Virtus Investment Partners, Inc. Q3 FY2021 Earnings Call

Good morning. My name is Richard and I'll be your conference operator today. I would like to welcome everyone to the Virtus Investment Partners Quarterly Conference Call. The slide presentation for this call is available in the Investor Relations section of the Virtus website, www.virtus.com. This call is also being recorded and will be available for replay on the Virtus website. At this time all participants are in a listen-only mode. After the speakers' remarks, there will be a question-and-answer period and instructions will follow at that time. I will now turn the conference to your host Sean Rourke. Please go ahead.

Thank you, Richard and good morning everyone. On behalf of Virtus Investment Partners, I would like to welcome you to the discussion of our operating and financial results for the third quarter of 2021. Our speakers today are George Aylward, President and CEO of Virtus; and Mike Angerthal, Chief Financial Officer. Following their prepared remarks, we will have a Q&A period. Before we begin, I direct your attention to the important disclosures on page two of the slide presentation that accompanies this webcast. Certain matters discussed on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 as such are subject to known and unknown risks and uncertainties including but not limited to those factors set forth in today's news release and discussed in our SEC filings. These risks and uncertainties may cause actual results to differ materially from those discussed in the statements. In addition to results presented on a GAAP basis, we use certain non-GAAP measures to evaluate our financial results. Our non-GAAP financial measures are not substitutes for GAAP financial results and should be read in conjunction with the GAAP results. Reconciliations of these non-GAAP financial measures to the applicable GAAP measures are included in today's news release and financial supplement which are available on our website. Now, I'd like to turn the call over to George. George?

Thank you, Sean good morning everyone. I'll start today with an overview of the results we reported this morning before turning it over to Mike to provide more detail. We delivered very strong financial and operating results for the quarter and although we did have modestly negative net flows attributable to equity mutual funds, we reported record levels of operating profitability and margin with operating income more than double the prior-year period, our highest level of earnings per share as adjusted, continued strong investment performance, positive net flows in retail separate accounts ETFs and institutional, and meaningfully higher return of capital through increases in both share repurchases and our dividend. We also continued to take actions to enhance the company's strategic and financial positioning. On October 1st, we closed on our acquisition of Westchester Capital Management further diversifying our investment offerings with $5.1 billion of differentiated non-correlated event-driven strategies. We also remain on track with the approval process to complete our transaction with Stone Harbor Investment Partners near year-end. Stone Harbor's $15 billion in emerging markets debt multi-asset credit and other strategies are highly complementary to our existing fixed income products and well respected among clients and consultants. In addition, we completed the refinancing of our credit arrangement providing additional financial flexibility and extended maturity profile and more attractive borrowing costs. Now, turning to a review of the results. Total assets under management were $177.3 billion, down 1% from June 30th due to market performance and modest net outflows. Over the past year, AUM has increased by 52% from the addition of the AGI assets, market performance, and positive net flows. Sales of $7.6 billion declined sequentially from $9.6 billion, while redemptions were flat for the period. The sales decline were primarily due to weakness in equity funds consistent with the shift in investor preferences during the period. On a year-to-date basis, sales have increased 13% on growth in retail separate accounts open-end funds and ETFs. Net outflows in the third quarter were $0.6 billion as outflows in mutual funds including a $0.7 billion model rebalance offset organic growth in retail separate accounts, ETFs, and institutional. Open-end net flows which include the model change were negative due to international and domestic equity. Retail separate accounts continued to deliver positive net flows with an 8% annualized organic growth rate and positive flows across investment strategies. Institutional net flows were positive for the fourth consecutive quarter with continued traction in multiple affiliates. ETFs generated positive net flows for the fifth consecutive quarter. Organic growth for the trailing 12-month period exceeded 5% with essentially all asset classes generating positive flows. In terms of the flows we are seeing so far in October, many of the third quarter trends have continued including solid momentum in retail separate accounts and ETFs. In institutional the pipeline is consistent, with what we've seen over the past year. In open-end funds, Ares continued strength in fixed income multi-asset and alternatives are being offset by international and domestic equities. Westchester Capital, which generated $0.1 billion of positive net flows in the third quarter prior to the close continues to grow organically in October. Our profitability for the quarter again reached a new high. Operating income as adjusted increased by 7% sequentially and more than doubled over the prior year and the related margin at 50.6% increased from 48.9% in the prior quarter and by 11 percentage points from the prior year. Earnings per share as adjusted were $9.71 up 7% sequentially due to higher revenues and stable expenses. Turning now to Capital. During the quarter, we increased return of capital to shareholders reflecting the meaningful growth of free cash flow over the past year. We repurchased approximately 65,000 shares for $20 million up from $7.5 million in the prior quarter and we increased our quarterly common dividend by 83% representing the fourth consecutive annual increase. Our balance sheet remains strong and we ended the quarter in a net cash position as we continue to generate significant cash flow providing opportunity to continue to invest in the growth of the business and growth for the shareholders. With that, I'll turn the call over to Mike. Mike?

