Q3 2023 DigitalBridge Group Inc Earnings Call
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White. Please go ahead.
Good morning, everyone and welcome to the digital bridges third quarter 2023 earnings conference call speaking on the call today from the company as Marc Ganzi, our CEO Jacqui <unk>, our CFO I'll quickly cover the Safe Harbor and then we can get started.
Some of the statements that we make today regarding our business operations and financial performance, maybe considered forward looking and such statements involve a number of risks and uncertainties that could cause actual results to differ materially all.
All information discussed on this call.
November 1st 2023.
<unk> does not intend and undertakes no duty to update future events or circumstances.
Information please refer to the risk factors discussed in our most recent Form 10-K filed with the STC for the year ending December 31, 2022, and our Form 10-Q to be filed with the SEC for the quarter ending September 32023.
Great.
Let's get started with Mark providing an update on our key objectives for 2023, Jackie will outline our financial results and turn it back over to Mark to talk about the opportunities. We are capitalizing on digital bridge credit.
With that I'll turn the call over to Marc Ganzi our CEO.
Thanks, Kevin I'm pleased to share our results for <unk>.
<unk> 2023, as we posted some very strong financial performance.
<unk>, both the steady progress we've made building a predictable fee income, earning stream and the onetime benefits, we realized from our simplification initiatives.
So first let's start by covering our top three priorities for 2023, beginning with fundraising.
In Q3, we generated strong year over year growth in our investment management platform.
With fee income up 57% and segment level FRE up 36%.
Both slightly higher than last quarter's already strong growth.
Howard by higher fees from core credit and co investment.
Along with our second full quarter of contribution from Infra bridge.
New capital formation came in at 2 billion with our flagship gingerbread partner series, leading the way and the balance from new strategies, including credit, which I'll cover in section three today.
L. P interest in digital infrastructure is robust on the back of an AI driven demand. So I'm pleased to confirm we are on track to achieve our fundraising goals for the year.
On the simplification front, we completed the data bank recap in September which resulted in another $50 million back to you did you bring shareholders bringing.
Bringing our total proceeds of $471 million and generating a 32% internal rate of return.
Did you bring shareholders.
Our balance sheet also got a lot simpler.
With $2 3 billion of debt deconsolidation.
In connection with the data bank closing as we brought our ownership in that asset under 10%.
Consistent with our alternative asset management peers.
Investors have consistently asked for this and we're delivering.
On that point portfolio performance.
Our third key priority we demonstrated.
Strong results, particularly in the data center vertical with monthly recurring revenue up 20% and the.
The other three vertical all delivering mid to high single digit growth.
That's detailed fund raising and our simplification progress before we get into the financials.
Next slide please.
On new capital information I'm pleased to report, we raised 2 billion since last quarter's earnings, bringing us to a total of $5 4 billion year to date.
Majority of that round 1 billion came from continuing commitment to our flagship did your bridge partner series.
Which will start generating fee income today triggered by the strategies first closing.
We've also completed an additional co invest syndication and brought in more capital in our liquid credit strategies during Q3.
We believe this progress puts us on track he had our fundraising targets as we come into the fourth quarter, which has been seasonally very strong trust given our fund raising kanan.
Look it's been a tough year for capital formation, it's been one of the toughest that I can remember.
The key here is perseverance perseverance of the team.
And persistent interest in datacenter infrastructure spurred by advances in generative AI, that's put us in a good position to deliver on our goals.
Ken I want to reaffirm our guidance and our beliefs that we will hit our fundraising goals for 2023.
Next page please.
So as you can see here, we continued to generate solid year over year growth in both <unk> and <unk>.
We ended last quarter with about 30 billion in <unk> up almost $10 billion over the prior year.
That's 46% EMEA growth driven by equal measures of organic capital information.
Contribution from the interim bridge acquisition, we closed earlier this year.
On the right assets under management, which tracks the NAV of the asset that we manage.
It was up to 75 billion last quarter again, 48% higher over the prior year.
Next slide please.
So on the simplification front, it's it's quite simple we deconsolidation Databank I can't tell you how thrilled I am to use the past tense here for a couple of reasons one <unk>.
In recap was a huge success, Virginia, rich, we doubled our money and only a few years generating a 32% IRR for different shareholders.
Just this last quarter, we added another $50 million of proceeds including $28 million carried interest, bringing the total monetize value two digit rich.
$471 million.
This was a smart use of our balance sheet.
And look we're retaining a stake in the business the stake is worth $434 million at the price we just transacted.
Databank as most of you know is experiencing explosive strong growth led by edge AI leasing.
So we're excited to be retaining a meaningful stake in the business.
We don't anticipate any additional sell down here in the near term as we're excited about the future prospects and we're delighted to continue support Raul and the data bank team.
The other reason I'm pleased to finalize the process is the closing resulted in the deconsolidation of data bank from our financial statements.
Most notably the transformation of our balance sheet.
As of September 14th 2023.
$2 3 billion of consolidated debt comes off the books.
A reduction of 42%.
While most of this debt at share was not really attributable to did you bridge. It did create a lot of unnecessary complexity for investors that were new to evaluating our business.
So it's a big milestone in our drive to simplify the gingerbread story.
One to go manage STC is next and I remain confident the next time, we report earnings there'll be some more good news if not sooner.
Next slide please.
As we complete our transition to a pure play alternative asset manager second facet of our simplification initiative has been improved and amplify our financial reporting.
This quarter I am pleased to announce we're introducing fund performance metrics into our quarterly 10-K and Q reporting.
Whether aligning with our peer set.
This has probably been the most requested dataset in recent quarters. So we're pleased to provide shareholders with insight into the performance of our platforms.
A couple of important notes here.
First.
These includes solely the commingled funds, we manage for over one year.
So our core and credit platforms will be incorporated in 2024 as these are new products on our platform.
And because it just includes commingled funds it does not incorporate returns from the SPV.
Or continuation funds that were formed in the original D V holdings investments or from GTP Tower company that I built and sold to American tower.
These returns will always be out of the perimeter.
Second as you know our long dated funds are early in their lifecycle and in some cases multiple on invested capital calculations are mics.
Include recent investments that are not benefiting from the compounding effects of our value add investment strategy.
Third.
We've incorporated the interbank funds, which we acquired earlier this year into our reporting framework.
With the investment and asset management teams now fully integrated we expect this to further strengthen the Jif fund performance overtime.
As we overlay our asset management framework.
