Kinetik Holdings Inc. Q4 FY2022 Earnings Call

Hello, everyone, and welcome to the Kinetik Fourth Quarter 2022 Results. My name is Nadia, and I'll be coordinating the call today. I will now hand over to your host, Maddie Wagner, Director of Investor Relations to begin. Maddie, please go ahead.

Thank you. Good morning, and welcome to Kinetik's Fourth Quarter 2022 Earnings Conference Call. Here with me is our President and Chief Executive Officer, Jamie Welch, as well as Matt Wall, our Chief Operating Officer; Steve Stellato, our Chief Accounting and Administrative Officer; Todd Carpenter, our General Counsel; Trevor Howard, our Vice President of Finance; and Chris Kendrick and Tyler Milam, our Vice Presidents of Commercial. The press release we issued yesterday, the slide presentation and access to the webcast for today's call are available at www.kinetik.com. Before we begin, I would like to remind all listeners that our remarks, including the question-and-answer section, will provide forward-looking statements, and actual results could differ from what is described in these statements. These statements are not guarantees of future performance and involve a number of risks and assumptions. We may also provide certain performance measures that do not conform to U.S. GAAP. We've provided schedules that reconcile these non-GAAP measures as part of our earnings press release. And after our prepared remarks, we will open the call to Q&A. With that, I will turn the call over to Jamie.

Thank you, Maddie. Good morning, everyone, and thank you for joining us today. We reported our full year 2022 results yesterday afternoon as well as issued our 2023 guidance. Last week marked the 1-year anniversary of the merger, forming Kinetik, and our team has done a tremendous job. So thank you to our employees for going above and beyond this past year. They have successfully integrated both assets and people following the merger, all while operating in a safe and reliable manner. And as always, I would like to thank you, our investors, for your continued support. Yesterday, we reported full year pro forma 2022 adjusted EBITDA of $822.2 million, which was within our revised guidance range provided in August and notably above our initial guidance from last February. This was despite weaker commodity prices in the fourth quarter, particularly in December, and the impacts of Winter Storm Elliott in late December. In addition to our results, we announced yesterday another highly strategic project expanding our gas gathering system into Lea County, New Mexico. This project is extremely important and candidly transformative for our company. This has long been part of our strategic vision to extend our operations further north and provide New Mexico producers access to Kinetik's best-in-class gathering and processing network. The system expansion is fully supported with a substantial minimum volume commitment under a long-term gathering and processing agreement with a large-cap investment grade counterparty. This project will serve as an entry into a new market within the Delaware Basin. We will construct more than 20 miles of new large diameter, high-pressure pipeline north from the existing Kinetik gathering system in Loving County, Texas, into Lea County, New Mexico and connect to Kinetik's existing processing complexes. The project is estimated to be in service in early first quarter of 2024 and will position us for additional commercial opportunities with both new and existing customers in an area of the basin that continues to see significant development activity and growth potential. 