Thank you, George. Good morning, everyone. Starting with our results on Slide 7, assets under management. At September 30, assets under management were $177.3 billion, down modestly from $178.6 billion at June 30. The sequential decrease reflected $0.5 billion of market decline and $0.6 billion of net outflows. Our assets under management continued to generate strong relative performance across strategies. At September 30, approximately 68% of rated fund assets had four or five stars and 85% were in three, four or five star funds. We have 13 funds with AUM of $1 billion or more that were rated four or five stars up from eight funds a year ago representing a diverse set of strategies from five different managers. In addition to strong fund performance, as of September 30, 92% of institutional assets and 92% of retail separate account assets were beating their benchmarks on a three-year basis. And 66% of institutional assets and 81% of retail separate account assets were outperforming their benchmarks over five years. Also, 87% of institutional assets were exceeding the median performance of their peer groups on the same five-year basis. Turning to Slide 8, asset flows. After five consecutive quarters of organic growth net outflows turned modestly negative for the quarter at $0.6 billion, which included a $0.7 billion model rebalance. Net outflows were specific to open-end funds as retail separate accounts ETFs and institutional all generated positive net flows in the quarter. Reviewing by product, for open-end funds, net outflows were $1.5 billion due to equity strategies with fixed income multi-asset and alternatives each delivering positive flows in the quarter. Within equities, both domestic and international generated net outflows including the rebalance in international equity. In retail separate accounts, net flows were $0.8 billion and continued to be positive across nearly all investment categories with an annualized organic growth rate of more than 8%. ETFs had $0.1 billion of positive net flows for the fifth consecutive quarter of organic growth. Institutional net flows of $0.1 billion were positive for the fourth consecutive quarter again benefiting from new mandates at multiple affiliates. By asset class for all products, net outflows were primarily due to international equity which turned negative in the third quarter most notably in July and August. Domestic equity, global equity and multi-asset each continued to generate positive net flows. Total sales were $7.6 billion, down sequentially from $9.6 billion. By product, fund sales of $3.6 billion compared with $4.7 billion in the second quarter, largely due to lower equity sales consistent with industry trends. Retail separate account sales were down modestly to $2 billion and institutional sales of $1.8 billion, decreased sequentially from $2.3 billion, which included the funding of several large new mandates. Turning to Slide 9, investment management fees as adjusted of $190 million increased $6.8 million or 4% sequentially, reflecting 4% growth in average assets. Performance fees in the quarter of $0.6 million compared with $0.8 million in the prior quarter. The average fee rate was 42 basis points, down 0.5 basis points sequentially. Excluding performance fees the average fee rate was 41.9 basis points and compared with 42.3 in the second quarter. The lower fee rate reflected a higher proportion of retail separate account and institutional assets. Looking ahead, it would be reasonable to assume a fee rate in the range of 41 to 43 basis points. For the fourth quarter, we would expect to be at the higher end of that range and then move to the middle of the range for 2022, after closing on Stone Harbor. Slide 10 shows the five-quarter trend in employment expenses. Total employment expenses as adjusted of $86.5 million were flat sequentially, as higher profit-based incentive was offset by lower sales-based compensation. As a percentage of revenues, employment expenses were 39.7%, a decline from 41.1%, due to market-driven revenue growth. We believe that a reasonable range for modeling going forward is 41% to 43%, subject to variability based on markets and sales. For the fourth quarter, we expect to be at the lower end of that range, moving to the middle of the range for 2022, upon closing the Stone Harbor transaction. Turning to Slide 11, other operating expenses as adjusted were $20.2 million, up on a sequential basis from $19.9 million, which included $0.8 million of annual grants to the Board of Directors. The sequential increase of $1.1 million normalized for the grants reflected growth in the business as well as a continued modest increase in travel and related expenses. As a percentage of revenues, other operating expenses were 9.3%, down both sequentially and from the prior year period reflecting the leveragability of the business. Looking forward, we expect other operating expenses in a range of $22 million to $27 million with the fourth quarter at the low end of that range. Slide 12 illustrates the trend in earnings. Operating income as adjusted of $110.1 million, increased $7.2 million or 7% sequentially due to higher revenues and essentially flat operating expenses. Notably, operating income as adjusted more than doubled from the same period last year due to growth in the business including the addition of the AllianzGI assets. The operating margin as adjusted of 50.6% increased by 170 basis points from 48.9% in the second quarter and was up 11.3 percentage points from 39.3% in the prior-year quarter. Net income as adjusted of $9.71 per diluted share increased by $0.64 or 7% sequentially, due to higher revenues from the increase in average assets under management. Regarding GAAP results, net income per share of $7.36, decreased 6% from $7.86 per share in the second quarter and included the following items; a $1.36 reduction reflecting the increase in the fair value of the minority interest liability, $0.27 of realized and unrealized losses on investments, and $0.21 of acquisition and integration costs. Slide 13 shows the trend of our capital liquidity and select balance sheet items. On September 28, we completed the refinancing of our credit agreement, with a new $275 million term loan maturing in 2028 and $175 million of revolving credit capacity, through 2026. In addition to increasing the company's financial flexibility and extending the maturity profile, the refinanced credit agreement reduces borrowing costs by approximately 65 basis points at current rates. Working capital was $345 million at September 30th, up 51% sequentially due to the net proceeds from the debt refinancing as well as cash generated by the business in excess of return of capital to shareholders. At September 30th gross debt to EBITDA was 0.7 times, which compared with 0.6 times at June 30 and was down from one time at September 30th, 2020 due to significant growth in operating income over that period. We generated $117 million of EBITDA in the third quarter, up 5% sequentially and 92% above the prior year level, as AUM growth from the addition of the AGI assets, market appreciation and positive net flows has meaningfully increased quarterly cash flow. We ended the quarter in a net cash position with cash exceeding gross debt by $162 million. Then, after the quarter, we made a closing payment of $135 million, for the acquisition of Westchester Capital. Additional upcoming obligations include a revenue retention payment for Westchester Capital that will be paid near year-end, the closing payment for Stone Harbor and the first AllianzGI revenue participation payment. During the third quarter, we repurchased 64,494 shares of common stock for $20 million, above the prior quarter level of $7.5 million. We also raised our quarterly common dividend by 83% to $1.50 per share, representing the fourth consecutive annual increase. We continue to take a balanced approach to capital management. And we're pleased to return meaningfully more capital to shareholders in the third quarter, reflecting the significant growth in free cash flow over the past year.

