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Forestar Group Inc
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Good afternoon. And welcome to Forestar’s Third Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions]
As a reminder, this conference is being recorded. I would now turn the call over to Katie Smith, Director of Finance and Investor Relations for Forestar.
Thank you, Paul. And welcome to our call to discuss our results for the third quarter of fiscal 2021. Before we get started, today’s call includes forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Although, Forestar believes any such statements are based on reasonable assumptions, there is no assurance that actual outcomes will not be materially different.
All forward-looking statements are based upon information available to Forestar on the date of this conference call and we do not undertake any obligation to update or revise any forward-looking statements publicly.
Additional information about factors that could lead to material changes in performance is contained in Forestar’s annual report on Form 10-K and its most recent quarterly report on Form 10-Q, both of which are filed with the SEC.
This afternoon’s earnings release can be found on our website at investor.forestar.com and we plan to file our 10-Q early next week. After this call, we will post an updated investor presentation to our Investor Relations site under Events and Presentations for your reference.
Now, I’ll turn the call over to Dan Bartok, our CEO.
Thank you, Katie. Good afternoon, everyone. In addition to Katie, I am pleased to be joined on the call today by Jim Allen, our Chief Financial Officer; and Jessica Hansen, D.R. Horton’s Vice President of Investor Relations.
The Forestar team delivered an outstanding third quarter. We have built our team quickly and they have done an amazing job of executing on our development projects and identifying attractive investment opportunities.
We accelerated our development activities last year and now that those lots are beginning to deliver, it has put us in a position to capitalize on significant market demand for finished lots. This resulted in significant revenue growth and market -- margin expansion, creating meaningful value for our shareholders.
Our development teams and contractors continue to execute solidly, positioning us for long-term profitable growth. We have delivered over 11,000 lots to homebuilder’s fiscal year-to-date, enabling us to increase our expected deliveries for fiscal 2021 to between 15,500 and 16,000 lots.
Executing on our plan is delivering measurable results. Our third quarter gross profit margin increased 610 basis points year-over-year to 17.8%. Several factors contributed to this quarter’s gross margin improvement.
The demand for develop lots remains incredibly strong as homebuilders bolster their inventory positions to meet sales demand. This, combined with our strategy of pricing lots closer to the time of delivery, enable Forestar to take advantage of favorable market conditions when setting finished lot prices in select markets.
We also make further progress in delivering more lots from Forestar sourced projects and we continue to reduce our exposure to lot banking. We are committed to our returns focused business model.
Our high turnover, low risk manufacturing strategy led us to achieve a 10% return on equity for the trailing 12 months ended June 30, 2021. This was a 390-basis-point improvement year-over-year and our fifth consecutive quarter of ROE improvement. We expect to continue to increase our returns on equity and inventory as our platform gains additional maturity and scale, and our team captures increased share in their respective markets.
Jim will now discuss our third quarter results in more detail.
Thank you, Dan. In the third quarter, Forestar’s net income increased 56% to $15.8 million or $0.32 per diluted share, compared to $10.1 million or $0.21 per diluted share in the prior year quarter. For the quarter, revenues increased 76% from the prior year to $312.9 million. We sold 3,858 residential lots during the quarter, an increase of 91% year-over-year.
The average lot sales price for the quarter was $80,700, 86% of lot sold in the quarter were from development projects, up from 77% in the same quarter in 2020. Lots sold to D.R. Horton during the quarter represented 96% of Forestar’s total lot sold, down from 98% in the third quarter of fiscal 2020. We sold lots to eight builders other than D.R. Horton during the third quarter of this year, up from four builders in the same quarter last year. Dan?
Our pretax income in the third quarter increased 105% to $21.1 million, with a pretax profit margin of 6.7%. As previously announced, during the quarter we refinance our 8% senior notes due in 2024, with 3.85% senior notes that mature in 2026.
As a result of the redemption, we recognize a loss on extinguishment of debt of $18.1 million. However, the refinancing transaction resulted in substantial interest savings. Excluding that $18.1 million charge, our pretax income increased 281% to $39.2 million and our pretax profit margin improved 670 basis points to 12.5%.
