Lument Finance Trust - Q3 2023

Transcript

Operator (participant)

Good morning, and thank you for joining the Lument Finance Trust third quarter 2023 earnings call. Today's call is being recorded and will be made available via webcast on the company's website. I would now like to turn the floor over to Andrew Tsang with Investor Relations at Lument Investment Management. Please go ahead.

Andrew Tsang (Investor Relations)

Thank you, and good morning, everyone. Thank you for joining our call to discuss Lument Finance Trust's third quarter 2023 financial results. With me on the call today are James Flynn, CEO, James Briggs, CFO, James Henson, President, and Zachary Halpern, Senior Director of Portfolio Management. Yesterday, on Monday, November 13, we filed our 10-Q with the SEC and issued a press release to provide details on our third quarter results. We also provided a supplemental earnings presentation, which can be found on our website. Before handing the call over to Jim Flynn, I'd like to remind everyone that certain statements made during the course of this call are not based on historical information, and they constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.

When used in this conference call, words like outlook, evaluate, indicate, believes, will, anticipates, expects, intends, and other similar expressions are intended to identify forward-looking statements. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those contained in the forward-looking statement. These risks and uncertainties are discussed in the company's reports filed with the SEC, including its reports on Forms 8-K, 10-Q, and 10-K, and in particular, the risk factors section of our Form 10-K. It is not possible to predict or identify all such risks. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. The company undertakes no obligation to update any of these forward-looking statements. Furthermore, certain non-GAAP financial measures will be discussed on this conference call.

Presentation of this information is not intended to be considered in isolation, nor as a substitute for financial information presented in accordance with GAAP. Reconciliations of these non-GAAP financial measures is the most comparable measures compared to in accordance with GAAP, can be accessed through our filings with the SEC at www.sec.gov. For the third quarter, we reported GAAP net income of $0.10 per share, while distributable earnings were $0.11 per share. In October, we paid a dividend of $0.07 per share with respect to the third quarter, which represented approximately a 17% quarter-over-quarter increase. I will now turn over the call to Jim Flynn. Please go ahead.

James Flynn (CEO)

Thank you, Andrew. Good morning, everyone. Welcome to the Lument Finance Trust earnings call for the third quarter of 2023. We appreciate everyone joining today. The macroeconomic environment continues to be a challenging one. A mild recession beginning in the first half of 2024 remains a possible outcome, as higher for longer rate environment seems to be the consensus economic forecast. Given the surprising resiliency of the labor markets, consumption continues to outpace incomes, and government spending and interest cost concerns. As we await the impact of the recent and dramatic monetary policy tightening to fully work its way through the system, we are also faced with heightened geopolitical uncertainty, further muddling the near-term outlook. Given the interest rate volatility, multifamily and other commercial real estate property types continue to trade thinly.

Overall, U.S. commercial real estate investment sales volume was down greater than 50% year-over-year in Q3. Despite deceleration of rent growth and widening of year-over-year cap rates, multifamily continues to be the preferred sector and is supported by strong fundamentals. While deliveries are elevated in certain markets this year and next, muted new construction starts suggest limited supply in the medium term, which is supportive of higher asset values as we move forward. Demand for multifamily continues to be driven by historic homeownership affordability gap, with prices of single-family homes remaining high and residential mortgage rates currently north of 7%. Given these positive signs in the long term, LFT remains committed to its investment roots in seeking middle-market multifamily investment opportunities that are accretive to the earnings and long-term shareholder value.

The CRE CLO market continues to see significant dysfunction, with only two managed CRE CLO transactions priced during the third quarter and year-to-date. Issuance volumes through October are down 66% year-over-year from an already depressed prior year. Given the uncertainty in the capital markets, we are proud to have successfully executed on July twelfth a $386 million floating rate mortgage portfolio financing transaction that we will subsequently reference as LMF 2023-1. In connection with LMF 2023-1 transaction, $270 million of an investment-grade-rated senior secured floating rate loan was placed with a private lender, and approximately $47 million of investment-grade notes were issued and sold to an affiliate of our external manager. LFT retained $67 million of subordinate notes in that transaction.

