Safe Bulkers - Earnings Call - Q1 2021

Transcript

Speaker 0

Thank you for standing by, ladies and gentlemen, and welcome to the Safe Bulkers Conference Call to discuss the First Quarter twenty twenty one Financial Results. Today, we have with us from Safe Bulkers Chairman and Chief Executive Officer, Mr. Polis Hajuana President, Doctor. Lucas Bambaris Chief Financial Officer, Mr. Konstantinos Adamopoulos.

At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. Following this conference call, if you need any further information on the conference call or on the presentation, please contact Capital Link at (212) 661-7566. I must advise you this conference is being recorded today, the 05/06/2021. Before we begin, please note that this presentation contains forward looking statements as defined in Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended concerning future events, the company's growth strategy and measures to implement such strategy, including expected vessel acquisitions and entering into further time charters.

Words such as expects, intends, plans, believes, anticipates, hopes, estimates and variations of such words and similar expressions are intended to identify forward looking statements. Although the company believes that the expectations reflected in such forward looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct. These statements involve known and unknown risks and are based upon a number of assumptions and estimates, which are inherently subject to significant uncertainties and contingencies, many of which are beyond the control of the company. Actual results may differ materially from those expressed or implied by such forward looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the demand for drybulk vessels, competitive factors in the market in which the company operates, risks associated with operations outside The United States and other factors listed from time to time in the company's filings with the Securities and Exchange Commission.

The company expressly disclaims any obligations or undertaking to release publicly any updates or revisions to any forward looking statements contained herein to reflect any change in the company's expectations with respect to thereto or any change in events, conditions or circumstances on which any statement is based. And now I pass the floor to Doctor. Barmbaris. Please go ahead, sir.

Speaker 1

Good morning. I'm Lucas Carbaris, President of Safe Bulkers. Welcome to our conference call and webcast to discuss the financial results for the 2021. Let me start our presentation by expressing our value to all our suppliers. We are committed to their safety and well-being.

Moving on to Slide three, we present some key points about safe barges. We are a pure drybulk player. Without predecessors, we have a history of sixty plus years of uninterrupted presence in the drybulk market. Our management team has more than thirty years of experience in the drybulk industry. We are here for the long run.

We preserve our liquidity, which provides financial flexibility, security, indebtedness and opportunistic asset acquisitions. Our spot market exposure allows expansion of profits in profitable charter market position. We have half of our fleet in the spot market and about onethree of period charters index linked enjoying the current market conditions. About 75% of our fleet is Japanese beef, providing us with a lower environmental footprint, lean operations and cost taking advantages from scrubbers to the vessels based on increased fuel spread differential. We have actively centered the environmental preservation in the heart of our competitive strategy by investing more than $67,000,000 in 2019 and 2020, thus offloading 50% of our fleet with exhaust gas clearing devices, also known as scrubbers, which provide us with extra income capability in rising oil price environment.

Management team has scaled the game that offers full alignment with shareholders. We have demonstrated our twofold fleet renewal strategy. On the one hand, looking forward looking towards 02/1930, with offering Greenhouse Gas EBI Phase three and NOx Tier three Japanese newbuilds and on the other hand, capturing the present market by opportunistically second hand acquisition replacing older vessels at a modest price differential. At the same time, we continue the gradual deleveraging of the company. I will continue on Slide four.

We focus on our spot market exposure. I would like to point out that 75% of our fleet is Japanese versus 46% of the world fleet, providing us with a lower environmental footprint, lean operations and cost being advantaged. We present on the left side the Cape and Kamsarmak spot market, which during the 2021 has significantly improved. As a result of our exposure in the spot market, with half of our fleet on the and the fact that about onethree of our period charters are index linked, we can observe on the right hand side figures the impact on our TCE and net revenues of this quarter versus the same period of 2020. We continue the presentation of certain key points in Slide five.

We demonstrate our lead operations and low breakeven point with stable operating expenses yet again during this quarter. As a result in Slide six, we have increased our profitability to earnings per share of $0.18 and $0.14 on an adjusted basis as compared to an adjusted loss of $0.13 for the same quarter last year. Our liquidity has also increased in Slide seven to over $190,000,000 as of quarter end and to over $2.00 $9,000,000 as of April 23, which increases our flexibility to execute on our fleet renewal strategy and deleveraging. At the same time, we have a strong balance sheet as analyzed in Slide eight with a healthy total liabilities to total asset ratio of about 57%. Now let's see another view of the first quarter as presented in Slide nine.

