Capital Southwest Corp Q1 FY2025 Earnings Call

Thank you. I would like to remind everyone that in the course of this call, we will be making certain forward-looking statements. These statements are based on current conditions, currently available information and management's expectations, assumptions and beliefs. They are not guarantees of future results and are subject to numerous risks, uncertainties and assumptions that could cause actual results to differ materially from such statements. For information concerning these risks and uncertainties, see Capital Southwest's publicly available filings with the SEC. The company does not undertake any obligation to update or revise any forward-looking statements, whether as a result of new information, future events, changing circumstances or any other reason after the date of this press release, except as required by law. I will now hand the call off to our Chief Executive Officer, Bowen Diehl.

Thanks, Chris, and thank you, everyone, for joining us for our first quarter fiscal year 2025 earnings call. We are pleased to be with you this morning and look forward to giving you an update on the performance of our company and our portfolio as we continue to diligently execute our investment strategy as stewards of your capital. Throughout our prepared remarks, we will refer to various slides in our earnings presentation, which can be found in the Investor Relations section of our website at www.capitalsouthwest.com. You will also find our quarterly earnings press release issued last evening on our website. We'll now begin on Slide 6 of the earnings presentation, where we have summarized some of the key performance highlights for the quarter. During the quarter, we generated pretax net investment income of $0.69 per share, which more than covered both our regular dividend of $0.57 per share and supplemental dividend of $0.06 per share paid during the quarter. Portfolio earnings continued to be strong, and as of the end of the quarter, we estimate that our undistributed taxable income was $0.50 per share. As we look forward to the September quarter, we are pleased to announce that our Board of Directors has declared a $0.01 per share increase to our regular dividend, to $0.58 per share, for the quarter ending September 30, 2024. Our Board also declared a supplemental dividend of $0.06 per share, bringing total dividends declared in the September quarter to $0.64 per share. Deal quality and activity in the lower middle market during the June quarter continued at a healthy pace as private equity firms and business owners continued to transact. That said, liquidity in the market and competition from both bank and non-bank lenders for quality deals has increased meaningfully over the past couple of quarters. This is as a result of the entire spread on quality deals and to a lesser extent, slightly higher leverage levels. We have built a tremendous nationwide network of field sources, and our team has been doing an extraordinary job sourcing deals in this market. We continue to close deals at loan-to-value levels of 40% to 50%, resulting in significant equity capital cushion below our debt and a reasonable leverage level of around 3.5 times debt-to-EBITDA. Over the past decade, our team has done an excellent job generating attractive returns for our shareholders in all competitive environments, and I am highly confident we will continue our track record in the current environment. Josh Weinstein, our Chief Investment Officer, will provide additional color on the market, our investment activity, and the performance of our portfolio later in our prepared remarks. Portfolio activity during the quarter consisted of $108.1 million in new commitments to three new portfolio companies and 11 existing portfolio companies, as add-on financings continue to be an important and highly attractive source of originations for us. Portfolio growth for the quarter was offset by $77.2 million in proceeds from eight debt prepayments, which generated a weighted average realized IRR of 12.6%. On the capitalization front, we raised over $38 million in gross equity proceeds during the quarter through our equity ATM program, at a weighted average price of $25.60 per share, or 153% the prevailing NAV per share. During the quarter, we also increased commitments under our SPV credit facility by $50 million, to $200 million. We have remained