Q3 2023 PennantPark Investment Corporation Earnings Call

[music].

Please standby we're about to begin.

Good afternoon, and welcome to the pennant Park investment Corporation's third fiscal quarter of 2023 earnings Conference call. Today's conference is being recorded at this time all participants have been placed in a listen only mode. The call will open for a question.

First question following the speaker's remark.

If you would like to ask a question at that time Crescent.

Starkey followed by the digit one on your telephone keypad to place your wine in the queue.

We would like to withdraw your question at any time press the star key followed by the digit two it is now my pleasure to turn the call over to Mr. Art, Penn Chairman and Chief Executive Officer of Pennant Park Investment Corporation. Mr. Penn You May begin your conference.

Good afternoon, everyone I'd like to welcome you dependent Park investment Corporation's third fiscal quarter 2023 earnings Conference call I'm joined today by Rick The Lauder, our Chief Financial Officer Rich. Please start off by disclosing some general conference call information and included discussion about forward looking statements.

Thank you art I'd like to remind everyone that today's call is being recorded. Please note that this call is the property opinion Park investment Corporation.

Any unauthorized broadcast of this call in any form is strictly prohibited.

An audio replay of the call will be available on our website.

I'd also like to call your attention to the customary safe Harbor disclosure in our press release regarding forward looking information.

Today's conference call May also include forward looking statements and projections and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these projections, we do not undertake to update our forward looking statements unless.

As required by law.

To obtain copies of our latest SEC filings. Please visit our website at pennant Park dot com or call us at 212905 1000.

At this time I'd like to turn the call back to our chairman and Chief Executive Officer Art Penn. Thanks.

Thanks, Ric we're going to spend a few minutes and comment on the current market environment for private credit and provide a summary of how we fared in the quarter ended June 30th.

The portfolio is positioned for the upcoming quarters, a detailed review of the financials and then open it up for Q&A for.

For the quarter ended June 30, with our net investment income was 35 per share core NII was 22 cents per share and excludes 13 cents, a onetime dividend income related to our equity investment in Dominion voting.

GAAP earnings increased one 6% to $7 72 per share from $7 60 per share. The increase was driven largely by stable portfolio valuations and the dividend from Dominion.

Adjusted NAV increased three 1% to $7 67 per share from $7 44.

The debt portfolio continues to benefit from the increase in base rates as of June 30th or weighted average yield to maturity was 12, 7%, which is up 12, 1% last quarter and nine 3% last year.

During the quarter, we continued to originate attractive investment opportunities and invested $70 million of new and existing portfolio companies at a weighted average yield of 12, 6%.

For the investments in new portfolio companies, the weighted average debt to EBITDA was $4. One times the weighted average interest coverage was two one times and the weighted average loan to value was 36%.

We continue to believe that the current vintage of middle market directly originated loans is excellent.

Leverage is lower spreads in upfront fees are higher and covenants are tighter we are seeing an increase in deal flow compared to the first half of 2023 and have a growing pipeline of interesting and attractive investment opportunities.

Additional capital, we are raising across dependent part platform well L. P N N T and the JV to capitalize on the attractive lending environment.

June 30 is the JV portfolio equaled $794 million.

And during the quarter, the JV invested $64 million, including $62 million of purchases from P. N N T.

After quarter end, the JV closed a $300 million securitization this new financing together with the existing committed junior capital from P. N N T and pantheon.

Now the JV portfolio to grow to over $1 billion of assets.

Over the last 12 months P. N N T earned a 17% return on invested capital in the JV.

We expect that with the continued growth in the JV portfolio. The JV investment will enhance pmt's earnings momentum in future quarters.

Credit quality of the portfolio continues to perform well as of June 30, we had one non accrual out of 129 different names at P. N N T.

This represents a one 1% of the portfolio at cost and zero percent at market value.

As a result of a stable debt portfolio and the growing net investment income the board of directors has approved another increase in the quarterly dividend to <unk> 21 per share. This increase is the seventh consecutive increase to the quarterly dividend and represents a 5% increase from the prior quarter and accumulative increase of 75% from Janney.

<unk> 2022.

The dividend will be paid on October 2nd to shareholders of record as of September 18th.

We are confident that with rising or stable base rates and continued strong credit performance. The increased dividend will be fully covered by core net investment income.

We believe that a portion of the investment community values of monthly dividend as a result, the board has also decided to change the frequency of the dividend from quarterly to monthly this change will be implemented in October .

