Royal Caribbean Cruises Ltd.
Q3 2020 Earnings Call Transcript

Published: 29 Oct 2020

[Operator:]

Good morning. My name is Shelby, and I will be your conference operator today. At this time, I would like to welcome everyone to Royal Caribbean's Group Business Update and Third Quarter 2020 Earnings Call. All participants are in a listen only mode. I would now like to introduce, Chief Financial Officer, Mr. Jason Liberty. Mr. Liberty, the floor is yours.

[Jason Liberty:]

Thank you, Shelby. Good morning, everybody and thank you for joining us today, for our business update and third quarter earnings call. Joining me are Richard Fain, our Chairman and Chief Executive Officer, Michael Bayley, President and CEO of Royal Caribbean International and Carola Mengolini, our Vice President of Investor Relations.

[Richard Fain:]

Thank you, Jason, and good morning, everybody. It's been almost seven months since we paused our cruise operations and every single day has been extremely frustrating and challenging on so many levels. But while emotionally and financially it hurts us tremendously to see our ships laid up. We've tried to use this time to good effect. Our teams together with the healthy sale panel have worked tirelessly to produce a thoughtful set of health protocols to resume operations. Simultaneously, our finance team has worked aggressively in securing liquidity to position the company well to the recovery. One of the most frustrating elements of COVID-19 is how little the world knew at the beginning of this pandemic about the virus and how many false paths we have all gone down over this period. Fortunately, the science has made remarkable strides and there are a few observations and predictions that we can make. We are seeing an upsurge in infections in the United States and other countries around the world. The experts seem to expect a second wave over the coming months. After seven months of agony the prospect of further surge is beyond frustrating. However, the advances on the science fronts give us optimism that this coming surge will not be as devastating as the early surges in March and April, and it will lead to a better 2021. Therapies are dramatically better and they are more effective. Testing capabilities are already at extraordinary levels and moving higher. And the progress on vaccines has advanced at unprecedented speeds.

[Jason Liberty:]

Thank you, Richard. This morning, we reported adjusted net loss of $1.2 billion and a quarter with muted revenues, as all failing that should have been recorded during the period were canceled. These painful results were underpinned by a strong focus on reducing operating expenses. As a result, our cruise operating expenses are down more than 80% or $1.2 billion versus our first quarter and $371 million or 55% versus our last quarter as the fleet transition to its various levels of layup reaching their desired state by the end of August. Our top financial priority remains ensuring that we are in a strong liquidity position. To that end, we have continued to take opportunistic actions to improve our liquidity. During the month of August, we obtained a one year commitment for a $700 million unsecured guaranteed 364 day facility. Including this new financing, we ended the third quarter with $3.7 billion and available liquidity. Moreover, during this month, we bolstered our overall liquidity even further by raising an additional $1.15 billion through a combination of convertible notes and a public offering of common stock. The convertible notes and equity offerings were multiple times oversubscribed and our convertible notes were priced at a rate of 2.875% with the conversion premium of 37.5%. This was really a superb outcome and a testament to the value of our brands into the amazing execution of our finance, legal and accounting teams.

[Operator:]

Your first question is from Robin Farley of UBS.

[Robin Farley:]

Great, thanks very much. I know you don't want to jump ahead of anything the CDC might do in the next couple of days. But I wonder if you could share with us a little bit about what factors, you know they've expressed are important to them. Because you mentioned that one of the goals as the healthy sale panel was to have a, the incidence rate of the virus, you know be better than it is on land. And that's certainly the case, I guess, with the cruises in Italy, from other brands that test everybody before they get on board. It's been like less than a point 1% or something incidence rate. So is that in other words, is that what matters most to the CDC, from your discussions with them when they think about restarting or are there other factors that you think are more important than that? Thanks.

