United Community Banks Inc Q3 FY2020 Earnings Call

Good morning and welcome to United Community Banks Third Quarter 2020 Earnings Call. Hosting the call today are Chairman and Chief Executive Officer, Lynn Harton; Chief Financial Officer, Jefferson Harralson; Chief Banking Officer, Rich Bradshaw; and Chief Risk Officer, Rob Edwards. United's presentation today includes references to operating earnings pre-tax, pre-credit earnings and other non-GAAP financial information. For these non-GAAP financial measures, United has provided a reconciliation to the corresponding GAAP financial measure in the financial highlights section of the earnings release, as well as at the end of the investor presentation. Both are included on the website at ucbi.com. Copies of the third quarter's earnings release and investor presentation were filed last night on Form 8-K with the SEC and a replay of this call will be available in the Investor Relations section of the company's website at ucbi.com. Please be aware that during this call forward-looking statements may be made by representatives of United. Any forward-looking statement should be considered in the light of risks and uncertainties described on page three of the company's 2019 Form 10-K, as well as other information provided by the company in its filings with the SEC and included on its website. At this time, I will turn the call over to Lynn Harton.

Well, good morning, and thank all of you for joining our call. This was certainly a busy quarter for the company. We closed the acquisition of Seaside National Bank in Florida and the combination of their earnings and the continued growth of our business led to a record level of pre-tax pre-provision income for the quarter at slightly over $81 million. Our earnings per share for the quarter came in at $0.52 on a GAAP basis, $0.55 on an operating basis, which represents a decline from the same period last year, but a significant improvement from last quarter. Our return on assets of 1.07% drove a return on common equity that exceeded 10%, and on an operating basis, our return on assets was 1.14%, and we reached 13.5% in our return on tangible common equity. Our bankers continue to deliver outstanding service and we were rewarded with 8% annualized loan growth and 15% annualized deposit growth due to their efforts. At the same time, given the low rate environment, we continue to work to drive down our overall cost of deposits to partially offset the decline that we and the rest of the industry are experiencing in loan and investment securities yields. Our net interest margin fell by 15 basis points during the quarter as a result of the low rate environment. Even with this margin decline though, our efficiency ratio on an operating basis reached a record for the company at 52%. Credit continues to perform well, as our markets rebound from the effects of the COVID-19 shutdown. Loan payment deferrals declined from nearly 16% last quarter to just above 3% at September 30. It continues to be difficult to predict the future path of credit results, but we're certainly encouraged by the performance of our client base during this time. Both non-performing loans and net charge-offs declined from last quarter and continued to be consistent with pre-COVID levels. Our allowance for credit losses now stands at 1.39% of total loans excluding PPP loans. So, given the environment, this was a strong quarter for the company and reflects great efforts by our team throughout the bank to maintain focus and continue to take care of our customers. I know you'd like to hear more details on the quarter, specifically credit and I'd like to turn it over to Rob for that now. So, Rob?

Thank you, Lynn, and thank you for being on the call today. I'm going to start my comments on page seven. Our loan portfolio grew by $1.7 billion this quarter with $1.4 billion coming from Seaside and $227 million coming on a core basis. Excluding Seaside, our loans grew at an 8% annualized pace. Our loan growth picked up a bit in the quarter, as we've been successful in market share takeaway from our lender hires in '19 and early 2020 and we've also had success in turning many of our new PPP customers into full relationships. Moving onto the allowance for credit losses on page eight. On this slide, we provide the initial credit marks and interest rate marks for Seaside. In total, there are $46 million in loan marks for the quarter. In addition to the $46 million, we also set aside a $21.8 million provision in the quarter, which included a $10.7 million CECL provision for Seaside's non-PCD loans, commonly called the double-dip. In total, our allowance for credit losses increased by about $30 million and our allowance for credit losses to loans ratio increased to 1.39%, which we view as healthy. On page nine, we look at credit quality, which was stable in the quarter. Our net charge-offs were improved from last quarter to 9 basis points, which included the benefit of strong recoveries. On page 10, we give you a deeper look at our deferrals, which improved significantly from June 30th and now just represent 3% of our total loans. Through our ongoing review of the Top 50 stabilized hotel properties, we have seen an increase in weighted average occupancy to 50% in the third quarter. While we've seen improvement in our hotel and restaurant deferrals, the deferral rate within these two loan books remains higher than other portfolios and amounts to 70% of the total remaining deferrals. I'm also pleased to note that our Navitas deferrals improved to just 2.4% of total Navitas loans. There is additional detail on our Navitas portfolio, our restaurant and hotel books, as well as retail CRE in the appendix, and we're glad to discuss during Q&A if you have any questions. With that, I'll pass it over to Jefferson on capital.

