect total revenue to be between $192 million and $195 million, up 22% to 24% compared to the prior year. Asset based revenue between $118 million and $120 million or 25% to 27% higher than 2017. The implied effective fee rate on our December 31 assets under management or administration is 10.5 to 10.7 basis points.
However, of the nearly $900 billion in assets with FolioDynamix, about $42 billion of that is earned fees priced to basis points. So including those assets in the beginning balance, the effective fee rate would be between 9.6 and 9.8 basis points. And we expect that to be closer to our run rate for Q4 and beyond.
Similar to prior years, we expect operating expenses to increase sequentially from the fourth quarter due to the seasonal nature of certain items particularly personnel expenses namely payroll taxes and other benefits all of which are significantly higher in the first quarter compared to the fourth quarter. And this impact will be increase further due to the inclusion of FolioDynamix for the first quarter.
Adjusted EBITDA for the first quarter should be between $30.5 million and $31.5 million which is 18% to 22% higher than 2017. And using a normalized long term effective tax rate of 27% and assuming approximately $47 million diluted shares outstanding, we expect adjusted earnings per share of $0.36 in the quarter.
Concluding with some comments on capital structure, we ended the fourth quarter with total debt of $240 million on January 2nd, we borrowed $195 million to finance the purchase of FolioDynamix. As a result, current debt levels are closer to $435 million, about 3.4 times our adjusted EBITDA for 2017. Priorities for our cash flow in 2018 continue to be investing in the growth of the business and supporting our long-term growth initiatives and paying down debt.
Thank you for your support at Envestnet. And at this point I'll turn it back to Jud for some closing comments.
Thank you, Pete. As we begin 2018, our priorities are first, to execute on our organic growth potential; second, to successfully integrate FolioDynamix customers and employees; and third, to align our organization and development efforts to fully realize our potential to become preferred operating system for financial wellness a broadening of our mandate from wealth management to financial wellness.
As Pete mentioned, our core growth expectations for 2018 are consistent with our long-term targets. As a reminder, we target mid-teens organic revenue growth with adjusted EBITDA growing at least 1.2 times revenue growth in our core businesses. We believe this is sustainable for the foreseeable future as we build our advice and data-centric intelligence systems for financial wellness.
Thank you again for your time this afternoon. Thank you for your support of Envestnet. And with the completion of our prepared remarks, we are happy to take your questions.
Thank you. [Operator Instructions] We'll go first to Chris Shutler with William Blair.
Hi guys good afternoon. On the Q4 customer losses Jud, I'm guessing some of those are pretty well-known names out there, some of the headlines over the course of the year. Can you confirm that? And can you give us some sense of how those customer losses impacted the 2018 guidance? Can you put a rough number on it?
So, I think Chris, there are names out there. It's not our policy nor intend to identify client losses by name. so, you can make your own inferences from that. And any quantification that we have is included in the going forward guidance for both the quarter and for the year.
Okay. I guess what I'm trying to get out it just seem like the 15% to 17% EBITDA growth in the core business when markets are extremely strong, and convergences were very strong just seems like up pretty low number. I know you trying to be conservative, but I just wanted if I missing something?
Well, it's less than a handful of client losses. And it has an effect on the EBITDA growth rates and the revenue growth rates.
Okay, fair enough. On the accounting impacted 2% to 3% on revenue growth rate, is that pretty consistent across the quarters and does that impact AUM/AUA licensing. How should we think about the impact?
It is consistent across the quarters and it will affect. Again this is, it's not going to effect of profitability as I described but it's a question of -- a number of clients where again as you are well aware the cost of revenue recognizes managers payments and sometime those going opposite directions, sometimes they recognized net of those manager payments and sometimes it's gross of manager payments and there is more control over those accounts within our platform and within the services we're providing. So, it's not one single direction, but the net of it is that there is reduction in revenue which is equally offset by a reduction in the cost of revenue. So, there is no impact on profitability.
Okay. And then lastly just on FolioDynamix, as you guys look at Folio's largest customers and their -- I guess their fastest growing customers. Can you give us a sense of overtime, how offend on the commission side or a client as using Folio and on the advisor side maybe their advisory side they are using somebody other than Envestnet, how offend is that the case? Just hoping you can frame kind of the up-sale potential that you made realized over time from their client base. Thanks.
So, the up sale or something that we see as sort of I think icing on the cake, it something that we do expect overtime, is not something that we guided to or suggested in our return on investment analysis which is driven by cost synergies.
However, the general case when an enterprise has adopted FolioDynamix trading tools is that it's a trading tool of that spends their entire advisor activity. Both fee based, and brokerage or commission based.
There are some opportunities out there for Envestnet to become the fee-based solution where it's in primarily in for commission base business. There is a broader set of opportunities where we could extend the FDX capabilities into Envestnet enterprises where we have not provided that in the past and leverage that going forward.
So that will take place not immediately but overtime, first of all we're completing the integration and then we expect that we'll be able to offer a broader solution based on the FDX capabilities to existing Envestnet enterprise clients.