The outstanding liabilities of this financing transaction have an initial weighted average spread of 314 basis points over a 30-day term SOFR, excluding fees and transaction costs. The initial collateral pool consisted of 21-25 first lien floating rate mortgage loans secured by 32 multifamily properties located across the United States. The majority of the collateral was acquired from an affiliate of the manager at an aggregate discount to par of approximately 1.5%. The weighted average spread of the initial collateral was approximately 365 basis points over 30-day term SOFR, which we estimate works out to an effective spread on the initial collateral pool north of 425 basis points.

LMF 2023-1 provides for a 24-month reinvestment period that allows principal proceeds from repayments of the mortgage assets to be reinvested in qualified replacement mortgage assets, subject to certain conditions. Consummation of this financing allowed the company to increase its investment capacity to approximately $1.4 billion at a relatively attractive incremental cost of capital. With the closing of LMF 2023-1, coupled with our CRE CLO debt previously issued in 2021 and outstanding corporate term loan, which matures in 2026, the company currently maintains an attractively priced and long-dated liabilities profile that positions us well as we enter an uncertain part of the market cycle. LFT's investment strategy of acquiring floating rate mortgage asset positions positions it well for a higher for longer rate environment.

We believe the company consistently differentiates itself from its peer group through its continued focus on middle market multifamily credit opportunities, its culture of active asset management, and its strong sponsorship from the broader ORIX platform. With that, I'd like to turn the call over to Jim Briggs, who will provide us details on our financial results. Jim?

James Briggs (CFO)

Thank you, Jim, and good morning, everyone. Last evening, we filed our quarterly report on Form 10-Q and provided a supplemental investor presentation on our website, which we will be referencing during our remarks. Supplemental investor presentation has been uploaded to the webcast as well for your reference. On pages four through seven of the presentation, you'll find key updates and an earnings summary for the quarter. For the third quarter of 2023, we reported net income to common stockholders of approximately $5.2 million, or $0.10 per share. There are a few items I'd like to highlight with regard to the third quarter P&L.

Our Q3 net interest income was $9.5 million, compared to $7.5 million in Q2, primarily as a result of the growth of our loan portfolio, facilitated through the execution of the LMF 2023-1 financing transaction in July. SOFR increased 23 basis points during the quarter from 5.09% to 5.32%, driving an increase in the interest income on our portfolio in excess of the increase in the cost of our floating-rate liabilities. Exit fees and other prepayment-related income were relatively flat sequentially, despite payoffs being higher than prior quarter, due to a larger portion of the multifamily payoffs this quarter being refinanced with agency debt provided by an affiliate of the manager.

Note that in such situations, a portion of the manager's expense reimbursements are waived pursuant to the terms of the management agreement. Our total operating expenses were $2.4 million during Q3 versus $4.4 million in Q2. This quarter-over-quarter decrease was driven primarily by the $1.7 million, or $0.03 per share of deal costs we expensed in Q2, and which had been incurred in pursuit of executing a broadly marketed CRE CLO securitization transaction, which we ultimately abandoned in Q2 in lieu of the more attractive LMF 2023-1 private financing transaction. For Q3, we reported distributable earnings of approximately $6 million, or $0.11 per share.

The primary difference between reported net income and distributable earnings was the approximate $800,000 net increase to CECL general reserves in the quarter, primarily due to the increase in the overall size of the floating-rate loan portfolio, as well as changes in the macroeconomic forecast in the period. As a non-cash, unrealized item, these charges are adjusted out for purposes of calculating distributable earnings. We did not take any asset-specific provisions in Q3. As of September 30th, the company's total equity was approximately $241 million. Total common book value was approximately $180 million, or $3.46 per share, up $0.03 per share from Q2. We ended the third quarter with an unrestricted cash balance of $43 million. We also had an additional $30 million of aggregate reinvestment capacity through our two secured financings.

We'll now turn the call over to Jim Henson to provide details on the company's investment activity during the quarter and portfolio performance. Jim?

Operator (participant)

Pardon me. This is the conference operator. Mr. Henson, is it possible your phone is on mute?

