PennantPark Floating Rate Capital Limited (PFLT) CEO Art Penn on Q2 2021 Results - Earnings Call Transcript
PennantPark Floating Rate Capital Limited (NYSE:PFLT) Q2 2021 Earnings Conference Call May 6, 2021 9:00 AM ET
Company Participants
Art Penn - Chairman and Chief Executive Officer
Aviv Efrat - Chief Financial Officer
Conference Call Participants
Mickey Schleien - Ladenburg
Paul Johnson - KBW
Devin Ryan - JMP Securities
Operator
Good morning and welcome to the PennantPark Floating Rate Capital's Second Fiscal Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, all participants have been placed in a listen-only mode. The call will be open for question-and-answer session, following the speakers' remarks. [Operator Instructions]
It is now my pleasure to turn the call over to Mr. Art Penn, Chairman and Chief Executive Officer at PennantPark Floating Rate Capital. Mr. Penn, you may begin your conference.
Art Penn
Thank you. And good morning, everyone. I'd like to welcome you to PennantPark Floating Rate Capital's second fiscal quarter 2021 earnings conference call. I'm joined today by Aviv Efrat, our Chief Financial Officer.
Aviv, please start off by disclosing some general conference call information and include a discussion about forward-looking statements.
Aviv Efrat
Thank you, Art. I'd like to remind everyone that today's call is being recorded. Please note, that this call is a property of PennantPark Floating Rate Capital and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone numbers and pin provided in our earnings press release, as well as on our website.
I'd also like to call your attention to the customary Safe Harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statement and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these projections. We do not undertake to update our forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at pennantpark.com or call us at 212-905-1000.
At this time, I'd like to turn the call back to our Chairman and Chief Executive Officer, Art Penn.
Art Penn
Thanks, Aviv. I'm going to spend a few minutes discussing how we fared in the quarter ended March 31st. How the portfolio is positioned for the upcoming quarters, our capital structure and liquidity, the financials, then open it up for Q&A.
We are pleased with our performance this past quarter. We achieved another substantial increase in NAV during the quarter. Adjusted NAV increased 2.3% from $12.32 to $12.60 as our portfolio continue to improve. We have several portfolio companies in which our equity co-investments have materially appreciated in value as they are benefiting from the economic recovery. This is solidifying and bolstering our NAV. Over time, rotation of that equity into debt instruments should help grow PFLT's income. We will highlight those companies in a few minutes.
As part of our business model, alongside the debt investments we make, we selectively choose to co-invest in the equity side by side with a financial sponsor. Our returns on these equity co-investments have been excellent over time. Overall for our platform from inception through March 31st, our $226 million of equity co-invests have generated an IRR of 28% and a multiple on invested capital of 2.9 times. In a world where investors may want to understand differentiation among middle market lenders, our long-term returns on our equity co-investment program are a clear differentiator.
As a result of the completion of the CLO financing at PSSL last quarter, we can efficiently grow the joint venture, which generate additional income for PFLT. PSSL's assets grew by $103 million during the quarter ended March 31. And as capacity for an additional approximately $100 million of assets over time. This growth can be a substantial driver of NII.
The combination of potential income growth from equity rotation, a larger and more efficiently financed PSSL, and a growing more optimized PFLT balance sheet should help grow the company's net investment income relative to the dividend over time. Those factors combined with strong portfolio performance through COVID and our $0.22 spillover as of September 30th have led us to conclude that we will be keeping our dividend steady at this point.
We are also pleased that we diversified our financing sources this past quarter with the issuance of $100 million, a 4.25% five-year senior notes to institutional investors in late March. Although we never predicted a global pandemic, as you may know, we have been preparing for an eventual recession for some time. Prior to the COVID-19 crisis, we proactively positioned the portfolio as defensively as possible. Since inception, we've had a portfolio that was among the lowest risk in the direct lending industry.
As of March 31st, average debt to EBITDA on the portfolio was 4.2 times and the average interest coverage ratio, the amount by which cash income exceeds cash interest expense was 3 times. This provides significant cushion to support stable investment income. These statistics are among the most conservative in the direct lending industry.
