Hannon Armstrong Sustainable Infrastructure Capital Inc Earnings Call

Operator: Go to www.beadaholique.com to purchase beading supplies and to get design ideas! Greetings and welcome to HACI's fourth quarter and full year 2023 earnings conference call and webinar. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Neha Gaddafi.

Greetings and welcome to healthy fourth quarter and full year 2023 earnings conference call and webcast.

At this time all participants are in a listen only mode. A brief question and ask the question will follow the formal presentation.

If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is not my pleasure to introduce your host Nate all got them.

Neha Gaddafi: Senior Director, Investor Relations and Corporate Finance. Thank you, operator. Good afternoon, everyone, and welcome.

Nate: Senior director Investor Relations and corporate finance.

Nate: Thank you operator, good afternoon, everyone and welcome earlier. This afternoon chassis distributed a press release detailing our fourth quarter and full year of 2023 results a copy of which is available on our website. This conference call is being webcast live on Investor Relations page of our website, where a replay will be available later today.

Neha Gaddafi: Earlier this afternoon, HASSI distributed a press release detailing our fourth quarter and full year 2023 results, a copy of which is available on our website. This conference call is being webcast live on the investor relations page of our website, where a replay will be available later today. Some of the comments made in this call are forward-looking statements that are subject to risks and uncertainties described in the risk factors section of the company's Form 10-K and other filings with the SEC. However, actual results may differ materially from those stated.

Nate: Some of the comments made in this call are forward looking statements, which are subject to risks and uncertainties described in the risk factors section of the company's Form 10-K, and other filings with the SEC.

Nate: Actual results may differ materially from those stated today's discussion also includes some non-GAAP financial measures a reconciliation of GAAP to non-GAAP financial measures is available on our posted earnings release and slide presentation.

Neha Gaddafi: Today's discussion also includes some non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is available in our posted earnings release and slide presentation. Joining me on today's call are Jeff Lipson, the company's president and CEO, Mark Bangburn, CFO, and Susan Nickey, our chief client officer. Susan will be available for the Q&A portion of our presentation. Now I'd like to turn the call over to Jeff, who will begin on slide three. Jeff?

Speaker Change: Joining me on today's call are Jeff Lipson, the company's president and CEO, Mark time, burn and CFO and Susan Nicky our Chief client officer.

Speaker Change: Susan will be available for the Q&A portion of our presentation now.

Speaker Change: Now I would like to turn the call over to Jeff who will begin on slide three Jeff.

Jeff: Thank you, Neha, and good afternoon, everyone. Thank you for joining the call. 2023 was a record year for HSE, producing outstanding results as our non-cyclical and adaptable business model overcame the challenges presented by disruptive capital markets. We increased our distributable earnings by 7% to $2.23 and increased our net investment income by 21%. We were able to close a record volume of $2.3 billion of new investments at a yield greater than 9%. This volume facilitated a 44% increase in our portfolio, which creates a foundation for continued revenue growth. We also declared a dividend of $0.415 for the quarter, an increase of $0.08 on an annualized basis from the prior quarter. Our ability to achieve these results in spite of the 2023 operating backdrop, including volatile interest rates, provides us ongoing confidence that our long-term business model, driven by our climate clients asset strategy, is exceedingly resilient and the path forward to achieving our financial and climate goals. Turning to slide four.

Jeffrey A. Lipson: Thank you Nate and good afternoon, everyone. Thank you for joining the call.

Jeffrey A. Lipson: 2023 was a record year for husky, producing outstanding results as our non cyclical and adaptable business model overcame the challenges presented by disruptive capital markets.

Jeffrey A. Lipson: We increased our distributable earnings by 7% to $2.23 and increased our net investment income by 21%.

Jeffrey A. Lipson: We were able to close a record volume of $2 $3 billion of new investments at a yield greater than 9%.

Jeffrey A. Lipson: This volume facilitated a 44% increase in our portfolio, which creates a foundation for continued revenue growth.

Jeffrey A. Lipson: We also declared a dividend of 41 and a half cents for the quarter, an increase of eight cents on an annualized basis from the prior quarter.

Jeffrey A. Lipson: Our ability our ability to achieve these results in spite of the 2023 operating backdrop, including volatile interest rates.

Jeffrey A. Lipson: Rides us ongoing confidence that our long term business model driven by our climate clients asset strategy is exceedingly resilient.

Jeffrey A. Lipson: And the path forward to achieving our financial and climate goals.

Jeffrey A. Lipson: Turning to slide four.

Jeff: As a reminder, our long-term business model is to continue to produce 10% EPS growth, consistent with our first 10 years as a public company. And we have also previously indicated that, over the long term, we are targeting a payout ratio of 50%, retaining the remaining 50% of our earnings to reinvest while shifting to less reliance on equity issues. Today, we are pleased to announce earnings and dividend guidance for the next three years, consistent with our long-term business model. Our earnings guidance reflects re-acceleration to 8-10% compound annual growth through 2026, using a 2023 base. The midpoint is above our 2023 growth rate but very slightly below our long-term business model due to this period including significant refinancing activity. However, this difference between the guidance and the business model should be viewed as a positive data point, as even in more difficult operating environments, the impact on earnings growth is minimal. Our dividend guidance reflects our continued gradual reduction in the payout ratio as we increase our dividend, but at a slower rate than our earnings. We typically paid 100% of our earnings as dividends prior to 2018, gradually reducing the ratio to 71% in 2023.

Jeffrey A. Lipson: As a reminder, our long term business model is to continue to produce 10% EPS growth.

Jeffrey A. Lipson: <unk> with our first 10 years as a public company.

Jeffrey A. Lipson: And we've also previously indicated that over the long term, we are targeting a payout ratio of 50%.

Jeffrey A. Lipson: Retaining the remaining 50% of our earnings to reinvest while shifting to less reliance on equity issuance.

Jeffrey A. Lipson: Today, we are pleased to announce earnings and dividend guidance over the next three years consistent with our long term business model.

Jeffrey A. Lipson: Our earnings guidance reflects reacceleration to 8% to 10% compound annual growth through 2026.

Jeffrey A. Lipson: Using a 2023 base here.

Jeffrey A. Lipson: The midpoint is above our 2023 growth rate, but very slightly below our long term business model due to this period, including significant refinancing activity.

Jeffrey A. Lipson: However, this difference between the guidance and a business model should be viewed as a positive data point is even in more difficult operating environments. The impact on earnings growth is minimal.

