Earnings Call Transcript - PFSI Q3 2024

Operator, Operator

Good afternoon, and welcome to PennyMac Financial Services, Inc.'s Third Quarter 2024 Earnings Call. Additional earnings materials, including presentation slides that will be referred to in this call, are available on PennyMac Financial's website at pfsi.pennymac.com. Before we begin, let me remind you that this call may contain forward-looking statements that are subject to certain risks identified on Slide 2 of the earnings presentation that could cause the Company's actual results to differ materially, as well as non-GAAP measures that have been reconciled to their GAAP equivalents in the earnings materials. Now I'd like to introduce David Spector, PennyMac Financial's Chairman and Chief Executive Officer; and Dan Perotti, PennyMac Financial's Chief Financial Officer. Please go ahead.

David Spector, Chairman and Chief Executive Officer

Thank you, operator. Good afternoon, and thank you to everyone for participating in our third quarter earnings call. PFSI reported net income of $69 million for an annualized return on equity of 8%. Excluding the impact of fair value changes, PFSI produced an annualized operating ROE of 20%. Our Production segment pretax income nearly tripled from last quarter as lower mortgage rates provided us the opportunity to help many customers in our servicing portfolio lower their monthly mortgage payments by refinancing. At the same time, our servicing portfolio, now nearing $650 billion in unpaid principal balance and with nearly 2.6 million customers, continues to grow, driving increased revenue and cash flow contributions as well as providing low-cost leads for our Consumer Direct lending division. Turning to the origination market, current third-party estimates forecast total originations of $2.3 trillion in 2025, reflecting expectations for mortgage rates to continue their decline from current levels, driving growth in both refinance and purchase volumes. As we have demonstrated, our balanced and diversified business model with leadership in both production and servicing enables strong financial performance and a foundation for continued growth as an industry-leading mortgage company regardless of the direction of interest rates. Because we retain the servicing rights on nearly all mortgage loan production and have been one of the largest producers of mortgage loans in recent periods, we are uniquely positioned in the industry with a large and growing portfolio of borrowers who recently entered into mortgages at higher rates and would stand to benefit from a refinance in the future when interest rates decline. Our strong results in Consumer Direct, with locks nearly doubling and originations up nearly 70% from last quarter, demonstrate the future earnings potential of our flywheel, providing outstanding service to our large and growing customer base while offering them the home loan products best suited to their needs. On Slide 6 of our earnings presentation, you can see as of September 30, approximately $200 billion in unpaid principal balance, more than 30% of the loans in our portfolio had a note rate above 5%, $90 billion of which was government-insured or guaranteed loans and $108 billion of which was conventional and other loans. The opportunity ahead is highlighted in this slide, as indicated by our historic refinance recapture rates, which have improved significantly from five years ago as a result of our ongoing technology enhancements and process improvements. We expect these recapture rates to continue improving given our multiyear investments, combined with the increased investment in our brand and our use of a targeted marketing strategy. Notably, we see higher recapture rates for government-insured or guaranteed loans relative to conventional loans given the low cost and more efficient nature of streamlined refinance programs. In 2022, when mortgage rates rapidly increased, we acted quickly to introduce the closed-end second lien product to enable our borrowers to access the equity in their homes while also retaining their low-rate first lien mortgages. We believe offering this product was significantly important for our customers given our strong emphasis on providing our borrowers with a cost advantage when obtaining a second lien mortgage versus doing a cash-out refinance at prevailing mortgage rates. The light sections of the bars on the two charts adjust our refinance recapture rates to include the impact of our closed-end second lien program, highlighting both the success in retaining our customers as well as our commitment to doing the right thing for them. Our large and growing servicing portfolio continues to anchor our core operating results. And in this higher interest rate period, we continue to realize the significant contribution from placement fees on custodial balances due to higher short-term rates. Additionally, this management team has done a tremendous job enhancing our proprietary servicing system, which has the flexibility to rapidly adjust for regulatory changes and incorporate new and emerging technologies including artificial intelligence to drive operational efficiencies. We expect to gain additional operating leverage as the portfolio grows and as we continue to look for opportunities to drive down expenses, providing us with a strong base level of profitability in the future. In total, we have built an operating platform that we believe is unmatched in the mortgage industry, able to handle large growing volumes of loans at the highest quality standards while also delivering strong performance across various markets. Our ability to swiftly react to the increased opportunity in the loan production market reflects our significant and ongoing investments in technology, the operational enhancements we have made and ultimately the scale we have achieved. PFSI stands stronger than ever given the continued growth of our servicing portfolio and the higher efficient cost structure that sets us apart from our competitors. With the leadership position in the correspondent channel and growing market share in direct lending, we are best positioned in the industry to capitalize on opportunities provided by growth in the origination market. In total, we expect to continue delivering strong financial results with annualized operating returns on equity in the high teens to low 20s in 2025. I will now turn it over to Dan, who will review the drivers of PFSI's third quarter financial performance.

