Landsea Homes Corporation (NASDAQ:LSEA) Q1 2024 Earnings Call Transcript

Landsea Homes Corporation (NASDAQ:LSEA) Q1 2024 Earnings Call Transcript May 1, 2024

Landsea Homes Corporation misses on earnings expectations. Reported EPS is $0.06 EPS, expectations were $0.13. Landsea Homes Corporation isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings, and welcome to the Landsea Homes Corporation First Quarter 2024 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Drew Mackintosh. Please go ahead.

Drew Mackintosh: Good morning, and welcome to Landsea first quarter of 2024 earnings call. Before the call begins, I would like to note that this call will include forward-looking statements within the meaning of the federal securities laws. Landsea Homes cautions that forward-looking statements are subject to numerous assumptions, risks and uncertainties, which range over time. These risks and uncertainties include, but are not limited to, the risk factors described by Landsea Homes in its filings with the Securities and Exchange Commission. We do not undertake any obligation to update forward-looking statements. Additionally, reconciliations of non-GAAP financial measures discussed on this call to the most comparable GAAP measures can be accessed through Landsea Homes website and in its SEC filings.

Hosting the call today are John Ho, Landsea’s Chief Executive Officer; Mike Forsum, President and Chief Operating Officer; and Chris Porter, Chief Financial Officer. With that, I’d like to turn the call over to John.

John Ho: Good morning, and thank you for joining us today as we go over our results for the first quarter of 2024, discuss current market conditions and provide an update on our outlook for the remainder of the year. Landsea Homes delivered strong top line growth of 22% in the first quarter, thanks to a 7% year-over-year increase in home closings and a 14% rise in average sales prices. Order activity during the quarter was also solid as we generated 612 orders at a sales pace of 3.3 homes per community bus. We continue to see strong interest for our new homes in our markets and look to capitalize on this demand through our well-located communities in our desirable high-performance home product line. The macro environment remains favorable, thanks to a resilient economy, strong job growth and low levels of existing home inventory.

Against this backdrop, we continue to pursue a strategy of targeting high-growth markets and rapidly achieving economies of scale at the local level. This strategy has proven successful in places like Arizona and Florida, and we look to achieve similar success in Texas and Colorado. Our Texas expansion goals got a big boost with the April 1 acquisition of Antares Homes, which provided us with 20 communities and over 2,100 lots in the Dallas-Fort Worth area. We are extremely excited about what this acquisition brings to our organization, not only from a land and loss perspective, but also from a talent and local market expertise standpoint. The team from Antares Homes shares our vision operationally as it relates to product and new home affordability as well as our values when it comes to quality home construction and customer service.

The integration is proceeding smoothly, and we expect to have Antares operations fully on board on our platform by the end of this month. In addition to the operational progress we made during the quarter, we also executed 2 capital markets transactions that added more stability to our balance sheet. First, we successfully placed another 2.8 million shares from our largest shareholder, Landsea Holdings Corporation with more traditional institutional investors. The transaction brought Landsea Holdings ownership to approximately 47% meaning Landsea Homes is no longer considered a controlled company under Astec listing standards. While we have always operated independently from our largest shareholder, we felt this was an important designation to achieve and believe it is in the best interest of all of our stakeholders to accrue a diverse and stable investor base.

The second transaction was our placement of $300 million in senior notes due in 2029 and an interest rate of 8 7/8ths. This was a significant achievement for our company as it allowed us to pay down a portion of the outstanding borrowings under our revolving credit facility and provide us with longer-term fixed rate capital to pursue our growth initiatives. Given the recent increase in interest rates since the deal closed, we felt fortunate to have place these notes when we did. One of our goals for the remainder of 2024 is to generate enough cash from operations to bring our net leverage down from current levels while continuing to invest in our homebuilding business. Over the last several quarters, we have made significant upfront investments in our operations, particularly in Texas and Colorado, and we’re beginning to see a return on those investments as well in close homes.

This shifting dynamic will bring more cash in the door as well improvement in cycle times, which lowers the capital tied up and work-in-process inventory. Higher cash balance will allow us to operate from a position of strength going forward that will give us the optionality to either reinvest in the business, pay down debt or return capital to shareholders. We ended the first quarter with 10% fewer shares outstanding as compared to the first quarter last year, a direct result of our share repurchase efforts over the last 12 months. We accomplished a lot in the first quarter, both from an operational and financial standpoint and feel we are in a great position to achieve our goals for 2024 and beyond. The new home market continues to benefit from a lack of existing home inventory and pent-up demand from buyers were motivated to own a home.

