Orchid Island Capital, Inc. Q3 FY2025 Earnings Call

Good day, and thank you for standing by. Welcome to the Orchid Island Capital Third Quarter 2025 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, Melissa Alfonzo. Please go ahead.

Good morning, and welcome to the Third Quarter 2025 Earnings Conference Call for Orchid Island Capital. This call is being recorded today on October 24, 2025. At this time, the company would like to remind the listeners that statements made during today's conference call relating to matters that are not historical facts are forward-looking statements subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Listeners are cautioned that such forward-looking statements are based on information currently available on the management's good faith belief with respect to future events and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in such forward-looking statements. Important factors that could cause such differences are described in the company's filings with the Securities and Exchange Commission, including the company's most recent annual report on Form 10-K. The company assumes no obligation to update such forward-looking statements to reflect actual results changes in assumptions or changes in other factors affecting forward-looking statements. Now I would like to turn the conference over to the company's Chairman and Chief Executive Officer, Mr. Robert Cauley. Please go ahead, sir.

Thanks, Melissa. Good morning. Hope everybody is doing well, and I hope everybody has had a chance to download our deck as usual. That's what we will be focusing on this morning. And also, as usual, turn on Page 3, just to give you an outline of what we'll do. The first thing we'll do is have our controller, Jerry Sintes go over our summary financial results. I'll then walk through the market developments and try to discuss what happened in the quarter and how that affected us as a levered mortgage investor. Then Hunter, I will turn it over to Hunter who'll go through the portfolio characteristics and our hedge position and trading activity, and then we'll kind of go over our outlook going forward. And then we will turn it over to the operator and you for questions. So with that, turn to Slide 5, Jerry.

Thank you, Bob. Slide 5, we'll go over the financial highlights real quickly. For Q3, we reported net income of $0.53 a share compared to a 29% loss in Q2. Book value at 9/30 was $7.33 compared to $7.21 at June 30. Q3 total return was 6.7% compared to a negative 4.7% in Q2, and we had a $0.36 dividend for both quarters. On Page 6, our average portfolio balance was $7.7 billion in Q3 compared to $6.9 billion in Q2. Our leverage ratio at 9/30 was 7.4% compared to 7.3% at 6/30. Prepayment speeds were at 10.1% for both Q3 and Q2. And our liquidity was 57.1% on parity, up from 54% at June 30. With that, I'll turn it back over to Bob.