[Richard Fain:]

Well, you know, it's a complex subject, and I don't claim to be the expert on this. And we together with Norwegian Cruise Line holdings, put together this panel, and they spent four months going through the details of this process. They did so with the CDC observers after meetings. And there are a lot of factors. And we've talked about that before Robin where we believe that there are things that make ships more demanding in terms of what you might want to take. But there's also the advantage that the ship has and the biggest advantage is that we have a controlled environment. And so that we can do and the whole industry here has accepted to abide by the 74 recommendations. And a big part of that is to create this kind of bubble in the beginning to do screening. No other industry that I know of has agreed to do 100% screening of everyone. And I think that's a big part of what makes this a viable project. But I think I would be very cautious about speaking on behalf of the CDC. I think they're looking at all aspects of it. As I say they at all the healthy sale panel meetings. And we've had discussions with them. And I think they're trying to put all of that together and I don't think at this stage. Also, they're going through a process that we don't necessarily see all of. So I think they also have to remember that is, not all of this is visible to us. But they're looking at all the aspects of it. And I think the, the no sale order is due to expire shortly anyhow. So I think we're eagerly and hopefully waiting for their specific comments.

[Robin Farley:]

Okay, great. Thank you. And then just as a follow up question, I think one of the things when we think about the cash burn rate and restarting is that potentially the risk of restarting and then having to stop again, that maybe the cash burn would go up. Just, we saw AIDA this morning say that they're going to pause in Germany for the for the month of November. Can you give us some thoughts about when you restart, whether it's like crew contracts are only going to be month-to-month and not six months or things that might keep your expenses from sort of going back up? And then having to carry higher expenses again in the case of perhaps a pause somewhere? Thanks.

[Jason Liberty:]

Yes. Hey, Robin. I think one of the key things to point to is, we've operated about 70 sailings now between TUI cruises and Hapag-Lloyd cruises and Silversea cruises. I'm utilizing the protocols that have been developed and put forward by the recommendations with the help and sale panel. And as you pointed out if the number of cases are exceptionally low and it shows that the protocols do work, we are very, very focused on doing whatever we possibly can for there not to be a situation where we become online and then we have to go offline. Well, sure, nothing's perfect. Any of the protocols have shown that they're working. The second thing I would say is and this kind of goes back to my comments around slowly ramping up the business. We do look to do this in a very methodical way, where we're able to see have test cruises and have cruises and that's we’re looking at those cruises, really watching how they're performing on both on experience level, of safety level, profitability level and then slowly kind of turning the dial back up to kind of avoid a situation where we have to bring all of our crew back which is took us many, many months to do between the spring and the summer. So I think we're being very thoughtful. We're learning a lot through the sailings that have already occurred, which provides us confidence. And then, of course, I think by just slowly ramping up the business, it avoids too much pressure on our cash burn.

[Richard Fain:]

Robin, because the question you've asked is -- I think is so apt and it is something that people are focused on unlike maybe embellished a little bit Jason's comments as well. Because this whole concept of the trial voyages is really quite important. We're not just suddenly coming back. It's going to take a while to organize those voyages and we're going to have the opportunity to see the protocols in action and to adjust them. So Frankly, I don't think we're going to be making the big leap until we and the other authorities and our healthy sale panel are all comfortable that that this is now a viable thing to do. And we really do believe that it is possible to make it so that you are safer on a cruise ship than you are on main street. And the evidence in the startups in Europe have demonstrated that when there have been instances -- and there will be because there are everywhere -- I think you've seen the response has worked. That's really the key. So we think that this slow trial trips and the slow startups will give us the opportunity

[Operator:]

Your next question is from Felicia Hendricks of Barclays.

[Felicia Hendricks:]

Hi, thank you so much. Richard, I’m understanding that this is kind of a sensitive subject. So I’m just wondering what you think the CDC needs to see for them to give you the green light? What are the key metrics they're looking for? And then also just with to TUI and Hapag-Lloyd in Germany and with the German shut down, what do you think is going to happen with those lines?

[Richard Fain:]

Sure. Well, good morning, Felicia.

[Felicia Hendricks:]

Good morning.

[Richard Fain:]

And as you say, this is a sensitive time. We're not part of their process. So I think it really would be awkward for me to speak and wrong for me to speak on behalf of the CDC. I think they're looking at all aspects of it and it is very complicated. I think we really made some dramatic inroads with the work of the healthy sale panel, to have people of this level of expertise, this level of experience -- these aren’t just leading experts in the field, these are the leading experts with the experience of regulating as well. So I think we learned a lot in that process and the cooperation with the CDC was very helpful. But I can't predict how they will do it here, so I'm not too much willing to comment on it, except to say, I'm assuming that if you really look at the fairly long -- and I know it's dry -- but analysis that was done by the safety panel, you see the depth of detail they went into and the transparency that they had, I think that should give the CDC a lot of comfort. I think that plus the trial trips -- the trial trips are important. That was an important issue for our healthy sale panel and I think it will be an important point for the CDC. I'm very optimistic that that will go well. The second part of your question was on TUI and Hapag-Lloyd?