We have made great progress in positioning our company to take advantage of these favorable trends, both in terms of our geographic footprint and our product positioning. As a result, I believe Landsea Homes can build on the success we’ve already achieved and established our company as a top builder in each of our markets. Now I’d like to turn the call over to Mike, who will provide more color on our operational performance this quarter.

Mike Forsum: Thanks, John, and good morning to everyone. Landsea turned in a solid performance in the first quarter of 2024 as our teams did an excellent job selling and closing homes, culminating in a delivery total of 505 homes, which was higher than our stated guidance. Arizona led the way with 183 deliveries followed by Florida and California. As John mentioned, we should start to see higher delivery contributions from Colorado and Texas moving forward particularly with the addition of Antares in the Dallas-Fort Worth market. Our operations in Austin are also starting to gain momentum as several phases of new communities are now selling in earnest with a number of homes under construction and an open model complex. Net new orders were up 23% on a year-over-year basis for the quarter, resulting in a total of 612 home sales.

Aerial view of a residential neighborhood with manufactured homes and developed homesites.

Demand was broad-based across our homebuilding platform as buyers in each of our markets continue to favor our high-performance homes and the value proposition they provide. Financing incentives continue to be an important selling tool to our communities and the levels that we’ve needed to use to spur sales activity has mirrored the movements in the mortgage rates. We expect sales incentives to remain elevated as long as rates stay higher for longer. The availability of quick move-in homes continues to attract buyers, which is why we continue to operate with an elevated supply of spec homes. The new home market has filled the void created by the lack of existing homes for sale, and these buyers typically want to close on a home within 60 days.

Our goal is to start the homes while leaving enough lead time to allow for personalization and upgrades from the buyer. We are also being mindful of not letting too many homes reach completion without a buyer in a given community and we’ll adjust the pace of our starts accordingly. We are seeing better labor and material availability in each of our markets, which has resulted in better cycle times and improved inventory turns. This has alleviated some of the cost pressures we’ve experienced in the past, the land prices continue to rise. Some of this is a function of a tight land market but is also a result of land banking arrangements, which reduced the risk of upfront capital required to own and develop land, but comes at a cost. In general, we believe the benefits of a land-light strategy outweigh the cost, and we will continue to look for ways to tie up lots in a capital-efficient manner.

Overall, I would characterize the spring selling season is solid. Traffic and interest from buyers have been consistent throughout the spring, while the changes in interest rates have dictated the level of incentives we have had to offer. Our cancellation rate for the first quarter came in at 10% compared to 16% last year aside that buyers who move forward with their purchase remain confident in their decision. Our existing operations in California, Arizona and Florida continued to perform well, and we are excited about the addition of Antara in the Dallas-Fort Worth market and the growing contributions from Austin and Colorado. We entered the second quarter in great shape, both operationally and financially, and I believe we are on track to meet our goals for this year and beyond.

With that, I’d like to turn the call over to Chris, who will provide more detail on our financial results this quarter.

Chris Porter: Thank you, Mike. As Mike mentioned, our 505 deliveries were 7% higher than first quarter of 2023 and our 579,000 average selling price reflected a 14% increase over last year. Both exceeded the high end of our guidance and produced a 22% increase in home sales revenue to $292.6 million. Our gross margin of 14.9% came in at the low end of guidance as incentives and discounts continued to weigh in the quarter and were approximately 5% of revenue. With the outlook for rates to stay higher for longer, we would expect these levels of incentives to remain relatively constant for some time. Fully adjusted gross margin came in at a stronger 19.4%. We reported net income of $190,000 or $0.01 per share. This compares to $3.2 million in net income or $0.08 per share in the first quarter of last year.