Thanks Mike. We will now take your questions. Richard, will you open up the lines please?

Thank you. We now have our first question from the line of Michael Cyprys from Morgan Stanley. Please ask your question.

Great, thanks. Good morning. Thanks for taking my question. I just wanted to circle back to the model rebalancing the $700 million figure that you had referenced I think in international equities. Just curious, if there's any additional color you can share with us around that rebalancing any thoughts on any potential risk as we kind of go forward from here? And maybe you could just remind us on how much of your AUM sits in the models today? And maybe you could also talk a little bit about your broader strategy and initiatives around model portfolios?

Sure. And when we use the term model portfolios, we're generally referring to those things that are sort of home office established and decided, as opposed to just pure wholesale product. So as we sort of indicated in our comments, the outflows included a model rebalance, it was the $0.7 billion again it was in the equity area. We don't have a lot of assets in that strategy still left in models. But periodically, we see over periods of time, you'll see people, home offices either making decisions to increase allocations to things or decrease allocations to things or making different decisions about what types of strategies they want to use. So generally, you will get some lumpiness as it relates to some of the model flows as opposed to the pure wholesale flows. So we did sort of experience that in the third quarter. Again, I think as you've sort of seen in some public commentary about international domestic in the third quarter. So, I mean I sort of look at it that way is that the assets that were in that model for a very long period of time, it was not a reasonable rebalance. But we don't have a lot left in those strategies in models. And then the other thing, as we sort of indicated in our comments the outflows in total were really in open-end mutual funds. They were in equity, primarily international equity and was mostly really in the month of July and August. So of the $1.5-ish billion of outflows in open-end funds, only $0.1 of it was in the month of September. So I was really kind of very focusing on that. None of us know what the markets are going to look like in the rest of the fourth quarter. But really that, July and August improved significantly in September, and we're kind of seeing the same kind of run rate so far in the month of October.