2023 is an execution and transition year that sets Kinetik up to be the very best version of itself in 2024. Think of it as Kinetik Next. We have a number of strategic projects underway, which will be placed in service at the end of this year, including Delaware Link and the PHP expansion. And next year, with the expansion into New Mexico and front-end amine treating at all of our processing complexes that will result in impressive EBITDA growth in 2024. These projects are all mid-single-digit and materially change our cash flow profile in 2024. These projects will allow us to further improve our reliability while providing a differentiated service offering of both blending and treating for customers as well as enhanced residue egress to the Gulf Coast. We believe our overall product offering will become even more compelling for producers and customers in the capacity constrained areas of Southern New Mexico. We would be remiss to not discuss the 2023 commodity price outlook given that 2022 benefited from higher commodity prices. Last year, we saw geopolitical events, most notably the Russia-Ukraine conflict that reinforced the importance of U.S. natural resources, including crude oil, natural gas, and natural gas liquids products. Three Permian to Gulf Coast residue gas pipeline projects reached FID last year in anticipation of the capacity constraints that we have already begun to experience. In the fourth quarter of 2022, we saw, in fact, how constrained and tight the market actually was when planned maintenance events resulted in depressed pricing at Waha. In 2023, we expect continued price volatility at Waha. The Whistler and PHP pipeline expansions will help in the latter part of this year. However, given the forecasted annual natural gas growth from the basin of 1.5 billion to 2 billion cubic feet per day throughout this decade, we will continue to face constraints and require new pipelines out of the Permian Basin. Permian residue gas will continue to provide the critical feedstock for global LNG demand, most notably on the Gulf Coast. As it pertains to Kinetik, commodity prices will not be as favorable in 2023 relative to 2022. However, we have been actively hedging our 2023 exposure to derisk this, which we will touch on momentarily. Additionally, once the PHP expansion capacity is placed in service, our exposure to Waha will be reduced to zero. Similar to our previous 2022 quarterly earnings results, many of the figures today will be reported on a pro forma basis, assuming the business combination between our predecessors, BCP and Altus closed on January 1, 2022. We believe it is more reflective of our actual results and helps to reconcile our 2022 full year guidance. Moving to our recent highlights on Page 3. We reported pro forma adjusted EBITDA of $822.2 million for the year, meeting our revised 2022 guidance presented in August. Despite lower commodity prices and winter weather events, we benefited from increased volumes across both the midstream logistics and pipeline transportation segments. As mentioned on our call last quarter, three large gas gathering and processing agreements commenced in the fourth quarter. As such, we processed record volumes in the quarter. Our core shareholders, Apache, Blackstone, I Squared, and Management have agreed to continue to reinvest 100% of their dividends from their base shares as part of the DRIP in 2023. This will help preserve cash to fund our 2023 capital program while working towards our 3.5x leverage target. In our press release, our three institutional core shareholders emphasize their continuing support of Kinetik and their conviction in our 2024 growth. I highly recommend reading their statements if you have not yet had the chance to do so. It is also worth noting management's actions. The management team believes in the company and its future and that the stock at its current price is very much undervalued. So the team has requested, and the Board has approved to pay 2022 performance bonuses in Kinetik stock. The Board has also authorized a $100 million share repurchase program. Any stock acquired under the repurchase program is expected to be reissued under the DRIP. At current stock price levels, the repurchase program would represent over 25% of the stock expected to be issued under the DRIP for the year. We believe the repurchase program will afford us more control of our DRIP issuance price and allow us to potentially acquire shares at levels that do not reflect our earnings power in 2024 and beyond and opportunistically acquire stock from short-term investors while continuing to increase our partnership with longer-term investors and our core shareholders. I would now like to hand the call over to Matt Wall, our Chief Operating Officer, to provide an operational update.