This quarter, we had a $1.7 million of transaction costs primarily related to Antares acquisition, along with $2.5 million of purchase price accounting from previous acquisitions. Excluding the onetime transaction costs, our net income was $1.9 million or $0.05 per share. We ended the quarter with 63 average selling communities, up 7% from first quarter of last year. During the quarter, we opened 10 communities and closed 6 communities. As John noted, with the Antares acquisition, we added 20 communities in approximately 2,100 lots as of April 1. Backlog ended the quarter with 624 homes for a total value of $384 million and an ASP of $616,000. Our SG&A expenses came in at 15.2% of home sales revenue this quarter, 110 basis points better than the first quarter of 2023.

Excluding the $1.7 million transaction cost, this ratio would have improved to 14.6%. We will not add any corporate staff or overhead for the Antares acquisition, and we’ll begin to see our SG&A leverage improve starting in the second quarter. Our tax benefit of $30,000 for the quarter was primarily the result of our improved site performance and the additional tax benefits from stock option vesting in the quarter. Now turning to our balance sheet. We ended the quarter with $364 million in liquidity and $140 million in cash and cash equivalents and $224 million in availability under our revolver. Our leverage ratios remained in line with our expectations, ending the quarter at 46% debt to total capital and 35% net debt to total capital. On April 1, we utilized cash on hand and revolver capacity to purchase Antares homes for approximately $242.5 million and closed on the issuance of our $300 million 5-year note, which gave us longer-term fixed rate capital and reduces our reliance on our revolving credit facility.

The rate is effectively equivalent to our current pricing and our revolver. Subsequent to these transactions, we completed the refinance of our revolver, led by Bank of America and U.S. Bank that broadened our bank group by adding 2 new banks to the syndicate and extended the term into 2027. We reduced capacity to a total of $355 million, reflecting the lower reliance for this facility and paid down $75 million during the quarter. We continue to have an accordion feature to increase up to $850 million should we need the capacity. Additionally, we updated our pricing to a grid pricing and will initially realize an approximately 50 basis point improvement in rate. Net-net, consistent with what we have been indicating, our leverage will increase temporarily for the acquisition and should be back in our targeted levels of 45% debt to cap within 1 year.

Now looking forward to the second quarter, we anticipate our new home deliveries to be between 600 and 650 at an average selling price between $525,000 and $530,000 with GAAP gross margins of 15% to 16%. And for the full year, we are confirming our previous guidance of new home deliveries in the range of 2,500 to 2,900 units. We expect ASPs of these deliveries to be in the range of $500,000 to $525,000. Additionally, we anticipate GAAP home sales gross margin for the full year to be in the 17% to 18% range. These gross margin ranges are dependent upon assumptions in our purchase price accounting with the Antares acquisition. We will not know the final allocations until later in the second quarter. Also, this guidance is based on our estimates as of today with the current market conditions as inflation, incentives and interest rates continue to change, overall results could change accordingly.

That concludes our prepared remarks. And now we’d like to open the call up for questions.

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Q&A Session

Operator: [Operator Instructions] Your first question comes from Matthew Bouley with Barclays.

Matthew Bouley : Congratulations on completing the acquisition. On that topic, now that you’ve kind of broadened out your exposure and obviously, building the Texas footprint here, should we look at the stage that at least for the time being, that the focus is really just going to be on organic investment in the markets that you’re now in or is there kind of any room in the sort of near to medium term where you still feel like you want to fill out some more spots in the geographic footprint?

John Ho: This is John Ho. We’re really pleased with the closing of the Antares Homes acquisition. As you know, we moved our headquarters here to Dallas, Texas last year. We believe that Texas and in particular, the DFW area is a significant pace of growth for us and for the future of the company. I think it’s a good market to be in. Very similar to how we penetrated the Florida market 2 years ago when we acquired [indiscernible] and over family builders, roughly same price. We use a combination of cash on hand and availability under the revolver. We’re really pleased to have completed the high-yield offering at the same time essentially as the closing of the Antares Homes. So that really puts us in a really good place from the quality of our debt, the stability of that debt.

We usually can within 12 months, be able to reduce leverage after the acquisition and really be able to drive cash flow generation from that acquisition. And that’s where we’ll be. You should expect any near-term M&A as this is — as we have done acquisitions in the past, we’ve — really good at it. We integrate them very quickly and then we move to generate significant cash and growth in our business and reduce debt. At the same time, we do grow our businesses organically in each of our respective markets. I can also have Mike chime in, in terms of areas, I think, potential growth for us.