We have profitability increased our in tandem with our exposure. We talked about fleet in the spot market and about one third of our period charters enjoying index linked rates. As an example, our recently early delivered Capesize has been subsequently fixed for one year at a gross daily charter rate linked to the five ITC book exchange Capesize Index multiplied by 119%. The current PCI rate stands at 44,000. At the same time, we have increased our liquidity and strengthened our balance sheet.

We will continue our efforts to gradually renew our fleet through selective sales of water vessels and new acquisitions with modern design vessels that adhere to new environmental regulations. We remain focused on our environmental performance and continue to invest to improve our operations in this area as we believe that our environmental investments will contribute to sustained operational and financial advantage. Let's move now to Slide 11 and the industry update. Most of the countries have accelerated COVID-nineteen vaccination and have resumed their economic activity and in most cases at a faster pace than pre COVID period. This year started with very strong charter market.

The average charter hire for Capes is about twenty thousand five year to date as compared to five thousand 400 for the same period in 2020. Presently Capes are trading at about 45,000 per day. Similarly for Kamsarmaxes, the average charter hire is 19,000 three year to date as compared to 7,100 for the same period in 2020. Presently, Kamsarmaxes are trading at about 25,000 per day. This represents a substantial increase in the vessel's revenue, which has been sustained through the first five months of 2021.

Moving on debt to pay caps, which have been extremely liquid and relevant to the market trend, the forecast at least for the market to remain strong. According to the present trading rates for capsizes, June is expected to trade at $47,000 Q3 and Q4 at $36,000 and $29,000 respectively. Similarly for Tamsar March, June is expected to trade at $28,000 per day, while Q3 and Q4 is at $25.5 and $22 per day respectively. The expected sustainability of the market comes as a result of the increase in the underlying demand, which is also reflected in the commodity prices, which we will review in a moment, and the lack of oversupply. In Slide 12, we present the current status of the major relevant commodity prices.

As seen, there has been a huge price surge on all commodities relevant to shipping. Main reason for this was a strong demand from China and from other countries and the government spending on post pandemic recovery programs as well as the greening projects of the global economy. Indicatively, iron ore, which is the main cargo for Capes, is trading at about $190 per tonne comparable to $2,009 less. Similarly for steel rebar, which is a direct product of iron ore and reflects the status of industrial production, is currently trading at the highest levels in five years. Soybeans, which are among the major cargoes for commercial buses, have hit an eight year high and similar pattern supply on all grain products such as wheat, corn, etcetera.

In addition, we also presented the price development of copper, which has stayed above $10,000 for the first time since 2011. The steady demand for commodities has been further enhanced by government's stimulus plans. President Biden has proposed two additional stimulus plans on top of the one it has already passed. Furthermore, it is important to note that the demand is not only driven by China, which was the case through the past decade. The rest of the world is picking up and many countries are real contributors to the demand side.

Turning to Slide 15, we present the status of the fleet for Capes and Panamaxes. On the top left graph, we present the price of a five year old Capes and Panamaxes since 2010 as assessed by both exchange. The five year old Capes have surged by about 30% since the last six months and about 90% since 2016 lows and presently are valued at about 12,000 million dollars Similarly, Panamaxes have surged up by about 35% during the last six months and about 135% since the 2016 launch. It is important to note that above figures reflect the average vessel in terms of country and the shipyard build, specifications and maintenance provisions. Shale Buyer has appeared mostly built by top class shipyards in Japan at advanced specifications.

Moreover, 75% of the fleet is fitted with ballast water treatment system and some of the fleet to build with scrubbers. All these features are providing significant additional market values for each of our vessels. On the second and third graph, we present the status of the order. At the end of the year, the new orders accounted for about 2.5% for Capes and about 3.7% for Panamaxes. From 2022 onwards, the new orders are less than 2%.