In the third quarter, our gross profit margin increased 610 basis points to 17.8% from 11.7% in the prior year quarter. The improvement was primarily due to increased margins on lot sales from development projects, which was largely driven by capitalizing on the strong demand for finished lots. We continue to expect fluctuations in our gross and pretax margins, due to the quarterly mix of our lot deliveries and the timing of track sales.
SG&A expense as a percentage of revenues in the third quarter was 5.4%, an improvement of 90 basis points from 6.3% in the prior year quarter. We remain focused on efficiently managing our SG&A expenses as we build out our platform to support our significant growth. We believe we will continue to manage our business in a mid single-digit SG&A percentage. Katie?
Forestar’s underwriting criteria for new development projects includes a minimum 15% annual pretax return on inventory and a return of the initial cash investment within 36 months. During the third quarter, our investments and lots land and development totaled $400 million, of which roughly 40% was for land and 60% was for land development.
For the fiscal year-to-date, our investments in lots, land and development totaled $1.25 billion. We now expect to invest at least $1.6 billion in lots, land and development for the full year of fiscal 2021.
Forestar’s lot position at June 30th increased 91% from a year ago to 96,600 lots, of which 64,200 lots are owned and 32,400 lots are controlled through purchase contracts. Of our 64,200 owned lots 33% are under contract to sell to D.R. Horton representing at least $1.6 billion of future revenue. Another 28% of our owned lots are subject to a writer first offer to D.R. Horton under the master supply agreements.
Lots forced by Forestar continue to grow as a percentage of the company’s owned lot portfolio supporting long-term improvement in our gross margins. Of the company’s owned lot position at June 30th, 51% were forced by Forestar, up from 34% a year ago. We are continuing to target a three-year to four-year owned inventory of land and lots. Jim?
Forestar remains focused on maintaining a strong balance sheet with ample liquidity and modest leverage. We ended the quarter with $470 million of liquidity, including $120 million of unrestricted cash and $350 million of available capacity on our revolving credit facility. Total debt at June 30th was $704 million and our net debt to capital ratio at quarter end was 37.8%.
As previously announced, during the quarter we amended our revolving credit facility to increase the facility size to $410 million and extended the maturity date from 2022 to 2025. At June 30th, stockholders equity was $970 million and our book value per share increased to $19.58, up 11% from a year ago. Dan?
Looking ahead, we remain confident in the outlook for our business. Continued execution of our strategic and operational plan supported by favorable market tailwinds across our diverse national footprint positions Forestar for further success.
Forestar is uniquely positioned to gain market share through housing market and economic cycles in the highly fragmented lot development industry. Based on our results for the fiscal year-to-date and current market conditions, we now expect to deliver between 15,500 and 16,000 lots, generating approximately $1.3 billion of revenue in fiscal 2021.
We are now expecting our pretax profit margin for the full year of fiscal 2021 to be in the range of 11.5% to 12%, excluding this year’s $18.1 million loss on extinguishment of debt. Additionally, we expect our tax rate for the full fiscal year to be approximately 25%, which does imply a tax rate of approximately 26% for the fourth quarter.
Before we turn to questions, I’d like to remind everyone of Forestar’s investment highlights. We have a unique lot manufacturing business model that is very different from typical land developer, we have no unentitled land.
We are focused on developing lots for the affordably priced housing market. We have a seasoned management team that is experienced in consolidating market share and in navigating through market cycles. We have a strong balance sheet and liquidity position, with low net leverage. We have been increasingly profitable and are managing our business to be mid single-digit SG&A percentage.
Most importantly, we have a unique competitive advantage due to our relationship with D.R. Horton, the nation’s largest builder. This highly strategic relationship allows us to expand our platform nationally while minimizing risk.
To summarize, we are continuing to execute on our plan and are positioned for continued success.
Paul, at this time, we will now open line for questions.
Thank you. [Operator Instructions] Thank you. Our first question comes from Ryan Gilbert with BTIG. Please proceed with your question.
Hi, everyone. Thanks for taking my questions. The first question is just on, I guess, the overall market, and Dan, I’d appreciate any color or detail you can add on the demand that you’re seeing from homebuilders. I think that there’s been some concern in the market that homebuyer demand is leveling off a bit and it -- maybe that there’s a sense that that might be bleeding back into the land market, although from your results, that certainly doesn’t seem to be the case. So just any color that you could give us or details on demand from homebuilders would be helpful?