Thank you, Jerry. I will begin with market developments. On the top left and right of Slide 9, we have the cash treasury curve on the left and the SOFR swap curve on the right, each depicting three lines. The largest red line shows the curve as of June 30, the green line is from September 30, and the blue line reflects last Friday's data. At the bottom, we compare the 3-month treasury bill with the tender note. I want to highlight that the curve has steepened slightly over the quarter, reflecting the declining labor market, with the market anticipating Fed rate cuts, thus moving the front end of the curve. The movements from the red to the green lines mirror the labor market's deterioration. Interestingly, the quarter kicked off on July 4 when President Trump signed the One Big Beautiful Bill Act, which initially led to a market sell-off with a 25 basis point dip in the 10-year yield. By the end of July, during the Federal Open Market Committee meeting on July 30, the Chairman was relatively calm. However, shortly after, a weak payroll number was released, accompanied by significant downward revisions, which highlighted the deteriorating labor market. The downward revisions to prior payroll numbers through Q1 2025 were worse than anticipated, and ADP reported negative numbers in the last two months, affecting the Fed's perspective. This shift led the market to price in a more accommodating Fed, evident in the changes from the green to the blue line since the end of the quarter. Due to the government shutdown and limited data available, we observe a challenging environment for yields. Some securities offer yields exceeding 4%, and the long end of the treasury curve has shown good performance quarter-to-date. There remains strong demand in the investment-grade corporate market despite tight credit spreads, perhaps due to a scarcity of alternative investments with similar yields. If I had to summarize our view, it was a very quiet quarter with rates essentially stable, while labor markets declined, which I will elaborate on shortly. Additionally, a steepening curve and low interest rate volatility are generally beneficial for mortgage investors. Moving to Slide 10, you'll see the current coupon mortgage spread in relation to a 10-year treasury on the top, and on the bottom, there are two charts indicating mortgage performance. The 10-year treasury is a common benchmark for mortgage evaluation, which has made the spread appear significantly lower now compared to May 2023 when it was at 200 basis points, and now it has decreased to 100 basis points. It's important to note that while the 10-year treasury serves as a solid long-term benchmark, the current coupon mortgage has a duration roughly half of that, around 5 years. Therefore, a more suitable benchmark might actually be a 5-year treasury and relevant swaps. On Page 27, if you examine the spread of the current coupon mortgage against the 7-year swap, you'll see that we're currently at the low end of the range, but still within the range, whereas with the 10-year benchmark we have actually broken that range. This indicates a modestly steep curve, where a 5-year asset is being compared to a 10-year benchmark, making it seem tighter than it really is. Moreover, we previously discussed the significance of the dollar amounts held in mortgages, as represented by the red line for the Federal Reserve, which has been declining. In contrast, the blue line indicates bank holdings, which are the largest mortgage holders. Despite increasing, this line shows modest growth; most of their purchases are in structured products rather than general mortgages. As long as banks remain relatively uninvolved, mortgages might not tighten significantly. The charts on the left show normalized prices for select coupons, with most significant moves upward occurring in early September. During this time, the banks were absent, and the marginal buyers became primarily money managers or REITs, which also experienced significant ATM issuance and preferred offerings from peers, contributing to tighter spreads during that spike. The spread of our current coupon mortgage to the 5-year treasury illustrated a notable drop around that period, however, it has plateaued. Mortgages still offer reasonably attractive carry, and although we had a favorable quarter, they remain appealing. To the right, the dollar roll market reflects that anticipated speeds affect dollar rolls, with the rally creating significant pricing impacts, particularly in the case of the Fannie 6 roll. As we moved into September, the market began pricing in very high speeds, favoring spec pools due to their call protection in a tightening environment. The cash window list released each month performed significantly well in October and is likely to maintain that momentum. On Page 11, the top chart normalizes mall as a proxy for interest rate volatility, with a spike noted in early April, which has not decreased much since. The bottom chart provides a longer look back period, showcasing another volatility spike during March 2020 due to COVID. We must remain vigilant as we navigate the upcoming year. As we proceed, we foresee a combination of scenarios that could either positively affect us or present challenges as we approach 2026. Now, I will turn it over to Hunter.