Dan Perotti, Chief Financial Officer

Thank you, David. PFSI reported net income of $69 million in the third quarter, or $1.30 in earnings per share, for an annualized ROE of 8%. These results included $160 million of fair value declines on MSRs net of hedges as interest rates exhibited significant volatility during the quarter. The 10-year Treasury yield declined approximately 60 basis points during the third quarter and ranged from a high of 4.5% to a low of 3.6%. The impact of these items on diluted earnings per share was negative $2.19. PFSI's Board of Directors declared a third quarter common share dividend of $0.30 per share, consistent with the prior quarter. Turning to our Production segment, pretax income was $108 million, up from $41 million in the prior quarter due to higher volumes across all channels, with the largest increase in Consumer Direct. Total acquisition and origination volumes were $32 billion in unpaid principal balance, up 17% from the prior quarter. $26 billion was for PFSI's own account, and $6 billion was fee-based fulfillment activity for PMT. PennyMac maintained its dominant position in correspondent lending in the third quarter with total acquisitions of $26 billion, up from $23 billion in the prior quarter. Correspondent channel margins in the third quarter were 33 basis points, up from 30 basis points in the prior quarter due to less competitive pricing from certain channel participants. In the fourth quarter, we expect PMT to retain approximately 15% to 25% of total conventional correspondent production, a decrease from 42% in the third quarter. In Broker Direct, we continue to see strong trends and continued growth in market share as we position PennyMac as a strong alternative to channel leaders. Locks in the channel were up 24% from last quarter and originations were up 8%. The number of brokers approved to do business with us at quarter end was over 4,400, up 25% from the same time last year, and we expect this number to continue growing as top brokers increasingly look for strength and diversification in their business partners. Broker channel margins were down slightly from the prior quarter but remained near normalized levels. In Consumer Direct, lock volumes were up 93% from the prior quarter and originations were up 69%. Higher volumes were driven by an increase in refinance volumes, as David mentioned earlier. Margins in the channel were down given a higher percentage of refinance loans versus lower-balance closed-end second liens. Activity in October across all of our channels remains in line with third quarter levels. And though mortgage rates have increased, and we expect some impact from normal seasonality, we expect another strong contribution from our Production segment in the fourth quarter. Production expenses net of loan origination expense increased 18% from the prior quarter, primarily due to increased volumes in the Consumer Direct channel. Turning to Servicing, the Servicing segment recorded a pretax loss of $15 million. Excluding valuation-related changes and nonrecurring items, pretax income was $151 million, or 9.5 basis points of average servicing portfolio UPB, unchanged from last quarter. Loan servicing fees were up from the prior quarter, primarily due to growth in PFSI's owned portfolio. Earnings on custodial balances and deposits and other income increased due to higher average balances. Custodial funds managed for PFSI's own portfolio averaged $6.9 billion in the third quarter, up from $5.7 billion in the second quarter. Realization of MSR cash flows increased $25 million from the prior quarter due to higher prepayment expectations from lower mortgage rates. Operating expenses increased slightly but remained low at approximately 6.4 basis points of average servicing portfolio UPB. The fair value of PFSI's MSR decreased by $402 million driven by lower market interest rates from the prior quarter end. Hedging gains were $242 million and included significantly elevated hedge costs due to interest rate volatility and the inverted yield curve. Excluding hedge costs, hedging gains offset 78% of MSR fair value declines. We seek to moderate the impact of interest rate changes on the fair value of our MSRs through a comprehensive hedging strategy that also considers production-related income, which was up significantly this quarter versus last quarter, as David mentioned. The Investment Management segment contributed $700,000 to pretax income during the quarter, and assets under management were essentially unchanged from the end of the prior quarter. Provision for income tax expense was $25 million, resulting in an effective tax rate of 26.1%. We ended the quarter with $3.8 billion of total liquidity, which includes cash and amounts available to draw on facilities where we have collateral pledged. We'll now open it up for questions. Operator?

