Q2 2020 Earnings Call
Moving on in early October as we reported we closed the acquisition of the euro be business in Singapore and have now largely completed integration of system and clients onto the platform.
The business is now running at slightly better than breakeven, which is marginally below where we had envisage that to be due to lower interest rates and some of the clients that came across being two large risk wise for us.
We have now started to see a cadence of new clients being on boarded and see some meaningful additional cost synergies on the IP and infrastructure side that can be realized over the next two quarters. We believe this business will be added nicely positive run rate by fiscal year end and well poised to grow into meaningful part of our international execution and clearing platform.
In December we announced me to reach agreement to acquire the brokerage business Elemer, formerly known as exotic this is a well known and respected franchise specializing in providing institutional investors with access to equity and debt markets in emerging and frontier markets.
Happy to report this transaction was closed on April one 2020, and we're already seeing the benefits of the AD and lots of synergies with our existing businesses.
In early January we reached agreement to acquire German based jet rocks. This is a company that provides an online platform for FX hedging and payments aimed primarily at European Union based midsize corporations.
We see a tremendous opportunity to provide the generac slice of the more integrated an expanded payments capability using our global payments network as well as a more comprehensive suite of hedging solutions for commodities and interest rates.
This will allow us to offer a new unique digital payments and risk management platform for small and medium sized clients. We see this is a global offering which should allow us to effectively and efficiently access these mid sized commercial clients and other geographic locations and further leverage our financial platform.
Regulatory approval for this transaction was obtained in April 2020, and pleased to report that this transaction is now closed that happened on makes sense.
Related to this we are in final discussions to acquire small us company, which will allow us to quickly rollout the generics platform to small and medium sized corporations in the U.S. The combination of our global global delivery network digital platform of Xerox will allow us to significantly broadening our offering and footprint in the us as well as in Europe.
As Youre, probably know we signed a definitive merger agreement with gain capital to acquire the business. The proxy has been delivered to gain shareholders with the shareholder vote set foot June five.
We have voting agreements for 44% to devote and need 50% plus one share to approve the transaction.
At the same time, we are well down off of obtaining the necessary regulatory approvals and home closing can occur by mid summer.
We have started the integration with the gain team and I'm not even more convinced of the commercial logic of combining these two franchises in order to become one of the leading global financial platforms gain brings a digital platform with a global reach into the retail in professional trader market, which we can enhance with additional products while at the same fine internalize.
And carrying costs for greater efficiency gain provides us with the digital assets and expertise to better and faster digitize our institutional offerings.
As you would expect gain is driven by many of the same metrics. We are mainly volatility which was validated by the recently announced Q1 results.
With that I'll now hand, you over to Bill Dunaway for discussion of the financial results Bill.
Thank you, Sean I'll be referring to slide in the information we have made available as part of the webcast.
Typically starting with slide number three which shows our performance over the last five fiscal quarters.
As shown that is very strong second quarter, representing record net income earnings per share and return on equity.
Net income was 39.3 million, which represents a 23 million dollar increase over the immediately preceding quarter and a $15.9 million increase versus the prior year.
Important to note the prior year quarter includes a $5.4 million bargain purchase gain on the acquisition of GMP Securities.
Earnings per share were $2 per diluted share in the second quarter as compared to 84 cents and $1.21 per share in the immediately preceding and prior year quarters, respectively.
Moving on to slide number four which represents a bridge between operating revenues for the second quarter of last year to the current period operating revenues were $366.8 million in the current period up 95.7 million or 35% over the prior year.
As Sean noted the wide spread volatility across asset classes due to the cobot 19 pandemic drove significant growth in operating revenues across our operating segments with the exception or possibly our global payments segments with still added 2 million or 7% growth in operating revenues as compared to the prior year quarter.
Standing out here security segment added 45.3 million or six 2% in operating revenues versus the prior year.
Within the segment equity capital markets nearly doubled its revenues, adding 30.4 million off the back of 134% volume growth as customer demand increased in our market share grew at some competitors stepped away from the market.
That's capital markets also had a strong quarter, adding 14.4 million in operating revenues versus the prior year with spreads widening 59% versus the prior year.
As despite unprecedented monetary policy actions fixed income markets remain highly volatile through the end of the quarter.
Operating revenues increased in our commercial hedging segment by 21.1 million versus the prior year to 101.7 million.