James Henson (President)

Thank you. Yes, thank you. Thank you, Jim Briggs, and thank you. I will now provide a brief summary of our recent activity within our investment portfolio. During the third quarter, we experienced a net $341 million increase in our loan portfolio, after accounting for $111 million of loan payoffs. The $111 million of loan payoffs experienced during the quarter represent approximately 33%, a 33% annualized payoff rate, which is relatively, relatively in line with the long-term historical averages and our short-term expectations. Of the $452 million of loan investments acquired or funded during the quarter, 99% were collateralized by multifamily properties. Loans acquired during the quarter from an affiliate of the manager were acquired at an aggregate discount to par of $7.1 million.

As of September 30, our portfolio consisted of 87 floating rate loans, with an aggregate unpaid principal balance of approximately $1.4 billion, of which 93% was collateralized by multifamily properties. 100% of our floating rate portfolio is indexed to one-month SOFR. Our investment portfolio performed well. We ended the third quarter with 75% of the portfolio risk rated a three or better, and we have maintained a weighted average risk rating of 3.4 quarter-over-quarter. Several offsetting factors impacted the average risk rating for the quarter.

On one hand, the average risk rating would have shifted toward improvement during the quarter due to the company acquiring four new two-rated loan investments with an aggregate unpaid principal balance of $64 million, and two existing loan investments totaling $31 million of unpaid principal balance, moving to a two rating during the quarter due to improved property performance metrics. In addition, several assets migrated from a three to a four rating, and two loan assets migrated from a four to a five rating. We had three loan investments, each collateralized by a multifamily property, which were rated a five for the third quarter. These loans, with an aggregate unpaid principal balance of $69 million, are currently considered collateral dependent due to the actual or expected monetary default.

One of these three loans we have discussed in prior quarters, and we continue to pursue all available remedies with regard to that loan. After conducting our analysis of the underlying collateral, we have concluded, we have not recorded any specific reserves with respect to these investments. We continue to proactively monitor the health of our portfolio, and we rely on the depth and breadth of our manager's capabilities to drive positive asset management outcomes while protecting shareholder value. With that, I will pass it back to Jim Flynn for some closing remarks.

James Flynn (CEO)

Thank you, James Henson. Appreciate everyone's time and interest. I want to open the call up for questions. I know there's a few already in the queue.

Operator (participant)

Ladies and gentlemen, at this time, we'll begin that question and answer session. To join the question queue, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up your handset prior to pressing the key to ensure the best sound quality. Once again, that is star and then one to join the question queue. Our first question today comes from Stephen Laws from Raymond James. Please go ahead with your question.

Stephen Laws (Managing Director in Equity Research)

Hi, good morning.

James Flynn (CEO)

Hi, Steven.

Stephen Laws (Managing Director in Equity Research)

Hey, good morning, guys. To start with the three multifamily loans, can you give us some details, kind of where the... I know you've talked about one before, but where are they located? Are they with the same borrower or different sponsors there? And, you know, what's the timeline on kind of resolving that and recycling capital into performing investments?

James Flynn (CEO)

So I'll let Zach Halpern talk on the details. They're all different sponsors, all different locations, and in different stages of you know, underperformance. But as Jim pointed out, you know, we still feel comfortable that we're going to be repaid on the collateral, but we're working with the borrower. They all have different issues. So I'll let Zach give you the high level of kind of generally where they are. But you know, one is primarily a partnership dispute, you know, one is behind its business plan, and one you know, had significant issues at the physical property and is working through you know, proceeds on insurance, et cetera.

Zach, you want to go ahead and give a high level?

Zachary Halpern (Senior Director of Portfolio Management)

Sure. So the asset that we've been talking about for the last three quarters is in Ohio. The asset, there's another asset in Virginia that is the one that's in a partnership dispute, and then there's an asset in Florida that's behind on its business plan. When we consider all three assets and look at them and, you know, have sought, you know, information on them and site visits, et cetera, we find that with the exception of the first asset, which that James Henson mentioned, we're pursuing legal remedies on and also do not expect a loss.

The other two, you know, while there is some monetary issues, the loan appears to be lower than the value at present, you know, and leaves the borrower/sponsors with incentive to cure these and work towards a resolution, and therefore, we're not expecting losses at present.

James Flynn (CEO)

And you had asked, Steve, on the timeline. There are payments being made. They're in a variety of ways, paying down principal, paying interest late, those kinds of things. The timeline is, as you know, you know, there's some uncertainty to it all. But we're certainly expecting these to be resolved, you know, in the next couple of quarters, is kind of how I'm looking at it. At least, you know, one or two of them and maybe all three. But, you know, for better or worse, things sometimes seem to take longer.