And our value add cookbook to enhance the performance of those assets.
Stepping back these fund performance metrics highlight how we're delivering for lp's.
Generating steady risk adjusted returns consistent with your expectations.
And with the broader infrastructure sector.
Next slide please.
Finally, I want to highlight the portfolio company performance that ultimately underpins and drives those investment returns overtime.
Our discounted cash flows.
Monthly reoccurring revenue across the portfolio is up again and all four of our verticals. This.
I want to highlight data centers inside the quarter. They were really the standout with monthly reoccurring revenue up over 20% and the rest of our vertical is performing well.
Up six 6% fueled principally by five G overlays and five G Amendment traffic.
As we then calibrate in the next three years to seven years into Densification across the four geographies. We serve we expect towers to be a consistent performer and organic growth.
Fiber is up 10%. This is really driven by the fact that folks are returning back to office and we're seeing steady contributions and enterprise fiber long haul fiber and data center connectivity, including recent performance in jail.
And small cells up five 5% as we've seen a nice turn in leasing activity driven by mobile carriers moving from five G overlays and amendments into five G. Densification.
We're really excited about what's happening in small cells, because it's not just the mobile carriers that are driving traffic.
Its private enterprises Iot networks, even cable companies. So we remain really optimistic about what's going to happen in the small cell segment in the coming years.
Look take a step back there's still this at 50000 feet, it's really simple the demand for compute.
And connectivity continues to grow steadily and our ability to deliver for customers.
<unk> to expand along with our portfolio.
Just your bridges unique ability to show up anywhere at any time for a customer.
Across the planet.
It is true differentiation.
With that I'd like to turn it over to Jacky to cover the financials.
Jackie.
Thank you Mark and good morning, everyone. As a reminder, in addition to the release of our third quarter earnings We filed a supplemental financial report this morning, which is available within the shareholder section of our website.
Starting on page 15, all of our quarterly key operating and financial metrics increased significantly year over year, driven by a robust fundraising efforts and acquisition are in brokerage platform.
We anticipate the strong momentum to continue as we progress in the fourth quarter.
Turning to page 16, total company distributable earnings was $35 million or 20 cents per share.
Including $28 million of carried interest realized from the final closing of data Bank recapitalization.
Assets under management increased to $75 billion in the third quarter, which grew by 48% from the same period last year and fee, earning equity under management increased to $30 billion or 46% increase from the same period last year.
A U N anti U M growth were primarily driven by the input bridge acquisition and capital raised and our new strategies and be paying co investments.
Our fund raising pipeline remain robust and we look forward to closing out the year with a strong fourth quarter principally from commitments to our latest flagship fund digital brakes partner straight or D. B piece right.
I would also like to highlight that effective today, we will begin generating management fees, coinciding with the first clothing and D B piece right.
Moving to page 17, the company achieved healthy year over year growth propelled by the expansion of <unk>.
That's my management business and further enhanced by our streamlined corporate structure.
Third quarter consolidated revenues were $477 million, which represents an 11% increase from the same period last year.
As a reminder, consolidate revenues include realized and unrealized carried interest.
Total company adjusted EBITDA was 34 million box.
15% from the same period last year. This growth is primarily attributable to an increase in investment management fee revenues offset partially by the reduced ownership and operating assets, which we will cover in more detail on the ball pages.
Moving to page 18, the company continues to grow its investment management earnings and be earning equity under management generated by additional fundraising and deployment and our flagship funds.
These strategies be paying co investments and contributions from intra bright spots.
The income excluding incentive fees was $66 million in fee related earnings was $29 million.
Representing 57% and 36% increases from the same period last year, respectively.
Investment management segment distributable earnings increased by 51% to $53 million from the same period last year benefiting primarily from carried interest recognized as part of the recapitalization of data bank, which closed on September 14th.
It is also important to note that as a result of the deconsolidation of data back the company's leverage profile and balance sheet continue to improve and become materially simpler and more asset light as mark and I had previewed, whereas our corporate strategy and mission going forward.
Turning to page 19 last quarter, we began including new disclosures designed to provide additional detail on carried interest allocation and expenses.
With a third quarter net carried interest income before Noncontrolling interest was $96 million due to the fair value of our managed funds increasing at a rate that exceeds the preferred return hurdles and our investment vehicles, which generates carried interest to digital bridge as the.
A manager.
Moving to page 20, the company share of digital operating revenues and earnings have continued to decline due to lower ownership interests.
On September 14th we announced the completion of the recapitalization of our interest in data bank, reducing our ownership to nine 9%.
This transaction generated nearly $50 million in proceeds inclusive of $28 million and carried interests or digital bridge.
Going forward, our remaining interest in the database platform will be treated as an equity method investment and we expect to sell a portion of our ownership interest in vantage S. D C. In the near future, which would complete our planned deconsolidation of the operating segment.
Turning to page 21 fee revenues in our high margin investment management segment continue to grow partially offset by the realization of two assets within the <unk> platform.
Since the third quarter of 2022, our annualized fee revenues increased from $182 million to $264 million in fee related earnings increased from $100 million to $125 million, we expect fee related earnings to grow materially as we continue to raise.
Capital D. B P three and as mentioned earlier effective today, the commencement of D. B P. Three management fee billings.
You've got the right side of the page run rate annual fee revenues are $276 million. We are on track to meet our previously provided fee revenue and FRE guidance ranges.
Turning to page 22, our balance sheet has significantly changed following the deconsolidation of data bank highlighted by the substantial reduction in investment level debt.
And upon that deconsolidation of vantage S. D C. And then near feature our debt profile will be similar to those of our peers in the alternative investment management space, especially as we continue to monitor the capital markets and consider further opportunistic optimization of our leverage profile through.
Both preferred and common equity redemptions and distributions.
Turning to page 23, as we have completed another milestone in our progress to simplify our capital structure, we have almost reached our target corporate debt level with no near term debt maturities.
And with approximately $530 million of liquidity, including the full $300 million available from our securitization revolver, our balance sheet and liquidity remain strong and poised for a creative uses.
In summary, Mark and I are proud of the substantial strides we've taken this year to simplify the business and solidify digital bridge's position as the preferred partner of choice in the digital infrastructure space.
Our financial performance continues to show market improvement, despite a difficult fundraising environment.
We remain committed to generating long term shareholder success by scaling new products and our dynamic investment management platform led by a robust fundraising abilities.
