Q2 2022 Broadmark Realty Capital Inc Earnings Call

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Greetings. Welcome to Broadmark Realty Capital's second quarter 2022 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Please note this conference is being recorded. I will now turn the conference over to Navid Bhoparai, General Counsel. Thank you. Thank you very much for your time.

being recorded. I will now turn the conference over to Navid Bhoparai, General Counsel. Thank you. You may begin. Good afternoon. Good afternoon.

Thank you for joining us today for Broadmark Realty Capital's second quarter 2022 earnings conference call.

In addition to the press release issued this afternoon, we have filed a supplemental package with additional detail on our results, which is available in the investors section on our website at www.broadmark.com.

As a reminder, remarks made on today's conference call may include forward-looking statements.

Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today.

We do not undertake any obligation to update our forward-looking statements in light of new information or future events.

For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our most recent SEC filing.

During this call, we will also be discussing certain non-GAF financial measures.

More information about these non-GAAP financial measures and reconciliation to the most directly comparable GAAP financial measures are contained in our earnings release and SEC filings.

This afternoon's conference call is hosted by Broadmarsh Chief Executive Officer Brian Ward and Chief Financial Officer David Schneider.

Management will make some prepared comments, after which we will open up the call to your questions.

Now, I'll turn the call over to Brian .

Thank you, Nevin, and welcome to our second quarter 2022 earnings call.

This afternoon, I'll begin with some remarks on the macro environment and briefly highlight our second quarter performance, and then turn the call over to David to provide additional detail on our financial results, investment activity, and portfolio.

We will then open up the call for your questions.

2022 has presented unique and perhaps unprecedented challenges to the economy and financial markets.

Spiraling supply-side inflation in the first half of the year caused the Federal Reserve to begin a rate hike cycle that continued into July , with the target Fed funds range up 250 basis points since January .

Mortgage rates rose in response, reaching over 6% in June , before falling over the past few weeks.

The recent drop in interest in mortgage rates, while welcome news, is most likely due to recession fears, which are now front and center with two consecutive quarters of negative real GDP growth on the books.

With the crosscurrents of inflation and recession, financial market volatility has hit levels not since the global financial crisis.

While employment figures remain strong, we are carefully watching for concerning signs in both the high and low-wage sectors of the economy.

These factors certainly impact Broadmark.

I want to emphasize that the foundational principles of our company position as well perform throughout the cycle and whatever the environment.

Indeed, over the last few years, as many in the industry chose to juice near-term earnings with high leverage.

We did not.

Yet, we continue to produce steady and solid unlevered results.

Now, as market dynamics have shifted,

and the risks and cost of higher leverage come to the fore.

We can continue to execute on our growth strategy as others are forced to pull back, or in many cases, cease origination.

As a result, we are in a great position to outperform as we move into the next cycle.

We have a strong and experienced team of ground level real estate investment experts that understand and can underwrite complex credit investments.

And we utilize conservative underwriting standards, including significant equity committed to any project.

Equally important, we have the lowest levered balance sheet in the industry among public peers.

This competitive advantage provides us with the potential to take on capital to fund future originations.

And with almost entirely all fixed rate debt, our balance sheet shields us from the impact of higher interest costs.

affording us significant stability in today's shifting markets.

While we have invested in a handful of floating rate loans, all have interest rate floors that protect our downside, while allowing us to capture upside if the current interest rate trajectory continues.

When I joined Broadmark as Chief Executive Officer earlier this year, my intentions were not to change what has made the company successful, but rather build on our strong foundation to expand our growth opportunities.

To that end, we have built a national underwriting team that, while geographically diversified, will focus greater attention on uniform underwriting standards for complex real estate credit.

and provide better opportunity to scale our financial analysis in relation to our growing origination efforts.

Additionally, we have implemented greater rigor and focus around both our pre- and post-funding asset management capabilities.

which now operate as the primary credit function for our business.

From our last earnings call, we anticipated minor increases in headcount in both our pre and post funding asset management roles.

with a smaller reallocation of existing resources when compared to our underwriting team.

We have now completed almost all of those hires with a few notable ones from our competitors.

One part of strategy that we plan to evolve in the coming quarters is our approach to defaults in REO.