diligent in ensuring we have strong balance sheet liquidity while also funding a meaningful portion of our investment activity with accretive equity issuances. We continue to maintain a conservative mindset to both BDC leverage and balance sheet liquidity. In fact, balance sheet liquidity at Capital Southwest is at an all-time high, which Michael will provide additional commentary on in a moment. Managing leverage to the lower end of our target range while ensuring strong balance sheet liquidity affords us the ability to continue to invest in new platform companies, as well as provide financing for growth capital and add-on acquisitions for our existing portfolio companies. This is especially true in periods of volatile capital markets when risk-adjusted returns can be particularly attractive. We also believe this strategy allows us to continue to grow our balance sheet while also maintaining the flexibility to opportunistically repurchase stock if it were to trade meaningfully below NAV. On Slide 7 and 8, we illustrate our continued track record of producing steady dividend growth, consistent dividend coverage, and solid value creation since the launch of our credit strategy back in January 2015. Since that time, we have increased our quarterly regular dividend 29 times and have never cut the regular dividend, all while maintaining strong coverage of our regular dividend with pre-tax net investment income. In addition, over the same period, we have paid or declared 25 special or supplemental dividends totaling $4.01 per share, including the newly declared $0.06 per share supplemental dividend for the September quarter, all generated from excess earnings and realized gains from our investment portfolio. Dividend sustainability, strong credit performance, and continued access to capital from multiple capital sources are all core to our overall business strategy. Our track record in all these areas demonstrates the strength of our investment in capitalization management strategies as well as the absolute alignment of all our decisions with the interests of our shareholders. Turning to Slide 9, we lay out the core tenets of our investment strategy. Our core strategy is lending and investing in the lower middle market, the vast majority of which is in first lien senior secured loans to companies backed by private equity firms. In fact, approximately 93% of our credit portfolio is backed by private equity firms, which provides important guidance and leadership to the portfolio companies as well as the potential for junior capital support if needed. In the lower middle market, we also have the opportunity to invest on a minority basis in the equity of our portfolio companies tied with the private equity firm when we believe the equity thesis is compelling. As of the end of the quarter, our equity co-investment portfolio consisted of 69 investments with a total fair value of $133 million, representing 9% of our total portfolio at fair value. Our equity portfolio was marked at 134% of our costs, representing $33.8 million in embedded unrealized appreciation or $0.72 per share. Our equity portfolio continues to provide our shareholders participation in the attractive upside potential of these growing lower middle market businesses, which will come in the form of asset value appreciation as well as equity distributions to Capital Southwest over time. In fact, over the past 12 months, we have received $5.6 million in cash distributions from our equity portfolio, representing $0.13 per share in pre-tax NII. As illustrated on slide 10, our on-balance sheet credit portfolio ended the quarter at $1.3 billion, representing year-over-year growth of 20% from $1.1 billion as of the end of June 2023. For the current quarter, 100% of the new portfolio debt originations were first lien senior secured. And as of the end of the quarter, 98% of the credit portfolio was first lien senior secured. Our weighted average exposure per company remains granular at 1%. We believe our portfolio granularity speaks to our continued investment discipline of maintaining a conservative posture to overall risk management as we grow our balance sheet. We expect that this metric will continue to improve as our asset base grows. I'll now hand the call over to Josh to review more specifics of our investment activity, the market environment, and the performance of our portfolio for the quarter.