Great. Thanks. And then just a follow-up question maybe just on the Westchester deal that had closed, just an update on how the integration is progressing and how are you thinking about the opportunity to accelerate growth at that property whether it's around new product introductions and also some distribution synergies going on both sides in terms of distribution relationships at Westchester that could help accelerate growth of your existing products at Virtus and vice versa, to help them grow faster Westchester as well?

We're very excited to have closed that transaction. It's a great firm, great strategy, great legacy, good culture and they've done an incredible job. As a smaller boutique, they've raised assets really just to the strength and the quality of their investment process. And while they certainly have great – support in terms of their own marketing and distribution, I think we really are going to bring another element to the table for them to allow – a product that, I would describe as speaking for itself, to have a lot more voices telling that story. So I think we will look forward to not only sort of amplifying their availability throughout the retail channel, but I think there's a lot of other opportunities to leverage their strategy possibly in other product structures. So we closed on October 1, I think the integration has gone incredibly well and a lot of thought and planning was put into that. So we're really now focused on the next step, which is how do we maximize their opportunity and how do we grow them? And as I noted in the comments, they were positive even pre-close and we continue to see organic growth since the close even though it's only been a couple of weeks.

Great. And I think I just maybe sneak another one in here. Just a question on SMAs, where you've had a lot of strength and traction on flows, I was just hoping you maybe could give us a sense of just what that underlying product looks like that you're selling into the SMAs from like a strategy standpoint what are some of the bigger ones? And what would be the opportunity to bring other products into the SMA wrappers you kind of lookout over the next year or two products maybe, including strategies from Stone Harbor, Westchester, AGI, et cetera. How are you thinking about broadening out the product set within the SMA wrapper?

Yeah. So we really do believe that the retail separate account structure is a great structure for investors. We have been in retail separate accounts actually since our initial creation back in the mid-90s where we've always been in the retail separate business. A lot of the growth that we have seen over the last few years has been in more of the equity product, either in the quality equity, growth equity, small-cap equities, mid-cap. But we absolutely do have other of our managers and capabilities on the value side even on the fixed income side available in retail separate accounts. So a lot of the growth and the continued strength in that has been driven more on the equity side. But we have a large number of other strategies and we continue to see that as an area of growth for us in an area where we have a lot of experience in selling that product.

Great. Thank you.

Okay. Thank you.

Richard, can we take the next question, please?

Our next question is from the line of Sumeet Mody from Piper Sandler. Please ask your question.

Hey, thanks. Good morning, guys. Just sticking with the SMA business. Just noticed the fee rates kind of kept down over the last couple of years. Just wondering if you could talk about the drivers of that trend and how we should think about that kind of moving forward from here?

Sure, I mean I think like a lot of active investment strategies there is always a little bit of pressure on fees. Most of the strategies that I sort of resided and answered in the previous question are more capacity constrained, so they're generally higher fees. And if we sort of look at that business it is really kind of two components. This is kind of like manager traded or model provided to the intermediary, so we do both. But if you actually sort of look through the industry trends, you've seen much more of a growth in what they call model-only as opposed to the manager traded. So we have seen some more of the model-only coming on as well. But I think that fee rate is going to be moving more by asset levels of market. Mike, anything else?

Yeah, I think that's right. I mean it's been in that 44 basis points or 45 basis points range over the last four or five quarters and I think that level will be dependent on market dynamic.

Yeah.

Okay. Great. Thanks. And then on the institutional pipeline, can you just update the kind of one but not yet funded mandate pipeline and kind of what you're seeing today where that demand has been concentrated? Just a little bit of color around that?

Sure. I think we mentioned that the pipeline appears consistent with our previous observations. We've discussed various affiliates and strategies. Mike, do you have any insights?