It is important to note that there are several limitations for anticipating a surge in new build orders. There is a scarce building capacity at most cities as most cities have covered their slots by building other sectors such as containers and tankers. In addition, only few cities have developed new environmental efficient designs. These reasons, taking into account the aging of the fleet and the eventual scrapping, will diminish the growth of the dry bulk fleet. On the next slide, number 14, we will present the status of the bunker prices and more specifically the difference between the price of very low sulfur fuel oil and the high sulfur fuel oil, the so called high five, which is of interest for our scrubber operations.

As shown in the top graph, the Brent prices collapsed during the pandemic period, especially in the beginning of 2020. As it was expected, this affected also the bunker prices and especially the distillate products and has a very low sulfur fuel oil. Presently Brent rates close to the pre pandemic levels in a healthy level of about $70 per barrel. High five is presently in the region of $110 per metric ton. And according to the future market in Singapore, it's expected to trade in the region of $120 for the remainder of 2021 and in the region of $130 for 2022 and 2023.

State bikers have installed scrubbers on half of its fleet. For reference, scrubber fitted post Panamax with consumption of about 7,500 metric tons per year may enjoy the benefit of about $120 which is the difference between the very low sulfur fuel oil and the heavy sulfur fuel oil, making about 900,000 per year or about 2,500 per day. The recovery of global economies, restoration of mobility and recovery of crude oil prices may push the high-five differential even higher to pre COVID-nineteen levels. Let me summarize the key market takeaways in Slide 15. The order book is minimal at its lowest level since 2,002 as decarbonization discussions not favor new orders.

Most citrus are preoccupied with containers and tankers orders until 2024. And only few citrus have developed new environmental efficiency designs. We have experienced an exceptionally strong start of 2021 with robust volumes of iron ore, coal and grain trade. Demand for commodities has been exceptionally strong during the first quarter. We have seen increased government spending on post pandemic stimulus programs and continuing greening of global economy.

We have experienced Brent prices recovery, which may lead even a wider high pipe spread differential than that of today of about 120 tons. And lastly, the aging of the fleet and the increased environmental restrictions for emissions may enhance the scrapping activity. Now let me pass the floor to our CFO, Buzadino Sadamopoulos, for our financial overview. Thank you, Lucas, and good morning to everyone. Let me start in Slide 17 with our chartering performance, where we present our quarterly time charter equivalent rate for the third quarter, which stood at 15,567 vessels versus our quarterly running expenses, which stood at $4,702 Moving on to Slide 18, we present our quarterly daily OpEx and our quarterly daily G and A stood at $14.40 dollars The aggregate figure for both OpEx and G and A for Q1 twenty twenty one was $6,142 demonstrating our focus on lean operations.

We believe that this number, when comparing apples to apples, is one of the industries lower. If not the lowest, given the fact that we include in our OpEx, all our dry dockings and food delivery expenses and in our G and A, our management fees, our directors and office organization as well as all expenses related to the administration of our company. Moving on to fleet debt profile, as seen in Slide 19, we present our repayment schedule as of 03/31/2021. As of that time, our liquidity stood at 191,400,000 consisting of cash and bank bank deposits, restricted cash, contracted undrawn borrowing capacity under the revolving credit facilities and secured commitments, including share and leaseback financing. Slide 20, we focus on our liquidity versus our CapEx.

As of 04/23/2021, we have liquidity of $209,600,000 which included cash and cash equivalents, time deposits, restricted cash and funds available under the sale and leaseback agreements, new term loan agreement as well as the revolving credit facility. Our aggregate remaining CapEx for the acquisition of our two new pits and the one motor were $52,000,000 of which $600,000 is payable this year and $51,400,000 payable in 2022. In addition, the committed CapEx for the scrubber for the installation of one scrubber and several ballast water treatment systems were $3,200,000 of which 2,300,000.0 is due this year and $900,000 next year. Slide 21, we present our debt amortization schedule versus the scrap value of our fleet. We have a smooth debt repayment profile for the next two years, so helping us gradually deleverage our company.

Next slide, number 22, we deliver quarterly financial highlights for the 2021 compared to the same period of 2020. As a general note, during the 2021, we operated in an improved charter market environment, higher charter rates compared to the 2020, with lower interest expenses, while our revenues were supported by the earnings from scrubber funds, heated vessels and the reduced voyage expenses. During the 2021, we had a time charter equivalent of $15,567 compared to a TCE of $9,089 during the same period in 2020. Net income for the 2021 was $21,300,000 compared to a net loss of $9,900,000 during the same period in 2020. Net revenues decreased by 37% to $62,500,000 for the third quarter in twenty twenty one compared to $45,700,000 for the same period in 2020, mainly due to increased TCE as a result of the improved market, assisted also by the additional revenues and by our scrubber fitted vessels.

