H World Group Limited (HTHT) Q3 2022 Earnings Report, Transcript and Summary

Good day, and thank you for standing by. Welcome to the H World Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. And now I'd like to hand the conference over to Mr. Jason Chen, Investor Relations Director. Thank you. Please go ahead, sir.

Thank you. Good morning and good evening everyone. Thanks for joining us today. Welcome to H World Group third quarter 2022 earnings conference call. Joining us today is our Chairman, Mr. Qi Ji; our CEO, Mr. Hui Jin; our President, Ms. Xinxin Liu; our CFO, Ms. Chen Hui; our Deputy CFO, Ms. Fei Year-on-year; and our CEO of International Business Ms. He Jihong. Following their prepared remarks, management will be available to answer your questions. Before we continue please note that the discussion today will include forward-looking statements made under the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995. Forward-looking statements involve inherent risks and uncertainties. As such our results may be materially different from the views expressed today. A number of potential risks and uncertainties are outlined in our public filings with the SEC. H World Group does not undertake any obligations to update any forward-looking statements except as required and applicable laws. On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliation of measures to comparable GAAP information can be found in our earnings release that was distributed yesterday. As a reminder this conference call is being recorded. The webcast of this conference call as well as supplementary slide presentation is available at ir.hworld.com. With that now, I will turn the call over to Mr. Qi Ji. Mr. Ji please.

Good morning and good evening, everyone. Thank you for joining our call today. We are happy to report that our China business grew positively [ph] in the third quarter recovered to 90% of 2019 levels, thanks to ending up leisure travel demand as well as a rate cover of business travel. This recovery is closely associated with the relaxing our COVID policy in the third quarter. However, with the recent increase of COVID cases, we may face more uncertainties and the negative impact on our business recovery as a consequence of tightened controlled net measures. In the third quarter, we reported that we carry out organizational restructuring and established six regional headquarters to focus on economic and middle-scale segments. In the third quarter, we have been further implementing regionalization strategy under strengthening our regional organizations. At the same time, we realigned the structure for Up and Middle Scale, Upscale and leisure brands in China to provide a more efficiency to management and other side [ph]. With our long-term sustainable quality growth strategy, we have been further emphasizing on improvement of products and service quality. We accelerated the exit from low-quality soft brands in economic segment. Moreover, we continuously upgrade our mature brands such as HanTing and Ji Hotel to the new -- enter new versions with better design and quality. Looking back in the last three years, COVID have brought tremendous challenges to Chinese lodging market. However, branded chain hotels were showing high resilience than independent hotels. In fact, over these last three years, chain hotels were continuously gaining more market shares and leading the recovery of the industry. We believe there's a shift from independent hotels to branded hotels to leisure in momentum and will have brand-new hotel chain to leisure consolidated market. We were confident that we will benefit from this chain with our strong brand and quality products. With the recovery of mainly international travel market, our Deutsche hospitality business achieved another good quarter with further RevPar improvement. RevPar in third quarter recovered to 102% compared to 2019 in this quarter. With the cost management and the reorganization of business structure in place, we are in a good position to continuously improve our product facility. Due to recent large sporadic resurgences of COVID in many provinces and cities in China, we see strict COVID measures continue to be carried out in order to cope with short-term turbulences and preserve dry powder. We will further streamline operations, be prudent on CapEx spending and allocate resources in disciplined way. We always work closely with our franchisees and partners to help them cope with the challenges during this special period. Together with the friends and partners in our ecosystem, we will further strengthen the foundation and build resilience of our company. With this, I will turn the call to Jin Hui to discuss our significant development in detail.