Thank you, Rob. I'm going to start my comments on page 11. I'll talk briefly on capital. Our capital ratios came in as we expected in the quarter with the closing of the Seaside deal and our ratios still remain above peers. You will remember that we raised $100 million in preferred equity and $100 million in senior debt last quarter. And given that we do have $63 million in senior debt and TruPS that we could call this year depending on the environment, but for now, we are planning to hold the capital as we keep an eye on the economy. The net interest income and margin is on page 12. Our net interest income was up $19.2 million from last quarter, primarily with the help of Seaside. Our net interest margin was down 15 basis points from last quarter as the core NIM was down 23 basis points and increased loan accretion offset this by 8 basis points. The core margin compression came as we got the full mix impact of the surge and liquidity at the end of Q2 and Seaside came in with a lower core NIM as well. The initial Seaside marks are what drove the increase in loan accretion. Excluding PPP forgiveness and loan accretion, we expect relative stability in our core margin in Q4. Page 13 shows our deposit mix and our cost of funds. We had success in the quarter again in growing deposits with core deposits of 15% annualized excluding the acquisition. Our cost of deposits improved to 25 basis points in Q3 from 38 basis points last quarter, and we were encouraged by that progress. Fees are on page 14. We were once again very pleased with the result with our fee income, up $8.5 million from last quarter. The main driver of the increase is just under $2.5 million that Navitas added and from our mortgage business that was up $1.5 million from our previous record last quarter. With the environment, our mortgage volumes actually increased from last quarter and the gain on sale percentage also increased, which we were not expecting. There were other notable items in the fee income result. We were encouraged that our service charges started to normalize higher in Q3 and our higher loan volume drove a $1 million increase in our customer swap fees. You saw in the release and in the investor deck that we had about $750,000 in securities gains and a $1 million positive swing in our SBA servicing asset valuation that may not well repeat. On page 15, we give you an update on our PPP loans. Our customers are thinking about and doing the work on forgiveness and 56% of our PPP customers have input completed forgiveness documentation into our portal. We have just started to turn that documentation to the SBA for the loan forgiveness. Rich is here in the Q&A to answer PPP questions. On page 16, our expenses included a $0.5 million contribution to our foundation and were relatively flat when you layer in the Seaside run rate of about $9 million. With the revenue increase as we had and the flattish expenses, our efficiency ratio moved to 52%. While we did not get much in the way of Seaside cost savings in Q3, we expect to convert their systems in the first quarter, and we feel confident on the $9 million of annual cost savings that we have targeted. With that, I'll pass it back to Lynn for closing comments.

Thank you, Jefferson. Another exciting event this quarter for United was the addition of Jim Clements, President of Clemson University to our Board of Directors. Under Jim's leadership, Clemson has set records in admissions, enrollment, graduation and retention rates, research funding, and as we all know athletics. Clemson has been ranked as one of the Top 25 public universities by US News & World Report for 11 straight years. I look forward to having Jim encourage and push us to perform at the highest possible level. So, Jim, welcome to United. And speaking of performance, I'd like to point out that while the economic outlook remains hard to predict, we are well positioned with solid pre-provision income, strong capital levels, and ample liquidity to outperform during this cycle. And that is all due to an outstanding team throughout the company, some of which are in the room here with me now. So, I'd like to open it up now for questions and give them an opportunity to provide more color for you on the quarter and the environment.

Thank you. Our first question comes from Brad Milsaps with Piper Sandler. Your line is now open.

Hey, good morning. Maybe just wanted to start on asset quality and you guys have seen some nice improvement in deferrals. I know a lot of moving parts with the reserve this quarter, but it looks like if I add back the marks, the existing marks you have like the reserve around 140, 145 of loans ex-PPP. Maybe still a touch lower than peers but just kind of curious how you guys are thinking about the reserve and provisioning going forward based on the improvement you've seen on the deferral side of the equation?

