Apollo Global Management, Inc.
Q3 2013 Earnings Call Transcript

Published: 8 Nov 2013

[Operator:]

Good morning, and welcome to Apollo Global Management's 2013 Third Quarter Earnings Conference Call. [Operator Instructions] This conference call is being recorded. I would now like to turn the call over to Gary Stein, Head of Corporate Communications.

[Gary M. Stein:]

Thanks, and welcome, everyone. Joining me today from Apollo are Marc Spilker, President; and Martin Kelly, Chief Financial Officer. Earlier this morning, Apollo reported non-GAAP after-tax economic net income of $1.34 per share for the third quarter ended September 30, 2013, compared to $0.98 per share for the third quarter of 2012. We also have declared a cash distribution of $1.01 per share for the third quarter of 2013. Later on the call, we'll discuss the composition of the third quarter's cash distribution. In addition, we'll provide you with details regarding a change we are making to our distribution, beginning with the fourth quarter. For U.S. GAAP purposes, we reported net income attributable to Apollo Global Management of $193 million for the third quarter ended September 30, 2013, compared to $83 million for the third quarter of 2012. Today's conference call may include forward-looking statements and projections, and we ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these statements and projections. We don't undertake to update our forward-looking statements or projections, unless required by law. We'll also be discussing certain non-GAAP measures on this call, such as economic net income and after-tax economic net income per share, which are reconciled to our GAAP net income or loss attributable to Class A shareholders and GAAP weighted average Class A shares outstanding. These reconciliations are included in our third quarter earnings press release, a copy of which is available on our Investor Relations section of our website. Please also refer to our most recent Form 10-K that was filed with the SEC for additional information on non-GAAP measures and risk factors relating to our business. This conference call is copyrighted property and may not be duplicated, reproduced or rebroadcast without our consent. If you have any questions about any information in the release or on this call, please feel free to follow up with me or Noah Gunn after the call. With that, I'd like to turn the call over to Marc Spilker, President of Apollo Global Management.

[Marc Adam Spilker:]

Thanks, Gary. And good morning, everyone. We have a lot to cover with you this morning, so I'll focus my remarks around 4 key topics

[Martin Kelly:]

Thanks, Marc. And good morning, everyone. As you can see from our results this morning as well as from Marc's commentary, we had a very strong third quarter. I don't plan to go through all of our results, but I do want to take a few minutes to discuss several items that you may have some questions about. Starting with our Management business, for the third quarter of 2013, Apollo earned $63 million of ENI versus $89 million in the second quarter. This decline in Management business ENI was due to lower management and advisory and transaction fees and increased expenses. The modest sequential decline in our management fees was driven by $3 million of non-recurring fees that we received within our credit segment during the second quarter. It's important to note that Fund VIII commenced its investment period on September 1st, which added approximately $10 billion to fee-generating AUM. The fee basis mechanics behind the commencement of Fund VIII's investment period and Fund VII's simultaneous step-down resulted in a roughly break-even financial impact to our third quarter management fees. Looking forward, although we cannot provide specific guidance, we expect to see a catch-up in management fees within our private equity segment upon subsequent closings of Fund VIII, as well as incremental recurring management fees based on any additional commitments to Fund VIII subsequent to September 30. However, this increased recurring revenue from Fund VIII will be partially offset, as we continue to exit investments in Funds VI and VII and reduce the amount of invested capital in these funds. Advisory and Transaction fees were $36 million lower in the third quarter compared to the second quarter, driven by 2 primary factors

[Operator:]

[Operator Instructions] Your first question will come from Mike Carrier with Bank of America Merrill Lynch.

[Michael Carrier:]

Maybe first question, just on Athene, maybe 2 things. One is when you think about the ratio that you just mentioned in terms of 10% being managed by Apollo, just want to get some color on what types of products can that go into. And then is there some limit over time? Or could it go over time to over 50% to 100%?

[Marc Adam Spilker:]

Thanks, Mike. It's hard to know where it'll ultimately end up. I think when you look across our credit platform, the platform has really developed over the last 5 years. And so I would expect that those are the products that are attractive to -- would be attractive to any insurance balance sheet. And so it would -- wouldn't be unreasonable to see the growth in the direction that it has been in, which is in the highly rated, yield-based investments that will be accretive to the balance sheet of Athene. And so I do think that it will probably look a lot like the existing footprint of our credit business.