Historically, our team has rightfully worked through each situation to achieve the most favorable results for shareholders.

This, however, has resulted in us taking longer to cure defaults than may be optimal.

and has impacted our ability to expeditiously resolve challenges and redeploy capital.

While we've rarely incurred a principal loss from these defaults,

These extended workout periods have and will continue to cause a meaningful drag on near-term performance.

Looking forward, our strategy will be to strike a more effective balance between maximizing collections

economic efficiency, and opportunity costs.

recognizing that in certain instances

exiting defaulted loans and reinvesting that capital into new opportunities more quickly could prove a more profitable path.

On the origination side, we will continue to be very active in the small to middle market investment space.

which we define as five to $75 million per investment.

We will continue to make smaller investments where there is an important relationship play.

However,

We will seek to move our average loan balance up from about $7 million today to ideally around $15 million.

but would anticipate this will take more than 12 to 18 months to accommodate the normal originations and payoff cycle.

We seek to move our average investment balance up because we believe there remains more market fragmentation.

and less capital markets efficiencies in the space that fits between the small balance, six and flip business purpose loans, and the larger institutional loans.

We also think our capital is more efficient in this space from a total profit perspective.

In addition to continuing our focus on construction loans, which we think remains viable through all parts of the cycle.

We're beginning to look at other investments and otherwise gearing our infrastructure to include bridge and transitional financing.

asset repositioning, mezzanine moans, and participating preferred structures which could enhance our risk-adjusted returns.

On the construction side, we're starting to see better borrowers and better transactions.

in the high-yield space as other lenders are forced to pull back or cease origination due to the pronounced recent changes in the capital markets.

Now turning to our second quarter performance.

We executed on about $197 million in new originations and amendments for the quarter.

at an average unlevered yield of 10.1%.

As a reminder, origination volumes naturally vary from quarter to quarter based on the timing of non-closings.

We continue to prudently expand our geographic footprint and we are now active in 20 states and the District of Columbia.

improving the diversification of our portfolio, and we will look to add more states as we grow our national platform.

As a result, we grew our portfolio to $1.6 billion of loans secured by high-quality real estate with a weighted average loan-to-value ratio at origination of approximately 59.9%.

This growth was achieved even as we remain disciplined with our investments and we will remain prudent in our origination approach to ensure we maintain a high quality loan book which we believe can withstand the current uncertain macroeconomic environment.

Finally, I would like to thank our strong and committed team for their hard work and contributions in the challenging times.

Your diligence and expertise are the true sources of our success.

With that, I'll turn it over to David to review the financial.

Thanks, Brian , and good afternoon, everyone.

Our operating results are detailed on slide 7 of our earnings presentation.

For the second quarter of 2022, we reported total revenue of $28.5 million and net income of $15.9 million.

On a per share basis, this reflects a gap net income of approximately 12 cents per diluted common share.

Adjusting for the impact of non-recurring costs and other non-cash items, our distributed earnings prior to realized loss on investments for the second quarter were $20.7 million or $0.16 per diluted common share.

Interest income on our loans in the second quarter was $22.1 million and fee income was $6.4 million.

On the expense side, for the second quarter, we had cash compensation and employee benefit expense of $2.9 million and G&A expense of $3 million.

Our total cash compensation and G&A expense normalized relative to the first quarter of 2022, and while up 5.9% from the second quarter of 2021, due primarily to increased headcount in the second half of 2021, we maintain our expectation of approximately $24 million in total cash compensation and G&A expenses for the full year 2022.

With regard to origination volumes, we continue to benefit from our increasing size and scale.

which has enabled us to grow our average loan size while keeping our percentage exposure to any individual loan very low.

In the second quarter, we executed on 25 originations with an average loan size of $7.9 million.

As we look ahead and have stated before, we believe one of our growth opportunities is that as we increase our network, we will be in a position to underwrite larger loans, achieve greater efficiency from an expense perspective, and reach a borrower cohort that typically has better credit metrics.

As of June 30th, our portfolio yield was 13.1%.

down from 16% a year ago, and over the coming quarters, we expect the portfolio yield to stabilize in a range of 10-12%.

Additionally, our loans remain short term, with a weighted average term of 14 months at origination for the second quarter.