We look forward to closing out the year strong already highlighted by the completion of our first close in our flagship on D. V. P. Three and continued progress and deconsolidation, our balance sheet interest and vantage as D C.
And with that I will turn it back to Marc Thank you. Thanks.
Thanks Jackie.
So this quarter in section three or we always talk about executing the digital playbook I want to talk about credit.
And how we've extended our platform organically into the private credit asset class.
Let's start with some context for the strong growth the asset class is experiencing.
Before I walk you through a case study that highlights how we're bringing scale capital to the game here.
It's clear to most of you that private credit is a growing force in global capital markets. Since 2010 over one eight trillion and capital has been formed by alternative asset managers to fill a growing demand for credit and traditional lenders hampered by tightened restrictions and regulations have not been able to keep up with.
On the right you can see in just the last five years that private credit is taking share.
Filling the gap left by traditional lenders.
To meet growing demand from borrowers.
Need liquidity and growth capital.
At the same time institutional Lps are increasingly being drawn to the sector.
Attracted by better risk adjusted returns on the back of higher interest rates and the reliability of credit products and an uncertain macro.
Next slide please.
As you can see here credits attractive risk adjusted profile is driving increasing institutional interest in private credit.
On the right size over one trillion has been raised in private credit in the past five years alone.
This is doubling AUM over that time period.
The average fund size continues to increase its expected that 2023 will generate another 200 billion plus of capital formation.
The fourth year in a row exceeding that level as you can see this is not just a fad it's sustainable.
The best part is as you can see on the left <unk> rich is that the intersection of the two asset classes.
With the highest content increased allocation among institutional investors.
Private credit one infrastructure too.
Only two asset classes, where that intent is greater than 50%. The intention here is everything we're talking to Lps on a global basis, and they want to be exposed to digital infrastructure and they want great exposure to private credit so why not give them both in.
In the same product set and this is where we've landed.
This puts us in a real sweet spot and an already fast growing market.
Next slide please.
So what do we built so far.
Over the past couple of years, we have organically grown our private credit business led by Dean careers.
Dedicated to supporting the growth of companies across the digital infrastructure sector and ecosystem.
We finished Q3 2023 with.
With $1 billion and fee paying capital.
<unk> private credit investment solutions.
Two other financial sponsors.
And in essence, we're providing the key skill capital that leverages our ecosystem.
Those investment solutions span the whole spectrum from.
From first lien senior secured debt all the way to preferred equity.
Most of the lending is floating rate securities with check sizes in the $20 million to $300 million range.
Across all of the verticals inside of digital infrastructure.
Labor.
Towers data centers and emerging infrastructures, such as small cells and other parts of the ecosystem.
It is important to note digital infrastructure is an incredibly capital intensive sector.
So we're just getting started in servicing a really big and growing Tam.
As I've mentioned in previous years on our earnings calls that Tam grows approximately about $500 billion per year in terms of the total wallet size. So on a reasonable loan to value equation, one could assume about $250 billion of new credit could be written every year.
This is a sleeve that can become an evergreen source of growth for digital bridge, we're really excited about the future prospects of this business.
Let's cover a case study on the next couple of slides to give you a sense for how did your risk credit.
Financing the growth of the digital economy.
Next slide please.
This summer just a rich credit participated in the financing for core vis a company. Many of you are familiar with.
<unk> is a leading next generation specialized cloud provider focused on servicing AI workloads at scale with the latest technology.
It fit alongside the large cloud service providers within the infrastructure layer of the AI Tech stack you see on the left.
With a business purpose built for artificial intelligence.
That means access to thousands of our latest generation Gpus specialized networking fabric felt to reduce latency.
And boost chip utilization.
And value added software and technical resources.
The distillate simply put this is GPU as a service serving rapidly growing AI workloads.
<unk> represents an incredibly compelling customer value prop focus on delivering first.
The best pound for pound AI compute.
Second Im very fast and flexible and cost effective service three it's incredibly scalable and then four they're targeting a large and growing market estimated to reach $160 billion by 2027.
Just recently or we've unveiled the world's fastest AI supercomputer built in partnership with one of their equity investors and video.
This is a terrific company with a terrific CEO it was seeking capital to finance the incredible growth you're experiencing.
So, let's turn to the next slide to cover the financing and how we leverage our Ginnie rich ecosystem.
As you can see on the left in July of 2023 did you rich credit participated in a $2 3 billion financing for core we'd alongside Blackstone Magnetar and cut it too.
Or are we just looking to fund a significant amount of growth capex ramps to be contracted AI compute demand, including the purchase of thousands of the latest generation Gpus.
Securing significant new data center capacity.
As well as continued working capital investment in their platform.
It's a financing back ultimately by core with high quality investment grade Counterparties and supported by a durable asset backed collateral.
This at the end of the day really is in parallel with how we underwrite our investments in digital bridge.
We're always focused on long term contracts investment grade counterparties and asset back collateral.
This is seminal to our investment thesis and gingerbread credit.
Over the course of the financing Goodrich levered, its ecosystem and unique ways to source deaths and accelerates the transaction highlighting the strategic value of our platform.
So let's start with the source.
Here are significant market intelligence intangible value prop attracted core we've to working with digital age.
Given the breadth of our data center assets and industry expertise.
We have actively sought to work with digital bridge.
You bet.
In terms of getting the ability to derisk transactions is always really important to us in the underwriting process. In this case, our credit underwriting process with enhanced access to <unk> data center portfolio companies in the long term relationships, we maintain with leading global technology companies.
Basically in a nutshell, we talked to the logos.
Finally accelerate.
Here, we are already actively we're supporting <unk> time to market advantage.
Leveraging <unk> global data center footprint, including switch vantage Databank Scala aims and Atlas edge.
Corey transaction is a great example of the Nextgen digital infrastructure, we're financing after you've read credit and.
Our team and portfolio companies can both benefit from what we call the power of the platform.
With that ill turn now to the CEO of checklist for the quarter before we wrap it up and open it up the line for Q&A.
Next slide please.
Great as always let's wrap it up with the review from the Ceos Checklist.
First on fundraising are number one kpis $5 $4 billion year to date, and we remain on target to hit our fund raising targets for the year.
The last quarter, we'll be busy I can promise you that.
And I'm confident we're going to get the job done.
Also the Desert Ridge partners serious <unk> kicks in this quarter. So we'll start to see the flow through from our fund raising efforts, which is really important.
Next step on simplification, we close data bank.