Yeah. Yeah. As it relates to, what the homebuilders are seeing, as I don’t really have that stronger visibility as to whether they really -- they’re really seeing a fall off in demand. What I know is that they have a hunger for lots that seems to be at this point, at least, insatiable.
Our number of finish lots that we have on our inventory actually went down this quarter, even though we delivered really strong lot deliveries, which is as fast as we can deliver and they’re buying them, and obviously, based on our guidance for the rest of the year, we expect fourth quarter to be a record breaker for us. So it’s -- at this point, we’re not seeing any lack of demand from homebuilders that want to buy lots. I think one of their constraints is the ability to get lots to build houses off [ph].
Okay. Great. Thank you. Second question is just on 2022, I think you’ve discussed, like, a 20% sustainable growth rate, with no additional capital needed on the balance sheet going forward and that’s kind of how I’ve been thinking about 2022. But your land bank is up 91% year-over-year. So it seems like you have a lot in place to do better than 20% growth. So do you think you can produce ahead of that growth rate in 2022 or just any color on 2022 would be helpful?
Yeah. Yeah. At this point it is probably too early to give any real guidance for next year. Although, we thought about it a lot preparing for this call and I’m not backing off that 20%. I feel very good that we will be able to hit that 20% growth rate, based on a lot that we have under development today.
Obviously, market conditions are strong right now and we hope that those continue. But at this point, I feel really good about that 20% guidance run. And I said, I think, next quarter what we’re going to try to tighten that up and give you some better color going forward.
Okay. Great. And then last one for me is just on pricing. It looks like your average selling price was pretty flat sequentially in the second quarter. I’m assuming that’s mostly mixed. But maybe you can just talk about what you’re seeing in the market in terms of finished lot price appreciation and how that compares to pricing of undeveloped lots?
Yeah. It is mix. We are definitely seeing some pricing power. I think that showed up in the margins. As you remember last quarter we probably guided you down for the rest of the year and we were able to overachieve on that. We are definitely seeing strength.
But we really going to look at every project on a project-by-project basis and think about the returns that we’re trying to achieve. And really looking at velocities and making sure that, as we believe there’s pricing power there we’re being very careful not to hamper that affordability of the house lot package.
But, again, I felt really good about the quarter, again, obviously, better than we probably had anticipated for the quarter in pricing power. We really are looking forward to seeing what the future brings as we say we have a lot of lots under development right now.
Okay. Great. Thanks very much.
Thank you. Our next question comes from Anthony Pettinari with Citi. Please proceed with your question.
Good afternoon. Can you talk a little bit about what drove the change in lot delivery guidance, I guess, 1,000 units at the midpoint? How much of the raised guidance was 3Q deliveries above maybe your internal expectations versus sort of the outlook for the balance of the year?
Yeah. I don’t know that I have a specific number of what was delivered in third quarter versus fourth quarter. I think it’s probably more driven by fourth quarter expectations. That -- there’s been a lot of talk in the market, at least from our perspective of delays in being able to get certain materials, there has been potentially delays in getting projects completed.
We were very careful with making sure what guidance we give, we’re comfortable with. As the -- as this quarter has unfolded and we see where we’re at on deliveries for next quarter, it made us comfortable in raising that guidance. So I feel really good about what we’re seeing for the next quarter.
Okay. That’s very helpful. And then in terms of just sort of hitting the higher or lower end of guidance, do you think it’s mostly a function of demand materializing on the part of the builders or maybe just timing or is it sort of those maybe labor permitting material related bottlenecks that, in terms of the kind of driving the greatest risk to the upside and the downside?
Yeah. I think the risk of upside versus downside is really in the delivery side. We have not seen any fall off in demand for lots. If anything, I think, the demand has increased, once again, has given us a little bit of pricing power. So I think it’s pretty good predominantly based on the ability to complete those projects that we see hitting substantial completion this quarter and being able to deliver those lots.
Okay. That’s very helpful. Maybe just one quick follow-up. In terms of cycle times, it seemed like you were able to sort of accelerate cycle times in the wake of the pandemic because of some looseness in the labor markets, obviously, that’s probably tightened quite a bit. In terms of cycle times and where they stand now, are they stable, improving, maybe deteriorating, just any color you can give there?
