CBRE Group, Inc. (CBRE) Q3 2015 Earnings Report, Transcript and Summary

Greetings, and welcome to the CBRE Third Quarter 2015 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation [Operator Instructions]. As a reminder, this conference is being recorded. I would now like to turn the conference over to Mr. Steve Iaco, Investor Relations for CBRE. Thank you, Mr. Iaco. You may now begin.

Thank you. Welcome to CBRE's third quarter 2015 earnings conference call. Earlier today, we issued a press release announcing our financial results for the quarter. This release is posted on the homepage of our website, CBRE.com. This conference call is being webcast through the Investor Relations section of our website. You can also find there a presentation slide deck, which you can use to follow along with our prepared remarks. An audio archive of the webcast will be posted to the website later today and a transcript of our call will be posted tomorrow. Before we get started, we would like to remind all of you that we will host our Annual Business Outlook Day in New York on December 3rd. This is an opportunity to provide the investment community with an in depth understanding of our business lines and our strategy. We look forward to see many of you there. Now, please turn to the slide labeled forward-looking statements. This presentation contains statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements regarding CBRE's future growth momentum, operations, financial performance, business outlook and adjusted earnings per share expectation, including expected contributions and cost synergies from the newly acquired global workplace solutions business and its integration. These statements should be considered to be estimates only and actual results may ultimately differ from these estimates. Except to the extent required by securities laws, we undertake no obligation to update or publicly revise any of the forward-looking statements you may make today. For a full discussion of the risks and other factors that may impact any forward-looking statements please refer to our third quarter earnings report filed on Form 8-K, and our quarterly reports on Form 10-Q filed in 2015 and our most recent Annual Report on Form 10-K. These reports are filed with the SEC and are available at sec.gov. During this presentation, we may make certain statements that refer to non-GAAP financial measures as defined by SEC regulations. Where required by these regulations, we have provided reconciliations of these measures to what we believe to be the most directly comparable GAAP measures. Those reconciliations together with the explanation of these measures can be found within the appendix of this presentation. Please turn to Slide 3. Participating on our call today are Bob Sulentic, our President and Chief Executive Officer, Jim Groch, our CFO and Gil Borok, our Deputy CFO and Chief Accounting Officer. During our remarks expect or where otherwise noted or reference to percentage increase or decrease are in local currency as calculated by comparing current period results at prior period exchange rates versus prior period results. Now, please turn to Slide 4 as I turn the call over to Bob.

Thank you, Steve. Good afternoon, everyone. Thanks for joining us. The third quarter of 2015 was an eventful period for CBRE. As you saw on our press release, we posted excellent results with strong top-line and bottom-line growth around the world, highlighted by a 28% increase in adjusted earnings per share. We also moved decisively to fortify our market leading occupier outsourcing business with the acquisition of Global Workplace Solutions on September 1st. This is our largest acquisition in nearly a decade and one of the most compelling ever completed in our sector. The combination creates a platform unlike anything that has previously existed in our industry with high complementary product offerings and common cultures around innovation and client services. It broadens our value proposition, creates true global scale, deepen our relationships with prominent global corporations and enriches our talent pool. Our last three large strategy acquisitions are recurring revenue businesses that operate under contracts that are typically five years or longer. These acquisitions have helped to transform CBRE into a more resilient business. We now have it dramatically more powerful integrated service offering while maintaining our core focus on commercial real estate services. We also continued to make gains through investments in recruiting, training, technology, branding and research. All positioned to help us deliver great outcomes for clients and to drive growth. We saw the pay off from these investments across CBRE in the third quarter. Notably, our services business comprised of the Americas, EMEA and Asia-Pacific regions, again, posted significant revenue and normalized EBIT growth with solid margin expansion. Our Investment Management business also performed well. Now, Jim will provide you with more specific insight into our performance.