Thank you, Bob. I'd like to talk to you a little bit about how our portfolio of assets evolved over the course of the quarter. Our experience in the funding markets, our current risk profile our portfolio is impacted by an uptick in prepayments and give a little bit of my outlook, I suppose, going forward. So coming out of the second quarter, we took advantage of an attractive entry point by raising $152 million in equity capital and deploying it fully during the quarter. The investing environment allowed us to buy Agency MBS at historically wide spread levels. During the second half of the quarter, equity rates have been slowed, but the assets we purchased in the third quarter were tightened sharply during that second half over the third quarter. As discussed on our last earnings call, our focus has been on 5.5s, 6s, and to a lesser extent, 6.5 coupons. And those didn't tighten quite as much as the higher coupons, but we feel like they offer a superior carry potential going forward. The portfolio remains 100% Agency RMBS with a heavy tilt towards call-protected specified pools. These tools help insulate the portfolio from adverse payment behavior and reinforce the stability of our income stream. Newly acquired pools this quarter, all had some form of prepayment protection. 70% were backed by credit-impaired borrowers like low FICO scores or loans with high GSE mission density scores. 22% were from states experiencing home price depreciation or where refi activity is structurally hindered. Those pools were predominantly in Florida and New York geographies. 8% were loan balance pools of some flavor. As a result of these investments, our weighted average coupon increased from 5.45 to 5.53, effective yield rose from 5.38 to 5.51, and our net interest spread expanded from 2.43 to 2.59. Across the broader portfolio, pool characteristics remain very diverse and defensive towards prepays exposure; 20% of the portfolio now is backed by credit-impaired borrowers from Florida, 16% from New York pools, 13% investor property pools, and 31% have some form of low payment story, if you will. We have virtually no exposure to generic or worse-to-deliver mortgage securities, and we were net short TBAs at 9/30. Overall, we improved the carry and prepayment stability of our portfolio while maintaining a conservative leverage posture and staying entirely within the agency MBS universe. Turning to Slide 17. You can see a sort of visual representation of what I just discussed; you can clearly see the shift in the graphs, the concentration building in the 5.5 and 6 coupon buckets across the 3 graphs. These production coupons remain the core of our portfolio and continue to offer the best carry profile in the current environment. And I'd like to discuss a little bit about the funding markets. The repo lending market continues to function very well and Orchid maintains capacity well in excess of our needs. That said, we observed friction building in the funding markets, particularly during the weeks of heavy treasury bill issuance and settlement. These dynamics have led to spikes in overnight SOFR and the tri-party GC rates relative to the interest paid by the Federal Reserve on reserve balances, particularly around settlement dates. This is largely attributable to declining reserve balances and continued heavy bill issuance. Orchid typically funds through the term markets, which has helped insulate us from some of the overnight volatility, but still term pricing has been impacted. We borrowed roughly SOFR plus 16 basis points for most of the year, but in recent weeks, that spread has drifted up a couple of basis points, say, SOFR plus 18 more recently. Looking ahead, we expect the Fed to end QT potentially as early as next week's meeting and begin buying treasury bills through renewed temporary market operations. If and when this occurs, it should provide a positive tailwind for our repo funding costs, especially if it's paired with further rate cuts by the FOMC. This would help with the continued expansion of our net interest margin. Just wanted to make a brief note about this chart on this page. It might seem a little bit counterintuitive. The blue line on the chart represents our economic cost of funds. This metric, as you can see, is slightly higher in spite of the fact that rates are coming down, than this is really due to the fact that as we've grown. There's a diminishing impact of our legacy hedges on the broader portfolio. So recall that this metric economic cost of funds includes the cumulative mark-to-market effect of legacy hedges. On the other hand, the red line, which has been moving lower, represents our actual repo borrowing costs without any hedging effects. As the Fed cuts, any unhedged repo balances will directly benefit from this decline. As of June 30, 27% of our repo borrowings were unhedged, and that increased to 30% more recently, slightly enhancing the benefit from lower funding rates. Turning to Slides 19 and 20, regarding hedges. On September 30, Orchid's total hedge notional was $5.6 billion, covering about 70% of our funding liabilities. Interest rate swaps totaled $3.9 billion, covering roughly half of the repo balance with a weighted average pay fixed rate of 3.31% and an average maturity of 5.4 years. Swap exposure is divided between intermediate and longer-dated maturities, allowing us to maintain protection further out the curve while benefiting from lower short-term funding costs. Short futures positions totaled $1.4 billion, primarily consisting of SOFR 5-year swaps, 7-year treasury futures, and a very small position in year swap futures. On a mark-to-market basis, our blended swap and futures hedge rate was 3.63 at 6/30 and 3.56 at 9/30. If you think of this metric as the rate we would pay if all of our hedges had a market value of 0 at each respective quarter end part rate, if you will. Our short TBA positions totaled $282 million, all of which were, I think, Fannie 5.5%. A portion of this short is really part of a bigger trade where we're long 15-year 5, a short 30-year 5.5%, so a 15/30 swap structured to provide production against rising rates in a spread-widening environment. The remainder of the short position was just executed in conjunction with some pool purchases late in the quarter following a period where spreads have tightened materially. So we didn't want to take the basis exposure quite yet. Orchid held no swap positions during the quarter, which was interesting as a sharp decline in volatility at June 30, approximately, as I mentioned, priced at 27% of our repo borrowings were unhedged. That figure then increased to 30% by September 30. This increase reflects the impact of the market rally and the corresponding shorter asset durations, which allowed Orchid to carry a higher unhedged balance while maintaining minimal interest rate exposure. In other words, this shift does not indicate that the portfolio is less hedged. In fact, at June 30, our duration gap was negative 0.26 years, and by September 30, it grown to negative 0.7 years. So still highlights a very flat interest rate profile. Speaking of which, Slides 21 and 22 provide a clear understanding of our interest rate sensitivity. The Agency RMBS portfolio remains well-balanced from a duration perspective, with overall rate exposure carefully managed. According to our model, a 50 basis point increase in rates would lead to an estimated 1.7% decline in equity, while a 50 basis point decrease would reduce equity by 1.2%. Therefore, we see a very low interest rate sensitivity based on our models. The combination of higher coupon assets and intermediate to longer-dated hedges reflects our ongoing strategy to protect against rising rates and a steepening curve. This strategy is rooted in our belief that a weakening economy and lower rates across the curve might introduce short-term volatility but should be positive for Agency RMBS and the broader sector. Such conditions often come with stress in equity and credit markets, prompting investors to seek safety in fixed income and REIT stocks. Conversely, if the economy remains strong or inflation stays persistent, we would anticipate a rise in rates, leading to basis widening in the middle of the coupon stack, with outperformance shifting to shorter duration high-coupon assets currently affected by prepayment exposure. This brings us to Slide 23, where we discuss our prepayment experience. We have not focused much on this aspect over the past couple of years except for a brief period following a 10-year run last September. In the third quarter, the speeds released, including those in early October, showed that Orchid experienced very favorable prepayment outcomes across the portfolio. Lower coupons continue to perform exceptionally well. The 3, 3.5, and 4s had CPRs of 7.2, 8.3, and 8.1 respectively, compared to TBA deliverables which were much slower at 4.5, 2.9, and 0.7. The 4.5s and 5s paid CPRs of 11 and 7.5 for the quarter, while comparable deliveries were at 2.3 and 1.9. Among our low premium assets, mainly the 5.5s, there was significant performance throughout most of the quarter, aligning closely with deliverables, where we observed a CPR of 6.2 compared to 5.9. However, last month, generic 5.5s surged to a CPR of 9 while our portfolio remained steady at 6.3, highlighting the advantages of pool selection and the relatively low volatility of our portfolio. In the premium sector, the 6s and 6.5s recorded CPRs of 9.5 and 12.2 for the quarter, while TBA deliverables were at 13.8 and 29.5 as refinancing activity peaked in September. The call protection features in our portfolio indicate notable disparities. Nonetheless, last month our 6s paid 9.7% compared to 27.8% for generics, and our 6.5s paid 13.9 versus 42.8 for generics. This clearly demonstrates the advantages and potential for carry beyond TBA for these coupons. Overall, the quarter's results emphasize our disciplined pool selection, where call-protected specified collateral consistently shows significantly better prepaid behavior than TBA deliverables. Just a few concluding remarks for me. In summary, we experienced a sharp rebound in the third quarter, more than offsetting the mark-to-market damage done during the widening in the second quarter. Orchid successfully raised $152 million during the quarter and deployed the proceeds into approximately $1.5 billion of high-quality specified pools. The pool required historically wide spread levels and a certain meaningful driver of increased earning power for the portfolio in the coming quarters. While our skew towards high coupon, specified pools and bare steepening bias resulted in slight underperformance relative to our peers with more sellers to belly coupons, we remain highly constructive on our current asset and hedge plan. We believe our positioning will continue to deliver great carry and be more resilient in a selloff, particularly given our call protection and one of the convexity exposure. Looking ahead, we're very positive on the investment strategy. As I mentioned, several factors that could provide significant tailwinds to the Agency RMBS market and our portfolio for the quarters ahead are continued Fed rate cuts, the anticipated end of QT, renewed treasury open market operations to help stabilize the repo and build markets, potential expansion of GSE retained portfolios, a White House and treasury department that are openly supportive of tighter mortgage spreads. We also continue to see strong participation from money managers and the REITs, as Bob alluded to. There's potential for banks to reenter the markets more meaningfully as funding and regulatory capital conditions improve. Taken together, we believe the current opportunity in Agency RMBS is still among the most attractive in recent memory, and we're well positioned to capitalize on that. With that, I'll turn it over to Bob.