Operator, Operator

Thank you. I would like to remind everyone we will only take questions related to PennyMac Financial Services, Inc. or PFSI. We also ask that you please keep your question limited to one preliminary question and one follow-up question, as we like to ensure we can answer as many questions as possible. Your first question comes from Doug Harter with UBS. Please go ahead.

Doug Harter, Analyst (UBS)

Hoping you could share a little bit what you're seeing in terms of lock volume in Consumer Direct in the past couple of weeks as, post the Fed, rates have started backing up?

David Spector, Chairman and Chief Executive Officer

Clearly, we've seen it come off its highs from where we were a month ago. I think it's a function of the higher rates. It's probably down roughly 30% from those highs. Having said that, we look at our direct lending businesses, both Broker and Consumer Direct, as being able to react to markets as they present themselves. In the Broker Direct channel, we continue to see nice share gains; by our estimate in the third quarter we're a 4% market share, up from a little above 3% a year ago. I'm really encouraged by what I'm seeing in that business as well. On the Consumer Direct side, we were able to really seize the opportunity when rates presented themselves. We're still seeing some good refinance activity, but with rates increasing, you're going to see a bit of a slowdown from the highs.

Doug Harter, Analyst (UBS)

And I guess along those lines, if you could just talk about capacity management — as volumes ramped up, your ability to meet that from capacity? And then if volumes are off, how does that play through today?

David Spector, Chairman and Chief Executive Officer

We're not going to get whipsawed by movements in the market unnecessarily. We spent 2022 and 2023 running capacity tight. Earlier this year, we made the decision to increase capacity and we're continuing to grow our capacity given the natural growth in the portfolio. Versus the alternatives in hedging the MSR, increasing capacity is the least expensive path that we can take with the most economic opportunity and the upside when rates do decline. So, we're going to be running a little bit more excess capacity. But given the volatility and the cost of hedging servicing, it's a very straightforward solution for what we need to do to manage the Company.

Dan Perotti, Chief Financial Officer

The other lever that we have is that we still have a significant number of loans in our portfolio with equity embedded. As rates increase, our loan officers are focused more on second lien opportunities. As we grow capacity, there's still a lot of opportunity in our portfolio there. Then, when interest rates decline, we can redirect them back toward refinances of first lien loans.

Operator, Operator

Your next question comes from the line of Crispin Love with Piper Sandler. Please go ahead.

Crispin Love, Analyst (Piper Sandler)

First, can you speak to your near-term outlook for ROE following the really strong third quarter, just with rates having backed up a bit in recent weeks? And then for 2025, presentation states expected ROEs in the high teens to low 20s. Can you discuss a little bit what's implied in the estimates from the origination side, and whether ROE is expected to be higher as you move through the year in 2025?

Dan Perotti, Chief Financial Officer

As we're looking at the fourth quarter, the operating ROE will be somewhat dependent on what we see happen with rates. Prior to the third quarter, we saw our operating ROEs in the mid-teens moving up toward the high teens. Even at current rate levels, we believe we can achieve similar or slightly higher ROEs than earlier in the year. Given production levels we're seeing today, if rates go higher, we would still expect to be in the mid-teens; if rates go lower, that would drive us back toward the level we achieved in the third quarter. The operating ROEs we cited for 2025 in the high teens to low 20s imply a market with production similar to 2024 or a bit higher. If we see lower rates consistent with some mortgage forecasts around $2.2 trillion to $2.3 trillion, and more refinance activity, that would push us up into the 20s range. Note that in the third quarter the benefit from lower rates was concentrated in roughly the last one to one-and-a-half months of the quarter; a sustained lower-rate environment would have an even larger impact.

Crispin Love, Analyst (Piper Sandler)

On the industry forecast — $1.7 trillion in 2024 and around $2.3 trillion in 2025 — you have said in recent quarters those might be a little ambitious. Do you still believe that might be the case?