Thanks, Jamie. In the fourth quarter, we achieved a new quarterly record for gas process volume at 1.2 billion cubic feet per day, representing a 9% increase year-over-year. Crude volumes gathered were flat year-over-year at 73,000 barrels per day and up 8% quarter-over-quarter. Water-gathered volumes were 146,000 barrels per day and up approximately 11% quarter-over-quarter as our largest customer completed their recycling efforts and resumed normal deliveries. The Diamond Cryo expansion of 120 million cubic feet per day of incremental capacity is currently under construction and on budget and is scheduled to start up in April of this year. In 2022, we replaced or avoided the addition of 32,000 horsepower of rental compression with 10 company-owned surplus compression units. Annualized, this translated to over $4 million of operating expense savings. We also completed the super system interconnect on time and on budget in June of last year. This project allows us to access the latent capacity at the Diamond Cryo complex and leverage the SRX technology, resulting in enhanced system recoveries. This is especially important in today's commodity price environment. We also achieved approximately $20 million of cost synergies through operating expenses, G&A, and ad valorem tax reductions following the merger. In 2023, we expect to achieve an additional $20 million of integration cost synergies. We plan to replace or avoid adding an additional 30,000 horsepower of rental compression given the inflationary environment today, in particular, with respect to compression rental rates. The compression relocation projects represent more cost savings than originally anticipated at the time of the merger announcement. Front-end amine treating will also be placed in service at the East Toyah cryo complex later this year and at the Pecos and Pecos Bend complexes in 2024. The addition of treating to our processing complexes will result in margin expansion with our customers and allow us to receive gas that would have previously been considered off spec. For example, the addition of treating has allowed us to expand our operations into New Mexico, where the gas has higher CO2 and H2S content. Delaware Link, our wholly owned 1 billion cubic feet per day intra-basin residue gas pipeline, is progressing as planned. Delaware Link will connect to the Pecos Bend and East Toyah cryo complexes directly to PHP. The project remains on track to be placed in service by November 1 of this year. The PHP 550 million cubic feet per day expansion also remains on track for a November 1 in service. This past year, we became the first and only midstream company to link 100% of our debt capital structure to sustainability-related initiatives, and we have made substantial progress towards our sustainability performance targets and ESG-related goals. Two of three sustainability performance targets are linked to Scope 1 and Scope 2 greenhouse gas and methane emissions intensity reductions. Over the past year, we began implementing several strategies to progress our emissions reduction goals, including the application of new technology, heightened leak detection and repair practices, and increased training. We will provide an update on our progress later this year. Our third sustainability performance target seeks to increase our female representation in corporate officer positions to 20% by 2026. Already in 2022, we increased our female representation in corporate officer positions to just over 17%, which is above our industry peer average. To reinforce our commitment to ESG initiatives, our 2022 compensation program tied 20% of all employees' at-risk pay to the achievement of specific ESG-related goals. In 2023, we will repeat the same approach. We will look to publish our 2022 ESG report midyear, providing additional context on our sustainability initiatives and 2022 achievements. With that, I would like to turn the call over to Trevor Howard to review our financial results and present our 2023 guidance.