Jeffrey A. Lipson: Our dividend guidance reflects our continued gradual reduction in the payout ratio as we increase our dividend, but at a slower rate than our earnings.

Jeffrey A. Lipson: We typically paid 100% of our earnings as dividends prior to 2018 gradually reducing the ratio to 71% in 2020 three and.

Jeff: And we expect this gradual reduction to continue to occur during the guidance period with a payout ratio between 60 and 70 percent as we continue to make progress towards our 50 percent goal. However, just as the actual dividend per share increased between 2018 and 2023, the payout ratio was decreasing. Investors should expect their dividends to continue to grow during the guidance period. We would expect to achieve our long-term target of a 50% payout ratio later this decade, after which earnings and dividends are expected to have identical growth. We believe our base case model that drives guidance is a balanced view of upside opportunities and downside risks. There are scenarios that would result in earnings above our guidance, including a second investment grade rating which would presumably reduce our debt costs, or an expansion of our investment platform resulting in higher transaction volume, or an improved return on underlying investments.

Jeffrey A. Lipson: And we expect this gradual reduction to continue to occur during the guidance period with a payout ratio between 60 and 70% as we continue to make progress towards our 50% call.

Jeffrey A. Lipson: However, just to see actual dividend per share increase between 2018 and 2023, while their payout ratio with decreasing.

Investors should expect our dividend to continue to grow during the guidance period.

Jeffrey A. Lipson: We would expect to achieve our long term target of a 50% payout ratio later this decade, after which earnings and dividends are expected to have identical growth rates.

Jeffrey A. Lipson: While we believe our base case model that drives guidance is a balanced view of upside opportunities and downside risks. There are scenarios that would result in earnings above our guidance <unk>.

Jeffrey A. Lipson: Including a second investment grade rating, which would presumably reduce our debt costs.

Jeffrey A. Lipson: Or expansion of our investment platform, resulting in higher transaction volumes.

Jeffrey A. Lipson: We improved return on underlying investments.

Jeff: Each of these items would have a positive impact on our margin. In summary, this guidance reflects an enthusiastic and confident vision of our company and strategy over the next three years, and we remain optimistic that we have the talent, client relationships, and market opportunity that will result in continued growth and prosperity. Turning to page five, I'd like to reinforce that, for many years, we have consistently accomplished our disclosed objectives.

Jeffrey A. Lipson: Each of these items would have a positive impact on our margin.

Jeffrey A. Lipson: In summary, this guidance reflects an enthusiastic and confident vision of our company and strategy over the next three years.

Jeffrey A. Lipson: And we remain optimistic that we have the talent client relationships and market opportunity that will result in continued growth and prosperity.

Jeffrey A. Lipson: Turning to page five.

Jeffrey A. Lipson: I'd like to reinforce that for many years, we have consistently accomplished our disclosed objectives.

Jeff: On our Investor Day in March of 2023, we discussed several strategic priorities and, in each case, kept our promise. We executed on a seamless CEO and CFO transition, invested at higher yields without incremental risk, expanded our fuels, transport, and nature segment, continued to access diversified sources of debt, were placed on a positive outlook by Fitch, discontinued our re-election, and migrated the business to be less reliant on capital markets via capital-led initiatives and dividend policy. It is also worth noting that we expect to achieve our prior earnings guidance in 2024. And we are meeting our dividend guidance with today's announcement. We have an unblemished track record of meeting or exceeding our guidance. Achieving our disclosed objectives reflects both the predictability of our lower risk business model and the reliability of our message. Turning to page 6.

Jeffrey A. Lipson: On our Investor day in March of 2023 we discuss several strategic priorities and in each case kept our promise.

Jeffrey A. Lipson: We executed on a seamless CEO and CFO transition invested at higher yields without incremental risk <unk>.

Jeffrey A. Lipson: Expanded our fuels transported nature segment.

Jeffrey A. Lipson: Continued to access diversified sources of debt where.

Jeffrey A. Lipson: Were placed on positive outlook by Fitch.

Discontinued a REIT election, and migrated the business to be less reliant on capital markets via capital light initiatives and dividend policy.

Jeffrey A. Lipson: It is also worth noting that we expect to achieve our prior earnings guidance in 'twenty 'twenty four.

Jeffrey A. Lipson: And we are meeting our dividend guidance with today's announcement.

Jeffrey A. Lipson: We have an unblemished track record of meeting or exceeding our guidance.

Jeffrey A. Lipson: Achieving our disclosed objectives reflects both the predictability of our lower risk business model and the reliability of our messaging.

Jeffrey A. Lipson: Turning to page six.

Jeff: I'd like to address four items that represent our most frequent investor questions, beginning with policy. We are aware of public policy and engage in advocacy efforts. However, we do not fundamentally believe that public policy will have a meaningful impact on our business over the guidance period.

I'd like to address four items that represent our most frequent investor questions.

Jeffrey A. Lipson: Beginning with policy.

Jeffrey A. Lipson: We are attentive to public policy and engage and advocacy efforts. However.

However, we do not fundamentally believed that public policy will have a meaningful impact on our business over the guidance period.

Jeff: Our company has been successful in administrations from either party and thrived prior to the IRA. In addition, clean energy demand continues to grow exponentially, including at the state and corporate level, and the levelized cost of energy supports further development. Our company is also well positioned to pivot to a variety of investment alternatives, which further provides comfort that public policy changes are not likely to be impactful on our profitability. Regarding interest rate risk, we've prudently navigated this period of interest volatility, which began in 2022. Since that time, we have not wavered in our execution, implementing a strategy of pricing our investments to produce our targeted margin. These higher yielding investments do not include higher risk but rather reflect broad industry adaptation to higher rates. We've also deployed a hedging program, which has allowed us to navigate the higher rate environment successfully and minimize the risk of rates moving further upward. Next, we are often asked about project delays.

Jeffrey A. Lipson: Our company has been successful in administrations from either party and thrived prior to the I R. A.

Jeffrey A. Lipson: In addition, clean energy demand continues to grow exponentially, including at the state and corporate level.

Jeffrey A. Lipson: And the level of <unk> cost of energy supports further development.

Jeffrey A. Lipson: Our company is also well positioned to pivot to a variety of investment alternatives, which further provides comfort that public policy changes are not likely to be impactful to our profitability.

Jeffrey A. Lipson: Regarding interest rate risk, we have prudently navigate this period of interest volatility which began in 2022.

