Essent Group Ltd. (ESNT) Q3 2017 Earnings Report, Transcript and Summary

Good morning. My name is Emily and I will be your conference operator today. At this time, I would like to welcome everyone to Essent Group Third Quarter 2017 Earnings Conference Call. All lines have been placed on mute to prevent background noise. After the speakers' remarks there will be a Question-and-Answer Session. [Operator Instructions]. Thank you. Chris Curran, Senior Vice President of Investor Relations, you may begin your conference.

Thank you, Emily. Good morning, everyone, and welcome to our call. Joining me today are Mark Casale, Chairman and CEO; and Larry McAlee, Chief Financial Officer. Our press release which contains Essent's financial results for the third quarter of 2017 was issued earlier today and is available on our website at essentgroup.com in the Investor section. Our press release also includes non-GAAP financial measures that may be discussed during today's call. The complete description of these measures and the reconciliations to GAAP may be found in Exhibit L of our press release. Prior to getting started, I would like to remind participants that today's discussions are being recorded and will include the use of forward-looking statements. These statements are based on current expectations, estimates, projections, and assumptions that are subject to risks and uncertainties, which may cause actual results to differ materially. For a discussion of these risks, please review the cautionary language regarding forward-looking statements in today's press release. The risk factors included on our Form 10-K filed with the SEC on February 16, 2017, and any other reports and registration statements filed with the SEC, which are also available on our website. Now, let me turn the call over to Mark.

Thanks Chris. Good morning everyone and thank you for joining us today. I’m pleased to report that Essent posted another solid quarter of financial results as we continued growing our high credit quality and profitability mortgage insurance portfolio. Also, I'm pleased to report that Essent surpassed $100 billion of insurance in force during the quarter. This was a significant milestone for our franchise and reflects our strong customer relationships and best-in-class service. According I would like to extend a thank you to both our customers and the entire Essent team. For the third quarter, we earned $78 million an increase of 31% compared to $60 million for the third quarter a year ago. On a per diluted share basis, we earned $0.82 for the third quarter of 2017 while generating an 19% return on average equity. In addition, we grew adjusted book value per share 31% to $17.96 compared to $13.76 as of September 30, 2016. Our increase in net income continues to be driven by growth in our insurance since force which increased 34% to $104 billion from $78 billion as of September 30, 2016. This growth drove a 24% increase in earned premiums to $138 million compared to $111 million for the third quarter a year ago. Overall, we remain pleased with our portfolio’s credit performance, ending the quarter with the weighted average FICO of 747 and a default ratio of 46 basis points. While we did not see much impact from the recent hurricanes on our defaults at the end of September, we did experience an increase in the number of defaults in October of which the majority of the increase pertains to the hurricane impacted areas. Even though our master policy provides protections from defaults due to property damage, initially we expect to reserve all new defaults in the normal course without incorporating a view that defaults in the hurricane impacted areas will perform any better or worse than other defaults. While the level of hurricane related defaults may cause some earnings volatility over the near-term, we believe that the ultimate economic impact on Essent will be minimal. As of September 30, our balance sheet is strong, ending the quarter with $2.5 billion of assets and $1.8 billion in equity. During the quarter, we enhanced our capital by raising $199 million of equity, which provides us flexibility in supporting growth and managing capacity under our revolving credit facility. Based on third quarter growth, we contributed $50 million to both Essent Guaranty and Essent Re and ended the quarter with $200 million of capacity under the revolver and $128 million of holdco cash in investments. Turning our attention to Washington, last week policymakers released details relating to proposed tax reform. Overall, we believe that a reduction of U.S. corporate tax rates to 20% is positive for the U.S. economy. Based on the initial details, we believe that our affiliate quota share would be impacted, since it is our interpretation that premium seeded by Essent Guaranty to Essent Re will be subject to a 20% federal excise tax. Given our 27% effective tax rate today, we believe that our 20% corporate tax rate would be an overall net positive for Essent. We caution however that tax reform is in early stages and subject to much debate and probable changes. Looking forward, we will closely monitor proposals and evaluate impacts on our business as the legislation evolves. Regarding PMIERs 2.0, the GSEs have told us that they project, these going into effect in the fourth quarter of 2018 after 180-day notice period. Prior to finalizing, we anticipate that our industry will have an opportunity to review and comment on the updated standards. We look forward to working with the GSEs on the PMIERs update and continue to believe that strong and transparent standards are a long-term positive for our industry, policyholders and shareholders. Now, let me turn the call over to Larry.