Exchange traded revenues increased 22%, particularly in the domestic in Latin American markets as well as in our expansion efforts in Europe and Canada.
Over the counter volume over the counter revenues increased 46% versus the prior year, primarily driven by volatility in energy market.
Interest income in this business declined 2.3 million the 5 million for the quarter driven by result declines in short term rates, which was partially offset by a 3% increase in average client equity to 944 million.
Our clearing and execution services segment had a strong quarter, adding $22.9 million of 31% than operating revenues a significant volatility in the global markets drove 71% and 62% increases in exchange traded in FX Prime brokerage volumes.
In addition, independent wealth management had 5.3 million or 30% in operating revenues.
Versus the prior year.
Our most interest rate sensitive segment. This segment cost 26% decline in interest income to 6.9 million and fee income related to customer sweep balances declined 600000 to 3.1 billion.
However on a positive note average client equity increased 47% to 1.5 billion and FDIC sweep balances increased 24% to 957 million.
Finally, physical commodities increased operating revenues 4.2 million or 21% versus the prior year driven by a $2.8 million increase in precious metals operating revenues is one of the $1.4 million increase in physical Laggan energy.
Precious metals revenues increased as the number of gold equivalent ounces traded increased 56% versus the prior year. However growth was tempered by mark to market declines related to the dislocation between Comex listed futures and over the counter precious metals contracts due to shutdown of global refiners and flight cancellations due to colder 19.
The next slide number five represents a bridge from Twoq 2022nd quarter pretax income of 30.9.
To pretax income of 56.1 million in the current period.
The significant operating revenue growth in our security segment led to a 26.6 million dollar increase.
In segment income versus the prior year.
Non variable direct expenses in this segment increased 3.8 million versus the prior year as the result of continued build out several recent initiatives and variable compensation as a percentage of operating revenues increasing versus the prior year due to this strong performance for the quarter.
Commercial hedging segment income increased 5.6 million as a result of the strong growth in operating revenues. However, this was partially offset by $3.2 million increase in bad debt expense.
CES segment income increased 4.7 million versus the prior year as a result of the increase in operating revenues, partially offset by 800000 dollar of 7% increase in non variable direct expenses.
Physical commodities in global payments added 1.8 million and 1.4 million respectively versus the prior year period.
Finally, the net cost in unallocated overhead increased 14.9 million versus the prior year.
5.4 million of this variance was driven by the bargain purchase gain in the GMP acquisition in the prior year noted earlier.
In addition compensation and benefits increased $6.4 million of which three and a half million was variable compensation increases driven by the strong performance for the quarter.
Fixed compensation increased 2.9 million in the spread out across several administrative departments into including key compliance and accounting.
Other expenses increased 2 million primarily related to the cost of our bi annual global sales meeting and customer global market outlook conference held in February.
Slide number six shows the interest and fee income on our investment of client funds of our exchange traded futures and options businesses as well as client them balances held in our correspondent clearing and independent wealth management businesses.
As noted on the slide our earnings on these balances have declined 5.3 million versus the prior year to $11.3 million as our yield on these balances have declined 101 basis point the 1.34% in the current period due to the effect of the fed actions over the last 12 months.
Moving on to slide number seven our quarterly financial dashboard I'll, just highlight a couple of items and no variable expenses represented 62.7% of actual expenses for the quarter well above our target of keeping more than 50% of our total expenses variable in nature.
We reported net income of $39.1 million in the second quarter, which brings our net income for the trailing 12 month to $99.1 million.
The quarterly results yielded a 24.9% return on equity well above our stated target of 15%.
Our total assets increased 16% versus the prior year, primarily due to strong growth in client balances.
Finally in closing out to review the quarterly results our book value per share increased $4 and 86 up the cold up quarter at $33.75 per share.
Next I will move onto the discussion of the year to date result can refer to slide number eight.
Year to date operating revenues were $107.8 million were up 20% of 643.6 million in the current fiscal year.
All segments of our business reported increases in operating revenues as compared to the prior year to date period.
The largest increase was in our security segment, which added $57.4 million driven by strong growth in both equity and debt capital market volumes as well as increase in interest income related to our securities lending and domestic fixed income activities.