Thanks, Matt. Staying on Page 5 we reported adjusted EBITDA of $211 million in the fourth quarter of 2022. We also generated an adjusted pro forma distributable cash flow of $142 million and free cash flow of $92 million. On January 17, we declared a $0.75 per share quarterly cash dividend, representing a pro forma dividend coverage ratio of 1.5x for the quarter. We exited the quarter with a 4x leverage ratio and remain confident in our ability to achieve our long-term leverage target of 3.5x. Total capital expenditures for the quarter were $68 million, $22 million of which was associated with the pipeline transportation segment and more specifically, funding for the PHP expansion and Delaware Link. Our Midstream Logistics segment generated a pro forma adjusted EBITDA of $133 million in the fourth quarter. Year-over-year, our segment adjusted EBITDA was up 2% despite a $12 million commodity headwind in the quarter. Additionally, Winter Storm Elliott affected gas and crude volumes on our system during the second half of December. However, despite the weaker commodity prices and winter weather, we met our full year 2022 revised guidance. Shifting to our Pipeline Transportation segment, we had another record quarter. We generated adjusted EBITDA of $79 million, up 8% year-over-year. For the full year 2022, we reported pro forma adjusted EBITDA of $822 million, million of distributable cash flow, and $372 million of free cash flow. Our total capital expenditures for the year were $284 million, $116 million of which was associated with the Pipeline Transportation segment. And lastly, we realized approximately $30 million of integration cost synergies in 2022 through compression relocation projects, system optimization, and other cost reductions, all of which exceeded our 2022 EBITDA synergy target of $25 million. Now I would like to discuss our 2023 outlook and guidance which you can find on Pages 9 through 12. Our 2023 adjusted guidance is $800 million to $860 million. Our underlying business remains strong in 2023 with respect to volumes and operational performance. However, commodity prices are lower year-over-year. Within our Midstream Logistics segment, 2023 will benefit from the annualization of several contracts that commenced in the fourth quarter of 2022, as well as a number of new contracts that will begin this year. Additionally, we expect modest growth from our current customer contracts year-over-year. Taken together, the midpoint of our 2023 guidance is predicated on an almost 20% increase in processed gas volumes with a 15% increase in gas fee-based gross profit year-over-year. We expect to exit the year with approximately 1.5 billion cubic feet per day of processed gas volumes representing a 20% increase over fourth quarter 2022 processed gas volumes. We expect to realize approximately $50 million of total EBITDA synergies this year through additional compression relocation projects, further system optimization, and the installation of front-end amine treating. Within the Pipeline Transportation segment, Delaware Link and the PHP expansion will be placed in service at the end of this year. Almost all of the capital for these projects will be spent this year. However, we will not see a full-year EBITDA benefit until 2024. As such, we estimate December 2023 annualized adjusted EBITDA to be approximately $900 million. In 2023, commodity price reductions are expected to offset fee-based earnings growth within our midstream logistics segment and the contributions from the pipeline transportation projects placed in service at the end of this year. On Page 11, we have detailed our full year 2023 commodity price exposure and price sensitivities to our guidance. Our 2023 guidance assumes market forward prices of approximately $76 per barrel for WTI, $2.07 per MMBtu for natural gas, and approximately $0.69 per gallon for natural gas liquids. For comparison, 2022 actual prices were over $94 per barrel for WTI, greater than $5.20 per MMBtu for natural gas, and approximately $0.96 per gallon for natural gas liquids. Note that is approximately a 20%, 60%, and 30% year-over-year reduction in crude, gas, and natural gas liquids prices. As discussed earlier by Matt, high gas transportation capacity utilization rates and continued Permian gas supply growth likely translates to a turbulent year for natural gas pricing at Waha until the new pipeline projects are placed in service later this year and in 2024. Staying in front of this dynamic, we layered on ethane and natural gas spread hedges in late 2022. This will result in us running several of our processing plants and recovery and reduce our equity natural gas exposure to effectively zero. And I would further note that with the in-service of the PHP expansion project, Kinetik customers and our equity volumes will be protected against Waha volatility given Gulf Coast pricing on PHP. Less than 10% of our 2023 total gross profit is exposed to commodity prices, and over 75% of this direct commodity price exposure is not influenced by natural gas prices. A 25% increase or decrease in commodity prices is expected to impact 2023 gross profit by 2.5%. We have been actively derisking our 2023 commodity exposure through our Board-approved hedging program and will continue to do so throughout the year. Capital expenditures guidance remains elevated as we fund several strategic growth projects. Our 2023 guide is $490 million to $540 million. This includes $235 million to $265 million of midstream logistics capital and $255 million to $275 million of pipeline transportation capital. Our midstream logistics capital guidance includes $90 million of maintenance and growth projects, $115 million of high-pressure gathering capital, and $45 million of our remaining integration capital. Following 2023, there will be no further integration capital spend. The $115 million of high-pressure gathering capital expenditures includes capital to support the New Mexico system expansion and remaining spend associated with the previously announced 2022 contracts. Pipeline transportation capital guidance includes the Delaware Link and the PHP expansion projects. Our 2023 capital expenditure guidance is in line with our previously communicated expectations when excluding the New Mexico expansion. In 2024, we expect to return to a capital program of less than $150 million, assuming no spend for new processing capacity nor the Shin Oak and GCX expansions. Turning to Page 13. As we previously announced, we made great strides in 2022 to clean up our balance sheet. First, we completed our comprehensive $3 billion sustainability link refinancing in June and fully redeemed the Series A preferred in July. Later in the year, we swapped 100% of our Term Loan A floating rate to fixed through April 2023 and swapped $1 billion of floating rate exposure to fixed through May 2025. As a result, Kinetik floating rate exposure as a percent of total current debt outstanding has been reduced to less than 15% through April and approximately 40% thereafter. We will continue to actively derisk our floating rate exposure through additional swaps and additional notes issuances. We remain committed to achieving a 3.5x leverage target and investment-grade credit ratings. We expect to maintain our $0.75 per share quarterly dividend in 2023, and we look to recommend a minimum 5% dividend increase once we have met our capital allocation priorities. And with that, I would like to open up the lines for Q&A.

