Ladies and gentlemen, thank you for standing by. Welcome to the McGrath RentCorp Third Quarter 2023 Earnings Call. [Operator Instructions] This conference call is being recorded today, Thursday, October 26, 2023.

Before we begin, note that the matters the company management will be discussing today that are not statements of historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our full year 2023 financial outlook as well as statements relating to the company’s expectations, strategies, prospects, or targets.

These forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties that could cause our actual results to differ materially from those projected.

Important factors that could cause actual results to differ materially from the company’s expectations are disclosed under Risk Factors in the company’s Form 10-K and other SEC filings. Forward-looking statements are made only as of the date hereof, except as otherwise required by law. We assume no obligation to update any forward-looking statements.

In addition to the press release issued today, the company also filed with the SEC the earnings release on Form 8-K and its Form 10-Q for the quarter ended September 30, 2023. Speaking today will be Joe Hanna, Chief Executive Officer; and Keith Pratt, Chief Financial Officer. I will now turn the call over to Mr. Hanna. Go ahead, sir..

Thank you, Travis. Good afternoon, everyone. Thank you for joining us on our call today. Our third quarter 2023 reported earnings reflect further progress with our strategic growth focus on the modular business. We delivered impressive results for a third consecutive quarter this year.

Rental revenues increased 22%, total revenues increased 40% and adjusted EBITDA from continuing operations increased 47% in the third quarter. Once again, our teams executed very well.

My sincere thank you to all our team members for your hard work and focus on what matters to our customers, our shareholders, and to each other with your incredible team coverage and delivery. As a reminder, on February 1 this year, we simultaneously acquired Vesta Modular and sold our Adler Tank business.

Since then, we have been focused on integrating Vesta into our Mobile Modular business. Progress on key integration milestones is on schedule. All aspects have gone extremely well. During the third quarter, we completed our organization work and associated changes and have now fully integrated the Vesta team into our McGrath operating structure.

Our new team members are very capable and engaged in each of the key integration areas. We have been impressed with the number of ideas generated towards achieving our synergy targets. We have completed a bottom-up synergy analysis and feel confident in our ability to achieve our $8 million EBITDA synergy target.

While still early, the cross-selling and geographic expansion opportunities we anticipated with the Vesta acquisition are being realized. Across the country, both Mobile Modular and Vesta sales reps have won incremental orders by being able to access our broader combined fleet.

Our combined sales teams are working well together to leverage relationships in national accounts to win orders. They have begun sharing contacts in key accounts where one party may have had a stronger presence, resulting in more one business and sturdier relationships. Shifting now to provide a few highlights specific to our modular business.

We were very pleased with overall business performance in the quarter. Rental revenues grew 36% and reflected not only more units on rent, but also continued benefit of the pricing appreciation trends that we have been realizing in prior quarters. Keith will provide more details on these trends in his remarks.

Both our commercial business as well as our education rentals grew during the quarter. The wins we experienced are geographically broad-based and in a wide variety of market verticals, including government and technology. We also want business as a result of customers’ investments in plants and manufacturing capacity that is reshoring.

Our education business benefited from modernization and growth projects and encompassed both public and private school customers. We maintained our focus on solid execution. Our team actively managed pricing, fleet utilization and deployment of new capital and achieved a healthy 79.7% utilization at quarter end.

In addition to our positive core revenue drivers, we also continued expansion of our revenues in the services portion of our customer offerings.

Revenues from Mobile Modular Plus, site-related services and our custom modular sales group all grew nicely in the quarter and we remain excited about the opportunities these additional services offer our customers. Portable Storage rental revenues grew 18% in the quarter. We are also quite pleased at the pace that this business is growing.

We continue to make progress on pricing with new shipment pricing up considerably compared to fleet averages. The acquisition of Design Space in 2021 and the acquisition of Vesta this year opened up opportunities for us to expand the Portable Storage business into new geographies.

The Colorado market tuck-ins this year were also strategic initiatives to support this growth. They have been fully integrated and are performing to expectations. Turning now to TRS-RenTelco, the softness we experienced earlier in the year around the semiconductor and computer business has not yet abated. Rental revenues decreased 10% for the quarter.