Jeffrey A. Lipson: Since that time, we've not wavered in our execution imply.

Jeffrey A. Lipson: Implementing a strategy of pricing our investments to produce our targeted margins.

Jeffrey A. Lipson: These higher yielding investments do not include higher risk, but rather reflect broad industry adaptation to higher rates.

Jeffrey A. Lipson: We've also deployed our hedging program, which has allowed us to navigate the higher rate environment successfully.

Jeffrey A. Lipson: And minimize the risk of rates moving further upward.

Jeffrey A. Lipson: Next we are often asked about project delays.

Jeff: However, the risk of potential short-term delays in certain asset classes is mitigated by the diversity of our investment strategy, as evidenced by our 2023 investment volumes and our current pipeline, and Long-Term Economic Fundamentals will allow our clients to maintain active pipelines. Finally, our ability to fund record volumes in 2023 is proof positive that our liquidity and funding strategy is sound. Our risk to capital markets volatility has largely been muted for 2024 as we have already pre-financed much of our pipeline with recent debt transactions. If markets are attractive, we will consider early refinancing of upcoming maturities, but are otherwise in a strong position related to funding needs over the next 12 months. In summary, and as reflected by our new guidance, we believe the business remains well-positioned to address any perceived headwinds. And with that, I'd like to turn the call over to Mark. Thank you, Jeff.

Jeffrey A. Lipson: And wherever the risk of potential short term delays in certain asset classes is mitigated by the diversity of our investment strategy as evidenced by our 2023 investment volumes and our current pipeline.

Jeffrey A. Lipson: And long term economic fundamentals will allow our clients to maintain active pipeline.

Jeffrey A. Lipson: Finally, our ability to fund record volumes in 2023 is proof positive that our liquidity and funding strategy is sound.

Jeffrey A. Lipson: Our risk to capital markets volatility has largely been muted for 'twenty 'twenty four as we have already pre financed much of our pipeline with recent debt transactions.

Jeffrey A. Lipson: If markets are attractive we will consider early refinancing of upcoming maturities, but are otherwise at a strong position related to funding needs over the next 12 months.

Jeffrey A. Lipson: In summary, and as reflected by our new guidance, we believe the business remains well positioned to address any perceived headwinds.

Jeffrey A. Lipson: And with that I'd like to turn the call over to Mark.

Mark Strouse: Thank you, Jeff I'll start on slide seven underpinning the guidance, Jeff discussed as our pipeline of over 5 billion, which is highly diversified across three markets eight asset classes over 30 programmatic clients in over 150 unique transactions a portion of a portion of which rep.

Mark: I'll start on slide 7. Underpinning the guidance Jeff discussed is our pipeline of over $5 billion, which is highly diversified across three markets, eight asset classes, over 30 programmatic clients, and over 150 unique transactions, a portion of which represents greater than $25 billion of Project CapEx from our 10 largest clients. We continue to be excited about growth in all three markets and the growing number of new clients that we can serve. Our pipeline has grown significantly from $3 billion in 2020 to greater than $5 billion in 2024, a reflection of our success and organizational structure that supports programmatic transactions.

Mark: Present, greater than 25 billion of project Capex from our 10 largest clients.

Mark: We continue to be excited about growth in all three markets and the growing number of new clients that we can serve our pipeline has grown significantly from 3 billion in 2022 greater than 5 billion in 2024, a reflection of our success and organizational structure that supports programmatic transactions.

Mark: A unique element of our business is our ability to pivot between asset classes, seeking the most attractive risk-adjusted returns and adapting to market conditions. Our annual closing since 2020 has confirmed the power of a diverse asset strategy as our volumes are consistent while our growth in the underlying end markets is not. We continue to see a vastly expanded opportunity set in front of us, driven by the underlying demand in all of our markets for energy transition assets and services. Moving on to slide 8, for full year 2023, we are reporting distributable EPS of $2.23. We closed a record volume of new transactions at $2.3 billion.

Mark: A unique element of our business is our ability to pivot between asset classes seeking the most attractive risk adjusted returns and adapting to market conditions.

Mark: Our annual closing since Twenty-twenty confirm that power divert of a diverse asset strategy as our volumes are consistent while our growth in the underlying end markets or not.

Mark: We continue to see a vastly expanded opportunity set in front of us driven by the underlying demand in all of our markets for energy transition assets and services.

Mark: Moving on to slide eight for full year 2023, we are reporting distributable EPS of $2 23, we closed a record volume of new transactions of $2 3 billion.

Mark: Year-over-year, our volumes increased 28%, distributable NII increased 21%, and gain on sale increased 15%. Notably, our portfolio grew 44%, providing a much larger base for long-term recurring income. And looking to the top right, this portfolio growth is at higher yields, with incremental on-balance sheet investments yielding greater than 9%, a material shift relative to prior years. Continuing to the next slide, we have a track record of stable growth on all notable metrics. Since 2019, we have grown our distributable EPS by a 12 percent CAGR, distributable NII by a 28 percent CAGR, and gain on sale by a 23 percent CAGR. The total managed assets have almost doubled to $12.3 billion, highlighting the increasing scale in the business. One key ratio reflecting the benefit of scale is the growth in our key performance metrics relative to SG&A. Year-over-year, combined NAI and gain-on-sale increased by 19 percent, while SG&A only increased by 2 percent.

Mark: Year over year, our volumes increased 28% distributable NII increased 21% and gain on sale increased 15%.

Mark: Notably our portfolio grew 44%, providing a much larger base for long term recurring income.

And looking to the top right. This portfolio growth is at higher yields with incremental on balance sheet investments, yielding greater than 9% immaterial shift up relative to prior years.

Mark: Continuing to the next slide we have a track record of stable growth along all notable metrics. Since 2019, we have grown our distributable EPS by a 12% CAGR distributable NII by a 28% CAGR and gain on sale by 23% CAGR.

Mark: The total managed assets has almost doubled to 12.3 billion highlighting the increasing scale in the business.

Mark: One key ratio, reflecting the benefit of scale is that the growth in our key performance metrics relative to SG&A.

Mark: Year over year, combined NII and gain on sale increased by 19%, while SG&A only increased by 2%. While we are happy with this result, Directionally. We believe there are more benefits to gain as we scale.