Thanks, Hunter. Great job. Just a couple of concluding remarks, and then we'll turn it over to questions. Basically, just to reiterate kind of our outlook. I think that it's kinda hard to say where we go from here in terms of the market and the economy. I think that we're possibly at a crossroads. On the one hand, we've seen a lot of labor market weakness, and it's gotten the Fed's attention and they appear ready to cut rates, which could lead to a prolonged low rate environment, but we also see a lot of resiliency in the economy, very strong growth. The consumer seems to be in sync shape. And as I mentioned, the government is running large deficits, plus you have the benefits of AI and the CapEx build-out, all that tied into the One Big Beautiful Bill and a very favorable tax component of that. So I think the market in the economy go either way. But the important thing is, as Hunter alluded to, is that the way the portfolio is constructed with the high coupon bias with hedges that are a little further out the curve and the call protected nature of the securities we own. I think that we can do well in either. So for instance, if we do stay in a low rate environment and speeds stay high, we have very adequate call protection. And to the extent that the opposite occurs and the economy restrengthens and we start going into a higher rate environment. We have most of our hedges further out the curve and we have higher coupon securities that would do well in the sense they have enhanced carry in that environment. So I guess one final comment is that we do expect now, especially after the data today that the Fed will likely cut a few times. And over the course of the next few months, we're probably going to potentially adjust our hedges to try to lock in some of that lower funding and maybe had a little up rate protection because we think if the fact the Fed does ease a few times that in all likelihood to move after that's a hike. So with all that said, we will now turn the call over to questions.