I think that's accurate. Over the past year, we've experienced positive flows, although any given quarter can be somewhat unpredictable. Looking ahead, we anticipate that our known wins that haven't yet been funded will surpass what we expect in redemptions, though individual quarters could still be affected. The strength we mention comes from several of our affiliates. We're gaining traction across multiple affiliates and continue to secure more mandates, which makes us optimistic that the progress we've made over the last year and a half can persist. However, it's important to note that this business can be unpredictable, and quarterly shifts may occur. Overall, we are satisfied with the current dynamics of our pipeline.

One important aspect that emerged last quarter is our growth outside the US. We have been working on expanding our client base internationally, and many of our affiliates have successfully secured non-US mandates. We view this as a significant growth opportunity. In the last quarter, we highlighted that one of the appealing aspects of Stone Harbor is its potential to enhance our ability to serve non-US clients. We believe that there is a much larger opportunity for us in these markets since our managers have not traditionally been represented offshore. We are very optimistic about this and see it as a promising growth area.

Great. Thanks. I noticed that you chose not to pay down any debt in the quarter and instead focused your capital on share repurchases and presumably the Westchester closing. Given the lower debt levels and available float, can you provide an update on your capital priorities moving forward? I know you aim to maintain balance, but regarding M&A now that two of the three deals have closed this year, what does the pipeline look like today? How are discussions progressing with potential future targets in the market? Additionally, how are you approaching inorganic growth from this point?

Okay. Sumeet, this is Mike. I'll start and address some of the capital components of your question and turn it over to George to touch on the M&A conversations. From a capital standpoint, we were pleased this quarter at the end of the quarter on September 28 to be in a position to refinance our term loan, extend the maturities, bring the borrowing cost down given current LIBOR rates and increase the flexibility position as well for the closing payment for Westchester and the upcoming obligations. And I guess in that period, that we are refinancing we wouldn’t anticipate paying down debt will continue our balanced approach, which we're pleased to pick up the share repurchases this quarter up to $20 million from $7.5 million and increase the dividend. So really address returning meaningful levels of capital to shareholders. And we are pleased to also have that balance sheet and financial flexibility to invest in the business and continue to grow the business. So I don't think I've read into any longer-term shift in our balanced approach to capital management more of a timing in terms of this is the period we refinanced, extended the maturity where the revolver was coming due in less than 12 months so we reset that to be maturing in 2026. The term loan was coming due in less than three years so we reset that for 2028. So none of that impacts the balanced approach that we would expect to continue to implement just more in terms of timing with executing that refinancing. So George?

Yes and on the M&A question, so as we always say, we think it's really important that our long-term growth strategy and value creation strategy is not on M&A, so we focus on that organic growth and then increase of distribution of existing products in creation of new product. That being said, as you noted, we literally have just done three transactions in a 12-month period. So we are structurally very focused on that activity. We continue to be very active in that area. We see lots of things, again I think as we've commented before, for us it would have to be very strategic and fit in either in terms of the product diversification or other strategic elements. So again I continue to think the activity out in the M&A market continues to be quite robust and that's just not for our sector I think it's for a lot of sectors. But again, we will only do things that make a lot of sense for us in terms of moving us forward on our growth plans.

All right. Great. Thanks. And just last one here on the CLO front. Is there any kind of open warehouses or anything to kind of look at over the next few quarters that you guys are kind of keeping your eye on in that way?

Yes, Sumeet, obviously we've been active at our leverage finance teams in the CLO market both in existing transactions to be in a position to refinance or reset those given the current outlook in the market we were able to recently extend one of our CLOs through refinancing and our team stay close to the market, it's a product structure and a capability that we think is compelling and we'll stay close to it. I think at this time there is nothing specific to report. But we believe the market characteristics are compelling and we'll stay close to it. And if we think it's a good use of shareholder capital, we would consider it.

All right. Great. Thanks for taking my questions.

Thank you.

We have a follow-up question from Michael Cyprys of Morgan Stanley. Please ask your question.

Thanks for taking the follow-up. Just wanted to dig in on a few other points maybe just starting with the CLOs, we've seen a number of firms across the industry raise new CLOs and do some restructurings, it sounds like you guys are doing some on the restructuring side at Virtus. But just curious, what's holding Virtus back from participating in new CLOs, where we're seeing others across the across the industry raise a significant amount of capital?