Generating a great return for our shareholders, while reducing complexity in our financial statements and Delevering our balance sheet.
And <unk> is up next and we'll get it done.
We've also introduced fund performance metrics.
Further aligning our profile with other alternative asset management peers. This is an important steps it's delivering on something that you our investors have been asking for and now we're presenting it to you. We're pleased with our performance and we're excited about the future of our funds and our flagship series.
Finally, and most importantly down in the trenches at the portfolio level.
We have continued to support the growing compute and connectivity needs in the most powerful investment great logos in the world.
<unk> for our growing credit franchise that benefits from the power of the <unk> platform.
Thank you for your support as we continue to execute on the final stage of our transition to a fast growing alternative asset management levered towards the powerful tailwind and digital infrastructure.
I look forward to updating you next quarter on our continued progress with that I'll hand, it over to the operator to begin the Q&A section. Thank.
Thank you.
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And our first question comes so my call Elias with Cowen and company. Please go ahead.
Great. Thanks for taking the questions and to start with the boom in data center leasing that we've seen it also appears that theres been a boom in demand for data for that capital to build new data centers Mark I'm. Just curious if you can share any observations related to the depth of the debt capital markets for data centers relative to the demand for.
And as part of that any observations around where spreads are going for data center and then I have a follow up.
Yeah. Thanks, Thanks, Mike appreciate it how are you.
So we think that the datacenter marketplace.
Over the next call. It next seven years is somewhere around 35, gigawatts of new leasing capacity that needs to be delivered as you know Michael most of that will be greenfield.
So when we when we contextualize that.
It's you know it's literally hundreds of billions of dollars of new construction activity in the data center industry. It depends on what your metric is on the price per megawatt and then obviously you can compute that to a price per gigawatt. So we think that the market is literally that shaping up from a capex perspective.
Somewhere in the $1 5 billion dollar.
Range just for you know for US just this year in terms of the stuff that we're financing. So if you contextualize that and Theres, probably a trillion dollars of datacenter spend and you assume a reasonable capital structure of a 50% loan to value you can assume that there's $500 billion of datacenter financings coming up here.
And the next seven years, we think that most of that as new construction loans will go will be will be financed by private credit.
Thanks, Obviously, given bank regulations are somewhat and hand tied in terms of financing Greenfield construction as you know.
And traditional real estate lenders are going through a significant amount of digestion and what to do with you know.
Office space and in other forms of commercial real estate that are in distress. So we are seeing a surge in interest, particularly in our credit side and financing new data center builds and keep in mind, our credit team finances four portfolio.
Our portfolio of companies that don't belong to us. So there is a huge universe of potential folks that were working with in terms of developers that we know well.
That we don't have the equity in but certainly have the data so contextually $500 billion Tam.
And pretty expansive on the pricing side, it really depends Michael on structure, whether it's a holdco note to help finance it a data center operator, whether it's actually a construction loan, but what we're seeing is obviously with base rates.
Near near five and new construction loans, certainly being riskier.
Which is where we're playing in.
Holdco notes, which are above the senior.
As you take the capital structure north of a 50% loan to value you can obviously begin to see spreads with credit enhancements in those loans entry fees exit fees.
You could see total total yields on those loans in the 12% to 14% range.
With coupons somewhere in the low side for the for the high quality assets in the sevens and the mediocre to perhaps less quality assets in that.
Eight five to nine 5% range. So we're seeing all kinds of opportunities in the datacenter space and obviously it is driven by public cloud and private cloud does AI workloads that you and I have talked about over the summer.
It's a it's a big marketplace, we're very active.
We've got a pipeline of over 60 loans that we're working on right now we can't stress enough how big.
The private credit opportunity is in data centers, but also in fiber and towers as well Michael.
Thank you Matt I appreciate the color there and then just as a follow up you were talking about the 35 gigawatt incremental opportunity here too.
Two part question first is can you talk about how digital brands is positioning itself to win more than its fair share of that opportunity and then as part of that perhaps at the portfolio company level. If you could just talk about the Unlevered return targets across the data center platforms. As you think about these large scale AI workloads. Thank you Mark.
Yeah. Thanks, So we do think we're taking more than our market share I mean, we've had a tremendous year of leasing and not quite sure where it all lands, but it's measured in the hundreds of megawatts.
Cross a switch vantage state of bank, and Scala and Ames and Atlas Ed. So as you know we play the sector in multiple different ways. We play it from a private cloud perspective up at switch we play it from a public cloud perspective at vantage Europe, and vantage North American Van adjacent Scala and then we're playing the edge compute business.
Ames and data Bank Annapolis, Ed So we've got multiple platforms to go attack the different verticals and the different workloads and I think you have to understand that as he's availability zones, which are essentially the search rings of the data center sector.
Localized teams from from some Paulo to you know to Europe to North America to Asia is really helpful.
It allows us to obviously think globally with our big customers, but indeed act locally in terms of securing power and the ability to execute and deliver for customers. So I think that you know we don't love to give out yields it's somewhat of a competitive advantage, but here's what I can share with you Michael I can tell you that you know.
So on cash yields are up year over year significantly and somewhere between 20 and 30% on average in terms of the CAGR growth of the yields what I can also share with you is that rents are up.
Rents are up 21% year over year on a global basis, when you distill the six portfolio companies that we own and operate and you look at their results year over year.
We've seen rental rates come up significantly this is really a function of supply and demand and there's more demand than there is supply and so our existing locations, where we have land, where we have power or you have entitlements those are renting at a premium.
So I think look the punch line is rents are up development yields are up.
We've got the biggest platform in the world to go attack this.
Today, we have just a little under 300, Datacenters and we have over one seven gigawatts of the.
Few power to offer to our customers. So we do think on a global basis. We are one of the largest if not the largest operators of edge cloud public cloud and private cloud data centers in the World and you know just looking at absorption. If we ended up leasing somewhere between 770 megawatts and 1.2 Gigawatts this year.
I think that's going to lead the league and leasing certainly far far bigger than DLR and far bigger than the Equinix. So we think we are definitely taking more than our fair share of the market.
Awesome. Thank you Mark.
Thanks, Michael.
Our next question comes from Jade Rahmani with <unk>. Please go ahead.
Thank you very much from your vantage point today, and I understand the Lumpiness of fund raising and that these things have long cycle times given the complexity is there anything today that would give you a read through to 2024 as to whether fund raising is on pace or even potentially.