Our first question today goes to Michael Cusimano of Pickering Energy Partners.

Interesting growth opportunities on the horizon. But I feel like funding has kind of come up a few times or it's a bit of a question mark. So we've seen the Permian gas pipes that you own got some pretty high multiples. Is that an option instead of debt or equity? Could you sell some interest in some of your long-haul gas pipelines?

So Michael, thanks for the question. It's Jamie. Look, I think you're right in the context of we always are presented with some interesting growth opportunities as evidenced by what we announced last night with New Mexico, which is obviously a big deal from our standpoint and probably the best means for us to make sure that we completely fill up our existing processing complexes. As we continue going forward and we look for opportunities, probably the easiest button we have is a GCX sale. Honestly, there's a marker out there done last year by Targa to a private equity firm. It's straight up, take-or-pay, nice duration of contracts. Obviously, the only question mark out there is whether it will actually get expanded or not. But I definitely think that is something that we've been ruminating about. We're not acting on it at this point, but we're certainly thinking about it as far as what exists within our toolkit as we consider and contemplate more and different growth opportunities going forward.

And the next question goes to Jackie Koletas of Goldman Sachs.

First, I would just like to touch you've commented that you expect around 1.5 Bcf a day in gas processing. I was wondering if you could give a sense of what you're thinking for overall Permian Basin growth and how much you were baking in additional contracts for your open processing capacity there?

So Jackie, it's Jamie. I'll let Trevor respond to part of this. Regarding additional contracts, we're not factoring any in. In fact, we may have taken on more risk with our existing customers, so we're being cautious. As for overall growth in the Permian, as we mentioned earlier, we expect a cross-basin increase of about 1.5 to 2 Bcf per day in residue gas. Last year, we observed actual growth of 2 Bcf per day in residue gas from the Permian. We believe that as gas-oil ratios increase and some of our customers explore various benches in the hydrocarbon stack, overall gas growth will remain strong. Trevor, do you have anything to add?

Yes. Thanks for the question, Jackie. I think from our vantage point, we're going to continue to grow with our existing customers. And I think the genesis of your question is what sort of market share gains are we potentially baking in? And I think with the contracts that were announced in the middle of last year and the new project that was announced this morning or last night, extending into New Mexico, I think should be pretty representative of sort of the market share gains that we are achieving and expect to achieve not just in 2023 but as the New Mexico gathering expansion is completed and move forward into 2024.

Okay. Great. And just to have a quick follow-up. Given that gas prices are so low, how are you thinking about Apache's activity on Alpine High specifically?

You will see that the Alpine High activity, which was contractually committed due to the proceeds from last year's sell-down, includes a couple of wells for this first quarter, and most of the remaining activity is scheduled for the end of the year. Therefore, the gas growth from Alpine High will mainly occur in 2024 rather than in 2023. We are noticing an increase in overall gas activity as we approach the end of this year and look into next year. However, gas prices have been quite low in the early part of the year, and our overall commodity assumptions indicate a gas price expectation of $2.07. There's likely more to come, especially from the Apache side. In summary, we should see significant developments from Alpine High by the end of the year.

And the next question goes to Spiro Dounis of Citi.

I wanted to go to the new agreement in Lea County, if we could. You guys mentioned, obviously, you're a new entrant to the basin there. And so I'm just curious, as you think about the commercial strategy and winning business against the incumbents, how do you guys think you're going to be able to do that? And you also mentioned high levels of activity there as you look out to 2024 and you continue on this path, how much of any of that activity is sort of considered in that of CapEx you highlighted.

Let me begin by discussing the overall opportunities we see. Chris Kendrick, our VP of Commercial, will elaborate on this shortly. We have allocated $115 million this year for capital expenditures related to our pipeline. A substantial part of this is earmarked for the high-pressure connection in New Mexico. While New Mexico itself is one aspect, it’s essential to consider it alongside our treatment capabilities. We recognize that the region presents challenges due to high H2S, CO2, and nitrogen levels. Our system is equipped to blend and process these elements, something we haven't done historically because our system was limited. However, that will change with the implementation of front-end amine treating at all our processing facilities by the end of this year and into the next. This approach will work in tandem with our operations. Now, Chris, could you share your insights on the opportunities we see?

Spiro, this is Chris. Look, as Jamie mentioned before, this has been a strategic goal for Kinetik for a long time even when we've gone back to when we were at EagleClaw. And I think it's pretty exciting to what we've done over the last couple of years with the North and a lot of this is due to Matt's team and running a great operation and run time because that's #1 for the customer. As we think about New Mexico, for us, it's pretty exciting to be able to offer in New Mexico customers a solution for processing in Texas, effectively moving those residue gas molecules through our pipe to delink and ultimately to the Gulf Coast. That's a pretty compelling solution for some of these customers in New Mexico who are constrained. So we're excited to have these discussions and hope to be able to talk about some more growth here in the future.

Got it. And then moving to the $900 million of the run rate you guys pointed to for December '23. Curious how much of that reflects G&P volume behind the system waiting for PHP to come online. Some of the way once PHP does enter service in November, I don't expect you see those volumes kind of rush in at the back end of the system. Could we see sort of several quarters after the fact kind of ramp up on the G&P side?

I think that's a reasonable view. As a management team, we've been contemplating what a turn-in-line forecast entails, especially given the lower pricing we're experiencing. We're anticipating some improvement towards the end of the year, particularly in November and December, when we expect to see increased activity. With Whistler and PHP expansion coming online, this should allow the basin some breathing room to plan the next steps.

