Good morning and thank you for joining us today for the Hovnanian Enterprise Fiscal 2019 Second Quarter Earnings Conference Call. An archive of the webcast will be available after the completion of the call and will run for 12 months. This conference call is being recorded for rebroadcast and all participants are currently in a listen-only mode.

Management will make some opening remarks about the second quarter results and then open up the line for questions. The Company will also be making and webcasting a slide presentation along with the opening comments from management. The slides are available on the Investor page of the Company's website at www.khov.com.

Those listeners who would like to follow along should log on to the website at this time. Before we begin, I would like to turn the call over to Jeff O'Keefe, Vice President, Investor Relations. Jeff, please go ahead..

Thank you, Brian, and thank you all for participating in this morning's call to review the results for our second quarter, which ended April 30, 2019.

All statements in this conference call that are not historical facts should be considered as forward-looking statements within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995.

Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.

Such forward-looking statements include, but are not limited to, statements related to the Company's goals and expectations with respect to its financial results for future financial periods.

Although we believe that our plans, intentions and expectations reflected in or suggested by such forward-looking statements are reasonable, we can give no assurance that such plans, intentions or expectations will be achieved.

By their nature, forward-looking statements speak only as of the date they are made, are not guarantees of future performance or results and are subjects to risks, uncertainties and assumptions that are difficult to predict or quantify.

Therefore, actual results could differ materially and adversely from those forward-looking statements as a result of a variety of factors.

Such risks, uncertainties and other factors are described in detail in the sections entitled Risk Factors in Management's Discussion and Analysis, particularly the portion of MD&A entitled Safe Harbor statement, in our Annual Report on Form 10-K for the fiscal year ended October 31, 2018, and subsequent filings with the Securities and Exchange Commission.

Except as otherwise required by applicable securities laws, we undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, changed circumstances or any other reason.

Joining me today are Ara Hovnanian, Chairman, President and CEO; Larry Sorsby, Executive Vice President and CFO; Brad O'Connor, Vice President, Chief Accounting Officer and Controller; and David Bachstetter, Vice President, Finance, and Treasurer. I'll now turn the call over to Ara. Ara, go ahead..

Thanks, Jeff. I'm going to review our operating results for the second quarter, and as usual, Larry will follow me with more detail. Overall, the quarter was in line with our guidance. I'll start with the sales. On the left-hand side of Slide 4, we show that wholly-owned contracts increased 10% to 1,546 contracts this year.

On the right-hand side of the slide, we show that the increase was 4% including joint ventures. Slide 5 gives more granular detail with contracts on a monthly basis. Every month showed an increase compared to last year this quarter. Additionally, May, the first month of our third quarter was even stronger with a 22% increase.

This is noteworthy because this is the first time we've had consistent year-over-year increases in the number of net contracts since the first quarter of 2016. After that time as we've discussed often, we dealt with the challenges of a shrinking community count due to paying off rather than refinancing $320 million of maturing debt.

Since that time, we've reinvested in land and once again growing our community count, which is driving improved sales. Our inflection point began with an improvement in the number of lots under control during 2018.

The second phase of improvement occurred over the last two quarters as we saw an increase in our community count when we opened these new communities. The third phase of improvement occurred as we began selling homes in a sufficient number of additional new communities this quarter and we saw an increase in our sales contract.

The fourth and very important phase of improvement will occur as we start delivering homes in these additional communities, which will result in increasing our topline, leveraging our overheads and interest expenses and enhancing our profitability.

Unfortunately, until these new communities start delivering homes, we're in the challenging position of carrying the overhead expenses and interest associated with opening these new communities without the benefit of increased revenues. However, this burden will become a benefit soon.

With respect to deliveries, revenues and profits, as we typically see in the second half of the year, we anticipate sequential growth for the next two quarters. Year-over-year growth should begin to occur in fiscal 2020, which starts in less than five months.

On Slide 6, you can see contracts per community for the second quarter for each of the last five years. Last year's second quarter was particularly strong, making the most recent comparison especially difficult.

While we fell just short of last year, we're pleased to report that the spring selling season remained strong and we achieved 10.8 net contracts per community for the second quarter. This represents the second highest per community rate for any quarter since the fourth quarter of 2005.