Thanks, Bowen. On slide 11, we detailed $108.1 million of capital invested in and committed to portfolio companies during the quarter. Capital committed during the quarter included $47.3 million in first lien senior secured debt across three new portfolio companies, in which we also invested a total of $2 million in equity. In addition, we closed add-on financings for 11 existing portfolio companies consisting of $57.8 million in first lien senior secured debt and $1 million in equity. We are pleased with the strong market position that our team has established in the lower middle market as a premier debt and equity capital provider. This is evidenced by the consistency of our origination activity and broad array of relationships across the country from which our team is sourcing quality opportunities. As a point of reference, currently, there are 73 different private equity firms represented across our investment portfolio. Since the launch of our credit strategy back in January 2015, we have completed transactions with over 100 private equity firms across the country, including over 27% with which we have completed multiple transactions. As Bowen mentioned, competition in the lower middle market has increased over the past six months, resulting in spreads tightening, particularly for high-quality sponsor-backed opportunities. However, due to the depth and strength of our relationships, our team has cultivated over the years, we continue to source and win opportunities with attractive risk-return profiles. For many of the private equity sponsors we work with, they are looking for a lending partner they know and trust. While we may not always be the cheapest financing option, our reputation for being dependable, thoughtful, and constructive partners are key differentiators in winning deals. Turning to slide 12. We continued our track record of strong returns on our exits with 8 debt prepayments during the quarter. In total, these exits generated $77.2 million in total proceeds, generating a weighted average IRR of 12.6%. During the quarter, all prepayment activity was a result of the robust financing market as all eight of these prepayments were refinancings rather than company sales, and six of the eight prepayments were companies with EBITDA north of $30 million. In fact, two of the companies, Intermedia and Vida, were large syndicated credits formerly held at I-45, which were paid off at par. I'll note that since the launch of our credit strategy, we have realized 82 portfolio company exits, representing over $1 billion in proceeds that have generated a cumulative weighted average IRR of 13.9%. On Slide 13, we detail key statistics for our portfolio as of the end of the quarter. The total portfolio fair value ended the quarter weighted 88.9% to first lien senior secured debt, 1.9% to second lien senior secured debt, 0.1% to subordinated debt, and 9.1% to equity co-investment. The credit portfolio had a weighted average yield of 13.3% and a weighted average leverage through our security of 3.8 times EBITDA. The decrease in our weighted average EBITDA across the portfolio for the quarter was driven entirely by the refinancing activity among the larger EBITDA companies in the portfolio as run rate EBITDA in our portfolio continues to grow. Overall, we are quite pleased with the company performance across our portfolio. Cash flow coverage of debt service obligations across the portfolio remains at a healthy 3.3 times despite the higher base rate environment, with our loans across our portfolio averaging 44% of the portfolio company's enterprise value. Quarter-over-quarter revenue and EBITDA growth on a weighted average basis was 5% and 4%, respectively. As seen on Slide 14, our total investment portfolio continues to be broadly diversified across industries, with an asset mix which provides strong security for our shareholders' capital. Asset and industry diversification has been, and always will be, a core tenet of our investment strategy. We continually assess risk both on a company-by-company basis as well as on the overall portfolio. Having originated over 150 deals since we relaunched Capital Southwest as a middle market lender back in January 2015, we are able to leverage our experiences to assess our successes as well as the lessons learned across all industries. We believe that continually improving our institutional knowledge and underwriting processes is key to driving long-term value for our shareholders. On Slide 15, we have laid out our ratings migration across our portfolio during the quarter. As a reminder, all loans upon origination are initially assigned an investment rating of 2 on a 4-point scale, with 1 being the highest rating and 4 being the lowest rating. We had three loans representing $17 million in fair value upgraded during the quarter, while having three loans representing approximately $35 million in fair value downgraded during the quarter. The portfolio remains healthy with 92.4% of the portfolio at fair value rated in one of the top two categories, a 1 or 2. I will now hand the call over to Michael to review the specifics of our financial performance for the quarter.

