Pure Cycle Corp Q1 FY2023 Earnings Call

Good morning and welcome to Pure Cycle Corporation’s first quarter 2023 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during this conference, please press star, zero on your telephone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Mark Harding, President and CEO of Pure Cycle. You may begin.

Thank you. Good morning everyone. I’d like to welcome you to our first quarter earnings call for our fiscal year 2023, and happy new year to you all. We have a slide deck for this. If you can surf over to our website at purecyclewater.com on the landing page, you’ll find a button there where you can click on that and then we will actually forward through the slides, but it will give you the ability to see some of the text in the slides within the presentation. With that, I’m also joined today this morning by Kevin McNeill, our CFO, and Dirk Lashnits, our Vice President and Director of Land Development, who will also give you updates into some of the business segments and the financial reporting, and then at the end, we’ll have a brief Q&A for those of you who want to drill down on some of the specifics. With that, let me first start with our Safe Harbor statement, which I’m sure most of you are familiar with. Statements that are not historical facts that are contained or incorporated by reference in this presentation are forward-looking statements. With that, we’ll get the lawyers out of the room and we’ll start. I’ll just be very brief on some of the overview of the company, but for those of you that are first-timers to the call or new to the company, we really operate on three primary business segments that are fundamentally interconnected to each other at the DNA level of the company. We’re a water-wastewater utility company, where we own water in a water-short region here in the State of Colorado and the west. We develop those water rights and we are cradle-to-grave on the water rights, where we develop the wells, the distribution system, and put that water to use in both the land segment, which is a parcel of property that we own that we’re doing a master-planned community on and we’re building lots for our homebuilder customers, and then we are holding back some of those lots and building homes on those for the single-family rental segment as well, so each of those segments really are interrelated to a vertically integrated platform that we have from the water utility side. Moving on, just to describe a little bit briefly about the water segment itself, we have that whole network of utility operations, where we have the diversions for the water supply, whether those are taking water sources from our streams and surface water supplies, our groundwater supplies, or our reuse supplies. We treat that water, we store it, we distribute that out to our customers. We’re also responsible for some of the development of that distribution system pursuant to our design standards for our community, which is some of the lands that we have but others as well, so we have master planned service areas that are very valuable, which we will highlight a little bit later in the presentation. Our customers use that water, they give it back to us, we collect that, we treat it, and then we reuse it, so we have a use and reuse model. Within that, we get some fee instruments for that on the water utility side. We get connection charges, which are a one-time connection fee which, between the water and the sewer tap fee, are around $32,000, $33,000, and those are paid by the homebuilder customers and those are typically added into the cost of the home, but that grants the service connection a permanent entitlement to the water supply and then we get usage fees for that, so we get a base fee which really amortizes some of the cost of operating and maintaining a system, and then a consumption charge which is a tiered consumption charge, and so what this tends to do is it tries to encourage conservation because the more water you use, the higher the cost of the water supply. As you take a look at our water balance, what we look to do is really keep control over that drop of water, where we’re taking that from the supply, we’re treating it, we’re putting it into our system, we’re getting it back from our system, and then we’re reusing that, and so we do have a very closed loop system. We do lose a little bit to outdoor irrigation and some evaporation, but those trends are really decreasing and there’s been a lot of press, I’m sure much of you have seen, about drought and the vulnerabilities of water supply on the left, so the company’s emphasis on technology and controlling that drop of water through its continuous life cycle is very important to our systems, and we want to make sure that we’re good stewards of this water supply. Taking a little bit of the infrastructure, you know, we build this infrastructure. It’s long-lived assets. The water supplies certainly are long-lived - those are perpetual, and then you have a lot of the brick and mortar that we’re building associated with that, and really this is showing the growth of the company in the last five or six years, really showing about an 86% growth in the capitalized asset class and the various categories of that infrastructure, whether that’s water and wastewater treatment facilities, transmission lines, wells, finished water storage, surface water, groundwater supplies, distribution systems, all the components of a water utility you’ll find in there, so that will continue to grow as we keep seeing that. Moving into how the growth of the utility looks like, our current customer count is up to about 1,250 new connections. We measure that in terms of the number of single-family equivalent connections on it, and so we have a combination of residential customers which would be a standard single-family equivalent, but then we also have commercial and irrigation connections attributable to those, and so just because you might have one irrigation connection, that might represent as many as a couple hundred as you see down in Lowry, because we have large irrigation requirements down there of connections. We rate that to the number of how we build those out, so the number of base charges that we get for each of those. I talked a little bit about our residential connections at Sky Ranch, which is our development. We have our first phase, which is completely built out, 500 homes. We are into our second phase, very robust tap sales in our second phase - Dirk will drill down into that a little bit, but we’ve got 124 taps there, and then a service area that we picked up a couple of years back, where we have more than 200 connections between the residential and the commercial connections as well. Moving on, another one of our big customers on the utility side is the industrial space, where we sell a lot of water to the oil and gas industry through a number of different operators. Our water supply, our service areas, and really - you know, the City of Colorado is located over a fairly prolific oil and gas field that’s gotten a little bit more attention more recently with the shale oil play, but we are seeing operators drill a number of pads in a number of formations here that consume a tremendous amount of water for oil and gas, and so we continue to see those sales. This is the distribution of how those sales go by quarter, and as you can see, it’s kind of all over the map. There’s not a lot of predictability to it. They drill year round, they frac year round, and a lot of this is really dependent on a permitting process and how aggressive they are. The leasehold interest particularly in our field has changed hands a number of times, which is pretty typical in the oil and gas industry, but it started out probably in the 2015, ’16 timeframe with a lot of the field assessment and field definition, and now it’s kind of moved into more of a well development, so they’re developing the field, so they don’t do a lot of exploration, they don’t do a lot of changing to it. Each rig has a much stronger capacity to drill more wells per pad per year, and so what we’re seeing is when you get a dedicated rig out here, that can drill as much as 25 to 30 wells a year. They’re pretty significant wells. They’re two-mile lateral wells on this thing. I think they’re experimenting with some three-mile lateral wells on it, and so they’ll continue to increase the amount of water that they’re using, depending on their laterals on it. This is kind of an illustration, if you look at the right-hand side of this, that will be kind of the Denver metropolitan area and kind of the growth of the metropolitan area. The two red or pink areas that you see in there, those are service areas. If you look at the one, kind of transition between the green and the grey there, that’s our Sky Ranch project, which is ideally located - it’s on the I-70 corridor, and it really is in the strongest area of growth in the Denver metropolitan area, and we, as a developer, are really targeting the entry-level housing product, which I think inures very well for us both in very strong markets as well as in challenging markets, and so Dirk will talk a little bit more about that. Then our service area at Lowry, it’s the very large pink area which continues to be really an untapped asset for us. The land is owned by the State of Colorado in trust for the public education system here, and it’s one of the most unique assemblages of land in the country. As you can see by the picture on the left there, most of the development has really come up to the border of that property, and so it depends on how the state looks to move forward with that, but that’s certainly an opportunity for us over the next few years that we look forward to doing the utilities for that. We’re the exclusive water-wastewater provider for that 24,000 acres of continuous property. That gives you kind of a sense of the utility side and some of the segments that we have in there. I’m going to hand this off to Dirk Lashnits, who will talk a little bit about our land development activities.