Our first question will come from Jason Weaver at JonesTrading.

Congrats on the results in the quarter and the growth I guess, first, given the relatively consistent leverage and even greater liquidity now as well as sort of the positive net as we mentioned in the prepared remarks, especially lower vault. Is there anything particular on the horizon macro-wise that you'd be looking for to change overall risk positioning, maybe like notably leaning more into leverage?

We could adjust our leverage. There are two paths I see for the market. One is maintaining our current position while the Fed continues cutting rates. In that scenario, we would benefit from the initial rate cuts since a small portion of our funding is hedged. If this occurs, we might consider locking in those rates and could be open to increasing our leverage. If the economy rebounds and strengthens, which is quite possible, I would expect fewer rate cuts between now and the end of next year, in which case we wouldn't increase leverage. Instead, we would focus on protecting ourselves by locking in funding and safeguarding our assets against potential extensions and the impact of rising rates on mortgage prices.

Got it. That's helpful. And then second, referencing the remarks on the high coupon spec pool you purchased just as of late. Do you have any view on pay-ups upside potential here, especially if we see more refi momentum growing?

We've observed significant pay-ups in the early part of this quarter, particularly during the recent cycle of the GSEs, where we noted a sharp increase in pay. This can largely be attributed to investors who were long TBAs when the roll markets were in a healthier state. However, the carrying benefit from those roles has mostly disappeared, forcing some investors with heavy TBA concentrations to start buying aggressively to maintain their income. Fortunately, we were not in that situation, and most of our top pool acquisitions occurred in the first half of the quarter. To emphasize this point, there was a spike in tighter mortgage rates in early September. Of the capital we raised during the quarter, 70% was deployed before that time, which benefited us. Additionally, we discussed this at the end of the second quarter; the weighted average price of our portfolio was about par, around 99.98%, and all the assets we added were higher coupon securities. Currently, the average price of our portfolio exceeds 101 with an average payoff of 33 ticks. Although we've been incorporating call protection, we are not paying top dollar for high-quality assets, as we don’t believe it is justified. Without going into specifics of our holdings, we have seen positive outcomes from our securities without having to pay excessive pay-ups. It’s doubtful we will return to the levels of 2020 or 2021, where our higher coupon New York assets had pay-ups of four or five points. We believe we've performed well without needing to reach such heights.

Our next question will come from the line of Eric Hagen with BTIG.

I think you guys have kind of talked a little bit around it. But are there scenarios where dollar roll specialness would return to the market in a more meaningful way? How do you feel like special sort of effect like trading volume and kind of market dynamics overall going forward?

I'm not sure about that. We really observed this in the early days of quantitative easing when the Fed was purchasing everything. I don't anticipate that we'll see another round of quantitative easing. The Fed has been quite clear that when they reinvest pay-downs related to mortgages, they will only be buying treasuries, which might increase. I don't foresee specialists in the rural market returning significantly. Historically, we haven't been major players in that area, as you likely know. Therefore, I don't regard it as a core aspect of our strategy. I don't believe it's likely to happen, and it's never been a central part of our approach.

No. It's looking as long as especially in the upper coupon, that's really being driven by fear of prepayments and the speeds that are being delivered into these worse to deliver rules that are pretty bad here. So I would expect them to continue to be so for the next couple of months. I think it's going to stay depressed at least in that space until we emerge from this. It will either rise out of this rate environment that we're in or return to the top or middle of the recent rate range or have rates meaningfully lower. But I think we're in a situation where we're not going to see too much in the role space.