Rob, regarding the provision, it will consist of three main components moving forward. Firstly, loan growth will continue to impact provisioning. Secondly, we need to consider future charge-offs. Additionally, I believe we may experience an increase in specific reserves for some troubled loans in the future, which could drive the need for more provisioning. As for the allowance rate itself, the primary factor influencing it is the economic assumptions. Although the environment remains highly unpredictable, if it aligns with our current assumptions, we expect the rate to stay relatively stable.

Were there any big changes in the criticized or classified list from the second quarter?

So, we did add in about $15 million of hotel exposures and we did add in about $20 million of senior care exposure. Overall, the criticized and classified increased by $15 million. So, we've been successful, continue to experience success in moving credits out of criticized and classified through refinance and pay-offs and so I was actually really pleased with how much movement we had out of the criticized and classified bucket to make room for some of the stuff coming in.

Great. And then, just maybe one follow-up for Jefferson away from credit. Appreciate including slide 23 on mortgage. I know last quarter you benefited from I think it was a $5 million or $6 million mark on the pipeline at the end of the quarter. Was there also a mark this quarter? And I guess, if I look at the table, it's sort of the difference between the number that the gain on loan sale multiplied by the number of loans sold sort of, is the plug number kind of what the mark would be. Just kind of curious kind of how to think about kind of that mortgage line going forward?

So, I'll start briefly. It is a good way to think about it. There was a much more slight write-up of the mortgage pipeline this quarter. I'll pass over to Rich, who manages that business for us to talk about the future and what he is seeing there.

Sure. Hi, good morning, Brad. In terms of production in Q4, we do see production coming down probably about 10%. We are seeing refis increase while purchases decrease. In terms of the margin as well, it was a healthy 5.4% in Q3. And right now we're seeing something 4.25% to 4.50% is what we're currently experiencing, kind of think that will hold through the end of the quarter and probably go down in the first quarter next year and then in terms of fee income, what we're kind of projecting is mid-to-high teens for Q4.

Great. Just a follow-up on that. Jefferson, I think you mentioned in the deck that mortgage commissions were up about $0.5 million. As those mortgage revenues decrease, is that how we should think about it? Will there be some expense relief as that declines?

Yes, definitely. If you think about mortgage commissions, they're up about $2 million from Q1. We also have some overtime that's in there as well. So, I think depending on how far mortgage comes in, you would get a portion of that $2 million back.

Thank you. Our next question comes from the line of Jennifer Demba with Truist Securities. Your line is now open.

Thank you. Good morning. Rob, just wondering if you could talk about what you think you could see in potential loss content in the hotel book. It seems to be the area where most banks are experiencing the greatest amount of stress, and I also be curious to what you think loss content to be in senior living? We hadn't heard a mention of that very much this quarter. So, I am curious, what your thoughts here on UCBI's book. Thanks.

Yes, I'll begin with the senior care sector. We successfully sold a senior care credit from our classified portfolio without incurring any losses this quarter. We remain optimistic about the senior care portfolio, although there are a few properties we have identified as needing closer scrutiny due to the slower pace of stabilization. The occupancy rates are not plummeting; rather, it's taking longer than expected for new properties to stabilize, largely due to the current environment rather than issues with the core business itself. Overall, I feel positive about this sector, although some credits may take longer to stabilize than initially anticipated. On the hotel front, we have some limited-service properties along Interstate 95 in the Carolinas that are performing well, with occupancy rates between 85% and 90%. However, there is some concern regarding business travel in more urban areas. That said, I remain optimistic about our hotel portfolio as we have focused on partnering with three to four leading hotel operators in our markets, rather than being random in our hotel origination. These operators have a long-term perspective, have weathered challenging environments, and are well-resourced to address their situations. While we currently have a few properties with a weighted average occupancy of 50% and some below 45%, we believe in the quality of our operators and are actively working with them to improve conditions, which I believe will contribute to our success in this area.

Thank you so much.

Thank you. Our next question comes from the line of Michael Rose with Raymond James. Your line is now open.

Good morning, guys. Thanks for taking my questions. Jefferson, hey, just wanted to start on the margin. Obviously, a couple of moving pieces this quarter, especially with the deal coming in, we'll get some PPP fees coming over the next couple quarters. Can you just kind of walk us through some of your high level thoughts on how we should be thinking about the moving pieces? Thanks.