If you look at this on the wholly-owned basis, we had 10.5 contracts per community this year and that compares to 10.6 contracts per community in the second quarter a year-ago. On Slide 7, we show monthly contracts per community for the quarter.

The most recent month is in blue, the same month a year-ago is in gray, and the same month two years ago is in dark green. We had sequential growth in contracts per community throughout the quarter in February, March and April. That's representative of the strong spring selling season.

Similar to my comments about the entire quarter, the individual months were difficult comparisons because of the strong base last year. As I also indicated earlier, May had started our third quarter on solid footing.

On the left-hand side of Slide 8, you can see that for the month of May 2019, our wholly-owned contracts per community increased to 3.7 this year, compared to 3.6 in both of the prior two years.

In the middle of the Slide, we show that contracts per community, including joint ventures, increased to 3.9 compared to 3.6 last year and 3.4 in the year before that.

To provide more clarity, on the far right-hand portion of the slide, we show contracts per community including joint ventures, but excluding the results from our joint venture in Saudi Arabia.

Although Saudi remains a small part of our overall business, we're showing this comparison because we had 54 contracts in our one joint venture there during the months of May, excuse me, our one joint venture community. These contracts were in a single government-sponsored community designed for first-time homebuyers.

Strong demand in the single community skewed our contracts per community results in May, and we wanted to avoid confusion by showing our results with and without contracts on this community.

Here, you can see that contracts per community during May, excluding our Saudi joint venture, were 3.6 both this year and last year compared to 3.4 two years ago. We're breaking this out now because prior to 2019, our historical contracts for this joint venture had very little impact on our overall contracts per community calculation.

Turning to Slide 9. Here, we show quarterly community count going back to the second quarter of 2016. That was the first quarter where we saw a significant drop-off in community count after paying off $320 million of debt. With two recent quarters of sequential increases, we believe we turned the corner with respect to community count.

This has obviously contributed to our sales improvement. More importantly, we've also achieved year-over-year growth in community count at the end of the second quarter. This is critical and because it's an important step towards our goal of growing our revenues and achieving higher levels of sustainable profitability.

Our consolidated community count increased 11% year-over-year during the second quarter. As you can see on the slide, while community count slipped following the second quarter of last year, we reversed that trend in the last two quarters, and we grew from 132 communities at the end of April 2018 to 147 at the end of April 2019.

Our total community count, which includes JVs, also increased year-over-year from 153 communities at the end of the second quarter a year-ago to 165 communities at the end of the second quarter this year. The increase in our community count is consistent with the guidance that we've previously provided.

More importantly, we expect our community count to continue to grow further this year. Now let me walk you through the operating results for operating results for the second quarter. Slide 10 begins with revenues in the upper left-hand quadrant. We show consolidated revenues in gray and joint venture revenues in blue.

As you can see, consolidated revenues declined, but our joint venture revenues increased. The decline in consolidated revenues is primarily because we moved some wholly-owned communities to unconsolidated joint ventures in 2016.

As we discussed previously, it was a period when the high-yield market was closed to us and we needed to raise liquidity to payoff maturing bond debt. Moving to the top right, you can see that our gross margin was 16.9% for the second quarter of 2019 compared with 17.7% in the second quarter of 2018.

As we said on our first quarter conference call, we were more aggressive with the use of incentives particularly on spec homes. Many builders added incentive to gain momentum from the slower winter season, and we had to adjust our incentives to remain competitive.

We expect to see improvement in our gross margin in the third and fourth quarter compared to the second quarter this year, but not quite as high as the comparable period last year.

In the lower left-hand portion of the slide, you can see that our total SG&A dollars were down 2% year-over-year from $62 million last year to $60 million in this year's second quarter. Our SG&A ratio remains high and is likely to stay higher than we'd like until the growing number of selling communities begins delivering homes.

There are costs associated with opening new communities, but there are initially no deliveries to help offset these extra costs. Once we start getting deliveries from these new communities, we expect to be able to leverage our costs and get our SG&A ratio back to the more normalized 10% range.

In the bottom right-hand quadrant of the slide, we show that our interest expense decreased from $45 million last year to $37 million in the second quarter of 2019. There were two primary drivers of that reduction. In last year's second quarter, we had $4 million of land sales interest expense compared with none in the second quarter of 2019.