In addition, our commercial hedging segment increased operating revenues 31 million or 22% versus the prior year, primarily driven by 58% in 13% increases in LTC and exchange trading traded transactional volumes respectively.
This is partially offset by $4.2 million decline in interest income.
Physical commodities segment, and a 10 million versus the prior year to date period, primarily driven by the acquisition of point invest as well as the increased customer demand for precious metals in general as well as improved performance biodiesel feedstock market.
Our global payments and CF segment that at 3.7, and 3.6 million respectively versus the prior year to date period.
In the Cdis eat CES segment its of note that the prior year comparative period includes the $2.7 million settlement received in the Barclays last look better.
Moving on to slide number nine pre tax income increased 22, and a half million to 77.89 for the current year to date period.
Ill segment increased segment income versus the prior year, except for our clearing execution services segment, which declined 1.9 million. However, when factoring in the $2 million net settlement in the Barclays last look matter in the prior year. The segment was flat year over year.
The largest increased within our security segment, which added $27.3 million segment income driven by the strong growth noted on the previous slide.
Partially offset by $8.7 million increase in non variable direct expenses and an increase in variable compensation as a percentage of revenue driven by increased performance.
Commercial had has been added $13.8 million segment income with growth in operating revenues, partially offset by $3.1 million increase in bad debt expense.
Our physical commodities segment added $3.5 million segment income versus the prior year, our roots of note for the prior year include the $2.4 million recovery on the bad debt of physical.
In addition, our goal payments segment added $1.7 million segment income versus the prior year.
Finally, the net cost and only unallocated overhead increased 21.99 versus the prior year, our and $5.4 million variances related to the GMP bargain purchase noted as noted noted earlier in the prior year.
Compensation and benefits increased 10.4 million of which 4.3 million represent an increase in variable compensation due to improved proof performance.
I will finish up with a review of the year to date dashboard.
Variable expenses are above our internal target of exceeding 50% of the total expenses coming in at 60.4% of the total expenses.
Net income was 55.6 million to the current year to date period, 34% increase over the prior year period.
The return on equity for the year to date period of 17.9%, which is above our internal target of 15%.
With that I would like to turn it back to shown to wrap up.
Thanks, Bill this is obviously being a highly highly unusual and in many ways historic time I.
I think the financial results, we have produced validate our business model, our philosophy around adding value to clients and how we manage risk.
We have made good progress in integrating intending to accounts many of the initiatives undertaken over the last year also.
The upcoming quarters will not be easy and we have to navigate our way through a variety of risks and market dislocations, we will remain vigilant and cautious biased, but I'm optimistic we'll have much stronger and bigger than before.
While in future environment may be challenging for us with low of volatility and low interest rates I'm, certainly there will be a reordering about industry and opportunities to pick up valuable clients people and businesses that will allow us to increase our market share and increase the value of our franchise, we've already seen the starting to happen and in the last three months, we've seen the strong.
Just onboarding appliance nearly 10 years and have many talented professionals wanting to join us.
We believe that the gain acquisition will be strongly accretive in every sense financially strategically and with the intellectual assets to enhance our strategy to become the best in class financial platform connecting clients the global markets across asset classes offering vertically integrated execution and sharing.
With that I'll turn it over to the operator and see if we have any questions operator.
As a reminder to ask a question you would need to press star one I got telephone to withdraw your question press the pound or hash key.
Please standby, let me come how do you any roster.
Your first question comes from the line of Justin Hughes with Philadelphia financial.
Good morning, and congratulations on impressive quarter I think is the highest return on equity I assume the company put up.
Well, thank you talked about a nice following wouldn't I guess.
Yes, I wonder if we didnt in losses, given the volatility of managed very well as well, but I was hoping to talk about April.
When when oil went negative.
Obviously tremendous amount of volatility there we saw interactive brokers pre announce a big credit loss.
In April kind of more of the same of what we saw.
I mean, one Q high volatility with manageable credit losses, or can you give a little bit of preview on the given take their between volatility in credit losses.
Okay.
A couple things.
As I mentioned, our business model is such that when we see extreme events, obviously, we make a lot more money, but we tend to have some charge offs and I think I said earlier I think you can see that enough Q1 results I think thats. The pattern, we came to see coming Holik right generally.
With regard to the dislocation in the energy markets I mean, I don't think anyone has ever seen anything like that and obviously historic.