Thank you, Bob. I will begin with an update on our overall performance and the expected contributions from our recent acquisition of Global Workplace Solutions. Please turn to Slide 5. In Q3, our business continued to exhibit excellent broad-based momentum. Revenue and earnings growth for the quarter was very strong. In local currency, gross revenue increased 26%, while fee revenue rose 21%. Without the one month contribution from the acquired Global Workplace Solutions business, gross and fee revenue were both, up 16% in local currency. Normalized EBITDA totaled $345 million, an 18% improvement from last year's Q3 or a 24% improvement in local currency. Profitability was strong with a 17.8% normalized EBITDA margin on fee revenue, up approximately 60 basis points from Q3 2014. Adjusted earnings per share increased 28% to $0.51 for the quarter. Please turn to Slide 6 for an update on the expected financial contributions from the newly acquired Global Workplace Solutions business. This acquisition greatly enhanced our ability to serve leading corporations around the world. We funded about one-third of the purchase price with cash and temporary revolver borrowings and two-thirds with attractively priced five-year and seven-year bank debt and 10-year bonds. Both Moody's and Standard & Poor's affirmed our investment grade credit rating. The integration of Global Workplace for existing occupier outsourcing business is off to a great start. Morale is very high, our organization structure percent senior leadership, line of business leaders and geographic leadership is in place. Feedback from clients, their consultants and our shareholders has been overwhelmingly positive as the rational for the acquisition and value proposition is clear. We have identified additional cost synergies and now expect run rate annual synergies of approximately $50 million, up from our initial estimate of $35 million in March 2015. We anticipate achieving approximately $30 million of the synergy in 2016, with the remaining run rate savings largely realized by year end 2017. When we announced the acquisition in March, we indicated expected material accretion to our adjusted 2016 EPS with a mid single digit percentage increase. We are now raising our estimate to high single digit percentage increase accretion in 2016. We closed the acquisition in the early part of our expected timeframe and raised financing with minimal interest expense in advance of closing. In light of this, we now expect the acquired Global Workplace Solutions business to contribute $0.03 to $0.04 to adjusted earnings per share for the last four months of 2015. Calendar year Q4 has typically been a seasonally slower period for the acquired Global Workplace Solutions business due to its fiscal year previously ending September 30th As a result accretion from the last four months of 2015 is not indicative of the higher expected run rate contribution in 2016. Please turn to Slide 7 for a review of the performance of our major global lines of business in Q3. As a reminder, I am referencing percentage increases in local currency unless noted otherwise. For the company as whole, contractual fee revenue plus leasing, which is largely recurring totaled 68% of total fee revenue. Occupier outsourcing showed strong growth in all three regions, excluding transaction revenue generated by this business which is accounted for in leasing and sales revenue, occupier outsourcing achieved a 53% increase in fee revenue. Excluding the contribution from the acquired Global Workplace Solutions business, fee revenue rose 14%. Asset services growth was moderate with fee revenue up 4%. Investment Management performed well, fee revenue increased 19% fueled by higher carried interest tied to property dispositions. Valuation again grew nicely, with global fee revenue up 14%. We benefited from higher volumes of appraisal and consulting work which stem in part from acquisitions we made in 2014. Property leasing revenue again rose by double digits with 12% growth globally led by Europe and Asia-Pacific. The growth rate in U.S. slowed modestly, but remained strong and 9%. We are seeing less availability in Class A office space in a few gateway markets with new development accelerating, but generally still lagging demand. This makes then the time it takes to complete certain larger lease transactions. However, we continue to reap the benefits of very strong recruiting activity, higher productivity from our existing brokerage teams and modest rent growth. Our capital markets business continued to perform exceptionally well and had gains in market share and strong capital flows into real estate. Property sales revenue rose 19% with region producing markedly higher activity. In the U.S., we logged impressive market share gains as confirmed by our RCA. At a time when the overall market activity was flat for the quarter. We continued to see activity broadening in the secondary markets in the U.S. and EMEA. In Asia-Pacific, Australia and Hong Kong accounted for lion share of the increase. Mortgage services also remained robust with revenue up 33%. Even though as expected, loan volume with the U.S. government-sponsored enterprises leveled off due to the regulatory caps. Banks life companies and other debt capital sources stepped up their lending. Please turn to Slide 8, overview Q3 results for our three regional services segments all in local currency. Fee revenue increased 18% in the Americas. In EMEA, fee revenue increased 29%. We saw healthy gains across the region, including France, Germany, the Netherlands, Spain, Switzerland and the United Kingdom. In Asia-Pacific, fee revenue rose 22%, with growth led by Australia, Greater China and India. Fee revenue growth without the contribution from the acquired Global Workplace Solutions business was 14% in the Americas, 19% EMEA and 17% in Asia-Pacific. Normalized EBITDA increased 18% in the Americas, 70% in EMEA and 54% in Asia-Pacific. Please turn to Slide 9, regarding our occupier outsourcing business, which is reported within the three regional services segment. This business line, which we previously called global corporate services adopted the Global Workplace Solution name on September 1st. This move reflects Global Workplace Solutions' high brand values in the facility management sector and increasingly diverse workspaces in which we are serving clients including hospitals, data centers, labs and manufacturing plants. Outsourcing continues to gain wider appeal and existing customers are taking advantage of our deeper and broader platform. In Q3, we set a new quarterly record for the number of expansions of existing contractual relationships. We also sign nine contracts with new or existing healthcare clients, reflecting the compelling and growing opportunity for CBRE in this sector. These numbers do not include contracts from the newly acquired Global Workplace Solutions business, which we will begin to reflect in our contract reporting in 2016. Please turn to Slide 10, regarding our Global Investment Management segment. This business performed well with $19 million of carried interest tied to significant property disposition activity. Capital raising totaled $1.8 billion in Q3 and $7 billion over the trailing four quarters. We continue to attract significant equity commitments based on the solid performance of our investment programs within 75% of our AUM has outperformed its long-term industry benchmark. At the end of Q3 assets under management of $86 billion were up $1.6 billion over prior year Q3 in local currency, but down $2.6 billion when converted into U.S. dollars. Please turn to Slide 11 regarding our Development Services segment. Pro forma revenue, which includes equity earnings and gains on real estate sales and EBITDA, both declined reflecting fewer large property dispositions than in last year's highly active Q3 period. However, activity is very strong and we expect most of this year's earnings to be achieved in Q4 from several large transactions. We now anticipate that our combined Investment Management and Development Services businesses or 2015 will moderately exceed 2014 performance. Development projects in process totaled $6.7 billion, up $1.3 billion since the end of 2014. The pipeline totaled $4 billion flat with year-end 2014 as projects have been converted from pipeline to in process. Now please turn to Slide 12 as I turn the call back over to Bob for closing remarks.

