M/I Homes Inc

NYSE:MHO

Earnings Call Transcript 2023-Q2

[Operator]

Good morning, ladies and gentlemen, and welcome to the M/I Homes, Inc. Second Quarter Earnings Webcast Conference Call. [Operator Instructions]. I would now like to turn the conference over to Phil Creek. Please go ahead, sir.

[Phillip Creek, EVP and CFO]

Thank you for joining us today. On the call is Bob Schottenstein, our CEO and President; and Derek Klutch, President of our Mortgage Company.

First, to address Regulation Fair Disclosure, we encourage you to ask any questions regarding issues that you consider material during this call because we are prohibited from discussing significant non-public items with you directly. And as to forward-looking statements, I want to remind everyone that the cautionary language about forward-looking statements contained in today's press release also applies to any comments made during this call. Also be advised that the company undertakes no obligation to update any forward-looking statements made during this call.

I'll now turn the call over to Bob.

[Robert Schottenstein, CEO and President]

Thanks, Phil. Good morning, everyone, and thank you for joining us today. We had a very strong second quarter. Despite higher interest rates and uncertain economic conditions, very pleased with our new contracts, homes delivered, margins and income. And we ended the quarter with our balance sheet in excellent shape.

In terms of our new contracts, we sold 2,197 homes during the quarter, 21% better than 1,820 homes that we sold during 2022 second quarter. Smart Series, which is our most affordable line of homes, continues to be an important contributor to our sales performance. During the quarter, our Smart Series sales comprised about 55% of total company sales, roughly the same percentage as a year ago. During the quarter, we were operating in 15% more communities on average than we were a year ago. Our sales pace equaled 3.7 homes sold per community per month. We are on track to open a number of new communities this year. We expect to increase our community count for 2023 by approximately 15%, 196 communities that we had opened at the end of 2022. Closed 1,990 homes in the quarter and continue to improve our construction cycle time throughout all of our divisions. Gross margins for the quarter were very solid 26%, considerably better expected going into this year. Our pretax income for the quarter was $155 million, down from last year’s record level, still very pleased to produce pretax results of 15.3% of revenue.

Now I will provide some additional comments on our markets. Our division income contributions in the second quarter were led by Dallas, Tampa, Columbus, Sarasota, Raleigh and Orlando. New contracts for the second quarter in the Northern region increased by 31%. New contracts in our Southern region increased by 14%. Our deliveries in the Southern region increased by 7% from last year. Our deliveries in the Northern region decreased by 22% from last year. 61% of our deliveries came out of the Southern region and the balance of our deliveries, 39% out of the Northern region. Our owned and controlled lot position in the Southern region decreased by 18% compared to last year, decreased by 4% from last year in the Northern region. 36% of our owned and controlled lots are in the Northern region while the other 64% are in our Southern region. We have a very strong land position. Company-wide, we own approximately 23,000 single-family lots, which is roughly a three-year supply.

Regards to our balance sheet, we ended the second quarter of 2023 with an all-time record $2.3 billion of equity, which equates to a book value per share of $83. We also ended the quarter with a cash balance of nearly $670 million and zero borrowings under our $650 million unsecured revolving credit facility. This resulted in a debt-to-capital ratio of 23%, down from 28% a year ago and a net debt-to-capital ratio of just 1%.

As I conclude, let me just state that we are in the best financial condition in our company's history. Feel very good about our business and are well positioned to have another year of very strong results.

With that, I'll turn it over to Phil.

[Phillip Creek, EVP and CFO]

Thanks, Bob. Our new contracts were up 6% in April, up 21% in May and up 46% in June, and our cancellation rate for the second quarter was 10%. 58% of our second quarter sales were to first time buyers and 55% were inventory homes. Our community count was 195 at the end of the second quarter compared to 168 a year ago. And the breakdown by region is 100 in the Northern region and 95 in the Southern region. During the quarter, we opened 15 new communities while closing 20. We currently estimate ending 2023 with about 225 communities. We delivered 1,990 homes in the second quarter, delivering 60% of our backlog. Ended June 30th, we had 4,500 homes in the field versus 6,300 homes in the field a year ago. We started 2,400 homes in the second quarter and 1,600 homes in the first quarter.