[Michael Bayley:]

On TUI. Yes.

[Felicia Hendricks:]

Yes.

[Richard Fain:]

So they continue to operate because we have seen such good results. And frankly, the knowledge that we're getting from these operations is helpful to us, it's helpful to the CDC. We are seeing both an ability to limit the spread onto the ship and we're seeing an ability to deal with incidents when they occur, to keep it from becoming an outbreak. So I think that experience is positive for us and it's small, we understand that, we’re not rushing to do this. We said from the beginning, we're not going to go until we and the experts are convinced that this is the right thing to be doing and it's safe and prudent, and we're sticking to that. But we are learning from this and that will make us safer and healthier as we go forward.

[Felicia Hendricks:]

I guess I was just wondering if the German shut down was going to affect those brands?

[Richard Fain:]

It does not appear to be. No. And again, that's because of the success of the protocols.

[Felicia Hendricks:]

Okay, great. So the next question is a little even more sensitive and I apologize for this, but we get a lot of questions on this almost daily. I'm just going to caveat it, which I do not think this is a place for political commentary. So there you have it. But we are getting asked all the time to walk investors through a scenario where the CDC no-sale order is extended to after the election and how or if a potential Biden administration would have any impact on when the order would be lifted?

[Richard Fain:]

So I'm quite pleased that we're working cooperatively with the experts and it is my strong hope that this is going to be decided on the basis of the science, not on the politics. I'll express a personal view that I will be pleased to get my television and my computer back when the election ads are over, but I think our focus is on the science. We think the industry has done a very strong job -- the whole industry. I've talked about the healthy sale panel, but I also remind you that that before the startup in Europe, they all used experts to guide that. They all work with the governments, it wasn't a political issue, it was a scientific issue. I think the science is strong. And so I'm definitely hopeful that regardless of who's in power, the science will lead us to good answer. But the other thing is that people do want to see the industry back in operation. There's a lot of people suffering because we're out of work and if we can restart one important element of our economy in a safe and healthy way, I think that's in everybody's interest.

[Felicia Hendricks:]

Okay, thank you for that answer, Richard.

[Operator:]

Your next question is from Steven Wieczynski of Stifel.

[Steven Wieczynski:]

Hey, good morning, guys. So Richard, I hate to do this to you, but I'm going to keep you on the hot seat a little bit here. I'm not sure if this is going to be a fair question or not. So you can tell me one way or the other. But I think there have been rumors out there that you have had direct conversations with the White House and maybe if you did or you did not, anything you did there you could help us understand how those conversations if there were conversations, how they progressed and maybe what the White House is looking for that's different from the CDC, if that makes sense?

[Richard Fain:]

So I'll have conversations with anyone who will talk to us on this subject. We're sort of obsessive. I'd like to get out of my house after seven months and there obviously is a lot of interest in this throughout the country. This is a huge issue for employment in our country, the cruise industry is an important employer, important driver of economic activity. And also, it's a respite and I think it will be soon seen as a respite from the isolation that we're all feeling here. Steve, I certainly never mind your questions, but you'll also understand what I can and can't say and the conversations I've had are private, and I would respect the privacy of those. But I will say that we have worked hard to make sure that the decision is a scientific one, that it is led by the best minds with experience, both in terms of the specific science of the disease, and of the engineering, and everything else, as well as the impact on the economy and how you regulate this. So we've talked essentially to all the people who are involved in this kind of decision. And I think I have to say that everybody we've talked to has taken this seriously. They understand the importance of controlling the spread of this virus, they understand the importance of getting the protocols right and I really am very excited to watch the methodical way that the panel worked and other panels. You saw this, the cooperation in Europe between the public health officials and the political officials and the cruise lines, cooperatively trying to solve something that's a problem for all of us. And I'm really not going to comment on who's on what on any given issue. It is complicated. I think everybody is trying to find the right solution. I'm optimistic. I am optimistic that we will soon have a path that we all see as a pathway back to resuming operations. It will be slower than I would wish, but faster than many are assuming. And I think if that slow, methodical, careful approach speaks well, for our industry, it speaks well for the regulators around the world. And we're going to continue on that plot process.