[Foreign Language] [Interpreted] Thank you, Qi Ji. Firstly, please turn to page 3. Let me briefly review our key achievements in the third quarter. Number one, our China business RevPAR recovery continues despite COVID's impact. Number two, continued network expansion with a focus on sustainable quality growth. Number three, on track for the development of upper middle scale and upscale segment. Number four, successful launch of new H World App with enhanced features. Number five, Deutsche Hospitality's business is on its recovery path. Now, I will then discuss for each of above points in details in the following pages. Please turn to page 4. Although the continuous resurgence of COVID, we still achieved a relative good RevPAR recovery in the third quarter in China, with the RevPAR recovered to 90% of 2019 level. This was mainly driven by pent-up leisure demand in July and August, as well as gradual recovery of business traveling in the late September. However, we saw more sporadic resurgence of COVID in October, with strict restriction was imposed again. Our RevPAR in October only recovered to 74% of 2019 level. Please turn to page 5. Our hotel network further expanded and the GMV also continuously increased in the quarter. At the end of the third quarter, our number of hotel rooms grew by 10% year-over-year to 797,000, with China hotel rooms grew 11% year-over-year to 772,000. Our total GMV in the third quarter increased by 24% year-over-year to RMB 15.2 billion, where China GMV grew 22% year-over-year to RMB 13.5 billion. Our lower-tier cities penetration strategy continuous progressing. Please turn to page 6. As of the end of the third quarter, hotels from lower-tier cities contributions further increased to 41% and 59% of total hotels in operation and pipelines respectively. Moreover, as you may notice that our number of new signings during the quarter was still lower than a year ago, and still shows that our franchisees' confidence level has not yet fully returned due to resurgence of COVID. Please turn to page 7. Looking back the last few years post-COVID, based on the China lodging industry data, we observed that branded chain hotel were showing better resilience than independent hotels. A lot of independent hotels with weaker anti-risk capabilities were actually closed with roughly 22% and 13% of independent hotel actually closed in 2020 and 2021, respectively. During the same period, our hotel network, were still expanding. We also showed our closure ratio in the figures. Our closure ratio was 10% and 7% in 2020 and 2021, which were much lower compared to independent hotels. China lodging industry’s chain hotel ratio continuously improved from only 19% in 2018 to 35% in 2021. Therefore, we think the trend of the further industry consolidation post-COVID remains unchanged. Moreover, as Mr. Ji mentioned in the beginning, more and more independent hotels started to prefer joining branded chain hotels, which could further bring more consolidation opportunities to us in the long run. Please turn to page 8. We still need to insist on our sustainable quality growth strategy for our long-term business development. For example, our Hanting brand, we continuously upgrade our Hanting products over the past few years. We found out that after upgrading to newer versions, the RevPAR would improve by roughly 20% than older version in average, at the end of the third quarter Hanting 2.7 versions and above accounted to roughly 59% of total Hanting Hotels in operation improved by 25 percentage points in 2020 -- compared to 2020. At the same time Hanting's customer satisfaction score also improved loan with product upgrading from 4.5% in 2020 improved to 4.67 in the third quarter. Please turn to page 9 not only Hanting brand, but also all our brands in our portfolio, which improve the overall hotel qualities. As you can see low-quality soft brand economics hotels and Hanting 1.0 version contribution were gradually declining over the years. As of the third quarter, it only accounts for roughly 14.3% of our total hotels in operation. Hotel product quality improvements also led continuously customer satisfaction score improvement. It improved from 0.54% in 2020 to 4.68% in this quarter. Please turn to page 10. Our Orange brand hotel achieved its 500 hotel milestone during the quarter, reaching 505 hotels by the end of the quarter. It becomes the third brand of Hanting and JI Hotel in our group to achieve over 500 hotels. However, up from mid-scale segment is also steadily progressing. Please turn to page 11. We introduced a new version of InterCity brands during the quarter. InterCity will be mainly located in traffic hub or commercial centers location that brings in German simplicity and pragmatism to hotels in China to provide high efficient service to customers. Our two newly opened InterCity hotels are located in Shenzhen and Wuhan. For our upskill segment, we saw our Blossom House brand is quickly tapping into leisure traveling market. Please turn to page 12. Since our acquisition, we successfully transformed its business model from previously 90% of hotels are under lease model to roughly 67% of the hotels are under asset-light franchise-based model. Moreover, the brand also expands from a single Blossom House brand to Blossom Lifestyle Community and Blossom Collections, achieving a multi-brand developed model. Please turn to page 13. We further upgraded our H World app and successfully launched its 4.0 version. This upgrade focus on our two service, and the full digitalization guest experiences and further strengthening the interactive service experiences with guest at different touch points on the basis of consistent highly efficient services. For example, our Intelligent Laundry function, it allows customers to make reservation remotely and attract the laundering process and status in real time. Such function could strengthen the perception of members' privileges and benefits. In the first nine months of 2022, there were totally 99 million customers have experienced our online service compared to only 27 million customers a year ago. Usage of online service also improved to 71% in October from 21% last year [Foreign Language], above, our key business development update third quarter. With that, I will now turn the call to our CEO of International Business Mr. Jihong to discuss our DH business development during the quarter.