Yes. Moving forward, I'll discuss excluding PPP. We have several factors that are now becoming advantageous for us, which were previously challenging. One is the CD book. It has consistently been beneficial, and we have $367 million maturing next quarter at 1.28%. The entire CD book amounts to $1.9 billion at 85 basis points, providing substantial opportunity. We have been deploying cash effectively, and I believe the cash accumulation you’ve observed will begin to reverse, excluding PPP; we can discuss PPP shortly. Notably, the securities portfolio has increased, contributing positively to our mix. There's been solid loan growth this quarter, and I believe the pipeline looks promising for the next quarter. However, on the downside, LIBOR continues to gradually decrease, which serves as a headwind. Overall, as we approach the fourth quarter, our deposit rates have declined more quickly than our loan yields. I anticipate the core margin will remain stable this quarter, with the possibility of a slight increase from accretion. Regarding PPP, we expect to begin seeing some forgiveness and cash inflow from that, and we will need to effectively utilize those funds to maintain the core margin, but my best prediction right now is for a flat core margin.

That's very helpful. We heard from large banks operating in some of your markets that they seem a bit more optimistic about the loan growth outlook. I appreciate the information on the securities book. Are you experiencing the same trend? Is there a point where, as we move past the PPP run-off into the latter half of this year and next year, the loan growth begins to more than offset what was added to the securities book, leading to positive mix shifts and net interest income expansion? Thank you.

I'll start and pass it over to Rich. Putting securities in is already a positive shift from cash into securities. If we can move that into loans, it could be beneficial for us. Now, I'll hand it over to Rich to discuss the pipeline and what he is observing.

Sure. Good morning, Michael. I want to add a little more color to Rob's earlier comments on growth. First of all, we're seeing a return on our investment on the 40 commercial lenders and leaders that we've hired since January 2019. Probably about half of those are replacement, half are incremental, and those are really paying off for us. Another piece of this is the large banks are moving away from the $5 million loan size. And that's a really great loan for United. Matter of fact, those banks are going in terms of portfolio management to a call center if you're a $5 million loan customer. And so that's been a real opportunity for us and I'm sure for some of our peer banks as well. And then lastly, I think we continue to enjoy some tailwinds from PPP, both from a reputation standpoint and the fact that of the 11,000 that we did, 3,000 were new customers to United and you can obviously figure out what's our biggest target in terms of who we've been going after for the last quarter, and that's been very successful for us. So, we do feel optimistic going forward. In Q4, our pipelines are strong and feel that we'll have a similar Q4 than likewise that we had with Q3.

I would like to note that the loan yields we are currently seeing are very much in line with our existing loan yields. Therefore, in terms of this growth, we are not experiencing any decline in the loan yield.

Got it, that's helpful. And then maybe just one final question from me. You guys just closed the Seaside deal. It does seem like M&A chatter is picking up a little bit. We did see a larger transaction here recently in some of your markets. Any updated thoughts? I know you guys have preferred some of the smaller deals, singles, maybe some doubles as opposed to home runs, but how should we think about kind of the capital deployment and M&A strategies we move forward? Thanks.

Yes, thank you, Michael. This is Lynn. I believe that as soon as the environment stabilizes, there will be significant opportunities for acquisitions. We typically prefer smaller deals, but we might consider a few larger ones as well. The challenges that existed before COVID, such as margin pressure, technology investments, and competition for loan growth, have intensified. There are many discussions happening, and people are eager to reassess their loan portfolios. I anticipate that we will be ready to re-engage in mergers and acquisitions.

Thank you. Our next question comes from the line of Catherine Mealor with KBW. Your line is now open.

Thanks, good morning. Maybe just one follow-up on the capital deployment question on buybacks. You've got a lot of capital, credit still stable, PPNR looks really good. How are you thinking about how soon you'd be comfortable re-engaging on the buyback?

That's a great question and we're discussing it frequently. Currently, we don't plan to resume the buyback, but we have sufficient cash at the holding company to last until early 2024. We also have upstream resources that will enhance our position. Before initiating buybacks, we intend to examine our trust preferred securities currently yielding 6.25%. Additionally, there is some senior debt maturing in 2022 at 5% that we could address early. We're considering using our cash to support 2021, but we prefer to gather more time and data before re-entering the buyback phase.