Mike Forsum: Yes. Not much more to add than what John said, Matt, other than it’s consistent with our acquisition strategy where we buy and digest, buy and digest. And so it’s a stair-step approach to growth, not necessarily it’s parabolic. So this is pretty consistent. As though we do this, we do always remain around the hoop in markets in which we’re targeting and looking at in terms of future growth that are consistent with our strategy, and we’ll continue to do that. I think that puts you in a position when it’s time again to find these opportunities that will help add accretive growth to our business, you’re in a position to do so on a relatively quick basis. For instance, Antares was a company that we’ve been talking to for almost 2 years before we brought it over to the bow and did the acquisition.

So these things take time. And for us, as I said, it’s a multipronged strategy of, as John said, organic growth, along with a consistent look at accretive growth and synthetic growth and just a continuation towards the place that we want to be, which is one of the highest, most effective performing homebuilders in the United States.

Matthew Bouley : Secondly, maybe just kind of zooming into the near term, a lot of great color, you gave a top around sort of the necessity of keeping incentives elevated given the latest move in rates. Just kind of looking for sort of a finer point on the recent trends, what is happening to incentives since rates have moved over the past 4 to 6 weeks here. And curious as well if any color around traffic or sales pace in your communities through the month of April?

Mike Forsum: I’ll take this one first. It’s Mike again, Matt. And for us, the spring selling season has been terrific. I think that’s indicated in our numbers around our orders and then also the closings thereof. So we’re very happy with the consumer side of our business as they continue to show strong interest in homes, particularly homes that are deliverable within roughly 60 to 45 days, which is reflective of the new home market really responding to the dearth of resale that’s available out there today. But that being said, we’re also in a difficult interest rate market, at least as it is historically. So it is requiring us to be active in doing forward mortgage buydown commitments which are not cheap, and it moves daily almost.

And so it is a — either a day-to-day or week-to-week or month-to-month evaluation and assessment against the backdrop of these rates moving against existing incentives and then also competitive posturing in terms of what our competitors are doing also. But at the end of the day, we are focused and committed to a consistent sales absorption around 3 per month per community to continue to drive cash flow. We believe this is a cash flow business and going back to you again what John has said, we will continue to do everything we can to have manageable and appropriate debt rates around our business. And so as we kind of do these acquisitions and we may be bop and tick up a little bit on debt. We’re going to drive our business to generate the cash to buy down the debt and then redeploy it into land that is more reflective of our cost structure and better positioning as we go forward.

So we’re just always sort of in the mix of trying to appropriately respond, maintain margin, keep pricing elevate pricing a little bit which, by the way, is also some things that we’re able to do in our markets, we’re seeing 1% to 3% to 5% price increase that we can take as we go forward to sort of mitigate some of the costs associated with it. It’s not crazy, but our teams are doing amazing jobs of finding those little opportunities for us to do the best to offset the cost and to continue our absorption and maintain margin where we can.

Operator: Next question, Carl Reichardt with BTIG.

Carl Reichardt : Just a housekeeping, Chris, how much backlog in units and dollars did you pull in from Antares on April 1?

Chris Porter: We’re still — we haven’t disclosed that as far as backlog from there. We did pull in 20 communities and we’ll work through that and work through those numbers, but we don’t have those numbers right now, Carl.

Carl Reichardt : Okay. And do you know when you think the purchase accounting will bleed off by 4Q, I’m assuming?

Chris Porter: Yes, it will probably be about 40% to 50% in the first year of operations. So between now and this time of next year, and then it will slowly bleed the rest of it off over the next 8 months to 12 months after that.

Carl Reichardt : Okay. So longer. Okay. And then, Mike, just sort of following up on the last question. Can you talk a little bit about performance across the various price points? I’m curious if entry-level versus move-up has seen sort of a differentiation in terms of traffic or conversion rate or sales?

Mike Forsum: Yes, it’s interesting. And it is evolving, and it’s fluid, Carl, as you know, this business is. It’s actually interesting to me because over the course of my career, markets have been pretty independent of each other. It’s not been monolithic. And when we came out of the GFC, it was the first time I actually saw the whole country sort of moving a lot step with each other. But now we’re starting to see a little bit of a breakaway where regions are now responding more regionally as opposed to nationally. So everybody is encumbered by rates. So with that being said, our highest — one of our highest ASP markets in Southern California is actually doing incredibly well, a very strong market. It’s healthy. It’s healthy in terms of the balance of offering that’s out there and price points.

