Earnings Call Transcript - CG Q1 2024

Operator, Operator

Good day, and thank you for standing by. Welcome to The Carlyle Group's First Quarter 2024 Earnings Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Daniel Harris, Head of Investor Relations. Please go ahead, sir.

Daniel Harris, Head of Investor Relations

Thank you, Norma. Good morning, and welcome to Carlyle's first quarter 2024 earnings call. With me on the call this morning is our Chief Executive Officer, Harvey Schwartz; and our Chief Financial Officer and Head of Corporate Strategy, John Redett. Earlier this morning, we issued a press release and a detailed earnings presentation, which is also available on our Investor Relations website. This call is being webcast and a replay will be available. We will refer to certain non-GAAP financial measures during today's call. These measures should not be considered in isolation from or as a substitute for measures prepared in accordance with generally accepted accounting principles. We have provided reconciliation of these measures to GAAP in our earnings release to the extent reasonably available. Any forward-looking statements made today do not guarantee future performance, and undue reliance should not be placed on them. These statements are based on current management expectations and involve inherent risks and uncertainties, including those identified in the Risk Factors section of our Annual Report on Form 10-K that could cause actual results to differ materially from those indicated. Carlyle assumes no obligation to update any forward-looking statements at any time. In order to ensure participation by all those on the line today, please limit yourself to 1 question and then return to the queue for any additional follow-ups. And with that, let me turn the call over to our Chief Executive Officer, Harvey Schwartz.

Harvey Schwartz, CEO

Thanks, Dan. Good morning, everyone, and thank you for joining us. I want to touch on 3 areas today. First, our financial performance and an update on our 2024 targets. Second, Carlyle's ability to capitalize on an improving macroeconomic environment. And third, progress on key strategic areas. First, our performance. Our first quarter results reflect continued momentum across the firm, and importantly, we are on track to achieve our 2024 financial targets, including targeting FRE of $1.1 billion, targeting FRE margins to increase to a range of 40% to 50%, and targeting inflows of $40 billion in 2024. We once again set several financial records this quarter, including record quarterly FRE of $266 million, a near 40% increase over first quarter last year and record FRE margin of 47%, more than 33% higher than last year. These results are the outcome of our efforts to prioritize operational excellence and optimize our business model, while at the same time enabling us to invest for growth. We anticipate a pickup in fundraising, deployment and realization throughout the year, and we remain confident in our ability to achieve our financial targets for 2024. With respect to fundraising, we raised $5.3 billion in new capital in the quarter, in line with our expectations, after a near record quarter closing out 2023. Looking forward, we expect to see a pickup in fundraising over the next few quarters, again, keeping us in line with our target. While the macroeconomic environment remains somewhat fragile, we continue to see signs that the investment environment is steadily improving. Capital from the banking system and private credit is more readily available. Private credit and syndicated loan spreads are at historically tight levels. Equity volatility is under long-term averages. And interest rates and inflation have generally stabilized. These are clear improvements from this time last year, which is driving increased investor confidence, and if sentiment continues to improve, we expect a higher level of deal activity. Our deal teams are already starting to see the knock-on effects of improved market sentiment. We had $5.9 billion of realized proceeds this quarter. We have to go back to the fourth quarter of 2022 to see a higher number. We've already announced additional exits in various strategies that will close in the coming quarters. We have $2.2 billion in net accrued carry across our portfolio, and our global pipeline continues to increase. Carlyle is well-positioned to capitalize on these improving market conditions over the coming months. We have high-quality assets in our portfolio ready to be monetized and $76 billion in dry powder ready to be deployed across our global franchise. Switching gears, I want to provide an update on our strategic areas of focus. In Global Wealth, we have strong momentum. Since inception, we raised nearly $50 billion of wealth assets. Our global scale and brand give us a competitive advantage in this rapidly growing distribution channel. I have witnessed the importance of our brand and quality of our funds firsthand in my personal interactions with wealth advisers. We want to ensure we're providing the most efficient access to alternative markets alongside the best funds for our end clients. Our credit fund CTAC had another strong quarter, and our secondary focused investment solutions product, CAPM, saw a ramp-up in sales. These funds have historically provided strong performance for our investors. We continue to expand our footprint, adding new wealth distribution partners in the near term. More broadly in Global Credit, we're focused on driving growth and capturing share. We see opportunity to continue to scale our asset-backed finance offering, a trend that may persist for years as market participants increasingly look to partner with firms like Carlyle to address their capital solutions. We have mobilized and scaled our credit strategic solutions team to address this opportunity. This strategy has grown to more than $7 billion in assets with good opportunity for continued growth. And finally, in Global Investment Solutions, we continue to see strong momentum. This is helping us both in the institutional channel as well as in the wealth channel with our secondary focused CAPM fund. And obviously, this business is somewhat countercyclical to the rest of the franchise. To wrap things up, we entered 2024 with solid momentum. We continue to execute against our financial targets and strategic areas of focus. All of this positions us to deliver significant growth and shareholder value. With that, let me now turn the call over to John.