Daily vessel OpEx decreased by 1% to $4,702 compared to $4,771 for the same period in 2019. This decrease is associated with reduced dry dockings and provision of technical services, which was impacted with increased crew utilization expenses due to COVID related issues. Daily vessel OpEx, excluding drydockings and pre delivery expenses increased by two percent to $4,358 for the 2021 compared to $4,258 for the same period in 2020. Our adjusted EBITDA for the 2021 increased to 34,600,000 compared to $9,400,000 for the same period in 2020. Our adjusted EPS for the first quarter in twenty twenty one was $0.14 calculated in a weighted average number of 103,300,000.0 shares compared to a loss per share of $0.13 during the same period in 2020, calculated in a weighted average number of 103,400,000.0 shares.

Slide 23 will provide an estimation of the expected downtime in days for this year in order to assist our analysts with their projections. Closing our presentation, in Slide 24, we present our quarterly flight data and average daily indicators compared to the same period last year. We would like to emphasize that the company is maintaining strong liquidity position with $209,600,000 as of 04/23/2021. This liquidity provides us with flexibility to follow our plan, aiming to gradually renew our fleet with a few forthcoming environmental changes and flexibly deleverage our balance sheet, targeting to create value for our shareholders. Once again, we'd like to thank our seafarers for their commitment and dedication throughout this past period.

Our press release presents in more detail our results, and we are now open to take questions.

Speaker 0

Thank you. We'll now begin the question and answer session. Session. Thank you. We'll now take the first question.

Please go ahead. Your line is open.

Speaker 1

Hi, this is Liam on for Chris Wetherbee. Thank you for taking my question. So I just wanted to first ask about your fleet and your chartering strategy. So I know that half of your fleet is on the spot market currently. I'm just wondering, could you be closer to the microphone because we cannot we don't have good reception or Sorry about that.

So I know

Speaker 2

that half of your fleet is on the spot market currently. So I just wanted to ask about your chartering strategy. So what are your thoughts about the portion of your vessels that will continue to trade in the spot market? And what would it take for you to kind of look to lock in some of your vessels on longer term charters?

Speaker 1

Yes. Right now, half of the vessels are in the spot market and the other half on short term period market up to one year. Out of this period of ships, onethree of them, as you saw, is index linked because we had we were feeling that the market will improve in 2021, and we decided those fixtures, a part of the figure fixtures will be done on index linked basis. So we will continue for the rest of the quarter and up to the third quarter this policy to keep ships in the spot market. And possibly in the third quarter or the fourth quarter, we will try to lock in longer periods as the charterers will be more keen to secure longer period charters.

Got it. That's very helpful.

Speaker 2

Thank you. And kind of as a little bit of a follow-up to that and some of the things you discussed earlier. So I know that more recently, given the fact that spot rates have surged, that's really benefited your liquidity. But I'm also just kind wondering like how you kind of plan to leverage that increased liquidity? Are you going to look to be more aggressive in pursuing your fleet renewal program and maybe acquire more vessels in the secondhand market?

Speaker 1

Yes. I think that now our aim is joint exercise of deleverage and fleet renewal. We are interested into newer technology vessels, which means we have to concentrate on acquisitions on ships younger than five years old. At the same time, we have some ships approaching 18 years old that we need to sell. So there will be some sales and some acquisitions and some selective ordering at a very limited pace.

Because right now, we see that shipyards are not ready to propose new designs with the new technology. And there are not so many options there. This, of course, is giving us more optimism for the freight market In that, we don't expect to see newbuilding orders, many drybulk newbuilding orders for 2023. We believe that the yards are getting filled up with big container ships and tanker orders. Whilst dry bulk orders, the owners will be waiting the new designs to appear, but we don't see many shipyards keen at the moment to develop these new designs.

Speaker 2

All right. Thank you very much for taking my questions.

Speaker 0

Thank you. And we'll now take our next question. Please go ahead. Your line is open.