Thank you, Qi Ji and Jason. Hello. Thank you, Qi Ji and Jason. My name is Jihong. I'm responsible for international business at H World. In our international business, we are very happy to report that we have continuous recovery in the third quarter. Our blended RevPAR increased 102% compared to the same quarter in 2019, with this recovery trend continuing October as well. The recovery is primarily brought by ADR which was increased at 17% compared to the same quarter in 2019. This demand continues to be driven by transient leisure travel and the pent-up corporate group businesses. In the third quarter, our team in Deutsche Hospitality continues to focus on cost management and margin improvement. As a result, we can report the third quarter EBITDA of RMB 94 million, a significant improvement compared to the loss of RMB 115 million in the third quarter 2021 and an achievement of 213% increase compared to second quarter 2022. This margin improvement was driven by headquarter overhead reductions, operational efficiency improvement, alongside with the RevPAR growth. At the same time, we are carrying out several energy management initiatives in our hotels to cope with increasing energy costs in Europe, especially in Germany. In third quarter, we added 23% system size growth of hotel rooms compared to the third quarter 2019. We launched our new website with all brands and the new H reward program to focus on loyalty development in the direct booking channel. We rolled out several new digital products to improve technology deployment. We are currently focusing on digital leap to further improve efficiency of our budget hotels through technology deployment. With this, I'm handing over to Ms. Ye Fei for the third quarter financial results.