I think as compared to where they were six months ago, we are definitely seeing cycle times expand. Again, you’re right, we were able to kind of accelerate cycle times when we really stepped on the gas earlier last year when a lot of people were not.
And it is really into lots of things, there is delivery of certain materials, there is the ability to get inspections, it’s the ability and a little bit of it’s been weather. I always hate to use weather. But it’s been a pretty rainy season in certain parts of the country. So we’re definitely seeing an extension, but probably back to more what was normal for us a year ago or a year and a half ago, first, that extended definitely from earlier this year.
Okay. That’s helpful. I’ll turn it over.
Thank you. Our next question comes from Deepa Raghavan with Wells Fargo Securities. Please proceed with your question.
Hey. Good evening, Dan, and Jim, and Katie. Thanks for taking my question. Just following up getting -- trying to get a little bit more clarity on the kind of growth you’re experiencing, but also trying to manage your operations for that level of growth. Are there any new challenges that kind of cropped up this quarter? You mentioned a little bit in the cycle time. But labor seems like it should be more of the challenge, just given the way you’re growing. Just curious, anything new that actually cropped up this quarter, the new challenges and if you can gently talk about how you’re managing for this kind of growth, especially with regards to operations, that will be pretty helpful?
Yeah. I guess I’ll start with the second question or a second part of your question first. We have been planning for our growth for quite a while and we’ve been staffing up pretty considerably. We’ve almost doubled our headcount from a year ago on really preparing for the volumes that we have today.
So from a labor standpoint for Forestar itself, I think we’re very well positioned for us to continue to execute on our business plan. And obviously, we’ll need to continue to add staff as we continue down the growth path.
As it relates to our operators and getting projects completed. Again, I -- to some extent I feel very fortunate. We’re not really seeing delays -- any delays really related to the contractors not being able to get people on the job to complete the jobs. We are hearing that they’re having more turnover, where people are, operators are moving to another operator for a couple extra dollars an hour, but they’ve been able to replace those people. So I -- we feel good about that.
Probably the one thing that I would say, last quarter I was talking about, we’re hearing about shortages in material. We are starting to experience some delays and getting things like fittings for to put PVC pipe together. We have seen some delays related to concrete allocation and I’ve been able to get full day pours in on certain projects, where you’re kind of limited the amount of concrete you can pour.
So I think some of the things that that last quarter we were hearing about, we are starting to see some impact of, but nothing that, at this point, it has been dramatic. Yeah, I think, we’re trying to stay ahead of the curve or making sure materials are ordered earlier in the process than would have normally been appropriate.
And part of it is relying on really good contractors, our customer base is strong and our contractor base is strong. And we’ve aligned ourselves with, I think, some of the best people in the various market. So that has, I think, been very beneficial for us.
Okay. That’s helpful. This -- my second question is on the lot price increases. I mean, it’s kind of flattish, but still the trajectory is not down and inspected, it’s already at 80K. Is this where you are starting to see it stabilize a bit at this point in time or you think there’s enough -- the backdrop is still pretty strong demand wise and there’s still a supply imbalance. So I think in all fairness, expectation is lot prices have still more to run. They’re not stabilizing here. But from your perspective -- from your side, are you taking any steps -- are you undertaking any measures to keep that lot pricing -- average lot pricing under a certain affordability threshold? How are you thinking about that?
Well, we think about it on a project-by-project basis. We really look at sales velocity that the builders are experiencing in those projects or in the case of a new project, I mean, what we think is a comparable project. And we tried to make sure that we’re balancing price versus velocity.
At this point, even with a average sale price of little over $80,000. We still think it keeps us in that affordable price points. But an interesting fact is that even our average is $80,000 or median price is closer to $70,000. So over half of our lots that we sell are under $70,000, which again, I think, really sets us up well for that affordable price house today.
But yeah, as far as just trying to manage it, it’s probably where we spend a significant amount of time is on a project-by-project basis as we’re setting prices and trying to negotiate appropriate pricing is making sure that we’re keeping velocity to keep our returns high.
All right. My final one, any updates on how July is trending so far? Just curious and I’ll leave it there. Thank you.
It’s -- as far as July, again, we’re issuing our guidance today for the full year, which again implies a record breaking quarter for us in lot deliveries. So at this point, as I sit here on July 20th, I feel really good about July and I feel really good about the next two plus months ahead of us.