Yes, I think there are two elements to it. We've got approximately 11 structured products and about $4 billion of assets under management in that product category. And we look at both sides of it one is resetting or refinancing the existing book and we completed one of those actually post the quarter in earlier in October, which extends the maturity and the reinvestment period at sites and the team there does stay close to the market. I think our last new issuance was a little over a year ago and the cadence has been anywhere from 12 months to 18 months. So I'd expect we'd stay close to that. And again, it's an area that we have the capabilities and we are certainly willing and demonstrated in the past to support our teams if we think the capital is appropriate and the opportunity is meaningful.

Great. And then just coming back to the capital management theme, we saw that the large dividend increase back in August. Just hoping you could maybe clarify elaborate a bit more and how you're thinking about what is the right dividend payout ratio for Virtus today? How do you think about that longer-term clearly you have the cash flows to support a higher dividend payout ratio. So I guess what holds you back?

I think we've shown consistent improvement in that area. We have seen four consecutive annual increases in our dividend, reflecting the underlying growth in our business. The recent increase was particularly significant, largely due to a substantial rise in our EBITDA and cash flow, which has nearly doubled in some cases. We believe that the dividend plays a crucial role in our capital return strategy, and we are committed to maintaining its reliability and expected growth. At the same time, we balance this with stock repurchases. As demonstrated this quarter, when we see an opportunity based on our stock's trading performance, we use some of our free cash flow to buy back shares. We have done this regularly over the years and will continue to do so. Additionally, we evaluate our payout ratio in comparison to our peers while also considering the investments we're making in the business. We want to strike a balance among all these factors as we believe that doing so will create the most value for our shareholders over the long term.

Great. Nice. And since you mentioned closed-end funds I do need to ask just because we are seeing others across the industry taking on the P&L, the issuance cost for a closed-end fund reopening that marketplace, it's been successful in another shop. Is that something you guys are considering or how do you think about that making sense for Virtus? And if you were to re-enter that marketplace with new issuance would you be putting through the issuance cost through the P&L as we've seen with some others?

Well, I'll speak to the opportunity side and then Mike will address the accounting side of it. But we're a big data closed-end funds. Currently, have about $11 billion-ish of closed-end funds across multiple affiliates. We think it is a great structure for retail investors and non-retail investors in fact. As you know though it's been gotten – its gotten very busy out there a lot of the underwriters are very busy putting out closed-end funds. We have several managers with attractive strategies. We've actually developed and actually probably have a filing out there on the fund that we've offered. So we're very excited about that product structure and are in active dialogs with underwriters. But unfortunately, they're also in active dialog with a lot of other people. So we continue to think that's a great opportunity and several of our managers have very attractive strategies. Mike, on the

And I think Michael touched on it regarding how the accounting works. While some closed-end fund structures may last seven to ten years or even indefinitely, the accounting requires that the costs associated with structuring be recognized in the period they are issued. We will adhere to that accounting standard, but we believe it represents a compelling use of the capital needed to establish one of these funds. We'll make sure to highlight this so the investment community is aware of the expenses involved, which we consider a wise investment of shareholder capital.

Great. Thanks. And just one last one if I could just coming back to M&A it sounds like the bar maybe is going higher for you guys at this point. Just what could make sense as you kind of look out over the next year or two what sort of gaps or whitespace remain that could be filled in through M&A? It sounds like it needs to move forward on your growth plans. But maybe you could just elaborate on what that could be?

Yes, I am not sure if it was just a shift, but it could go in different directions. As a company, we have evolved, and what we valued the most two or three years ago may differ from our current priorities. However, we still believe that incorporating unique investment strategies and firms is valuable. We have strong coverage in traditional active management, but we see significant opportunities in more non-traditional and less correlated strategies. Westchester will enhance our exposure to these non-correlated strategies, which we view as a key area for growth. Additionally, diversifying our business internationally in terms of client base remains appealing. We consider all aspects organically, whether they relate to specific product capabilities that are not daily liquid strategies or opportunities outside the US, or anything that can advance our business and drive organic growth.

Great. Thanks a lot for taking my questions.

Okay. Thank you. Thank you.

Okay. Thank you.

This concludes our question-and-answer session. I would now like to turn the conference back over to Mr. Aylward. Please go ahead.

Great. And I want to thank everyone for joining us today. And obviously, I certainly encourage you to give us a call or send a note if you have any other further questions. Enjoy the rest of your day.

That concludes today's call. Thank you for participating. You may now disconnect.