We have only 2 non-accruals out of a 104 different names in PFLT and PSSL. This represents only 3.1% of the portfolio at cost, and 2.3% at market value. We have largely avoided some of the sectors that have been hurt the most by the pandemic, such as retail, restaurants, health clubs, apparel and airlines. PFLT also has no exposure to oil and gas. The portfolio is highly diversified with 100 companies and 41 different industries.
Our credit quality since inception over nine years ago, has been excellent. Out of 381 companies in which we have invested since inception, we've experienced only 13 non-accruals. Since inception, PFLT has invested over $3.9 billion at an average yield of 8.1%. This compares to a loss ratio of only 8 basis points annually.
We're one of the few middle market direct lenders who was in business prior to the global financial crisis, and have a strong underwriting track record during that time. Although PFLT was not in existence back then, PennantPark as an organization was investing at that time. During that recession, the weighted average EBITDA of our underlying portfolio companies declined by 7.2% at the bottom of the recession.
This compares to the average EBITDA decline of the Bloomberg North American high yield index of 42%. We're proud of this downside case track record in the prior recession. Based on tracking EBITDA of our underlying companies through COVID so far, we believe that our EBITDA decline will be substantially less than it was during the global financial crisis.
Many of our portfolio companies are an industry such as government services, defense, healthcare, technology, software, business services and select consumer companies that are less impacted by COVID. And where we have meaningful domain expertise. We believe that we are experiencing an economic recovery with some companies and industries being beneficiaries of the environment. We are pleased that we have significant equity investments in three of these companies, which can substantially move the needle in both NAV and over time net investment income.
I'd like to highlight those three companies. They are, Cano, Walker Edison and By Light. Cano Health is a national leader in primary healthcare, who's leading the way in transforming healthcare to provide high quality care at a reasonable cost to a large population. Our equity position has a cost and fair market value on March 31st, a $431,000 and $9.1 million, respectively. We believe there's a massive market opportunity for Cano to grow in the years ahead with a Medicare Advantage program.
The merger with Jaws Acquisition is currently scheduled to close in June. At that time, we will receive another $800,000 of cash and own 825,274 shares of Cano Health in a limited partnership controlled by financial sponsor where the sponsor will earn 20% of the exit proceeds. The shares will be locked up for six months. From a valuation perspective due to the lockup, the independent valuation firm valued the position with a 6% illiquidity discount to the traded value on March 31st.
Walker Edison is leading e-commerce platform focused on selling furniture exclusively online through top e-commerce companies. As of March 31st, our equity position had a cost of $1.4 million and a fair market value of $12.1 million. Shortly after quarter end, the company executed a refinancing and dividend recap, which resulted in shareholders receiving approximately two times their costs, while maintaining the same ownership percentage in the company. This resulted in PFLT receiving a $2.8 million cash payment on its equity position.
By Light is a leading software, hardware and engineering solutions company focused on national security challenges across modeling and simulation, cyber and global defense networks. Our position has a cost of $2.2 million and a fair market value of $11.8 million as of March 31st.
All three of these companies are gaining financial momentum in this environment. And our NAV should be solidified and bolstered from these substantial equity investments as their momentum continues. Over time, we would expect to exit these positions and rotate those proceeds into debt instruments to increase income at PFLT.
The outlook for new loans is attractive. We are focused on the core middle market, which we generally define as companies with between $10 million and $50 million of EBITDA. We like the core middle market, because it is below the threshold and it does not compete with a broadly syndicated loan or high yield markets. As such, we do not compete with markets where leverage is higher, equity cushion lower, covenants are light, wide or non-existence, information rates are fewer, EBITDA adjustments are higher and less diligence. And the timeframe for making an investment decision is compressed.
On the other hand, where we focus in the core middle market, because we're not competing with a broadly syndicated loan or high yield markets, generally our capital is more important to the borrower. As such, leverage is lower, equity cushion higher. We have quarterly maintenance covenants, which are real, we receive monthly financial statements to be on top of the companies. If there are EBITDA adjustments, there are more diligence than achievable and we typically have six to eight weeks to make thoughtful and careful investment decisions.