Speaker 3

Great. Thanks. Hey, this is Ben Nolan from Stifel. I actually just wanted to follow-up on that last response you're talking about. Well, obviously, you guys ordered some ships late last year, but now are sort of looking for things with new designs.

I'm curious if you could maybe flesh that out a little bit. Does that are you most interested, I don't know, in things that maybe would use ammonia? Or is there something specific that you have in mind that isn't being developed that would be of interest?

Speaker 1

Yes. Look, when we speak about newbuildings for the future and we said that we bought we have bought the two ships and we referred to phase EDI Phase three. I wanted to clarify that EDI Phase three comes in the regulations after 2025. So basically, what the company has done is that we ordered not the present generation that we can do easily, which is Phase two until 2025. But we ordered Phase three vessels, which are much closer to 2030 and they are more advanced.

Now the company has chosen this route because we believe it's a pragmatic route for the existing technologies. And we know that despite the fact that there are several discussions and researches about new fuels, we are not while we're quite sure and we know that new fuels like hydrogen or ammonia will not come to play a role in, let's say, the next decade. So by having the most advanced ships of 2025 onwards earlier, that would be a competitive advantage. A certain point that we want to stress out is that our company has and we said that many times that we want to clarify that our company has the vast majority in Japanese big fleet, which generally are lighter and more energy efficient. And as a result, we have better footprint.

So we expect that when the new regulations for greenhouse gas is coming to 01/01/2023 as expected to play a role in the performance in the classification of the vessels from categories A to E and the eight categories vessels will receive a notice that within a year, they need to fix, set and take. So the B category within three years, I mean, our vessels will be well placed in this lease. And so we will maintain the operational advantages that we always have had in the past. I don't know if you want to ask me another question on that.

Speaker 3

Well, really the question is, and I appreciate that you're in a good position and that your newbuilds that you have ordered are also in a good position. But when looking at sort of what would be next if you were to order a ship and but yet isn't available to shipyard. What do you have in mind there? I mean what is that next generation ship that would if a yard were to come out with a design, what would check the boxes for you? Is there a particular type of fuel This or

Speaker 1

is a problem right now. There is no next generation ship available. A lot of stories appearing in the press about what will be the fuel for the next ten years or twenty years. No one knows. Definitely on tankers, on containers, there are a few options being proposed by the shipyards, which really we don't know which is the medium term or the long term or the short term.

For ourselves, we cannot do anything more at this stage than go for Phase three newbuilding whenever it's available. Otherwise, we will concentrate on very modern secondhand ships, but under five years old. That will be very close to on the upper part of Phase II designs. There's nothing we can do at the moment because really no one knows if this ship will be LNG powered, if it will be hydrogen, it will be ammonia. No one has an idea.

And the yards and this is maybe a good point for trade markets. The yards, they are not really interested to develop such designs for bulkers. So at the moment, they concentrate on big container ships that they have big consumptions or VLCCs on bigger ships. And they don't bother yet to develop designs for bulkers for the next phase of decarbonization. Basically, you have to remember that the yachts like shipowners, they've been losing money for a number of years.

And first of all, they have to do the change on the bigger ships. They have better levels and new contract levels. And thereafter, they will bother. So I think it will be very difficult to have new buildings with new designs from bulkers proposed by the yachts this year. If at all, if at all we get it, it will be next year at the earliest.

So the delivery of bulkers with different fuels and all these things should not be available before 2025 delivery. So we have to be patient. If we can find reasonably priced with good delivery date, new fleet of Phase III, we may consider. If we don't find, we will go for very young ships in replacement of our older ships. If we consider that the only alternative fuel to the existing fuel, which is the natural gas, for example, the LNG, and we don't have such solutions in this in the bunker industry, Such solutions may come, let's say, towards the end of this decade.

And maybe new fuels like hydrogen or like ammonia could come at the early or mid of the next decade. So basically, the next generation ships that are not generally available now are Phase III vessels. So this is the only thing that we have and which is pragmatic.

Speaker 3

I appreciate that. If I can switch gears for a second on my next question. Obviously, we've seen spot rates go up and talked about that and there's strong underlying demand. You guys did do some time charters, but still most things both for you and elsewhere in the market tend to be pretty short duration, six to maybe eighteen months on the long end. But as the market tightens, are you guys beginning to see any lengthening duration in terms of what customers are looking for to sort of perhaps hedge out the risk of a spike or something like that?