Mark: While we are happy with this result directionally, we believe there are more benefits to gain as we scale. On slide 10, our portfolio yield increased to 7.9 percent, while the portfolio grew by 1.9 billion. This growth compares to the previous three-year annual average of 700 million.

Mark: On slide 10, our portfolio yield increased to seven 9%, while the portfolio grew by 1.9 billion. This growth compares to the previous three year annual average of $700 million.

Mark: In the fourth quarter, we funded $609 million of new and previously closed investments, and anticipate funding additional commitments of $500 million through 2024. Additionally, with the growth in FTN and community solar, our portfolio has attained a higher level of diversification in 2023. On slide 11, our focus on profitable growth has contributed to maintaining healthy margins throughout 2023 with a portfolio yield of 7.9 compared to interest expense of 5.0. In 23, we made incremental investments at an average yield greater than 9%, with the new cost of debt being 7%. And we expect that over time, we will benefit from an improved cost of funds if a second investment-grade rating can be attained. To provide another data point, in our recent corporate debt offering materials, we identified near-term investment opportunities that are anticipated to yield 11%.

Mark: In the fourth quarter, we funded $609 million of new and previously closed investments.

Mark: And anticipate funding additional commitments of 500 million through 2024.

Mark: Additionally, with the growth in F T N and community solar our portfolio has attained a higher level of diversification in 2023.

Mark: On slide 11, our focus on profitable growth has contributed to maintaining healthy margins throughout 2023 with a portfolio yield of 7.9 compared to interest expense of 5.0.

And twenty-three we made incremental investments at an average yield greater than 9% with new cost of debt 7%.

Mark: And we expect that over time, we will benefit from improved cost of funds as the second investment grade rating can be attained.

Mark: To provide another data point in our recent corporate debt offering materials, we identified a near term investment investment opportunities, which are anticipated to yield 11%.

Mark: This results in ROEs of mid- to high-teens relative to where the offering price is. Looking along the bottom of the slide, in past quarters, we've provided additional context to address questions on our 25 and 26 Bond Refinancing. As a reminder, the base rate for the expected bond refinancings is currently hedged around 3%. Based on market spreads, a theoretical refinancing would result in a blended cost of debt of 5.6%, resulting in a 12.5% ROE.

Mark: This results in Roe's of mid to high teens relative to where the offering price.

Mark: Looking along the bottom of the slide in past quarters, we've provided additional context to address questions on our 25 and 26 bond refinancings as a reminder, the base rate for the expected bond refinancings are currently hedged around 3%.

Mark: Based on market spreads a theoretical refinancing would result in a blended cost of debt of five 6%, resulting in a 12, 5% Roe.

Mark: Turning to slide 12, our funding platform was critical to our success in 2023. Starting on the left with over $930 million, our liquidity remains robust. The total liquidity includes approximately $300 million of corporate unsecured debt and non-recourse secured debt, both of which closed in January.

Mark: Turning to slide 12, our funding platform was critical to our success in 'twenty two there in theory.

Mark: Starting on the top left with over 930 million our liquidity remains robust.

Mark: The total liquidity includes approximately $300 million of corporate unsecured debt and.

Mark: And nonrecourse secured debt both of which closed in January.

Mark: Our current leverage is two times debt to equity and 92% is either fixed or hedged.

Mark: Our current leverage is two times debt-to-equity, and 92% is either fixed or hedged. Over the past 12 months, we've raised $1.9 billion of debt, the vast majority of which was used to fund portfolio growth. Importantly, we utilize all sources of debt available to us, highlighting our diverse funding platform.

Mark: Over the past 12 months, we've raised $1 9 billion of debt a vast majority of which was used to fund portfolio growth.

Mark: Importantly, we utilized all sources of debt available to us highlighting our diverse funding platform. The recent high yield offering secured debt raise and existing liquidity substantially address our growth capital debt capital needs for 2024.

Mark: The recent high-yield offering, secure debt raise, and existing liquidity substantially address our debt capital needs for 2024. We will consider opportunistic windows for refinancing or extending our 25 debt maturities throughout the course of this year. While equity or balance sheet funding remains strong, we continue to progress our capital light initiatives to further diversify our funding platform. In summary, our execution to date, current liquidity, and go-forward plan position us extremely well to capitalize on the opportunity ahead. I'm now turning the call back to Jeff.

Mark: We will consider opportunistic windows for refinancing, we're extending our twenty-five debt maturities throughout the course of this year.

Mark: While liquidity or balance sheet funding remained strong we continued to progress our capital light initiatives to further diversify our funding platform.

Mark: In summary, our execution to date current liquidity and go forward plan position us extremely well to capitalize on the opportunity ahead.

Mark: I'll now turn the call back to Jeff.

Jeffrey A. Lipson: Thanks Mark.

Jeffrey A. Lipson: Turning to slide 13, we summarize a few of our sustainability and impact highlights from 2023 include.

Jeffrey A. Lipson: Including our alignment with the EU taxonomy, and other items related to advocacy disclosure and philanthropic priorities as well as summarizing the impact of our investments as measured by our carbon count metric.

Jeff: Thanks, Mark. Turning to slide 13, we summarize a few of our sustainability and impact highlights for 2023, including our alignment with the EU taxonomy and other items related to advocacy, disclosure, and philanthropic priorities, as well as highlighting the impact of our investments as measured by our carbon count method. We'll conclude on slide 14. As I reflect on my first year as CEO of HSE, I am extremely proud of our many accomplishments in 2023. And I remain confident that our three-year business planning process concluded that all the components of long-term success are in place.

Jeffrey A. Lipson: We will conclude on slide 14.

As I reflect on my first year as CEO of Hassey I'm extremely proud of our many accomplishments in 2023.

Jeffrey A. Lipson: And I remain confident that our three year business planning process is concluded that all of the components of long term success are in place.

Jeffrey A. Lipson: As I said on Investor day back in March.

Jeffrey A. Lipson: Nancy is the pre eminent climate pure play with a differentiated strategy that allows investors to access the growth trajectory of the energy transition in a low risk business model.

Jeff: As I said on Investor Day back in March, HACI is the preeminent climate pure play with a differentiated strategy that allows investors to access the growth trajectory of the energy transition in a low-risk business model. This strategy of focusing on climate-positive asset-level investing with leading sponsors and developers continues to be successful and provide ongoing shareholder value. Our business model has proven resilient despite many headwinds. And our new guidance reflects a path forward to consistent profitability and less reliance on capital markets. I thank our dedicated team for their outstanding achievements in 2023 and their enthusiasm and commitment to our future success. Thank you for joining the call. I'll ask the operator to open the line for questions.

