Farmland Partners Inc

NYSE:FPI

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Thank you for standing by. My name is Greg, and I will be your conference operator today. At this time, I would like to welcome everyone to Farmland Partners Incorporated Q2 2024 Earnings Call. [Operator Instructions] Thank you.

I would now like to turn the call over to Luca Fabbri, President and CEO. Luca, please go ahead.

[Luca Fabbri, executive]

Thank you, Greg. Good morning, everybody, and welcome to our second quarter 2024 earnings conference call and webcast. We appreciate your presence here on this call and taking the time to join us because we see them as a very, very important opportunities to share more informally our thinking and our strategy in a more interactive format rather than the usual SEC public filings and press releases.

But first, let me turn the call over to our General Counsel, Christine Garrison, for some customary preliminary remarks. Go ahead, Christine.

[Christine Garrison, executive]

Thank you, Luca, and thank you to everyone on the call. The press release announcing our second quarter earnings was distributed after market closed yesterday. The supplemental package has been posted to the Investor Relations section of our website under the sub-header Events & Presentations. For those who listen to the recording of this presentation, we remind you that the remarks made herein are as of today, July 25, 2024, and will not be updated subsequent to this call.

During this call, we will make forward-looking statements, including statements related to the future performance of our portfolio; our identified and potential acquisitions and dispositions; impact of acquisitions, dispositions and financing activities; business development opportunities, as well as comments on our outlook for our business, rents and the broader agricultural markets.

We will also discuss certain non-GAAP financial measures, including net operating income, FFO, adjusted FFO, EBITDAre and adjusted EBITDAre. Definitions of these non-GAAP measures as well as reconciliations to the most comparable GAAP measures are included in the company's press release announcing second quarter earnings, which is available on our website, farmlandpartners.com, and is furnished as an exhibit to our current report on Form 8-K dated July 24, 2024.

Listeners are cautioned that these statements are subject to certain risks and uncertainties, many of which are difficult to predict and generally beyond our control. These risks and uncertainties can cause actual results to differ materially from our current expectations, and we advise listeners to review the risk factors discussed in our press release distributed yesterday and in documents we have filed with or furnished to the SEC.

I would now like to turn the call to our Executive Chairman, Paul Pittman. Paul?

[Paul Pittman, executive]

Thank you, Christine. I'm going to make comments about sort of 4 different topics today. One is the farm economy, generally land values, our cost control efforts and our continuing discount to the net asset value of the underlying assets we own. So starting with the farm economy.

We're in an environment today where commodity prices for the primary row crops like corn and soybeans and wheat are lower than they have been in the past several years. That is leading to certain challenges for farmers in terms of their cash flow and the strength of their balance sheets. As is typical, though, this is by no means a crisis. There are a few farmers facing gradual levels of distress, but there is no broad-based economic problems in the farm belt. This is highly consistent with what has happened in the past. And for me, I'm now on probably cycle 5 or 6 in my career.

You go into a relatively lower commodity price phase, a few of the weaker farmers from a financial point of view get into trouble. But the overall market stays quite stable and quite strong, and we expect that to be exactly the same this time. We do anticipate still getting modest rent increases on the rent rolls that we do, and we do not anticipate any significant change in our bad debt levels. And as you all probably know, our bad debt levels are almost 0, if not 0.

Turning just a second to the West Coast markets. Their commodity prices are also somewhat challenged, although there are some bright spots like citrus, where pricing is actually higher than it's been in the last couple of years. The major challenges, though, in California, assets continue to be the same, both the absolute water risk, what I call political water risk because of the rules and regulations which sometimes don't line up with the true reality of water. And then finally, continuing sort of increases in labor costs for the farmers out there coming out of what, in my perspective, are sort of bad policies coming out of Sacramento. But those are the challenges there. But again, similar to the green belt, not expecting any major crisis in that region.

Turning for a second to land values. Land values have sort of in the row crop regions hit a bit of a plateau in this industry. A plateau is kind of what down feels like. As we all know, there's a sort of 6% per annum long-term average appreciation to the underlying assets. That, of course, does not come like clockwork. It comes a little bit of a lumpy style. And to refresh your memory, we've seen really, really high appreciation rates for the last 3 or so years, possibly as high as 15% or 20% on some assets in some regions. And so, we're going to see the kind of revert to the long-term mean occur, and how that occurs is you'll go through a period where you get almost no appreciation in assets for a year or 2, and that's how you kind of stay at that long-term approximately 6% appreciation factor.