Dan Perotti, Chief Financial Officer

It comes down to what interest rates will be in 2025. If rates are a bit lower, a $2.2 trillion to $2.3 trillion market is achievable. If rates sustain at a higher level, that would likely be high and we'd expect a smaller overall market. Generally, we don't think that range is unreasonable, but it depends meaningfully on rates. In either environment, given our balanced business model, we are built to perform well. If rates stay higher for longer, we'll build a larger inventory of loans at higher mortgage rates that can generate significant production income when rates decline. In the meantime, our servicing side generates significant earnings. So, we could see a market from a little below $2 trillion up to the mid-$2 trillion range depending on rates next year.

Operator, Operator

Your next question comes from the line of Bose George with KBW. Please go ahead.

Bose George, Analyst (KBW)

I wanted to go back to the MSR hedge. Historically, your MSR hedge covered about 80%. The mark was pretty close to that level this quarter, but you've been targeting higher levels recently. Can you discuss the hedge performance this quarter relative to your expectations?

Dan Perotti, Chief Financial Officer

The hedge overall insulated about 80% of the change in MSR value before hedge costs, which was in line with our target. On the last earnings call, we said we'd moved to targeting coverage in the 80% to 90% range, and this quarter ended up around 78% before hedge costs. During the quarter, the yield curve became more inverted for much of the period — long rates went down while short financing rates did not decline until the very end of the quarter when the Fed lowered its target — and we saw significant interest rate volatility. That drove option implied volatility and elevated hedge costs that exceeded our normal 1% to 2% range. As we moved into the fourth quarter, the yield curve de-inverted somewhat and our hedge costs have come back down into our normal range. We're still targeting overall coverage of around 80%. In short, the hedge protection operated as expected, but at higher-than-normal cost during the quarter; those costs have eased in the fourth quarter.

Bose George, Analyst (KBW)

Okay, great. And related question: given hedge costs coming down, should we assume your GAAP ROEs will essentially converge to your operating ROEs over time?

Dan Perotti, Chief Financial Officer

Generally, yes. Hedge costs have historically been in that 1% to 2% range, and at times we've even been paid to hedge. Over longer periods, we'd expect GAAP ROE and operating ROE to converge fairly closely. There may be some persistent hedge cost over time, so GAAP ROE could be slightly lower than operating ROE, but generally they should be fairly close.

Operator, Operator

Your next question comes from the line of Michael Kaye with Wells Fargo. Please go ahead.

Michael Kaye, Analyst (Wells Fargo)

Has anything surprised you with that mini refi boom we just had — that 1.5 months, for example — in terms of which higher-note-rate borrowers were more likely to refinance? Any thoughts?

David Spector, Chairman and Chief Executive Officer

I don't think anything surprised us per se. I was encouraged by the amount of inbound activity in our call centers and our ability to get borrowers to take refinances and to borrow to lock loans; that execution demonstrated our flywheel. What surprised me was the increase in jumbo activity. A year ago our locks for the quarter in jumbo were $22 million; this quarter they were $1 billion. We're seeing banks step back and we're seeing broker volume rise. That helps explain some of the share gains in Broker Direct. Overall, the tripling of production speaks to the power of the flywheel. As we think about hedging the asset and openings that emerge, we consider our production engine's profitability as part of our overall approach, and we delivered on that front. It was a very good quarter for us.

Michael Kaye, Analyst (Wells Fargo)

I was wondering if you could give a subservicing update. You talked previously about expecting some subservicing deals to happen in Q4; I don't think I heard anything in the prepared remarks. Any update to that? Do you still expect that to happen and are you excited about the opportunity?

David Spector, Chairman and Chief Executive Officer

We do expect to have one or two smaller customers by year-end. It will take a month or two to onboard them. We're in discussions with larger clients but nothing close to the finish line to report yet. Interest in our technology is growing. People see reductions in expenses and the value of the VA VAS program we introduced, where we sold 917 loans back to VA totaling $267 million in UPB; we had a negative mark on the servicing of close to $4 million but demonstrated our ability to transact efficiently. We were the first to market with that VAS program. I think people see the power of our technology and we're getting good inbound inquiry into subservicing. I'm hopeful that by the end of the year we'll have one or two smaller customers inked and can continue to grow that business.

Operator, Operator

Your next question comes from the line of Mark DeVries with Deutsche Bank. Please go ahead.