We continue to take countermeasures to account for these business conditions and we are moving the needle. We have reduced our capital expenditures for new fleet considerably and continued to execute consistent fleet sales of underutilized equipment to a net positive result as we ended the quarter, with utilization up over 60%.

Our efforts to right-size the fleet for current market conditions are an important step to manage the business responsibly. Finally, on a macroeconomic level, we recognize that there is some uncertainty in the economic outlook and some softening conditions as indicated by the recent ABI reporting.

However, we are generally seeing steady business demand at McGrath for the remainder of the year and early indicators into 2024 appear positive. I am very pleased with our progress this year. We have good momentum with our pricing and services initiatives, which have considerable growth potential ahead.

Additionally, with our acquisitions, we have the opportunity for densification at locations with low presence currently. So we remain very positive on the future growth potential for the business. We will be working hard to maximize every dollar we spend over the months ahead and are looking forward to finishing 2023 on a good note.

With that, I will turn the call over to Keith who will expand on my overall comments with greater financial detail..

Thank you, Joe and good afternoon everyone. As Joe highlighted, we delivered strong results in the third quarter driven by the performance in our Mobile Modular segment. Looking at the overall corporate results for the third quarter, total revenues increased 40% to $243.5 million and adjusted EBITDA increased 47% to $95.3 million.

Before the contributions from Vesta, McGrath had 20% total revenue growth and 25% higher adjusted EBITDA. During the third quarter, the company sold two properties used by the recently divested Adler Tanks business, which resulted in a $3.6 million net gain on sale and increased earnings per diluted share by $0.11.

The total diluted earnings per share for the quarter, excluding this transaction was $1.54, an increase of $0.43 when compared to a year ago. These property sales are reflected in other income on the income statement. Turning now to review of Mobile Modular’s operating performance as compared to the third quarter of 2022.

Mobile Modular had an impressive quarter with adjusted EBITDA increasing 83% to $73 million. Total revenues increased $69 million or 55% to $194.9 million. There were increases across all revenue streams, including 36% higher rental revenues, 45% higher rental related services revenues, and sales revenues which more than doubled.

Vesta contributed $34.9 million total revenue and $14.4 million adjusted EBITDA to the current quarter results. Before these contributions from Vesta, Mobile Modular also had an impressive 27% total revenue growth and 47% higher adjusted EBITDA.

In addition to the contribution from the Vesta acquisition, our rental operations experienced strong organic growth across our commercial, education and portable storage customer bases. Sales revenues increased $29.9 million to $58.9 million demonstrating good progress with our initiative to grow modular sales projects.

Vesta contributed $16.2 million or roughly half of the increase. We continued our disciplined fleet management on a much larger fleet and achieved a 30% higher average rental equipment on rent with average fleet utilization of 79.4%, down from 80.1% a year ago.

Keep in mind that we have achieved this healthy total fleet utilization, while integrating Vesta’s fleet, which was utilized in the mid-70s at time of acquisition.

The average monthly rental rate for the portfolio was 2.92%, which was 5% higher than a year ago and reflects our focus on pricing optimization as well as continued healthy market conditions.

Rental revenues increased by 36%, while inventory center costs increased 2% and depreciation expense increased 30% resulting in rental margins of 65%, up from 56% a year ago. Similar to last quarter, I will share additional data that helped illustrate our progress with our modular business strategic focus.

Third quarter monthly revenue per unit on rent increased year-over-year from $633 to $695, a 10% increase. For new shipments over the last 12 months, the average monthly revenue per unit was $1,027. A year earlier, this last 12-month average revenue was $905.

So, we see a positive trend with new unit pricing, which is up 13% on a full year-over-year basis. Similar to last quarter, this data is for our legacy modular building and classroom fleet, excluding Vesta. These pricing dynamics are significant, positive long-term revenue drivers.

As the rental fleet churns, we expect a rental revenue tailwind as the average rental unit pricing for all units on rent moves towards current market rates. Our early progress with Mobile Modular Plus is embedded in these data points and is an additional growth opportunity for us.

We continue to make progress with our modular services offerings for our legacy modular business, excluding Vesta and Portable Storage. Mobile Modular Plus contributed $20 million revenue year-to-date, up from $13.7 million a year earlier. Site-related services contributed $18.3 million revenue year-to-date, up from $11 million a year earlier.