We will likely incur some small provisions against that.
They're not going to be material or shrinking in any way sort of single digits of millions.
But.
We.
Hi, I don't know if you picked up in one of the reasons. We put this in a filing is we were very quick in terms of when we saw that happening getting our customers to move out of the front month contract, which we believe had become I'm tethered to the underlying price when it becomes irrational and actually we put.
Got a letter that made it was picked up on Bloomberg I'm not sure if you sold that.
We will sort of really pushing people out of that contract and one of the reasons. We just mentioned all of that is because I think some of our shareholders and investors actually sold as Nexus and was wondering what was going on the good news is I think almost every market participant followed us in maps in that action. So I think almost every one now is forcing that customers.
Out of the front month, particularly as it gets close to delivery just because of the sort of dissipation thats happened. So that the story around the sort of the oil side as the business.
I would say generally what we see is.
Probably volatility has declined if you just because the mix. So I don't think we going to see the same time of positive situation as we saw in March but still elevated versus where it was prior to the prices. So I think we'll continue to see by sort of longer term trends.
Hi of volatility.
If we have extreme events out there that does give rise potentially to some credit exposure for us if we do our jobs right that will still be a net positive, but I think the volatility. We saw in March was just really exceptional and Fortunately, we benefited from that but I think that impact as being somewhat me.
Okay.
As we stand now, but it could change so just I'm not so just and I don't know does that answer your question.
Yes. It does that system that you said the start of the movement oil was unprecedented says when them.
Yes.
It's crazy [laughter].
And then the thank you for quantifying the interest rate headwind it looks like 80 to 94 cents in the present presentation.
It looks like that includes money market fund fee waivers correct.
Yes, it we tried to aggregate everything related to outflows.
Only one chip.
Are there any offsets you can do in the now it's going to probably going to cost you money to hold these balances.
Can you add fees or anything else to offset this this revenue.
Yes, well a couple of things I mean, firstly, we are on our own situations. So there's a natural offset on our borrowings cost right. So that somewhat helpful.
If we assist with negative interest rates.
Awesome. The rest of industry are going to have to figure out how we turned that from being a net cost to being a possible because our business model is predicated on us owning something on the flip side I mean, you sold the big moves with the discount focused 18 zero percent commissions I mean part of that was the float kind of gives you some earnings right and if so.
That doesn't happen you are going to either have to charge fees or do something so should you correct I think if that perpetuates, we'll have to do something at the moment, we believe we in sort of negative territory.
In aggregate.
The other things we can do in certain parts of our businesses, we are able to rollout exposure optimal third we've done this previously.
So that's I guess three full years ago, when we had zero and.
In short instances negative interest rates on T bills, we rolled our exposure to opt to sort of the too.
Mark on the curve. So they offerings, we can do to manage that it's not perfect and it doesn't apply necessary to all the aspects of our hopes, but we will pull whatever live as we can to make sure that.
We maximize the return on that and if necessary change our business model slightly if we believe it's going to perpetuate.
Okay. Thank you.
Alright. Thanks.
Operator any other questions. Your next question comes on line of Russell Mollen, when 910 capital.
Hey, John are you doing.
I'm doing good Russell and by the way I keep telling everyone. You would the smartest God knows because in February you with telling everyone. This was the major pandemics.
August to you would have positioned my portfolio, a little bit better than.
And what am I missing thoughts worse so.
I'm not that anymore.
Okay.
So you kind of answered it before but.
You've probably seen lots of crazy stuff in your career, where did where to negative oil.
Back in all the crazy things that you've seen in your career.
All right spot to be like top three Oh, sorry, I mean never in my Wildest dreams that I think that a commodity would ever goes I guess, if I mean, it's probably top one I mean, it's it it just unprecedented and the speed of the move was was crazy.
Yes definitely effect.
And I mean, you mentioned that you have some credit provisions or whatever but it's nothing material I'm just kind of.
Let me through what you guys were down you said it a little bit in terms of moving people out of front month, but like.
How was there not just.
You know.
Major impacts on your business in our their competitors out there that you saw our seeing that have yes.
Taken it completely on the Chen from the negative oil.
Yes. So is there anything second than either on things that are public I mean, there's nothing else that I know, but.
Interactive brokers announced and there's also been Bloomberg article that announced I'll, let everyone everything they announced that about $88 million losses.