Thank you, Jihong. Good morning or good evening to everyone. Let's move on to our operational and financial review for the third quarter of 2022. As shown on slide 17, Legacy-Huazhu blended RevPAR for Q3 actually performed well. Only 10% off from 2019, mainly dragged by the occupancy rate. The ADR 2022 Q3 was up by 3% on a year-over-year basis and RevPAR was up by 9%. Turn to page 18. Legacy-DH business recovery further accelerated in third quarter as Jihong mentioned. Our Legacy-DH blended RevPAR for Q3 grew by to 57% to €76 compared with Q3 2021 and also grew by 2% compared with the 2019 level. The occupancy improved by 17 percentage points compared with Q3 2021, but still 9.6 percentage points lower than 2019 level. The ADR improved by 15% year-over-year to €114, which actually exceeded the 2019 level by 17%, driven by the pent-up demand in Europe and also price increase to against cost inflation. Please see our financial results on slide 19. Total revenue grew by 16% year-over-year to RMB 4.1 billion in Q3, mainly driven by the 7.7% year-over-year revenue growth of Legacy-Huazhu to RMB 3.2 billion and 68% year-over-year revenue growth of Legacy-DH to RMB 932 million. Revenue was in line with our previous guidance. Legacy-Huazhu revenue growth was mainly supported by the leisure demand in the summer holiday during July and August and the gradual recovery of the business traveling in late September as well as a low base from last year. Breaking down of the revenue in Q3 Leased & Owned revenue grew 15% year-over-year to RMB 2.7 billion. Excluding DH leased and owned revenue of Legacy-Huazhu grew by 0.5% year-over-year to RMB 1.8 billion because we shut down some loss-making hotels during this quarter. Revenue from Manachised & Franchised Hotels declined by 16% to RMB 1.3 billion, mainly driven by 16% revenue growth of Legacy-Huazhu and 22% revenue growth Legacy-DH. The 16% year-over-year growth of revenue from Manachised & Franchised Hotels of Legacy-Huazhu also included roughly RMB 120 million impact from the management fee waiver provided to the franchisees during this quarter. Due to the strong business recovery of Legacy-DH Leased & Owned Hotels during this quarter, at the group level the Manachised & Franchised revenue contribution was flattish to 32% in Q3 compared to last year. But China only although considering the management fee waiver provided to our franchisees our Manachised & Franchised revenue contribution in the third quarter further expanded to 40% compared to 38% in Q3 last year, thanks to our continuous network expansion with asset-light model. Now let's move to the cost and profitability section on Slide 20. In Q3 2022, the reported operating income was RMB 500 million, compared to only RMB 72 million last year and RMB 8 million a quarter before. The significant increase of the operating income year-over-year was mainly due to better China business performance and the recovery of DH business. Excluding DH, Legacy-Huazhu's operating income in Q3 was RMB 449 million, grew by 88% year-over-year and improved significantly from RMB 21 million a quarter ago. The hotel operating cost for Q3 was RMB 3 billion, increased by 6.6% year-over-year. For Legacy-Huazhu, it's recorded RMB 2.3 billion hotel operating costs almost flattish from last year. The increase was mainly from variable costs such as utility, salaries, performance-based bonuses for hotel GM and more GM recruited as our hotel network expands, but we offset the cost by roughly RMB 130 million rental reduction which doubled the amount we achieved in Q2. For Legacy-DH, we recorded RMB 744 million hotel operating costs indicating 18% year-over-year growth. The increase was mainly due to the increase of variable costs associated with business recovery such as labor, F&B, variable rents and et cetera, but we have less rental reduction compared to the same quarter last year as business recovered. Our pre-opening cost was RMB 25 million in Q3 mainly due to the limited service leased and owned hotels under construction during this quarter including the flagship intercity hotels. This number is expected to be small as we raised the hurdle for the leased hotels and very much focused on the asset-light model. Our SG&A in Q3 increased by 1.6% year-over-year and 15% Q-over-Q to RMB586 million. Excluding DH SG&A for Legacy-Huazhu was flattish on a year-over-year basis to RMB435 million in which the labor cost was roughly the same as last year, while the headcounts were already trimmed during this time. Further efficiency improvement is on the way. The 31% Q-over-Q increase was due to the resumption of business in Shanghai headquarter vis-à-vis the lockdown in Q2. On the DH side, overall, the selling expenses increased along with the business recovery and generated higher efficiency as the selling expenses as a percentage of revenue actually declined by 2% from quarter weakest quarter. Although other operating income in Q3 2022 increased by 90% year-over-year to RMB76 million mainly due to more subsidies received from government for our China business side. Turning to page 21. Our adjusted EBITDA was RMB491 million in Q3 2022 compared to RMB385 million a year ago. DH achieved better profitability in Q3 with EBITDA at RMB94 million compared with the loss of RMB116 million last year. Excluding DH, Legacy-Huazhu recorded an adjusted EBITDA of RMB397 million declined by 20% year-over-year, but significantly improved from RMB23 million a quarter ago. The year-over-year decline was mainly due to the RMB340 million ForEx loss brought by the depreciation of euro/dollar versus our accounting currency USD, which largely is a non-cash loss. If we exclude the ForEx loss, the EBITDA would be over RMB150 million higher than 2021. In Q3 2020, we recorded adjusted net loss of RMB375 million in large from the loss of RMB46 million a year ago and a loss of RMB84 million a quarter ago. Excluding DH Legacy-Huazhu had recorded an adjusted net loss of RMB389 million in large from a loss of RMB39 million a quarter ago. The net loss was mainly due to ForEx loss as I mentioned previously and also the timing adjustment of effective tax to be paid in China between the quarters. Adjusted net profit of legacy DH turned positive for RMB14 million for the first time in Q3 compared to the net loss of RMB164 million a year ago. Coming to the cash position. Our net debt increased slightly to RMB6 billion in Q3 from RMB5.7 billion in previous quarter was mainly due to some bank facilities withdrawn this quarter. Our cash balance improved to RMB5.2 billion in the quarter from the RMB4.7 billion a quarter ago. The unutilized bank facility are RMB2.9 billion. Given the COVID impact remain uncertain, we are very cautious on CapEx and OpEx spending to preserve cash. In addition we have successfully redeemed our convertible note with the amount of $475 million recently, through both the combination of bank facilities and cash generated from operations. Turning to page 24 on guidance, given lately there are more resurgences of COVID happened in many provinces and cities, each world expects revenue to grow 7% to 11% in the fourth quarter of 2022, compared to the fourth quarter of 2021 or, to decline 1% to 5%, if excluding DH. Again, above guidance only reflects our current view which is subject to change. With that, let's open for Q&A. Thanks.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of Dan Xu from Morgan Stanley. Please ask your question, Dan.