Thank you, Jim. As we enter Q4, 2015 is clearly emerging as another exceptional year for CBRE. The actions we have taken to upgrade our talent base, enhance our service offering, materially strengthen our operating platform, particularly around data and technology and fortify our financial position are yielding strong results for our clients and for our shareholders. We are mindful of the challenges to the global economy. However, in light of outperformance through the third quarter and our strategic and financial momentum, we are raising our full-year 2015 guidance for adjusted EPS by $0.10 to the $2.00 to $2.05 range. This new guidance implies 20% year-on-year growth in adjusted earnings per share at the mid-point of the range. With that, operator, we will go to questions.

Thank you. We will now be conducting a question and answer session. [Operator Instructions] First question is from Brad Burke of Goldman Sachs. Please go ahead.

Good evening, guys. Congratulations on the quarter. I want to start with property sales. The growth was obviously strong in the U.S., certainly versus what a lot of us were expecting when you look at the RCA data and you had called out that you had taken share in the quarter, but I was hoping you could break down how much of the growth that you saw in Q3 was share gain versus maybe the market holding up a little bit better than what that third-party data would indicate, to the extent that you are gaining share, if you could touch on some of things that would be driving that?

Hey, Brad. It is Jim Groch. We think RCA's data is pretty good, so we attribute the vast majority of our performance to the share gain.

That is 17% growth in the quarter versus you had said RCA being zero, so the entirety of that is share gain?

Yes. I think so. Now, as we say every quarter depending on which way these things go regardless of which way they go quarter-to-quarter swings in this data can move quite a bit from one quarter to another.

Is that an increase in headcount or recruiting or better productivity or a combination of the two?

Yes. Brad. This is Bob. It is both. We've had a lot of recruiting success. That has been a big initiative for us for the last three years. You know we have talked about the fact that we have had a couple years ago was one of the best years in the history if not the best year in the history of our company. We repeated it last year. This year is on a similar pace and we are starting to see the benefit of that recruiting. We are seeing better production from some of our people. We are teaming in some ways and doing some things. We have built an in-house investment banking capability to support our investment sales professionals. That has been helpful in a number of cases. As a result all of this came together to produce what you saw this quarter. I think it is notable though what Jim said, these things do fluctuate quarter-to-quarter. This was a particular good quarter for us. Okay. That is helpful. With the capital markets business, I know it has been something that will spend nervous on - I was hoping that you could give us some thoughts about how that business is shaping up looking forward and also whether you are starting to see any sort of pullback in the credit markets?

