Q2 2020 Broadmark Realty Capital Inc Earnings Call
Good afternoon, ladies and gentlemen, thank you for standing by welcome to the ballpark Realty capital second quarter twice Horny earnings call at this time, all participants alright listen only mode.
Question answer session will follow the whole presentation.
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I'll now turn the conference over to your host Steven Sweat Investor Relations. Thank you you may begin.
Thank you for joining us today, well I'm not really capital's second quarter 2020 earnings conference call.
In addition to the press release distributed this afternoon, we filed a supplemental package with additional detail on our results, which is available on the investor section on our website.
W. W Gulfmark dot com.
Today's call management's prepared remarks and answers to your questions may contain forward looking statements forward looking statements addressed matters that are subject to risks and uncertainties that may cause actual results to differ from those discuss today.
A number of factors could cause actual results could differ materially from those anticipated.
Forward looking statements are based on current expectations assumptions and beliefs as well as information available to us at this time and speak only as of the date. The Army management undertakes no obligation to update publicly any of them in light of new information or future events.
During this call will discuss certain non-GAAP financial measures more information about these non-GAAP financial measures and reconciliations to comparable GAAP financial measures are contained in our earnings release and filings with the FCC.
The second this conference call. This hosted by Brad Martz, Chief Executive Officer, Jeff <unk>, Chief Financial Officer, David Schneider.
That's what we'll make some prepared comments after which we will open up the call to your questions.
I will turn the call over to John.
Thank you Steve.
Welcome to our second quarter Twentytwenty earnings call.
We hope that all of you and your family's every me safe and healthy.
This afternoon I'll begin by discussing how broad mark performed in the second quarter.
And provide an update on how we are operating through the challenges posed by cobot Nike.
I'll then discuss why we believe we're well positioned for longer term growth as we emerge from this crisis.
Given the strength of our balance sheet secular tailwinds that should help drive our business.
Then I'll turn the call over to David to provide additional detail in our financial results and performance.
Portfolio and balance sheet.
When David is finished we'll open up the call for your question.
Starting with our origination for the second quarter, we originated approximately $50 million low.
Bringing year to date origination $157 million.
We also added $47 million of loan amendments during the quarter.
Generating additional fee income.
I'll de risking our loan portfolio by a transformation of investment in land.
The vertical construction.
As we discussed on our last fall early in the quarters it restrictions permitting inspection office closures.
And economic uncertainty all contributed to slower construction activity in most of our market.
At the time, we were disciplined in our capital deployment given the uncertainty amid the early stages that the pandemic.
And originations were modest in April and May.
We emphasized this lower origination volume not due to lack of demand in fact.
We received many inbound inquiries from developers, whose financing partners had pulled back after losing their lines credit.
We made the decision to deliberately slower originations in the early days, but cobot crisis until we had better visibility.
As we moved through the quarter, we slowly built our pace of origination while maintaining our stringent underwriting standards.
So while some levered construction lenders were forced to cut off originations entirely due to lack of cash.
We were able to proceed in a measured manner.
This is working toward benefit we were able to resume a pace of originations closer to historical levels.
With 90% of our second quarter originations occurring during June.
All originations can vary month to month, just on closing times, we regard the pace in June originations is more representative of our historical cadence.
Please see slide five of our supplemental earnings presentation, which provides additional detail on new loan origination, but the last several quarters.
Most of which were disrupted by the merger in the second half of 2019.
Encoded in Twentytwenty, respectively.
However, while we have experienced some near term opened related pressures.
Underlying demographic trends in consumer preferences are likely to provide a strong backdrop for broad mark as we move forward.
We operate in markets, where strong population continues to stimulate demand for housing.
Well covered 19 has affected construction activity with respect to timing.
It has not eliminated the significant housing shortage that persist in the states in which we operate.
Also the combination historically low interest rate and the growing desire by many for more space and that social distances and work from home policies.
Resulted in explosive demand for single family housing across the country.
We continue to see developers worked to respond to that unmet need.
The same time, we believe that cobot 19 has served the further limit at least for the near term universe of lenders able to finance construction loans, moving broad mark with more demand and less competition.
Now turning to contractual deep.
I remind everyone of our historical contractual default level, which has averaged less than 3% overrides and year history.
With the impact of coated contractual deep also increased over the past few quarters.
Permitting and inspection office is closed or went remote.
And in some states halted construction altogether.
Resulting in construction timelines being pushed out.