The short term nature of our loans reduces our exposure to interest rate fluctuations.

It also allows us to be nimble and pivot quickly as the environment evolves.

Turning to portfolio management, as of June 30th, we had a contractual default rate of 13.8% of the total portfolio by value.

As a percent, this was up slightly from the first quarter of 2022, but improved nearly 14% from the second quarter of 2021. And as a reminder, these are largely not monetary defaults, but rather represent proactive asset management focused on early identification of potential problems to ensure protection of our investment. I threw out two of them, I won a $1,000 refund on how much cash I spent on programs. This procedure is for the offer of aableagogia, some information off of French

During the second quarter, we foreclosed on three loans and received payoff on three loans in contractual default, representing $75 million in total commitment.

In addition, we sold one REO property with a carrying value of $28 million for a gain of nearly $700,000.

And at quarter end, we own 10 foreclosed properties with $93 million in carrying value.

From an earnings perspective, as of June 30th, we had approximately $92 million in principal outstanding on loans in non-accrual status.

and loans in non-accrual status and foreclosed properties continue to result in a drag on earnings of approximately 4 cents per share for the second quarter of 2022.

We continue to work diligently to resolve these issues to achieve the best results for Broadmark shareholders.

And while we expect the tactical changes described by Brian will ultimately reduce new defaults and enhance default management, this is likely to take time.

One part of the strategy shift will be that there could be times where we determine that exiting a loan in default or foreclosed property with a principal loss and reinvesting that capital into income-producing loans is the most favorable outcome.

Ultimately, the goal is to generate strong cash flows and earnings, so we will utilize this strategy as we work to maximize performance.

Now, turning to our balance sheet.

As detailed on slide 17 of our earnings presentation, we had $36 million of cash and a fully undrawn $135 million credit facility for total liquidity of $171 million as of June 30.

In July , we drew $20 million on our revolving credit facility to support borrower draws and new originations while we rated several large loan payoffs and we then repaid the balance in full at month end following the receipt of loan repayments.

This demonstrates the value of our credit facility as a cash management tool.

We finish July with $56 million of cash and a fully undrawn credit facility for total liquidity of $191 million.

With our $100 million, a five-year, 5% fixed coupon, senior unsecured notes outstanding, we currently have a debt-to-equity ratio of 8.6%, which is unrivaled in the mortgage rate space.

Maintaining a fortress balance sheet has always been a foundational principle for Broadmark, which provides a significant competitive advantage that will enable execution on opportunities in an evolving market.

This completes our prepared remarks. We will now open the line for questions.

Operator.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Our first question is from Steve Delady with JMP Securities. Please proceed.

Hello Brian and David, good to be on with you this evening.

I guess my first thing, David, is directed to you. I'm just looking at the expenses, and I was wondering if you could give us some color on the real property management expenses. They were just under $1.1 million this year and pretty significantly increased from prior periods. Thank you. Sure. Thanks, Steve, for joining, and thanks for the question. So what's happening there is we've got...

You know, our REO properties have become a little bit more seasoned and under the GAP accounting guidance, once a property is no longer under construction and is ready for an intended use. It's no longer you're no longer in a capitalized expenses into the principal outstand or the investment in the property. So, what you're seeing is for some of these season properties that were. Now completed construction, and we're looking to exit in the coming quarters. We can no longer capitalize. Any kind of maintenance property taxes, other expenses.

So that's what that $1.1 million represents, expenses that we cannot capitalize under GAAP, so we're expensing them now. There's a good chance we're going to collect those upon exit. We just need to expense them now, and then when we exit the property, you know, they won't be included in the investment in the property, but we may be able to sell it at a gain similar to what we did for the one property that we sold in the second quarter.

Great. So ultimately, not necessarily a greater economic loss, but it's more optics as to whether it's been expensed or whether it's capitalized in with the balance. And remind me, David, what triggers that? If you would, again, I was trying to take notes. What triggers the change? Is it when it goes to REO? What triggers the expense versus capitalization?

Sure, yeah, so as long as if you take over a project and the construction is not complete and you're finishing the construction, any of those expenses associated with completion of the remaining construction can be capitalized. Once the property is in a position where it's ready for its intended use and can be rent out and it has a certificate of occupancy, then any of those expenses going forward are going to be expense directly still can be recovered through the sale of the property. But they can no longer be capitalized once it's ready for intended use.