Also, our inventories under development increased, resulting in more interest being capitalized into inventory. Turning to Slide 11. First half of the year is typically our most challenging, and the second half ends far stronger. This year will be no exception.

On this slide, we show that our second quarter pretax loss last year was $10 million compared to $15 million in this year's second quarter. However, our pretax loss for the first six months this year was less than last year, and that's consistent with the guidance we gave in our first quarter conference call.

As usual, we expect the second half of the year to substantially outperform the first half. We anticipate that third quarter adjusted pretax profit will be slightly negative. However, we expect the adjusted pretax profit for the fourth quarter will be significant and will make us profitable for the full-year.

With our plans for increased deliveries and growth, our financial performance should improve during 2020. I'll now turn it over to Larry Sorsby, our Executive Vice President and Chief Financial Officer..

Thanks, Ara. Let me start with a brief comment about our joint ventures. On Slide 12, you can see that income from joint ventures increased from $1 million profit in last year's second quarter compared to $7 million in this year's second quarter. Our income from joint ventures have been strong for the past four quarters.

Looking forward, while we anticipate joint venture profits in the third and fourth quarter, they will be lower than they were for both of those quarters a year-ago. Joint venture community count is down year-over-year and many of these joint venture communities are now at the tail end at the tail end of their lives.

The vast majority of our recent communities have been wholly-owned. If you turn to Slide 13, you can see another view of contracts per community with longer-term trends. On the far left-hand side of the slide, we show our annual contracts per community from 1997 to 2002.

We averaged 44 contracts per community during a time period that was neither a boom nor bust for the housing industry. On the center portion of this slide, you can clearly see the steady growth in contracts per community for each of the past several years.

On the far right-hand side portion of the slide, we show that net contracts per community for the trailing 12 months ended April 30, 2019, were 36.2 compared to 35.9 for the same period one-year ago. Despite the slowdown that the industry saw for the second half of 2018, we are continuing our gradual migration back to normal absorption levels.

Turning now to Slide 14. You can see that the growth in orders has led to a 5% growth in consolidated contract backlog dollars from $901 million at the end of last year's second quarter to $950 million at April 30, 2019. This is another leading indicator of the growth in revenues and profits we expect to occur in the future.

Now I'm going to provide more detail on our continued efforts to grow our community count. Turning to Slide 15. We show our total consolidated lots controlled at the end of the second quarter increased 17% year-over-year. All of this growth came from increases in our lot optioned position as our owned lot position was down slightly year-over-year.

We are aware of the housing market choppiness that the industry saw in the last half of calendar 2018 and remain disciplined to our underwriting standards of using current home sales price, sales pace and construction cost when purchasing new land parcels.

Specifically we look at recent home sales prices, net of incentives of our competitors in determining the correct current pricing. Similarly, we look at our competitors' most recent 13-week sales pace and seasonally adjust them for the full-year. We are pleased with the recent land acquisitions we've made.

Our proven ability to utilize options to grow our land position also provides us with a built-in market hedge. If you turn now to Slide 16, you can see our year’s supply of total lots controlled compared to our peers. At 6.7 years of total lots controlled, we are well above the median of our peers.

This was another leading indicator of the growth in deliveries and revenues we expect will occur in the future. On Slide 17, you can see that we have the third highest percent of land controlled via options.

We continue to use land options as much as possible in order to achieve high inventory turns, enhance our returns on capital and to reduce land risk. We have been getting a lot of questions recently about our spec strategy.

We continue to believe that it is prudent to have a few started unsold homes on hand in each of our communities to accommodate buyers who are looking to move in quickly. On Slide 18, we show that we had 4.4 started and unsold homes per community at the end of the second quarter of 2019.

There really has been no change in our strategy with respect to started unsold homes. We have averaged 4.6 started unsold homes per community since 1997. As Ara mentioned, in fiscal 2019, we have been somewhat more aggressive with the use of incentives on these started unsold homes compared to our to-be-built homes.

We remain very comfortable with our spec home position. Some investors have expressed concerns about potential future write-downs on our mothballed lots. Turning to Slide 19, we show our mothballed lots broken out by geographic segment. In total, we have 2,590 mothballed lots within 14 communities as of April 30, 2019.