Now, let me turn to the current market environment.

From an overall perspective in this market environment of inflation rising interest rates.

No political risk and a potentially weakening economy, we are well positioned as a lender focused on capital preservation in the United States. We're floating interest rates on our loans can protect against rising interest rates and inflation.

We continue to believe that our focus on the core middle market provides the company with attractive investment opportunities, where we are important strategic capital to our borrowers we have a long term track record of generating value by successfully financing high gross middle market companies and five key sectors.

These are sectors, where we have substantial domain expertise.

The right question to ask and have an excellent track record. They are business services consumer government services and defense healthcare and software and technology. These sectors have also been recession resilient and tend to generate strong free cash flow and our software vertical we don't have any exposure to <unk> loans.

Many cases, we are typically part of the first institutional capital into a company and the loans that we provide are important strategic capital that fuel the growth and help that $10 million to $20 million EBITDA company grow to 30, 40 50 million of EBITDA or more we typically participate in the upside by making an equity co investment.

Returns on these equity co investments had been excellent over time.

Overall for our platform from inception through June 30, we've invested over $403 million in equity co invest and have generated an IRR of 26% and a multiple on invested capital of two two times.

Because we are an important strategic lending partner the process and package of returns we receive is attractive.

We have many ways to do our diligence with care, we thoughtfully structure transactions with sensible credit statistics meaningful covenants substantial equity cushion to protect our capital attractive upfront fees and spreads and equity co investment.

Additionally from a monitoring perspective, we received monthly financial statements to help us stay on top of the companies.

With regard to covenants virtually all of our originated first lien loans had meaningful covenants, which help protect our capital. This is one reason why our default rate and performance during Covid was so strong.

We believe we are well positioned in this environment.

This sector of the market companies with $10 million to $50 million of EBITDA is the core middle market. The core middle market is below the threshold and does not compete with a broadly syndicated loan or high yield markets.

Many of our peers, who focus on the upper middle market state that those bigger companies are less risky.

That is a perception that may makes some intuitive sense, but the reality is different according to S&P loans to companies with less than 50 million of EBITDA have a lower default rate.

A higher recovery rate than loans to companies with higher EBITDA, we believe that the meaningful covenant protections of the core middle market, where there's more careful diligence and tighter monitoring has been an important part of this differentiated performance.

Since its inception P. N N T has invested $7 $5 billion and an average yield of 11, 2% and has experienced a loss ratio of approximately 20 basis points annually.

This strong track record includes our energy investments, primarily subordinated debt investments made prior to the financial crisis and recently the pandemic.

With regard to the outlook our loans new loans in our target market are attractive and this vintage should be particularly attractive our experienced and talented team and our wide origination funnel is producing active deal flow.

Our continued focus remains on capital preservation and being patient investors, we want to reiterate our goal to generate attractive risk adjusted returns through income coupled with long term preservation of capital, we seek to find investment opportunities and growing middle market companies that have high free cash flow conversion.

We capture that free cash flow, primarily through debt instruments, and we pay out those contractual cash flows in the form of dividends to our shareholders, but let me now turn the call over to Rick our CFO to take us through the financial results.

Art.

Quarter ended June 30, net investment income was 35 per share and core net investment income was 22 per share.

Core net investment income excludes 13 cents per share of one time dividend income received from our equity investment in Dominion voting net of an increase in accrued excise taxes and incentive fees.

Operating expenses for the quarter, whereas follows interest and credit facility expenses were $10 1 million.

Base management and incentive fees were $8 9 million.

General and administrative expenses were $1 9 million.

And provision for excise taxes was $1 2 million.

For the quarter ended June 30, net realized and unrealized change on investments and debt, including provision for taxes was a loss of $2 million or <unk> <unk> per share.

Yeah.

As of June 30th our GAAP <unk> was.

Was $7 72 per share, which is up one 6% from $7 60 per share in the prior quarter.

Our adjusted NAV per share was $7 67.

Which is up three 1% from the prior quarter.

As of June 30th our debt to equity ratio was 126 times and our capital structure is diversified across multiple funding sources, including both secured and unsecured debt.

As of June 30th our key portfolio statistics were as follows.

Our portfolio remains highly diversified with 129 companies across 27 different industries.

The weighted average yield on debt investments was 12, 7%.

The portfolio was invested in 55% first lien secured debt.