What that means in kind of a practical matter, if you're reading newspapers in the U.S. Midwest, what's gone away from the sales of high-quality farmland are still very, very strong. Our best land in Illinois and Iowa is easily $16,000 to $18,000 an acre virtually every time you try to sell it or buy it. But those sort of $20,000-plus sales that make headlines, there's frankly less of those than there were. We've never marked our internal marks that we carry on our portfolio in terms of understanding what things are worth. We never use those super high outlier transactions. They're just not where the market is. We tend to use sort of where is the 75% of deals are getting done in X price range. That's the price range we want to use when we think about the value of our portfolio. And we don't think that's going to go down very much. It's hard to even measure a 2% or 3% move either way, but it's certainly a very tight bracket. We don't see any real risk in the row crop reading the portfolio for any kind of asset price declines.

Turning then to California. California is a little different, and people are frustrated about the water and the labor cost issues I talked about. Many institutions are concerned about their exposure in that region. As I've said in prior phone calls, we will gradually, over time, lessen our exposure to that region because of those factors.

Cost cutting, as you all know, we changed the CFO role inside the organization during the quarter. We had our CFO, James Gilligan, leave the company. We promoted the long-term top accountants up into the CFO role, Susan Landi. She will speak here later today. We just didn't need that level of staffing in the finance department. When we're in a position like we are now, where we're not frankly growing very much, we're not raising a lot of capital, and we had more staffing at higher cost than made sense. James was a wonderful member of the team. We made as per his employment agreement and the payout he was permitted to get and he deserved it. This is all about cost cutting, not about performance. And Susan Landi has been the top CPA in the company for many years, and will do a great job as our CFO and help limit our overheads in the home office in Denver.

Then finally, I'm like a broken record on this, but I always want to make it clear. We continue to believe we trade at a deep, deep discount to our net asset value. I think that discount could be north of $4 or $5 a share. It is absolutely huge. We will continue to do our best to close that gap through things like asset sales and arbitraging the private market values for our assets against the public market discount. This is not a situation which we're going to allow to sit there forever. As a REIT, we're obviously constrained in the kinds of the numbers of deals we can do in any year by the tax law. And so, we'll stay in compliance with that. But we will continue to drive, as we did in the '23 calendar year, to arbitrage the high private market values for our assets against the discounts in the public market.

With that, I'm going to turn it over to Luca to make some additional comments.

[Luca Fabbri, executive]

Thank you, Paul. I only have a couple of very quick remarks. First and foremost, I want to remind everybody about the seasonality of our business from a financial reporting standpoint. Based on our Investor Relations activity and the calls that we've had, I know that we might have a couple of new investors listening to this call. And Q2 and Q3 in the calendar year tend to be the slower months because we don't have very much in the way of revenue recognition other than the revenues that are spread all over the year. Typically, the first quarter and, even more importantly, the fourth quarter in the year are the ones where we have higher revenue recognition and, therefore, higher -- more prominent performance at the bottom-line level.

Speaking of that, I think that Q2 was, relatively speaking, a very, very strong quarter for us when compared to last year. Of course, on a net income basis, last year, we had several dispositions that actually contributed to the GAAP bottom line. We try to present through our adjusted FFO and more of a view into what we consider the core performance of our business. And we had a very strong one indeed.

If you think that from a gross book value standpoint, we actually disposed of about 10.4% of our portfolio, yet our operating revenues were down only 1.2%. So I think that, that is a testament to the -- frankly the good work that we've done in improving our portfolio and pushing our revenues, and also managing our expenses. Our total operating expenses, which include, of course, overhead, which is harder to flex with the size of the company, were down 7%.

One quick note to present some questions that I certainly expect, especially after post remarks. We haven't announced any significant asset dispositions in the year. As I've mentioned in the past, in prior calls, we do expect to have some likely later in the year because of the safe harbor limitations that we are operating under this year. We are kind of postponing any disposition transactions until later in the year when we have a better view for what we have available.

And finally, one quick remark also on the CFO transition. As Paul mentioned, Susan has already been a very, very important part of our team driving SEC reporting and financial reporting in general in our company now for several years. So, thanks to her experience with the company, experience in general, and James' active roll in transition. I believe the transition was absolutely seamless.

