Q3 2022 Group 1 Automotive Inc Earnings Call
Okay.
Good morning, ladies and gentlemen, welcome to group, one Automotive's 2022 third quarter financial results Conference call.
Please be advised that this call is being recorded.
I would now like to turn the call over to Mr. Pete along Shaw group, what senior Vice President of manufacturer relations filing.
<unk> services and public Affairs. Please go ahead, Mr Dong shop.
Thank you Anthony and good morning, everyone and welcome to today's call.
The earnings release, we issued this morning, and a related slide presentation that include reconciliations related to the adjusted results will be referred to on this call for comparison purposes.
<unk> been posted to the group one website.
Before we begin I'd like to make some brief remarks about forward looking statements and the use of non-GAAP financial measures.
Except for historical information mentioned during the conference call statements made by management of group. One automotive are forward looking statements that are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.
Forward looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results.
Those risks include but are not limited to risks associated with pricing.
Volume.
Inventory supply due to increased customer demand and reduced manufacturer production levels due to component shortages.
The conditions of markets and adverse developments in the global economy as well as a public health crisis related to Covid, 19 virus, and resulting impacts on demand for new and used vehicles and related services.
Those and other risks are described in the company's filings with the Securities and Exchange Commission. In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call.
As required by applicable SEC rules. The company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website.
Participating with me today on the call Earl Hester Berg, our Chief Executive Officer.
Daryl Kingham, President and Chief operating Officer, and Daniel Mchenry, Senior Vice President and Chief Financial Officer, I'd like to now hand, the call over to Earl.
Thank you Pete and good morning, everyone I.
I am pleased to report that for the quarter group one generated adjusted net income of $188 million from continuing operations.
<unk> are adjusted results exclude non-core items totalling $9 million adapter tax games, which primarily resulted from the sale of the dealership franchise in real estate during the quarter.
These results were largely due to continued strong new vehicle margins that we are able to more than offset week supply.
Continued double digit same store growth in our after sales business <unk>.
Significant contributions from our recent acquisitions and.
And record profitability from our UK region.
One of the challenges we faced in the U S and the quarter was a declining industry used vehicle price levels.
This required quick action by our team to rapidly sell through our existing inventory, so we could restock and latest market price levels.
This action enabled us to slightly increase sales and a market which declined double digits.
However are used vehicle margins declined sequentially from roughly $900 a unit in the second quarter to roughly $1600 in the third quarter.
Our ongoing used vehicle stocking level of approximately 30 days supply enables us to react very quickly to market changes of this nature.
Consumer demand in the UK remained steady and new vehicle availability is still constraining.
Our new vehicle order bank remains at nearly 17000 units, which is consistent with the end of June and represents more than a six month backlog based on our 2022 sales pace.
As a reminder, our UK business mix is predominantly luxury brands.
And those consumers are more resilient during times of economic uncertainty.
We continue to believe that pent up demand built over the past several years due to both Brexit and the very strict pandemic Lockdowns will help drive strong UK vehicle demand well into 2023.
We're also seeing continued strength in this state of Texas.
The market once again collectively outperformed our total use same store growth in new vehicle sales used vehicle sales after sales and net profitability.
Texas demographic trends continue to be a positive tailwind for the company due to population growth reasonable cost of living low taxes, and a friendly business environment.
We believe our geographic exposure is both a near term and longer term advantage for our company and shareholders.
Finally, our companywide after sales performance continues to be a key profit driver.
We delivered over 10% consolidated same store gross profit growth on a local currency basis, which is even more impressive given the tough double digit growth comps from last year's consolidated results.
Or after sales initiatives and recruiting efforts continue to drive outsized growth in this segment.
To provide some color on our U S second quarter performance I will now turn the call over to Darryl Cunningham.
Thank you and good morning, everyone.
As of September the 30th we had 5000 U S new vehicle units in stock.
Represents a 15 day supply a slight increase from June .
The inventory increases mainly in our domestic brands as important brands remain very constrained.
As a reminder of 30% of our U S businesses, Toyota and Lexus, which continues to be very tight and a combined five days supply.
Despite fewer new car sales in the quarter versus a year ago, our same store used retail sales increased 2%.
In an industry that was down 12%.
Are gaining sourcing efforts continued successfully during the quarter.