John Redett, CFO

Thanks, Harvey. Good morning, everyone. As Harvey said, our first quarter results were in line with our expectations, and we remain on track to achieve the 2024 financial targets we outlined on last quarter's call. For the first quarter, we generated record FRE of $266 million, nearly 40% higher than the first quarter last year. FRE margin of 47% was also a record and up from 35% in Q1 2023. We produced $431 million in DE or $1.01 in DE per share, our best quarterly DE result since 2022. We finished the first quarter with $425 billion of assets under management, up 12% year-over-year. In the first quarter, we completed the sales of McDonald's China and Neptune Energy, both of which produced attractive returns for LPs and strong performance revenues for our shareholders. Over the past year, we have returned $22 billion in capital to our LPs, highlighting the ability of our investment teams to find liquidity opportunities in difficult and challenging capital markets. We raised $5.3 billion of capital in the quarter and remain confident in achieving our target of $40 billion of inflows for the year. In Solutions, we raised $2.3 billion in the quarter and nearly $14 billion over the last 12 months, as we continue to have success attracting investors to our secondaries and co-investment strategies. And we are starting to see momentum building in our global wealth product, CAPM. In Global Credit, where our CLO platform is one of the largest in the industry, we had an active quarter in a very active market. We priced 7 CLOs, including 3 new issue CLOs. We also saw a strong inflow activity into our global wealth product, CTAC, and continue to see capital raise for our asset-backed finance strategy. And in Global Private Equity, the fundraising environment remains somewhat challenging, but we do see some pockets of strength like real estate in Japan. Management fees totaled $516 million in the first quarter, up about 2% compared to the prior year. We have $15 billion of pending fee-earning AUM that has yet to activate fees. Capital markets activity remains constrained, but it is showing signs of improvement. Transaction and advisory revenues of $27 million increased more than 60% from the first quarter last year. G&A expenses of $80 million were lower compared to the first quarter last year as we benefited from expense discipline and had some one-time items that lowered the quarterly G&A level. We expect G&A expense to shift back towards the recent run rate in the second quarter. Our net accrued carry balance of $2.2 billion declined relative to last quarter due to fund realizations and a relatively lower level of appreciation in our carry funds. And at $6 per share, it remains a substantial source of future earnings. We repurchased $150 million of stock, decreasing our adjusted shares outstanding by 1%. Our remaining share repurchase authorization is approximately $1.25 billion, and we remain active buyers of our stock. Wrapping up, we are optimistic about market conditions improving, and we are on track to meet our financial targets for 2024. With that, let me turn the call over to the operator for your questions.

Operator, Operator

Our first question will come from Brian Bedell with Deutsche Bank.

Brian Bedell, Analyst

Maybe you could just talk about how you're viewing the FRE trajectory for the balance of 2024, and maybe just the components on that. Given the lower expenses, maybe if you can classify the help from the lower G&A expense in 1Q and where you see the expenses moving as we move through the year, and then contrasting that with fee-related revenue. So really the sort of the underlying components of how you see the FRE improving during the year?

Harvey Schwartz, CEO

Thanks, Brian. We're very pleased with the FRE for the quarter at $266 million, which is a record and represents a 40% increase compared to the same period last year. The margin was strong as well, coming in at 47% compared to 37% last year. As I mentioned regarding G&A, we benefited from lower expenses due to discipline on our part and some seasonal factors, as typically, G&A is lighter in the first quarter. We also had a couple of one-off items. I expect G&A to rise to more normalized levels in the second quarter, and I anticipate the FRE margin over the next couple of quarters to fall to the mid-40s instead of the current 47%. The mid-40s aligns well with our 2024 financial targets, which range from 40% to 50%, so we are comfortable with a 45% expectation. Concerning management fees, the figures came in as anticipated, with no surprises. Given our strong fundraising in the fourth quarter—nearly $17 billion—and the $15 billion of pending fee-paying AUM, I expect the number to begin accelerating throughout the year, with growth increasing as well.