Thanks, Josh. Specific to our performance for the quarter, as summarized on Slide 16, pretax net investment income was $31.3 million or $0.69 per share, as compared to $29.8 million or $0.68 per share in the prior quarter. Net investment income after-tax was $28.9 million or $0.63 per share for the quarter. The main driver of the increased tax expense this quarter was $2.2 million in deferred taxes related to our taxable subsidiary, CSCI, which holds the majority of our equity investments. These deferred taxes relate to the current cumulative appreciation on our equity portfolio versus the portfolio's current tax basis, and are not payable until we realize gains on portfolio company exits. Moreover, changes in the deferred taxes, positive or negative, do not impact our undistributed taxable income balance at Capital Southwest. During the quarter, we paid out a $0.57 per share regular dividend and a $0.06 per share supplemental dividend. As mentioned earlier, our Board has declared an increase to the regular dividend to $0.58 per share and a supplemental dividend of $0.06 per share for the September quarter. Management and the Board have spent significant time contemplating the impact of a lower interest rate environment on future earnings. Our belief, based on the earnings power of our investment portfolio through steady growth and improved operating leverage, is that increasing the regular dividend by $0.01 this quarter is in the best interest of our shareholders. We have consistently maintained that setting a regular dividend at a level that we believe will never be cut in any foreseeable interest rate environment is key to generating stable, attractive shareholder returns over the long term. We continued our strong track record of regular dividend coverage with 122% coverage for the 12 months ended June 30, 2024, and 111% cumulative coverage since the launch of our credit strategy in January 2015. As a reminder, our intent is to continue to distribute to our shareholders a portion of the excess of our quarterly pre-tax net investment income over our regular dividend and a quarterly supplemental dividend. We are confident in our ability to continue to distribute quarterly supplemental dividends for the foreseeable future based upon our current UTI balance of $0.50 per share, our ability to grow UTI each quarter organically by over-earning our total dividend, and the expectation that we will harvest gains over time from our existing $0.72 per share in unrealized appreciation on the equity portfolio. For the quarter, total investment income increased 11% to $51.4 million from $46.4 million in the prior quarter. The increase was driven primarily by a $3.1 million increase in cash interest income as well as a $900,000 increase in the amendment and other fees quarter-over-quarter. As of the end of the quarter, our loans on non-accrual represented 1.9% of our investment portfolio at fair value and the weighted average yield in the portfolio on all investments was 13.5%. As seen on Slide 17, LTM operating leverage ended the quarter at 1.8%, which was up slightly quarter-over-quarter due to some one-time expenses during the quarter. Our operating leverage of 1.8% continues to compare favorably to the BDC industry average of approximately 2.8%. We believe this metric speaks to the benefits of the internally managed BDC model and our absolute alignment with shareholders. The internally managed model has and will continue to produce real fixed cost leverage while also allowing for significant resources to be invested in people and infrastructure as we continue to build and manage a best-in-class BDC. As we look forward, we expect further improvements in operating leverage as we continue to grow our balance sheet over time. Turning to Slide 18. The company's NAV per share at the end of the quarter decreased by $0.17 per share to $16.60, representing a decrease of 1%. The primary drivers of the NAV per share decrease for the quarter were net unrealized depreciation on our investment portfolio and dilution from the annual issuance of restricted stock to employees, partially offset by accretion from the issuance of common stock at a premium to NAV per share. Turning to Slide 19. We are pleased to report that our balance sheet liquidity is at an all-time high with approximately $485 million in cash and undrawn leverage commitments on our two credit facilities and our SBA debenture commitments, which altogether represented 3.1 times the $158 million of unfunded commitments that we had across our portfolio as of the end of the quarter. During the June quarter, commitments to the SPV credit facility increased $200 million, up from $150 million in the prior quarter. In addition, based on the current borrowing base, we have access to the full $460 million in total commitments on the ING-led corporate credit facility. This facility has an inquiry-in feature, allowing for the further increase in total commitments up to an aggregate of $750 million, allowing us to continue to grow our revolver capacity in lockstep with the growth of our overall balance sheet. We are actively working to further increase commitments to the corporate credit facility and we'll provide updates on that process in the coming months. As a reminder, in March 2024, we submitted a MAC application to the SBA, which began the process towards a second SBIC license. We are actively working with the SBA and are hopeful to complete this process by the end of the calendar year at the latest. We look forward to providing updates on this process as they become available. Finally, as of the end of the June quarter, 49% of our capital structure liabilities were in unsecured covenant-free bonds with our earliest debt maturity in January 2026. Our regulatory leverage, as seen on slide 20, ended the quarter at a debt-to-equity ratio of 0.75:1, down from 0.82:1 as of the prior quarter. While our optimal target leverage continues to be in the 0.8:0.95 range, we are weighing the impact of future base rate reductions and maintaining adequate cushion levels to allow us the flexibility to potentially increase leverage to support future earnings and dividend growth. We will continue to methodically and opportunistically raise secured and unsecured debt capital as well as equity capital through our ATM program to ensure we maintain significant liquidity and conservative balance sheet leverage with adequate covenant cushions. From a capital markets perspective, BDCs have been very active in the unsecured debt market over the past few months as investors remained constructive on new bond issuances. Despite not having any maturities within our debt structure until 2026, we are actively evaluating financing transactions to mitigate future capital markets volatility while also being mindful of the current interest rate environment. I will now hand the call back to Bowen for some final comments.