As a result, some of our borrowers who we believe would not otherwise would face trouble, but from tobey experienced completion or refinancing delays, resulting in contractual default.
It is very important to make clear contractual defaults are broad market historically been part of the process.
Which we protect our claims against collateral.
Our normally result, with minimal if any principal losses.
And it had limited negative financial impact on broad Mark overtime.
Indeed in some cases contractual defaults increase total return as a result of our earning default interest and other fees.
At June Thirtyth, we had 30 loans and contractual default representing 16% of our total portfolio value.
The majority of these loans entered into contractual default status in March and April as we proactively began to work with our borrowers to exercise our lenders rights.
March represented the high watermark for new contractual defaults and since then new incidents and steadily trending downward each month.
June and July represented a return to pretty cold good levels of new contractual defaults.
We spent some time on our last earnings call discussing but contractual defaults mean for broad mark.
Worth reiterating because the contractual default is not necessarily mean a lot.
Over a 10 year history, we have had loans go into and out of contractual default and the most common result has been a positive economic outcome for broad Mark.
Note that our estimated losses on current contractual defaults is approximately $6.8 million a.
Approximately 3% of the principal outstanding on the loans in contractual default status.
In less than 1% of our total portfolio value.
And for most loans that experienced a contractual default.
We resolve the issue and collect all contractual interest and fees.
In the second quarter, we result for loans and contractual default with minimal losses previously captured in our reserves and these resolutions for pad at $14 million and liquidity.
David will provide further detail on these loans later on the call.
We did not foreclose on any properties in the second quarter and as of June Thirtyth, we have only one owned property or Oreo in our portfolio.
We believe foreclosure will continue to be a rare outcome of contractual defaults.
The past three years, we've experienced 75 incidents contractual default only 8% resulted in foreclosure.
As we work with our borrowers we have a tool box of options to help us resolve issues in the satisfactory and often an economically positive basis.
These options include.
Deferring payments and setting up a plan to bring the loan back the current overtime.
Helping the borrower refinance.
Putting receiver in place.
Working with the borrower to find options to sell the project in an incomplete state that would help them satisfy their obligation to us.
Or getting a deed in lieu of foreclosure.
Remember also that our loans tend to be relatively small and that our borrowers are required to provide significant personal equity, creating a large incentive for them to work with us to cure any issues.
As of June Thirtyth, you've executed forbearance agreements on 10 loans with a total value of $41.4 million.
And 61% of our other non performing loans or in an active forbearance process.
We believe that by working with our borrowers to resolve contractual defaults, you'll be able to capture our principal.
Interest in penalties just over a longer time horizon.
Most importantly, with our significant cash position with payoffs trending positively we will have ample liquidity to continue to fund a new loan.
Even as we work through these contractual default.
Lastly, if we do need to take over a project and finish it we have the resources to execute on that.
Over the years, we've built relationships with numerous contractors and our strong liquidity means that we will not be forced to sell access quickly fire sale prices.
Furthermore, our Maxim 65% loan to value ratio is that we have a meaningful value buffer in the event that we need to foreclose and sell it project.
To summarize covert 19 did lead to a slowdown in our originations and an uptick in our contractual default rate.
However, as we progress through June and July we've seen encouraging signs of a reversal in those trends.
We have resumed originations at a more normal cadence and new monthly contractual defaults have returned to pre coated levels.
We sit here today, our borrowers are seeing fewer construction financing options, even as demand for single family housing is rising increasing the need for more construction.
Our pipeline is strong.
We're confident that we are well position over the long term to continue to grow our loan book.
Of course, these improvements depend on the path of the cobot 19th situation.
Construction activity has resumed and all of our markets, but the recent increase in case counts across many states has raised the possibility of further restriction.
Given the significant uncertainties, our board of directors aligned our dividend with our second quarter core earnings of 18 cents per share.
For the month of August our board declared a dividend of six cents per share.
Of course, our intent is to grow our earnings and therefore, our dividends over time and our board will continue to evaluate incident appropriate dividend rate on a monthly basis.
As of the close of business on August six we currently have approximately 7.4% yield.
In the world for Treasury rate.
Our near zero.
Finally, let me give a brief update on an important area of focus for us.
Our environmental social and governance or SG initiatives.
Our mission is to empower real estate developers and then investors.
To improve places the spaces in our communities.
With that and we adhere to six core value.
Integrity collaboration diversity.