Thanks, Mark, good morning. Land development is highlighted by our flagship project, Sky Ranch. Every time I see its overall view, it reminds me of the notorious Tetris piece from the game. This property spans 930 acres, as Mark mentioned, on the developing edge east of Denver. It features a capacity for 3,200 residential lots and 2 million square feet of commercial space, located about 15 miles east of downtown Denver. The overall build-out of Sky Ranch is expected to take about 10 to 15 years and will largely depend on market conditions. We plan to develop it in multiple phases. Over the past four or five years, we have frequently discussed our first phase, which consists of 500 lots and is essentially complete; we are now moving on to the second phase. The first phase is the block on the left side of the site, while the second phase covers the central part, with future phases extending eastward, and the commercial area located in the northern block adjacent to I-70. We aim to average approximately 250 lots built per year and will integrate schools, commercial elements, and recreational centers, all essential to a master-planned community. As previously mentioned, Phase 1 involved 500 lots and also included our pilot program for build-to-rent lots, which saw four occupied units that are fully completed. Moving into our second phase, this encompasses 850 lots, which we are subdividing into four sub-phases labeled 2A through 2D. Phase 2A is currently about 80% complete, and we expect to finish it by late this year or early 2024. Infrastructure work for Phase 2B has commenced and we aim to advance that seriously in the second to fourth quarters of this year, while the last two sub-phases, 2C and 2D, will be developed in the following years. We've recently welcomed our first residents in Phase 2A, which is very encouraging. All lots have been delivered to our builder customers. As you may have seen from our water taps data shared earlier, this reflects the number of homes the builders have initiated, which is currently around 120 to 130 houses. Builders have sold about 20% to 25% of their lots and expect to sell the rest by the end of this calendar year. The details on the phasing are as follows: Phase 2 includes 850 lots divided into four sub-phases. Our lot revenues indicate the income generated from sales of these lots to builders, while tap revenues refer to the water and sewer connection fees that Mark talked about. We also account for the costs required to develop the lots and the reimbursable costs associated with public infrastructure that qualify for reimbursement through public funds, including taxes and bonding. The graphs at the bottom of this sheet consist of a bar graph and a pie chart showing our builder distribution for this phase, with four builders represented. The center pie chart illustrates our product mix, with six segments showcasing our diverse product offerings. Moving onto some market conditions, starting with the positive aspects. The pent-up demand for new home sales suggests there is significant potential. Back in the 2005-2006 period, home sales were around 1.4 million, and even during the recent upswing in 2021-2022, we’ve only reached 600,000, indicating good growth potential for us. In the first quarter, mortgage rates have begun to stabilize, hovering around 6%, which falls within historical averages. Lot delivery continues to lag behind home starts, meaning we are selling more homes than we have finished lots. From our perspective as a lot-selling business, this presents good potential due to the demand. Our homebuilders in Sky Ranch are all nationally ranked, with all four in the second phase placed in the top 15, including three in the top 10 and two in the top five.