Hi. Good morning. Can you hear me?

Yes.

[Foreign Language] Sorry, please allow me to repeat my question in English. This is Dan from Morgan Stanley. I have two questions. My first question is on Legacy-Huazhu. China domestic business, I would like to ask about the recent RevPAR trends for October, we saw that there was some decline in RevPAR due to more tightening measures. So October RevPAR was 74% of 2019, I would like to ask about the trend in November. And also for the fourth quarter revenue guidance, especially for Legacy-Huazhu, what the management factor in terms of RevPAR and also hotel opening expectation? Thank you.

[Foreign Language] [Interpreted] Okay. So to answer your first question, given more sporadic resurgence of COVID happened in China in many cities and provinces, and we are seeing more strict restriction carried out by the local government again to maintain the zero policy in China. So, we are now expecting the fourth quarter our RevPAR recovery could be in the range of 70% to 75% for our China business. In terms of the opening in the fourth quarter given the recent COVID impact, the opening will be somewhere affected as well. However, if you asked about the gross opening effect on the revenue, actually, the fourth quarter new opening has a very limited impact on the revenue for the fourth quarter, a majority of the impact will be from again the RevPAR recovery, which is largely impacted by the recent COVID resurgence. Thank you.

[Foreign Language] My second question is about overseas DH business. So against the backdrop of searching inflation in Europe and can management share with us about – more about the energy efficiency measures implemented by DH. We saw DH operating expense actually declined 4% Q-on-Q in third quarter. What is the trend in fourth quarter? And should we expect further increase during the winter? Thank you.

Thank you, Dan, for your question. I will address the issues of international businesses. Your question is quite complicated. So I try to dissect in different areas. Actually, we are focusing, first of all, on top line management. So, we're focusing on revenue management really to generate top line results and increased ADR, where possible which is really in line with all the international hotel management group with – especially with inflationary results. At the same time, of course, we continue our operational improvement program as we already started this year, including operational cost management, especially in headquarters, efficiency improvement which is at the hotel level, as well as energy efficiency management that you mentioned. At the same time, actually, we are also conducting our portfolio review as well about really the performance of assets. The energy efficiency management and hotel level are very granular and very operational. For example, you do not turn on the air come, when it's not necessary. We turn down the heat, when it is too warm and you turn off the light when there's nobody in. So we really try to penetrate to all the operations -- day-to-day operations to cut down our cost -- our energy costs. At the same time, we are also negotiating with the energy supply company, where we can fix the cost and we will fix them. And where we see the possibility to work with flexible pricing, we will do that. Basically, we are working in a short-term fixed price and in the mid to long-term more flexible pricing. But just to assure you that we are already working very closely with the energy supply companies to manage our cost. Some of these effects, we reported this quarter, actually, you should be able to continue to observe them in the fourth quarter and next year as well, especially in some of the efficiency improvement program and the overhead cost reduction, the full year result will only start to show after the one-time kind of write-off. I hope that addressed your question, Dan.

That's very clear. Thank you, Ms. Ye.

All right. Thank you for your question. Our next question comes from the line of Ronald Leung from Bank of America. Please ask your question, Ronald.

Hi. Could you hear me?

Yes, please go ahead.

Okay. [Foreign Language] Please allow me to ask the question in English. So, over the past few months, there were still COVID outbreak across various cities and provinces in China. Do you see that this would further negatively impact the franchisee sentiment? And if possible could you share the monthly hotel sign-ups over the past few months? Thank you very much.

[Foreign Language] Okay. So, yes, to address your question. So basically, we agree that the current restructuring due to COVID has continues to be affected our franchisees confidence sentiment. So in terms of the new signings, we are seeing the recent new signings in third quarter and fourth quarter are roughly at 80% compared to a normal period. However, we look at that thing in different ways because the China is big. So we are seeing that quite different development trends if you divided the country into Tier 1, Tier 2 cities and the lower-tier cities. In fact, we are seeing that in the lower-tier cities actually the confidence sentiment impact and COVID impact are much smaller compared to those Tier 1 and Tier 2 cities, because more resurgence of COVID happened in those Tier 1 and Tier 2 cities. So that's why the confidence level in -- the confidence level for the franchisees in lower-tier cities are relatively better compared to those in the Tier 1 and Tier 2 cities. And I think if you are talking about the full recovery, so we are still need to wait until the further ease of the COVID restructuring and the improvement of the economic condition in the upcoming futures. However, for us in terms of our strategy, we will not because of the weak market condition or low confidence level, we will insist on in implementing our strategy in terms of the lower-tier cities' penetration, as well as further penetrating or increase our market share in the up to mid-scale segment. Thank you.