9% in second lien secured debt.

10% in subordinated notes to PSL F 4% in other subordinated debt.

<unk>, 5% and PSL F equity and 17% in other preferred and common equity.

96% of the portfolio is floating rate.

Debt to EBITDA on the portfolio is four eight times and the LTM interest coverage is two four times.

The portfolio as a whole has a meaningful cushion with regard to interest coverage on a sensitivity basis for overall interest coverage to decrease to 1.0 times base rates would need to go up 200 basis points and EBITDA would need to decrease by 25%.

This analysis is based upon the current run rate interest coverage, assuming a five 5% base rate.

Now, let me turn the call back to art.

Rick in closing I'd like to thank our dedicated and talented team of professionals for their continued commitment to PMT and its shareholders. Thank you all for your time today and for your continued investment and confidence in US that concludes our remarks at this time I would like to open up the call to questions.

Thank you if you would like to ask a question. Please signal by pressing star one on your telephone keypad.

Again, we do ask that you pick up your handset before posing your question.

That is.

It is star one at this time, we will pause for a moment.

We will take your first caller in the queue.

That will come from Robert Dodd from Raymond James. Please go ahead Sir.

Hi, good morning.

On the quota.

Going to your.

Prepared remarks.

The ramp in the pipeline question Hello.

A lot of earnings.

Give us any more color on kind of the kind of drivers there.

Pulling out of the market.

Instead.

Well that differently.

Great.

So all types refinancing add on any any color like that and then.

Last.

What's your confidence.

Those things Lexington Amanda.

Okay.

Thanks Robert.

The disclaimer of course is M&A can be lumpy.

Lots of things that can go M&A in middle market M&A.

A key driver of what drives deal flow.

So.

A little bit it's kind of like being an economist are predicting the weather. We are we are busy we are busy we are looking at a lot of deals.

What's going to land what is going to land on this side of 930, what is going to land on the other side of 930, it's hard to say.

There is a lot of deal flow in the market, it's kind of though like a tale of two cities, where you have some very high quality companies that are.

<unk> had very good growth characteristics.

Those types of companies are still attracting very fancy multiples in terms of enterprise value as well as even leverage.

And that's that's one city and the other city is companies that are do not quite have that kind of robust.

Growth parameters or they may be viewed as a little bit more economically sensitive those deals on the other hand are hard to predict you know they are still in some cases could be significant gaps between buyers and sellers they could come together.

So we've got pipeline in both of those both of those categories.

And we're fairly certain we're going to close a bunch of deals between now and year end.

But is it a is it a very very very robust pipeline or a nice moderate pipeline, who knows at this point, where we're working hard our deal teams are working hard we're getting a lot of inquiry.

And it's nice to have.

Lease capital around our platform too.

To execute that here at here at PNM.

The JV has as we said jbs, some nice capital availability and JV has been doing very very well and we're hopeful that we can continue to do well and ramp that JV.

Got it I appreciate that thank you all second.

Second one.

Homeowner companies that might be.

Click on that a little bit more immersive environment.

How would you characterize that.

Yes.

I mean are they are they doing what you would expect that the stepping up and providing support.

At the margin or do you think the decisions are getting are they telling you. This is getting harder for them or any color on that.

Yes, so in terms of sponsor reaction I think it's thankfully as expected the environment.

Like electric let's go back to the pandemic that was a.

There was a lot of turmoil there that was a shock to the system.

And there you might've seen sponsor behavior, where people would just kind of write off and wash their hands from the bad deals.

And be willing to invest in the good deals are thankfully in our scenario. They basically invested in and supported the company's this environment is less of a shock it's more of a.

A.

Slow grinding.

Companies and sponsors absorbing higher interest rates mean.

So theres less volatile movement of their cash flow and because there is less volatile movement of their cash flow, they're not forced as much to make.

Quick decisions about which which company theyre going to support and which company they are not going to support.

So these these decisions are being made in a slower fashion. They are generally being made in a thoughtful fashion and by and large we've continued to see sponsors.

Really support there.

There are companies with additional capital.

So obviously when they're putting in additional capital makes it easier for us it makes it easier for us to give them some concessions when they are putting some money in junior to us.

On the occasions that they might not putting capital junior to us than those conversations are a little bit more challenging and we have to obviously be great fiduciaries and protect the interest of our investors and be a little harder around around that so nothing dramatic at this point, it's still kind of a slow moving.