Operator, Operator

Our next question will come from the line of Kenneth Worthington with JPMorgan Securities.

Kenneth Worthington, Analyst

Fee paying AUM, so, lower in both private equity and credit this quarter. And we know things don't move in a straight line. Maybe first, can you talk about the drivers of the decline in private credit fee-paying AUM this quarter? I think you highlighted some elevated outflows in the release. And based on your fundraising, fund activations, and realizations, how should we think about fee paying AUM developing from current levels in both private equity and credit as we kind of migrate through the year?

John Redett, CFO

Yes. Ken, we have very good momentum in terms of fundraising. We have some products in the market that have real demand. Our secondaries business, our Solutions business, we're seeing real good demand, both in secondaries and co-investment. I would expect that to continue. As we said in the past, we've had good momentum in Japan. We'll be wrapping that one up at some point this year. Real estate is another area where we think we'll have really strong demand. We'll start that fundraise this year as well, and we do expect that to be a successful fundraise. So I would expect to see an acceleration in growth in the fee-paying AUM as well. In terms of the kind of slight decline in fee paying AUM in credit, it was just normal course runoff. And again, the runoff is outside of carry funds. So it was just a small amount of normal course business-as-usual runoff.

Operator, Operator

Our next question comes from the line of Ben Budish with Barclays.

Benjamin Budish, Analyst

Maybe just following up on the $15 billion of pending fee-paying AUM, and John, your comments on the confidence in achieving the $40 billion plus for the year, can you sort of just unpack the major pieces? We know there's a lot of PE funds in the market. How much is left on the solutions fundraises that you're doing? What are the key pieces of the credit side? Can you give us a little color there? That would be great.

Harvey Schwartz, CEO

Yes. Maybe I'll jump in. And so we're not going to walk through fund by fund, which I'm sure you understand. But as John said, and I've been traveling the world the past 6 months, you can really feel the momentum in the pockets of strength that John hit on. So in Solutions, in the Wealth channel across credit, as I mentioned in my comments, we expect to be joining additional wealth platforms, new partners coming on in terms of CAPM and CTAC. And so there's a lot of momentum around Wealth, secondaries, credit, and as John mentioned, pockets of the private equity segment and real estate and other areas, I would say, generally in private equity across the industry in this environment, you should maybe expect some headwinds. Now of course, I think over the next several years, the institutional channel might be a little over-allocated, but the wealth channel is clearly under-allocated. And so we look forward to also bringing out our private equity wealth product in the first half of next year. And so it feels like across the franchise momentum is quite good, and that's why we reiterate the targets for this year. And also, the other thing I'll say is we understand the focus on the quarter-to-quarter. We focus on it for running a business, just not really how we think about the fundraising. As John said, this was perfectly on plan for us.

Operator, Operator

Our next question comes from the line of Alexander Blostein with Goldman Sachs.

Alexander Blostein, Analyst

I was hoping we can spend a minute on your outlook for share repurchases for the rest of the year. Harvey, I think on the last call, you talked about up to $1.4 billion, now it's $1.2 billion in authorization, being a function of kind of quarters, not years. Can we maybe get a little more specific here on the outlook for the rest of the year? And related to that, how should we be thinking about equity-based compensation on a quarterly basis from here, I guess, given that it stepped up quite meaningfully as well?

John Redett, CFO

We repurchased $150 million of stock, and historically, we've averaged around $200 million per year. So the first quarter was quite significant compared to our past performance. We still have $1.25 billion remaining on the share repurchase authorization, and you can expect us to continue actively purchasing stock. Regarding equity-based compensation, it increased due to the performance stock units granted to key senior members of our global investment teams, who are the ones driving growth and are accountable for it. The accounting for these instruments is somewhat different, resulting in a slight increase from those performance stock unit grants. It's important to note that these units only vest with significant stock price appreciation, making them very shareholder-friendly and aligning well with shareholder interests. I anticipate that the equity-based compensation number will start to trend down next year.

Operator, Operator

Our next question comes from the line of Brian Mckenna with Citizens JMP.