Thanks, Mark. And good morning, everyone. I will now discuss our results for the third quarter in more detail. We reported net income of $78 million or $0.82 per diluted share for the quarter ended September 30, which includes the impact of our $5 million share equity offering in August. Net income for the quarter increased31% compared to $60 million for the third quarter of 2016. Earned premium for the quarter was $138 million, an increase of 9% over the second quarter of $127 million and an increase of 24% from $111 million for the third quarter of 2016. The average premium rate for the primary mortgage insurance business for the third quarter was 53 basis points, which was consistent with the second quarter and down from 58 basis points for the third quarter of 2016. The decrease in the average premium rate compared to the third quarter of last year is primarily due to a lower level of singles cancellation income. We remain pleased with the credit performance of our insured portfolio ending the quarter with the default of 46 basis points compared to 41 basis points as of June 30, 2017, and 41 basis points as of September 30, 2016. Our provision for the quarter was $4.3 million compared to $1.8 million for the second quarter, and $5 million for the third quarter a year ago. The increase in our provision this quarter compared to last quarter was driven by an increase in number of new defaults net of periods reported. During the third quarter, hurricanes Harvey and Irma made landfall in Southeastern Texas and Southern Florida causing property damage in many counties. As of September 30, 2017, our risk in force in the affected counties is approximately $2.5 billion or 9.5% of our total risk in force. As Mark noted, we did not observe any material increase in defaults in the hurricane impacted areas as of September 30. However, in October, total defaults increased by 898 of which 733 are located in hurricane impacted areas. As of October 31, the total number of default in our portfolio are 3051 out of 478,000 policies in force. The total defaults in hurricane affected counties are 1055 representing 22 basis points of our total insured portfolio. As more information becomes available in terms of defaults, cures and property damage in the hurricane areas, we will assess the impact on our loss assumptions in related reserves. Other underwriting and operating expenses were $37 million for the third quarter, with an expense ratio of 26.8% compared to $35.7 million and 28.2% last quarter and $32.8 million and 29.6% for the third quarter of 2016. The income tax rate for the third quarter of 2017 was 27% compared to 27.1% for the second quarter. We expect our effective tax rate for the full-year 2017 to be 27% excluding the favorable impact of $3 million of excess cash benefit associated with restricted stock vesting that was recorded in the first quarter of 2017 as well as any impacts of possible Federal Tax Reform. The consolidated balance of cash and investments at September 30, 2017 was $2.2 billion the cash investment balance at the holding company was $128 million compared to $27 million as of June 30. As Mark discussed earlier, we raised $199 million in common equity offering during the quarter and used these proceeds as well as draws under the credit facility to make capital contributions of $50 million to both Essent Guarantee and Essent Re. Consistent with the prior quarter, we have $200 million of undrawn capacity under the revolving credit component of the facility as of September 30. Weighted average annualized interest rate on the total amounts spared under the credit facility as of September 30, 2017 was 3.24%. As of September 30, the combined U.S. mortgage insurance business statutory capital was $1.4 million with the risk-to-capital ratio of 14.7:1 compared to 14.9:1 as of June 30, 2017.Finally, Essent Re had GAAP equity of $650 million supporting $5.8 billion of net risk in force. Now let me turn the call back over to Mark.

Thanks Larry. In closing, Essent had another strong quarter of financial performance and our goal at Essent remains simple and that is building a high credit quality and profitable mortgage insurance portfolio. Looking forward, we remain positive about housing and our long-term prospects. Both Essent and our industry are well positioned and continuing to play a significant role in supporting a robust and well-functioning housing finance system. Now, let’s get to your questions. Operator?

[Operator Instructions] And our first question comes from the line of Bose George with KBW. Your line is open. Please go ahead.

Hey, guys, good morning. Actually, first, just I wanted to ask about the comments you made on the way you are provisioning for hurricane related notices. I just wanted to clarify, so even though you are going provision as if there were normal notices, under your master policy, are you guys not liable for those claims at the end?