[Gary M. Stein:]

I just want to mention that there are some additional information about Athene that's posted on the AP Alternative Assets website. There's an investor presentation, among other things, with some additional helpful information about Athene.

[Michael Carrier:]

And then just on that business, we think, longer term, when you look at the opportunity that you had with Aviva, should we think about, from an M&A standpoint, more potential activity in this segment? And maybe just meeting dynamics of the industry, like why was this so attractive and then are same ingredients still there in this environment?

[Marc Adam Spilker:]

Well, the landscape of industry is evolving, and so the way -- at least, the way I think about it is that -- and we've articulated this before, that it's a spread business. Where do you take on your liabilities versus where can you invest your assets? And then when you asked the question about growth, the real question is can you increase your liabilities. And there's a number of ways to do that, which we have shown. One is through organic growth, which I think will be a focus of Athene going forward. Secondly, it is buying blocks of business, and third is acquiring whole companies. And all of that is predicated upon the ability to redeploy assets at a spread that gives an interesting ROE. And so I don't think there's a mandate for growth. But as long as the ROEs are attractive, then I believe there'll be opportunities to continue to grow that business.

[Michael Carrier:]

And then just last one, in the credit segment, it seemed like -- I don't know if you want to call it the carry margin, but basically, the carry less the comp, just seemed like that margin was a little compressed. I didn't know if there were some catch-up or if there was something that was more unusual this quarter.

[Martin Kelly:]

Yes, sure, Mike. It's associated with an earn out contract with this turnstile business. And so from time to time, there's a reassessment of the future expected cash flows coming out of those acquired funds and businesses, and the obligation that's on AGM's balance sheet is revalued and that increase in value during the third quarter by about $35 million. And that was attributed to both an expected longer sort of tenor or duration of the funds, as well as an expected increase in capital raise assumptions going on to the future.

[Operator:]

Your next question is from Howard Chen with Crédit Suisse.

[Howard Chen:]

Marc, I appreciate, understand that you do not get fixated on quarterly deployment levels, and you all have really patient capital. But just now that 2013 is mostly complete, it looks like PE deployment will be roughly half of that $3.5 billion to $4 billion range you all have kind of consistently been in for the better part of last decade. So just curious if you could just again expand on that and talk about how you think about the broader environment for deployment? You also noted the pipeline's getting loud here.

[Marc Adam Spilker:]

Yes. Thanks, Howard. I mean, this is more like a long-term way we think about the business that we do go in cycles, realization cycles, deployment cycles. And we set up our platform to be nimble and take advantage of the opportunities that we see, whether it's to deploy or whether it's to realize. And clearly -- and we've said this consistently as an organization over the past year to 18 months that we believe we're in a good realization environment. It's clearly a less good deployment environment. But having said that, things are going to change in the world. There's many reasons for the low deployment environment. But if you think over the long span of time, we continue to have high confidence that having "dry powder" will accrue to the advantage of our funds when those opportunities present themselves. And so while people -- the organization is out there clearly trying to generate ideas, and as we've said, we've seen a handful of things that look more interesting, and you never know which ones will get across the line, that we do remain confident. And you just can go back over the 23-year history, and the deployment cycle has always been very lumpy quarter-to-quarter, year-to-year. And so we'll see where we get to. But we continue to be confident that we have developed a world-class sourcing and idea-generating network, and that will come to fruition over time.

[Howard Chen:]

And my second question, as you build more scale across the sleeves of alternative credit, not only for your business and hand in hand and hopefully, advising more Athene assets over time, how do you think about the pace of investment spending for Apollo? What's done? Can you just level set for us what's done and what's left to do in terms of building out some of the sleeves you all want to do?

[Marc Adam Spilker:]

Yes, I think it's a really good question. Again, it goes to the structural issue of what's going on in the capital markets, more broadly where the increased pressure there are on many financial intermediaries on the balance sheet is making some of the more specialty, esoteric and liquid parts of the credit market more appealing to us. And so we've built a lot of our big silos in performing credit in Europe, in mezz, in distress. And we've also started, as you know, over the last year or 2, build out more specialty silos, and I think we're going to continue to do that. It's hard to say the bulk of the investment is done, but I feel like we've created a position now of scale. The core business will continue to scale, and we're in credit products where there is significant room to grow. And again, I've said this in the past, whether it's real estate mezz or things like residential and consumer lending where those markets are very large and we're small players in those markets where I think that losing credible scale to grow. So in summary, we've built some silos that have opportunities to continue to grow in scale and then the many other specialty areas that, I think, that we can add on over the course of time.