Brian Mckenna, Analyst

I appreciate the commentary on the buyback. But it seems like there's some capacity to increase the dividend given the earnings outlook moving forward, specifically if realizations remain healthy. So how are you thinking about the dividend moving forward? And do you see an opportunity to increase the payout ratio over time?

Harvey Schwartz, CEO

It's Harvey. So as John said, and maybe just taking a step back and again go through how we're thinking about the capital allocation methodology here. And so we're going to remain very flexible because we see very significant opportunities to invest in the business over the next couple of years. But we also see opportunities to return capital to shareholders. And that was really the strategic decision about going with the buyback, because it gives us that flexibility. In the immediate term, we expect no changes to the dividend. Of course, again, we're not tying ourselves in the math here, depending on how things move forward. But right now, it really is about positioning ourselves for dynamic flexibility around capital allocation. So we can invest in the business when we see the most accretive opportunities, which we're currently doing, and we can also return value to shareholders. And as John said, you should expect to see us be active in the stock.

Operator, Operator

Our next question comes from Brennan Hawken with UBS.

Brennan Hawken, Analyst

You guys flagged in the investment performance slide that there's an uptick in U.S. and European CLO default rates. So I'm curious about what your exposure is to Altice in the European or the global CLO business. And how should we be thinking about the risk of deterioration and increased defaults as far as the potential for management fee deferrals in that business?

John Redett, CFO

Yes, Brennan, it's John. So look, we really like our CLO business. We're one of the largest in the world. At any given time, we're 1 or 2. Look, this business has great margins. They have a long-term, highly attractive track record. And when you look at kind of credit in the platform, it still looks very, very good. Our default rates in our U.S. business are half of the industry average. The credit stats in Europe are not quite as good as the U.S., but they are still better than European industry averages. So from a credit quality perspective, we feel very good about the credit quality in our CLO business.

Harvey Schwartz, CEO

It really is a world-class franchise with a world-class team.

Operator, Operator

Our next question will come from the line of Daniel Fannon with Jefferies.

Daniel Fannon, Analyst

You talked about wealth and increasing partnerships and distribution through that channel. Can you give us what the number of flows were from the wealth channel this quarter, and which products you see are driving those flows and where you see that kind of the outlook for that going forward?

Harvey Schwartz, CEO

I've personally been spending increasing amounts of my time with our wealth partners, and I can tell you, I'm pretty close to a cold case on this, we've been really well received. The brand Carlyle, our history in the business, our long track record, the name recognition, just the iconic aspect of the firm really resonates with the wealth advisers. Now of course, we've been in the wealth channel for a very long time. As I mentioned, we raised nearly $50 billion of assets. But this new shift in terms of how the market is really receiving in the early days of whatever you want to call it, democratization, etc. But I'm personally spending a lot of time with wealth advisers, truly trying to get very close to understanding how we can be the best value partner to them. And with CTAC growing steadily, CAPM picking up momentum, our secondaries product, we will be making some announcements in the near term of some new partnership launches, I feel really good about the momentum here. And again, obviously, first half of next year, we're targeting the private equity product. So I feel really good about how our business is being received. This is going to be a long journey for the industry, but I feel really optimistic about our long-term growth trajectory.

Operator, Operator

Our next question will come from the line of Chris Kotowski with Oppenheimer.

Christoph Kotowski, Analyst

I realize you didn't want to go fund by fund, but when I look at the fund tables, it looks like your Asia V Fund steps down in June and then Europe V in September. So should we be expecting kind of a new fund launch around those dates? Or do you effectively not have a flagship vehicle after those dates in Europe and Asia?

Harvey Schwartz, CEO

I’m a bit confused. However, we do have flagship vehicles in those regions. I think, Chris, the best way to view this is as John mentioned, we anticipate an increase in management fees across the platform for the remainder of the year. Everything is on track, and we’re happy to provide more details in a private conversation.

Christoph Kotowski, Analyst

Can you provide more details about the reversals of prior performance allocations mentioned on page 11? Is this related to European style waterfalls, or can you explain what occurred?

John Redett, CFO

The first thing I want to emphasize is that we don't manage the business based on quarterly performance. My background is in private equity, where I spent 16 years managing several funds, and I’ve always taken a long-term view regarding our trajectory. While I understand that you focus on quarterly changes, our management approach differs. For instance, CP VII was in carry last quarter but fell out of carry this quarter, which explains the impact you're seeing. We have been in the private equity business for 35 years and have consistently generated strong returns for our investors, achieving 26% over that time and returning 2.4 times their money. We take pride in these results, and we remain very focused on performance now and in the future.