Jeffrey A. Lipson: This strategy of focusing on climate positive asset level investing with the leading sponsors and developers continues to be successful and provide ongoing shareholder value.

Jeffrey A. Lipson: Our business model has proven resilient despite many headwinds in our new guidance reflects a path forward to consistent profitability and less reliance on capital markets.

Jeffrey A. Lipson: I, thank our dedicated team for their outstanding achievements in 2023.

Jeffrey A. Lipson: And their enthusiasm and commitment to our future success.

Speaker Change: Thank you for joining the call.

Speaker Change: And I'll ask the operator to open the line for questions.

Speaker Change: Thank you we will now be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad.

Speaker Change: Correlation Tom one vacate your allotted in the question queue.

Speaker Change: Press Star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the Cherokee.

Operator: Thank you. We will now be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key.

Speaker Change: Our first question is from Brian Lee with Goldman Sachs. Please proceed with your question.

Brian Lee: Hey, good afternoon, everyone. Thanks for taking the questions.

Brian Lee: Maybe just starting off with the longer term three year.

Brian Lee: Earnings growth outlook can you kind of give us a sense I don't know.

Brian Lee: Think about it in that in that context.

Brian Lee: Our first question is from Brian Lee with Goldman Sachs. Please proceed with your question. Hey, good afternoon, everyone.

Speaker Change: You mentioned now we're full.

Speaker Change: Yields have moved higher.

Speaker Change: So kind of what the cost of capital is today.

Jeff: Thanks for taking the questions. Maybe just starting off with the longer term, you know, three-year earnings growth outlook, can you kind of give us a sense? I don't know if you think about it in that context, but, you know, you mentioned how portfolio yields have moved higher. You gave us an indication of kind of what the cost of capital is today, sort of what you are baking into your medium to longer-term, maybe the tail end of that forecast in terms of where you think yields kind of settle out and then where also you think cost of capital and then, obviously, spreads could ultimately sort of settle So thanks for the question, Brian. I would say in our base case, we primarily use the forward curve rather than making any of our own predictions related to rates.

Sort of what are you baking into your sort of medium to longer term.

Speaker Change: Thank you Joanne.

Speaker Change: Forecast in terms of where you think yields kind of settle out.

Speaker Change: We're also taking cost of capital.

Speaker Change: Spreads could ultimately sort of settled in that quarter.

That's right.

Joanne: So thanks for the question, Brian I would say in our base case, we primarily used the forward curve, rather than making any of our own predictions related to rates and from a credit spread perspective, we're using credit spreads on both the investment side.

Joanne: And the debt side fairly similar to where they are today and projecting that forward with obviously some range on that as we build out the.

Jeff: And from a credit spread perspective, we're using credit spreads on both the investment side and the debt side, fairly similar to where they are today and projecting that forward. You know, with obviously some range on that as we build out the guidance, and that's in part why guidance has some range to it. But I would say, as our general baseline, those are the numbers we're using for rates and credit spreads. Okay, fair enough. I guess my question was more around, you know, it sounds like there's some opportunistic, um... I know there's been some segment makeshift, namely more FTN versus historical.

Joanne: The guidance and that's in part why guidance has some range to it but I would say is our general baseline those are the numbers, we're using for rates and credit spreads.

Joanne: Okay.

Joanne: My question was more around your it sounds like Theres some opportunistic.

Joanne: Assets and I know theres been some segment mix shift.

Joanne: Nathan.

Versus historical like is there opportunity in that three year horizon to kind of drive portfolio yields higher.

Jeff: Is there opportunity in that three-year horizon to kind of drive portfolio yields higher and hence earn kind of a higher return spread from that vantage point? I guess that was sort of the angle I was taking with that question, just given the makeshift nature and potential for, I guess, refinancing at the same time. Sure. And I think I did, and I'll just reiterate what I said in my prepared remarks. I think I did say there was upside to guidance, and it's mostly around, you know, debt costs could be lower than we forecasted, especially if we get that second investment grade rating. Volumes could be higher, particularly if we go into some new markets that are not necessarily in our base plan, but that we're thinking about.

Joanne: A lot of.

Joanne: Higher.

Joanne: We all return spread from from that vantage point, I guess that sort of market.

Speaker Change: The angle I was let's take your questions.

Speaker Change: Mix shifts.

Speaker Change: I guess refinancing at the same time.

Speaker Change: Sure and I think I did and I'll just reiterate what I said in my prepared remarks, I think I did say, there's upside the guidance and it's mostly around you know that cost could be lower than we forecasted, especially if we get that second investment grade rating.

Speaker Change: <unk> could be higher, particularly if we go into some new markets that are.

Speaker Change: Not necessarily into our base plan, but that we're thinking about and then the third one identified was that the return on at the individual investment level could be higher than we forecasted which I think is is the one that's responsive to your question. So yes. There is an opportunity for yields over the next three years are to be a bit wider than we forecasted and that would be an upside to.

Jeff: And then the third one I identified was that the return on the individual investment level could be higher than we forecasted, which I think is the one that's responsive to your question. So yes, there is an opportunity for yields over the next three years to be a bit wider than we forecasted, and that would be an upside to our. Okay, fair enough. And then maybe one more question for me, and I'll pass it along. There's been a lot written in the press about some of the challenges in the residential solar segment in the U.S., and I know you have some hot exposure there.

Speaker Change: Guidance.

Speaker Change: Okay Fair enough and then maybe one more question for me I'll pass it along.

Speaker Change: It's been a lot made in.

Speaker Change: Less about some of the challenges in the residential solar.

Speaker Change: And I know you have some exposure there.

Jeff: Can you remind us kind of, as you head into 24, where that mix lies in your portfolio, and what you're embedding in kind of the near-term view as to additional growth there? And then, with some of these publicized bankruptcies and developers having some challenges in the marketplace, how are you sort of navigating that credit risk? What's embedded in the kind of your portfolio exposure, if you will? Thank you. Sure, and maybe what I'll do, Brian, is I'll start out, and Mark and Susan may add to my answer as well.

Speaker Change: Can you remind us kind of.

Speaker Change: As you head into 'twenty, or where you know that in the slides in your portfolio.

Speaker Change: Near term.

Speaker Change: Sure.

Speaker Change: Additional growth.

Speaker Change: With some of these.