Revenue decreased 3% in the second quarter, and our average closing price for the second quarter was a second quarter record $493,000 which was a 3% increase compared to last year's closing price of $477,000. Backlog average sale price is $507,000, down from $519,000 a year ago. Our second quarter gross margin was 25.5%, down 180 basis points year-over-year and up 200 basis points from our first quarter. Our construction costs were flat in the second quarter compared to the first quarter, and we are starting to get some improvement in our building cycle time.

Our second quarter SG&A expenses were 10.6 of revenue compared to 9.7 a year ago. Our second quarter SG&A expenses increased 6% versus a year ago, due primarily to higher third-party broker costs and expenses related to our higher community count. Interest income for the quarter was $4.7 million, and our interest incurred was $9.4 million. We are pleased with our returns for the second quarter. Our pretax income was 15%, and our return on equity was 23%. During the quarter, we generated $164 million of EBITDA compared to $195 million last year, and our effective tax rate was 24% in the second quarter compared to 25% a year ago. Our earnings per diluted share for the quarter decreased to $4.12 per share from $4.79 last year, and our book value per share is now $83, a $17 per share increase from a year ago.

Now Derek Klutch will address our Mortgage Company results.

[Derek Klutch, President, Mortgage Company]

Thanks, Phil. Our mortgage and title operations achieved pretax income of $11.2 million, a 29% increase from $8.7 million in 2022's second quarter. Revenue increased 30% from last year to $25.3 million due to higher margins on loans sold and an increase in the average loan amount. The average loan-to-value on our first mortgages for the second quarter was 84%, which was slightly higher than last year. 71% of the loans closed in the quarter were conventional and 29% FHA or VA compared to 80% and 20%, respectively, for 2022's second quarter.

Our average mortgage amount increased to $402,000 in 2023's second quarter compared to $384,000 last year. Loans originated decreased to 1,281, which was down 5% from last year, while the volume of loans sold increased by 4%. Our borrower profile remains solid with an average down-payment of over 16% and an average credit score of 743 compared to 748 in 2022's second quarter. Our mortgage operation captured 81% of our business in the second quarter compared to 77% last year. Also, we maintain warehouse facilities that provide us with funding for our mortgage originations. At June 30th, we had $186 million outstanding under these facilities.

Now I'll turn the call back over to Phil.

[Phillip Creek, EVP and CFO]

Thanks, Derek. As for the balance sheet, we ended the second quarter with a cash balance of $668 million and no borrowings under our unsecured revolving credit facility. We have one of the lowest debt levels of the public homebuilders and are positioned well with our maturities. Our bank line matures in late 2026 and our public debt matures in 2028 and 2030 and has interest rates below 5%. Our unsold land investment at June 30th is $1.3 billion compared to $1.1 billion a year ago. And at June 30th, we had $673 million of raw land and land under development and $587 million of finished unsold lots.

During the second quarter, we spent $96 million on land purchases and $109 million on land development for a total of $205 million. And at June 30th, we owned 23,000 lots and controlled 41,000 lots. At the end of the quarter, we had 303 completed inventory homes and 1,737 total inventory homes. And of the total inventory homes, 827 are in the Northern region and 910 are in the Southern region. And at June 30th last year, we had 91 completed inventory homes and 1,732 total inventory homes. We spent $15 million in the second quarter repurchasing our stock and have $78 million remaining under our current Board authorization. And since the start of 2022, we have repurchased 8% of our outstanding shares.

This completes our presentation. We will now open the call for any questions or comments.

[Operator]

[Operator Instructions] Your first question will come from Alex Barron.

[AlexBarron]

Yes. Thank you. And great job on the quarter, guys.

[RobertSchottenstein]

Thank you, Alex.

[AlexBarron]

Glad to see the market is starting to reward you finally. Yes, I was hoping you could walk us through the improvement sequentially in the gross margin. Anything that drove that? Was it just start -- you started to raise prices or lumber cost were or anything that explains the big jump sequentially?

[RobertSchottenstein]

Yes. I'll start that, and maybe Phil will have some comments he'd like to add to it. Look, at the beginning of the year, I think the entire industry was quite concerned with rapidly rising rates and how much pricing leverage we might have. And we had frankly expected our margins to be somewhat lower than they obviously have turned out to be, despite the higher rates and has been quite solid and remains so today throughout almost all of our markets, in fact throughout all of our communities currently limiting sales in about 15% of our communities, which is an indication of the demand in various places.