According to S&P, loans to companies with less than $50 million of EBITDA have a lower default rate and a higher recovery rate than those loans to companies with higher EBITDA. We also believe that middle market lending is a vintage business. This upcoming vintage of loans is likely to be the most attractive we've seen since the 2009 to 2012 time period, which was the time period after the global financial crisis. This vintage is characterized by leverage levels that are lower, equity cushion higher, yields are higher and the package of protections including covenants are tighter. After and during about five years of a late cycle market for middle market lending, it is refreshing to have an attractive risk reward available to us.
Let me now turn the call over to Aviv, our CFO to take us through the financial results in more detail.
Aviv Efrat
Thank you, Art. For the quarter ended March 31st, net investment income was $0.26 per share. Looking at some of the expense categories. Management fee is totaled about $3.9 million, taxes, general and administrative expenses totaled about $800,000 and interest expense total about $4.8 million.
During the quarter ended March 31st, net unrealized appreciation on investments was about $12 million or $0.29 per share. Net realized gains were about $500,000 or $0.01 per share. Net unrealized depreciation on our credit facility at notes was $0.27 per share. Net investment income was lower than the dividend by $0.02 per share. Consequently, GAAP NAV went from $12.70 to $12.71 per share. Adjusted NAV, excluding the mark-to-market of our liabilities was $12.60 per share, up 2.3% from to $12.32 per share.
Our entire portfolio, our credit facility and notes, our mark-to-market by our Board of Directors each quarter using the exit price provided by an independent valuation firm exchanges or independent broker dealer quotations when active markets are available under ASC 820 and 825. In cases where a broker dealer quotes are inactive, we use independent valuation firms to value the investments. Our spillover as of September 30th was $0.22 per share.
We have ample liquidity and are prudently levered. Our GAAP debt to equity ratio was 1.2 times, while GAAP net debt to equity after subtracting cash was 1.1 times. The regulatory debt to equity ratio was 1.3 times and our regulatory net debt to equity ratio after subtracting cash was 1.2 times. With regard to leverage, we have been targeting a debt-to-equity range of up to 1.5 times.
We had ample liquidity to fund revolver draws and we're in compliance with all of our facilities at March 31st. We have readily available borrowing capacity and cash liquidity to support our commitments. We have a strong capital structure with diversified funding source and no near-term maturities. We have $400 million revolving credit facility maturing in 2023 with a syndicate of 11 banks and with $147 million drawn as of March 31st. a $118 million of unsecured senior notes maturing in 2023, $228 million of asset backed debt associated with PennantPark CLO I due 2031 and our newly issued $100 million of unsecured senior notes maturing in 2026.
Our portfolio remains highly diversified with 100 companies across 41 different industries. 86% is invested in first lien senior secured debt, including 12% in PSSL. 3% in second lien debt, and 11% in equity, including a 4% in PSSL. Our overall debt portfolio has a weighted average yield of 7.6%. 98% of the portfolio is floating rate and 84% of the portfolio has a LIBOR floor. The average LIBOR floor is 1%.
Now, let me turn the call back to Art.
Art Penn
Thanks, Aviv. To conclude, we want to reiterate our mission. Our goals are steady, stable and protected dividend stream coupled with the preservation of capital. Everything we do is aligned to that goal. We try to find less risky middle market companies that have high free cash flow conversion. We capture that free cash flow primarily in first lien senior secured instruments and we pay out those contractual cash flows in the form of dividends to our shareholders. In closing, I'd like to thank our extremely talented team of professionals for their commitment and dedication. Thank you all for your time today and for your investment and confidence in us.
That concludes our remarks. At this time, I'd like to open up the call to questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from Mickey - Schleien with Ladenburg. Please go ahead. Your line is open.
Mickey Schleien
Good morning, Art and Aviv. Hope you're well.
Art Penn
Good morning.
Mickey Schleien
Art mentioned the advantages of structures in the middle market versus the broader loan market. And I you know completely agree. And obviously the broader loan market is very frothy at the moment. Are you seeing that frothiness starting to trickle down into the middle market? And how is that affecting your ability to close deals?
Art Penn
It's a great question, Mickey. Look it's, the mark has been remarkable in terms of how it's bounced back. Certainly we've seen it in the broadly syndicated loan and high yield market and how it's related to the upper middle market, which we call the upper middle market above $50 million of EBITDA. We're not, you know, we're not quite back to where we were pre-COVID yet in the below $50 million of EBITDA zone. But certainly, if the economy continues to recover, at some point in the not-too-distant future, you know, we'll be back to where it was pre-COVID.