Accelerate.
The second question would be if we get past some of the macro uncertainties that are weighing on so many sectors will that accelerate and provide more tailwind to your fundraising efforts.
Thanks, Jay appreciate it well look lets first start with the quarter right. I mean, we raised we formed $2 billion of new capital in the quarter.
Really delighted with the $2 $3 billion first close of our third fund.
I think as you peer set that against other alternative asset managers, we definitely believe we've now kicked our coverage, we're having a very strong fourth quarter in fundraising historically, we've always performed well in the fourth quarter I think one of the dynamics that has happened here Jade is that a lot of lp's are sat on their hands and Q2 and Q3.
We got investors motivated and into our new flagship series and that's why we're pretty pretty happy to have the first closing yesterday.
And we do have optimism around the fourth quarter and we have even further optimism for next year.
Asset allocators of already given us a sense of where they're allocating capital for next year I. Just finished a three week tour, where I saw 80 of our Lps someone told me that they thought I went around the world twice I don't think that was exactly true, but definitely it was in Asia in the Gulf in North America, and pulsing all of our key accounts and look I think there's three takeaways.
From that trip Jade over the last three weeks, one investors want to be with the best of the best.
They're generally shrinking their G. P list, they want to be with less GPS and they want to be with the best G. P and credit they wanted to get the best Best GPS and in private equity and infrastructure and then most importantly, they want to be allocated to the best manager in digital and renewables. So we think we sit in a pretty protected place. There is we are the largest alternative.
An asset manager in digital infrastructure and that's why we had a good print in Q3 and while we'll have a very strong print in Q4 and I reaffirmed our guidance for 2023 this year.
I think next year will be very constructive.
You know we have over 200 investors still working in our flagship fund.
We've had today, we've had 23 investors come into the first close we believe this fund will attract anywhere from the low side of 80 investors to the high side of over 120 investors given our market intelligence and we've had so far 100% re up from fund two to fund III there hasnt been a fun to investor that's told us they're not committing to fund III and many of those investors.
Haven't closed with us yet so our calculus may be a little different than other folks.
We have a lot of precision study the data every week.
Coming out of Salesforce and <unk>.
As most of you know somebody who really likes data and I study the data and we're hitting our points and that's the key but I am optimistic about next year and I think our guidance for next year will demonstrate that but we're very pleased with the performance inside this quarter.
And look the key here is we just activated $25 million in fees.
We literally start billing those fees as of yesterday and all of those fees will get caught up in the fourth quarter and there'll be more catch up in Q1, and Q2 next year and so there'll be a profound impact to our earnings in fourth quarter is now that they are closing has occurred we finally get to start billing on fund III that is absolutely important as investors think about what.
Look at these numbers and how to think about desert ridge the expenses always come in front of the revenues. Unfortunately, when you're fundraising so that's a little bit about what's happening today.
Yeah.
And the follow up would just be as it relates to macro do you believe that that is one of the reasons why fund raising cycle times are a little extended.
Yeah, No doubt I think the macro has forced investors to.
Move with a little more what I would call a patients and I think investors are being incredibly thoughtful about how to deploy capital.
And certainly certain pension systems want to cover the liability so it's easier for them not to commit to funds and to make sure that they can cover their liabilities as pensioners take money out of the pension. So these are called outflows and inflows and so in a market like this where investors get nervous pensioners get nervous they may elect to take money out of their pension Jade.
So on that on that you get more outflows than you get inflows, which is taxes and the percentage that gets taken from someone's paycheck that gets put into a pension system like in places like Canada or places like Europe.
And even here in the U S, where certain U S state pensions or are definitely watching very carefully and taking a risk off mentality that being said theres pockets of great optimism, we've done incredibly well in Asia. That's been a really good market for US we had a brand new fundraising team. We've put in place last year, we're seeing terrific results out of that region. We've seen very good results out of the G.
D C region.
Europe's been a little slow in the U S is coming on right now candidates coming back on so as I said, the macro certainly makes people slow down a little bit and have some pause, but one thing. We are seeing is the pension systems are being very cautious jade just given that outflow inflow dynamic and that should stabilize next year is what our belief is that's what we see and that's what fundraiser.
Consultants are telling us as well.
Thank you very much.
Yeah. Thanks, Jamie.
Our next question comes from Rick <unk> with.
With Raymond James Please go ahead.
Thanks, Good morning, everybody.
Hi, Greg Hey, Rick.
Couple of questions.
Timing in life is everything.
Obviously youre working on the vantage deconsolidation help us understand what are you trying to achieve how much are you trying to sell down to how many people are involved in discussions.
What's kind of the process as you think about either by next time you report earnings if not sooner I think we said that we could get this one done so just help us understand the process to get to this next final deconsolidation simplification story.
Yeah. Thanks, Rick So look we're where we're having good conversations with with some of our biggest investors I.
I can't give you the exact color of who it is for confidentiality reasons, but rest assured that their long term core type investors.
Our pension systems generally the value. These U S assets that are 97% investment grade you know close to 6% yield and offers investors incredible safety even.
Even in light of today's interest rate conditions. These are some of the best data centers in the World I think our process is obviously, we want to sell down $60 million of our position we've made that perfectly clear to the investors were talking to.
We do have interest and we do have ongoing negotiations with a couple of investors and the key is also not just the sell down to 60, but to also to continue Rick.
To introduce new capital into vantage STC, New third party capital.
As vantage North America now has other data centers that they want to push into this long term REIT that we own we liked the read we want to own literally nine 9% of it. It's a good it's the best of the best and I think you cannot find a better set of U S data center assets in the world.
And just the credit quality of the duration of the leases being greater than 11 years. It's a really unique set of assets. So as you can imagine it sounds it's not been for lack of interest we have multiple parties looking at the position. We're looking at ultimately who can provide us with the most capital who can join us in our fund raising of some primary capital as we're going to grow that.
Sleep of assets, Rick I want to be clear about that vantage STC is a growth vehicle as we continued to develop some of the best public cloud campuses in the U S. We want vantage STC to keep growing it's attracting capital obviously interest rate narrative has been a bit of a headwind, but the counter to that is we've got great customers, great leases and we've got a great yield on.
This portfolio so it pays a nice dividend and Theres a lot of interest from from various pension fund clients of ours, and we will make a decision this quarter on what to do with it. So that's about as much granular detail as I can give you and oh by the way vantage FCC had great results this quarter.