We’ve got the top one.

Yes, we are among the top in the industry. This is beneficial for stability and indicates our commitment for the long term. Our partners have effectively navigated market fluctuations. Low unemployment is crucial, and we hope it remains positive. House prices continue to appreciate, making them a solid investment. Average days on the market are decreasing; homes are selling relatively quickly. Last year in Denver, the average was under 10 days, and homes were selling above asking price without the buyers seeing them in advance, on the day they were listed. Even with some market slowdown today, we're still seeing a positive outlook, with average days in the 20s. However, there are challenges as well. The sudden increase in interest rates has caught the market off guard, but we're gradually adjusting. Important metrics are trending downward: builder confidence is declining, mortgage applications are down, buyer traffic in model homes and home sales are decreasing, compounded by rising material and labor costs. Our cancellations on contracts are increasing, and ultimately, we believe homes are becoming too expensive. We need to find ways to recalibrate. Our involvement in land development is essential to adapt to these market changes, primarily focusing on timing our deliveries. The lead time in development can range from six months to a year from when demand rises, which presents a challenge in identifying the optimal time to build lots. Here is a slide that illustrates job growth, interest rates, and sales data.

I’m going to push this over to Kevin and he’ll give you an update on some of the rental segment, and also just some brief stats on the quarterly performance.

Thanks, Mark, and Dirk. Our single-family rental division, which we launched in 2021, continues to grow. As of December 15, we have completed four houses and have 10 more under construction, which will be delivered throughout fiscal 2023. The four rented houses are priced between $2,800 and $3,000 a month, with stable renters, so we remain very optimistic about this market. Given the increasing interest rates and sustained high home values, we believe the rental market in Colorado will remain strong. Based on our projections from last year's fiscal results, we anticipate generating nearly a million dollars a year in free cash flows from our rental operations, not including overhead. This quarter’s financial results are not the strongest we’ve had. As Mark mentioned, we are continuing our investments in water infrastructure, totaling over $67 million in water rights. This quarter, we delivered about 67 million gallons of water, slightly down from last year primarily due to lower oil and gas activity, as well as a decrease in construction activities. Dirk discussed land development, and our single-family rentals continue to grow. While revenue and segment revenues were down this quarter compared to the last several quarters, the decline is somewhat expected due to the housing market slowdown. Phase 2B was intentionally delayed to align our lot availabilities with homebuilder sales, but the housing market and interest rates have complicated that situation. Our net income dropped this quarter similar to revenue due to these factors, but we managed to mitigate some of the revenue declines with over a million dollars in payments from oil and gas companies, suggesting a potentially positive outlook for fracking and drilling throughout 2023 in our service area. We will provide more details on diluted earnings per share when we file the Form 10-Q, expected in the next few days. Our annual shareholders meeting is scheduled for tomorrow, which will be a formality without major presentations. The 10-Q filing date is January 17, but we plan to file earlier. Additionally, our ESG report launched in November is available on our website, offering more insight into our environmental initiatives and how we are managing our responsibilities to the environment and our shareholders. Real quickly, looking at the balance sheet and income statement, we experienced a significant increase in cash last year. The Sky Ranch cap conducted a bond offering, allowing us to repay over $24 million in reimbursables, which we subsequently invested in short-term treasuries to take advantage of favorable interest rates. This helped us further grow our balance sheet regarding assets and invest in new water rights and infrastructure. The income statement will be released in the Q, and there's more detailed information in the press release we issued last night. You will notice the revenue decline that we previously talked about, mainly in land development and lot sales, as well as in the commercial water sales segment. Our overhead remained relatively stable as we maintained a strong headcount. Additionally, you can see the $1.2 million in other income, which consisted mainly of surface use payments in anticipation of future drilling and oil and gas operations on our land.