Hey, Bose, it’s Mark. Yes, that's correct. We do have protections around the master policy, but it is our view just - since we are relatively newer company and have not experienced this type of hurricane in the past, we did not see any evidence to kind of that change our reserve methodology at this time. That could change as we get new information, but at this time, yes, we still have the protections, but we decided to maintain our existing reserve methodology.

Okay. Okay that makes sense. And then actually just switching over to the question on the margins, I guess a couple of quarters ago and you have sort of talked about the margin drifting down, it’s remain very steady. Can you just give us an update there I guess the growing percentage of 97 is presumably kind of helping it in the other direction. So just kind of the different drivers there and how you think that moves going forward will be great?

Yes, I mean I think on the premium rate, I think before we said, it’s kind of an at origination, it's kind of still in the low 50s, you're going to see one or two basis points normally for the singles cancellation, it’s been little higher when refinances spike up. But yes the 97% is not that big of an impact, because remember a lot of the 97% is just migration from the 95s, if you look at our over 90, Bose, it's gone from 54% to 57%. That’s not really enough to kind of move the needle on premiums, but I think it was our call, there hasn't been much change obviously in pricing and it's a pretty big portfolio now. So it's harder to make the moves. But I still think that kind of 50, low 50s is pretty good guidance going forward.

Okay, great. Let me to sneak in one on market share. I know you don't really like to talk about market share, but in our numbers, it looks like you gained another point. You guys used to talk about 12 to 14 as kind of the range and then you moved it up to 13 to 15. Anything in the data this quarter, where you would want to revisit that number or is that still the range that you think is good?

No, remember, these are longer term ranges, it's really important and I know everyone is doing this more now, focused on kind of insurance in force on the growth there, I mean, with the overall size of the market being the it is. The market share really isn’t as relevant as it was maybe three to four years ago. We didn't think it was that relevant then to be honest. So we really focused on insurance and in force. In the summer months, we do a little bit more some of the professional loan programs, so that's a little bit of an increase. But again this stuff tends to ebb and flow overtime. So we feel comfortable and I think our view is within that range Bose and kind of the way the portfolio is performing, kind a keeping our expenses low. And then really with the tailwinds of housing, we feel like we can generate strong returns. So we don't feel a real reason to kind of push that.

Okay great. thanks a lot.

Your next question comes from the line of Douglas Harter with Credit Suisse. your line is open. Please go ahead.

Sure. Keeping in I guess on insurance in force growth. The persistency showed a nice improvement this quarter. You had kind of been targeting around 80% came in above that. Is there anything that we should expect that persistency gap continue to improve from here. Or is this kind of a good level?

Hey Doug it's Mark. I think it's a good level. I think it getting above 80s is tougher, it's a tougher prediction to make. Especially and there is always a normalized level of refinancing even as rates starts to increase. But I think it 80 is still pretty good level.

Alright and then just moving to the balance sheet. Can you just talk about the decision to sort of keep the high level of cash as appose to kind of paying down the revolver for the short-term?

Yes I mean I think our view is we like to have kind of as much financial flexibility as we can. So there wasn't I think haven't - we just really issued the share of fact in August. So we didn't have - not a ton in time between that and at the end of the quarter. But we will continue, remember we are still on consumptive mode kind of at that at the two end of these. So I think having the cash on hand will probably be use at least some of them will be used to fund both Essent Guarantee and Essent Re in the fourth quarter.

Alright thank you.

Your next question comes from the line of Mackenzie Aron with Zelman & Associates. Your line is open. Please go ahead.

Thanks good morning congrats on the strong quarter. Mark, I guess just going back to the capital. With the secondary in the credit facility. but given the strong growth. Can you just talk about going into 2018. Is there going to be further need for outside capital or given the current rate of growth. do you feel like you have the resources that you need right now?

I would say as we are today, Mackenzie, we feel pretty comfortable with the capital position, but that's really as of today, it doesn't really factor in what is going to happen with cash reform and some of those things. But as of today, I think we feel pretty good with our capital level. So you're talking $200 million of dry powder on the facility and the $120 million of cash at the holdco. That's I think we feel like really comfortable. And we are pleased with the kind of the transaction that were able to do in August to put us into this position.

Okay, perfect. And then just going back to the strong NAW, obviously the growth is continued to be very impressive and I think coming at above certainly where were expecting. Is there any color you can give us on how much that's coming from improving allocation with the existing customers versus bringing on new accounts. Just any color on really where the growth is coming from in addition to the comments that you made about the summer program?