And really, ask because I know in the past, you guys have done some longer duration deals. So is that something that's materializing at all? And is it something that you would be interested in doing?

Speaker 1

You are talking about the longer period charter deals?

Speaker 3

Yes, three years or four things longer than a year.

Speaker 1

For this to happen, we have to be a little bit patient because we had a decent two months, February and April. In between, we had a correction of the market in March. So all we have seen until now was just two good months of freight market, February and April, and we continue now in May the third month of a good trade market. The charterers before they start fixing long term deals, they have to see the spillover of enthusiasm going on in the forward years. And many of them usually monitor this FFA market, which is not necessarily every ship owner's piece of cake or guidance for long term business.

But the charterers, mainly they monitor these things. And as we know, the forward part of those curves is very depressed from the point of view that there is not enough volume to push it up to the proper levels, similar levels like 2022 when 2021, when we know 2022 is supply restricted and the same for 2023. So as we enter into Q3 and Q4, I believe Charter will get this feeling that the commodity prices of today's and the value of the dollar and what is happening worldwide with the stimulus package, both East and West, we'll keep the market this time higher for a longer period of time. And then we will shift the FFA forward years, start moving to higher levels. And then charterers will start asking ships for three or four or five years.

So we have to be patient and have the ships in the spot market to be able to reach that point when charterers will decide that, yes, they believe in this market and they start investing into the forward part of the FFA curve. So I think this will happen sometime in the third quarter personally. But maybe you will call me optimism optimistic. Maybe it happens in Q4, I don't know. But I mean, a lot depends on those two quarters if we will see the long period charters.

Personally, I believe that because ship owners do not participate in the FFA market, especially for the forward years, I believe that the FFA market is rather constrained and is the freight is being exchanged for the forward years between charterers and operators, which mostly sit on the same side of the French usually.

Speaker 3

And if that does materialize, is an area that you guys would seek to be active If

Speaker 1

it doesn't materialize, we have to enjoy the $20,000 a day. Right. No,

Speaker 3

if it does, if it happens

Speaker 1

If it does, a certain part of the fleet has to go there. Yes, definitely.

Speaker 3

Yes. Okay, perfect. I appreciate it. Thank you.

Speaker 0

Thank you. And we'll now take the next question. Please go ahead. Your line is now open.

Speaker 4

Gentlemen, it's Randy Giveans at Jefferies. How is it going?

Speaker 1

Yes. Hi, good morning.

Speaker 4

Good morning. Two questions for me. First, clearly, TCE rates increased pretty meaningfully from $12,000 a day in the 2020 to about $16,000 in 1Q twenty twenty one. So how big of an increase are you expecting in 2Q twenty twenty one?

Speaker 1

Look, I mean, the spot market has moved to the levels, dollars 22,000, 23,000 a day on The Capes. It has moved on to $40,000 a level. So you should expect that second quarter TCE rate should be a similar increase. We already run 50% of the second quarter, and the fixtures you are doing now will cover the rest of the second quarter. So I mean, the assumptions are easily to be made.

So I do not want to predict the numbers now, it's I mean, you are 50% in the spot market and one third of the period shifts on index linked, you can run the calculations very easily. Okay.

Speaker 4

And then it looks like you used half of your $23,500,000 ATM program raising, I think it was $12,700,000 in recent months. Average price was under $2.80. So with the ongoing rally now pushing your shares around 4, will use the remainder of that ATM here in the near term? And what will the primary use of the proceeds be?

Speaker 1

Look, small part of ATM has remained, but we don't know exactly when we will activate this last part. I mean, we always activate it when we when the company as we have already indicated when the company thinks that it's right pricing. And so we cannot comment on that anymore.

Speaker 4

All right. Well, thanks so much. That's it for me.

Speaker 0

Thank you. There were no further questions coming through. So I'll now hand back to the speakers.

Speaker 1

So thank you for attending this Q1 conference call and webcast to discuss our financial results, and we're looking forward to have the same discussion in about three months from now. Thank you to all, and have a nice day.

Speaker 0

Thank you. That does conclude the conference for today. Thank you for participating. You may now disconnect.