I think our communities are exceptionally well located, very strong product offering. Smart Series is exceptional in terms of its appeal to first-time buyers, feel good about our move-up product as well as our attached townhomes. And the combination of all those things, including the level of demand, strength of our buyer profile, given us ability -- margins were appropriate. And as we've said over the years, we manage the company on a subdivision basis, have a number of communities throughout our company where our margins are considerably higher than the 26%, also have some that are lower, subdivision-by-subdivision basis. And no one knows what the future will bring and continues to stay about where it is today, a fair amount of confidence that we'll continue to have margins that are at a very acceptable level. Phil, do you want to add anything to that?

[PhillipCreek]

The only thing I would add, Bob, is we talked about opening 15 stores in the second quarter, and we had opened 19 in the first. So the 34 new stores we've opened this year are performing very well, even a little better than we thought they would. We also talked about cost being flat and so forth. And again, just a lot of time, as you said, on product, every subdivision is a little different, trying to open these new stores to the right way, really trying to emphasize sales pace. So we just continue to be focused on that.

[AlexBarron]

Okay. Great. And then obviously, your cash balance is pretty significant compared to any time in your history. I was curious what you guys have that invested in? Because it looks like you generated almost $5 million of interest. And I'm assuming that, that's going to go higher unless you put the money to work. And if you are going to put the money to work, what's the most likely use? Is it buy more land? Is it just pay down debt at some point? Is it to buyback your stock? Like how are you guys thinking about uses of that cash?

[RobertSchottenstein]

I'll take the first part of that. Job one for us is to continue to grow our business. We think we have gained market share in nearly all of our markets over the last number of years, and we expect to continue to growing market share. So job one for us. Job one for us would be to invest in our divisions. And that's how we'll likely be deploying most of the cash. Phil, do you want to comment on the rest of that?

[PhillipCreek]

Yes, I agree with that, Bob. We do expect to spend more money on land in the second half than we have the first half. We did push back a number of land transactions in the second half of last year when the business slowed down. So we do expect land spend to accelerate. We feel very, very strong about our land position.

As far as stock repurchase, we continue to look at that, what is the best use of our capital. As I mentioned, we did buyback $15 million of stock in the quarter. And in the last few quarters, we bought back 8% of the outstanding shares. So we will continue to balance all those things. We do not have any debt due as far as the public debt until 2028, and it's below 5%. So we'll still have some cash, and we'll continue to put that to the best use we can, Alex.

[Operator]

Your next question comes from Jesse Lederman at Zelman & Associates.

[JesseLederman]

I remember last quarter you talked about your expectations for closing through the year, not to necessarily follow the typical sequential increase through the year. And your second quarter closings were roughly flat from the first quarter. Can you talk a little bit more about like how you see that cadence trending through the balance of the year given the deviation or at least the stronger results in 2Q than at least we were expecting and maybe you were even expecting as well?

[RobertSchottenstein]

Well, one thing I'd say that has, I think, helped our closings, and I suspect we'll continue to as we noted improvement in cycle time, and that varies by division. We have a number of divisions where we've improved our cycle time by more than 30 days year-over-year. Some have improved by 15 to 20 days. And we expect to continue to improve cycle time and hopefully get it back to those pre-COVID levels that we were seeing in the year 2019 and before, and that will certainly contribute to getting the homes in the field closed at a more rapid pace. Phil, do you want to add anything to that?

[PhillipCreek]

Yes. As we disclosed, Jesse, we do have less houses in the field at mid-year than a year ago. We did start a lot of houses in the second quarter, and we're pleased with that. Also, about 50% of our business is specs and some of those houses do sell and close in the quarter. We were a little surprised, pleasantly, we closed more houses in the first quarter than we thought we would, and we had a similar good experience in the second quarter, closing more houses than we thought.

But again, we're trying to get all the good quality, fully completed homes closed we can every quarter. But it is going to be a challenge for us to close this many houses in the second half as we did in the first half, but we're doing all we can.

[JesseLederman]

That's helpful. And as you mentioned, was luckily on last quarter's call, your land spend nearly doubled sequentially, but it's still a little bit below the run rate over the last couple of years and the percentage of communities that you're limiting sales at inched a little higher to 15% of communities from 10% last quarter. What do you need to see for that percentage to trend lower here? And is there a risk that, that moves meaningfully higher over the near term, at least until some of these recent deals end up being community openings?