The book value at the end of the second quarter for these remaining mothballed lots was only $14 million net of an impairment balance of $147 million. We are carrying these mothballed lots at about 9% of the original value and believe further write-downs on these lots are extremely unlikely.

A little more than 1,300 of the mothballed lots, or about half the total, are in a single community in Northern California that we are currently redesigning and re-entitling to maximize its value in today's market.

This community is located in the Sacramento Valley, a market which continues to post solid performance for us, and we expect this community will also be very successful once we get it open. We hope to un-mothball and then begin developing this large community as early as next year.

Looking at all of our consolidated communities in the aggregate, including mothballed communities and the $154 million of inventory not owned, we have an inventory book value of $1.3 million net of $227 million of impairments. Turning now to Slide 20.

Compared to our peers, you see that we have second-highest inventory turnover rate over the trailing 12 months. Although we lag NVR's industry-leading turnover number, our turns are 33% higher than the next highest peer below us. High inventory turns are a key component of our overall strategy.

Another area for discussion is related to our deferred tax asset valuation allowance. Our deferred tax asset valuation allowance is very significant and not currently reflected on our balance sheet. We've taken numerous steps to protect it. As of April 30, 2019, our valuation allowance in the aggregate was $643 million.

We will not have to pay federal cash income taxes on approximately $2.1 billion of future pretax earnings. On Slide 21, we show that we ended the second quarter with a shareholders' deficit of $484 million. If you add back our valuation allowance, as we've done on this slide, then our shareholders' equity would be a positive $159 million.

Now let me comment on our current liquidity position. During the second quarter, we spent $110 million on land and land development. As seen on Slide 22, we ended the second quarter with liquidity of $266 million, which is above our targeted liquidity range of between $170 million and $245 million.

On Slide 23, we show our maturity profile as it looked at April 30, 2019. The first of the larger maturities occurs in a little less than three years from now. We are confident that our performance will improve in the intervening years, allowing for a smooth refinancing of this debt in the future.

That concludes our formal remarks, and we're happy to open it up for questions now..

Thank you. [Operator Instructions] And our first question will come from the line of Mary Gilbert with Imperial Capital. Your line is now open..

Yes. Good morning. Thank you for the details with the slide. I had a question on the guidance that you were talking about with regard to pretax earnings and it getting better in the second half.

How should we look at it on a reported EBITDA basis, adjusted EBITDA basis? It sounded like you were hinting that we won't see that turn positive year-over-year until fiscal 2020? Is that the correct way to look at it?.

Well, I don't think we really gave any direct guidance on EBITDA. We only did it in terms of pretax earnings. But certainly, EBITDA generally mirrors pretax earnings..

Okay.

So you do expect year-over-year – a year-over-year increase in EBITDA in the second half is the way we should look at it?.

That's not exactly what I said. I said we didn't give any specific guidance on EBITDA. But generally, EBITDA mirrors the trends in pretax..

Okay. And then also can you talk about some of the market conditions geographically? Are you seeing strength? Is there some variance as we look geographically? And then also in terms of the homebuyer, maybe you're seeing strength in a certain category of the homebuyer community.

Can you talk about what you're seeing in the market and how you're seeing that evolve? Thank you..

Sure. I'll kind of move around the country. One of our stronger markets continues to be Northern California. We're primarily in the Sacramento market, although part of the more affordable portions of the Silicon Valley market for the longer commuters. Interestingly, Southern California has picked up recently, which is helpful.

Still not as strong as it was maybe 1.5 years ago. But it has picked up a bit, which is helpful. Houston is decent, not as strong as it used to be. Dallas is picking up a little steam. I'd say as I look around the markets, the markets that have been a little choppier is what we call our southeast coastal markets in the Carolinas and Coastal Georgia.

And it's been just a little choppier in Chicago. Ohio has been strong. New Jersey has been strong. The Virginia market has been stronger than D.C. market, and Delaware has been strong. I can't say we have any particular trend by product types, but our most affordable entry-level products have generally been doing well. We call them the Aspire line.

They've been doing well. The active adults generally have been doing well. So I can't say there is a particular product niche that has standout performance, good or bad..

Okay. That’s very helpful. And then as you continue to ramp up the communities, it's going to take time to get the – sort of the revenues to offset the costs associated with these communities.

How should we think about free cash flow for the year?.

I'm sorry.