Thank you for clarifying that.

And Brian , one for you as well. I'm just curious, gosh, you haven't been in the job for six months yet, but my question was sort of framed in that respect. Last week we heard a lot of the bridge lenders that use CLOs comment on the loan pricing, kind of year over year, but...

Might as well just say six months ago. And they were saying generally, if a year ago they were L plus 300 to 350, that now they are quoting L plus 400 to 450. Just curious how.

I know you're changing your mix a little bit and looking more at some bridge versus construction, but have you been able to or decided to up your prices as well, or is it more of an upgrade in terms of property types? Thank you.

Yeah, sure. I mean, you know, so I'm surprised they're quoting that number. I would have guessed even more than that. I mean, what I can say, Stephen, is that we certainly have seen as a result of sort of market, you know, dislocation, you know, some pretty rapid movements in pricing. I think there is a difficulty in sort of figuring out the bid ask a little bit for some folks. And I'd say price discovery is a little bit challenged right now.

I mean one of the things that we like obviously being the lowest levered balance sheet amongst public peers is these types of dislocations, disruptions, you know, would suggest the market, you know, sort of coming our way. I don't want to leave the audience with the impression that that somehow gives us a definitive standard or, you know, a sustainable standard going forward because I think right now it's really hard to call. You know, but certainly the markets are...

The pricing is widening very quickly, which for us playing in the small to medium balance high yield space presents us with competitive advantage, particularly with the unlevered balance sheet.

Yep, and it would seem that you have more flexibility given that your leverage and your structure doesn't really force you into a CLO financing. You can hold most of your loans on an unlevered and still get the return you want.

Seems like it's- Oh, right. Yeah, I'm sorry I'm stepping on you, but you've hit the nail on the head. I mean, the unlevered balance sheet, we believe is significant with respect to our competitive advantage. We believe particularly in situations like we've got, where markets do get dislocated and leverage plays a heavy hand with some of the other folks in the industry. It just allows us to have a clearer runway and a clearer path in terms of our investment strategy.

You know, of course, we are unlevered in terms of the returns that we deliver as opposed to levered, which sometimes people get, you know, either get skewed or can be confused with folks, but having an unlevered balance sheet and unlevered returns right now we think is particularly unique.

Thank you both for your comments.

Thank you.

Our next question is from Christian Mark with Paper Sandler. Please proceed.

Thank you. This is Chris Lemo from Piper Sand, and I said, good afternoon, Brian and David. It was given an update on the construction lending environment here and just how it progressed over the last few months from your seat. And I guess what I'm asking out is just some color on the shortages in raw materials, construction time-wines, labor inflation, just have all these factors, or have any of these factors been improving from what you've been seeing and then what's your outlook.

Thanks, Crispin. You know, there's a couple dynamics at play here.

First, with respect to our role as a small to middle market construction lender, I think

What I can tell you is that we are seeing today

More transactions.

with better borrowers.

and better opportunity.

That doesn't mean that the door is wide open. We're still very carefully underwriting investments. And there are other challenges at play which are necessitating us to make sure we're very careful.

But because of the pullback from others in the market, because of what's occurred, you know, we're seeing, you know, we're seeing increased opportunity, but again still being very selective in the investments that we're making.

That being said, answering kind of part two of your question, certainly there are still pressures in the broader markets around overall construction costs and supply chain, those and labor.

Those matters, anecdotally, are getting better, but they're not nearly to where they were pre-crisis.

And so, you know, our borrowers are certainly in certain instances wrestling with those things. I wouldn't say it's across the board. It depends on asset, market, and a whole host of other things. But yeah, we're still seeing some of that.

Generally it feels like it's improving.

Thanks, Brian , and thanks for the color there. My next question was going to be on demand for construction laws. And just based on your commentary there, it seems like the demand has stayed stable or actually increased. Do you think that demand is coming from competitors of yours pulling back, or there being more demand from the borrowers?

It's the former.

Competitors pulling back and opening up the door for us more in the high-yield space to provide value to our clientele. We talked about this in the last conference call. We hoped that it would occur.