[RobertSchottenstein]

Jesse, could you sort of reclarify the question? I'm not sure I completely understood it.

[JesseLederman]

Yes. Just recognizing that the percentage of communities that you had to limit sales and increase a little bit sequentially here. What are you -- is there any risk to that percentage of communities that you're limiting sales in increasing in the near term as you wait for these more recent land deals to filter through to community openings?

[RobertSchottenstein]

Well, first of all, the reason that we're limiting sales where we are is simply to control the deliveries in a way that we think we can best manage. We don't want to get too far out over our skis so to speak. And in those communities where we are limiting sales, we're also getting very strong margins. And we just think that's the smartest way to run the business. The decision to limit sales has little, if anything, to do with new communities coming on. Phil, I don't know if you want to add anything to that. And I don't know if that answered.

[PhillipCreek]

So every community is different, and it's a combination of the number of finished lots we have, the amount of times to get the houses built. When you like a price in to a customer today, you got to make sure you can get the houses built on a timely basis at the cost you have kind of locked up. So it's kind of good news when we are having to limit sales that number kind of moves around every quarter based on what's going on in the local subdivisions, but that would be a really hard number to project. But again, I will say that the new stores we're opening which are a big part of our business last year. And this year, we're very pleased with the way they are performing.

[JesseLederman]

Great. I appreciate it. And just one last one. On the cost side of the business, you've mentioned costs are stabilizing. They've been relatively flat the last few quarters here, and you are seeing some cycle time improvements. But your ramp starts pretty significantly and the industry broadly is also trying to increase their share of speculative starts. What are your expectations for costs and even labor and material availability over the next couple of quarters? Do you expect to see any hiccups as it pertains to the supply chain just with the industry broadly ramping their starts base? Or have you been relatively insulated from that just because of your relatively larger size?

[RobertSchottenstein]

Well, first of all, to know what's going to happen on the cost side is always a tough. But I feel really good about the supply chain issues throughout nearly every one of our markets and with regard to almost every part of our business. The one issue that continues to be concern, I think, for all the builders is on the land development side and the time it takes to get all of the approvals and the entitlements to bring deals to market. And even it's well documented, the issues that a lot of the builders, including us, have had in certain markets with getting all the utilities in place, particularly transformers. That continues to be somewhat of an issue. I think it's getting a little bit better. But I feel pretty good about the supply side of the business. And I think that we'll continue to see improvement in cycle time across all the parts of our business. And I think that the cost side, I don't see a lot of risk in big cost increases right now. Phil, do you have anything you want to add to that?

[PhillipCreek]

The only thing I will add is, we do when we build houses and develop land, build in a certain contingency for cost. That could be 2%, that could be 5%. But we are hopeful, like Bob said, of not having anything significant the rest of the year, but we'll continue to keep those contingency amounts in our cost.

[Operator]

Your next question comes from Jay McCanless at Wedbush.

[JayMcCanless]

The first one I had, just wanted to get your take on this issue. We've heard from a couple of your competitors that they think gross margins at least in the back half maybe a little bit softer just because they're finishing out the last of the closings for homes that they sold back in the fourth quarter '22 when there's a lot of price competition. Just wondering how you're feeling about gross margins for the back half of the year? And any commentary you could give around that?

[RobertSchottenstein]

Phil?

[PhillipCreek]

Jay, that's a hard estimate to give. As Bob said, our margins have been better the first two quarters than we thought. When you look at what's in our backlog, our backlog margins are relatively flat. Again, we're selling about 50% specs. We plan on opening more stores in the second half than we did the first. So that's kind of a hard number to come at. But I would answer it the same way Bob did, that we still think our margins will be good and respectable. It's just hard to pin down a number. We have a lot of emphasis and focus on margins because it's so important to us. So we'll continue to do all we can to keep those margins as strong as we can. It's just really hard to estimate what they'll be.

[JayMcCanless]

And then could you talk about pricing power or maybe how many communities on a percentage basis where you were able to raise price or cut back on incentives this quarter?

[RobertSchottenstein]

Phil?