Speaker Change: Publicized bankruptcy.

Speaker Change: Developers, having some challenges in the marketplace. How long are you sort of navigate that credit risk with Switzerland.

Speaker Change: Sure.

Speaker Change: Portfolio exposure. Thank you.

Speaker Change: Sure and maybe what I'll do Brian is I'll start out and and Mark and Susan May add to my answer as well, but I would say as a baseline first of all that resi solar portfolio itself is performing very well and we are at the asset level and the homeowners continue to make payments on their leases and we are very <unk>.

Jeff: But I would say, as a baseline, first of all, that our ResiSolar portfolio is performing very well, and we are at the asset level, and the homeowners continue to make payments on their leases, and we are very comfortable with our exposure, and it is performing. I will say, obviously, some of the sponsors are going through some challenges, mostly related to cost structure and other business challenges at the corporate level, and we've been very supportive in working with them. We have been involved with SunPower over the past several weeks, getting various waivers in place, as they reported this morning. And we will remain a supportive partner.

Speaker Change: Well with our exposure.

And it is performing I will say, obviously some of the sponsors are going through some challenges mostly related to cost structure and other business challenges at the corporate level.

Speaker Change: And we've been very supportive working with them wherever they are involved with sunpower over the past several weeks getting various waivers in places they reported this morning.

Speaker Change: And we remain a supportive partner, we do think it will be an ongoing portion of our business, but a relatively modest portion of the business going forward given some of those challenges. So I do think we will lose certain transactions in 'twenty 'twenty four relates to resi solar very similar risk profile to what we've done in the past.

Jeff: We do think it will be an ongoing portion of our business, but a relatively modest portion of the business going forward given some of those challenges. So I do think we will close certain transactions in 2024 related to Resi Solar, very similar in risk profile to what we've done in the past. But if there's a bit of a slowdown there, as those companies do some restructuring and different things and maybe see lower demand, that won't have a meaningful impact on our business, and it really won't affect what we've put out there in terms of guidance. I think, Jeff, you covered that well. Just two additional details. All of our investments, whether it is within ResiSolar or other asset classes, are structured to have some level of replaceability of the operator. And so that is how that is the primary means by which our risk is really isolated at the asset level.

Speaker Change: But if there's a bit of a slowdown there as those.

Speaker Change: Companies do some restructuring and different things and maybe see lower demand that will have a meaningful impact on our business and it really won't affect our what we've put out there in terms of guidance.

Speaker Change: I think Jeff you covered that well just to.

Speaker Change: Additional details all of our investments whether it is within resi solar or other asset classes are structured.

Speaker Change: To have some level of repeat replace ability of the operator.

Speaker Change: And so that is how that as the primary means by which our risk is really isolated at the asset level.

Mark: The other, and I think Jeff covered the portfolio exposure already, in terms of the pipeline, it's really just not a material part of our pipeline. However, as Jeff mentioned, we do anticipate it will continue to be a part of our go-forward business on a new closings basis. But as you look at the expansion and diversification of our business across multiple different asset classes, it has shrunk in terms of its pipeline exposure. Okay, great. I appreciate all the color.

Speaker Change: The other and I think Jeff covered the portfolio exposure already in terms of the pipeline. It's really just not a material part of our pipeline as Jeff as Jeff mentioned, we do anticipate it will continue to be a part of our go forward business on a new closings basis.

Speaker Change: But as you look at the expansion and diversification of our business across multiple different asset classes.

Speaker Change: It has shrunk in terms of its pipeline exposure for us.

Okay, Great I appreciate all the color I'll pass it on thank you.

Brian Lee: I'll pass it on. Thank you. Thanks, Brian. Our next question is from Chris Cuther with B. Reilly Securities. Please proceed with your question. Hey guys.

Speaker Change: Thanks, Brian.

Speaker Change: Our next question is from Chris Souther with B Riley Securities. Please proceed with your question.

Chris Souther: Hey, guys. Thanks for taking my questions.

Chris Cuther: Thanks for taking my questions. Maybe you could just break down some of the assumptions around the growth components here, going from 24 to 26, within the guidance between distributable and NI, and some of the episodic pieces. I know in the past, you've kind of given a little bit more granularity there, but just curious how we should be thinking about, you know, from those two components. Sure. Thanks, Chris.

Chris Souther: Maybe you could just make some assumptions around the growth component here going from 24 to 26.

Within the guided between distributor will add.

Chris Souther: And some of the episodic P C.

Chris Souther: Although in the past you've kind of given a little bit more granularity there, but just curious how we should be thinking about.

Speaker Change: Yes from those two components standpoint.

Speaker Change: Sure Thanks, Chris So.

Mark: So, I think the primary area to focus on when trying to think about our business as either NII or gain-on-sale as it relates to guidance is that we do not need to see any incremental growth in gain-on-sale to achieve guidance. So, we'll, of course, continue to work to maximize that, to the best we can, but it is not baked into government. Got it. That's great to hear.

Speaker Change: So I think the the primary area to focus on when trying to think about our business is either NII or gain on sale as it relates to guidance.

Chris Souther: Is that we do not need to see any incremental growth in gain on sale to achieve guidance, but will of course continue to work to maximize that.

Chris Souther: To the best we can.

Chris Souther: But it is not baked into guidance.

Speaker Change: Okay, that's great to hear.

Mark: And then maybe just for housekeeping, can you talk about the gap income from equity method investments there? That was, you know, a lot higher than it's ever been. So I'm just kind of curious.

Speaker Change: And then maybe just a housekeeping can you talk about the GAAP income from equity method investments there that was a lot higher than it's ever been so I'm just kind of curious.

Speaker Change: If you could if you could walk us through that piece.

Speaker Change: Sure. So the primary driver for that.

Chris Cuther: If you could walk us through that, Sure. So the primary driver for that is the HLBV pass through from some of our solar projects that generally happens at the initiation of an investment primarily related to the tax credits coming to, Okay. I'll hop in the queue.

Speaker Change: It is the H L. B V pass through from some of our solar projects that generally happens at initiation of an investment primarily related to.

Speaker Change: The the tax credits coming through.

Speaker Change: Okay.

Speaker Change: I'll hop in the queue. Thanks, guys.

Noah Kaye: Thanks, Chris. Thank you. Our next question is from Noah Kaye at Oppenheimer and Company. Please proceed with your question. Yeah, thanks for taking the questions.

Speaker Change: Thanks, Chris Thank you.