The near-term signs suggest that it is occurring, but I cannot tell you that it will continue to occur. There's just too many unknowns right now. And like I said earlier in my comments, between sort of price discovery and bid ask, it's a little bit too soon to call the ball on this. But early indications would suggest that this is playing out in some respect how we thought it might.

Okay, great, thanks. And then just one last one for me. Just on the dividend, you've held it consistent at seven cents per month for a while now, despite falling short of covering it with distributed earnings. So I'm just curious if you can share your thoughts on the dividend level, how the Board thinks about the dividend level, and if you think you can get back to covering it with distributed earnings over kind of the near to intermediate term.

Sure, I mean what I can say is this, the board is hyper conscious of all of the different forces at play in making dividend decisions with a very, very, very experienced board and they certainly again understand you know the various issues or concerns that might be raised and they look at it as a board would you know consistently in relation to our business and

I guess that would be my best way of answering it, Crispin, is they get it. And the board will make those determinations as they go.

Thank you, Brian , and thanks for the time.

Thank you, Crispin.

Our next question is from Stephen Laws with Raymond James. Please proceed.

Hi, good afternoon. I think you guys both touched on the REOs and the process. If you could maybe give us a little bit more detail. It looks like you resolved or sold one for a gain that you foreclosed on about a year ago. Can you talk about what a normal resolution path and timeframe is? And David, you may have been pointing this or both of you may have mentioned it about the best interest may be to sell something at a loss now to recycle capital and to do investments.

the thought process and thoughts around timing of disposition of some of these assets or resolution.

Yeah, thanks, Stephen. I'll take it and then would ask David if you could please add color commentary as we go. I've been in the role only five months. And what I can say is that because of the nature of how we invest, where we invest, some of these will just take longer to sort out than others. I've talked previously about some of the tactical changes that we've made to put us in position.

to more proactively address the asset management of NPLs. We now have that team really in place and are going. It will continue to be a question of fact as to how we proceed on a particular investment. But I guess suffice it to say that we understand that time is of the essence with respect to these investments, but we also are very conscious about...

About our responsibilities to shareholders and trying to maximize value wherever we can and because this is real estate Sometimes these things take a little bit longer than people would like so, you know with that I would ask David to chime in here further

Sure, yes, even just your commentary on so, yeah, we sold the sage Creek, Utah that we had talked about. We foreclosed on that about a year ago. I think we were expecting hopefully 2 to 3 quarters. We ended up just in the 1st, half of the 2nd, quarter. Being able to exit that, you know, in a positive economic situation, a gain of about 700 K. In terms of the other R. A. O. we foreclosed on 3 to primarily being senior senior housing facilities.

In terms of timeline, it's a bit unique to each project. The Sage Creek one that we just sold this quarter had limited construction that needed to get done. So it was really cooperating, getting any limited construction done, and then finding the right exit that was the best economic outcome. I'd say we'll take the same approach for the senior housing facilities, the others, and just look to, you know, we're not property managers. We're not in the business to be operators of REO.

any construction that needs to get complete or if there's an opportunity to exit prior to completing construction, we're going to look at all those options and do what's right from an earnings per share perspective and redeploy that capital into income earning loans. So I think you'll see us be more aggressive with those and hopefully bring that timeline. 12 months it was for this one that we just closed. I'm hoping that near term timelines are going to be significantly less than that for other REO properties.

Great appreciate the comments on that. I think that previous comments cover my questions. Thank you.

Thank you.

Our next question is from Eric Hagen with BTIG. Please proceed.

Hey, good afternoon. Hope you guys are well. Maybe a couple of questions for me. First, just what is a rough timeline to think about with respect to the unfunded commitment in the portfolio and how you balance the pay downs and the reinvestments and just the overall flexibility that you have to fund those commitments? The Raisi

And then maybe you can talk about the relative attractiveness.

that you see in different, call it property types, loan purposes, geographies, like where do you expect to lean with respect to, again, just the various types of loans that you're able to originate. Thank you for watching.

and why those are more compelling than others per se. Thanks.