So — and it’s also one of the markets in which we’re having to apply the least amount of incentives and rate buy-downs and we have a higher monthly mortgage rate per closing there. Florida, on the other hand, is one of our most affordable markets is doing very, very well. But it’s requiring us to have a combination of incentives along with mortgage rate buydowns that are relatively constantly against the backdrop of a lower ASP there. What we’re really trying to do is to maintain a mid $3,000 a month mortgage payment, which seems to be a real driving force in that entry-level market. They are very, very focused on their monthly payment, not necessarily what the rate is. They don’t translate it that much. Whereas if you took Northern California, they get very focused on what their rate is, it’s the rate — it’s the ultimate rate for them.

So we’re listening. We’re getting data back and we’re trying to be responsive as uniquely to what we’re trying to present out there, Carl, is the best as we can, but it’s really across the board for us.

Operator: Next question, Alex Rygiel with B. Riley Securities.

Alex Rygiel: A couple of questions here. First, as it relates to SG&A, you talked about starting to realize some nice leverage on that particularly since the Antares acquisition is not going to layer on too much more corporate overhead. Can you comment a little bit further on that topic?

Chris Porter: Sure. So if you think about, Alex, the G&A in each of our divisions is roughly 3% to 4% of home sales revenue and layer on the rest of it on the corporate side of that. And when I say SG&A, it’s primarily G&A, right? On the sales side, it’s typically running pretty consistently between 6%, 6.5%, and that’s your variable cost that’s in there. And then the SG&A side layers on within the division. So if you back into the corporate perspective of that, we will pick up some G&A with the Antares acquisition just from their division operations, et cetera, but we won’t layer on any corporate side at all on that one. And so just from a pure leverage standpoint, that will start improving that leverage.

Alex Rygiel: Excellent. When we look at sort of maybe a year or 2 down the road, do you have maybe sort of a bracketed sort of target for where SG&A as a percent of revenue can get to?

Chris Porter: Yes. I think — we think that we can get back to kind of close to where the rest of the industry is. Now size definitely matters and a lot of that is continuing to grow the top line side of things. But we think that between that 10% to 12% is where the industry is and where we can typically lay out over time.

Alex Rygiel: And then circling back to an earlier question. Can you talk a little bit about the cadence of new orders sort of in January through March and now into April?

Mike Forsum: Alex, it’s Mike. Yes, I guess the cadence is that it’s been a strong selling season for us — spring selling season. Week-over-week has been very consistent and actually a little bit better week-over-week as we go through it. So we’re pretty excited about, again, what the market has brought to us here in the first 4 months of the year, and we’re building a nice order book and then looking to be in a good position as we go into the summer with a healthy backlog and then subsidize it through the summertime and then finish off the year strong. So I think from our standpoint, our mix of incentive mortgage rate buy-downs, good product offering and the right pricing is resonating in our marketplace.

Operator: Next question, Jay McCanless with Wedbush.

Jay McCanless : I wanted to touch on the comments earlier that you are able to raise prices in some markets. What could you identify which markets those are and talk a little bit more about, is that a price increase at the same time with a higher mortgage rate buydown or what’s going on there?

Mike Forsum: Yes, Jay, it’s Mike. I just want to make that comment. So we’re able to do it really almost in every one of our markets currently. And as I said, we’re a little fixated on where we can get any pricing advantage, we’ll go after it. But in some cases, it may be a net wash against the mortgage rate buydown on a price increase. In some cases, we may get the full benefit of that price increase. So as I said, in Florida, particularly in the northern part of Florida, we’ve had really strong absorptions there. We’ve been doing the best that we can to continue to raise prices, Southern California. Arizona is a very, very competitive market right now. And so it was probably net neutral as we move through there in Northern California.

We’re probably a little bit above in terms of getting advantages from raising prices. But we’re not talking about raising the 8%, 10%, 12% from release to release like we’ve done in the past when the market gets running. It’s just little incremental ticks here and there, but everything matters at this point, along with increasing your cycle times, driving cost reductions through our processes as well as just a consistency of watching our spend, which we’re fixated on because it’s a mix of everything right now. You can’t depend on one thing to get you through this.