We are in the early innings with these initiatives and they are making positive growing contributions. Turning to review of TRS-RenTelco, adjusted EBITDA was $21.9 million, a decrease of 9% compared to last year. Total revenues increased point $0.6 million or 2% to $39.1 million.

We saw an increase in sales revenues, partly offset by a softening in rental operations revenues. Rental revenues for the quarter decreased 10%.

As we experienced continued softness in semiconductor related demand, the average monthly rental rate was comparable to the previous year, which reflects generally stable pricing conditions for both communications and general purpose equipment in the current market.

Average utilization for the quarter was 59.4% compared to 65.3% a year ago and rental margins were 40% compared to 44% a year ago. Sales revenues increased 58% year-over-year to $8.7 million, with gross profit decreasing 9% to $3.1 million due to lower gross margins in 2023.

The increase in sales revenues demonstrates our focus on reducing inventory to better align with current market demand. To address the currently challenging business conditions at TRS, we maintained our return on capital discipline. With our actions to reduce new equipment capital spending, and continued focus on sales of used equipment.

We have reduced fleet size, based on original cost of equipment from $398 million at the end of March to $384 million at the end of September and ended the quarter with utilization at 60.3%. The remainder of my comments will be on a total company basis from continuing operations.

Third quarter selling and administrative expenses increased $11.6 million to $48.5 million. The addition of Vesta Modular increased selling and administrative expenses by $6 million, which included $1.2 million amortization of intangibles.

Interest expense was $11 million, an increase of $7.7 million as the result of higher average interest rates and $242 million higher average debt levels during the quarter, which was primarily the result of funding or acquisitions.

The third quarter provision for income taxes was based on an effective tax rate of 27.3% compared to 25.3% a year earlier. Turning to our year-to-date cash flow highlights, net cash provided by operating activities was $119 million, compared to $133 million in the prior year with transaction expenses, accounting for most of the reduction.

Rental equipment purchases, excluding equipment received from recent acquisitions were $171 million, compared to $130 million in the prior year. The total cash paid for acquisitions year-to-date of Vesta, Brekke, Dixie and Inland was $462 million, emphasizing our strategic initiatives to grow the modular and portable storage businesses.

Proceeds from the sale of Adler Tank Rentals earlier this year was $268 million. In addition to significant investments in new fleet, and the acquisitions, healthy cash generation allowed us to pay $34 million in shareholder dividends.

At quarter end, we had net borrowings of $668 million comprised of $175 million notes outstanding and $493 million under our credit facility with capacity to borrow an additional $157 million under our lines of credit. The ratio of funded debt to the last 12 months actual adjusted EBITDA was 2.03 to 1. Finally, our updated 2023 financial outlook.

For the full year, we currently expect results from continuing operations to be total revenue between $820 and $830 million adjusted EBITDA between $312 and $320 million, gross rental equipment capital expenditures between $190 and $200 million. Our outlook reflects the following expectations for the final quarter of the year.

Modular rental revenues up sequentially from the third quarter. Modular rental related services revenues at a level comparable to the first quarter of 2023. We expect fewer site related services projects in the fourth quarter compared to the seasonally busier second and third quarters. Modular sales revenues comparable to the fourth quarter of 2022.

Modular other direct costs of rental operations comparable to the third quarter as we continue to prepare buildings for new rental opportunities. Overall TRS performance comparable to the third quarter with the potential for some normal seasonal reduction in business levels towards year end.

Total McGrath selling and administrative expenses, up sequentially from the third quarter. We are very proud of McGrath strong third quarter performance, and we are fully focused on solid execution for the remainder of the year. That concludes our prepared remarks. Travis, you may now open the lines for questions..

Thank you, sir. [Operator Instructions] We do have a question from Scott Schneeberger, Oppenheimer..

Thanks very much. Good afternoon. I’d like to focus in most on Mobile Modular, what was volume in the quarter? It looks like it was plus 3%.

And Joe, did you say that you think you were taking market share gains? And then one more question on that, Joe, you mentioned positive indicators into 2024, please elaborate on that as far as the business momentum? Thank you..

Sure. I mean, as far as business volume, Scott, shipments have been up sequentially, each quarter from Q2 to Q3. And we are estimating that that is going to be the case, again in Q4. So I mean, our shipment volume has been healthy. And we anticipate that for the remainder of the year.

