Extra Space Storage Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 3, 2023

Key Takeaways

  • Operational performance remained strong as Q1 occupancy hit 93.5% (highest non-COVID first-quarter level), driving 7.4% same-store revenue growth and 8.7% same-store NOI, beating internal forecasts.
  • External growth accelerated with net additions of 44 third-party managed stores, acquisition of 6 stores (primarily via JVs), generation of $53M in bridge loans, and early-stage remote storage acquisitions.
  • Announced a leverage-neutral, all-stock merger with Life Storage to form a portfolio of over 3,500 stores across 43 states, targeting at least $100M in annual run-rate synergies and further scale benefits.
  • Strengthened the balance sheet by issuing $500M of 5-year bonds at 5.7%, reducing revolver borrowings below $100M (with over $1B of available capacity) and cutting net floating-rate exposure to 22%, prompting an S&P credit watch positive.
  • While payroll expense and property taxes provided Q1 savings, management expects double-digit increases in property & casualty insurance costs and maintains elevated marketing spend (~11% of expenses) as key 2023 headwinds.
AI Generated. May Contain Errors.
Earnings Conference Call
Extra Space Storage Q1 2023
00:00 / 00:00

There are 11 speakers on the call.

Operator

You for standing by, and welcome to the Extra Space Management First Quarter 2023 Earnings Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Mr.

Operator

Jeff Norman, please go ahead, sir.

Speaker 1

Thank you, Jonathan. Welcome to Extra Space Storage's Q1 2023 earnings call. In In addition to our press release, we have furnished unaudited supplemental financial information on our website. Please remember that management's prepared remarks And answers to your questions may contain forward looking statements as defined in the Private Securities Litigation Reform Act. Actual results could differ materially from those stated or implied by our forward looking statements due to risks and uncertainties These forward looking statements are qualified by the cautionary statements contained in the company's latest filings with the SEC, which we encourage our listeners to review.

Speaker 1

Forward looking statements represent management's estimates as of today, May 3, 2023. The company assumes no obligation to revise or update any forward looking statements because of changing market conditions I would now like to turn the call over to Joe Margolis, Chief Executive Officer.

Speaker 2

Thank you, Jeff, and thank you, everyone, for joining today's call. We have had an exciting couple of months, and a lot has happened since our 4th Quarter Earnings Call in late February. Operationally, occupancy remained very strong through the Q1, Ending March at 93.5%, our highest first quarter result outside of the COVID years. Our strategy to maintain high occupancy through the winter allowed us to sequentially increase rates to new and existing customers through the Q1, driving same store revenue growth of 7.4%. Same store expenses were lower than expected due to normalizing payroll expense growth as well as year over year savings from repairs and maintenance and property taxes.

Speaker 2

As expected, our same store NOI growth Rate moderated sequentially from the 4th quarter due to an exceptionally difficult 2022 comparable And was modestly ahead of our internal projections at 8.7%. We have also been busy on the external growth front. We continue to grow our 3rd party management platform With net additions of 44 stores. We acquired 6 stores, primarily in joint venture structures. We originated $53,000,000 in bridge loans.

Speaker 2

We started our external growth phase of our remote storage strategy, Approving 3 remote model acquisitions, 2 of which are in our primary markets. Subsequent to quarter end, We closed the 2nd preferred investment with an affiliate of SmartStop in the amount of $150,000,000 And of course, on April 3, We announced a strategic merger with Life Storage through a leverage neutral all stock deal. We believe this combination will produce an even more formidable portfolio, team and platform With over 3,500 stores across 43 states, we anticipate that there are at least $100,000,000 in annual run rate synergies with this transaction that neither company could have created on their own. So far, Everything is on track to successfully complete the merger in the second half of the year. And as we continue to refine our integration plan, We are even more confident that we can achieve at least our stated synergies.

Speaker 2

Further, There are additional potential growth drivers and synergies not captured in the minimum target of $100,000,000 These include Additional expense savings due to increased scale, a lower cost of capital, a 50% increase in data, Which could further improve property performance, a larger pool of properties to evaluate opportunities such as expansion, redevelopment and solar installation and finally, broader industry relationships, which will provide greater reach and scale To offer potential products and services and build our acquisition pipeline. We are working hard to complete the pending merger And I appreciate the efforts of the teams from both companies and the way they have remained focused on driving the existing business as we enter the busy leasing season. I would now like to turn the time over to Scott.