[Howard Chen:]

And then I just had a last quick numbers question. In the last Athene 10-K, the value of the capital and surplus fee relationship, I think, was estimated around $370 million. Now that you've closed the Aviva deal and the operating backdrop has evolved, do you have an updated figure for that estimate?

[Marc Adam Spilker:]

I don't have an updated estimate. But I would say if you went back to the way Martin talked about the $22 million, which is based upon the CNS fee that -- on capital surplus, which has roughly doubled. And I think we've said in the past that we expect that to occur over 8 quarters. I think that you could do some rough math that may get you within the ballpark.

[Operator:]

[Operator Instructions] Your next question will come from Matt Kelly with Morgan Stanley.

[Matthew Kelley:]

Coming back to Athene, kind of the broader business environment. I think this was sort of asked, but I just wanted to ask in a different way, how you see the evolution of the number of blocks of business that are potentially out there for sale and what sort of -- can you give us a little bit more color on your conversations with the regulators as you -- as Athene has become a bigger player in the space now?

[Marc Adam Spilker:]

It's really hard to know how many blocks are for sale and where we'll ultimately get to. And this -- the reinsurance industry has clearly gone through a big phase of restructuring. There are a lot more eyes focused on it. And so while I'll go back what I said earlier, I would be reasonably optimistic that there will be things to do going forward. It's just each one of those things is complex, it's hard to know where we'll ultimately get to.

[Matthew Kelley:]

Okay. And then just a quick follow-up for me, this one maybe more for Martin. But on the private equity transaction fees, I know last quarter, you had some -- a little bit over $20 million in nonrecurring from IPOs. This quarter seemed kind of abnormally low relative to where you've been. Just curious, any sort of guidance on a run rate there outside of IPOs? Or what should we be thinking about going into year end?

[Martin Kelly:]

I guess, the way I'd think about it is the transaction and advisory fees for the quarter of around $29 million include the $22 million within the credit segment for the capital and surplus fee. And the balance is just standard recurring advisory fees for the most part and then a very small amount of deal-based transaction fees, so -- and if you look at Q2, it had transaction fees it, both for terminations, termination fees related to IPOs and new deals. So we're probably at a low point given the transaction volume, and it's -- the future trajectory of that is entirely dependent on deal flow.

[Marc Adam Spilker:]

I'd also add and we've said this before in prior calls, that if you look at the Fund VIII agreement, 1 of the terms we talked about was the 100% fee offset on transaction fees. And so I would just note that, that's something to keep in mind going forward.

[Operator:]

Your next question is from Kenneth Worthington with JPMorgan.

[Kenneth B. Worthington:]

Apollo had taken the position earlier in the year of selling everything that wasn't nailed down, sort of made its way around the financial press. Your comments this quarter seem to highlight realizations more opportunistically. So is either the Apollo investment team or management team more sanguine about the outlook for the market? And should we read into this any impact on the pace of realizations?

[Marc Adam Spilker:]

Thanks for the question, Ken. I would say, no, that each investment is evaluated on its own merits. The now famous comments from last year really were highlighting our view that with good equity markets, the capital markets window is open, relatively attractive financing markets, even though rates are higher, that it's a good environment to realize. And you can obviously see that we continue to believe that, but that's really ultimately then has to be supported by each investment on its own.

[Gary M. Stein:]

Yes, just to follow up on that, at quarter end, 73% of the gross fair value of our investments was essentially publicly traded and was reliant upon either broker quote or a public mark -- in the equity markets. And breaking that down, 62% of that -- 62% of our private equity fair value is based on public quotes, 86% of credit and 50% of real estate. So clearly, large part of the portfolio is already in the public domain in terms of marks and access to the public markets.

[Kenneth B. Worthington:]

And then, I guess, about AAA, so the NAV is going to increase substantially with Aviva. Can you walk us through in terms of the management fee and the carry that results from the step-up? I assume the management fee is fairly straightforward. The carry seems to have some controversy around it. Any chance that you can walk us through the implications on the carry that APO gets on the step-up?