Sure. Yes, I mean, in addition to the summer we did bring in some newer clients, two relatively large ones in 2017 and they have contributed to some of the increase in volume, and I think you combine that with some increased utilization, especially around some of the non-depositories as you know we were stronger with more of the banks earlier in Essent and we are still pretty strong with the banks and I think that over time, it takes a lot of time especially with some of these large non-depositories that are spread kind of throughout the country. But I think we have increased our utilization with few of those, so, it’s a little bit above.

Okay, perfect. Well, thanks again.

Your next question comes from the line of Mark DeVries with Barclays. Your line is open. Please go ahead.

Yes, thanks. I was hoping you could help us think through the provisioning impact in 4Q from the hurricanes, I think it’s very helpful you provide those incremental delinquencies. Should we assume those come on when you provision, Larry, it kind of un-assumed, maybe, 10% claims rates, so we take whatever we think an average claim size would be for those loans and assume kind of 10% of that is the provision impact?

Yes, I think that’s not a bad assumption as you get towards the end of the quarter. So if you were to look at our financial supplement, the reserves as percentage of defaulted risk for that first bucket which is three payments or less is about 12%. So I think that’s a reasonable, load in your models what you think the default rate will be by the end of the quarter and that's probably a reasonable assumption to look at.

Okay. And should we expect more as we get into November, December, hurricane related delinquencies to trickled through, do you think most of that came through in October?

Hey, Mark, it’s Mark. No, I think we would expect them to increase in November and probably December too.

Okay. Got it.

As At what rate the increase, we really don't know, and I think that's why we kind of release the number, just to allow - different folks have different kind of assumptions and we really don't get information until they are 60 days past due, so we have disclosed as much information as we have, and I think we want to do it that way so you guys could look at your models. And again, taking it in context, we do think there is going to be some noise in the fourth quarter, and I think that's why we want to be upfront about that, but taking a step back, in a longer term, whether these claims materialize or don’t materialize, we think it doesn't have a real impact on the future earnings power of Essent, or nearly in the kind of the economic impact on Essent.

Yes, sure. And just to clarify one of your earlier comments, Mark, I'm assuming the difference for your treatment versus some of your peers, because you're in your company you just don't have the historic data, you can lean on to say, we are clear that this is going to ultimately just all these will cure, so you're taking a more conservative approach on this?

You know I can't really speak to what they do, but that's not a bad guess, I mean, these guys have been around for a long time, they have much more historical information than we do. So I think I wouldn’t say we are being conservative, just I would say based on the information we have today, we didn't see enough information to basically change our reserve methodology at this time.

Okay. Got it. And then just one other question, as I think about kind of the earnings contribution from these just the reassuring transactions, for the $35 million you did this quarter, how much capital you hold against that and is it still fair to assume you're going to generate roughly the same returns on that capital that you would on your [indiscernible] business?

I would say the capital is very similar to PMIERs. So it's very PMIER oriented very similar to. And which sits on top pretty much of our economic capital assumptions. I would say the returns are a touch below the base business that's tax affected, I mean the pricings is a little sharper there. And again however, the other thing Mar, and we don't talk too much about this because it's relatively small. As we have an MGA in Bermuda kind of a Managing General Agent role. We consult with at this time three other reinsurance companies as they bid and reinsure some of these deals. So we get our fee for that. So when you combine the fee with kind of our return on capital its actually back to our goal levels or our objectives, so that’s been a pretty nice add to the franchise.

Okay. Great thank you.

Your next question comes from the line of Mihir Bhatia of Bank of America. Please go ahead. Your line is open.

Great thank you and congratulations on a good quarter again. I had one just very quick question. Just wanted to clarify on the hurricane. I appreciate the additional details and the noise in Q4 et cetera. But as you said this is not - there is a strong - probably that a lot of these are not going to resulting claims in the end. So I was just wondering how long does do you expect it to take for some of the stuffs to clear out. because it seems it shouldn't take very long for you to go in and say okay this is hurricane related damage or what have you related to your policy. So how long does it take are we talking 1H 2018 2H?