[PhillipCreek]

That's -- it's hard, Jay, to have that exact number. What we tend to do more than anything -- and every subdivision is a little different is help people with an interest rate again, even though we have strong down payments, we are still in the payment business and buying the rate down a little bit is very effective to get those people's payment down. And even though rates have been a little bit sticky, it's still not that expensive to buy down rates, 30, 45, 60 days prior to closing. In general, the incentives have less than some. But again, every community is a little bit different. But I would say, in general, incentives have come off a little bit.

[RobertSchottenstein]

And the only thing I'd add to that is, obviously, we're in the time of the year where seasonally and typically falls off a little, we really haven't seen much of that. And while we're no longer in the spring selling season, the demand for the summer months has held up quite well, and there's nothing happening right now suggest that incentives are going to increase.

[JayMcCanless]

You actually stole my next question, Bob, I was going to ask if there's any commentary you could offer up around July which I'll see month to date.

[RobertSchottenstein]

I mean things are holding steady. Jay, you know as well as anyone, the inventory levels are at or near record lows somewhere between 50% and I don't know, maybe 75% of all the homeowners in this country are living in a home where their mortgage is maybe [1.5%] or lower, probably even lower than 4 and likelihood that those homes are going to come to market anytime soon is not great. And as a result -- and that's out there, is largely buying new. And I think that's going to continue for quite some time. And I think that's very strong tailwind for our industry, which is why I think others in general, are producing much stronger results than anyone would have thought eight months ago.

[PhillipCreek]

Jay, we're really excited about the opportunity we have with all the stores that we are opening. We're obviously focusing on sales pace that really matters. Of course, if you look at comparables last year in the second quarter, we sold 1,800. Third quarter last year, we sold 1,300. In the fourth quarter last year, we sold 1,000. So our sales decreased significantly last year. We are trying to catch up as far as houses in the field. We did start a lot of houses in the second quarter. Bob talked about cycle time. Cycle time is improving. Our spec level is about the same as it was a year ago. We do have a couple of hundred more finished specs than we did a year ago. We're obviously hoping to get the majority of those, the big majority of those sold and closed the third quarter that's the big swing item on our closing, how many of those finished specs and specs that are almost finished today that we can get closed can we get through the third quarter. And those are all the things that we're focused on.

[JayMcCanless]

Great. And then the last one is kind of a two-part question. I guess, number one, maybe for people who are newer to the story, could you walk through the Smart Series and some of the pace and gross margin advantages Smart Series has versus your traditional product? And then also, as you think about the community openings you talked about, is there a path to getting Smart Series above 55% or getting to a bigger percentage with the openings you're going to do through the rest of this year and then to '24?

[RobertSchottenstein]

Well, the Smart Series has been a grand slam homerun for our company. Just opened it in Tampa in 2016, grown to over half of our business. I think that the 55% or so of our business that it represents today, it may go up a little, but I think it will hover between 50% and 60% here for quite some time. It primarily caters to a first-time buyer. It's a very well-designed line-up of homes. It's a tight line-up. It's not a lot of opportunity for, I'd call nonstandard changes. The selection process is very efficient. Smart Series buyers do not go through a design studio per se. They select their options off of a predesigned menu, which gets homes from sale to start much quicker. And then once the home start because average square footage on a Smart Series home is probably around 2,000 square feet versus maybe 2,400 or 2,500 for the rest of our product line, we're able to build these homes quicker, this contributes to returns. And frankly, while we didn't expect that when we first designed it to sell for better margins in many, many of our Smart Series communities, our margins are better. And I think it's just because of the appeal and the quality of the product. And the other thing is we're getting better pace. So cycle time better, sale to start quicker, better pace, streamlined offerings, efficient way of running that part of our business. All of that has contributed to our top line and our bottom line.

[Operator]

Your next question comes from Carl Reichardt at BTIG.

[CarlReichardt]

Nice to talk to you. Jay just stole the one I was going to ask on Smart Series. So I want to ask another sort of one bigger picture one. So no maturities until 2028. And -- but we're reasonably concentrated in some markets. As you look at the opportunity set over the next five years to grow the business, would we expect you to try to deepen share in existing markets? Or is new expansion to new markets on the table for you? And then how are you thinking about the acquisition environment right now of private is really what I'm focused on, but even in public. I'm just curious your thoughts there.