Which, you know, so look we think number one, the vintage right now is good, you know, we should be capturing the vintage, the best we can, you know, with high quality companies, good structures and taking advantage of 2021.
To the extent, the market continues to rebound, you know, to some extent, it's back to the future, you know, we need to continue to be very diligent and careful about what we invest in, as you know, with PFLT, we've always had a very defensive mindset, you know, kept the leverage levels low and reasonable, been willing to prioritize capital preservation over yield, which has been a good thing for PFLT and PFLT's shareholders over time and where PFLT is positioned is kind of, we want to be among the lowest risk BDCs, willing to accept a lower reward. But you know, having us and our investors feel very strong - strongly about the capital preservation attributes.
One of the nice things we get in the below $50 million of EBITDA space is, we get these equity co-invests to the extent we want them, and, you know, tell us those are separate investment decisions, but those equity co-invests have been very helpful, you know, over time, you know, in terms of creating some additional return, helping filling the gaps for losses, et cetera.
So, you know, we only have an 8 basis point annualized loss ratio, part of that is due to, you know, the power of these equity co-invests. So we're not back to where we were yet. If things continue inevitably, we may be, let's capture the opportunity today, while we have the opportunity and then let's continue to, you know, have, you know, execute what has been a good track record you know, now nearly 10 years, you know, we're coming up on our 10-year anniversary here. So I don't know if I answered your question, Mickey, but please keep -
Mickey Schleien
That's fine and congrats on the 10-year anniversary. Art, how would you characterize then, given what you just said, the prepayment risk in the portfolio. You know, just again, considering that the broader markets' frothiness and how much call protection do you typically get in your deals?
Art Penn
Yeah, so look the market's active and that's good news and bad news, right. The bad news is, when the market's active, you know, high quality credits get taken out. Sometimes the companies are sold, sometimes they can't access the broadly syndicated loan market at a lower yield. That's the bad news. The good news is, we are getting paid - when we do get paid off, we say thank you and deal flow is heavy. So we can replace that and over time grow the portfolio, because there is so much activity and that's certainly the game plan here. Grow PSSL to the tune of about another $100 million. Grow PFLT on balance sheet you know over time up to the 1.5 times you know debt to equity, and then of course, rotate those equity investments.
So we've never had a difficult time ramping and still finding high quality deals that fit our box. It's because you know, we have such good relationships and calls have been around so long relative to you know, I'll call us we're medium-sized relative to our capital. The origination flow relative to our capital is usually very robust. So we've never had a challenged ramping over time. These deals do take longer you know, these are fully diligent, fully negotiated six-to-eight-week processes, where we negotiate covenants so it's not like we can turn around and flip on a switch and ramp overnight. But we are very active and do see an opportunity to grow the portfolio.
In terms of call protection as you know, typically we're buying these loans in $0.98 or $0.99 on the $1 original issue discount, which we do not account for is upfront fee. We amortized that original issue discount over the life of loan. Typically we'll get a $1.02 or $1.01 in the first couple of years. And the best part - the best call protection we can have for you know, the really good deals is those little equity co-invests which you know, continue to generate value, you know, even when, you know the debt is called out.
So that's and we've seen that with some of these wins like Cano. Cano were not in the debt anymore, the company refinanced this out of the debt in the broadly syndicated loan market but we have a very valuable equity co-invest. Walker Edison, we have a valuable co-invest. By Light we have valuable co-invest. So that's the way we have a tail and that's the way we continue to have upside, you know, on these deals.
Mickey Schleien
Okay, I understand. And one just last sort of housekeeping question for you or Aviv. Could you just highlight what were the main drivers of the unrealized depreciation on investments?
Aviv Efrat
Certainly -
Art Penn
Go head. Go ahead, Aviv, please.
Aviv Efrat
Yeah, certainly some of the large movers if you look at quarter-over-quarter you have DBI Holding improved about $0.09 per share quarter-over-quarter. The PSSL JV, you know, its mark-to-market, because it's a robust first lien portfolio and there was about $0.07 or so. And on the negative side is, Country Fresh, its mark-to-market went down about $0.09 quarter-over-quarter. So net-net kind of that you see the large movers.