And with that, let me turn over the call over to her for her overview of the company's financial performance. Susan?

[Susan Landi, executive]

Thank you, Luca. I'm going to cover a few items today, including the summary of the 3 and 6 months ended June 30th, a review of capital structure, comparison of year-to-date revenue and updated guidance for 2024. I'll be referring to the supplemental package, which is available in the Investor Relations section of our website under the sub-header Events & Presentation.

First, I will share a few financial metrics that appear on Page 2. For the 3 months ended, our net loss was $2.1 million, and net loss per share available to common stockholders was $0.06, lower than the same period for 2023, largely due to the impact of dispositions that occurred in 2023. AFFO was $0.5 million and AFFO per weighted share was $0.01 higher than the same period for 2023. AFFO was positively impacted by lower property taxes due to fewer properties, lower G&A expenses as part of the company's cost-cutting initiative, and increased volume of citrus sales on our directly operated properties.

For the 6 months ended June 30, our net loss was $0.6 million and net loss per share available to common stockholders was $0.05, lower than the same period for 2023, again, largely due to the impact of dispositions that occurred in 2023. AFFO was $3.3 million and AFFO per weighted average share was $0.07, higher than the same period for 2023. AFFO was positively impacted by $1.2 million of income from forfeited deposits in the first quarter, lower property taxes due to fewer properties, lower G&A expenses as part of the company's cost-cutting initiatives, and increased volume of citrus sales on our directly operated properties.

Next, we will review some of the operating expenses and other items, which is shown on Page 5. Property operating expenses were lower than for the 3 and 6 months ended June 30, 2024, which are caused by, again, the lower property taxes, lower property insurance expenses and lower repair expenses. G&A increased primarily due to the onetime severance expense of $1.4 million in connection with the previously announced departure of the company's former CFO as part of the company's cost-cutting initiative. This is partially offset by lower salaries and travel expenses.

Gain on dispositions was down from prior year as no farms were sold during this year. There was only a small, fixed asset dispositions from a few properties reported in the 6 months ended. Income from forfeited deposits relate to the sale of a farm that was initiated back in 2020, where we received a series of nonrefundable deposits over time. The sale was terminated by mutual agreement in the first quarter of 2024. And as a result of that termination, we recognized $1.2 million of forfeited deposits. Interest expense decreased slightly from the prior year due to lower outstanding principal balance.

Next, moving on to Page 12, there are a few capital structure items to point out. First, floating rate debt net of the swap as a percent of total debt was approximately 20%. Second, we had undrawn capacity on our lines of credit of approximately $158 million as of the end of Q2. In 2024, we have 2 MetLife resets that are set to happen in the fourth quarter on debt totaling approximately $27 million. The Rutledge Facility was amended during the quarter to reduce interest rate by 40 basis points. In addition, the 2.5% annual reduction in the facility size was also eliminated. There was also a reduction in the facility size from $85.8 million to $75 million, as well as the introduction of an unused commitment fee of 0.2%.

Page 14 breaks down the difference in revenue categories with a few comments at the bottom to describe the difference between periods. The few points that I would like to highlight are fixed farm rent decrease due to dispositions as we were expecting. Solar wind and recreation changes were caused primarily by rent on land with a large solar project in Illinois that was higher in 2023 than 2024 as that project moved from construction to operational at the end of 2023. We will see this impact throughout the year, especially in Q4.

Tenant reimbursements decreased in the current year due to a onetime tax reimbursement in Q1 of last year, also dispositions that occurred in 2023, and a small number of leases that renewed with higher fixed rent with lower tenant reimbursements. Management fees and interest income increased with greater loans and financing receivables outstanding. Direct operations is a combination of crop sales, crop insurance and cost of goods sold. It is up relative to 2023, largely due to a larger volume of citrus and walnut sales and lower impairment expense. Other items decreased slightly between the period.

Page 15 is our outlook for 2024. Assumptions are listed at the bottom. Note that we had 3 acquisitions in Q1 of 2024. There are no other transactions that are included in the projections. On the revenue side, fixed farm rent changes reflect the full year impact of 2023 transactions, plus the 3 Q1 2024 acquisitions and a few lease changes that occurred during 2024. Direct operations, which is crop sales, crop insurance minus cost of goods sold, is up due to higher expected performance in citrus farms under direct operations.