You know, for example, the partnership dispute is really—it's impacting us as lender, but it's an issue between the two owners and, you know, they have to settle their own dispute, and then I think we would be ready to move forward, likely through a sale or whatever they decide to do. So we're pursuing our remedies to push them to get to their conclusion. So that's an example of just, you know, working through the legal process. But hopefully a first half of 2024 event, but you know, it could be longer.

Stephen Laws (Managing Director in Equity Research)

Sure. It sounds like it's unique issues with each asset, not anything that's-

Zachary Halpern (Senior Director of Portfolio Management)

Correct. It's not a-

Stephen Laws (Managing Director in Equity Research)

Yeah.

James Flynn (CEO)

-dramatic.

Stephen Laws (Managing Director in Equity Research)

Yeah.

Zachary Halpern (Senior Director of Portfolio Management)

The other thing I'd mention is that these two assets are within the securitization, whose reinvestment period is ending, and so there's not too much we can do near term anyways. You know, even if these paid off to redeploy capital, like it, it's... You know, we're gonna have to deal with that securitization in probably late 2024. So it's not like we're losing investment capacity.

Stephen Laws (Managing Director in Equity Research)

Understood. And then, did they go on a nonaccrual at end of quarter? Were they in interest income for the full three Q, or did some of them only contribute for partial or none of the quarter?

Zachary Halpern (Senior Director of Portfolio Management)

We reversed out when we put it nonaccrual around $300,000. As Jim mentioned, we talk in our filing about them being on a cash basis. So we are seeing some payments there, which will reflect an income as we get it. It was around $300,000 of income that got reversed in the quarter.

Stephen Laws (Managing Director in Equity Research)

Helpful. Great. Appreciate the time this morning. Thank you.

Operator (participant)

Our next question comes from Steve Delaney from JMP Securities. Steve, go ahead with your question.

Steve Delaney (Managing Director and Director of Mortgage and Real Estate Finance Research)

Thanks. Well, good morning, Jim, Jim, and Jim. Jim Flynn. The portfolio at $1.3 billion, about 4.5% debt to equity, do you consider Lument's portfolio to be fully invested, you know, currently based on your capital base? Thanks.

James Flynn (CEO)

Yeah. Thanks, Steve. Good to hear from you. We have. The answer is yes. It's around $1.4 is the total capacity, give or take. You know, obviously, we want some cash. We have, you know, a couple assets that we've discussed. But generally speaking, it's, you know, upwards of $1.3 and close to $1.4. You know, we're obviously where we have. You know, as loans work themselves out and things like that, we've generally kind of made the decision to maintain the liquidity, the elevated liquidity for, you know, for obvious reasons. But that's the kind of max of our portfolio today.

As we've discussed many times, obviously, we want to, you know, think about growth, but right now, it's really focused on our portfolio, asset quality, working with sponsors, making sure that we're positioned to take advantage of, you know, the market as it improves down the road here.

Steve Delaney (Managing Director and Director of Mortgage and Real Estate Finance Research)

That's helpful. I mean, we really are in a market, it would seem, would emphasize quality over quantity, at this point. Just kind of wait and see. So, the net interest income that you had, $9.5 million, it was, I think, $7.5 million in the prior quarter. I realize, you know, repayments, you get acceleration. Is there anything, you know, in that $9.5 million that you would point out to be, you know, materially large one-time accrual of revenue that you had on either discount or deferred fees that you had on the books?

James Flynn (CEO)

Jim, you want to go ahead?

James Briggs (CFO)

Yeah. No, I wouldn't say there's anything one-timer in there. As we talked about, the economics around prepayment and fees there, you know, we're relatively flat quarter-over-quarter. Some of that is coming through a reduction in expense reimbursements, but I don't consider there to be anything material in there, Steve.

Steve Delaney (Managing Director and Director of Mortgage and Real Estate Finance Research)

Okay, great. And then just one final point: the $7.1 million that you pointed out, discounts specifically to LMF 2023-1. Should we look at that? I don't know if those loans were already originated, but would a three-year average life be a reasonable approach to accreting that money into the net interest income?