Slow moving slow moving scenario and by and large we're seeing sponsors put more money in.

I appreciate that thank you.

As a reminder, ladies and gentlemen that is with <unk> followed by the date you place your line.

You find that your question has been answered you May press the star key followed by the digit too we'll.

I'll move to your next question Casey Alexander from Compass Point Research. Please go ahead.

Hi, I just have one question art.

Youre deployments in the quarter the $70 million that you invested there were three new 43 existing portfolio companies, which is a third of the portfolio. When 43 companies I'll do something at the same time, there must be something in common what kind of trends you're seeing from those existing portfolio companies.

Yes.

Good question Casey Thats, a combination of and this is where most of our activity at least in a slower M&A environment. Most of your activities with your existing companies. Many of them have these delayed draws DT tls, where theyre doing add on acquisitions. So that's a portion of it and then also as you know we have revolver commitments. So.

The revolvers that we do have and we try to limit them revolvers. We do have are usually priced at the same spread and in some cases higher spread than the term loans. So.

Delayed draws revolvers, where kind of the key to the existing the existing companies.

Okay I appreciate it thanks for taking my question.

Thank you.

Okay.

We'll hear next from Paul Johnson from K B W.

Yes, good afternoon, guys. Thanks for taking my questions.

In the JV, how much capacity.

Do you kind of envision for share growth there.

Both I mean, I guess is it could.

Could you grow it any more than it is today or is it pretty much is.

In terms of.

Percentage of your portfolio.

So today, the JV is about $800 million and total assets.

With the junior capital coming from Us and pantheon as well as the CLO, we can get to a little bit over $1 billion.

It's a big big contributor to our NII. So we really like it is in our 30% bucket and so it is part of the 30% bucket. So.

Kind of if it Ain't broke don't fix it so.

Speaking for <unk>, we'd like to continue to grow it is assuming we have room in our 30% bucket.

I can't speak for pantheon.

We could use the 30% ballpark of any of these jv's have been very good for our Bdcs. We have one at <unk> as you know with Kemper, We've wanted PNT with with Pantheon. These had been very good for the NII.

Of the Bdcs.

And.

Obviously there is there is there is no additional management fee other than obviously on the junior capital. So it's very efficient from the standpoint of our shareholders. So look we're going to we're going to look to continue to potentially grow them. The structures can be very robust. Obviously, it's all kind of very secure lower risk first lien senior secured debt.

Which you can finance safely.

A number of different ways, including securitization CLO technology.

And that's long term long term locked in financing generally low cost at which really helps.

Create that return on capital Thats been very attractive so.

We will continue to grow this JV will continue to talk to pantheon.

And we may even do other JV down the road.

Okay.

Got it thanks.

Those have been obviously very very successful for you guys.

And then just kind of turning to the market. I mean, you know how do you kind of I guess observe today I mean, it seems like activity's been picking up over the summer are lenders holding the line in terms of just.

Disciplined on terms that we've kind of seen in the first half of this year or is that starting to soften up in any way.

Yes, so it's a good question.

As you know the upper end of the direct lending market takes its where we are not.

It takes its cue from the broadly syndicated loan space the broadly syndicated loan space is starting to thaw.

And that will create deal flow, which will create.

<unk>.

In the upper end, there is going to be there.

The syndicated loan market is competing with those folks so on the upper end of our market kind of $40 million to $50 million EBITDA companies, we're starting to see some of the.

The upper market guys kind of come into that zone, and put a bit of pressure on that $40 million to $50 million EBITDA company kind of where we play which is we say it's 10% to 50 or mean median is about 20 to 30, we're not seeing any pressure yet.

We're vigilant we're vigilant.

Most important thing we can do is pick solid credits.

And create balance sheet capacity to take advantage of solid credits. So we still think the vintage 'twenty three 'twenty four is going to be good vintage.

But we got to be.

We got to watch this space.

And and.

And we've got to be careful if if things get out of hand, as we always are so.

So nothing to report in our kind of core middle market space, yet, but we're we're watching.

Thanks, I appreciate that.

Great.

Okay.

Well move next to Mark Hughes from Chile.

Yes.

Good afternoon.

Your line of sight on repayments.

Timber quarter, how is that trending so far.

So nothing materially different mark on repayments we.

We have them, we're happy to get when we underwrite loans. We are we say, thank you and they pay us off.