Mark DeVries, Analyst (Deutsche Bank)

You've had some nice share gains in Broker Direct and approved brokers are up about 25% year-over-year. Could you talk about any natural lag between getting someone signed up and ramping to a full run rate? Also, can you give a sense of the size of the brokers you've been signing recently compared to prior ones to help us think through future share gains?

David Spector, Chairman and Chief Executive Officer

The team is making the case that brokers need a second alternative and many top brokers want diversification in their partners. We've invested a lot in technology over the last two years and the final piece will come out in Q4. We're adding to our sales force meaningfully. We are signing existing brokers who do large volumes and adding others. I expect share growth to continue at a good pace, though I don't want to put specific quarter-by-quarter markers out. The fact brokers need a strong second option, the availability of our jumbo product with consistent execution, and the closed-end second lien product in the broker channel are all meaningful. I consider our tech to be as good as, if not better than, the tech provided by the number one and two organizations in the channel. I'm highly encouraged by what I'm seeing in that channel.

Mark DeVries, Analyst (Deutsche Bank)

Dan, could you clarify — I missed some forward-looking commentary for the fourth quarter for the Production segment. Could you repeat?

Dan Perotti, Chief Financial Officer

I didn't provide specific guidance for the Production segment. Overall, depending on what happens with rates for the rest of the quarter, we still expect operating ROEs in the high teens range. We're seeing positive effects from the availability of loans to be refinanced and some correspondent production that carries over from the third quarter due to timing. So, we expect production income to remain strong and meaningful in the fourth quarter, but depending on the recent backup in rates, it might not be at the exact levels of the third quarter.

Operator, Operator

Your next question comes from the line of Terry Ma with Barclays. Please go ahead.

Terry Ma, Analyst (Barclays)

Your servicing margins have held steady at about 9.5 basis points the last two quarters. How sustainable is that into next year even as delinquencies continue to tick up?

Dan Perotti, Chief Financial Officer

We've shown the ability to maintain that margin and expect it to remain at a similar level into 2025. If delinquencies pick up somewhat it could add to operating expense, but we've driven down operating expense through efficiency enhancements, including our proprietary servicing platform, which has driven about a 30% reduction in servicing costs over the last few years, and through scale as the servicing portfolio grows. We don't expect a meaningful uptick in delinquency next year; absent that, we should continue to drive down costs as we move through the next year.

Terry Ma, Analyst (Barclays)

For production, your correspondent market share and margins have held up well despite competitive pressures. What did you see in that channel in the third quarter and early fourth quarter?

David Spector, Chairman and Chief Executive Officer

We've been through a period of some irrational pricing, yet we've kept share roughly flat to a year ago and were up meaningfully in Q3. Margins were up from last quarter and continue to be strong. We're focused on profitability as well as maintaining share. Given the market's size and scale, we can continue to grow share in a meaningful way. We're a consistent bid in the market every day. We're approaching that 20% share in correspondent; we'll run above or below that depending on pricing dynamics, but by and large, I'm pleased with the 20% quarter-over-quarter increase in locks in correspondent. Fundings were up a bit less, but our seller base remains strong at close to 800, and it's still an industry-leading powerhouse for us.

Operator, Operator

Your next question comes from the line of Trevor Cranston with Citizens JMP. Please go ahead.

Trevor Cranston, Analyst (Citizens JMP)

Looking at the chart of servicing operating expenses, there's been consistent improvement over the last few years. Looking forward, will that improvement level out, or with new technology coming on board how much lower can servicing expenses realistically get over the next couple of years?

Dan Perotti, Chief Financial Officer

We believe there's still significant room to run in terms of servicing efficiencies. It may not be at the same clip we've seen over the past few years, but there's substantial runway. We don't want to set a specific floor, but through continued scale and operating efficiencies, we believe at least another roughly 30% reduction in that operating expense metric could be achieved over time. That won't all happen next year, but we can continue to move that down meaningfully over the next several periods.

Operator, Operator

Your next question comes from the line of Derek Sommers with Jefferies. Please go ahead.

Derek Sommers, Analyst (Jefferies)

On production expenses, you attributed the increase to the Consumer Direct channel. How should we think about Broker Direct volume-related or variable expenses as that channel continues to gain market share?

Dan Perotti, Chief Financial Officer

Think of overall variable expenses on the broker side in basis points in the mid-double-digit range. As Broker Direct increases, we should continue to get meaningful scale from that channel. We are also investing in the platform and bringing on additional resources to grow the channel, so not all of the cost reductions will be immediate. From a pure variable standpoint, expect expense levels in that mid-double-digit basis point range.