Great. And then I'll follow-up on credit as well. Are there any loans that have come off of deferral, but where you have kind of entered into a loan modification and anything to speak of there?

I'm going to say no to that. That's not really something that we're doing. If it's modified, then that's likely because of a change in performance. We would either downgrade it, transfer it to a different category, or classify it as a deferral. Deferrals are essentially modifications.

Yes. We've just seen some other companies that talk about coming off deferral but entered into a modification or structured solutions. Just wanted to make sure that there wasn't another group of loans that.

No, we're not doing that, no.

Okay, great. Helpful. Thanks for the color and great quarter.

Thank you. Our next question comes from the line of Kevin Fitzsimmons with D.A. Davidson. Your line is now open.

Hey, everyone. Good morning. I wanted to follow up on the organic loan growth and see if there are specific markets contributing more to that. Rich, you mentioned the small to mid-sized loans that larger banks are overlooking, which I assume is part of the equation. You also talked about former PPP customers, who may no longer be current customers. I'm curious if any of that is impacting the situation and if some of those customers are starting to engage in other loan business. Thanks.

Good morning, Kevin. The short answer to your PPP question is yes, absolutely. About a third of that loan growth came from the new PPP customers. In terms of where we're seeing some of the loan growth, it's in medical office buildings. I would say it's near owner-occupied because the definition of owner-occupied is 50%. We have some large deals where the owner has 35% to 40% occupancy, so we feel good about those. We've completed a fair number of grocery store-anchored deals, and following that, we have warehouses. Additionally, I want to highlight that our South Carolina and Coastal Georgia team, along with our North Carolina team, had tremendous quarters and significantly contributed to the volume.

That's great. Thanks, Rich. Just one quick follow-up. Jefferson, you mentioned a few times the timing of the PPP process. Regarding when the remaining fees will be recognized through the margin, is your best estimate that most of it will come through in the first quarter? Perhaps around one-fourth in the fourth quarter and the remaining three-quarters in the first quarter? I'm curious about your thoughts on that.

Yes. We believe it will happen a bit sooner than expected. Rich might have more to add, but we’ve noticed that a large number of our customers have submitted their full documentation in our portal. As a result, we are accelerating the application process for SBA approvals. We anticipate that there could be a waiting period of up to 90 days once we submit the forgiveness application before we receive the cash. However, we are currently estimating that about 50% of the fees could come in during the fourth quarter. I’ll let Rich share any additional insights he may have.

I have some numbers available. Out of the 11,000 we processed, we have entered 100% of the expenses, totaling approximately 6,057, which amounts to around $718 million. We still need to verify some information and obtain certifications from our borrowers. We developed a portal on day one and have continued to enhance it, including updates for the forgiveness process. We anticipate that most of our forgiveness will be received in a split between the fourth and first quarters.

And a trickle from there.

Thank you. Our next question comes from the line of Christopher Marinac with Janney Montgomery Scott. Your line is now open.

Hey, thanks, good morning. Want to talk about Navitas and just get a sense of whether the charge-off rate would be same or higher as you get into year-end and early next year. And also, kind of what type of new growth Navitas has on the horizon.

So, regarding Navitas, the charge-offs in the third quarter increased to 93 basis points, which amounts to about $2 million. When we first met with the Navitas team at the onset of the pandemic, their projections were somewhat higher. However, we are cautiously optimistic that their performance is improving, possibly even better than we had anticipated. The $2 million figure for the third quarter gives us confidence. Initially, when we acquired the portfolio in early 2018, we planned for a 1% loss rate, which was our expectation. They have managed to exceed those expectations even during the pandemic. We feel positive about this situation; it appears to be progressing as we hoped. While there has been a slight increase, overall, they have outperformed our earlier expectations. I anticipate that the charge-offs will remain close to 1% in the coming quarters. Now, I'll hand it over to Lynn to discuss...

So, if you look at the pipelines, they are encouraging. They have picked up from a summer when they had fallen off and we expect this sort of loan growth that you saw this quarter to continue into next year.

Thank you. Our next question comes from the line of Brody Preston with Stephens. Your line is now open.

Good morning, everyone. So, I just wanted to circle back on loan growth real quick. So obviously, really great quarter. I think it was 8% organic loan growth that you called out in the release. And so I guess to put up sort of high single-digit loan growth in this type of environment is impressive. And so as we think about the pipeline moving forward, maybe short term but also longer term, I guess if 8% is what you're going to put up in this environment, what do you think you could put up maybe back half of '21?