On the expense side, G&A increased due to severance costs, but that's partially offset by targeted cost reductions. The forecasted range of AFFO is $9.8 million to $12.8 million, or $0.2 to $0.26 per share. The low end of the range is slightly higher than the outlook from the last quarter. This summarizes where we stand today, and we will keep you updated as we progress through the year.

This wraps up our comments this morning. Thank you all for participating. Operator, you can now begin the Q&A session.

[Operator]

[Operator Instructions] And it looks like our first question today comes from the line of Scott Fortune with ROTH Capital.

[Scott Fortune, analyst]

Just wanted to follow up and get a little color as we look into the second half into next year on the renewal lease discussions you're having. And obviously, you mentioned some of the pressure -- downward pressure and volatility in many of the row crops for the farmers from that standpoint here. But just kind of what are your initial expectations with the farm economy coming off a little bit? And just those discussions around rent renewal leases for going into '25 to start here initially.

[Paul Pittman, executive]

Yes. This is Paul, and I'll take that question, and I'm in a different location than the rest of the management team today. So if they have anything to add, they will. So we would expect, just to give you the punchline first, we would expect rent renewals this year hopefully in the 5% to 10% increase in terms of the leases we renewed this year. That's still a pretty good increase, certainly not as strong as the last couple of years, which has been 15% to 20%. And that's, as I discussed earlier, kind of reflecting the lower commodity price environment. And it has not only the kind of financial impacts I mentioned earlier, it has kind of a psychological and emotional impact, which makes rent negotiations harder. So that's where we would anticipate. We're really early in the process. So it's hard to say exactly where that number will come out, but I think it will be in that bracket.

The other thing to remember, and it's a very important fact. We are now starting on the leases coming up for renewal this year or leases that came up for renewal 3 years ago. So they got a very large increase on average 3 years ago. So we're really working off a much higher base. So it's not just the farm economy impact, it's all about whether you're working with a lease that was renewed during a boom time era in farming, which is where we are at this time as opposed to the last couple of years, we were renewing leases that had been renegotiated during a tougher economic period in sort of, call it, '17, '18, '19 era. And so, it was much, much easier to get the big jumps. I hope that answers your question, Scott.

[Scott Fortune, analyst]

Yes. No, that's great. That's real good color on that. And just kind of follow-up. I know you mentioned a little bit, but anything different on the farmers' income and the economy in general. Like you said, we are seeing some distress there, but it's very limited from that standpoint. And then how does this kind of project as you look at -- you mentioned that we're going to do some dispositions potentially in more likely fourth quarter here kind of since the third quarter will be kind of very, very similar to this last quarter, but a lot depends on fourth quarter. But just kind of your framework on kind of any additional distress out there, and then how that portrays into kind of the dispositions or sales of assets like in that marketplace?

[Paul Pittman, executive]

Yes. I mean, if you own high-quality farms, which we overwhelmingly do, I mean, we've got certainly some farms that aren't perfect, but many, many of our assets are exceedingly high quality. That market is still strong and deep. You can move a farm if you choose to move a farm. Our big constraint this year, just to refresh everybody's memory, is because we were so aggressive in selling assets last year, we actually are limited to 7 total transactions for the calendar year. And we've actually already consumed 1 of those with a small sale of something in the Opportunity Zone Fund that we own 10% of. So, the reason we're waiting kind of the fourth quarter to late third quarter, fourth quarter, it really gets focused on asset sales is we don't have very many bullets, if you will. And so, we want to use them in the best possible way. The most active time for selling and buying farms is the late third and fourth quarter. And so, that's why we haven't done much to date.

We would anticipate anything we sell. We'll be on average over whatever package of farms we end up selling will be a pretty substantial gain if we get a deal done. And we don't see a weakness in farmland values. My comments are all focused on the following: in the last 3 years, we have seen very, very strong gains in farmland, that has gone away. But that's not the same as saying, there's a decline in value. I used the word plateau for a reason. We're just not seeing the gains we saw in the last 3 or 4 years, we're also not really seeing a pullback.

[Operator]

[Operator Instructions] And our next question comes from the line of Rob Stevenson with Janney.

[Robert Stevenson, analyst]

Paul, given all your comments on the market land values, at today's market pricing, how aggressively would you be buying farmland if you had a more normal cost of equity? Or would you just be doing a select few deals and waiting for pricing come back to you? Just trying to strip out your cost of capital from the market conditions and whether or not you'd be a buyer if you had a better cost of capital here?