Mickey Schleien
Thank you for that. Appreciate your time. Those are all my questions.
Art Penn
Thanks, Mickey.
Operator
We will now take our next question from Paul Johnson with KBW. Please go ahead.
Paul Johnson
Good morning, guys. Thanks for taking my questions. Kind of on the lines along Mickey's question with competition in the middle market. I'm curious and you talked to this a little bit, but just, I mean, have you guys seen you know, any pressure on covenants or LIBOR floors, you know, compared to I guess, sort of the pre-COVID vintage from any sort of competition as the market recovers?
Art Penn
Yeah. So on the covenants side, we've - we're getting tighter covenants that we did pre-COVID. So that's good for now. And again, we get these quarterly maintenance test and we get the monthly financial statements, which you know are a differentiator and are kind of below $50 million of EBITDA world. What was the second part of your question, Paul? Covenants and -
Paul Johnson
The LIBOR floors.
Art Penn
LIBOR floors, yeah. So you know, well there is a little bit of pressure, you know, in certain cases, you get pressure to push it down to 75 basis points from 100 basis points. So that all depends, that could be good news or bad news. It depends on your going in yield and your spread. I guess the good news about the lower floor is that, if you went LIBOR, it goes up, inevitably, it well, you know, we'll start capturing more upside sooner than if the LIBOR floor stays at a 100.
In certain cases, we've had LIBOR floors higher. We had a recent deal where lot of the LIBOR floor was 150. So it's deal-by-deals, it's kind of a dynamic you negotiate. And it's - it just depends on the particular deal on what the situation is. So we've seen it go both directions, the LIBOR floor in 90% plus of cases is still you know, 1%.
Paul Johnson
Okay, thanks. That's good color. And then I guess, kind of along similar lines. I mean, do you guys see any difference you know, for those same reasons, just competition growing maybe not so strong yet. And you're short of core middle market below $50 million EBITDA. But do you see any pressure at all that, you know, would make you view the difference I guess, an opportunity set between, you know, loans on the balance sheet versus, you know, investments in the JV?
Art Penn
No, I mean, it's still the same group of competitors. There's not like in our world, there's no like new people, new money that's, you know, has cash burning a hole in their pocket. And it's just kind of changing the risk reward spectrum. It's the same characters, same people we compete with some, one day we're competing with them, the next day we're in a club with them. So it's a - it's the - I call it the usual suspects. So generally, those usual suspects are relatively rational in how they're behaving. So we're not seeing any, you know, exogamous kind of movement.
Paul Johnson
Okay, thanks for that. And the last question, I guess, was just around the equity co-investments. I'm just kind of curious. I mean, obviously, you know, again, the markets you know getting more competitive. Have you seen any change in terms of your ability to receive equity co-investments, you know, from any of your portfolio companies? Has this changed at all as sponsors, I guess less willing to give equity at all or is it just really no change and kind of case-by-case basis?
Art Penn
Yeah, it is more case-by-case and with us, it's case-by-case too. We don't automatically always say we want the equity when we're doing the debt. For us it's a separate investment decision. So some cases we'll like the debt and we'll graciously decline the co-invest, even if it's offered. In other cases, we may fight hard to do more co-invest. So for us the equity co-investment is a separate investment decision, needs to stand on its own two feet as an investment decision.
And there's no, you know, difference in behavior. It's again, it's case-by-case idiosyncratic based on - the sponsor based on the deal. The deal dynamics and, you know, it's something that as we look over the last 14 years of our business, that by and large has worked out really well as we're looking at the opportunity set over 14 years now through the global financial crisis through COVID now, a 2.9 times multiple on invested capital, says in general, it's something that we think should be part of most of these portfolios.
Obviously, you could do some bad equity co-invest, you could do some really good equity co-invest so but by and large the good ones have way outperformed you know, the bad ones you get to the Canos or the By Lights or the Walker Edisons or you know, some of these, your, those can be very powerful, you know, add-ons to the portfolio. And by the way, you don't get those for the folks who are doing direct lending for with companies above $50 million of EBITDA or $100 million of EBITDA or whatever they're, that's generally not part of the mix. So that is a benefit you get in the kind of below $50 million of EBITDA you know, world that we traffic in.