That's a great question. There is also an election coming up in the short term, so several factors could influence this. We're thinking of mid-single digit growth. That said, we remain optimistic as we enter Q4 and hope some positive trends continue. I don't believe that large banks will return to chasing the $5 million loan market, so that opportunity will remain for us. We're also very excited about leveraging the talent in the metro markets where Seaside operates. We view that acquisition merge as a potential boost and are thrilled about our new teammates.

Okay, great. And then you've had obviously a lot of success hiring over the last year and a half, just with all the disruption up and down your markets from the tourist deal, I think you've had some success maybe making some hires there. Is that something you expect to continue as we move forward into the new year?

The answer is yes, but we're going to be more opportunistic. It's going to have to make sense for us and we're really vet the people we want, we want the best and we'll make sure if we're hiring that we are getting the best because we feel very good about the team now in terms of our existing United market although, we are doing some hiring again to capitalize on our strengths with Seaside.

Okay. Regarding the equipment finance book, it seems that the pipelines are looking stronger, and since some others have reduced their involvement in this area, it appears you might have a better chance to select higher-quality credit options. However, with Seaside possibly adjusting that portfolio further, do you plan to let the Navitas portfolio run for a while before considering any loan sales in the future?

Yes, that's a great question. We previously mentioned keeping it under 10%, and it's currently well below that threshold. We are noticing that volumes are beginning to increase and are growing faster than our overall book. We plan to start selling loans in the first quarter and onwards. To clarify, our target is not 10%. We anticipate that it will grow at a rate faster than the core bank. Therefore, you can expect us to pursue loan sales more quickly before reaching 10%, since we are not aiming for 10%, and it is currently growing at a faster pace with a smaller number.

And just on the asset quality side, I think this team has been very disciplined in its originations and they are saying that they are seeing an uptick in the quality of the applications.

So, the applications are higher, they're higher quality and we're accepting a much lower percentage of them. So the acceptance rates of what we are getting versus what it has been applied for is much lower than pre-cycle.

Okay, great. I have a couple of quick modeling questions. Regarding the swap fees and brokerage fees, what factors contributed to their increase, and do you believe this trend will continue moving forward?

So, the swap fees simply go right along with loan growth. So, whatever you have for loan growth, I would think about the swap fees being similar. So, if loan growth comes down, I would expect the swap fees to come down on an absolute basis. Rich, thoughts on that.

I would add one minor point, which is that we want to have more fixed rates on our balance sheet. As a result, we have adjusted some of the incentives, so I anticipate a slight decline in swaps.

Yes, that's a great point. The growth in wealth management this quarter was primarily due to the addition of Seaside, so excluding Seaside, the business remains relatively stable. It is still a growing business, and that provides a solid starting point for this quarter.

Okay. And then last one, just what are you guys sort of view, I guess as normalized cash balances for you all? And how quickly do you think maybe those can run down, and then tangentially with the FDIC expense move a little bit higher, again is that liquidity is deployed?

In the year prior to COVID, we maintained around $50 million at the Federal Reserve overnight. I would consider a normalized amount to be approximately $50 million or close to that. Currently, we are managing balances between $800 million and $1 billion, which is significantly higher. Our aim is to return to that normalized figure, though I understand it may be challenging to achieve quickly. We have substantial cash inflows from the PPP loans that we need to deploy, so while returning to that number is our objective, it will require some time.

Okay, great. Thank you very much.

Thank you. This concludes today's question-and-answer session. I would now like to turn the call back to Lynn Harton for closing remarks.

Thank you all for joining the call. I want to take a moment to congratulate our team. This marks our first quarter with Seaside onboard, and to the Seaside team listening in, your impact on the numbers has been evident, demonstrating you are the outstanding team we anticipated, with strong relationships. After participating in the wealth management planning exercise with you, I am very excited about its progress throughout the rest of our footprint. Congratulations once again. Additionally, I would like to highlight our automation initiatives this quarter, particularly in the PPP process, which have been remarkable. Our customer retention and additions have also been impressive, and I noticed some early customer service scores today that made me very proud. I want to commend everyone at United for their hard work, and I look forward to sharing more updates with you next quarter. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.