[Paul Pittman, executive]

Well, we had a better cost of capital. If we had a better cost of capital, we would be buying farms. There's not bargains per se out there because there never are. I mean, you can't say that land values don't really pull back in the bad times and then also say there's a bunch of bargains out there. Any time in my career, where now spanning 30-plus years of doing this, when there is a bargain, I look back on it 5 years later, and it's a little like the lemon car you would have bought in a used car lot, you wish you hadn't bought it. They just aren't bargains on high-quality farms because farmers have strong personal balance sheets.

But when you get to this kind of plateau period that we're in right now, this is the time to try to buy some farms, if you had the cost of capital. And the reason is, we don't try to steal a farm. I mean, when I hear investors trying to raise capital, talking about off-market deals and all that, it's nonsense. This market -- it's not transparent to us sitting in the big cities. But I've been spending most of my time this summer back in where I grew up in Central Illinois.

It's very transparent to that group of farmers in a 20-mile radius of their house. They know about every deal, all they know about the pricing, they know about the quality of the farms. They've been driving by them every other day for their whole life. And so, they're -- but what happens when you get to this plateau is that when you work on your valuation, you've got a kind of static set of data. So you look at comps from the last 6 months or 12 months, and they're kind of flat. They're the same place, so you can use them as opposed to try to adjust them for how rapidly the market is moving away from. And so it's really a very good time to buy farms. But as you indicated, Rob, we just don't have a cost of capital allows us to do it.

[Robert Stevenson, analyst]

All right. That's helpful. And then, Luca, you talked about dispositions in your comments. Any sort of commonality on the assets that you guys are going to be looking to sell in the back half of the year? Is that going to be a lot of West Coast stuff? Is it going to wind up being stuff out of your row crops, so mixture. How should we be thinking about the stuff that you guys are going to be teeing up to potentially sell in the back half of the year?

[Luca Fabbri, executive]

Yes. I'm not going to give you a straight answer because I don't have one, frankly, certainly not one I can share publicly. We are considering evaluating various opportunities, some in California, some in the rest of our portfolio. We are unlikely to let go of any of most prized assets in the core of the Corn Belt, like in Illinois. But if somebody shows up with a strong offer, we will consider that as well. So I can't give you much information unfortunately, I'm sorry, but just to hold on tide until the later in the year.

[Paul Pittman, executive]

Let me amplify that just a little bit, if you don't mind, Luca. We keep this internal valuation of all of our assets. Our farm managers help us redo this internal value every year or 6 months, it depends if the market is moving rapidly. If people make us an offer higher than our internal mark on an asset, we're quite likely to sell them. I mean, we're in the business of making money in 2 different ways, appreciation and current income off of the farms. And as you've heard me say many times, probably 2/3 of your return to farmland is appreciation. So you can't kind of fall in love with anything. So somebody shows up with a full price offer in excess, certainly if it's in excess of our internal view of value, we're likely to sell those farms.

Luca is correct, we do believe in the long-term core of the Corn Belt probably more strongly than the other part of our portfolio, so less likely to do sales there than anywhere else. And then the final point is, we are on an effort to gradually lighten up in California. We're not going to go out there and just sell everything we got just because we want to be out of it. But you should expect us to gradually lessen exposure to California over the next 3 to 5 years. It's just going to happen. Hope that added a little more to it as well.

[Robert Stevenson, analyst]

Yes. And then just Susan, a couple of numbers questions. How meaningful is the reset on the $27 million of debt in the back half of the year? I think it's right around 3%-ish now on that combined $27 million. What is that likely to go to? Is that sort of high 6s, what we should be anticipating there?

[Susan Landi, executive]

Yes. It is somewhere in the -- let me kind of flip to my numbers here. It is somewhere in the low 3s -- high 2s, low 3s currently, and we will likely end up in the 6s on that.

[Robert Stevenson, analyst]

Okay. And then, in terms of the guidance, the drivers that pushed cost of goods sold up $200,000 over the prior guidance and management fees and interest income down $300,000, anything singular on that? Or is that just a bunch of little stuff that combined into those adjustments?