[Steven Wieczynski:]

Okay, gotcha. Thanks. Thanks for trying to, you know, to answer that. .

[Richard Fain:]

Yes. No, never a problem to ask, Steven as you well know, and if I can answer it, I will. But this is a fluid situation. That's the other thing I think we have to say and I know I hate to sound like a broken record, but what we don't know, we don't know.

[Steven Wieczynski:]

Right, exactly. So let's go to a couple years down the road from now and hopefully the world is back to normal. I guess the question I want to ask is around supply and supply outlook for the industry. But we've seen certain operators remove, a good bit of capacity from the market already and you guys -- and I can't imagine other operators are going to be ordering new ships for an extended period of time. As we look a couple years down the road, is it fair to say the cruise industry could be set up for a multi-year period of supply growth that could be basically close to zero? Am I thinking about it the right way?

[Jason Liberty:]

Hey, Steve, it's Jason. Well, I don't know if I would say close to zero. Certainly, capacity growth, as we were all collectively expecting pre-COVID is certainly going to be less whether that exits out of the industry where ships are being scrapped, whether it's shipped sales being sold to kind of tertiary operators and of course, I think we do expect that there'll be slower on new build growth probably towards the latter part of four or five years from now. But the shifts that are in order as we see them though delayed by probably 8 to 10 months, I think we expect to continue to come online, and the question will be how many ships will be retired, or sold, or scrapped during that period of time? I know, for us, we've been selling about a ship or two a year. We have scrapped some ships and we're certainly -- we're being very opportunistic about the situation when our point of view is that that ship with inside of one of our brands does not fit strategically or we can't invest to have that ship fit strategically with inside the brand. And so that's something that's kind of an ongoing process for us which has been similar in the past.

[Steven Wieczynski:]

Okay, got it. And Jason, one more, sorry, real quick one. But the cruises that you're operating in Europe today, are they operating at a breakeven or even a profitable level at this point?

[Jason Liberty:]

I would say that the ships that are operating in Europe today, in terms of breakeven relative on a ship-specific basis, are probably at or about breakeven. I'm talking more kind of direct profit. Obviously, they were fixed costs that their ships probably don't cover as of yet. But the occupancy levels, the demand that we're seeing is relatively good, all things considered. And I think a little bit what we've experienced to date, which is a little bit different than in the U.S. with COVID news, sometimes when there's negative COVID news over there the consumer or the guest gets an opportunity to kind of get out of town and get some fresh air. You actually see elevation in demand and that's one of the things for sure to increase .

[Steven Wieczynski:]

Great. Thanks, guys. Appreciate it.

[Jason Liberty:]

Thanks, Steve.

[Operator:]

Your next question is from James Hardiman of Wedbush securities.

[James Hardiman:]

Hey, good morning. Thanks for taking my questions. I've got three of them, but I think they're pretty quick. So I'll ask them all at once. And I think everybody generally understands that 2021 is going to be a rocky year and it's hard to anticipate. But maybe if you could walk us through A, to follow up on Steve's question, is there any easy way to think about your capacity in 2022-2023 versus say what you had in 2019? That's number one. Number two; any way to think about leverage and I fully understand that your leverage is going to be a function of how long these layups last and you're ultimately burning cash. But is there any way to think through what leverage looks like once you emerge from this in 2022 and beyond? And I guess just more broadly, if I look at the consensus numbers for 2022, revenues are basically almost back to 2019. Obviously, there's a bunch of incremental interest and everything else but that's the target earnings power. Is that realistic? Or there are some considerations that we should be thinking through? Once we get past the mess that will be 2021? Thanks.