Revenue NOI and EBITDA and same store same store sales growth all four metrics beat our budget. So we're really happy with what's going on at vantage STC and we do anticipate that that sleeve of assets will grow next year as we look to acquire more assets in that.
That vehicle.
Okay second question I think your stock buyback program, maybe expired as far as the authorization program Jackie you alluded to looking at preferred stock.
Some other items out there subsequent under some public stock common stock has been under pressure help us understand how you think about as you are monetizing some of these interest how you look at.
Taking a look at the preferred to common stock et cetera.
Well look we're always looking to buy back our preferreds I think we've made no secret.
We have a formula for how we use our cash.
As you know, we've got close to $590 million of cash and cash equivalents coming out of this quarter.
We're well capitalized you know, we're putting some money into our third fund that capital won't be called until reasonably as we do new investments in the third fund until third or fourth or next year.
We do see an opportunity when we do see an opportunity Rick we make those purchases on the stock buybacks, we've been in a blackout period.
We're hopeful to end that black Knight that blackout period. Soon so that we can go back to buying some of our stock back when it makes sense and then certainly we as a leadership team want to buyback our stock too. So we love our stock we think its a good value.
Once that blackout period ends.
And we're unrestricted we can we can go back to having that conversation so.
That's really it I think in addition to that we've always we've always decided that theres four sources attach rate share buybacks debt debt pay down.
And then certainly GP commitments into our fund New fund products, we really like where credit's going where we're really looking to build that credit strategy. I think that was really clear from my commentary earlier today, we like credit we're growing our credit team, we want to grow credit assets under management and where we are in flight in doing that so we.
That's a huge opportunity for us in terms of the Tam and our market positioning the last thing I would say Rick is we do see other G piece from time to time that are adjacent to what we do.
Whether it's adjacencies in digital infrastructure, whether its adjacencies and other verticals like infrastructure or private equity or renewable energy. We're constantly evaluating like we did with A&P over a year ago, whether or not we put our balance sheet to work to acquire other folks of our ilk that are subscale that when you integrate them with us like we did in the M. P.
You can see incredible margin.
And you can see obviously revenue growth volume growth in FRE growth. So we're measuring all of that Rick right. It's a it's a box right and Theres four quadrants in that box and we're carefully evaluating that literally every day as a management team.
And any update I know I think originally Jackie might've been leaving at the end of the calendar year any update on <unk>.
All of that hard work is important and is there a replacement coming or whats the process of CFO.
Yeah that that process is ongoing we've had really good success in some great conversations I mean, I would first tell you that.
Jackie has in place and he's extended with us.
Through I think through the second quarter of next year, we'd like them to stay.
He's happy here is I won't put words in his mouth.
If he's happier now I'm, having a good time.
He's worked really hard to get this company to where it is so a lot of the effort and a lot of the success. We're having is a function of jackie's hard work. So I for one would like to seems to crown over the longer he's got personal goals that he wants to achieve and I support fully as does the board.
And I'm not in a rush to hire the wrong CFO I've got the right CFO in the chair right now and so as you know.
We do feel confident we're going to announce the right candidate here and inside this quarter hopefully, but in the meantime, I'm very happy with my partnership with Jackie as a sovereign we worked well together, we're getting the results we're delivering for shareholders and I think he's pretty he's pretty happy to be extended through and needed. If we need them through to the end of June next year.
Okay. Thanks, everybody.
Thanks, Rick Thanks Roger.
Our next question comes from Richard Choe with Jay.
JP Morgan. Please go ahead.
Great I just wanted to follow up on the capital formation, that's been strong through the year, but the flow through to <unk> has been a little bit volatile how much of the $5 4 billion or target 8 billion should we expect to see them in this year.
Well as I said, you know, we're activating $25 million of Sam.
Fees officially yesterday, so that's going to flow through into the fourth quarter all of that $5. Four will now flow through because before we did not turn on the D V. P. Three.
Yes, and so the other key to that Richard is Theres no expenses associated with that $5 4 billion of fees that were turning on so that is 100% pure profit and the challenge in our business. Richard as you know is you spend six months raising the capital spend a lot of money a.
<unk> got a lot of people got sales he got a sales team and you have no revenue to show for that and now we're through that period and the fund raising is now got good escape velocity and as I said, we're having a strong fourth quarter and we anticipate having a very strong first and second quarter next year or so.
As we go forward.
Now starts to move into pure profit and as we've told you our strategy for our third fund is that $8 billion strategy. We have every clear belief and conviction, we will hit that $8 billion and we actually have some conviction that we're going to push through that.
And exceed the $8 billion target for this fund so that's what the data suggests but we're excited to turn on the 25 million of fees.
As I said, 100% profit associated with that in the fourth quarter Youll see a pure flow through on that revenue and we should anticipate the financial results in the fourth quarter to be incredibly strong and big on revenue lower on expenses and candidly some of that volatility is associated with just a geography flip between corporate expenses.
Being now allocated to I am so you'll see it.
It's almost a dollar for dollar flat between those two segments, but obviously are just real earnings is way up because that obviously gets neutralized.
Geography.
Great and then thank you for the fund performance reporting slide that it was very helpful. The performance has been good so far but can you give us a sense of how they're tracking.
Granted there's still a lot of time and the second one but just overall.
So your current projections are.
Danielle.
I'm not sure.
Repeat the first part of that question question Richard Sorry.
The gross M L ice's tracking for DP, one DP two.
D V P. You wanted to.
Yeah. So this is our first quarter of reporting fund level performance I think is what you're indicating to Richard but what I would tell you is of course gross Mike's had been up quarter over quarter on fund, one and fun too.
Fun too as you can tell from the vintages is going through the J curve phase and so those mics will catch up and we actually think fun to.
Where it sits today because it would be fun, one has performed better than fund one so we're pretty optimistic I know other firms.
Not that we stand around watching other firms, but we know from Q1 to Q2 and Q2 to three and three to four.
Other financial sponsors other GPS have had some challenges and theres been markdowns, we've not suffered from that at all actually our marks had moved up through Q1 through Q2 and Q3.
We anticipate both fund one and two with digital bridge to continuing to perform as the discounted cash flows across all of our portfolios are up quarter over quarter and year over year, and then I think also with respect to <unk> and jiff to we've been very good solid performance in the Infra Bridge one fund as you can see from the from the table that's performing at our.
Our expectations and we're continuing to deliver DPI.