Including 10300 vehicles acquired from individuals through accelerate.
As a franchise dealer. We also have a distinct advantage overused only operators due to numerous organic sourcing channels available only to us.
Including our service drives the lease returns OEM closed auctions.
Although the quarter presented a challenging used vehicle pricing environment, we maintained our discipline with a 31 day supply of used inventory.
As in rural mentioned this allowed us to quickly rebase, our inventories at current market prices.
R. U S. After sales performance was outstanding once again generating double digit same-store gross profit growth despite facing mid teen growth comps from a year ago.
Through our technician recruiting and retention efforts, we increased increased our same store technician head count by 14% versus the third quarter of 2021.
And following a very strong 2021, our customer pay business generated 11% same store revenue growth compared to a year ago and our collision revenues increased 21%.
We foresee or after sales business continuing to be a strength over the course of 2022 and into 2023.
Our F&I business was up $174 for retail unit retail in the quarter.
We are seeing improved product tenant penetrations nearly across the board.
And we continue to maintain costs discipline, despite the normalization of used vehicle margins.
Our third quarter adjusted SG&A as a percentage of gross profit with 66%.
An increase of roughly one percentage point over the first half of 2022 and down from over 70% in the pre pandemic third quarter of 2019.
And lastly, I'm happy to say that our customers continue to vote, yes on accelerating.
We solve an all time record 7600 vehicles through accelerate in the second quarter and the third quarter, 11% of our U S. Retail sales also an all time record.
Just as important as that 74% of our customers use excel or riding their transaction in some way and the month of September .
And we're also looking forward to our full integration of accelerated with our DMF CRM and credit software.
We continue to test it in several dealerships and expect a full roll out in the months ahead.
Early results are very positive and we expect this will provide faster and more transparent transactions for our customers.
I will now turn the call over to our CFO , Daniel Mchenry to provide a balance sheet and liquidity reviews Daniel.
Thank you dial in good morning, everyone.
As of September 30th we had 21 million of cash in hand, and another $218 million invested in our floor plan offset accounts bring.
Bringing total cash liquidity to $239 million.
We also had $551 million available to borrow on our acquisition line, bringing total immediate available liquidity to 790 million.
Through the first nine months of 2022, we generated $730 million adjusted operating cash flow.
And $647 million of free cash flow after biking is $83 million of Capex.
This capital was deployed through a combination of acquisitions share repurchases and dividend.
This year to date, we had spent 460 million repurchasing nearly 2.7 million shares at an average price of $171.10.
And over the last 12 months, we have repurchased 20% of our share float.
Our shower kind as of today is approximately $14 $6 million.
This significant repurchase activity. In addition to the acquisition of over 2.5 billion in revenues over the last 12 months.
Illustrates hawk add commitment to accretive capital allocation.
R and adjusted leverage ratio as defined by U S syndicated credit facility with 1.8 times at the end of September .
Are strong balance sheet will continue to align meaningful and balanced capital deployment.
Finally related to interest expense.
Our quarterly floor upon interest of $6.5 million with an increase of $2.2 million from the prior year.
Due to both higher vehicle inventory holdings in interest rates.
Non floorplan interest expense increased by $6.5 million from the prior year prior year, primarily to the dead raised in conjunction with the Prime Exposition.
As a reminder, the majority of our data has been fixed through the interest rate swaps.
September 30th 77% of our 2.7 billion in floor plan and other debt with fixed.
Therefore, the go forward annual impact to EPS, It's only 32 cents for every 100 basis point increase in the secured overnight funding rates are so far which is the benchmark rate referenced in our floor pan and mortgage debt instruments.
For additional details regarding our financial condition. Please refer to the schedule of additional information attached to the unusual relief as well as the investor presentation posted on our website.
I will now turn the call back over to <unk>.
Thank you Daniel and.
2022, we have continued our focus on high quality external growth actions with the purchase of six dealerships that are expected to generate $740 million of annual revenues.
These dealerships add to our existing scale and the Austin Albuquerque in Shreveport markets in the U S and the south end market in the UK.
Growing R U S. In UK businesses remains our top capital allocation priority.
However, our balance sheet cash flow generation and leverage position will continue to support a flexible capital allocation approach, which will likely include further share repurchases. In addition to the 20% of our outstanding shares we have repurchased over the last year.