And it happens even in even in down markets, even even during the pandemic certain people who are paying us off so that means kind of solid underwriting, but nothing materially different than what we've seen.

We're seeing a drip of our repayments were seeing new deals and of course, the continued growth of the JV, where we sell assets from <unk>. The JV. So more of the same but nothing meaningfully different.

Yes.

When you think about the equity co invest with the terms of those evolved over time when you get into a.

Challenging market.

Or terms and conditions.

Yes.

Favorable for you like that had been the last few quarters.

That also manifest in the better terms on the equity co invest or is that.

And to be stable.

That's a nuanced question because it's kind of like we invest side by side with the sponsor. So there is no real difference in the investment we are making with the sponsors so theres not a lot of negotiation over the quote unquote terms.

You can debate is the multiples the multiple makes sense is it really is at a company that's going to grow quickly or not so quickly or what's the downside. So I can say, we've been pickier with equity co invests over.

Over the last few quarters, just because it's been a.

It's been a more challenging environment to evaluate the economy.

And it might be wanting to say Gee, we feel safe, making a loan of four times cash flow and.

And the sponsors paying 10 times for the company. So there are six times beneath us as equity cushion that's one type of <unk>.

Question. The second question, which is which is should be a totally separate question for us. It is do you co invest in the equity of 10 times.

So of course, it's a higher bar for us to invest in the equity of course, we have to have greater conviction.

To deal with.

So I think I would say, we've just been a little bit more selective on that equity co invest.

I appreciate that thank you.

Okay.

Ladies and gentlemen that is with ducky, followed by the digit wanted to get a question or comments, we'll hear next from Kyle Joseph from Jefferies.

Great.

Yeah, Hey.

Morning, Thanks for thanks for taking my questions just kind of want to given your portfolio size and industry exposure to kind of get you.

Your get your sense for how the economy is doing.

Anything you can provide us in terms of revenue and EBITDA growth trend and how that's changed.

James and frankly companies at this point are starting to see.

A little reprieve from inflation really starting to abate.

Yes.

Yeah. Thanks, Yeah. Thanks Kyle.

Based on the numbers we're getting.

It would support the soft landing.

It would support the soft landing scenario.

There are certain areas that are soft certain areas are very strong, but when you look at our platform and over 170 companies across the economy.

It would support the soft landing, we're not seeing any areas of great stress.

So we are now kind of revenues are generally up across the platform Ebitdas generally up there are certain areas of weakness such as theres areas of consumer we've talked about Walker Edison in the past Walker Edison is a furniture company did very well during COVID-19 is reverted too.

Reverted to the mean post COVID-19 and that is a that's been a non accrual.

So.

So, but by and large it supports the soft landing.

<unk> theory.

We say theory, because as credit underwriters as lenders.

When we underwrite credit we have to assume a recession.

In a normal environment, we would say sometime during the five year loan we have to model in a recession.

The reality is today, we model in a recession kind of in year one.

Is that how we should be underwriting credit we should be feeling comfortable about our loans, even in recessionary environments and even if there's a recession next year. So that's how we think about it.

But we're not seeing and then to the earlier point about amendments.

The amendments that seem to be coming off of really just do by and large.

To the much higher interest cost that these companies need to bear now the debase rates went up so substantially when you are paying 12% on your first lien debt.

12, plus percent on your first lien debt.

And if you have a lot of leverage or if you have second lien or mezzanine debt.

It's.

It's sucking up all the cash flow so that's.

That's where the amendments were.

We typically come in.

Yeah.

Yes got it helpful and then.

You talked about your area bucket kind of that.

Smaller companies, but we deal with all the headlines on bank and potential capital requirement increases there you know how would that kind of funnel and near market what was that a big opportunity for you guys.

I'm sorry, the question again.

Oh, Yes, sure was it with everything going on with with regional banks I know you guys focus on kind of original bank yes.

Yeah, Yeah yeah.

The lower middle market and smaller companies, but would there be any sort of reverberations in is that are you thinking about that as an opportunity for you guys.

Yes, I mean, it should be it's hard to say what exactly it.

At this point.

I think it's too early to tell.

Certainly we did see prior to Silicon Valley Bank turmoil.

Many of the companies that we would finance a four or five times once they got down to under three times.

Regional banks, who would would refinance those capital structures.

And much lower spreads to so for then.