James Briggs (CFO)

Yeah, I think that's reasonable, Steve.

Steve Delaney (Managing Director and Director of Mortgage and Real Estate Finance Research)

Agreed.

James Briggs (CFO)

Yes.

Steve Delaney (Managing Director and Director of Mortgage and Real Estate Finance Research)

Okay. Well, great quarter, and good job on the big financing, and we'll look forward to fourth quarter. Thank you very much.

James Briggs (CFO)

Thanks, Steve.

Operator (participant)

Our next question comes from Matthew Erdner from JonesTrading. Please go ahead with your question.

Matthew Erdner (Director in Equity Research)

Hey, good morning, guys. Thanks for taking the question. So could you just talk a little bit about what the opportunities you're seeing out there currently? I know that you guys focus on multifamily, you know, but can I just get an idea of what you guys are looking at at the moment and just the health of the pipeline? Thanks.

James Flynn (CEO)

Sure. Well, look, I mean, the opportunities are less than they've been in prior quarters as we've discussed, just in terms of transaction volume being so significantly down. So assets aren't on trading hands, so that's, you know, that opportunity has significantly declined. But so have lenders, and lenders that are either can or are willing to make new loans. So when we have seen assets come in, you know, we are looking at, you know, generally speaking, you know, the more conservative looking underwriting, lower leverage, you know, high quality sponsors. It does have an impact. You know, I think with rates being so high, spreads have kind of stabilized around, you know, 4%, but you've seen a lot of pressure on that.

I'm sorry, spreads at 4%, but I think you've seen a lot of pressure on that to be lower when you've gone with, you know, very low levered bridge loans and kind of pushing things down to towards 3% for those high quality loans. I think you'll see lenders probably take a look at those deals and trade a little spread for risk or lower risk. In terms of some of the things we've talked about in the past around, you know, subordinate debt opportunities, around mezz financing, preferred equity, etc, there's a lot of market chatter around those particular products. There's a lot of lenders and people looking to participate in that market, including us, both at LFT and then our broader platform.

The reality is that there's not a tremendous amount of deals that works for today, given where the rates are expected to be for that product, you know, in the teens, mid-teens even. And it's hard to replace your prior debt capital if you're kind of refinancing something with a mid-single digit, with a 2x on preferred. And so there's just... I think that we haven't yet seen kind of the dam break, so to speak, of transactions. I think as, you know, values, buyers and sellers kind of accept values, the spread between buyers and sellers narrows.

I think we're going to see more opportunity for, you know, for new loans, for bridge-to-bridge transactions that are kind of moving, finishing off a prior strategy at a different cap stack, transitioning some of these assets that are being delivered off of construction loans to lease-up bridge loans. And I think you'll see opportunities both on the bridge space. It's not going to be 2020 or 2019, but I do think we'll see some opportunity increase. And I also think that other space of mezz capital, as you start to see actual transactions, assets changing hands, that there'll be more opportunity there. But we really need that transaction flow to pick up.

And for that, I think we need buyers and sellers to, you know, accept where values are and come to an agreement, narrower gap, and then we'll see some of those opportunities. And as we noted, you know, we retained some of the low investment grade rated bonds in our last transaction, and that was because of, you know, it was an attractive spread. So there's, there might be some opportunistic trades in the secondary market for some of these CLOs that are out there, but that's going to be very, very portfolio specific.

Matthew Erdner (Director in Equity Research)

Got it. Thank you. That's good color there. I appreciate that. And then on the recent CLO, I don't know if you mentioned it or not, but is there a reinvestment period? And then if there is, you know, when does that expire and how much of it is open at the moment? Thanks.

James Flynn (CEO)

It's two years. And to be clear, I may have said CLO, but it's a financing transaction. It's not technically a CLO, just to clarify, but it is a very similar structure, and it has a two-year reinvestment period.

Matthew Erdner (Director in Equity Research)

Thank you.

Operator (participant)

Once again, if you would like to ask a question, please press star and then one. To withdraw your questions, you may press star and two. Our next question comes from Christopher Nolan from Ladenburg Thalmann. Please go ahead with your question.

Christopher Nolan (SVP)

Jim Briggs, just a clarification. Were there any non-recurring expense items in the quarter?