With that, I’m going to turn it back over to Mark for closing statements and questions. Thank you. So what should we take away from this? For management, it's about how we manage our business model effectively. We possess very valuable, low-cost legacy assets in both water and land. We’ve effectively positioned invested capital to market risks, particularly through our builder contracts. Those familiar with our company understand this well. We have a structured delivery agreement with builders who collaborate with us on the costly infrastructure necessary for master-planned communities, while homebuilders handle the vertical construction. Managing exposure in softer markets, which we currently face, is important for both us and our builder partners. Our business model's success is evident in our lack of exposure to these risks. According to the presentation, about 15% of Phase 2B, concerning grading and over-excavation, has been funded by our homebuilder customers, reflecting a minimal investment on our part. The pace of lot deliveries is crucial; earlier in Phase 1, builders completed seven to eight homes a month, but now in Phase 2B, it's about three homes per builder. We've positioned ourselves in the right market segment with entry-level products. There remains strong demand for single-family homes, which is evident in builders pulling permits and constructing spec homes in Sky Ranch, as well as the sales activity from recent customers. We are adding value to the community by opening a local charter school in partnership with a national operator, enhancing educational options for families. The demand for more living space, especially from dual-income families working from home, remains high. Our home product offerings have diversified, now featuring six different categories instead of just a couple, allowing us to cater to various price points effectively. The design features in our master-planned community will endure through varying market conditions. Additionally, we continue to sell water in industrial operations, anticipating an uptick in oil and gas demand, while maintaining a reliable customer base. We manage our water supply conversion well, balancing development with asset growth. We are also pursuing small acquisitions to expand our land portfolio, and we’re being aggressive in this pursuit thanks to our strong financial position. We have managed our capital effectively, making disciplined investments and conducting stock buybacks, which reflect our capital allocation strategy. Now, I’ll hand it over to Jenny in Scotland for any questions you may have.

Thank you very much. I am indeed waiting for my lunch as it’s five past two. Your first question is coming from Robert Howard from Boiling Point Resources. Robert, your line is live.

Good morning.

Good morning Robert.

I have a quick question about the new customers being added. You mentioned that each water customer contributes $1,500 in annual revenue. I was curious about the additional costs associated with this at Sky Ranch. Is the infrastructure already in place so that this $1,500 is nearly all incremental, or are there extra costs that arise as you continue to build? Have you reached a point where costs are increasing at a slower rate compared to earlier in the project?

That's a good question. We allocate some of the costs for adding connections into the tap fee charges. Typically, the connection charges, which is the $33,000 for a tap fee, cover the wells, treatment facilities, and all the infrastructure needed to deliver water to customers. This is part of our capital investment, with a significant portion being early investment. Additionally, oil and gas revenues help us expand the system beyond just the tap fees. We generally view this as a 50% margin business, but margins improve because some of the oil and gas revenue can be used to expand the supply side ahead of those tap connections. Once we account for the connections, which cost $1,500 per year, there are added costs since we have an operating entity. This includes chemical costs for water disinfection and lab costs for continuous water sampling to ensure compliance with clean water standards. We also consider this part of our business as a 50% margin operation, primarily influenced by operating costs rather than capital costs. Our operators ensure the systems function properly and manage daily operations along with lab costs. Overall, there isn’t a significant increase in costs; in fact, it often performs better initially since everything is new and functioning as expected. We estimate those margins to be around 50% in each segment, which addresses your question.