[Marc Adam Spilker:]

I'm not sure that it's related to the step-up that you're talking about. And the carry -- and I think I understand what you're talking about. The carry is related to the value of the underlying assets, not related to the NAV of AAA. And so as Martin had talked about in his script that the increase in carry receivables is due to the fact that the underlying assets themselves increased in value during the quarter.

[Kenneth B. Worthington:]

Okay. So, does that imply that the meaningful step-up in NAV isn't going to translate into significant carry? It's just the underlying performance really drives the carry, not the AUM? Maybe this is worth taking offline, but I thought I'd get it out there.

[Marc Adam Spilker:]

Yes, just again to reiterate, if -- if it's the carry that I think you're talking about, which is in our disclosure as AAA and Other, I think, is the category, those are related to specific assets that moved up in value and not related to the NAV of AAA.

[Gary M. Stein:]

And then also I'd direct you to the Page 20 of the press release, the Carry Receivable table. We did add some additional details around the AAA and other receivables. And the footnote exquisitely described the portion that's related to Athene, which I think is what you're asking. At September 30, there were -- $82 million was related to Athene.

[Kenneth B. Worthington:]

Yes, yes, I was figuring since the deal closed after September 30, that's why I brought it up.

[Operator:]

Your next question is from Bill Katz with Citigroup.

[William R. Katz:]

You mentioned you had another nice win in the strategic mandate with the sovereign wealth fund. I was just wondering if you could size the pipeline behind that, what you might see out there. And then my underlying question is, I think you still look at this with a little bit of skepticism or cautiousness I guess. Any updated thoughts on tapping to retail sort of a 1940 Act type product set?

[Marc Adam Spilker:]

Yes. Thanks, Bill. Sizing the pipeline is hard. It's more part of the structural shift that we've talked about, which is -- and we -- it's generally referred to as increasing allocation to alternatives, but part of that is really increasing allocations to unconstrained credit. And I think I described earlier on the call the robust multi-asset credit platform that we currently have. And there is fairly good dialogue, ongoing dialogue about how to create good risk rewards in the credit space for many of our LPEs. And that dialogue is interesting, and we've continued to highlight that over time as what we think as a real growth opportunity for the firm and real investment opportunities for our LPEs. I would say on your second question, retail gets a lot of focus, and we're very focused on at the same dynamic that's happening in the institutional market, which is search for yield and search for things that will be accretive to the discount on reliability that individuals have the same issue that institutions have. And that's why all of our -- that's why the asset management industry and in particular, alternative asset managers are focused on creating product that is suitable for retail, which we are focused on. And over time, it has grown. There's a lot of difference in the language that people use. The way that we think about it is really twofold

[Operator:]

Your next question is from Robert Lee with KBW.

[Robert Lee:]

Just curious, maybe, in looking at Fund VIII. Clearly, capital raising has been going on very well, and could you -- 2 questions at that. Number one, I'm just kind of curious of the $12 billion committed to date. Now does that include insiders' and employees' commitments? Or, is that all third party? And then, what's kind of your ultimate goal for this fund? I mean, would you kind of feel like you need to cap it out?

[Marc Adam Spilker:]

We haven't said -- we haven't given any construction of the $12 billion, and just very hard to know where we're ultimately going to get to. I did highlight in my script that things were going well. We've talked about in the past that LPEs are going to reward managers who have had good performance, and we think we're in that category. But at this point, it's very hard to say where we will ultimately get to.

[Robert Lee:]

Okay. And maybe, Martin, just to -- I don't -- if you could -- I don't know if you could -- just looking quarter-to-date, obviously, you've had the large Lyondell follow-on and some other things possibly out there. Any kind of incremental update on kind of where we stand quarter-to-date and what that all translates into? Kind of what's in-house so far in terms of a distribution from realizations or whatnot and where we're sitting right now?

[Martin Kelly:]

Yes, sure. To date, based on completed closed transactions from private equity, we are at $0.19 per share, and that predominately includes the Lyondell secondary.

[Operator:]

Your next question will come from Chris Harris with Wells Fargo Securities.

[Christopher Harris:]

Really just one question. The bank acquisition you guys had recently done in Spain, you talked about it in your prepared remarks. It sounds really interesting. Wondering if you could just comment a little bit more on whether there's a lot more deals like this to be had in Europe given some of the restructuring that needs to happen there and maybe whether there are a lot of other players like yourself trying to capitalize in similar situations?