That's really good question. Again, I would caution that we don't have one data point. And the information we get on defaults doesn't have that type of details. So it’s not like we can look at it and say, the property was damaged, we are not under the obligation to pay. We don't know if someone lost their related to that. So to give you some guidance I would say I would think through next year, I would say by within the next 12 months we will know whether the claims materialized or don't materialize. But I wouldn't expect a lot of clarity over the next quarter. I don't think we will be sitting here in February that we will know all the answers. I think you guys have the big picture and we are providing you with the detail, and we will kind of let it play out.

Okay great. Thank you.

Your next question comes from the line of Rick Shane of JPMorgan. Please go ahead. Your line is open.

Hey guys thanks for taking my questions. In looking at the reserves, the overall reserve ratio was down modestly or it's down. And then you delve into it some of that appears to be driven by mix shift that a greater percentage of the [indiscernible] are in early bucket. So that make sense. But it does appear that the reserve ratio on the early bucket has trended down both sequentially and year-over-year as well. I'm curious if there is something you're seeing in terms of cure rates that's driving that and again I'm assuming that there was no adjustment for the September quarter related to hurricanes. Because it sounds like this is really an October starting issue?

Hey Rick it's Larry, good question. first of all to respond your second part of your question. There was no change in the reserves related to anything hurricane related as of September 30. And I think your instincts are right. What we do in our model is we on a rolling basis will update recent performance. And we continue to see a little bit better performance in the migration from the default to claim. So again, we will incorporate that on a rolling basis, drop off three months each quarter and add three new months and our experience has shown that to be favorable and that’s what is driving some of the decrease - ensure that prepayments or less buckets that we include in the supplement.

Got it. And when you think about the causal factors of that, I assume that it's twofold. One is strength in the labor market that people just have an opportunity to earn their way out of difficult situations. They have better opportunities to do that in this environment, but I'm also assuming that given home price appreciation, it turns out borrowers are in appropriate homes or appropriate loans they have an opportunity to get liquidity because of the strength of the home price appreciation?

Hey, Rick. It’s Mark. I think given the level of defaults that we have, I think you may be reading a bit too much into it, I think some of those factors are there, but it's hard for us to pinpoint that given you know you're looking at 2,100 defaults at the end of September. I would pin it more on, if you are kind of taking kind of big picture, look at the overall strength of the portfolio in terms of the FICO. And I think we just talked about this before, you are talking about now the end of October, 477,000 loans in our portfolio with an average FICO of 747. That's a pretty strong borrower, and I'm not sure everyone appreciates the strength of that borrower, so they generally have a lower debt to income, they generally have better reserves, they are a borrower to your point, if there is a mishap is more likely to rebound from that mishap versus a lower FICO bar. And I think that gives us a lot of comfort kind of in a strength of the portfolio, remember though, of course we are macroeconomic dependent and home price dependent at some point, but we really like the makeup of the portfolio, should we hit a bump in the economy over the next few years.

Great. That's very helpful guys. Thank you very much.

You're welcome.

Your next question comes from the line of Chris Gamaitoni of Compass Point. Please go ahead. Your line is open.

Good morning, guys thanks. Most of my questions have been asked, I don’t know if you have done your 2018 plan or not, but I was just wondering if there is an update on kind of the expected expense level or expense growth for next year?

Hey, Chris. It’s Mark. We are in the process of the 2018 plan. So we will probably be able to give some pretty good guidance on the February call.

Okay. That’s all I had. Thank you.

Sure.

Your next question comes from the line of Jack Micenkoof SIG. Your line is open. Please go ahead.

Hey, good morning, guys. When I look at the risk in force and insurance in force over the last couple quarters, the 95, the 97 rather has been growing and your right market seem to be coming out of the 90, 95 bucket. Is that a number you manage to say, would you look at and you know what we don't want to be more than 10 or 12, and relating to that question, on a flow basis what is the composition of that product, and how do you guys think about it?

Yes, I think the flow is in the supplement. So the flow has been higher, but I think that was the number I quote it was 57% of the flow was coming above 90% versus 54% like this time last year. So, two things, one I do think we are probably getting some share from FHA, that's the delta in my view. I think it's priced pretty well. So we look more at it on a return on capital standpoint. And I think we feel pretty comfortable with the returns. So we don't set limits saying we don't - I think there is some noise here in the background. But we don't set limits, we don't set hard limits per say unless we thought there was an issue around the crowd. I think what we are seeing...

Emily, this is Chris, we are getting a lot of background noise. Sounds like there is another call.