This concludes our prepared remarks.
I will now turn the call over to the operator to begin the question and answer session operator.
Thank you we will now begin the question and answer session.
To ask a question started morning telephone keypad.
Excuse me a speaker phone please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then too.
We ask you to please them yourselves to one question and one follow up.
At this time, we will pause momentarily to some bar roster.
Our first question will come from Daniel <unk> with Stevens.
You may not go ahead.
Hey, good morning, Guy Thanks to any other questions.
My first question I want to turn on the news side of the business. You know obviously days inventories very steady you talked about it forward order book of of demand here, what does that look like compared to a few months ago. If I think about how much of inventory and maybe presold here in the U S. And then thinking about seasonality on the news side you know typically gpus.
Up in the fourth quarter.
Now is anything but normal, but but how how should we think about that seasonality playing out in this environment in light of the order book of that that you are seeing today.
Okay alignment at this is Darryl I will take the U S side of that and then the rules speak to the UK side of that question.
And the U S a.
I'll start with the first.
<unk> are optimistic about the fourth quarter.
With the inventories that are up a little bit, especially in certain brands.
You know I believe we will see some of that material I really well.
Some of the supply chain issues that.
The industry over the last year, and a half or so a lotta those are behind us.
And so we're seeing smoother flow.
And that will that will impact the fourth quarter.
Positive way.
And we're still tracking it under a 12 million units retail SAR and in the U S. So there's still.
Plenty of demand when we look at our pre solids in the U S. They are about even with where they were in the second quarter.
And so we feel like there's still plenty of plenty of demand there to meet us and we feel like the fourth quarter.
It's going to shape it would be pretty good.
And the UK as we mentioned in the script with no material change to our new vehicle order bank, which is sometimes somewhere around 17000 units.
And the last two or three quarters were just retailing a little over 7000 units.
Per quarter.
You can see that's a healthy backlog.
And.
What we're seeing in the UK that supports the continuation of that.
As a wave of new models, particularly from the luxury brands, we represent that are either plug in hybrid or battery electric vehicles.
And there is a dynamic in the UK market.
They're really stiff.
Stimulates further new vehicle purchases because of the tax scheme that supports plug in hybrid battery electric or alternative fueled vehicles.
And.
Big part of the UK market, we would call fleet in the U S. But it's really company cars, and it's known as a user choose or market.
And the people who drive these vehicles, although their company pays for the vehicle itself. These individuals who drive that pay the tax.
And over time, it's going to be more and more had been pages for them to buy new vehicles with either battery electric or plug in hybrid technology. So we're seeing that as it continues to refill our order bank.
And Darryl Dunn method did you did you mentioned the seasonality Gpus like regular seasonality would say things improve but obviously something production's going to improve and so would you guys assume new GPU, maybe step down a bit in the fourth quarter, just given that comment on volume.
Hi, it's hard for me, if I hadn't predicted gpus correctly.
Uh-huh.
Throw out I guess, but cause.
Cause I, just I don't know, but I do know this.
One of the things that we.
We believe that we see everyday.
The relationship with our captives they they they will support a whole lot of it.
Business driving through our new car franchise.
That makes sense then from a follow up question I wanted to ask an accelerated specifically curious just as you continue to scale. It in with the penetration Joan B C usage jumped what did we learn about the long term cost savings opportunities more than you thought it might be that less just trying to understand you know as more of the consumer does this online like what does that mean for the long term SG&A.
A profile of the business well I I believe over time, what you see is selling model that changes for customers and for the way we staff are stores schedule our teams.
The type of people, we hire skill sets and.
I think there's definitely historically.
Historically.
A retail business, we have staff to cover the hours that we're open in today's world, where staffing more for the appointments that are set and driven through.
Tools like accelerated and so.
You know that has Ah that is a big change on the way, we will staff and we're seeing the productivity improvements are holding.
We've seen.
Re launched accelerated and they continue to hold even as.
Supply start to increase.
Yeah, I believe that we will see.
<unk> staffing model moving forward.
And our industry and I think it's not an overnight is not a light switch, but I do believe that it will evolve over time and doing this.