Accountability community and reliability.
One way in which we strive to become a more socially responsible company is by matching our employees charitable contributions.
This has been especially rewarding in recent months as our team members had been focused on helping their favorite organizations. During this difficult time.
Furthermore, we feel it it's incumbent on us as business leaders in our communities to engage with difficult social issues, rather than shying away from them.
I recently signed the CEO action pledged for diversity and inclusion.
Many thousands of Ceos, and committing ourselves to creating more inclusive works workplaces.
And our COO, Linda Coa assigned the NAACP dispatch to stop eight.
We also joined the stop paid for profit campaign suspending our Facebook advertising in July as part of a movement against intolerance online.
And from a governance perspective, the management team at broad Mark is uniquely aligned with investors as we are internally managed and management has significant stockholdings.
I'll now turn it over to David will review, our financial results in more detail.
Thanks, Jeff and good afternoon, everyone.
Let me start with the fact that we earned $20 million net income in a quarter, where our new loan originations were primary limited one month by the uncertainty of the pandemic.
Our commitment to take an even more discerning approach to lending.
Which are detailed on slide four apartments presentation.
For the second quarter of 20 point, we recorded total revenue of $29.1 billion and net income of $19.8 million.
On a per share of April this reflects the GAAP net income of approximately 15 cents per diluted common share.
Adjusting for the impact of nonrecurring costs and other non cash items.
Our core earnings for the second quarter with $23.4 million were 18 cents per diluted common share.
Matching our dividend rate for the quarter.
Interest income on our loans in the second quarter.
$22.2 million.
Net income for $6.9 million.
With regard to originate in volume.
Which are presented on page five of earnings presentation.
Second quarter everything in loan with a total face value of $50 million.
As Jeff mentioned.
The vast majority of our second quarter with nation.
$45 million worth.
Play thinking as we slowed originations in April and May during the height of the Copel lockdown measures.
Given the unprecedented events. This quarter. We also want to provide an update on July activity, which included $88 million elimination.
Million dollars menu, including conversions from land vertical loan.
Moving our June numbers.
We view that July early August positive pace of origination building, Puerto Rico with level subject to further coven disruption.
Positioning the company for growth as we move ahead.
As we've previously mentioned.
Core earnings benefit of origination in any given quarter will be realized over time as our accounting treatment requires that origination.
We recognized over the life will belong.
Now turning to our industry leading balance sheet.
I'd like to give a brief accounting up as it relates to our contractual default beyond the comments Jeff provider.
Every loan and contractual bulk data has been evaluating potential awful and weve recorded aggregate estimated losses on loan of $6.8 million as of June 30.
This is down from $7.2 billion of estimated losses as of March 31st and represent 3% of the principal outstanding on loans currently infrastructural default and less than 1% of our total loan portfolio.
As we've said in the past the contractual default with a new to protect our interest in collateral and in most instances contractual defaults are resolved without issue.
Even in these uncertain time, our strong underwriting model and ability to manage through contractual default demonstrates that we continue to operate effectively.
Also the contractual default does not mean no income.
To date, we recognize more than $35 million indefinitely.
Interest.
Loans currently and contractual bulk data.
And we generally expect positive economic outcome upon exit.
In addition.
As detailed on slide 11 earnings presentation.
With zero debt and $218 million of cash on our balance sheet as of June Thirtyth 2020.
We believe our liquidity positions us well as we go through our current pipeline.
Also as we previously mentioned, we intend to put a modestly sized working capital credit facility in place.
We have significant amount of existing cash on our balancing the deployment into new loan origination.
We expect to find a way its credit facility by year end.
Our privately it's lots in March participated in home loans in the second quarter for a total participation of $6 million as of June Thirtyth 2020.
As we expected a heightened market uncertainty, resulting from Covidien has.
Has contributed to slower fundraising.
But we expect the pay slowly improve as long as market continues to stabilize and recently.
We believe the implementing a working capital credit facility.
And our strong pipeline of accretive loan will lead to positive growth of our earnings and dividend in the near term.
Now I'd like to turn the call back to Jeff for a few closing comp.
Thanks, David.
To recap as we navigate the covert 19 crisis, we feel confident that our fortress balance sheet experience expertise will allow us to continue to ramp up our originations grow broad mark as a lender of choice for developers.
Cobot 19 presents some near term uncertainty we believe the demand for housing remains strong supporting demand for our loans and now reputation as a reliable lender offering speed in certainty of execution will help us continued to grow our pipeline.