Operator, Operator

Our next question will come from the line of Patrick Davitt with Autonomous Research.

Patrick Davitt, Analyst

I want to circle back on the flow commentary. I understand there's some seasonality, but obviously just run-rating to about $20 billion of flow this year versus $40 billion target. So maybe when you budget this, could you maybe help us understand what you see as the biggest incremental contributions to closing that gap between $20 billion and $40 billion and what you think the cadence through the rest of the year of building to that $40 billion will be?

John Redett, CFO

Yes, Patrick, as Harvey mentioned, it's challenging to assess fundraising on a quarterly basis since things can shift. The fundraising figure for the first quarter met our expectations, which indicates our potential to reach the $40 billion goal. We remain confident about achieving that target. Harvey provided insights into the sources of that fundraising. We're observing significant interest in our Solutions business, particularly in secondaries and co-investments. In Private Equity, we anticipate strong demand for our real estate offerings and good interest in Japan. In Credit, our asset-backed platform has expanded significantly over the past two years. On the Wealth side, we're gaining momentum in CTAC, CAPM, and our solutions wealth product, which is just beginning to take off but is showing promise. Overall, we're seeing growth across the platform without any particular segment standing out as an exception.

Harvey Schwartz, CEO

Yes, if we were to take that kind of risk, we would be misleading you if we suggested you should simply multiply the first quarter results by four. That's our main point. You should really understand that we anticipate significant momentum in that area. This was precisely in line with our plans.

Operator, Operator

Our next question comes from the line of Steven Chubak with Wolfe Research.

Steven Chubak, Analyst

So in the past, you had spoken about the significance of the IPO market reopening. Certainly starting to see some green shoots. But just concerning the PE transaction environment, I was hoping you could speak to whether that recent pickup supports more durable improvement in realization activity, or is it still too early to call an inflection?

John Redett, CFO

It's John. I think it's helpful just to kind of level set where we are. We're coming out of a very, very complex environment. And having spent most of my career in private equity, it was one of the more complex environments I've seen. Yet our team has been able to generate $22 billion of realizations through that period in some pretty choppy markets. And then I said in my comments, we had a strong quarter in terms of realizations. I noted McDonald's China and Neptune Energy. I know these portfolios really well. I spent a lot of time in that business. I feel good about these portfolios. I also like the momentum we have. So I mean if the markets continue to improve, I would expect that momentum to accelerate. But it's market dependent, obviously.

Harvey Schwartz, CEO

In terms of your comments on the IPO markets, I think the IPO markets are kind of open. I know a lot of the bankers and headlines say they're open, but I would say they are opening.

Operator, Operator

Our next question comes from the line of Glenn Schorr with Evercore ISI.

Glenn Schorr, Analyst

I have a question regarding the insurance sector, specifically about what we can anticipate from new business. We haven't discussed this much today, and I'm asking because some insurance companies are mentioning that they plan to reduce block trades and seek to raise third-party capital on their own. I'm uncertain how many are capable of doing that and managing it independently, but I've heard this from several sources. I'm interested in your perspective on the deal environment and the expectations for your insurance business.

Harvey Schwartz, CEO

The pipeline looks pretty solid. We successfully closed the Lincoln National transaction last year, and we've discussed how that impacts FRE over the medium term. Overall, I believe the pipeline is in good shape. While there will be fluctuations in the marketplace, over the long term, insurers will need to manage their capital effectively. I feel that Quarter 2 is well positioned to be an excellent partner and has proven to be so. Additionally, the insurance sector as a whole is increasingly significant to us and shows a lot of momentum. There's a connection and a continuous cycle between the capital required and the ability to enhance performance in private credit, as banks look to better optimize their capital structures. We're actively engaged in numerous flows, and this momentum seems likely to continue for an extended period. Although I hesitate to speculate too much, it truly appears to be a multiyear trend.

Operator, Operator

Our next question comes from the line of Bill Katz with TD Cowen.

William Katz, Analyst

Maybe a step back, you mentioned that there's some good demand in real estate. I was wondering if you could unpack that a little bit. And then maybe the broader question associated with just the asset class or the segment in total is how are you thinking about the opportunity infrastructure? And how is Carlyle positioned to maybe participate in what seems to be a pretty big opportunity?