Yes, sure. Then just that $1,500 number, I think you guys have kind of been talking about that for a number of years. Is there pressure on that, or I don’t know, is the market rate elsewhere in Denver, are other people charging that amount, or is there possible pressure for that going up, just inflation in general? How are you able to kind of keep the customer rates flat?

Yes, and I would say there’s two rates there. There’d be the tap fee rate and then the usage rate. The tap fee rate probably has a little bit more upward mobility just because of the scarcity value, and as you continue to hear about the competitiveness of water rights and the incremental costs, because we have to go farther and farther out to reach for those water supplies, I’d say our tap fees have a little higher upside than, say, necessarily usage rates. The usage rates will continue to grow. We continue to grow those for making sure that we keep up with our inflation costs as well as anticipatory costs for whatever the evolving regulatory climate is going to look like, but that’s a little bit more inflation-oriented as opposed to the value of water in water-short areas and the cost of water, acquiring those water rights from farther and farther areas. When you take a look at those two revenue streams, there’s probably a little more strength in the tap fee side, which is going to be our big number. You apply that to our portfolio - we have 60,000 connection worth of that, so that’s over $2 billion worth of revenue potential over time as opposed to that $1,500. That’s been a stagnant number. We’re probably a little bit above that - that’s just been a metric number that we continue to look at. I would say that that continues to go at about 3%, 3.5% per year.

Okay, great. That’s all I’ve got. Thanks a lot.

Thanks.

Thank you very much. Your next question is coming from Bill Cunningham, who is a private investor. Bill, your line is live.

Hi Mark, how are you doing?

Just living the dream, Bill!

Good. You know, on the last conference call, I had made the comment about the unusually good results, which were a result of lot sales and tap fees, and we talked about how earnings are lumpy so we might not see the same results quarter to quarter, and this quarter proved exactly what you were talking about. I kind of did some penciling out of things ahead of time to kind of figure out what your numbers might be and thought it was 50/50 as to whether you’d be reporting a loss or a profit this quarter, so it was kind of a pleasant surprise that you actually squeaked through with a bit of a profit. Hopefully, nobody else was surprised with the results being not as good as the prior quarter.

That’s correct, Bill. It's cyclical in a couple of ways. First, due to the timing of our year-end reports and where we report. For instance, Denver is an excellent place to live, except perhaps during December, January, and February, so we experience some cyclicality. Being in the outdoor business, many of our activities such as water supply, outdoor irrigation, land development, and sales for single-family homes are all cyclical during the winter months. This pattern is fairly predictable. We are thankful that we were still able to achieve profitability, and we will keep working to maintain that quarter after quarter.

I do have a couple of particular questions for you. One is I was looking at the tap fees sold in the totals - your 10-K at August 31 said that 618 taps had been sold in Sky Ranch. Your press release said four more were sold this quarter, but then you reported a total of 766 taps that have been sold so far in Sky Ranch, so I’m confused on the difference between the 766 and the 622.

Yes, we made a strong effort to standardize the number of tap connections. There is a distinction between residential connections and the governmental entity, CAB, which oversees the parks, open spaces, and outdoor irrigation. They pay a tap fee but only have one connection, highlighting that difference. When we report the number of irrigation connections, you’ll notice a higher figure. We have been working to clarify this for everyone, so those interested can better understand what the $1,500 per connection per year represents. We’re trying to provide more transparency by applying that figure to the 1,246 connections. It’s important to note that the bill we send out may not reflect 1,246 individual bills, as some customers may have multiple connections. I hesitated about presenting this statistic this quarter, thinking you might question me on it. I appreciate you bringing it up, as we aimed to provide this information with your detail-oriented approach and Robert's interest in tracking the $1,500 per connection in mind. Our goal is to offer the market a clearer understanding of how to calculate that number.

Thank you. I also have some questions about the different builders in Phase 2A. There seems to be a significant variation in their activities. KB appears to be outperforming, with 27 home sales so far, which is approximately two-thirds of their total. Challenger is also doing reasonably well with their homes. Lennar has just begun selling their single-family homes, but their townhomes are still marked as coming soon.

Pending - right, right.

I was wondering about the progress of D.R. Horton, as we discussed last quarter, where they needed to revise their building plans with the County and hadn't started yet. I'm curious about the status of some of the slower builders, particularly Lennar townhomes and D.R. Horton homes.