Thanks so much. I’ll pass it on.
Thank you. Our next question comes from Truman Patterson with Wolfe Research. Please proceed with your question.
Hey. Good afternoon, everyone, and thanks for taking my questions. First, just wanted to touch on your balance sheet and kind of spin going forward, you’re approaching that 40% net debt to total capital threshold, your own lots over 64,000 four years own if you look at kind of 2021 closings. I guess going forward, assuming that development work takes up a decent amount of networking capital right? Are you all comfortable going above that 40% threshold or should we just expect that your lot acquisition to start to moderate a little bit over the next, we’ll call it, six months to 12 months?
Our sales velocity should continue to accelerate. So we -- the need to replace the existing lots will be there. As far as am I comfortable going over 40%, we’re really managing to that 40% number. It may trend over a little 40% for a while, but our goal will be to bring it back down. It’s still about finding those projects that we believe fit our operating model and our underwriting requirements.
And frankly, it’s also a little bit harder to find those with as much other people that are out there, trying to bid up the price of land, especially in those smaller shovel ready projects, there may be just less that fit our underwriting requirements today anyway.
So I feel good about our pipeline. I think that we’re going to be very careful and making sure that we’re only buying projects that we think are really good solid projects. But, again, we’re going to guide to that 40%. We’re not -- we don’t look to exceed 40% for very long or by very much if that happens at all.
Okay. Okay. And then, you all are finding lots that are hitting your underwriting. There’s clearly some lot pricing power in the market right now, very strong builder demand in your markets. When I look back at the past couple quarters gross margin in that 18% range, same thing just looking at your guidance, it seems like it’ll be at least in that range. Is it safe to assume just given kind of the tailwinds in the market that this is kind of a new normal that we should see at least maintain out into 2022 or are there any…
You know…
… big items that we need to think about?
We’re still maturing our portfolio. I think you’re still going to see some fluctuations from quarter-to-quarter. I wouldn’t take that 18% as a run rate. I think that -- what I’ve now done at least to myself and I think maybe to you folks as well as show that we can actually hit 80% more than just once, which is really good.
But I wouldn’t -- if it was me, I wouldn’t be betting that I’m going to do that every quarter for the next umpteen quarters on that. Hopefully, that will happen and I don’t -- I can’t say that it’s impossible. But the markets still the market and I got to make those pricings fit the market.
We were really fortunate, when you really think back a year ago and when -- we had those quarters, it was our first quarter of the year or maybe last quarter when we bought a lot of land. It was really outsized for us and before all these prices ran up. So whether it was lots or just we were really smart people, but we bought a lot of land at a really good point in the market and we feel really good about the inventory that we have.
And Truman, as you’ve heard, Dan and team say over and over. I mean the focus is more on returns than it is gross margins. They’ve reported a fifth consecutive quarter of improvement in ROE and the gross margin will be what it will be based on market conditions, but they’re going to maximize their portfolio to drive the best possible return.
Okay. Okay. Fair enough. And then just final one for me, there’s been a lot of talk already on the call about very strong demand and builders are basically short lots right now. Just hoping you can give a little bit more color, are there any markets that you’re scaling back investment? Just any metros, where you perceive as a bit of a frothy land environment or are there any markets where you’re starting to see or hear builders push back a little bit or their appetite for a lot soften a little bit?
I don’t think there’s really, I think, where we’re seeing a slow up in demand. When our investor presentations decks gets published, you compare or map against -- the map last quarter, you’ll probably see we have less exposure up in the Pacific Northwest than we did before, and again, further increased exposure in Florida and in Texas.
Again, so our focus has been in the markets that we know we can get velocity and are hopefully not as governmental regulated -- governmentally regulated as other markets where we can have a more fashionable and deliverable a lot timeframe.
So, again, I -- it’s not from lack of demand, it’s more from looking at opportunities and making sure that the projects that we’re underwriting we can deliver on and so, as I say, you will see a less allocation of our dollars on lots into the Pacific Northwest right now.
Okay. Thank you and good luck on the upcoming quarter.
Great. Thanks, Truman.
Thank you. Our next question comes from Michael Rehaut with J.P. Morgan. Please proceed with your question.