Also back that up to say that our quote volumes are healthy, and the business has been very steady. So we feel very confident about how we’re going to end this year. In looking at 2024, I would say that, based on what I just said, our – since our quote volumes are healthy, our commercial activity is steady.

We are seeing just very high levels of funding for construction projects across the country. The Infrastructure and Jobs Act, has funded projects across all 50 states. We’re seeing the benefit of that in road and bridge and airport and other government projects. And we expect this to be a tailwind well into next year and beyond.

And the same goes for the CHIPS Act, which – we’re actively working on projects that are funded by that right now. Over on the education side, the demand has been very healthy. And to give you an example, Texas is expected to have over $17 billion in facilities bonds on the local election ballots in November.

So this – these types of funding dynamics really fuel our growth and will do so for a long time. The other thing that I’ll add in there too is with our services offerings that we touched on they are growing very, very nicely, Mobile Modular Plus, site-related services and custom modular sales. We have a very nice pipeline is there.

So I feel very, very confident that we’re going to see a nice continued momentum into 2024 based on these dynamics that I just reviewed..

Thank you on that. With regard to, I think you said every sequential quarter volume has been improving. Is it in fact Joe improving on a year-over-year basis as well? It sounds like it is.

If you could hit that and then just speak to deliveries versus pickups, are you seeing more deliveries then pickups in modular and storage, please address both? Thanks..

Sure. Yes. I would say that the answer to the first question is yes, we are shipping more than we did in the prior year. I would say that from a returns and shipments dynamic, it’s – it kind of varies from quarter-to-quarter. But I would say that we’re in a healthy state right now.

We’re not seeing anything from a return dynamic or looming returns out there, in each of the businesses that are really concerning me at this point, so I’m feeling pretty good about both our shipment and return numbers that we’re seeing right now and the projections that we have..

Okay, thanks.

And that was Joe, just to clarify, that was for modular and storage, any unique comments on either of those two asset classes on delivery pickups or any other topic?.

No, not really. I would say it’s fairly similar for both businesses..

Okay. Thanks. The – lastly, in Mobile Modular you mentioned very steady quote activity and it sounds like you feel good about that as far as this momentum carrying into next year.

Could you elaborate a little bit with some metrics you gave on pricing and that sounds pretty powerful? Could you just elaborate on what you’re seeing with the pricing trend comparing to recent quarters and any comments you can share about potentially extrapolating? Thanks..

Sure, I’ll just start off and maybe Keith can add in here. I mean really what we look at is the differential between our average fleet pricing and what we are shipping new orders at and that is a fairly significant delta.

And as long as we – that delta is in place and actually continues to get more favorable as we continue to increase pricing on new shipments. We feel very good that that’s going to be a long-term tailwind for us and just a built-in revenue growth opportunity for the business and so I feel really good about that very positive revenue driver for us.

Keith, I don’t know if there is anything you want to add there?.

Sure. I’ll just recap Scott, the data and you’ll see these numbers in our investor relations presentation that is available on the IR website. But again, I think the biggest indicator for overall revenue trend is the metric we’re quoting for monthly revenue per unit on rent.

And as I mentioned in the prepared remarks, that matrix is up from $633 to $695, that’s a 10% increase and that’s for all the units on the fleet. Again, this is modular buildings and classrooms. It excludes Vesta at this point, but very healthy. And then those numbers by the way, last quarter were $613 and $670, which was a 9% increase.

So again, all the numbers moving up and in this particular quarter, the percentage increase is actually a little higher than last quarter.

And then the other item we keep our eye on is new shipments and the revenue per unit that is in a new shipment that was over $1,000 on an LTM basis for the third quarter actually at $1,027, up 13% compared to a year ago. Again, on an LTM basis, we saw similar numbers last quarter and the trends again are very positive.

So we are putting a lot of work into this. As I mentioned, it includes the benefit of Mobile Modular Plus, which are really additional services we’re including with the unit but, the bulk of that increase, both for units on rent and for new ships, the bulk of the increase is what I would call the core base building pricing.

So, these are good numbers, good trends, and again, we think they have a longer term positive tailwind for the business..

Thanks both of you for that color and it sounds very good. Just one more and then I will move up Mobile Modular. But it sounds like pricing is, you are getting pricing, and that’s going very well. Joe, at the beginning of your comments, you mentioned that there was an adverse move last month in ABI. We will see what we get next month.