We've made it very clear that we are in the process of unwinding and exiting out of Jeff one some of those assets and we've also had tremendous DPI across our first fund and some of the continuation vehicle. So returning capital right now is super important to help these Richard if you want to go out and raise money right now you've got to produce DPI and we've done a very good job there we've produced over.
Cumulatively about $4 2 billion of DPI. This year in the last 14 months for MLP, So returning capital and raising capital that's the cycle.
Great. Thank you.
Thanks, Richard I appreciate it.
Our next question comes from Eric Wold of Michelle with Wells Fargo. Please go ahead.
Great I. Appreciate the question just wanted to touch on kind of the M&A landscape across the different digital infrastructure verticals you operate in.
Are you seeing any traction on higher interest rates recently, moving down multiples for private infrastructure or are they kind of still remaining in pretty elevated ranges and does that shift at all.
Your desire to just accelerate Greenfield development versus M&A as you look at what.
Just to deploy capital going forward.
Yeah. It's Super interesting you should ask that question, because I'm actually giving a speech later today or where I'm going to talk exactly about this.
It's.
So fiber has come down significantly.
Eric we've seen.
Private market multiples move from the mid twenties.
Into the low teens, we even think there's further compression.
In fiber multiples, particularly in residential fiber, where the investor is exposed exactly to the household where the cash flows are month to month 30 days and then certain aspects of fiber.
Enterprise fiber wholesale transport fiber.
Down a little bit, but not quite as heavily hit us as fiber to the home you know.
Data centers actually you could make the argument Eric that multiples have gone up and the good assets and you know what the good assets are because of the Hyperscale public cloud.
<unk> campuses, where theres a lot of growth and Theres, a lot of opportunity and you've got a wallet that's growing.
On the enterprise side, you've seen the flip of that coin, which is older legacy data centers that are 20, plus years old like six area suffered and really don't have a growth story. So there is really not even a bid.
For those kinds of data centers. They are just somewhat impaired so.
Whether it's enterprise and then you've got data bank, which is doing edge and they are performing really well and there's been no degradation in the valuation of that equity. So datacenters are tricky I always tell investors that there's six different ways that you can invest Eric in data centers, there's six different sub industries and the data center sector.
What where valuations holding their holding in hyperscale and they're holding in edge, where are they going down managed services hybrid cloud enterprise. Those are the areas that are suffering and then I would say private cloud, which is what switch does is performing quite well.
So three good verticals, three probably less good verticals and so there's a wide range of valuation. There you can see is as high as 30 times EBITDA and you can see all the way down to an enterprise and managed services like six to seven times EBITDA because in some instances.
No bid because of the debt.
Towers that actually held in pretty well on the private side, we've seen private transactions in Europe recently trade in the mid 'twenty two.
94% to 25 times, there hasn't been a material degradation in tower valuations, maybe they've lost three to four turns in Europe and the U S. There just hasn't been any material M&A.
While the public multiples are down 20% to 30% private multiples actually hung in and the smaller transactions that vertical bridge is chasing theres still losing deals at 25 26 times no. Those were the deals that we're losing at 32 to 36 times a year ago. So theres, probably been a six to eight turn compression and what I would call small ball M&A.
But there hasn't been a material big M&A trade in the space to really see where those multiples arent and I think you could basically.
Push private market small cell multiples into the same bucket as U S towers, and then in South East Asia, and Latin America. We've seen you know tower multiples trade in the high teens and in some parts of Asia, Jackie we've seen towers hang in at 21 times also.
The market is still.
One that's really attractive from a tower multiple perspective.
But again digital infrastructure sort of painting it with one paint brushes and fair I think you've got to sort of lay out the canvas and bring 12 paint brushes to the canvas because youre going to have to paint it a lot of different ways right now Eric.
Yes that makes sense and just a follow up.
Comments on residential fiber fiber to the home.
There's obviously been some speculation about a big consolidation wave coming in that market you kind of touched on this a little bit, but I guess, given where cost of capital of dot have gone.
For a lot of those over builders is that an area that traditionally I know you've shied away from but if we see inappropriate discounted evaluations here or is that an area. We could see you potentially plan further going forward.
I think look right now we're very focused from a credit perspective, and we're providing credit to some of those companies. So certainly I'll put the investment committee level, we're very supportive of residential fiber and there are certain management teams, who really like and we're backing them and we're giving them capital in the form of credit.
And in the equity investment committees were not constructive on residential fiber right now.
We haven't been and I think we've been pretty vocal about that we've had our reasons now that the valuations are moving in line. If we do find the right geography, the right management team and the right set of competitive dynamics, we're happy to write an equity check behind a great management team in the residential fiber space I mean, we're doing that now in Europe with net Omnia, we're rolling up the tier two tier three mark.
<unk> in our in the U K with a lot of success, we got the great. We've got a great management team. He is building at 20% to 30% cheaper than its competitors and as penetration is 20% to 30% higher as ARPA is about the same. So that's the situation where we saw a very specific set of skills and a management team that had comparative advantage and they werent just chasing homes in London.
They were focused on the tier two and tier three markets, where there's less competition. So the investment thesis stood up same thing in Chile, we have a wholesale residential fiber business, but we also have a business that same business also sells directly to home, where we've seen underpenetrated homes, a lot of streets, where we're going down the street and we're the only fiber carrier and so we will play in residential fiber Eric we're just.
Doing it through <unk> and through net Omnia and doing it very carefully and very surgically I think theres, probably a little more pain left and residential fiber in Europe, and the U S and we're going to watch it carefully.
And we'll play I mean bean field as our Canadian residential and enterprise fiber play, it's mostly focused on Toronto, Montreal, and it's done really well.
We sold a third of that to <unk> for an incredible multiple they've been a great partner they are providing a ton of primary capital and we're going into Toronto, Montreal and were facing Rogers Bell are a very formidable and we're taking market share.
And that's a fight rub four but it's got to be priced correctly, the equity has to be priced correctly.
I appreciate it Mike Thank you.
Thanks Art.
Our next question comes from Joel <unk>.
With RBC. Please go ahead.
Thanks wanted to ask you about the comments you made about small cells in the scripts.
And maybe focusing on outdoor small cells, you sounded a little bit more positive than you have in the past.
What's driving that.
In terms of U S demand and and how capital intensive is that.
Sure.
<unk> and <unk>.
Any of your other platforms in other words are you seeing.
Same store lease up on existing plants or are you having to kind of build to meet the demand.