Completes our prepared remarks, we will now open up the line quick questions.
Operator.
Thank you.
At this time will be conducting a question answer session.
Like to ask a question. Please press star one on your telephone keypad, Hey, confirmation Tollway indicate your line is in the question in queue. If at any time you wish to remove your question from the Q. Please press star to for participants using speaker experiment, maybe necessary to pick up your hands had before pressing the star case.
One moment, please owing poll for questions.
Our first question is from Stephen laws with Raymond James.
Hi, good afternoon.
No the job.
First off I hope everybody well is it safe and healthy a good to hear from you.
You know talk it looking at the new originations great to see that turned back on their Ragus late may and the majority in June can you talk about the underwriting standards, how you're thinking about new originations post co bid versus Cree co bid. The the LTV doesn't look so change materially but can you talk to to maybe other character.
Chris six that you have a laser down on or change anyway.
Hi.
So I.
I am always reluctant to say that we change our underwriting ties in with various things in the market we like.
The way, we haven't set up we certainly never go over our 65% loan to value, where you might see something change. If you were to look loan by loan comparing today would say six or nine months ago, it's quite possible that the loan term will be a little longer they will have a little more interest reserve in there. We've also.
He's looked at.
We expect the value to be completion.
And just what it is today so.
Ladies and a post co bid.
Era is is.
Probably different but I think mostly we just try to stay real tight with our our underwriting and as I said, we might build a little extra determined just knowing that things are going a little more slowly than usual.
Great and you know hard to read a lot into slight changes in mix, but looks like.
Texas in southeast exposure up a little bit as at the expense of Washington in Utah.
Also looked like CRT up a little bit it's expensive for rent in the land anything behind those slight ships I know that geographic diversification has been a a focus and that will gradually take place over time, but.
Any other than anything else going on with the shift in mix.
Either by geography or property topic for long time.
By geography, certainly not we we continue to.
To to push on all four regions I think percentage wise the best odds are in the southeast and minute Atlantic region, because they're smaller to start.
But but the mountain west, Texas, if that that might go up because we do a big loan Washington might go down because we have a payoff.
Then that might slip a months from now.
As far as far as product type goes we here.
We still like single family in multifamily housing and we're really trying to push there.
We have brought our land exposure down.
As we had expected we would we've had we've had loans that we had classified as land convert to vertical construction, we like that as you main how I think we've said before we'd look at.
At land loans really is providing lot inventory for our home builders are apartment builders and so and they need a lot inventory and so we don't want to just be land developers, but we'd like to provide them with.
With that product so they can continue to build houses.
Great and my last question David shift over to you.
In a another or some onetime items in there can you maybe.
Break that down a little bit more course of the foreign outgoing for the quarter or I guess could cut to the chase what should we really think about as a run rate go forward number four Raj DNA expenses.
Yeah, I would say.
Thanks for the question, Steven and DNA anytime for a first year public company.
A little bit Hearts project, obviously, we're definitely incurring a little bit more legal costs were incurring costs related to prox implementation I kind of expected to see a little bit more in Q1 in Q2, Hasnt really are focused in on implementation of stock.
We expect some of those normalized but I think if you look at our core earnings in terms of.
What we're backing out from first year public company transition expenses. It gives you a little bit more of a normalized run rate per probably future years.
But I think between the two periods were probably looking at something between.
For the half the $5 million a quarter.
For cash and cash expenses I.
I would say the other thing to note on Q1, we had a diverse in general entry related to some amortization, which threw off the DNA little bit Bucks.
It was actually decreasing expenses mid Q1 look over that lower versus Q2.
But generally.
You know again.
This year, what we're going to have a little bit more legal and accounting and professional and costs associated with being a public company, but we think we've gotten in contrast to them and we expect them to start going down overtime as we continued our NOI internalize.
Those function.
Great I guess is a slight follow up to that will there be any onetime expenses associated with the credit facility that that you guys and kind of getting the second half or is that just going to be amortized.
Into the.
We capitalized and amortized over the life.
Thanks for taking my questions have a grid.
Thank you.
Our next question is from Tim Hayes with B. Riley FBR.
Hey, good afternoon, guys hope you're doing well.
Just on on the two queuing Threeq you originations, so far and does yields on those loans been consistent with historical average or just wondering if you're able to pick up a little bit a yield given the.