[Marc Adam Spilker:]

Yes. Thanks, Chris. I mean, it's a great question because we said many times that the landscape in Europe is changing. It's hard to know where we are in that, but it's a very, very long-term opportunity that's probably at the beginning phases. And so it would stand to reason that there are more opportunities, but I'll give you 2 sides of the coin. On the one side, these transactions are really complex and very hard to do, and so therefore, it's hard to predict that lots will get done with these. On the other side of the coin, there's just -- there is a lot to do in Europe. And we think that we are very well positioned because we have built a franchise that is growing. We have an experienced team on the ground with a track record through what the funds have done and other acquisitions have built a servicing platform that we think is becoming more unique in nature and a competitive advantage. So if it goes in the direction that we believe, which is ongoing restructuring, that we think that Apollo has positioned itself extremely well to take advantage of these kinds of opportunities.

[Operator:]

Your next question is from Marc Irizarry with Goldman Sachs.

[Marc S. Irizarry:]

Just in terms of the change in your distribution policy, I was hoping to get a little more color around the thinking of the big step function higher and the fixed component of it. I guess, specifically, when you think about the jump that you have and the size of the fixed distribution, what sort of, I guess, fund-raising expectations are sort of embedded in that? And I guess, you can ask why not more if you just think about sort of the expected run rate of your -- the management fee business as you bring on Athene in Fund VIII that, I guess, you could say maybe it's a little lower or could be a little higher relative to the fee related or these management fees coming in? Maybe if you can just give us some color on that.

[Marc Adam Spilker:]

Yes, look, it's a good question, and suffice it to say that we spend a lot of time trying to figure out what we believe was the most appropriate place to end up. And many of those factors that you cited were part of the consideration. And so I'm not go into the specifics other than to say that we obviously took this very seriously. We think this is an important step forward for our overall franchise and made this decision very carefully, and we think we ended up in a very good place.

[Gary M. Stein:]

Yes, just to emphasize the distribution policy, the $0.15 regular distribution, you can expect every quarter. But as Marc said, our distribution policy is such that we do pay out all cash available but for the amounts management holds back in order to run the business each quarter.

[Marc S. Irizarry:]

Okay, great. And then just in private equity, Martin, I think you mentioned maybe there's some fund formation costs that are going to -- that could come into the P&L that aren't there yet. I don't know if you guys can address this specifically about the fund raising for Fund VIII. I don't know if you could talk about what the target size might be and maybe how those costs are sort of affected by how big that fund might ultimately prove to be.

[Martin Kelly:]

Marc, it's really hard to do that because we can't talk about the size of the fund and the associated costs, depends on couple of variables

[Operator:]

Your next question is from Brennan Hawken with UBS.

[Brennan Hawken:]

Question on the Athene market. Did you guys see any change in the blocks are for sale in the market back when rates started back up in 2Q? Is there enough business that's sort of out for bid that you could see whether or not there's been any kind of shift now that we've approached or people start to believe that we're within reach of a taper at some point?

[Marc Adam Spilker:]

Honestly, I'm not sure I know the best answer to that question. I don't believe we have seen a big change. And partly, it's because I think a lot of these transactions take a really long time to do, and they're related to corporate strategy as opposed to necessarily specific market focus at the time. So there may be slightly less of a relationship there than you would think, but ultimately, they are related. So I'm not sure that I've seen a shift in it, but there may be.

[Brennan Hawken:]

Okay. And then a follow-up on Marc's question or question on the distribution change there. It seemed -- I think you guys indicated that there's sort of less income coming from some of the holdings and what have you, and so I think some may read into that thinking that there is -- maybe we're closer to the end of the harvest mode that you guys have been in or maybe we're beginning to wind down in the harvest mode. Is that the right conclusion to come to when we think about the change in the distribution policy?