Well look I think the reason we see optimism is because we're watching our pipeline's at Boingo and extranet and fresh wave.
And also our Latin tower businesses like highlighting an ATP edge point in Asia. All these businesses have small cell divisions.
And we're not only seeing green shoots we're seeing bookings.
And we've seen a turn in the bookings that X net we've seen a really big turned in bookings and Boingo.
Look there's close to as you know Jonathan Theres, a little under half a million small cells to end use depends on whose numbers you believe and then Jonathan what do you count as a note or what's not a note right.
What I can tell you is we believe the re forecast on small cell growth between now and 2030, it's about $1 1 million or $1 2 million notes. So we think theres about another six to 700000 nodes that'll be built and we're talking to our customers and look yeah.
Some of it will be self perform but even now in this market where the cost of capital has gone up our conversations with all four of the U S carriers have picked up significantly I know an X. For example, they just signed a new MLA with dish and dish now has capital and Theyre going to put some work put some money to work in small cells, but all three of the major carriers are also putting money into small cells now.
While capex has been curtailed if we can come in and provide a good solution. The carriers are willing to listen provided they don't fund the capex. So we're seeing more opportunity we've seen our pipelines grow I think you saw a little bit of color from Crown and I think there was a competitor research paper out today I think one of your competitors that are out of non deal Road show.
With Crown and they were talking about the same thing they've seen an increase in pipeline. So I see a market. That's growing this is exactly what happened with <unk>. We spent the first three years and LTE basically doing macro overlays one for one and then when <unk> and LTE moved into 2015 2016 and moved into Densification. It was all small cell.
And it was a little tougher on towers were probably another six to nine months away from hardcore densification ramping on <unk>, but we're starting to see it starting to happen. So I am very very optimistic around small cell.
And.
We're looking forward to putting more capital work raising more capital at these platforms and our investors understand it we've been out there talking to them about it and it's not just small cells for the carriers, but you have to think in other dimensions, you have to think about Iot networks private <unk> networks, and then of course as you know Jenny.
Generally of AI starts to penetrate towards the edge and moves towards mobile edge, we've always talked about how generative AI ultimately is going to be dispersed and low latency environments that are less than 110th of a millisecond. The only way you get there is through small cells. That's the only way that youre going to have through autonomous vehicles true true machine to machine learning.
True public safety that has true early responders getting in front of the threats is by having a essentially a no latency environment in small cells take you. There we're very constructive on how AI is going to change the small cell space in the next five to six years.
Oh, Great and then maybe just pivoting briefly but any anything you can elaborate on in terms of <unk>.
And on your venture strategy and things we're looking at.
Well look I mean, now that we've announced the closing of the third fund. The first closing is we can start to pull back the curtain on on what we're doing what I would tell you is we built a really good diversified fund wanted diversified fund two we did 10 investments 13 investments and this one same thing we're targeting 12% to 16 investments probably check sizes, a little <unk>.
<unk> is what I would tell you we're very constructive on Asia were a little less constructive on Europe, where certainly constructive on the U S and Canada and Latin America. So you know what I would tell you is our strategy is much of the same.
But if we're thinking about that strategy, we're seeing a lot of positive things in Asia.
We're seeing a lot of positive things here in our home market in North America, and Theres, a couple of interesting things in Latin America and.
Europe is just going to be a tough road out those guys have a much tougher road. So as we're thinking strategically about where to deploy capital you know Europe is probably third or fourth on my list right now the U S and Asia stand to be one and two and then in terms of sectors.
We like of course, we like Datacenters that face AI.
We do like wholesale fiber then again faces AI, we do like private <unk> networking we.
We do like small cells, that's the thematic that we like in our new strategy and then.
If theres a right tower opportunity if its E M or if it's in the primary world. We'll look at towers, we think we've got some great companies, but there's always room to further invest and then the last thing I would say is we have spent.
Some time thinking about how to grow the private cloud we've had so much success at switch. The question is can we translate that success to Europe and Asia. So we're working on that really hard right now.
Private cloud networking and owning private cloud infrastructure, the timely secure theres a huge market for that and no. One is doing it no. One is doing it the way switch does it. So we've now that we've owned that company for almost a year, we feel like we have the DNA to take that strategy forward. There's some other things we're working on that are proprietary.
We know that we've got the third fund closed the next strategy closed we can deploy capital from that from that strategy. So youll start to see some new deals announced here in this quarter.
As I said, we've got a big pipeline, we're tracking over $30 billion of new ideas in our pipeline. Our pipeline has never been bigger in terms of new platform information. So we're excited this is a big call today. It was important for us to get the first closed on its important for us to turn on the billing.
Inactivate those fees, everyone loves those fees and and then of course, you know go execute and so what youll see from US going forward is now.
New deals new execution and continued.
Thinking around DPI in how we return capital back to our investors so it'll be a busy fourth quarter for us.
Jonathan and we'll look forward to hosting you are hopefully soon down in Florida.
Thanks very much.
Thank you.
There are no further question at this time I would like to turn the floor back over to Mark for closing comments. Please go ahead.
Yeah. Thank you operator, well first I want to thank everyone for showing up on the call today.
As I think you hear in my tone and my tenure, we're very optimistic this was exciting to get to the first close of our new strategy and we are again reaffirming our guide for fund raising this year, it's been a tough market out there, but we seem to be defying gravity in terms of fund raising we've done a great job returning capital tell piece.
We've done a very good job managing our assets in our portfolio companies and the state of digital bridge is quite strong as we sit here today as we move into the fourth quarter. You can expect more of the same as I said before we're pretty excited about the fact that now we convert into fees on our new strategy you will see a strong financial performance here in the fourth quarter and that will.
Persist into next year, we remain incredibly optimistic around the fundraising environment and exactly where we are in terms of our key accounts and where our fund raising is and then in terms of capital deployment as I said, just a few moments ago, we're sitting on a $33 billion pipeline of new opportunity in terms of where to invest capital and we will start deploying that capital in short order.
So to sum it up it's really about hitting the marks on capital formation, maintaining our portfolio, maintaining our competitive advantage and of course, raising more capital and deploying that capital in what we think are some of the best strategies in the world and digital infrastructure. It's a privilege to represent your capital. We appreciate your support and we'll look forward to.
Talking to most of you soon thank you have a great weekend and have a great rest of your week take care.
This concludes today's conference call.
May disconnect your lines at this time, thank you for your participation and have a great day.
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