James Briggs (CFO)

No, nothing unusual or one-timer. As I pointed out, we did have the big one-timer last quarter for the that deal costs for, you know, a widely distributed public CLO that we expensed in Q2, but nothing I would consider one-timer in the current quarter.

Christopher Nolan (SVP)

Great. And then I guess, for just the panel in general, any change in non-accruals in fourth quarter to date?

James Briggs (CFO)

Nothing to date.

James Flynn (CEO)

Yeah, no.

Christopher Nolan (SVP)

And then finally, on looking through the deck and looking at the LTVs, which are roughly 75%-80% or so, what sort of rent haircut are you applying when you evaluate those LTVs?

James Flynn (CEO)

I don't think it's. I mean, when we're looking at the assets, it's each one is an individual evaluation, meaning you know, basically, it's going to be a view of what are the in-place rents. Most markets today have, you know, either somewhere in, you know, plus maybe two or three at the max, to minus the same level. But some markets are slightly different. But in general, you know, we'd be looking at in-place rents, particularly if they're, you know, a lot of these assets are still renovating and are still, you know, moving through their business plans, albeit obviously with whatever changes market conditions have warranted.

And so there's real-time data on what does it look like for, you know, renting new units today? But we're certainly-

Christopher Nolan (SVP)

So you're using this, you're using the stated rent, right?

Zachary Halpern (Senior Director of Portfolio Management)

We're often using rent rolls, right? So it's—this is real information. I think that, you know, perhaps it's helpful to make a distinction between evaluating something like a CMBS bond, in which, you know, you're looking at a tape of data provided to you by the servicers, looking at multifamily loans, the way we're looking at it, which is, you know, asset management data, rent rolls, information that's coming directly from the borrower, that's not necessarily been passed through data tapes, et cetera. So it's a lot more boots on the ground than you might see versus looking at CMBS bond things.

Christopher Nolan (SVP)

Well, here's the issue I have. And I used to... Just FYI, I used to run a portfolio of four rent-stabilized apartment buildings in New York City with 218 rent-stabilized units. And, you know, when you talk to bankers in this space, at least in New York City, they give a haircut to their reported rent roll of 20%-25%. Simply because what your reported rent is, could be different than what the actual rent is, like, if you get one month free or something like that. And, you know, if you're using what the stated rent roll is, doesn't that sort of overinflate the value of the property on an LTV basis?

James Flynn (CEO)

So, so let me just, just address that specifically. So when we look at rents, we are taking into account the leases, the concessions, right? We're not, we're not saying someone's giving two months free and then charging... You know, we're, we're using what the real, what the real rent is, right? So concessions and things like that are not. But just also for context, you know, we, we've seen, or will see by the end of this month, every asset in our portfolio within the last, since June or July, I forget, the summer. So over four months, we've gone out and visited every asset, with someone from our team and visiting with the sponsor. So, to, to Zach's point, just, you know, these are transitional assets, right? They, that, that had a business plan.

They're not stabilized assets where a servicer pays someone to go out every two years to look at the asset, right? We are in contact with our sponsors on a regular basis, weekly, monthly, quarterly, whatever, whatever is appropriate for the given asset, and are physically out there seeing them. So there's a little bit more engagement there and real-time access to financial information than, you know, receiving a, you know, to the point of if it's a, a large portfolio where you're receiving information secondhand and you're making some assumptions. We, we don't have to make those assumptions because we have the real data. There's, there's not an assumption to make. We know what it is.

Zachary Halpern (Senior Director of Portfolio Management)

Yeah, I would layer on top of that, you know, a couple of things, right? One is the LTVs that are reported on, you know, the earnings supplemental or LTVs at time of origination, which is noted there. But the underwriting that is done in evaluating these assets is layering on all that nuance. We're not simply taking what the borrower gives us as, you know, as our underwriting. You know, any nuance, you know, whether it be, you know, free rent for a month or two, or you know, issues on stabilization or issues on occupancy, that's all, you know, put into our underwriting and analysis as we're evaluating these loans, both at underwriting and on an ongoing basis.

Christopher Nolan (SVP)

Okay. Thank you.

Operator (participant)

Ladies and gentlemen, with that, we'll close today's question-and-answer session, as well as today's presentation. We thank everyone for joining today's conference call. You may now disconnect your line.