Just the.
Economic environment or or vice versa, as you've seen has come into that.
David Yeah, Yeah.
Yeah, absolutely. Thanks for the question Tim No, we Havent changed our our products are exactly the same we haven't had anything to change their rates were not looking to increase rates and take advantage of the market I think more importantly, what we're seeing is better opportunity.
Maybe some borrowers in different collateral that maybe didn't come to us in the past because some of our competitors have been struggling so I think where.
Were allowed to be more picky and than usual I mean, we always have hurt our same underwriting standards were applying and probably more stringently, but I think the change over the last two quarters is I think we're seeing deals now that may be didn't come to us.
When somewhere cheaper in the path. So I think thats, probably the biggest thing but to answer your question directly now you know we're still doing the same 12% tend to focus on interest rate and 4% to 5%.
Origination fees, so no change there.
Kevin I can add a better color I'm sure.
I'm thinking of one competitor in particular that when they had been.
And they were trying to get deals on their books, if it had a little extra money. They would just undercut their pricing that Slashdot and then and then the same borrower bar or would come back to them. Another time, when they were low on money and they would be price that 30 or 50% higher than the last deal and and as you.
No roughly two thirds of our businesses repeat business and part of that is because our borrowers know exactly what they're going to get every time they pick up the phone and so this this doesn't feel like the time to try to take advantage them and.
And boost our yield.
[noise] makes sense I won't glad to hear that's hold up 10, no no major changes there.
And then I know you gave some good is some color on July so far just wondering if we.
Able to get a few other data points, you would you able to disclose what how repayments looked in a in July so far and then if there's any update on the private read a web EMEA and the third quarter quarter, you could give so far if it's pretty static at about 12 and have failing.
Yeah on the payoffs, we havent publicly disclose the activity for July, but I can say it's.
More normalized I mean, just to put them in perspective right.
Q1, we had total payoffs of about 126 million Q2 that decreased to 75.
Somewhere probably in between the two of those is a normal run rate definitely closer to Q1 Q1 with a little bit high Q2 with with over one low.
So typically historically, we've seen something around $30 million, a month or pay off.
Yes.
As normal for us so that's kind of what we're expecting to component.
In the upcoming quarters.
And then on the private green.
No material changes, we'll continue to tune in in the near term kind of release, our press release or 8-K, showing that the assets under management no huge activity in Q2 were in the in the month since Q2, but it's something that we continue to really have or we're really looking to grow the private mi we've got a failed.
And that is working terribly hard and a very difficult environment to raise capital. So I think it's something that.
No. We're continuing to monitor container worked really hard and we expect ultimately to start getting.
Closer to the target level that we originally had.
Got it okay. Thanks for the color there David.
And then you know I know you mentioned that contractual defaults have come down in July so far would you be able to just give us that data point on kind of where it stands right now and then.
Maybe a little bit of color on if the drop there isn't because you put more loans in our parents or if you just extended these loans and they're not technically in forbearance and you're able to clip your fees as you normally do or any other tidbits you can they're out there would be helpful.
Yeah.
Public we didnt publicly disclose too much we had so I can say that we had zero default linzess. All convertible. This is positive I think we had in one or two new defaults in June. So I mean, we're really focused on the new defaults. The reality is existing default we had a really big uptick in Q1, I think we had 22 of our defaults from new.
In the three months ended May 31.
Since then I think five have paid off hand have enter forbearance agreement.
And then we got no another eight or nine defaults in Q2. So the positive trending is that we're we've basically halted new defaults, which is great news.
Mhm equal that really kind of came to fruition at the end of Q1 way covert really started to hit home.
We're working there wasn't really hard they're not going to get resolved overnight, but what we're expecting each quarter.
To work on a chunk that a chunk resolved.
Whether that you know, we're hoping more pay off in exits of alone the forbearance agreements are helpful.
Oftentimes will allow us to get some collections right some of these.
Loans, we're not paying mantra forbearance agreement, obviously, no I think it's important to note that.
These loans that are in default status as of Sept, 30, and entry 31 quickly are pretty much all competing projects, they're not sitting on a bunch of the construction in progress a lot of them are actually now.
Revenue generating so the forbearance agreements with that allow it allows us to do with the hey, we're not going to foreclose on you and but any of those rent collection should be paid directly to us. So we'll still get some income off those loans, but ultimately we wanted to exit them off our books.
And really start to get the full interest income on our portfolio.