[Foreign Language] I ask my question in English. So the Southeast market in China is one of the regional markets that the company has put great emphasis on. So, could you share the latest development in the south-based market? And if possible, could you share the mid to long-term development target in the Southeast market of China. Thank you very much.

[Foreign Language] Okay. Thank you for your questions. So, in terms of the Southern part of China, yes, it is one of the most important that we are going to further penetrate. In order to achieve this, so we have been making a lot of preparations over the last year. So, the most important thing is that we did a very significant organization restructuring and we moved the intel organizational down to the regions as well as move a lot of the management -- middle management team from the Shanghai headquarters to the local market. At the same time, we are also building up a localized based talent pools and trying to make, for example, the localized marketing strategy, localized supply chain management to meet the customer demand in that particular market because those customers demand somewhere different compared to what we have been seeing in Eastern part of China like Shanghai. In terms of the long-term target, again, similar to other regions, we are targeting 20% of the market share in Southern part of China as well. Actually we are -- we have been opening several flagship stores in core cities in Southern part of China like Shenzhen, Guangzhou by using our HanTing JI Hotel as well as Orange and Crystal Orange to provide some of the showcase in that market. So, we are hoping that in the next three to five years we will be achieving a very good development in that particular regions. Thank you.

Thank you, Jason. [Foreign Language]

Thank you for your question. Our next question comes from the line of Simon Cheung from Goldman Sachs. Please ask your questions Simon.

[Foreign Language] My first question is related to the price of ADL. We have observed that over the last couple of quarters the ADL has been very resilient, in fact actually exceeding the 2019 level? Given the fact that there's a lot of independent hotels being closed over the last couple of quarters, given COVID, would management see the opportunity for them to raise price upon the COVID -- after the COVID is over. Thank you.

[Foreign Language] Okay. Thank you. Yes, for the ADR, actually, it has benefited from both external and internal factors. For our internal factors this is actually aligned with our regional management that we have been doing over the last few months. So, internally, we have been using pricing synergy, brand synergy and regional synergy to create a better ADR to assure that for a longer-term healthier and a sustainable in growth, and it becomes a very important part of the long-term revenue management. This is one. And for the external factors, yes, this is due to several factors, like higher inflation, as well as the impact of the continuous closure of the independent hotels that also, from the external sides, to provide some of the room for our further improving the ADRs in the longer term. Thank you.

[Foreign Language] The next question is in relation to the brand strategies observed and also saw in the presentation that now you have three brands, where you have more than 500 stores, including HanTing Hotel and Orange. Wondering whether the company would want to concentrate it in those three brands or several key brands. Or just like other competitors they're going to be diversified and expanded into a lot more different brands. Thank you.

[Foreign Language] Yes, to answer your questions, in terms of our brand strategy our key thing behind this is that in each of the segments. We were trying to build the number one or number two brands in the market. So in terms of our economic segment, we have been successfully established a very strong brand which is HanTing and we are also establishing now the Ni Hao brands for specifically for the lower-tier cities penetration. And in terms of the middle scale segment, our JI Hotel has been very famous in the market and leading top brands in the middle scale segment. And we are seeing a pretty good progress on the development of Orange Hotel. And we hope that it's going to be creating another one in that particular segment. So basically for each of the segments, we want to have one or two brands which, is on the top list of the brands and which can create a very popular brands that our customers like and make helps our franchisees to make money. Thank you.

[Foreign Language] Thank you.

Well. Thank you very much for all your questions. We have now reached the end of the question-and-answer session. I'll now turn the conference back to the management team for closing remarks.

Thank you everyone for taking your time with us today. And we look forward to see you in the upcoming quarter. Thank you. Bye-bye.

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