Hi. This is Maggie [ph] on for Mike. Thanks for taking my questions. First, I was hoping to zero in a little bit on the gross margins this quarter. You listed several factors, driving the upside, demand, pricing lots, closer delivery, delivering more Forestar sourced lots. But I was wondering if you could maybe rank order the different drivers of that upside, maybe give a little bit more color there?
Oh boy rank order. That’s tough one. But I’d like to say is, it’s probably -- if I had to pick the top two, it is Forestar sourced transactions where we had -- where we didn’t price earlier in the transaction and it is a strong market demand. So we happen to be in a position last quarter and where we were delivering lots and had been recently priced into the market strain. But again, that -- a lot of that is driven by Forestar sourced transactions versus builder sourced transactions. And again -- and then -- and we’re growing our portfolio in the -- only in that area, now over 51% of the lots that we own are in Forestar sourced transaction.
Got it. Thanks. And second, just on SG&A. I know you spoke to kind of a mid single-digit range. I know in the past you had talk about maybe being comfortable in the kind of 5% to 6% range, so mid single-digit. But as we look forward into 2022 and kind of the next few years, can you talk about the ability to continue to see some leverage on that line and how we should be thinking about SG&A over kind of the more medium to longer term?
Yeah. I think 5% is a pretty darn good rate and at least way I was brought up and I think that we can manage to that. That mid -- is it going to be 6%? Is it going to be 4%? I think you’ll see some variability quarter-to-quarter based on volumes.
But I -- as far as can it be leveraged further? I think as our platform continues to mature and scale up, I think that you will probably see some leverage, but I don’t know that I could quantify for that for you today.
Got it. Thank you.
Thank you. Our next question comes from Alex Barron with Housing Research Center. Please proceed with your question.
Yeah. Thanks for taking my question. I was hoping you could help me understand, how sensitive are your prior is on the lots relative to the home prices? And A, are -- in other words, if home prices start to move up as they have in the last couple quarters, how quickly could you re-price your lots? And B, are the lots price is a function of the home price or is there some other metric you guys are using? Thanks.
Well, I think our -- as far as our ability to continue to move up lot prices is probably more based on the builders margins than it is on the house price itself. Obviously, they -- they’re trying to manage with certain margin themselves and I -- and if I can squeeze some of that increased margin out of it, I will know.
As far as metrics, we do not -- we don’t have any kind of true-up based on a percentage of the house price. That’s not the way we’re pricing our lots. We do our best to try to get a sense of what the market pricing is in an area. But really it is focused on the project-by-project trying to understand that balance between velocity and pricing. And hitting that number where we’re really maximizing our returns on invested dollars.
Got it. If I can ask another one on materials, as you mentioned, builders have been facing various material supply chain issues, and I think, I heard you mentioned concrete. So I was curious, if you could give us a sense whether you guys are experiencing shortages of concrete? And if so, is it just in one market or is it pretty widespread across the country?
It is really in only certain isolated markets and we’re basically -- a couple things that we’re seeing delays on. And that is, in some places, we are seeing concrete allocations, where you’re only allowed so much concrete per day as they are allocating out to their various jobs. But, again, it’s not widespread. It is only in certain location.
The other thing that we’re seeing, again, more delays on is pipe fittings. That we’re able to pretty much get pipe, but with the fitting that put the sections of PVC pipe together and there seems to be a shortage of that.
My understanding is a lot of that is being manufactured in India and because of some of the COVID issues in India that those factories have been either closed down or operating only marginally, which has created somewhat of a shortage for those fittings at least from the suppliers that we’re getting things through.
But we’ve been still able to get them as we’re trying. We learn to order them earlier in the process. But in some cases, we have had some delays in getting them on job site. But, again, pretty isolated, some of our contractors inventory more things than others. Some of them only buy to kind of outfit your job. So it isn’t that widespread, but they are things that we’re seeing.
Thank you very much.
Thank you. There are no further questions at this time. I would like to turn the floor back over to Dan Bartok for any closing comments.
Thank you, Paul. Thanks to everyone on the Forestar team for your focus and hard work. It was a great quarter. We look forward to working together to continue growing and improving our operations over the coming years. We appreciate everyone’s time on the call today. We look forward to speaking with you again in November to share our fourth quarter results and our full year results. Thank you.
This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.