So, there is concern out there, because there is various macro indicators going in different directions. But how is the firmness of the pricing? Is it a major area of customer pushback, or is it just a very disciplined industry, and in the price discussions rational? Thanks..

Sure, I would say our pricing discussions are rational. I would say that, we are not the low-cost leader. And so we are off times, having discussions with customers about moving pricing up. But we give the value for the services that we offer in the buildings that we provide.

And so in our case, that conversation tends to go relatively well, because customers, and we have tremendous amount of repeat business. They know what it is like to deal with us. And so typically we are able to live comfortably in the higher end of the pricing spectrum. So, we have not been getting pushed back, but we watch that very, very closely.

And we watch our close ratios very, very closely in conjunction with the pricing that we are trying to get. And so if any of those get out of line, we can very quickly make adjustments to our approach in the market, and we do so. And some of that’s targeted region-by-region.

But overall, we have had success, and I presume that we will continue to do that..

Great. Thanks. Appreciate all the color. Just real quick over to TRS, I think that the best way to ask the question of what’s occurring there is, could you provide some color on what you have seen in past cycles? We are obviously in a bit of a down cycle and maybe elaborate a little bit on what’s driving that.

But what I am getting at here, and the question is, what’s the typical duration of a down cycle? Does this look like a typical down cycle for TRS? When would be your anticipation of return, and how much visibility might you have? Thank you..

Yes. Here is what’s interesting about what’s happening right now, Scott. We – from my perspective, it really doesn’t feel like a down cycle. If you look at our rental revenues in the business, they have actually been going sideways. And so we anticipate that in Q4, we will actually kind of go sideways again.

And what we are actually not experiencing is the typical lift that we get in the business during Q3 and Q4, which are – typically are stronger rental revenue quarters for TRS. So, we actually are kind of going sideways, and so we are just not seeing the growth that we have experienced before.

And I believe that in 2024, we are going to come out of this. I really do, because I think that the semiconductor demand, which just doesn’t last for long periods of time, historically that we have seen in the business, I don’t think it’s going to last historically long this time.

And I think we are going to be back to better opportunities once we get into next year. That’s my outlook on this part of the business..

And you mean whirlwind demand in semiconductors?.

Yes..

Correct. Alright. Well, it sounds good. Yes, it doesn’t. Yes, it’s not – that wasn’t saying that it’s down. It just is in a wall.

But it sounds like you anticipate improvement in next year potentially, just because you don’t see a long duration…?.

Correct..

Thanks. I appreciate that. I will turn it over right there. Thanks..

Our next question comes from Marc Riddick, Sidoti..

Hi, good evening everyone..

Hi Marc..

Hi Marc..

So, one of the things that you touched on that I wanted to follow-up on, you had made mention of Texas and the education funding on the ballot there.

One of you could talk a little bit about maybe your overall thoughts of use as far as education funding if there are any other potential hotspots for the upcoming election cycle and then of course, I have few follow-ups on that..

Yes. So, the other big market of course for us is California and then Florida. In California, there is not going to be any bond measures on a ballot this particular year, that will be next year.

But I can tell you that California has actually funneled well over $1 billion from other revenue sources into facilities funding, because they need the money to go there. And so what you have in a state like this is, a lack of funding at the state level that is actually being addressed through other funding sources, so that’s a good thing.

Then you have Texas, which I just mentioned, and then you have Florida, which the sales tax initiatives and things like that, that they have on ballots should receive favorable voter turnouts. And so we are expecting that that should be good for a state like that too.

So, across our operating geographies, we are seeing education funding in a good place. We anticipate that will be the case next year..

Okay. Excellent.

And then one of the things you mentioned in your prepared remarks were some of the findings and learnings that you have had with some of your new investor colleagues, and one of you could talk a little bit about that, and elaborate on that as far as how that plays into the future opportunity set?.

Well, one of the things that we are diligently working on is achieving our $8 million synergy target that we have committed to. And what we are seeing when we bring our two teams together, is that there are a lot of really good ideas that people and teams are generating, that are going to enable us to hit that target.