I see okay.
All right. Thanks for the the color there David and then just one more for me I think last quarter, you guys mentioned that you're interested in pursuing some portfolio acquisition opportunities and just wondering if that's still and forgive me. If that was maybe your fourth quarter call I don't I must tell my head, but im wondering if that's something you're still.
Interested and if you're seeing any opportunities there from from Samir distressed competitors or if that's maybe not as much of a a target as it may be was our earlier in the year.
Yeah, I would say, we're always open we're always going to pick up the phone and hear about opportunities out there and we did that.
With that some portfolios in Q2.
I think ultimately worked out.
And obviously, we'll continue to have those conversations.
When if it makes sense and it's accretive to our shareholders. It's something that is off interest to us.
In the meantime, we're really focused on originating our own bones, rather than acquiring someone else's loans that there's a there's a deal out there obviously, we'll look at it but we've got a healthy pipeline of loans that we can underwrite.
On our standard and there is no skeletons in the closet or anything like that so that's the primary focus right now, but wasn't as well we will always pick up the phone and have those conversations and see if something makes sense.
And then got I don't just if I can go a little further on that one also here of the David's point about.
But our own portfolio we.
And we try not get into loan level detail, but sometimes I can't help myself.
We had we had an opportunity come to us from in Austin, a really nice loan on a project that was basically.
I think it was it was well into its construction process when cobot, yet and that lender was unable to complete it.
And and this developer.
Needed to keep coin, obviously, and so came to us candidly in a panic.
We underwrote it quickly.
We are able to close on it we got a really nice loan out of that so that's not buying a whole portfolio, but that's buying.
That is buying a piece of someone else is part of someone else's portfolio as they as they were going down.
Another example, similar but homebuilder oh build to rent homebuilder in the in Florida market.
Came to us when they were in a pinch they had more traditional financing that was dragging out and they came to us because they needed to get a small deal close quickly.
And we were able to perform they had watched us for.
Most of the year finally gave us a chance they now our reference for us and and build these homes by that doesn't where their go to lenders. So.
So we want to take care of our current borrowers and we thought we may not be looking at whole portfolios and we certainly will as David said.
We're we're getting nice little pieces of other portfolios from lenders that either direct head to scale way back or maybe are no longer business.
Got it yeah no. That's it that's a good a little anecdote there Jeff appreciate.
You know that's always going to just get at kind of a visual of how does how you can actually benefit and.
Situation like this so.
I'm going to sneak in one more.
If I could just he mentioned that your current cash balance represent 84% of unfunded commitments. Currently just can you remind us what you're kind of cash target is there and how much cash you feel comfortable deploying right now because I know through Threeq you activity has been pretty strong.
And I don't know exactly what repayments are at this point, but I imagine there lower than what you Virginian. So far so just wondering how low that numbers come down and and how comfortable you are within at that level.
Sure Yeah, I think I can come on that Tim So we're still at over $200 million.
Today.
A little over $200 million.
That percentage is probably come down from 84%, but we're targeting I think anything.
We had extraordinarily high percentage of pass on the balance sheet as of Q1 Q2 that started to come down I expecting probably come down a little bit in Q3, but it's something that we continue the modern pay pay high attention too because we always want to have enough cash on our balance sheet to finished projects and.
Make sure that.
If you have to take over price. If we can do that but that being said you know, we're looking to be way more efficient with our and our cash and that's really the focus of the credit facility that we mentioned a couple of times.
Okay comment on exactly the timing is but that's something that we foresee.
Taking our levels of cash as a percentage of hold back somewhere between 70, 80% historically down to at least 50%, where we're comfortable holding you know still holding well over $100 million the cash on the balance sheet, but freeing up just cash sitting there right now for deployment and goes to deploy that origination pipeline behalf. So.
There isn't it.
Magic number per se, but we know the number can come down we're comfortable with it below 80, 84%, where it was that Q2 and ultimately with the credit play places at the cash management toward backstop.
The company thing it significantly lower than 84%.
Got it okay. Thanks for taking my questions I appreciate it.
Thanks.
Ladies and gentlemen, we have reached the end of the question and answer session.
Turning the call back to management for closing remarks.
Uh huh.
Before we close I. Thank you all for your time and your confidence I.
I hope you all enjoy the rest of your summer stay healthy.
And we'll see you next quarter.
Thank you. This concludes today's conference.
May disconnect your lines at this time.