[Richard Fain:]

Thanks, James. So I think I think on a capacity standpoint, there's obviously there's a lot of time between now and 22 and 23. I'm certainly I think our current expectations is that our fleet will be back up and running certainly by 2022 and 2023. Capacity for us is likely to be higher, because of the new ships that I talked about in my remarks coming online. But at the same time, as I commented, on Steve’s question, we do continue to opportunistically look at ship sails or scrapping and very kind of remote type of situations, which could lower that capacity growth number down a little bit. But I would expect our capacity as we look in 22, and 23, to be higher than it was in 2019. Driven by new capacity, we've already taken out some capacity, the scrapping of some ships. And of course, as we know, as the ships roll on, the higher inventory mix more onboard revenue venues, the more cost much more fuel efficient lead to really enhancing our margins. Moving on to leverage, it is certainly a goal of ours, to get back to our pre COVID level metrics, especially as it looks like we are getting to investment grade, I think how we look to do that is obviously putting more of our free cash flow towards paying down debt. We've taken some action here recently, to put ourselves in a position to pay down debt. And hopefully, the sooner we get started here, the less of the cash that we're holding, today, we're going to need and that can be purpose to also, paying down debt. But it is it is definitely one of our management team on our boards kind of core objective to look at, how do we get to pre COVID leverage, as soon as possible. I won't really comment on its just way too early to talk about consensus. For 2022, I think important variables will be when we get the green light to get back into service, and what that ramp up looks like, what the universe looks like around therapeutics and vaccines and testing. And of course, your wave is very important to 2021. But waves also begin the momentum into 2022. And so, the more for us, the flywheel is spinning. As we go into all of that, the more momentum I think we'll build for 2022. So we're cautiously optimistic, I won't talk about whether it will be a pre COVID levels by 22 or 2023 except to say that, we're trying to build momentum as quickly as we can and making sure we're doing it in a very safe and healthy way.

[James Hardiman:]

That's all really helpful. Thanks, Jason.

[Operator:]

The next question is from Jamie Katz of Morningstar.

[Jaime Katz:]

Hi, good morning. Can you help us unpack? What is in that negative onboard and other revenue line item, it looks a little optically funny? So I'm just curious if that's a onetime thing I should be aware of, or if it's something that could potentially repeat?

[Richard Fain:]

Yeah, sure. Sure. Jaime. It's a very immaterial amount of money but as we were going through in the kind of Q1 and Q2 and processing tons of refunds and cancellations and so forth. There's some cancellation or penalty income that we’re reversing here in our Q2 numbers and these are small numbers, of course, we don't really have any onboard revenue, we don't really have any ticket revenue. So just a small correction there stands out.

[Jaime Katz:]

Okay. And then on the capital allocation front, you guys called out pretty long on putting out an equity issuance to raise capital. I'm curious how you're thinking about that going forward? If there is a preference or sort of a rule set you're thinking for capital raises ahead? Thanks.

[Richard Fain:]

Well, I think we're going to continue to be patient and methodical on how we raise capital, if and when we need it. I think we feel pretty good about our liquidity position. We took action here to put ourselves in a posture to be able to deliver as we returned to service. And I think that, we'll continue to evaluate if we do need to raise capital, the debt markets, the Convert markets, or the equity markets. But our focus here is to fix the balance sheet as soon as we can, but also doing it in a very thoughtful way. And so I think, we'll continue to do is to evaluate those options, as well as looking at within our in our business, how do we improve our margins, to generate more cash flow to have that to be available in order for us to pay down debt and invest in our business?

[Jaime Katz:]

Thank you.

[Operator:]

Your next question is from Brandt Montour of JP Morgan.

[Brandt Montour:]

Good morning, everyone. Thanks for taking my questions. So thinking about pent up demand and possibly a meaningful inflection booking that you may be expecting when you're allowed to sail? Can you just weigh which factors or events you think will be most important for how that curve looks between actual exploration of the no sale? But wait that against the crew specific travel warning the CDC put out last week? Obviously, the recent lift in virus data is another drag. But I guess what I'm asking is, is it possible we have to wait until you're actually able to prove you can cruise safely before we see that big inflection in bookings?

[Michael Bayley:]