Thanks, Eric. I'll start with the kind of liquidity, I think, question, how you put it. So, you know, we have a lot of flexibility from our liquidity perspective. As we mentioned in our prepared comments, we got some nice payoffs post quarter end. We're probably about $60 million of cash now in a fully undrawn credit facility of $135 million. And the real, the reason we got, we thought it was so critical to get the credit facility was managing.

those unfunded commitments. Those are going to come in over a year. The way we think about those is we've got the credit facility as a cash management tool in between large payoffs. We're expecting some healthy payoff production in Q3, which will keep our liquidity relatively high. We think about it as a total liquidity perspective. So I would say our current total liquidity is about 14 months of operating cash requirements without sourcing any new capital.

executing on our pipeline, drawing on the credit facility as needed, and then repaying it back as large payoffs come in. We've got some storage facility deals that we expect to pay off in Q3, which are pretty sizable. We're thinking about it from a total liquidity perspective, 12 to 14 months of operating cash requirements is what we want between our cash on balance sheet and the credit facility itself. So a lot of flexibility. If things come to fruition and we're not going to be able to get to the next one, things come to fruition, as Brian can talk to you more, and there's lots of opportunities out there.

You know, we don't need to source capital if there's windows of stability that open and we can raise capital. We're going to take advantage of those to make sure we can execute on our pipeline.

And Eric and forgive me so the second part of your question Could I summarize it in saying it's really questions about markets and asset class?

Is that fair? That's right. Yeah, that's right. Just the relative attractiveness that you see across the spectrum of what you're able to originate right now.

Got it. Okay, so while I'm in our prepared remarks, we mentioned that we're invested in 20 markets.

Really, 70% of our portfolio is invested in Washington.

Colorado, Utah, and Texas.

And by the way, you can correlate that to Probably four of the most robust markets in terms of job growth not just today But really for the long term future in the United States

So while we will continue to expand our markets and are certainly actively exploring growth opportunities and think that if the present trajectory continues those growth opportunities in terms of markets come our way, it's just really important to back up and understand that 70% of our book is in for the best markets in America.

Secondly, if you look at the composition of our portfolio by asset class, we're heavily, heavily invested in multifamily and what I'll call business-oriented single-family, which is we have a large investment in townhomes, a much smaller investment in condos, and even smaller in single-family. And so that's about 70% of our overall book between what I'll call the broader resi space space.

And 30% of our books spread between commercial with the largest asset class in commercial being on storage And obviously a very a very robust and and and well proven asset class through all parts of the cycle So so I envision broad mark as we go forward to continue our focus in this space I'm sure you and the entire audience are very aware of the broader Longer term supply and demand dynamics around housing generally

for our ambitions to embark into other opportunities, whether it be bridge or value add asset repositioning or Mez and the like. The underwriting, the cognitive requirements for construction just play really well for those other opportunities.

That was really helpful and perspective. Thank you.

And our final question is from Matthew Howlett with B Riley. Please proceed. Thanks for taking my question. First, you said the capital markets. Can you just talk about what type of pricing or access you would have to the capital markets today?

in terms of debt.

Sure, yeah, I mean, I think we talked a little bit, or I think Steve Delaney mentioned the spread. Obviously, you know, the 5% fixed rate coupon deal we did in November looks pretty magical right now and is not something we could execute currently. I think there's still kind of like Brian's comments on the asset yield side, I think there's still some price discovery going on in terms of what folks can execute on. We saw a couple of deals get priced and done more in the convert market. We haven't seen a lot of the private placement, you know, unscared bonds that we really like, and we did the 1st.

execute because of our balance sheet, but we also have the time. And we'll continue to try and make the best decisions we can for the benefit of our shareholders in light of those two benefits to what we've got. Again, I sort of finished where I started, which is I just can't emphasize enough the importance of an unlevered balance sheet.

And Matt, I would just add, you know, it's ultimately math, right? We look at the widening of spreads, we look at the Fed funds rate, and you can take what a 5% coupon was and layer on and get to a number. You know, but we again, we're not in a rush. We don't need to execute until something is attractive and accreted for us to do it.

We have reached the end of our question and answer session. I would like to turn the conference back over to Mr. Ward for closing comments.

Thank you. Again, I appreciate all of your great questions and for your interest in Broadmark. We're honored and we will look forward to speaking with you next quarter.

This does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation.

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