Speaker Change: Yeah.

Speaker Change: Our next question is from Noah Kaye Oppenheimer and company. Please proceed with your question, yes, thanks for taking the questions.

Susan Nickey: You know, I think if we had looked back at the start of 2023 and looked to where 2023 ended, we would have been surprised that fuels, transport, and nature were 30% of the origination mix. You know, clearly you're giving some information on the pipeline mix, as always, but talk to us about the incremental growers this year. Where are you bullish by asset class? And, you know, what, if I think back to your Investor Day presentation, are some watch items in terms of, you know, either new asset classes or maturing asset classes where you expect more participation? Hey, thanks Noah. This is Susan Nickey.

Speaker Change: You know I think.

Speaker Change: If we look back to the start of 2023.

Speaker Change: And look to where 2023 ended we would've been surprised that fuels transport nature was 30% of the origination mix.

Speaker Change: Clearly, you're giving some information on the pipeline mix as always but talk to us about the intimate the incremental growers. This year, where are you bullish by asset class and you know what if I think back to your Investor Day presentation are some watch items in terms of either new.

Speaker Change: Asset classes are maturing asset classes, where you expect more participation.

Speaker Change: Hey, Thanks, No. This is Susan Nicky.

Susan Nicky: I think as we talked about in our Investor day.

Susan Nickey: As we talked about in our investor day presentation, we're very client-centric. And not only with our existing clients, but as we add new clients and sectors, we look for the leading strategic and industrial companies that will do not only the first transaction but programmatic repeats of transactions in existing asset classes but also as they themselves expand into new sectors. I see that's what you see represented as we look going forward. As we look at the pipeline, that follows from a top-down approach of looking at where our clients are forecasting their growth and then how we fit into that capital stack in their projects. So we have a diversified base and are seeing strong demand for energy, as well as for fuel, as companies and states want to continue to see growth in demand but also in decarbonization. And no, I'd add one thing to Susan's answer.

Susan Nicky: Presentation, we're very client centric focus and it not only with our existing clients as we add new clients in sectors, we look for.

Susan Nicky: The leading strict strategic and industrial companies that will do not only the first transaction, but programmatic re pizza have transactions in existing asset classes, but also as they themselves expand into new sectors I see that's what you see represented as we look going forward.

Susan Nicky: As we look at the in the pipeline that follows from the top down approach of looking at where our clients are forecasting their growth and then how we fit into that capital stack in their projects. So we have a diversified base and are seeing strong demand and energy and as well as fuel as as companies and stay.

Susan Nicky: Just want to continue to see growth in and in demand, but also in decarbonization.

Speaker Change: And I'd add one thing to Susan's answer and looking at page seven we hopefully have the deck with you there.

Jeff: And looking at page seven, we hopefully have the deck with you there. Our cadence is such that we have different leading asset classes in subsequent years. And I actually don't think we ourselves would necessarily have, in your hypothetical, predicted that FTN would have been 30% community solar 18%. You know, the pace of Closings, we obviously know our pipeline very well, but the pace of closings is outside of our control. And therefore, that short-term prediction of what's going to hit in 24 can be a little difficult, but think of our pipeline as more than two times what we need to be successful. And therefore, it gives us the confidence that enough will hit so that we will meet our target. Thanks, Jeff and Susan. It's slightly around clarifying the cadence of distributable EPS.

Our cadence is such that we have different leading <unk>.

Speaker Change: Asset classes and in subsequent years and.

Speaker Change: I actually don't think we ourselves would have necessarily in your hypothetical if we dialed back to the beginning of 'twenty three.

Speaker Change: Predicted that MTN would've been 30% community solar 18% you know the pace of.

Speaker Change: Closings you know, we obviously know our pipeline very well, but the pace of closings is outside of our control.

Speaker Change: And therefore that short term prediction of what's going to hit it.

Speaker Change: In 24 can be a little difficult, but think of our pipeline is more than two times, what we need to be successful and therefore, it gives us the confidence that enough. We'll hit that that we will we will meet our guidance.

Speaker Change: Okay.

Speaker Change: Thanks Jefferson.

Speaker Change: This is.

Speaker Change: Lately around clarifying the cadence of distributable EPS, if I look at the dividend guidance for this year of 166, and if we just took the midpoint.

Noah Kaye: If I look at the dividend guidance for this year of 166, you know, if we just took the midpoint of the Payout Ratio Guidance, Distributable to the U.S. for 2024, a fair bit north of the prior midpoint. And so, without putting too much of a fine point on it and understanding EPS can be lumpy, should we think about a potentially higher growth rate in 24 versus 8 to 10 Based off of your Pipeline and Funding Visibility. No, I don't think so. It certainly could turn out that way, but that's not the way I would propose you think about it.

Speaker Change: The.

Speaker Change: Payout ratio guidance it would imply.

Speaker Change: Distributable, yes for 2020 for a fair bit north of the prior midpoint.

Speaker Change: And so without putting too much of a fine point on it understanding EPS can be lumpy.

Speaker Change: Ah shall we think about it potentially higher great growth rate are in 24 versus the 8% to 10%.

Speaker Change: Based off of your.

Speaker Change: And funding visibility.

Speaker Change: No I don't think so it certainly could turn out that way, but that's not the way I would.

Speaker Change: Proposed do you think about it.

Jeff: I do think if we stick somewhere near the midpoint of the guidance over the next three years and have dividend increases that I can't quite, you know, articulate right now publicly, of course, but something in terms of future dividend increases, you would, the math would be that you would end up in that 60 to 70%, you know, through 24, 5. So I think that's the math on how the... Go ahead, Mark, sorry. Sure, no worries.

Speaker Change: I do think if we stick somewhere near the midpoint of the guidance over the next three years.

Speaker Change: Have a dividend increases that I can't quite.

Speaker Change: Articulate right now publicly of course, but something in.

Speaker Change: In terms of future dividend increases you would the math would be that you would end up in that 60% to 70% through 'twenty four five and six so I think thats the math on how that was built.

Speaker Change: You mentioned that bad.

Mark: Go ahead, Mark sorry.

Mark: Sure No worries you mentioned midpoint of payout I would think of it more as a midpoint of EPS with payout fluctuating to achieve.

Mark: You mentioned the midpoint of payout. I would think of it more as a midpoint of EPS with payout fluctuating to achieve the guidelines that Jeff already laid out. Yep, yep. So that would argue for a little bit higher payout in 2024. Last sort of housekeeping questions.