Repeat the last part about free cash flow for the year?.

Yes, for fiscal 2019..

Yes. I would say – again, I don't think we gave specific guidance on free cash flow for the year. I mean we remain focused on maintaining active liquidity and growing our community count.

And then I think once we actually achieve the higher community count, begin seeing deliveries from that, is when you'll see us begin to harvest cash and generate larger levels of free cash flow that will allow us to pay down debt..

In general, we feel comfortable that we're going to be able to grow our revenues in 2020 and still stay within our target range of liquidity. Part of that is, obviously, we're getting activity from the new communities. But in general, we've been having good success with options and just-in-time land takes. We've been pacing our land development.

So we're fairly comfortable with our cash and liquidity position in spite of the growth that we're anticipating..

Thank you. And our next question will come from line of Megan McGrath with Buckingham Research. Your line is now open..

Thanks. Good morning. I wanted to follow-up a little bit on your conversation around incentives. And I was wondering if you could tell us, what the level of incentives looks like in your backlog or your orders versus the closings. And I'm really trying to get a sense how sticky these incentives are once you start to give them in a community.

Is it going to take us maybe six months to get back to the level we were a year or so ago? Or how are you thinking about that?.

Well, what we did mention is that we expect our gross margin to improve over the next two quarters. So I mean there are a lot of factors and moving parts in that, it's the mix of communities, its increasing prices, increasing costs. But overall, the net-net effect is we plan to increase our gross margin.

We believe that going to happen in these next two quarters, but as I mentioned earlier, not quite as high as our gross margin a year-ago..

Right.

But are you feeling like you can start to remove incentives now that your order growth has picked up pretty significantly?.

Yes. I would say on the whole – first of all, it's obviously very, very situational even in the same division. One community we might be increasing prices, another community might have had a competitor open up with particularly low prices and we adjust there. So it's hard to make generic comments that are applicable across the board.

But on the whole, I'd say there's a little less incentive pressure at the moment..

Okay. And then to follow-up again on community count also.

Can you remind us what your goal is for the year? And then now that we're – I know community count is really hard to forecast, but now that we're seeing the order growth tick up, could we start to see a little bit of pressure on that number given maybe closeouts might start to increase?.

As you mentioned, I mean it's a hard number to accurately predict for precisely the reason you're saying it. You have fast absorptions that you can actually close out communities quicker than you've previously anticipated.

And if you have new ones coming onboard and you run into some regulatory delays, they could not come onboard as quickly as we thought. I think what we've said is about all we're willing to say, which is we think that we'll continue to see growth from where we ended the second quarter this year, and that's probably….

Is that sequentially, sorry?.

I just said that we'll see growth this year. So I didn't say sequentially and I didn't say each quarter. I just said that we'll see growth in our community count this – further growth this year. And I think that's about as much clarity as we can provide at this point..

Okay. Thanks very much..

Thank you. [Operator Instructions] And our next question will come from the line Arjun Chandar with JP Morgan. Your line is now open..

Good morning. Thank you. I just wanted to ask a quick question on land acquisition and development spend. As we look forward to the second half of fiscal 2019 and then into fiscal 2020.

And how you think about the land opportunities available to you in the back half of this fiscal year with regards to getting that liquidity number back into the target range? Or do you see more opportunities potentially down the pike in fiscal 2020?.

We would love for our liquidity to be within the range. It was slightly above the high end of our range this time, which I think is just further evidence that we stayed disciplined to our underwriting standards and don't go beyond it just in order to get money invested.

We want to make sure they're good deals that we're investing in, that's the most critical thing. Having said that – and Ara may want to add comments here, but I would say that there are lots of opportunities that all of our business units are bringing to the land committee.

So there are still good deals out there that we're looking at on a regular basis..

Okay. Thank you..

Thank you. And our next question will come from the line of James Finnerty with Citi. Your line is now open..

Hi, good morning..

Good morning..

Sorry about that.

Just wanted to talk about the maturity profile and just thoughts around how you're intending to sort of push out the maturities that are coming up in 2021? And the potential for simplifying the capital structure, if there's any further thoughts there would be helpful?.

Okay. I mean the only one that's coming due in 2021 is really $75 million in the new group. So with respect to that, we may look at combining that with the $195 million that is also part of the new group that comes due in 2022, fiscal 2022. We may consider collapsing the two groups. We talked about that roughly a year ago. We continue to analyze that.