We had some some small losses I'm sure that there were lots of small lots of scattered throughout the industry.
Estimate of the aggregate losses, when its hoxton, though because it moved so quickly both up and down I mean in a bizarre way if you never reacted it sold to the situation by the end of the day, everyone was positive we don't run off business that way, we react immediately inside as everyone else.
But the estimates of the losses could be anywhere from 150 million to abate adults, but no one knows exactly.
So when people were liquidated the what happened they just take the size of that leaves times open interest.
So they could be people out there who have significant losses.
Just does not the other thing with no is a very large Singaporean energy business up effectively filed for bankruptcy very large very well respected nine.
Remit to have very significant losses over rule and their capital some of the companies out there who agreements had losses. So there's going to be tightened up there and obviously, it's also going to be the frac is on the produce the pay there's going to be throughout the industry.
Okay.
From a really good question yes.
From a risk management perspective.
What we saw in March and early April.
Was it a situation where you were having to.
China.
You know have direct oversight on every single thing that what's happening or you sort of have all the systems in place where.
It was being managed the way it should be based on kind of what you put in place in that commonsense approach.
Yes, I hate to say you know weve been through a number of these things now as I as I sort of set up on but I kind of deal we have a a really good battle hardened sort of management theme I mean, we've come through the financial crisis. We went through the flash crash I mean, we haven't got everything right right. I mean, you know we've had some issues where things to bracket.
Plan, but.
Over the last 10 years, we've managed to massively accrete our capital I think we'd be in aggregate massively profitable.
And Weve lens, along the way and I have to say I was really really proud of my team I mean, there was no panic, everyone knows working from home totally calm and.
We relied on the system, we had in place.
You know two to protect US I think if you don't have all of those operational things in place and something like this it's year Yukon both him on the fly rights and Yukon manager business Outsize.
On an AD hoc basis. So I think there's really comes down so you get on making sure you institutionalized you approach that you had.
Right controls in place you have the right people doing the right things then and you have smart people, who can deal with exceptions quickly and run towards the problems as they start emerging and that was very much our approach. So.
Honestly, plus pretty sort of calm for us I mean, there were things we have to dump on Monday, we sold were starting to pop off like WT Iden. We immediately got on Investor day thought a lot customer contract on but there wasn't panic and it wasn't like everyone was running around sort of hair on fire, but I think it's because we have high team we've been together along.
Time, we've seen in loss and I think we have hopefully the right kind of controls and infrastructure in place, but it over yet liquidity, Greg just on the stay guarded and stay vigilant and make sure that we kind of do up due out jobs.
Okay.
Got it.
[noise] does that answer your question Russell, Yes.
It does yes.
Hi.
I have one more question.
And now I'm blanking on it so I think I'm got.
You can come back and if you once we have to on so okay perfect.
Operator, as anyone else, who would like to Austin question.
In my mind or to ask the question do we need to press star one on your telephone to withdraw your question first upon or Heskey. Please standby wanted to go polychlorinate roster.
Your next question comes on the line of positive Io with punch and associates.
Hi, good morning, guys.
Hey, Paul how are you.
I'm doing well thank you for the call on that.
Nice job navigating Q1 are I guess your Q2, but.
Could you spend a little more time talking about how payments.
Payments segments has seen anyone.
Issues from current affairs.
Yeah, I guess two things we've noticed that is.
Obviously, there is being sort of an attraction in trade and sort of cross border activity.
That ultimately feeds into the payments business right because it just less cross border stuff happening so thats way.
Hey pretty negative.
General trend and I think we probably sold at the front end of that so hopefully that tends around at some point. So that's that's sort of generally negative we didn't really see that in this quarter because the number of payments went up but the payments where lots more about right. So they all signs out there that that is not initially going to be a positive trend for us.
The thing that really hurts us in this quarter is we had been getting a loss of for us sizable payments coming through the system related to.
Capital investments dividend payments.
You know.
No those kind of thing so I wasn't so the 100000 dollar payments. It was about 5 million dollar payments and obviously be just make a lot more money on a bigger payments and that was noticeable in how quickly that dropped off. So you know those nice big payments, where we make a we make obviously a smaller percentage on those but the absolute dollars.