[Susan Landi, executive]

Yes. There's a lot of little stuff that's combined into those figures. But the thing that -- to note on that guidance there, what's I think really driving the majority of that is, there's a citrus farm that is up -- let me flip to my numbers here. There's a citrus farm that we increased by $0.5 million. That is because yields are up approximately 31% and the price is up approximately 14%.

[Luca Fabbri, executive]

In the revenue side.

[Susan Landi, executive]

On the revenue side, correct.

[Operator]

And our next question comes from John Massocca with B. Riley Securities.

[John Massocca, analyst]

With the recent data from the USDA that it seemed to drive some stabilization in almond pricing, is that something you are seeing on your farms? And if that pricing does improve, is that going to impact the variable rent bucket in the current year?

[Paul Pittman, executive]

Luca, do you want to take that or do you want me to take it? I don't have a specific factual answer, but I have a point of view.

[Luca Fabbri, executive]

No, happy to take it. Yes, so I've seen some talks about the kind of bottoming out of almond prices, just also because we've seen some orchards coming out of production. We believe that our almond production assets are of a higher quality than average. And yes, the way some of our leases that are structured, we will be beneficiaries of stronger almond prices, at least up to a point. Ultimately, if there is a runaway in almond prices, the operator as it's right would be the main beneficiary. But to some extent, we will be beneficiaries as well, both directly in terms of higher lease -- variable lease revenues as well as having stronger tenants is always better.

[Paul Pittman, executive]

And Luca, I want to add one comment, though, just for John's benefit. If we believe that there was a big bump in variable income or variable revenue already highly probable, it would be in our projections. So it's sort of -- it's not to say it's not going to happen, but it's too early to tell. So yes, there's a little bit of positive movement in pricing. But as an analyst, don't get the cart before the horse, so to speak here, because we're just not sure yet.

[John Massocca, analyst]

And I just mean maybe kind of broad strips, there was an increase in the guidance this quarter versus last quarter in terms of variable net payments, largely driven by what you already talked about in terms of the citrus farm. But I guess kind of how much of that bucket is citrus versus 3 permanent crops like tree nuts. I'm just trying to think about how various kind of movements in prices could impact that revenue stream.

[Paul Pittman, executive]

Yes. So let me give a general comment while the team in Denver pulls together a couple of facts, John, to help you with that. So, the big picture is to always remember, as an overall percentage of our revenue, variable isn't very high. So keep that in that context. This company is largely about fixed rents. And so, I'll let the team in Denver try to break it down to the extent they can a little more specifically on the different crop types, but I just wanted to make that general comment.

Luca and Susan, do you want to add anything to that?

[Luca Fabbri, executive]

I'll just chime in quickly. I mean, our variable rents are effectively all, virtually all, if not all coming from permanent crops. We really don't have any direct exposure to a meaningful way to row crop price variability.

[John Massocca, analyst]

Okay. That makes sense. And then, I guess, in terms of the resets or the adjustments on the existing debt, I know you kind of have an idea of where that's going to price today. I mean, is that basically set at this point? And I guess, how close to the actual adjustment date is kind of the new rates set for that debt?

[Paul Pittman, executive]

This is Paul. It's set very, very close. So we get the benefit of rate reductions this fall in a general economic sense, it will show up in that rate reset.

[John Massocca, analyst]

Okay. And then, anything else to maybe conscious of in terms of moving pieces for some of the nonfixed farm rent line items. I'm just thinking kind of solar wind recreation or even stuff on kind of the management fees and interest income that maybe could move around a bit versus kind of a quarterly run rate?

[Paul Pittman, executive]

I don't have any comment on that. I think the folks in Denver have something to add, please do.

[Luca Fabbri, executive]

We do have a little bit of variability that we are expecting on the interest income, for example. So we're expecting a loan that we have outstanding to be repaid early. But nothing that moves the needle that I would expect to move the needle on a global scale. I mean, think of the renewable energy leases as being -- is going fundamentally in 1 direction. Typically, the movements there are driven by the conversion of option leases into full construction and then production leases, but we don't expect any here in the short-term.

[Operator]

Thank you, John. And it looks like that is all the questions we have today. So I will now turn the call back over to Luca for closing remarks. Luca, the floor is yours.

[Luca Fabbri, executive]

Thank you. We appreciate your interest in our company, and look forward to updating you on our activities and results in the coming quarters. Thanks, everybody.

[Operator]

And ladies and gentlemen, that concludes today's call. Thank you all for joining, and you may now disconnect.