The other area of potential benefit is that, we expect that we will be even more competitive than we currently are for new enterprise signups, new enterprise conversions, new enterprise engagements because of the expanded capability.
All right. Thank you.
We know take your question from Chris Donat with Sandler O'Neill.
Hi, Chris.
Good afternoon. Hi, thanks for taking my questions. I want to ask about your guidance on EBITDA margins and Peter looks like what the accounting came that's going to represent like a 50% basis points change to that EBITDA margin just because you going to lower denominator from revenues. But by math you are guiding to about a 16% EBITDA margin for the first quarter of 2018 down from nearly 2019 for all of 2017,
I'm just trying to figure out what the headwinds are I mean you got the accounting change in there and you've got the growth initiatives, just anything else waving on EBITDA margins there and FolioDynamix of course?
Yes, Folios in there two and then again just the seasonal adjustment from Q4 to Q1.
Okay and then as we think about the second quarter, some of the stuff like payroll rolls-off, right, so because look that you got a decent ramp in quarterly earnings from the $0.36 in the first quarter, the full year number.
Right, that's consistent with the way 2017 played out as well.
Okay. And then just as we think about our modeling here, with FolioDynamix revenue can you remind us, you talked in the presentation when you announced the acquisition of what is FolioDynamix wasn't revenues, but you tell it aligns up with sort of the lines on the income statement with roughly $10 million of quarterly revenue from FolioDynamix is it the split between AUA, AUM, fee-based et cetera?
Yes, so, I don't want to get into a lot of detail a lot of granular level on this call, I am happy to go through with you but, generally speaking overall, FolioDynamix where there is fee based revenue will be recognized with gross and net and the number we are talking about four was primarily a net number for the impact as we were still analyzing that impact, and so overall the revenue is going to come in, about 70% of it is going to be in the fee base side, which will have some costs and then the other 30% will be more on the subscription and licensing side.
I think if I can go behind your question. The $10 million per quarter, you're referencing was the net revenue that we gave guidance on for 2018 earlier Chris and the gross revenues that we will be recognizing is part of the revenue recognition changes will be significantly higher than that, and you can calculate what that gross revenue was going to be based on the guidance of 9% to 10% growth year-over-year.
Okay. And I'll follow-up.
I think that's what you were asking. Right.
Yes, that's, – yeah you got a bunch of moving parts here, I am just trying to understand all of them.
And then just lastly, Jud kind of philosophically on a couple of client loses as you think about the history of Envestnet it's not something I have seen very often, I mean it seems like the exception approves the rule that you don't lose clients very much. Nothing, do you feel anything has changed so this is just it does happen periodically, and you move on or is there something different going on?
So, with respect to the competitiveness of the product set, I am certain that nothing new is going on. With respect to the increase of level of merger and acquisition activity and financial services in general and in particular within broker dealers and the custodial area, I think that this is a new and I think it may be with us for some period of time, I think that those kinds of strategic activity are going to if anything stay higher than it’s been in the past, for the foreseeable future.
I think the main thing to remember though is that while it's happened rarely in the past, we have been to able to plough through those things by just growing organically both organic growth through same-store sales if you will and organic growth through new enterprise acquisition and conversion.
But it's not a product set that and I guess that's the good news. On the other hand, I think that in the consolidating space we're going to be in the market share leader we will probably win more than we lose, but it will not always be predictable and always to the same side.
Understood. But thanks for -- I appreciate it.
We'll take our next question from David Grossman with Stifel.
Hi, David.
Hi Jud, good afternoon. So, I wonder if I can just go back just some of the mechanics. First in terms of the losses and the client base. I think you identified two buckets. Can you give us a sense of how much of that was related to just straight M&A that just went away from your versus? And I'm not sure I understand the all the bucket that well but if I understood you right if that where you're acquiring other companies and you have attrition within the base of the companies that you've acquired.
So maybe you could just help us understand the relative magnitudes between those two if I got them right. And how that happens, if forgot that second bucket right why that happens when you acquire a customer and if it --.
Yeah, I understand the question. The first bucket is where the majority of the impact falls coming from merger and acquisition activity in the industry. The second bucket is when we do a consolidating acquisition, the way we get the savings is through conversions. When we do that conversion it prompts a review of the acquired companies, what are we going to do about this conversion?
It sometimes prompts a review to bring that service in-house if they're going to, if they're going to go through full conversion. It's sometimes enables a client to look for solution elsewhere. And so, it's the conversion activity, which is a necessary for us to realize the operating efficiency that prompts client changes from time-to-time.
And so, all of the client loss activity falls into those two buckets, either client disruptions from merger and acquisition activity or client disruption that results from the impending conversion of making the consolidating transition work across all client base.
Got it. And then in terms of the how to think about the assumptions underlying in 2018? If I heard you right, you said that you could see some elevated redemptions related to these dynamics in the 2018. So maybe if you could just explain that as well as how that kind a factored into the 2018 guidance, in terms of the assumptions on redemptions.
Because I actually thought the volatility alone in the marketplace would actually create kind of a higher redemption assumption as well. So just trying to kind of understand those two dynamics and how they impacted your 2018 guidance?