Derek Sommers, Analyst (Jefferies)

On Consumer Direct volume expectations, do you expect the product mix from 3Q to carry into 4Q, or will there be a reversion back to a second lien mix?

Dan Perotti, Chief Financial Officer

If rates stay higher, we would expect a reversion back to more of a second lien mix. It will be rate dependent. If we see more rate volatility with dips, then we'd shift back toward first lien refinances. Part of our strategy is toggling between those products to maintain capacity: rotating to second liens in higher-rate environments and first-lien refinances when rates decrease.

Operator, Operator

Your next question comes from the line of Eric Hagen with BTIG. Please go ahead. Eric, your line is open. Your next question comes from the line of Brian Violino with Wedbush. Please go ahead.

Brian Violino, Analyst (Wedbush)

Just one quick one. I wanted to get your view on custodial balance earnings. There's probably some seasonal declines in the fourth quarter. Thoughts on how that part of the business trends into next year if we see a steeper decline in short-term rates? Could that impact servicing profitability and how does that factor into ROE expectations for next year?

Dan Perotti, Chief Financial Officer

Brian, could you repeat that?

Brian Violino, Analyst (Wedbush)

Yes. My question was about custodial balance earnings: how could those impact servicing profitability if we see a decline in short-term rates next year?

Dan Perotti, Chief Financial Officer

If short-term rates decline, that would impact the earnings we've been realizing on custodial balances, which are somewhat driven by short-term rates. There is a partial offset because we would also see reductions in expenses on our floating-rate debt. Another factor is realization of servicing cash flow: when we project cash flows for the servicing asset, forward curves projecting lower short-term rates would result in a lower amount of realized cash flow in a given period, which could offset lower custodial balance earnings. We expect those impacts to offset to a degree.

Operator, Operator

Your next question comes from the line of Shanna Qiu with Barclays. Please go ahead.

Shanna Qiu, Analyst (Barclays)

Delinquencies increased sequentially by about 70 basis points in FHA and 50 basis points in USDA portfolios. You mentioned that remains within expected levels and previously indicated you don't expect a meaningful uptick in delinquencies next year. What drove that sequential increase and what gives you confidence on delinquency formation going forward for more recent Ginnie Mae originations if rates stay elevated?

David Spector, Chairman and Chief Executive Officer

A lot of the sequential noise in delinquency relates to calendar effects — for example, how many business days in a month, month-end timing, or when customers are paid. By and large, delinquency rates remain at very low levels. Given the state of the economy combined with low housing supply, I have confidence in continued servicing profitability. For borrowers struggling, there are numerous forbearance programs offered by FHA, VA, USDA, and the GSEs aimed at keeping borrowers in their homes until they recover. If borrowers do exit, the tight supply market supports orderly dispositions, which helps limit servicing costs. Also, many borrowers have low-rate first liens, so options like walking away or refinancing at higher rates are limited. I expect some monthly or quarterly gyrations, but overall delinquencies should remain at historically low levels.

Shanna Qiu, Analyst (Barclays)

One last one: how should we think about refinancing the 5 3/8% bond maturing October 2025? Those are relatively low coupon, but they're now current. How should we think about financing costs going forward?

David Spector, Chairman and Chief Executive Officer

We have that 5 3/8% bond maturing later next year. We'll evaluate opportunities to issue debt and refinance it through 2025. As you noted, it carries a pretty attractive coupon, so we're not in a rush to refinance if we don't see an attractive opportunity. We have $3.8 billion of liquidity including amounts available to draw on secured lines against our MSRs, and significant committed capacity available. If we don't find an attractive issuance opportunity prior to maturity, we can draw on lines to retire the debt at maturity. That said, our expectation is that we would issue between now and maturity to refinance the issue.

Operator, Operator

We have no further questions at this time. I'll now turn it back over to Mr. Spector for closing remarks.

David Spector, Chairman and Chief Executive Officer

Well, thank you. I'd like to thank everyone for joining us today on this call. If you have any additional questions, as always, please feel free to contact our Investor Relations department, and we will be available to answer those questions. Thank you for joining us.

Operator, Operator

This concludes today's conference call. Thank you for your participation, and you may now disconnect.