Daniel Daniel Here I think there's one thing that I would say in addition to let Daryl said I think it will also help us having the integration of accelerated our D N S and add CRM and and credit software all in one place as well and I think that will give us further synergies once we rollout I'd throw out our stores.
Our next question will come from Michael Ward was benchmark you may not go ahead.
Thanks, Good morning, everyone.
[laughter].
I think the two areas of your business that seemed to be outpacing the rest of the market or the F&I and surface and just today I think you are saying that your technician count is actually increasingly it sounds like you're getting a lot of retention.
Somehow they all seem to be connected can you talk about some.
Some of the things you've done over the last several years too.
Building on that and what it means going forward.
Mike This is Darryl I'll speak to service people speak to ethanol.
Service, we we firmly believe we have to be a philosophically has to be available in our customers wanted to do business with us so.
We we try not to one of our schedules and our shops will try to be open.
As much as possible and have as many appointment slots as available as possible that's different from some of our competitors.
Some of our competitors will limit the appointment slots, we don't we don't like to do that at all.
Second thing is we have several retention programs in place for technicians.
Some of them are recruiting base mental programs.
We ensure that our pay is at or above market with our with our.
Technicians and strategic.
Strategically one of the most important things, we can do and to be successful in after sales moving forward.
You've seen over the last few years as human capacity will drive your volume and we can.
We can we can provide customers with a reason to come into our stores, but if we don't have people to work on the cars that doesn't it doesn't matter. So.
That's where a lot of our focus and emphasis is and you know and you know all about our work we can essentially process using more and more technology to try and drive efficiency in our shops as well.
Technicians operating very high level.
Officials.
Okay.
Like on the on the F&I. We're we're very pleased with as we continue to improve on our processes.
You know the fact that we incur.
Increased $174 for the quarter, and then $218 same store. So it continues to be.
Process improvement and you know, we're very pleased with how our product penetration rates have increased and.
We have not seen any headwinds with with lending whatsoever. So we're bullish move forward on ethanol business.
As you make as you integrate these different acquisitions, how fast can they come onto the GPI system, whether it's a celeron, where your call center, how fast they brought in and did did part of the able to see a pretty quick improvement in service.
Like they're all we try to integrate them as quickly as possible all of our technology.
Phone systems Accelerative.
On everything we do sometimes we spaced out a little bit just depending on if the DNS has to change cause that's a huge change in a store.
This has to change we might say, let's say a month or two to do that but generally we try to get them on as quickly as possible.
Just to do that.
Our next question will come from John <unk> with Bank of America.
You may not go ahead.
Good morning, guys. Just a first question for you. It's just the last conference call you you're going to be doing.
I believe.
By popular demand it will be the last one I'm I'm doing it's my 75th and final one you have strong well congratulations are all for for a very long great running group one in the industry and Darryl you've had a great run, but we're expect a lot more so congratulations to you too.
I hope that doesn't count the got my <unk> My question count here, but.
Oh that was easiest question I've ever had John Yeah, well congrats congratulations really there has been a great run.
On on after sales to follow up on Mike's question.
And do you think about capacity utilization.
How do you how do you think about that now and where you're at and where where you. Ultimately can go I mean, we know the four day work week has.
It has been very helpful. But I mean, where are you in cat and where do you think you can go in any service base.
Well, we have stores, John where we have.
10 service bays, and 17 or 18 technicians and we have other stores.
One of our Toyota stores in New England I was just a couple of weeks ago. We have 29 service based in 45 technicians and so we feel like while we may not be able to have that ratio in every store we feel like we.
We can definitely have more technicians than we have physical stall count.
And that doesn't mean, we won't invest in more brick and mortar for service capacity.
Where we do see that need is especially in some acquisitions, we do we tend to see the the acquisitions.
Our Underbuilt then after sales, especially for our taste and so we will invest there, but we feel like there's more upside and I would also say in the UK I think Earl would tell you that we have a lot of upside in the UK and exercise.
This is Earl I I do think our one of our big growth opportunities in the future what what sterile is fully aware of it he used toward a lotta. These shops with me in the U K.
Is we're not yet at the same level of after sales sophistication.
And the UK that we are in the U S.
In the brands, we have there such as Audi B M. W. Mercedes and land Rover will really support a lot more service business for us.
We can implement some of the general concepts that we've been able to implement in the U S and after sales.