Thank you, Michael, and thank you, Josh. And again, thank you, everyone, for joining us today. As always, we appreciate the opportunity to provide you with an update on our business, our portfolio, and the market environment. Our company and portfolio continued to demonstrate strong performance, and we continue to be impressed by the job our team is doing in building a robust asset base, deal origination and portfolio management capability, as well as a flexible capital structure. We believe we have prepared our company well for future growth and performance. The overall health and security of our portfolio is strong. Our credit portfolio is predominantly made up of first lien senior secured loans allocated across a broad array of companies and industries, the vast majority of which are backed by private equity firms. Further, interest coverage of the debt obligations across our portfolio is a strong 3.3 times with significant equity cushion and support below our debt investments. Additionally, our equity co-investment portfolio gives our shareholders participation in the equity upside of many of these growing lower middle market businesses, providing further enhancement to our long-term shareholder returns. Last but not least, we have a very well-capitalized balance sheet with multiple capital sources and balance sheet liquidity that is at an all-time high, all of which provides our company an exciting runway to continue to grow and generate strong shareholder returns for years to come. This concludes our prepared remarks. Operator, we are now ready to open up the lines for Q&A.

Thank you. Our first question comes from Mickey Schleien from Ladenburg Thalmann.

Yes. Good morning, everyone. Bowen, how would you describe your interest in non-sponsored deals in the current market to help offset spread compression in the sponsored finance segment? Additionally, how do those deals compare to the sponsored ones in terms of the size of the portfolio company and deal structure?

We've always been open to non-sponsored deals, and we have a few in our portfolio. We know the space can be attractive, but we would need them to have higher equity cushions, and we typically see slightly higher yields, though not always, compared to funded sponsors, along with tighter credit documents. To answer your question, we're definitely open to it. Our deal flow from the sponsor community has been very strong, and we've noted increased competition in the market. In the last quarter, we've lost a few deals due to our unwillingness to leverage companies as much as other lenders or due to pricing. On the non-sponsored side, we definitely have an appetite for those deals, and we receive inquiries for them. While it hasn't been a major focus for us, it's certainly a market we understand.

Mickey, I'd like to highlight that when we take a broader look at our yields and the returns needed to increase the dividend, our average yield on new platform companies has been 7.5% over the past two years. However, in the last two quarters, this has decreased slightly to just below 7%. Nonetheless, we still consider these spreads to be strong. We are not actively seeking additional spreads due to the recent tightening, but overall, when examining the blended return spreads, they remain quite healthy across the board.

I appreciate that, Michael. And one follow-up question. Could you give me a sense of the average SOFR floors in your debt investment portfolio?

All of our new deals have generally included 2% floors.

But it's on a weighted 1.5%.

I'm sorry. Can you repeat that?

Sure. It was about 1.5% across the total portfolio.

Okay. Thanks for that. Those are all my questions. Appreciate your time.

Thank you. And one moment for our next question. And our next question comes from Bryce Rowe from B. Riley. Your line is now open.

Thanks a lot. Good morning. Maybe Bowen or even Chris, I appreciate the details in the prepared remarks around kind of the repayment activity, especially calling out those that came out of the I-45 portfolio. Just kind of curious, how do you kind of size up or handicap the portfolio as it sits right now? I assume those refinanced investments were kind of lower-hanging fruit and more obvious, and just kind of trying to think about what the potential for continued refinance activity might be?

I believe we discussed this yesterday. What we observed in the last quarter was likely a significant increase in prepayment activity due to a strong market. There is ample liquidity available, and a lot of refinancing is happening because of the current volatility in the capital markets. You might see that activity slow down a bit. We have a couple of companies undergoing sale processes, but we aren't facing a lot of prepayments at the moment. Therefore, I would expect prepayment activity to decline in the near term, and possibly in the intermediate term, compared to last quarter.

I would say for this quarter specifically, I expect it to be somewhere in the $20 million to $30 million this quarter. And Bowen's point, I think that the information we're getting is some of the portfolio companies will look to have exits sometime in mid-2025 or end of 2025. So, we might have a little bit of a reprieve, haven't seen so many happen just this quarter.

Okay, that's helpful. And then any commentary around the more elevated dividend income for the quarter? Should we consider that to be more one-time?

Yes. So, this quarter, we had about $1.4 million of the dividend income were from dividend recaps. So, obviously, that's going to be one-time in nature. But there was another almost $600,000 of recurring dividends coming off of our equity portfolio. And we have seen that, and we have somewhere between $0.5 million and $2 million of equity investment, and many of these companies do produce some level of dividend income on a quarterly basis.

Okay, that's helpful, Michael. And then last one for you, Michael. In terms of maybe a comp guide for us. We've had some volatility in the compensation expense line, just any thoughts around that would be super helpful.

Yes. This quarter, we reported total compensation at $4.7 million, which included some one-time expenses. Therefore, the run rate is around $4.3 million per quarter. For general and administrative costs, we had several one-time expenses this quarter due to it being our proxy and shareholder meeting quarter and conducting a compensation study every two years for management and the Board. The run rate for G&A should be about $2.5 million. Consequently, the total expenses for selling, general and administrative costs should be approximately 6.8% moving forward, instead of the current 7.6%.

Okay. Awesome. Thank you so much.

And thank you. And one moment for our next question. Our next question comes from Sean-Paul Adams from Raymond James. Your line is now open.