Hi, Brandt its Michael. Interestingly, when I think Jason commented on quantum in Singapore, when we opened for sale, after we received approval from the Singaporean government, we were really quite surprised by the level of demand that came in for the product winter season that we've got it open. And those cruises are basically ocean voyages that sail for three, four or five days. And within the first two weeks, we had literally the triple demand that we were expecting it rates above what we were expecting. So I think going back to Jason's point earlier, with regards to what they're seeing in Europe, with demand, even when COVID increases, there is demand in the marketplace, and it's coming quite naturally. The other comment I would make on demand that we're seeing is that in the American market, it's really correlated with how consumers feel about COVID. And what they believe is occurring with COVID, in terms of it moving behind it. About three or four months ago, a large group of consumers with taking consumers every single month, and about three or four months ago, most people believed that COVID would be kind of moving behind us by the end of 2020. Of course, that shifted now. And the belief for most consumers is that as you move through 21 COVID will move behind us with vaccine therapeutics, etcetera. Then you very much see a correlation between what people are believing and how they're booking. So I think we've commented before that a lot of consumers effectively lost their summer 2020. There's a belief that we've been behind us at some point in 21. And we kind of see that in the booking behavior at the American market for our products through 21 with a particular emphasis on summer 21. And I think, there's a kind of a, it feels and it looks as if customers are thinking this is going to be behind us, and we're going to have a summer vacation. I think with regards to the no sale order, I do believe that if there is a change in the no sale order, and a pathway is created for the sake returned to cruising, there will be an uptick in demand. But I think people will naturally wait and see. And I think also there'll be, as I just mentioned, the correlation between what's occurring with COVID in the community, and how people feel confident about taking a vacation and booking a vacation. So it's complicated. It's very much connected to consumer obsession, and feelings about COVID.

[Brent Montour:]

That's incredibly helpful color. Thank you for that. And my second question is following up on the universal testing front, and we all read the 74 points, and I know that, the recommendations include sort of a dual layer, right, where the customer brings their own sort of PCR level test. And then there's another perhaps rapid test at the port. Is that what you've committed to across all your brands, that sort of dual layer testing? And is that an industry wide thing as well, we haven't heard much detail on specific, how many tests what kind of tests and things like that any color you can provide? Thank you.

[Richard Fain:]

Yeah, so I think your comment on that is accurate. Referring back to the panel report, part of the point that the panel made, once how quickly this whole testing issue is changing and I think that's one of the more exciting things that we're seeing. We've gone from a very small number of tests to now the tests are regularly running 1 million, 2 million a day. And that number has the potential for troubling in a fairly short period of time. So the panel really did conclude that as this technology improves, we all improve. Our mantra is continuous improvement. We think that as the new tests are coming out, these lateral flow tests are quite dramatically an improvement in speed and accuracy, and in availability, and in cost. So we do think that testing is going to be an important part of it. I'm not going to get into all the different kinds of testing. And we do where, because that's all going to change tomorrow. As I say, it's interesting that even today, no other industry that I'm aware of, has said they would do 100% testing. And that's what we are committed to do. And frankly, the whole industry has said that they think that's the right thing to do. So I won't get into the specifics, because I think if I do we'll be wrong tomorrow. But I think we will be starting with 100% testing. And over time, we hope that will get even faster, cheaper, etcetera.

[Brent Montour:]

Helpful. Thanks and good luck.

[Operator:]

Your next question is from Greg Badishkanian of Wolf Research.

[Frederick Wightman:]

Hey, guys, good morning. It's actually Fred Whiteman on for Greg. Jason, you gave some stats for the full year 21 pricing on a cumulative basis. And it sounds like that was unchanged versus what you guys had provided last quarter, I thought you were expecting that number to come down as more FCCs were redeemed. So can you just sort of talk about what if anything different versus your expectations?

[Jason Liberty:]

Right. Yeah. And this will be our last question. So that's exactly right. On the pricing standpoint, the new as we've been taking on new bookings, we've been able to hold our rates and despite the FCCs coming more and more into play. And I think it is a testament to demand. It is still very early, but at least overseeing for the back half and really quite frankly from June on is as our pricing is holding up quite well.

[Frederick Wightman:]

And then if I could sneak one more quick, I think last quarter you talked about there was a line in the sand sort of Early Middle 2Q as far as where that consumer demand really did pick up. Have you seen that timeline change in any way? Are people sort of moving their bookings either early or later in the year?

[Richard Fain:]

It's very consistent with what Michael said, I mean, you can really draw a line from when the summer begins. And then you can see that it's not just about the new booking, it's also seeing where people are lifting and shifting their bookings is very much similar to what they were expecting to do this year. As we look at the summer, summertime and beyond, and by summer, we mean really kind of when kids get out of school. Okay. Thank you for your assistance, Shelby with the call today and we thank you all for your participation and ongoing interest in the company. Carola will be available for any follow up she might have and from all of us wish you all a very great day.

[Operator:]

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