Okay. So, for much of 2017, redemptions were below our forecast. It's one of the main reasons that we outperformed as strongly as we did versus our initial guidance on the year.
So. in trying to model and anticipate what is what we expect to occur over the year, is we expect over the year a base level of redemption rate of 2% per month, which would be more of I would characterize it as a return to normal, higher than what we experienced through 2017, except for the heightened activity in Q4, which was a result not of market volatility but a result of client losses.
So, now we expect there to be some client loss activity that continues into the early part of 2018. So, when Q1 comes around, Q2 comes around, no one should be surprised to see elevated levels of redemption, and no one should expect that that is due primarily or exclusively to increase market volatility. Now that's all to say, we expect there to be higher redemption rates throughout 2018 than there were in 2017.
But not abnormally high by historic standards. And in the first quarter or two of 2018, we expect to see some continued heightened redemption activity due to the client losses that we identified.
Got it, okay thanks for that. And then just the third question really is around the incremental investments that you identified in terms of the growth initiatives and maybe you could just outline, what you're seeing in the market place that may have lead you to the conclusion that you needed to kind of invest at a higher rate and maybe help us understand how much of the increment that you are identifying and really calling out this year is from that effort and the need to kind of invest at a higher rate or an accelerated rate, versus what maybe happening in terms of economic for the core business?
So, as we look at our core business, we see that the financial planning, the data aggregation and data analytics, the wealth management technology and the fiduciary solutions, the asset management solutions, are a business that's going to have a core growth of an attractive profile and we believe that we can grow cash flow and adjusted earnings per share faster than the revenue growth owing to economies of scale.
As we have understood, more clearly our capabilities in data and data analytics, we're finding applications to data and data analytics that go beyond that narrow scope, that narrow worse scope of financial planning data aggregation and investment technology. We are finding that the data is uncovering opportunities for advisors and for enterprises in broader areas and those broader areas are promising and those broader areas are in the areas of protection both data security protection as well as retirement income protection and eventually we expect that there will be enhanced opportunities perhaps with respect to credit.
All around an advisor’s centric delivery model, advisors who want to capabilities to go deeper with the opportunities that the data is uncovering, that the data aggregation and the data analytics has been covering.
So what – we are able to grow the core business at a nice rate with the investment that we have identified in the past, but we see that in the second half of the year we would like to extend beyond planning, data and investment technology, two, to this adjacency of protection and there is an investment that we intent to make in the second half of the year around that, that we believe will yield a very favorable ROIC profile overtime, and we are guiding for that investment that we expect to make in the second half of the year with this overall guidance.
Okay, great. Thanks for that color. Appreciate it.
[Operator instructions]. We'll go next to Peter Heckmann, with D. A. Davidson.
Hi guy. This is Alexis [ph] on for Peter, so I just want to make sure firstly that we're understanding redemption rate correctly. So, you mentioned that 2018 is going to see a return to normal values, is that going to be the 2% per month that we saw for most 2017 or will it be a higher value?
No, we are expecting that the normal redemption activity will come in, we are expecting 2% per month for the year of 2018 which is higher than what we experienced in 2017.
Great, okay. Thank you for that clarification. And then where are you going to be – where you thinking FolioDynamix is going to end 2018 in terms of run rate EBITDA margins are we looking somewhere in the realm of 20%?
Not nearly that high. We are expecting -- again this on gross revenue, but it's not nearly that high. It's going to be, it's a consolidated type transaction, so to put out that component of it in terms of margin, it can be really challenging as the integration goes on. So that's however I understand where you got that number, that number based on net revenue is not a bad estimate. But because of revenue recognition we're going to be recognizing revenue on gross and so that same number on -- that same numerator on a much figure denominator is going be less.
Okay, great. That makes a lot of sense, thank you. And then finally we're seeing that Yodlee maybe didn't seen as much margin expansion in the back half of 2017 as we were expecting. Where there any discretionary investment there made by you?
No, it expanded nicely as far as we were concerned, you are saying not as much as you expected?
Yeah, that's correct.
Okay. We had some very nice margin expansion in the Yodlee segment, during 2016 and the first half of 2017. As we are getting our arms around this broader opportunity, we see that it's important that we continue to invest in data analytics and data aggregation with respect to credit and insurance barriers and that requires continuing investment in data capabilities, in particular data science capabilities. And so, we're managing the process of investing in the business that's growing nicely, and also delivering the benefits of scale to our investors.
Okay, great. Thank you so much.
[Operator Instructions] And it appears there are no further questions at this time. Mr. Jud Bergman, I would like to turn the conference back to you for any additional or closing remarks.
I want to thank you for the questions and I feel that they were a helpful amplification to understanding the business dynamics. We look forward to building on the success of a truly remarkable year in 2017 for us. And we're looking forward to new product introductions around the launch of Envestnet Envision and our Advisor Summit in May. And would invite any analysts that are still interested to be a part of that effect can work into your schedules.
You will hear more about that with the first quarter earnings which should be happening just before that Summit. Thank you for your time. And with that, we will close the call.
This concludes today's call. Thank you for your participation. You may now disconnect.