So, it ranges from, how we interact procedures that we have for maintaining equipment, procedures that we have for utilizing fleet between both of our companies, had the passing of sales leads, how all that system works. I mean all those things have just really gone very, very well. And so I have been very pleased at the progress we have made there.

And we just have a team that is leaning forward, and doing a really wonderful job to try to have us be successful in our commitment to hit that $8 million synergy target..

Great. And then you have made mention as far as the units on rent that are going out, and the gains that you are seeing there and the benefits of plus.

So, I want you to talk a little bit about sort of how that’s played out, particularly with maybe geographic mix, are certain areas a little stronger in that than others, are there certain customer groups that are more receptive to that, or has it just kind of been across the board?.

Yes. Well, because as I have said, we are in the early innings. We have some geographies that are just doing a better job than others.

And that’s as we continue to get our arms around this initiative, that’s part of our – the gains that we know that we have that are out there are getting everyone on the same sheet of music and everybody growing in the same direction. And so those are just normal implementation issues that we have when we roll out something like this.

And I think we are doing a very nice job of it. I am not concerned about any particular customer groups that are pushing back, or any particular geographies that are not being receptive to this. It’s actually going quite well for us. And we are very excited about what the future holds there..

Yes. Marc, I would just add, if we look at how applicable the new Mobile Modular Plus services are to the different customer groups, there is more that’s applicable on the commercial side compared to the education side.

So, when you look at some of the gains we are getting, you can think of it as a lot of the opportunity near-term is being recognized with the commercial customer base..

Okay. That’s very helpful. Thank you. And then one of the things that I was sort of thinking about, and with everything that’s sort of going really well so far with Modular in particular.

I was sort of thinking about sort of should we be rethinking what the general ceiling is when it comes to utilization, or is it more that the gains are going to be more focused on the pricing side, which certainly seems to be the case.

I was wondering, what you have seen so far changes any thoughts or views as to maybe what the utilization floor and ceiling is going forward for Modular..

Yes. Marc, I mean running the business at the 80% level is pretty good. And we like it when it’s in that range. We do have room to go up a bit. But due to the geographic diversity and the fleet diversity that we have, it’s tough to run it much, much higher than that.

So, what do we do in that case, that’s where we, in some locations have very, very high utilization, that’s where we fund new capital expenditures and we have done that very, very carefully this year and anticipate that we will have opportunities to do that in 2024. So, we have the lying time.

We have got the relationships with suppliers to be able to make that happen. And so that’s our kind of lever that we can pull there to make sure that we continue to fund our growth..

Great. And then the last one for me, I wondering if you can sort of give us an update. You made mention of some of the acquisitions that you have done since Vesta and some of the tuck-in opportunities and the like.

So, one of you could give us maybe an update on maybe what you are seeing there, and as far as – potential targets as far as what’s out there and/or whether the pricing has changed, or is it fairly similar to what we were experiencing earlier in the year? Thanks..

Sure. Well, first of all the acquisitions that we have done outside of Vesta, the tuck-ins, we have been very pleased with. They are integrated. They are growing the way we have expected them to grow. And so that’s been a very nice add to the business. As far as our pipeline, we have an active and robust pipeline for additional tuck-ins.

And we would like to continue to utilize tuck-ins in certain areas as another way to grow the business. Pricing for those opportunities, I would say, generally doesn’t really change much depending on economic conditions, because you have sellers that are positioned their business to be sold in a variety of different circumstances.

A lot of times it’s related to a change in a life event or somebody that wants to retire out of their business. And they want a good price for it, and they are not going to sell in an environment that’s not something where they can get a good price. So, I would say that that has not changed much. I don’t anticipate that changing much.

But we are very careful about what we spend on these tuck-ins. And we spend it for quality businesses in locations that we want to be in and that have fleet that’s in good working condition and not too old. So, we are going to continue to watch those metrics as we discussed and enter into more tuck-in acquisition opportunities..

Okay. So, thank you very much for everything. And I also want to say, just as an insight, Slide 28 is an absolute work, I really appreciate it. Thank you..

Thank you..

Ladies and gentlemen, that appears to be the last question. Let me now turn the call back over to Mr. Hanna for any closing remarks..

I would like to thank everyone for joining us on the call today and for your continuing interest in our company. We look forward to speaking with you again in late February to review our fourth quarter results..

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation. You may now disconnect..