Mark: The guidelines that Jeff already laid out.

Speaker Change: Yep Yep, so that would argue for a little bit higher payout in 'twenty four.

Speaker Change: Last sort of housekeeping questions I, you know look like portfolio cash inflows all in where we're down slightly year over year primary delta or one of them seem to be collections from the equity method affiliates. So just trying to understand the timing on that is there.

Noah Kaye: You know, portfolio cash inflows all in were down slightly year over year. The primary delta, or one of them seemed to be collections from the equity method affiliates. So just trying to understand the timing on that. Is there a catch up in 2024? Any color there would be helpful.

Speaker Change: Is there a catch up in 2020 for any color there would be helpful.

Mark: Sure. So just as a for some context, the total portfolio collection was higher and around 500 million. And that is relative to an average portfolio of 5.3 billion, which is roughly a 10% cash yield. And that has been somewhat consistent over time. The two primary drivers that you mentioned, as we discussed before, for new transactions, the cash expectation during the tax equity window is a little bit lower, and then it flips to be higher thereafter.

Speaker Change: Sure. So just as a for some context, the total portfolio collections was higher and around $500 million and that is relative to an average portfolio of $5 3 billion, which is roughly a 10% cash yield and that has been somewhat.

Speaker Change: Consistent overtime.

Speaker Change: The two primary drivers that you mentioned as we've discussed before.

Speaker Change: New transaction for new transaction, the cashback expectation during the tax equity window is a little bit lower and then it flips to be higher thereafter, and given the substantial growth in the portfolio that dynamics on display here.

Mark: And given the substantial growth in the portfolio, that dynamic is on display here. The other dynamic, which we've actually talked about a few times throughout the course of the year, and you might have seen in some other asset owners, is wind performance. So, in 2023, we saw poor wind performance. It was a P99 year, which means we would not expect it to continue.

The other dynamic, which we've actually talked about that a few times throughout the course of the year and you might have seen in some other asset owners is wind performance. So in 2023 wind we've seen poor wind performance. It was a P 99 year, which means we would not expect it to continue and.

Mark: And additionally, given our preference, we expect it to, as you already identified, a delay in distribution and not a lot. So, yes, we do see a line of sight into those starting to catch up, and we've already reflected any updates into our guidance and portfolio yields. I just want to make sure we're not talking past each other on guidance, and there's good understanding. So to get more specific on your math question a moment ago, if we hit the midpoint of our guidance in 2024, that would be 9% growth, which would be 243. If I divide the 166 dividend by 243, I get 68%, which is right in that 60 to 70% range. So yep, hopefully that hopefully holds together. I just want to make sure we're not talking past each other. Yeah, absolutely. It's at the higher end of the payout, but that makes perfect sense.

Speaker Change: Additionally, given our preference we expected says you are already identified a delay of distributions and not a loss.

Speaker Change: So yes, we do see line of sight into those.

Speaker Change: Into those starting to catch up and we've already reflected.

Any updates into our guidance and portfolio yield.

Speaker Change: Very helpful.

Speaker Change: Alright.

Speaker Change: I just want to make sure we're not talking past each other on guidance and there's a good understanding so.

Speaker Change: To get more specific on your math question, a moment ago, if we hit the midpoint of our guidance in 2024.

Speaker Change: That would be 9% growth, which would be $2 43.

Speaker Change: If I divide the 166 dividend by 243, I get 68%, which is right in that 60% to 70% range. So.

Speaker Change: Hopefully that moves I hope that holds together I just want to make sure we're not talking past each other.

Speaker Change: Absolutely.

Speaker Change: Higher end of the payout, but that that makes perfect sense. Thanks Chuck.

Jeff: Thanks, Jack. Our next question is from Davis Sunderland with Baird. Please proceed with your question. Hey guys, thanks for taking my question. Brian and Noah kind of already asked in a different roundabout way, so I don't mean to beat a dead horse here, but I guess maybe I should ask from the perspective of willingness to assume risk or risk appetite. Has the higher rate environment had any impact on? Appetite for risk in any particular asset class and I guess just asking a bit more about maybe yields have become too attractive to ignore for anyone in particular or any details there would be helpful. I think, as a general matter, we've not changed our risk appetite. I think our underwriting has been very consistent. I think the higher yields, as I think we said in the prepared remarks, are mostly the market adapting to higher rates. Some economics at the project level, some credit spread dynamics in the market.

Speaker Change: Okay.

Speaker Change: Our next question is from David Sunderland with Baird. Please proceed with your question.

David Sunderland: Hey, guys. Thanks for taking my question.

David Sunderland:

David Sunderland: Brian and know what kind of already asked in a different roundabout way. So I don't mean to beat a dead horse here, but I guess, maybe asking from the perspective of willingness to assume risk or risk appetite has the higher rate environment had any impact on.

David Sunderland: Appetite for risk in any particular asset class and I guess, just asking a bit more about maybe have yields become too attractive to ignore for anyone in particular or.

David Sunderland: Any details there would be helpful.

I think as a general matter, we've not changed our risk appetite I think our underwriting has been very consistent I think the higher yields as I think we said in the prepared remarks are mostly the market adapting to higher rates.

David Sunderland: The economics at the project level, some credit spread dynamics in the market but.

Jeff: But I think we've fundamentally kept a very stable risk profile that we're very comfortable with and results in an enormous amount of opportunity, so we haven't really felt the need to change the risk profile when we found these higher-yielding investments and this ongoing margin expansion available to us without changing our risk parameters. Perfect. That's all for me. Thanks, guys. Thank you. Ladies and gentlemen, thank you for your participation. This does conclude today's conference call. You may disconnect your lines and have a wonderful day. Thank you.

David Sunderland: But I think we fundamentally kept a very stable risk profile that we're very comfortable with it.

David Sunderland: And results in an enormous amount of opportunity. So we haven't really felt the need to.

David Sunderland: To change the risk profile, we've found these higher yielding investments.

David Sunderland: And this ongoing margin expansion available to us without changing our risk parameters.

Speaker Change: Perfect. That's all from me thanks, guys.

Speaker Change: Thank you. Thank you.

Speaker Change: Ladies and gentlemen, thank you for your participation.

Speaker Change: This does conclude today's conference call you may disconnect your lines and have a wonderful day.

Speaker Change: Thank you.

Speaker Change: Yeah.