Someone such as ourselves or any other direct lenders. So the regional banks would be a source of exit for us.

It's too early to tell but perhaps the good news and the bad news, perhaps we can hold onto some of those credits are a little bit longer when youre down yet and we do have some of these where youre under three times.

Debt to EBITDA, our clip in 600 to 650.

In the regional bank isn't there, where we're happy with that alone, we're very happy with that loan so.

That that may be something that's more kind of direct for us.

Got it very helpful. Thanks for answering my questions.

Thank you.

Yes.

We'll move next.

Melissa Wedel from Jpmorgan.

Good morning, Thanks for taking my questions today.

I wanted to touch on something that you mentioned earlier in the call about the pipeline where sort of bifurcate it sounds like between some higher quality companies with lofty.

Valuations and then also more economically sensitive.

And I think you're right.

You mentioned that you've got sort of pipeline in both segments. There when you think about sort of portfolio management and portfolio construction or the BDC.

Do you think about.

The optimal split.

Between those or is it just sort of see what lands and they're all suitable for the BDC.

That's a great question I mean, I think that ends up coming out in the wash.

Obviously, the higher quality higher growing companies.

We and maybe others are willing to put a little bit more leverage on because of the confidence level.

In that company's growth through the confidence level on that company's ability to weather.

You know a choppy or economic environment.

On the other hand, if you are less confident about the growth of your less confident confident about.

The company's ability to handle an economic environment, you either saying no.

What we say the vast majority of the time are you say, let's structure a deal that is safe the more the leverages low where the covenants are sensible and really protect us or are there substantial equity cushion.

Beneath us so that we feel comfortable that if there were a bump in the road.

More times than not the sponsor would put more equity in so that's kind of individual deal by deal credit underwriting.

And.

We've learned of course high quality companies, usually take care of themselves.

The whole world of credit Thats made to companies that are not so lofty and quality that you can do well and you just need to.

You just need to be really really comfortable and need to look at your downside cases need to keep leverage reasonable on covenants tight so.

So.

In the in the in the former maybe Youre a little bit more.

Assertive about getting that equity co invest.

And in the latter maybe you graciously declined to call Investor you don't even ask for the call invest so.

Again, youre talking about from a portfolio construction is there a percentage or whatever we've tended to we've tended to have the vast majority of the portfolio and super high quality companies.

And that's generally how we how we underwrite.

And where we play.

Okay. Thanks.

Second question I wanted to go back to the dividend policy.

You mentioned, having seven straight dividend increases.

I know theres been a lot of one time income.

This quarter and also the previous quarter, but when we look at sort of a Brian rate core NII and with base rates sort of okay. We think taking out looking to peak in the second half of this year.

Should we start to think about the dividend policy, maybe starting to stabilize a bit.

Just to write out any.

Change in that base rate environment going forward.

It's a great question and every quarter, it's a healthy discussion with our board of directors.

Yes, it's hard for me to pound the table and say theres going to be another seven increases in the dividend I can't do that I shouldn't do that and who really knows it will take its cue from the quality of the portfolio will take its cue from base rates.

It will take its cue from the earnings generated from the JV.

We are tweaking the frequency to monthly starting in October .

Really because we believe there is no hard numbers on this but we're seeing we see it in our other BDC <unk>. We believe there is a portion of the investment community that does value the monthly.

So it's a way to welcome other investors into our company, we certainly would like to do that.

We do have substantial spillover.

So we're going to take it quarter by quarter, we still believe there's more upside in NII through continued.

Growth of the of the JV with continued rotation of the equity we didn't spend much time today talking about equity rotation.

But there's still something like 17% of the portfolio in preferred and common equity that.

They will be rotated.

At some point so.

We feel comfortable with 'twenty, one we feel like we've got substantial.

Substantial runway.

Above and beyond that.

But it's hard for me really to comment.

Really firmly at this point hopefully you can appreciate that.

Yes. Thanks.

Okay.

And that does conclude the Q&A portion of our call today I'd like to turn the conference back over to our host for any additional or closing comments.

Thanks to everybody on behalf of the Lauder and myself want to want to.

Thank you all for participating today, we are our next quarter is the 10-K. So we're we'll be out with our needs a little bit later than normal kind of mid mid November . So look forward to talking to you. All then and wishing everybody a healthy and happy rest of the summer. Thank you.

That does conclude today's teleconference. We thank you all for your participation you may now disconnect.

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