[RobertSchottenstein]

Yes. No, good questions. First of all, we're just getting started in Nashville. We have a number of homes under construction, and we will be generating our first sales in that market this year. We're in Nashville to grow over the next several years to 300 to 500 homes a year. Nashville is going to be a big contributor to growth as we move on down the line here over the next couple of years. Likewise, in Fort Myers and Naples we just got opened there within the last year. We've got several communities, and we expect to have a significant operation in Fort Myers, Naples as well. We're very bullish about that particular part of Florida and think it will be just as strong a contributor to M/I Homes as Tampa, Orlando and Sarasota have been. So in terms of expansion, we have a lot of work to do to get scale, and we're confident we'll be able to do so. A lot of work to get scale, both Nashville and Fort Myers, Naples.

As far as additional expansion beyond that, no real plans at this point, but in five years -- if we’re in 17 markets today, I should say, in five years might we be in perhaps another one, 18 or maybe 19. I think it's possible. But I also think that we have the ability, and we've said this before, our current run rate is around 8,000 homes within the markets we're in, we think we can get to 12,000, 13,000, 14,000 homes and are poised to do so. And that is a very strong goal of our company.

As far as the acquisition side, small privates or what have you, possible, it's not something that we're lesser-focused on. If an opportunity presented itself in a market that we're in or perhaps even a market that we're not, we always would look at it. But I think that in general, organic growth rather than acquisition, we've done both, add more success with organic very candidly. And we're really excited about the teams that we have on the field in both -- well, first of all, all of our markets, but in particular, in Nashville, Fort Myers and Naples. And that's very exciting for the company as we go forward.

[Operator]

Your next question comes from Alex Barron at HRC. Mr. Barron, your line is open. Did you have a question?

[AlexBarron]

Yes. Can you hear me?

[RobertSchottenstein]

Yes, we can.

[AlexBarron]

Okay. Sorry about that. Another call was trying to intercept my question. Yes, I wanted to focus on the outside broker commissions. I think you mentioned they went up this quarter, and I guess as a percentage of revenues, it seems they were 5.3% versus 4.5% a year ago. Do you see this as just a temporary thing due to the slowdown that's happened in the last -- at the end of 2022? In other words, is this percentage likely to trend back down? Or is this kind of a new normal for some reason?

[RobertSchottenstein]

Phil, you want to take that?

[PhillipCreek]

Alex, that's something we've worked very hard on the last few years. And we had some divisions that got outside broker rates down to 2%, 2.5%, especially with sales toughening the last -- half of last year and the first of this year being a little slow also. So some of those rates have gone back up in certain markets where we're kind of getting started up, like Bob mentioned, some of those realtor rates have moved up a little bit as far as percent of business. Very hard to predict what that's going to be. It is something we obviously focus on, it's a big item to us. But we try to manage that just like we do all of our other expenses. We think we're doing a pretty good job on SG&A. Today, we have about 9% less people than we did a year ago. So we focus always on our cost structure, including all those items. Another thing, of course, is having 15% more stores that's driving the non-variable selling up. So we'll continue to focus on all those things.

[AlexBarron]

Okay. Great. I guess on that same front, just wondering what percentage of your sales generally come from brokers? And also, what are you guys doing in terms of digital marketing efforts? Can you talk about that?

[PhillipCreek]

Well, as far as the broker -- if you look at the broker commission the last few years, every market is a little different, but we've been in the 65% to 75% range.

[RobertSchottenstein]

On the digital side, biggest part of our marketing, nothing even comes close -- performance area of emphasis for close to four years, five years now since that part of our business has changed so much. Everything that we can possibly do, maximize online search engine optimization and all the things associated with that, a giant area focus in every one of our divisions. There are people exclusively dedicated to that. Significant percentage of all of our leads are all start online, very densely manage that online part of our business. It's as much a part of the blocking and tackling of our business as constructing a home is. Net marketing, online marketing, dual side of our business, that's a critical key part of our business. I can't emphasize it enough.

[AlexBarron]

Yes. And I'm sure it's only getting more competitive. All right. Well, thanks again, and great job.

[Operator]

There are no further questions on the phone line. So I will turn the conference back to Phil Creek for any closing remarks.

[Phillip Creek, EVP and CFO]

Thank you very much for joining us. Look forward to talking to you next quarter.

[Operator]

Ladies and gentlemen, this does conclude your conference call for this morning. We would like to thank you all for participating, and ask you to please disconnect your lines.