Paul Johnson
Yeah. Okay. Thanks for that. And congratulations on the 10-year public anniversary.
Art Penn
Thanks, Paul.
Operator
We'll take now our next question from Devin Ryan from - with JMP Securities. Please go ahead.
Devin Ryan
Hey, great. Good morning, everyone. So first one, I guess just a follow-up on the last conversation. And these are just a couple of follow-ups. So on the equity co-invests given kind of your track record and you've experienced in the portfolio over you know more than a decade. Is now a time to lean in there. I appreciate it's opportunistic and idiosyncratic. But you as you've kind of looked back over the history, is your markets are strong right now and you know clearly a lot of momentum, same time valuations are high. So I'm just kind of curious how you guys are thinking about kind of the risk reward in that, and I know, on a general comment, but you know I'd love to get a bit more color there.
Art Penn
Yeah, that's a great question. And, you know we're typically not the type to say, you know either isn't the time it's kind of a bottoms up, you know, deal-by-deal approach, that we do have to obviously look at the economy and what's going on in the economy, of course, the economy is recovering quite nicely.
What drives our equity co-invest decisions and where we're a little bit more aggressive are either two facts. Fact A, the valuation is very attractive, the enterprise value to EBITDA is, you know, attractive relative to the comps or the peers or low relative to the cash flow that we think it's going to be generated.
So, you know, classic value investing. So if the value is very attractive, that will be something we'll prioritize and conversely or as an adjunct, and maybe this is, you know, having our cake and eat it too, when we see a very strong growth trajectory, that can be very attractive to us, you know, our typical - prototypical deals we're doing these days are where a sponsor identifies a sector, where they think growth is going to be high.
It's a fragmented industry, they can do that on acquisitions or their secular win behind it, and they buy a platform with $10 million or $15 million of EBITDA that they want to grow to $20 million, $30 million, $40 million, $50 million, $100 million of EBITDA either through add on acquisitions or just organic growth.
And, generally, you know, that fact pattern and our debt capital by the way is going to fuel that, right. So the capital commitment we're making is going to fuel that move from $10 million or $15 million of EBITDA to $50 million to $100 million. And therefore, we're - we have a front row seat on seeing the growth. And therefore they know we're fueling the growth with our debt, they're generally more than happy to share the equity co-invest with us. And that's kind of our prototypical deal these days, that's where that kind of fits our box perfectly.
That's you know, Cano, that's Walker Edison, that's By Light, that's over PNNT, that's Wheel Pros. You know, that's kind of where if you want to look at look at a prototypical PennantPark deal these days, and it's going to be an industry that we know and like that are high free cash flow industries where we can be, you know, among the smartest people in the room with a domain expertise, that's kind of our bread and butter.
So take it from $10 million or $15 million of EBITDA, have the debt fuel it to $40 million or $50 million or greater, ride the equity co-invest. And the equity co-invest can be nice upside, you know, Cano, the example as they took us out, they took the debt out with a broadly syndicated loan, but we still have a very attractive co-invest that we're riding.
You know, Walker Edison just did a dividend recap. We still have the equity there. So you know you can look at the deal-by-deal-by-deal as where we've had you know very nice, strong track records. So I know that really shed the light on how we look at equity co-invest and how we look at our business. But that's kind of what we're doing these days.
Devin Ryan
Yeah, no, it's great context. I appreciate it, Art. Just a follow-up here on the PSSL JV obviously, great growth there and compelling for shareholders. As you look ahead and think about that incremental $100 million or so of capacity, how should we think about, you know, timing, you know, and is it reasonable to think that yeah you could kind of get there over the next one or two quarters or any other context you give us would be helpful.
Art Penn
Yeah. I'd say probably two to three quarters on optimizing PSSL.
Devin Ryan
Okay, terrific. Thank you very much.
Art Penn
Thanks, Devin.
Operator
Thank you. And as there are no further questions in the queue, I would like to hand the call back over to Art Penn for any additional or closing remarks.
Art Penn
Thank you, everybody. Thanks for your time today. We really appreciate your interest. We wish you continued good health, hopefully as we come out of COVID. And looking forward to speaking to you all in early August on our next quarterly earnings call. Thank you very much.
Operator
Thank you. This concludes today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.
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