Can you discuss the current supply and availability of longer-dated repo? Do you view it as an effective hedge against the Federal Reserve not cutting rates as much as currently expected?

We like to be doing so. We've looked into it a lot. Unfortunately, the spreads are just too wide. We've done some and we will continue to do so. But as Hunter mentioned, we were historically in the mid-teens. We're approaching the higher teens, but you're getting above that when you start going out in terms. So we have done some just to try to lock in as much as we can. And we do it opportunistically. So for instance, if we were to see, let's say, the government reopens and you get some non-payroll number in, the market prices in 7 or 8 cuts, that's when we try to do those things. So it’s opportunistically.

Yes, it has been more effective for us to operate in the futures market, and we do this periodically. I mentioned that a significant part of our portfolio is currently hedged. This gives us the flexibility to engage in shorter-dated short futures in the early years of the curve or to enter into swaps with relatively low duration. However, we often observe that repo lenders quickly adjust for rate hikes but are hesitant to account for rate cuts. This experience has influenced our strategy, especially considering that when the Fed tends to implement multiple cuts, it usually coincides with a downturn in the credit market or a weakening economy, which creates an uncomfortable environment for repo lenders.

Our next question will come from the line of Mikhail Goberman with Citizens JMP.

Hope everybody is doing well. You guys talk about call protection. About what percentage would you say of your portfolio is covered with call protection, and if rates were to go down, say, 50 basis points in a sharp manner?

Almost all of the portfolio has some form of call protection. We do have some lower pay-up stories like LTV, which we still view positively, despite their relatively low performance in terms of PAP. The housing market is facing challenges, and it's tough for borrowers with high LTVs to refinance at every opportunity. They will eventually be able to do so, but it's not very cost-effective for them right now. These are not the easiest opportunities, while the more generic options are. Almost all of our portfolio is structured this way. We keep some assets on hand in case we experience a sudden tightening of spreads, including some low pay-up pools that could help us quickly reduce leverage through TBA delivery if necessary. Overall, the rest of the portfolio is functioning well for us.

As far as the rally, our weighted average price at the end of the quarter was just over 101, and the average coupon remains in the high 5s. It's premium and in the money, but not excessively so. A 50 basis point increase from here would bring us above 6, which translates to a price around 12 or 13. We expect to move quickly, but due to our call protection, the impact of premium amortization shouldn't be significant. In fact, our premium amortization this quarter was quite modest, showing only a slight increase compared to the drastic numbers we experienced right after COVID. As we navigate this range of rates, we've been purchasing the higher quality assets in the first discount space, primarily because they are relatively inexpensive at certain times. For example, when rates were slightly higher, 5s were around 98 to 99, and we acquired a substantial amount of New York 5s early in the quarter when rates were elevated. If we continue to see a rally, those will perform very well.

That's helpful. Can you elaborate on your comments regarding the hedge portfolio? If swap spreads were to widen again, what benefits do you anticipate for the portfolio?

We said, why not they've been widening, right? I know it's unusual.

Continue to widen, yes.

Yes, we will continue to benefit from that. I’m not sure if we have a specific dollar figure, but if you look at it, it was quite advantageous.

It's around 2 million DV01, so you can think of it in those terms, yes.

The long end is around negative 50. If we were to look at 40%, it’s hard to determine how much further it could go since the market has already factored in actions by the Fed at the end of Q2 and reinvesting pay downs in treasuries. For that to occur, we would likely need to see significant pay down from culture investing. Regarding what Hunter mentioned, if we want it to increase by another 10 basis points, that translates to approximately $0.15 or $0.12 on the book.

Fair enough. And if I could just squeeze in. Any update on current book value month to date?

It is up slightly; we don't track that number daily since we receive a small amount every day, and it's up very modestly from the end of the quarter.

Thank you. And I would now like to hand the conference back over to Robert Cauley for any further remarks.

Thank you, operator. Thank you, everybody, for taking the time. As always, to the extent anybody has any questions that come up after the call or you don't get a chance to listen to the call live and you wish to reach out to us. We are always available. The number here is 772-231-1400. Otherwise, we look forward to speaking to you at the end of the fourth quarter, and have a great weekend. Thank you.

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