Okay. That's incredibly helpful. One follow up on the F&I P. B R.
Can you give us a breakdown of the components.
Of that 21, 25, because I think there's a lot of concern that rates might be rising and that's going to compress your your your F&I PDR or.
Pricing might come down and and that might compressed F&I PBR. So I mean, what are the major components of that 21 25.
So that we can understand what the risk or opportunity you may ultimately be there sure. John This is Pete.
About a third of the business comes from origination of financing loans. The rest of it comes from product.
Product sales, so and it's been like that for a long time, so we're very happy with the equilibrium.
I think the key is to keep the that one third right and the rest the.
Increases come from additional product penetration are we still got some room to run.
Our next question will come from Russia, Cooped up with J P. Morgan.
You may not go ahead.
Alright, great. Thanks for taking the question.
You know maybe maybe you know just to address you know once the economy and.
That's gonna be notified 70 around there no reward mixed commentary from from <unk> underlying demand trends.
Curious to get them to take on how you're feeling about it.
The consumer in general no underlying demand trends and to the fourth quarter, maybe into next year as well.
And maybe for planning purposes.
<unk> scenario does turn out to be true and 23 three is is a recessionary yeah.
Are you able to give us a sense or or any boundaries an hour on how are we should think about the earnings following of the company.
And what are the key variables that would go into those assumptions and I have a phone.
Well. This is all kind of take the first shot at a bit of that but we can't deny that on a broad basis consumers are under pressure when there's inflation at this level and this this type of economic turmoil, but the majority of our business.
Is with higher income people, not just necessarily with luxury brand business, which dominates in the U K and is a big part of our U S business.
But when you look at the vehicles that Oems are building in our average sale price, which is somewhere near $50000. These days.
You know we are we are dealing with people who have the wherewithal to continue to buy vehicles, even though the monthly payments are are some significant amount above where they work two or three years ago.
And this backlog of vehicles in both markets that we operate in are generally pretty expensive vehicles. In addition, most of the used cars, we sell tend to be at the higher end of the used car market.
Which is let's say three years old or younger that's that's the business we're in.
We're in a franchise business.
And again this is Darryl mentioned.
The affordability of Ah.
<unk> is generally a financing matter.
And these captive credit companies of our major partners are very powerful.
So the combination of that and the cushion between the level of supply and demand. There is something that's gonna give us some legs.
And clearly there are some normalization.
It's going to occur and has occurred we've seen normalization and used vehicle prices in both the U S. In the UK this year.
And that's why we mentioned we had to be very responsive.
Responsive and reactive to flush those vehicles out of our system.
Which were able to do because we only have a 30 day supply and that's one of the advantages of this business model is we can react.
But nothing in the pace of normalization.
Has surprised us we have been prepared for it will continue to be prepared for it and and our business is flexible enough for will continue to react. So we we don't have any big trepidation about next year or anything like that or.
Our core businesses such as after sales.
And new vehicle sales are going to remain strong in the near term Russia.
It's Daniel here, there's a number of things that I would add to what all has to say.
<unk> of our businesses are parts and service business and if you look back to the N O eight recession, the parts and service business contracted by by far less than any other element of our business and it was kind of mid single digits that that had contracted and I think that will set us and good day and should there be a recession and.
2023.
Well is that we've continued to grow our company and with our capital allocation either through share buybacks that will help towards our continued in EPS and as well as as growing the company by nearly 3 billion in revenues over the last 18 months. So I think a combination of all the help is whether and.
Recession.
And let me just make one more point if I mind both of these markets we operate in.
The U K and the U S. In the UK. This is the third straight year of 1.6 million units of industry sales. This is a market.
Four or five years ago that 2.7 million units. So those are recession levels sales that we've operated under three straight years. The U S were running at what 13 313 five.
Historically, those or recession level sales, that's 2 million units.
Below what you would normally expect even and just kind of an average economy.
So you know we have already been operating.
Recession level new vehicle sales.
Got it made me just before I ask the follow up question. You also wanted to Echo Jon's comments and you know congratulate both.
Going forward.
So just just <unk> you know you in the past you had mentioned 300 basis points of structural SG&A to grocery option.
Was this pre pandemic Gwendolyn G beers would reward the normal.