[Marc Adam Spilker:]

Well, let's just give you a way -- one way to maybe think -- a framework for thinking about it, and then you can come to your own conclusion. And Martin's gone through this a couple of times in the past. And I would just say on the first part of the question is that when you look at the construction of the portfolio, especially given the investments that were made at the bottom of the cycle, and so you could see things like exiting our positions in Lyondell and Charter is going to affect what we used to refer to as the second bucket, which is interest and dividends from the portfolio. And that's position related. The second part which is really important, if you just -- But Gary, I'm not sure which page it is. But if you just refer to the fair value on the ground of the PE portfolio on Page 19, you could look at what we have said each quarter in terms of the total size of realizations in PE by quarter, look at the fair value, and then you can make an assumption as to where do you think that fair value will appreciate or what rate and whether or not we'll put new capital into the ground and what the average rate of realization will be over forward quarters, and then you can come up with a framework. And all of the math would suggest that there are still numbers of years left. Again, that could change. We could realize slower. We could realize faster. But if you come up with a framework, it would suggest that there are still numbers of years. And the other thing that I'll point to, which we're quite proud of is, if you look at the dynamic of -- if you look at the AUM dynamic, and in general, there are 3 big moving parts. One is additional capital raised. The second is change in fair value, and the third is distribution. And in an environment where over the past 12 months, we have distributed $22 billion and the AUM has ended up in around the same place and the fair value has ended up in around the same place, that we continue to, I believe, show that we are, for the parts of the franchise, that runoff, we're continuing to rebuild. And that really shows the dynamic nature of our organization.

[Operator:]

Your next question is from Patrick Davitt with Autonomous.

[M. Patrick Davitt:]

I just have one quick one on Athene, more on the organic growth side. Is there kind of a regular pace of organic growth we can think about there? Because I'd imagine there's a fairly consistent pace of new policy origination and many going into old policy.

[Marc Adam Spilker:]

I don't have an answer to that at all. As Gary did refer you to the materials that are put out, I'm not even sure if they say a number. But I would say that, as you can imagine, in the ongoing operational consolidation of the businesses that we have put together, there is a organic distribution platform. And I think part of what is being said by Athene, which seems quite rational, which is there's not a mandate for growth but to grow when it is sensible to grow based upon where you take on liabilities weather versus where you could deploy assets. And I believe that Athene will be quite rational in terms of where it prices its liabilities as a function of where the assets are. And so as long as that overall spread leading into a sensible ROE is out there, then there's opportunities to continue to grow organically.

[Gary M. Stein:]

And I would just add, with the completion now of the Aviva transaction, Athene is one of the leaders in the U.S. fixed annuity business and clearly, with now -- together with Aviva, really poised for material growth in retail. And again, as Marc said, we'd refer you the Athene information on the AP Alternative Assets website, which does provide a little bit of detail about the growth strategy for Athene.

[Operator:]

And your final question is from Bulent Ozcan with RBC.

[Bulent S. Ozcan:]

I have a question on Athene. I just want to get a better understanding of the return on equity and which figure to use as a comparable. It sounded like the new targets will be around 15% to 20% for ROE. Should I be comparing that to the 40% number that was disclosed or more versus the 27% that was reported in 2012?

[Gary M. Stein:]

No, I think target has not changed. I think the ROE for Athene has always been in the mid- to high teens. So I don't think anything has changed there. Again, I'd refer you to the Athene information on the AAA website. And also, there will be a replay of that call available on the AAA website later today. There was a discussion around ROE with respect to Athene, again, mid- to high teens and to the extent there was outsized ROE in the third quarter, was due to some partnership investments in particular, so -- again, but I think the mid- to high-teens target has always been the case and continues to be a solid return range.

[Bulent S. Ozcan:]

Okay. And in terms of the growth, it sounds almost like the growth from here on will be organic. Is it a right read into the discussion this morning? While there are opportunities out there, I came away with thinking that you're right now more focused on making sure that there's enough capital -- better capital there to grow the business organically. Would you have any comments, additional comments -- additional color to that?

[Marc Adam Spilker:]

No, I think we have said -- I think we have given you a roadmap on that.

[Gary M. Stein:]

But just to drive on the point that Athene is -- remains very well capitalized and is focused clearly on integrating the Aviva business into Athene and focused on building out the growth of the business going forward.

[Operator:]

That was our final question, ladies and gentlemen. I will now turn the conference back over to Mr. Gary Stein for closing remarks.

[Gary M. Stein:]

All right. Thanks very much. Thanks, everyone, for joining today. As we said earlier, if you have any follow-up questions, please feel free to reach out to Noah Gunn or myself.

[Operator:]

Thank you, ladies and gentlemen. This does conclude today's conference call. You may now disconnect your lines.