Brad, this is Jim. At the beginning of the year as you know we gave guidance that we thought the growth rate in this business would go back to high single digits. We think obviously the market we and market have outperformed that projection, but we still believe that business will slowdown in that is coming and we may have just been a little bit early on that call. We think it will slow down there at more sustainable level, but that continues to be our belief. The rate of increase in liquidity in the market has come down, but as you know there is still quite a bit of liquidity in the market.

Okay. I guess, last one, just sticking with capital markets with the commercial mortgage business I think last quarter you had said there was a $50 million headwind to EBITDA. You were expecting Q3, Q4 due to the GSE lending caps and certainly it does not seem to have impacted the third quarter, so I was wondering whether that was still the case and if you are able to beat that what would be driving it.

That ended up being about flat. For Q3, we are still projecting that Q4 will be down from prior year. We are now thinking, plus or minus $10 million, but it is a little hard to the project those numbers precisely. Other lenders have picked up pace, more capitals come in market from other sources as they have pulled back.

All right. Thank you guys.

Thank you.

Thanks Brad.

Thank you. The next question is from Tony Paolone of JPMorgan. Please go ahead.

Thanks and good afternoon, everybody. First on GWS, I just want to reconcile if I think about the $237 million of revenue you got in September and annualized that I think it is a $2.8 million and it seems inside if our recall correctly the run rate revenues coming out of the deal, was there seasonality or can you just give a sense as to what the annualized number should be as we look at GWS in the first year?

Yeah. We will give a little more color when we normally do guidance and 90 days, but two comments. One is, the numbers I think may be referencing were from 2014, JCI had been shedding a couple of unprofitable contracts and then of course revenue and expenses were impacted by foreign-exchange since 2014.

Okay, so there will be some diminution in that just from a run rate point of view that should not be the number we look at.

Yes. Not EBITDA, but revenue, yes.

All right, in the accretion guide that you gave with the transaction is that just to understand the connections. Is that kind of still the EBITDA that you originally expected I think plus the cost savings and then minus I guess interest expense on the bond deal you did then some DNA? Is that how you are getting to that accretion, just trying to understand the components of that number.

Yes. Pretty much, I think you have outlined the right factors.

What was it that I guess surprised you or turned out to be a bit more positive to move from mid-single digit to high single digit accretion?

There is two factors, one being increased synergy and the second just increased confidence.

Okay. In this synergy, I think you had mentioned $30 million, but I thought that was the same as what it was originally. Extra $20 million was something for 2017?

No. When we first announced the deal on March, we referenced the $35 million run synergy and noted that we expected most of that to be back end weighted to the second year or not most of it, but referred to be more backend weighted, so that we would realize that over two years. That $35 million run rate synergy has now increased to $50 million and we are saying we believe we will achieve $30 million of that $50 million in the next calendar year in 2016. By the end of '17, we should largely achieve the full $50 million run rate synergy.

The total amount of synergy has increased and the pace at which we expect to achieve this synergy has increased.

Okay. Got it. Thanks for clarifying that. Then I have a question in development services and I guess as well as in investment management, given you know how robust capital markets are, do you think you will accelerate asset sales and drive promote incentive fees and that sort of stuff in the next few quarters? We noticed that it seem like your carried interest was little higher this quarter and just curious as to what your plans are with again the development pipeline being pretty large and moving its way through and then any other assets sales that might drive promotes?

Yes. Tony. You mentioned both, the development business and the Investment Management business. It has been the case for some time now and continues to be the case that we are aggressively harvesting assets in our Investment Management business, because that is what our clients want us to do. We are able to fetch good prices and recycle the capital for them in many cases and they are generating very good relative returns, so w will continue down that path. In the Development business, we built up a very healthy in-process portfolio of opportunities. They are very well underwritten, very good and we think that that business will contribute really nicely to the Company fourth quarter this year and next year and we are not doing anything to new accelerate it. Development projects have their own lifecycle and you have to get them improved design, built and leased up and then you can sell them, so we are not doing anything to accelerate that process, but that process is playing out. As you know, our portfolio of projects has grown nicely over the last couple years, so we expect to see some good returns as a result.