Jay McCanless : Got it. I want to ask about the new markets in a second, but could you maybe talk about California and Arizona for a second and what you’re expecting for community growth this year for those 2 markets?

Chris Porter: Well, I think that — I think they’ll be consistent with the rest of the company, which is a 10% to 15% organic growth there. So I don’t see that either one of those would be any different overall.

Jay McCanless : And then if you could just remind us all about the pace of openings in Austin. And also, are you going to be able to grow the Antares count this year? Is that going to be more of a 25% of debt?

Mike Forsum: Yes. So we’re locked and loaded on our communities that we’re going to have available to us in Austin. We just need to get the last couple open, which they’re really driving towards. We have a large community in [indiscernible]. It’s a multi-segmented community there, very excited about it. And so they’re very close to giving the full breadth of our offering. So that’s coming along, Jay. And then in Antares, we have the acquisition, as Chris said, the things roughly 20 communities there. We do have a controlled pipeline through that acquisition and they will continue to deliver slots along the way for communities that we actually have open and running at this point as well as identified communities which I believe only one towards the end of the year would be brought online and open and selling.

So we have plenty to eat from that transaction. That’s going to really help with our growth. And we have a great team over there. I was super excited. We look to be fully integrated from a marketing and sales standpoint by May 15 is our goal. So if we get on our website on May 16, Antares will no longer exist. They will be full communities with all of the branding through Landsea Homes and manned through our internal and external sales forces. So we’re really excited about our ability to now get faster, better, smoother in terms of our integration around that area. And so we’ll bring all of our marker over there as well. So we’re excited. I think if there’s some exciting things to come from Antares here soon.

Jay McCanless : And then the last question I have, just wondering about land costs, how much of those are up year-on-year? And what kind of increases are you thinking about for the rest of the year?

Mike Forsum: Yes. Unfortunate downside about holding sales absorptions through incentives and buy downs is that the land sellers think everything is great. So from the standpoint of them witnessing any lack of pace or absorptions coming through us. It’s hard to prove that the cost of our sales are getting a little bit steeper and we’re trying to drive it through the land residual. So though I would say they’re not going totally crazy, but I would still say that they’re about a single-digit percentage increase as we go from opportunity to opportunity. And honestly, I’m not really sure if I see that really changing. So we’re factoring not only higher for longer in terms of baking in, what is taking us to move houses in our COGS, but also on our land basis going forward, it’s going to be a little bit tighter.

So it’s just going to — all these things are kind of compressing a little bit, and we’re going to have to continue to find every nickel, like I was saying earlier in the process and in our business to offset those costs that we can’t really control right now.

John Ho: I would add, Jay, this is John. With the acquisition of Antares Homes, Mike mentioned that we’re going to add about 2,100 lots to our [indiscernible] so that will put us just over 13,000. We’ve gotten control now of our destiny over the next several years now. So really, really focused on building a lot supply really for 2026 and beyond. It gives us a little bit of flexibility or ability to find good land opportunities and be able to take in some of the costs at Mike Forsum was talking about to think about sort of the future years — other years?

Operator: We have a follow-up from Carl Reichardt with BTIG.

Carl Reichardt: Just one question, John, on buybacks versus debt paydown. Obviously, I know you want to reduce the DTC back to sort of your norms in the mid-40s. Does that change your thought process on repurchases over the course of the next year or so despite where the stock is trading?

John Ho: Yes, Carl, the stock buybacks has been a useful tool. We’ve used it as you guys can tell in this past year but it’s never been at the expense of growing the business, scaling the business and leveraging our SG&A. So we’ve also demonstrated that we can continue to do that through this acquisition. Now that the debt will be slightly ticking up, we will be focused on reduction in reducing debt. And then thereafter also thinking about how we can continue to do shareholder distributions. But it’s never been the expensive growth. We’ve got to grow the business; we get to scale. And like we’ve done in the past with acquisitions, we’ve reduced debt first. And then we — as another tool in our toolbox to be able to use additional capital and cash flow that we generate for shareholder contributions.

Operator: There are no further questions. I would like to turn the floor over to John Ho for closing remarks.

John Ho: Thank you, everyone, for joining us today, and we look forward to speaking to you next quarter.

Operator: This concludes today’s teleconference. You may disconnect your lines at this time, and thank you for your participation.