Those are the two largest builders that Dirk mentioned, and they each evaluate their own schedules, which is new for both. This project is a first for them, and Lennar is likely leading the way with about 18 spec townhomes currently under construction. They are particularly focusing on utilizing the seasonal downtime to build up their inventory and ready a significant amount of product for the March cycle. They believe in the value of their offerings, especially since these townhome products are highly price-sensitive and expected to perform exceptionally well. Lennar aims to maintain a solid inventory of these homes. If you didn’t catch it in the earnings presentation, check our website for aerial and drone shots showcasing the majority of our starts, which number over 60, possibly closer to 70 homes. KB has also seen success in the area with their paired product offering, which is designed for higher density and better pricing. Challenger is competitive on price, and D.R. Horton has a considerable number of building permits finalized, and they are prepared to start construction in a more aggressive, streamlined manner. Each builder has its own distinct approach.

It's great to know that Lennar is currently building the townhouses.

Yes, they’re very aggressively building.

Wow, that's great, because when you look at the website and see coming soon, you just figure that nothing has happened yet, so.

No, I think they’ve got four six-packs.

That's very positive news.

Yes, yes.

Okay, great. Thank you very much, Mark.

You bet.

Thank you. Your next question is coming from Bill Miller, who is a private investor. Bill, your line is live.

Hi there, Mark.

Morning Bill.

Happy new year. I wonder where we are with two things: one, you at one time indicated you might buy back some of the lots for the build-to-rent part of your business; and secondly, where do we think we are with the I-70 development, which can either be sometime near term, and I wondered whether you could give us any indication of how soon that might take place.

We are advancing with Phase 2B of the buyback and some other phases of the lots. This month, we're finalizing our plat, and we'll gauge the builders' responses. They were hoping to assess their traffic activity for the start of the year. We have contacted each builder to inform them that if they need to extend their absorptions beyond their typical inventory limits, we are willing to reclaim some lots. All four builders have been presented with this offer and are under contract. I need their cooperation, but I believe we will successfully retrieve some lots, which would benefit both parties. They can choose not to close on certain lots while still having the opportunity to build houses, which helps them manage cash flows and maintain positive sales for Sky Ranch to clients like us rather than waiting for traffic, contracts, and cancellations. This arrangement allows us both to grow our portfolios, and we have observed very strong demand. Every time we complete a house and list it, it is quickly purchased. We are still aggressive in that segment as we see significant interest. Regarding the potential for moving beyond the 850 lots into another phase, we can pursue that. However, it would increase our exposure as we would need to manage all those land development opportunities. Our balance sheet supports this, but we also have to consider new land acquisition opportunities to ensure the continued growth of the company, which requires a balanced approach. Regarding the land development on the I-70 corridor, you may be referencing the Lowry project. We are witnessing considerable demand for entitlements as everyone seeks more finished lots in the current market. Our strategy is to deliver lots at a measured pace, rather than overwhelming builders with 850 lots, allowing them to share the holding costs. This cyclical approach has proven effective for land development. We are monitoring how the housing market's weakening may affect the timing of Lowry and other land developments around Sky Ranch that we are considering acquiring. While we don’t have clear predictions, we prioritize making informed decisions consistent with our capital allocation strategy.

Well, what about buying back stock under various informed decisions?

That’s a great opportunity for us, and if the market continues to frustrate that stock price, we’re there now. We’re ready to do that. Do I have an answer for you at what price do we buy stock? I don’t.

Okay, well sounds good. Keep going.

Thank you.

Okay, we have now reached the end of the question and answer session. I will now hand back over to Mark for any closing comments.

So in closing, I guess I want to continue to thank you all for your continued support and confidence in our business, our business model and our team here. I want to recognize and give a shout-out to our board of directors - they’re an outstanding group of folks that continue to give our management team very sound and reasoned and expert advice into all business segments that we have. We’ve built a great board that has disciplines in each of these to help us continue to evaluate those decisions and make good decisions for our investors and our invested capital. As Kevin mentioned, we have our annual shareholder meeting. There’s not anything exciting on the shareholder plans, but if you haven’t voted your shares, please vote them. We look forward to an update sometime in the April timeframe to give you a little bit more detail on the markets. If you weren’t able to ask a question or if you’re listening to this on a replay, don’t hesitate to give me a holler and we’d be happy to give you any color or any information that would help you guide decisions in ownership of the stock. With that, I will close, and thank you all. Look forward to speaking to you again soon.

Thank you Mark. This concludes today’s conference. You may now disconnect your lines at this time. Thank you for your participation.

Thank you.