Okay. Can you share what the fourth quarter expected incentive fees or carried interested amount is going to be?

Tony, what we mentioned, just before we opened up for questions is that we expect the combination of the two businesses to be up moderately over last year.

Okay. Then just last question, if I think about your various business lines and then also your various geographies and then overlay that with some of that the more macroeconomic volatility we have seen over the last few months, where you guys see pressure if anywhere on that matrix?

Right now Tony, we are not seeing a lot of pressure. I would tell you where we are seen the strongest growth is in Europe. You saw the results this quarter, we expect that continue, but we saw good growth in places where people did not necessarily expected. In Greater China, we had nice growth. In Australia, we did, so we have not felt a lot of meaningful pressure at this point and the backlogs of business we have suggest that year should finish out nicely for us.

Okay. Thanks. Nice quarter.

Thank you.

Thank you.

Thank you. The next question is from Brandon Dobell of William Blair. Please go ahead.

Thanks. Good afternoon, guys. I know you keep hammering the capital markets line for a second here. Do you feel there is any or was any acceleration in deals and just with an eye of maybe uncertainty towards the end of the year or people just kind of changing their approach based on how the interest rate noises is kind of playing through capital markets? Are people change their trajectory or was it just - it felt like deals that closed were closing when they were supposed to close?

Brandon, this is Jim. We did not see any change in the dynamics of people try to accelerate deal closings. I would say that - you asked about coming forward next quarter. I mean, Q4 of the last two years has been really strong, so it is a little bit of a tough compare, but outside of that I think that the business activity is still strong.

Okay. Within the U.S. looking at the larger markets versus secondary markets, I know there are still some pretty big gaps in cap rates and things like that between those markets, but do you look at those if you want to divide the market into those two categories, where do you feel you have got more momentum or where do you feel the momentum is sustainable over a longer duration for your brokers?

While there is still honestly an awful a lot of activity across the market globally both, in this core CBD markets and in the secondary markets, so we have seen strengthening in the secondary markets both, throughout the U.S. and the EMEA.

Okay. Then in GWS, maybe some color on how the cadence of the either contract renewals or your opportunity to kind of get under the covers of some of this contracts. How we should think about that impacting some of the potential knock on revenues around other services whether it would be add on to the existing contracts for facility or property, leasing maybe if some capital markets activity, but I guess I had focused on a more on the leasing and consulting around the existing contracts. Is it going to take four, five, six years to get through all these things or do you have opportunities to go back or to go with those customers kind of midstream and change what those deals might look like?

Well, Brandon we always have the opportunity because of the full-service nature of what we do to talk to those and they are mostly large corporate still increasingly we are doing work for hospital systems and government enterprises, but we always have the opportunity to talk to them on a full-service basis, but we have made an absolute commitment to ourselves and to our clients that for the time being our focus for them with this acquisition which again as we talked about in our prepared remarks is the biggest we have done in a decade and really unlike anything to spend on our sector. The focus is on great results for our clients. We believe that the other things we do are not going to be a secret to them and that over time - provide make great services to them with work we do now. We will be able to integrate back and forth between the client base that we had and the client base that GWS brought to us with the very complementary services we have had, but that is not what we have talked about in our underwriting or - Jim has talked a number of times over the last couple of quarters about what we expect out of this deal. What we are talking about is, not that. That will be there if we do a good job. Our focus is on doing a good job. We think there will be upside, but we are not factoring in a lot of revenue synergy into that business right now. We are factoring in our normal growth and excellent execution and we think the revenue synergy will come as a result of that.

Okay. The acquisition change, how we should think about the headcount growth trajectory for '16 i.e. do you need to add service professionals in the core service lines kind of around the GWS deal to really take advantage of the breadth of the portfolio or should we expect kind of the numbers of headcount you guys add in '16 it looks like it did in '15 to the growth rate it is a little bit slower?

Yes. We won't need to add a lot of professionals. We added a lot of professionals as you know and we are really kind of at a record pace the last couple of years.

Yes.