And now that we are doing with this call we can resume the Essent call. Hey Jack to answer the question is more around the returns on a 97. I think we look at that. And think where we take some comfort is that relative again FICO is pretty high on a higher LTV. And our view is FICO whether it's 3% down or 5% FICO is a pretty strong indicator.

Okay. And then in admittedly it’s another fair question. But when you look at the tax proposal and obviously we are probably in the second or third inning. Corporate rates comes down the excise tax on the Bermuda piece but net-net still a lower effective rate than you're at today it seems. And then strategically does it change your thinking about the mix, about the way you go about it, about capital at all. If as proposed today we magically sort of get to a real change in policy that looks like today.

Yes I mean it's as we said we have cautioned and you're appropriately cautioning it too is where this ends up. But if it does end up just as is. you're looking at 20% tax rate. We will still have the third-party business so we will probably be below 20% given how that grows. I wouldn't expect much change to be honest. I think we would still - lower than it is today, and right we are 27 today. Also we will become a little bit more capital efficient. And I think again that's an underappreciated benefit. We are currently funding two companies. Especially and in growth mode and that's why we source outside capital. So having if that didn't happen and we kept all the business within Essent Guarantee we certainly have - it would certainly be more capital efficient. So we look at that as a benefit probably a little bit bigger than people thing.

Alright, great. I appreciate your thoughts there.

Sure.

Your next question comes from the line of Geoffrey Dunn with Dowling & Partners. Please go ahead. Your line is open.

Thank you good morning. Mark Essent Guarantee was in for a time period of being able to capital self sustaining. Obviously growth has picked up there. What are your thoughts in terms of given the growth trajectory incremental capital needs for that business. And what is the good proxy is 16 to 1 a good proxy or kind of the threshold where we should think more capital to gets downstream?

I wouldn't hang my head on the 16 to 1. I think it really Geoff, it depends on when the growth starts to subside. It's been quicker than we thought over the past 18 months which we think is a great thing. So I think all else being equal in 2018, we should start to see the - all else being equal meaning around tax reform and impacts on quota share and so forth. All else being equal we should see the capital required in both Essent Guaranty and Essent Re to materially decrease in 2018.

Okay. And then with respect to tax reform, if it ever came to it, is it unwinding the offshore seat, something that is a possibility, something that could be executed?

Yes, I think, Geoff, again, this is Larry, I would just caution, it’s early in the process, but depending on what the final tax reform is as it relates to the excise tax on affiliate reinsurance, that is an option that we could consider, but I think we would have to see what are the transition provisions and what is the overall impact, but yes, that is one option.

Okay. Thank you.

You're welcome.

Your next question comes from the line of Phil Stefano with Deutsche Bank. Your line is open. Please go ahead.

Yes, thanks and good morning, most of the questions have been asked and answered, but I wanted to dig into MGA business in Bermuda a little more and I appreciate it's a small piece of the business, but I think an interesting one. I was hoping you can talk a little more about the consulting process there, I guess, are the return expectations different for the three companies that you're assisting or do they sit next to you on these deals, how exactly does that look?

Yes, really good question Phil. So I would say each of the companies have different risk appetites. So they may have different risk appetites and different tranches versus us, and they may price differently than we do. I think what we do is give them - we kind of leverage our models on kind of how we see the structure playing out, and we also provide a lot of surveillance on the back end, and third, we give them a lot of color around how the U.S. mortgage business works. So it's been a good benefit. Again, it is small, but when you add the fees in with kind of what earn in on the deals, the union economics of the business are a lot more attractive.

Great. What are the opportunities for growth there, when I listen to the Bermuda reinsurance call, it feels like everybody is trying to grow mortgage reinsurance. It's only three companies at this point, is there potential for this to grow and be something more material?

I wouldn't say it's going to grow, we probably could add a few more. But like you said, there is a lot of folks over there, lot of the reinsurers can like to handle this on their own, and I think with our partners here they like to leverage our expertise, so I could see us adding a few more, but I don't see it growing much bigger than that.

Alright. Great. Well, thanks and best of luck for sorting out of the hurricane ebbs and flows.

Thanks, Phil. Take care.

I’m showing no further questions at this time. I will now turn the call back over to management for closing remarks.

Great. Thank you, operator. Hey, we would like to thank everyone for participating in today's call and have a great weekend.