Is that still a good framework to think about now you mentioned earlier that productivity is sustaining.
There are other back in integration happening Mcgee M as in the credit apps.
It sounds like you guys are also talk to about the highest degree of from the introduction. So so curious to get a little thoughts.
On that as well.
Yeah on what on what level of asking the address <unk> should be a more normalised number.
It needs to go back to normal.
Sure, it's Daniel and a feel it get why we were pre pandemic 2019, and you know as a company as a whole we were at and 74% there or thereabouts.
In terms of where we are with our modeling at the moment, we don't ever see in our SG&A subject to borrowed recession or any kind of disaster going back to about 70% and we and as of today. It's setting you know early sixties.
Clearly as the margins moods and it'll be somewhere between the 61 and 70%.
[noise] again, if you have a question or another follow up pretty please first started one or.
Our next question will come from early February let's Guggenheim.
You may not go ahead.
Hi, everyone. Thanks for taking my questions. So your new car G. P remained strong in the quarter, but I guess are you seeing any signs of a more meaningful G. P. U compassionate maybe September October and then I guess as part of that what's your expectation on when you G. P. U's will fully normalized one of your competitors reported last week and talked about new G. P.
You likely to normalize by mid to late 2023 curious your thoughts on that and if your view differs.
L. A this is darryl.
We're seeing some a little compression our results show that you know from quarter to quarter.
When it will normalize I don't know, it's it's I think the Oems in general have more discipline on supply I believe that and if you know the the Oems results are are very good as well their earnings are very high at these.
Production levels and so I.
I think they found a model that works for them as well and so hopefully the days of the distribution channels being stuffed are behind us.
Even in the brands, where we see a little higher day supply today than we did in the second quarter.
Still very reasonable 20 days or something like that rather than six or seven so that's terrific and that gives customers a little more choice and helps us satisfy a need a little quicker than we have been able to.
So we're pleased with that and I I can't forecast what <unk>.
Quarter, it might be or what month, it might be I I I don't know I I I I.
I do believe that the amount of work they will continue to try to try to drive it.
Yeah, Let me, let me see if I can add some color.
For you at least on the U S part of the business.
We had mentioned several times a pre COVID-19 groupon automotive at 29000, new vehicles that inventory.
And we have been quoting for a year that we've had less than 4000.
And I think what Darryl told you today is yeah, we do have more vehicles now we have 5000 and.
5000, not 2000 9000, we have 35 more dealerships at the moment that we had when we had 29000.
So maybe that gives you a frame of reference now 25% of our company is Toyota and Lexus.
Week ago, I spoke with the general manager of one of our biggest.
Biggest Toyota dealerships freak.
Pre COVID-19 this Toyota dealership.
A thousand new toyotas on the ground at all times I asked the person how many they had on the ground last week and the number was seven so.
And so I think Darrell mentioned, we have a five day supply of Toyota and that's 25 per cent of our company. So yes. There are some brands that will normalize more quickly than others, but we are not anywhere in the ballpark.
Pre COVID-19 inventory levels.
Mmm, that's really helpful color in a follow up if I may on the F and eyesight. So clearly remains strong in the third quarter sounds like dancing any real headwinds yet, but maybe you can talk about how much of the improvement in F&I per unit versus 2019 is structural versus cyclical I think maybe put another way what's your expectation.
[noise] breath and I per unit into 2023, as new and used car ATP started negatively normalized and maybe vehicle affordability challenges cause consumers purchased your insurance products.
But first I'm not sure. If you know normalized on Atp's is is going to really happen. When you think about the price of these cars and what the what the customers want on these cars with technology. So.
You know I don't think we're gonna see headwinds there and I do think this is this is structural and I think that you look at the history of our performance with F and I. It's been it's been very solid with an increase over the last 15 years. So you were not as I said earlier were bullish on the F&I business and as you model I think that you can look at these levels though.
Half the day and feel comfortable with them.
Great. Thanks for taking my questions and Earl Congrats on the on the retirement and best of luck. Thank you so much [noise].
This concludes our question and answer session I'd like to turn the conference back over to Earl sinus closing remarks.
So thanks to everybody for joining us today. The team will look forward updating you on our fourth quarter earnings call in February .
[noise]. The topic is now concluded. Thank you for Penn State presentation, you may now disconnect.