Good morning. Regarding the downgrades and risk ratings in the portfolio, we previously mentioned that the watchlist was trending positively, with some non-accruals showing turnaround potential. With the recent downgrades of a few companies to Levels 3 and 4, increasing from 5.3% last quarter to 7.6%, has there been any additional pressure on previously low-risk holdings in the portfolio?

The overall situation with the watchlist has slightly improved as a group. There were no new non-accruals this quarter. We saw two downgrades from a rating of two to three, both involving equity-backed companies. In each case, the private equity firm that invested significantly in these companies sees potential for turnaround, despite one indicating softer consumer demand. Additionally, we downgraded one company to a rating of four because we chose not to participate in a liquidity round, believing it carried too high a risk of losing additional funds. This particular downgrade is in the pharmaceutical services sector.

Another capital did come in to support that deal. So there is definitely value there.

They definitely have capital coming in to support it on a priming basis in that case. That's why we downgraded it and chose not to participate. However, aside from that, the watchlist as a group has shown improvement, consistent with the last quarter.

Turning over to kind of your thoughts on leverage levels and whether or not you guys are overlaying that with the forward curve, which has really moved around quite a bit, I think we're looking at like a 100 bps reduction in the three months over by January. To what extent are your thoughts around the shifting the leverage dependent on these changes in the curve? Or what are your general thoughts operating with those two in tandem?

We have made a corporate decision to reduce our leverage, anticipating that interest rates will decrease. While it’s uncertain, we expect there could be about eight rate cuts in the coming months, which will likely affect earnings. However, our portfolio is strong enough to generate solid earnings. By remaining unlevered and maintaining substantial liquidity, we can seize investment opportunities as market conditions become challenging. This strategy will enable us to originate loans when others may be hesitant, allowing us to modestly increase leverage and enhance our earnings and dividends. This summarizes our outlook moving forward.

Got it. Got it. So more of a wait-and-see and wait until the forward curve stabilizes more before you deploy? Or are you guys just looking for any opportunities that come up from now to stabilization?

Let me clarify. Are you asking about our portfolio company investments or are you asking about the BDC corporate leverage?

BDC corporate leverage?

Okay.

Yes. I would also mention that we increased the dividend this quarter. We had kept it flat for several quarters while we took a wait-and-see approach to the rate environment. Since rates remained elevated for an extended period, we were able to enhance our portfolio and reduce our operating leverage. This gave us greater confidence in anticipating where the low point may be when the rate cycle eventually bottoms out, which could realistically be in the low to mid-3s or around that range.

Got it. Thank you. I appreciate the color.

And thank you. And one moment for our next question. Our next question comes from Doug Harter from UBS. Your line is now open.

This is actually Cory Johnson on for Doug. You mentioned that competition has increased and that spreads have tightened. Can you talk about what you see as other lenders may be giving up in the market in terms of possibly covenants in order to be able to win deals, is the quality of these covenants as strong they were previously?

Yes. Generally, we haven't observed any significant deterioration in covenants in our new deals. Covenants tend to fluctuate slightly within a narrow range in the lower middle market. Regarding lost deals, it's often because we propose a certain leverage level that may be lower than what the sponsor desires, leading them to choose another lender who meets their request. Recently, as Josh mentioned, spreads have tightened, resulting in a higher percentage of lost deals related to pricing than we typically experience. We're continuing our usual practices as risk and credit managers, making decisions based on risk-adjusted returns and pricing. The market has a cyclical nature: we've seen competition rise and fall, and spreads tighten and widen over time. From my experience, when rates decline, spreads usually widen, and increased market volatility typically leads to wider spreads as well. We will see how things develop, but this should give you an idea of the competitive landscape.

And the other thing to point out, look, we're on the lower middle market. And so when you talk about covenants, the covenants are there. I mean, you'll see that 100% of our deals will have strong covenants. It's not like the syndicated market where you'll see strong add-backs or covenants being dropped or no covenants at all. So the lower middle market is going to be very consistent in that way. So just echoing Bowen's comments, but making sure that you understand that that will be consistent in our business plan.

Great. Thank you.

And thank you. And I'm showing no further questions. I would now like to turn the call back over to Bowen Diehl for final remarks.

Thanks, operator, and thanks, everybody, for joining us. We appreciate your time and always love telling you about the performance of our business. And we look forward to talking to you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.