…in our transactional businesses and we work for 80%, 90% of a large companies around the world on the transaction site already. We are positioned to do more for those clients. We are position to do work on a contractual basis and we are seeing more of that, but we are not going to have to meaningfully ramp up our headcount to get that done.

Okay. Perfect. Thanks a lot.

Thank you.

Thank you. [Operator Instructions] The next question is from Mitch Germain of JMP Securities. Please go ahead.

All right. Thank you. Jim, we are trying to a better idea with regards to the guidance. It looks like better $0.03 to $0.04 of it was GWS, mortgage some carried interested is that the way they kind of think about the different variables that led you guys to take such a constructive view on the outlook?

I would say those are factors, but really the businesses have been performing pretty strongly across all three regions and all lines of business. We do a bottoms up detailed review every quarter and it was that review that took us to this increase.

Great. If I look at the balance sheet a little over two times debt to EBITDA today, where do you see that factoring out? As 2016 progress, you see that dropping down to more normalized levels?

When we announced the deal on March, we said we thought we would be 1.7 times leverage, 1.7 times EBITDA by year-end. I think we are right on track for that. Even that is a relatively conservative view, so our bank covenants will show a lower leverage ratio, because we can pro forma in the run rate EBITDA that that we have acquired et cetera, but on the most conservative view, we are just over two now and we will be under 2 by year-end.

Great. Then just two more quick question from me, one, in terms of retention GWS, it sounds like you said you guys have the business leaders in place and the management in place. Do you see any loss in terms of some of the key personnel that you guys were expecting to take on?

Well, the most important people have signing employment agreements four, five years and are showing quite significant enthusiasm for the business and the combinations, so I do not think so. There will be some overlap, so there will be some people that leave, but I think we are in a very strong shape there as far as retention.

Great. Now that this deals has been completed, are you guys going to be now focusing back on some of the smaller tuck-in and strategic acquisitions?

Yes. I think you will start to see pickup probably as early as our next quarterly call.

Great. Thank you. Great quarter.

Thank you.

Thank you. The next question is from David Ridley-Lane of Bank of America. Please go ahead.

Sure. One concern we have heard from investors, the sources of the cross-border capital and either commodity driven economies or greater Asia economies are likely to slow going forward. What have you seen either quantitatively or anecdotally about cross-border capital flows?

We have not seen that, David. What we have seen is that cross-border capital flows have remained strong. We have interviewed, we kind of pulled our clients in various ways. We think half of the clients that we did business with a year ago were moving capital across borders. Half of them intend to move more capital this year than I did year ago, so you saw the numbers not only for us, but for the whole market for the quarter and a year, so we have not seen a pullback in that at this point. It just has not been something we have seen. In Europe, in particular, we have seen a meaningful increasing cross-border flows into Europe.

Got it. On the capital markets pipeline, so disruption we have seen in sort of the debt markets and around CMBS in particular has that been enough to put some deals out of the pipeline or has most of the things that you have been working on still very much go ahead for the fourth quarter?

Yes. From what we have seen, there is sufficient capital from other sources to step in. As I mentioned earlier, we have been anticipating that the rate of growth in sales will come down to a more sustainable level and we still believe that that is likely to be the case, but we are not seeing deals die basically because of a lack of capital [ph].

Got it. Then kind of curious on the leasing volumes, did you see any impact from the market volatility or were corporations pretty ahead of confidence to go ahead and execute leases even with some of the broader market volatility in the quarter?

We saw strong growth in leasing around the world, slightly slower growth in the U.S. this quarter than we have seen, but still very strong at 9%, so we have not seen the dynamic. We are expecting to see some of that in China, but we as of now have not seen that pullback and we are expecting to see a nice finish to the year. We are watching China like everybody else.

Got it. Thank you very much.

Thank you.

Thank you. The next question from Mitch Germain of JMP Securities. Please go ahead.

I am sorry guys. Just one more from me, how should I look at the recurring that is the fee revenue of the Company on a pro forma level when we assume like a full year impact of the GWS deal?

Mitch, we…

…to the whole…

Yes. We have not given any guidance on that. When we come back next quarter, we will take a look at that. Maybe we can give some more color.

Thank you.

Okay.

Thank you. We have no further questions at this time. I would like to turn the conference back to Management for any closing comments.

Thanks everyone. We look forward to talking to you when we do our year-end release in three months.