Harvey Schwartz, CEO

So in real estate, as we've discussed before, really is a world-class franchise. They're in the market now. The performance has been exceptional. They'll be in their tenth fundraise. And I think in a space which is not drawing a lot of capital, they really are extraordinary team with a lot of momentum. And we see the opportunity quite optimistically across the rest of the real assets platform, whether it's in renewables, infrastructure, energy. I think the natural demands of what's happening really around the globe, whether you look at geopolitics, energy transition, demand for energy, energy security, all these things bode well. And I think there are platforms which will continue to grow. And so you should look to see us continue to invest and continue to build on the platforms we have, but we feel pretty good there too.

Operator, Operator

Our next question comes from Michael Cyprys with Morgan Stanley.

Michael Cyprys, Analyst

Just wanted to circle back to the realization commentary. I was hoping you may be able to help quantify the pipeline of exits that you were alluding to. And when we look at the overall portfolio, it seems about nearly 50% is aged 40 years, which could suggest maybe we could see a meaningful pickup in exit activity market depending. But just curious what portion of the portfolio do you view as in the exit phase and just waiting for that right backdrop.

John Redett, CFO

Yes. I mean I don't know if I'd quantify in terms of percentage of portfolio. And that stat you alluded to that's 4 years or older, that's really not specific to Carlyle. That's an industry-wide stat. So look, we have a lot of great companies that are ready, we're ready to monetize. We just need markets to continue to improve. We need the IPO markets to really open up. That will be helpful. But as I said, if the markets continue to move on the current trajectory, I do expect realization activity to pick up. It's one of the hardest aspects of this business to project. If you could tell me where markets are in 6 months, I could probably give you a very specific answer. I just don't know. But the way it looks today, we're pretty optimistic that realizations will accelerate.

Michael Cyprys, Analyst

Sorry, just to clarify. On Page 17, there was a chart next to the $159 billion of AUM in private equity with a note saying 48% aged 4 plus years. That's not for Carlyle, that's for the industry?

John Redett, CFO

Yes, that is our stat, but I think the industry stats are somewhat similar. I don't think we're an outlier at all.

Operator, Operator

Our next question comes from the line of Craig Siegenthaler with Bank of America.

Craig Siegenthaler, Analyst

Hope everyone is doing well. So we had a follow-up on the CLO question, just given your commentary that defaults are rising in Europe. So quick math, I think European CLO AUM is around $11 billion, and about half of those are subordinated fees, and they can be deferred if certain tests are not met. So about $30 million run rate, near 100% incremental FRE margins. I'm curious, is that math correct? And then also, are those tests still being met or will be met given the rise in default commentary in the earnings release?

John Redett, CFO

Yes, Craig, it's John. Look, we're not concerned with the credit quality stats in the European CLO business. They are elevated relative to the U.S., although I would tell you the U.S. are extremely low. And the credit stats in the European CLO business are still below industry. I think it's important to recognize we've been in this business for 25-plus years. We have a great long-term track record. We have a very deep and talented team leading this investment effort. And over that 25-year period, we have collected 100% of the management fees and the subordinated management fees.

Operator, Operator

Our next question comes from the line of Brennan Hawken with UBS.

Brennan Hawken, Analyst

Totally appreciate that stock-based comp is expected to drop in 2025. But when we think about 2024, is this $111 million quarterly run rate the right way to think about this year? Or could there be movement off of this level?

John Redett, CFO

I don't think it's far off. It might increase slightly. The accounting for the performance stock units is somewhat different compared to traditional equity awards, but I don't anticipate a significant increase. I'm available to discuss this with you and provide more details about the accounting.

Harvey Schwartz, CEO

The important thing again is the alignment that John talked about. You have to have a very meaningful uptick in the share price. And so as we've discussed, this really aligns the senior leadership of the firm with the shareholders. It's a little bit the accounting is the accounting. But we'll take it offline for you.

Operator, Operator

At this time, this concludes our Q&A portion. I'd like to hand the conference back over to Mr. Daniel Harris for closing remarks.

Daniel Harris, Head of Investor Relations

Thanks, operator. And thank you, everyone, for your time and attention today. If you have any questions or follow-ups, please contact Investor Relations after this call, and we look forward to talking with you again next quarter.

Operator, Operator

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.