Got it. Great. Last one, if I could just quickly sneak it in. Just looking out to 2024, it seems like the setup today is for a fairly nice inflection point in free cash flow. You've got CapEx coming down. You obviously have EBITDA projected to be a lot higher. So that does come up with few options as you think about capital allocation. And so I'm just curious, you've got several things going obviously, a lot of robust growth. You've some capital return this year and so maybe an expectation you sort of return to that next year. Then you're also trying to sort of deleverage and achieve investment-grade. So I guess how are you thinking about those options in 2024 when you do have a little more free cash flow in front of you?

I believe our capital allocation priorities are focused on maintaining the 3.5x leverage target and increasing the dividend. This is a key objective for us.

And our next question goes to Robert Mosca of Mizuho Securities.

Just wondering, so now that, I guess, Grand Prix is off the table. I know you guys have identified that as a potential acquisition target. I'm just wondering how that affects your desire to increase the downstream connectivity of your system? Could we see that mindset shift to perhaps getting more involved on a fractionator asset or aligning more closely with the specific midstream providers such as EPD. Just curious to hear your thoughts there.

We have consistently indicated our preference for a vertically integrated business. We recognize that this year involves significant capital expenditures, and we have collaborated with our main shareholders to ensure this is funded responsibly from both a balance sheet and credit perspective. As we look ahead to 2025, we should not expect the capital investments of under $150 million to start increasing again. Our top priorities include New Mexico, treating, PHP expansion, and the Delaware length for Kinetik NGL, as these are central to our vision. Other initiatives may be interesting but do not hold the same level of priority or importance. Moving into 2024 and beyond, we anticipate favorable conditions, especially as we observe growth from our producers and customer opportunities, whether in New Mexico or Central Reeves.

Got it. That's helpful color, Jamie. And also wondering if you could expand a little bit on the outlook for GCX expansion. We've seen some contracts we signed with these other greenfield pipeline offerings. I'm just wondering, does that expansion look better now that gas prices are lower and presumably fuel prices are lower. Just wondering what's keeping a lid on that expansion from happening?

I find this topic quite intriguing. Chris Kendrick, who serves on the Board with me at PHP, and I often discuss this. We feel there is a significant focus among producers on developing new steel. They're looking for new egress. While increasing fuel percentages on our existing pipeline might quickly help in a tight situation, I honestly believe, considering the recent developments with GCX, that Whistler did an excellent job. They acted promptly, completed their work, and built a lateral into the Midland to access additional volumes. I think they executed very well. However, I'm uncertain about the future of GCX. It seems more likely that we will hear about projects like Warrior pipelines moving forward within the next 18 months or reaching a final investment decision by that time, rather than developments with GCX. You'd need to check with Kinder for more details, as they have been the primary party involved. For us, it remains a small part of the equation, but I doubt that an expansion of GCX will happen in the near future. Chris, what are your thoughts?

Rob, this is Chris. And I agree with what Jamie said. Producers overwhelmingly want new steel in the ground versus these pipeline expansions. And also, since we did PHP expansion, the market softened a little bit in the fourth as well. You have Matterhorn coming on later in 2024. So it's just going to take more time to get a project done. With that being said, the Kinder team is still looking at it, and we'll see what happens.

Great. Great. And maybe just 1 quick last one. I just wanted to kind of confirm what I thought I heard in your prepared remarks. Just the function of that $100 million buyback program, absolutely just you could be more opportunistic when it comes to, I guess, the share price of these PIK shares are offered at and that's why you didn't just take down that 100% to 75%. Just you have some more, I guess, autonomy over the share price you're purchasing at.

We believe the current price is considerably undervalued. If we have the chance to take advantage of something the market isn't fully recognizing, we will proceed, as the Board has authorized us to do so. This could potentially allow us to execute a buyback at a lower price compared to the ultimate issuance price under the DRIP in the coming quarters, which would be beneficial. Overall, we see this as an excellent mechanism for self-improvement.

Thank you. We have no further questions. I'll hand back to Jamie Welch for any closing remarks.

Thank you, everyone, for your time this morning. We're excited for our 2023 execution year and year of transition, and we look forward to catching up with you all relatively shortly on the conference circuit. So thank you very much, and have a great day.

Thank you. This now concludes today's call. Thank you so much for joining. You may now disconnect your lines.