And if that's a better economic way and provides us more benefits than keeping two separate collateral pools, we would certainly consider simplifying our capital structure by doing that. So there's no firm plan one way or the other. At this point, we continue to analyze and look at different alternatives..

Great. And then just going back to the community count, I think the ramp was bit more than anticipated from first quarter to second quarter. I know you're guiding to grow this year relative to the second quarter.

But if you took a step back and you looked at where you peaked in the past in terms of community count, can you give as an idea like where – what percentage of those peaks – like, I mean, Slide 9, you have – back in 2016, you had over 200 total communities including 12 JVs. Something like – just relative to that would be helpful..

I just don’t think we're comfortable making a longer-term projection on – or giving you more clarity on where our community count might peak. We have made good progress. Just as we have been telling you probably for like two years, we've been saying that we're going to build and see growth in fiscal 2019, and we actually are achieving that.

We're pleased with the growth that we've had. We expect some continued growth in the remainder of this year, and we're just not in a position to give you more clarity than that at this time..

Okay. Thank you..

Thank you. And we have follow-up questions coming from the line Mary Gilbert with Imperial Capital. Your line is now open..

Yes, Larry.

With regard to the collateral coverage, so for example looking at the 10s and 10.5s that's now down to around 74%, how should we look at that where we can start to see an improvement in that metric? Will we see it in the second half or into fiscal 2020?.

Well, I think the answer to that is as these new communities and the growth in community count that we've already achieved start generating deliveries, revenues and improvement in profit, we would expect that – over time, we will see improvements in this collateral coverage ratio as well.

I can't tell you specifically the time period, whether it's the remainder of this year or whether it's next year, but it's going to mirror – as we get to higher levels of sustainable profitability, then this collateral coverage ratio should improve..

Okay. Great. Thank you..

Thank you. And we have follow-up questions coming from the line of James Finnerty with Citi. Your line is now open, sir..

Hi. Sorry about that.

On the collateral question and related to community count growth, is there a way of you framing how many communities that were opened in the most recent quarter are part of the 10s and 10.5s collateral group or some way of thinking about that?.

Yes. That's just not data that we've ever made public. I will just explain how we make a decision as to whether it goes into the new group or the old group. The new group is where we put all of our joint venture communities. So if we're going to do a joint venture, it'll be in the new group.

If it is not going to be a joint venture and it's going to be a wholly-owned community, we make the decision on whether to put it in the collateral pool for the old group or the new group purely based on the projected cash balances in each respective group and how much cash is necessary for that community.

So we do not make any kind of determination based on product type, entry level or active adult or geography, West Coast versus East Coast, all of that is not taken into account as it's purely based on which group has excess cash to make the investment..

So then could you say if – will a greater percentage of communities eventually be represented by that 10s and 10.5s collateral group as we go forward in your expectation?.

I mean it has more cash, so I think that's absolutely correct..

Okay..

It does today represent the majority of our communities and will in the future just because we have more capital in that collateral pool than we do in the new collateral pool..

Okay. Great. Thanks for that..

Thank you. And we have follow-up questions coming from the line of Megan McGrath with Buckingham Research. Your line is now open..

Thanks. You talked about the – all the moving parts in the gross margin.

And I was wondering if you could just give us an update on what you're seeing in terms of input costs, labor costs, lumber, all that?.

The commodity pricing has eased up a little bit in general recently. But that's all in play depending on how things shake out frankly with the China tariffs. That certainly could affect some of the materials we purchase. So there's a lot of movement around.

In general, the theme of big problems with construction cost increases has abated a little bit, but there's still ongoing construction cost increases in general. It's just not as big a concern as it was, say, two years ago when it really, really hurt margins..

Okay. Great. Thank you..

Thank you. And I'm showing no further questions at this time. So now it's my pleasure to hand the conference back over to Ara for any closing comments or remarks..

Okay. Well, thank you very much. We have positive news and we are pleased to report it regarding sales. We look forward to giving update as of the new sales deliver and improve our results, and as we drive into more growth for 2020. Thank you very much..

This concludes our conference call for today. Thank you all for the participating, and have a nice day. All parties may now disconnect..