Vega that really helps so that we stop you know so I guess most of the sort of two trends I think the second one was the one that impacted us more in the quarter.
We continue to see a good flow of payments I think they are smaller and I think if the world so to stay shops.
Probably going to start to see that group with some a little but I would suggest.
That's kind of my views on that.
But what we did tell you in my introductory remarks was one of the things you pretty excited about as soon as Jim rocks platform and we think there's a there's an opportunity for us.
You know to really roll off to a new customer segments, which would be sort of small SMB type customers you can't do that manually I think as some incumbency trying to do it and not doing it very well and we think if we can rollout a digital platform that we can start accessing on a broad basis.
And new customer base for us so that's a whole new so those opportunity for payments. We believe we have moving pieces in place with the direct acquisition.
Thats, a little company buying in the U.S. is going to give us the ability to roll that out pretty quickly.
And we think the other places in the World with is some application for that that's not going to be instantaneous like everything when you stop to both the business going to take.
A month's quarters in years to get there, but I think we feel pretty confident that is an exciting kind of new chapter in the payments business and inhibition.
Okay great.
And then changing gears a bit any.
Any update you can provide on.
On the.
That capital raised for gain capital.
Yes, so we working with Jefferies.
The.
Firstly and surprisingly the markets actually look any stable at the moment, then the high yield issuances as being pretty yet so we sort of in process with.
Our getting ourselves organize to get the capital in place in good times for the closing of that transaction. So all underway and kind of we're on track.
Yeah.
Perfect. Okay, and then maybe just last from me as a.
You talked a lot about.
Additional consolidation and opportunities.
Over the next few years here.
What.
What do you think.
I would make sense to add to the platform in terms of.
Another leg or are you looking at just adding scale to existing platform just talk a little more about which thinking big picture there.
Yes, so I think the thing that makes up platform more valuable to customers is to make sure that we have sort of the one stop shop full execution and peering.
So you know, it's a little bit lock in network Robyn midpoint that goes to one places not pretty valuable so over the last 10 years. We've tried the AD you know all of the markets and then use that we think are interesting declines that sort of a never ending process. I mean, I think you won't be acquisition was great for us because it doesn't.
And us well in some of the key exchanges in markets off the far east. So I think we'll continue to sort of AD products and capabilities and that'll be sort of just a never ending thing we have to do to keep on network relevance and to keep it.
Exciting and sort of front and center with our customers I think the most important thing now given that we believe we already have kind of one of the best Nicholas will execution and hearing out there across cross market cross products other than the bulge bracket banks, what we really need now is more volume through the pipes. So.
That's going to require us to push out into both customer segments to do that property, we need to make sure. We have right sort of on rents on Tom. It works I mean, you comps use a very high touch broker assist model for retail for example, you know and you can't use you know a no touch no service model.
So full launch customers that have complex solutions. So you've got to figure out how do you build but as those on rents to get that flow NGL pipes. That's the tricky part of it and I think you doing well on that and frankly that was the real attraction with game is they've got a highly digitized very efficient on ramp.
So smaller customers and we think we can deploy that on ramp throughout our businesses and make that on ramp.
Mitch more more frictionless and more attractive to customers. So I think thats really what we're looking for is how do we pick up more volume.
And more customers through consolidation and ultimately.
We want to own the end customers, we must citadel, we don't know what should we want to only end customer we don't want to just be providing services to other markets competitors. So we really want to own that end customer we want to provide that in customer with a platform that allows them to do whatever they want to do we want to be part of the market structure, we want to provide the key.
During an execution and we need to build you know the right capabilities.
Platforms to do that efficiently. So that's really kind of what we pushing through now is how do we pulled us on ramps how do we get more customers do we acquire do we go dynamically do we merged with someone I mean, those are all things we think about.
Okay sounds great. Thanks for your time, we'll talk soon.
Okay fantastic. Thank you.
Operator or anyone else.
At this time there are no further questions.
All righty so.
If we have no one else I would just like to thank everyone.
For joining.
Once again, our thoughts with the countless millions of people that have not head well and we certainly know we amongst the lucky ones.
We will do all that we can get to that new normal and be in a position to take advantage.
I would like to thank all of our clients were trusting us through these difficult times and once again.
To our amazing and talented team out there.
Guys have been worries for us so thank you and we'll be speaking to you in about three months time. Thanks.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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