Speaker 1

Thank you, Joe, and hello, everyone. As Joe mentioned, we had another good quarter, beating our internal FFO projections by 0 point 0 $4 The beat was driven by better than expected property net operating income, lower G and A and higher management fees and tenant insurance. Interest income and interest expense both came in modestly lower than modeled, generally offsetting each other. Achieved rates to new customers have been improving sequentially since bottoming out in November. In January, year over year rates improved to approximately negative 14%, in February, they were negative 11% And in March, they were negative 3%.

Speaker 1

We did see lower rental volume in March at those rates. And in April, our pricing algorithms dropped rates modestly with average achieved rates in April closer to negative 7% year over year, Contributing to higher rental volumes in April. Turning to the balance sheet. We completed a $500,000,000 bond of 5 year notes with a coupon of 5.7%. We used the proceeds to reduce our revolver balances Less than $100,000,000 at the end of the quarter, leaving over $1,000,000,000 in revolving capacity.

Speaker 1

We reduced our floating interest rate exposure to 22% of total debt, net of variable rate receivables. Shortly after the announcement of our proposed merger with Life Storage, S and P Global updated our rating to credit watch positive confirming its view that the proposed transaction is credit enhancing Given the increase in scale and potential synergy opportunities, we reaffirmed our guidance ranges for same store growth expectations And core FFO, which do not include the impact of the proposed merger with Life Storage. We made modifications to our 2023 outlook To capture the SmartStop preferred investment, delays in bridge loan closings, the impact of our bond deal on interest expense And other adjustments to tenant insurance and G and A. Property net operating income in the Q1 was modestly ahead of our expectations. As we progress through the leasing season, we will monitor achieved rates to new customers, rental and vacate trends, Web traffic and top of funnel demand before revisiting these guidance ranges after the second quarter.

Speaker 1

As mentioned on our Q4 call, our guidance assumes positive same store revenue growth for and throughout the full year. It assumes the growth rate moderates more quickly in the first half of the year due to exceptionally difficult first half comps, Troughs in the summer and modestly reaccelerates late in the year. Much of our NOI growth is offset by the 1st year headwind of our investment in non stabilized properties, which carry approximately $0.23 of dilution, The modification of the NexPoint preferred investment and higher interest rates. While each of these headwinds slows our 2023 growth, We believe they will result in stronger long term growth rates over a multi year period for our shareholders. We are off to a great start in 2023.

Speaker 1

We believe storage as an asset class is among the most resilient in the REIT space and that the sector will continue to produce healthy, albeit moderating year over year growth. We believe our operating platform and highly diversified With that operator, let's open it up for questions.

Operator

One moment for our first question. And our first question comes from the line of Todd Thomas from KeyBanc. Your question please.

Speaker 3

Yes. Hi, thanks. I just wanted first to ask about occupancy in April. If you could talk a little bit about any post quarter updates there, where you stand year over year and Just talk about rental demand coming out of March a little bit in greater detail.

Speaker 1

Yes. Our occupancy at the end of April increased about 30 basis points. At the end of April, we were 93.8. So we actually are in a good position moving into the rental We saw good rental activity during the month of April.

Speaker 3

Okay. And Within the guidance framework, where would you expect to see occupancy kind of peak in June, July? It seems like The quarter end occupancy, which was about 10 basis points below the quarter average, was a little unusual from a seasonal standpoint.

Speaker 1

Are you

Speaker 3

pleased with the occupancy improvements that you're seeing? Is it a little bit below What you are anticipating? And, yes, if you could just talk about what you expect in terms of the peak during the rental season?

Speaker 1

Yes. So as we did our guidance, we focused obviously on revenue. But in that number, we do assume that occupancy is a negative Delta compared to last year, less than 1%. You're up against 2 of the toughest years the last 2 years with the COVID peaks, But there is a slight negative headwind with occupancy throughout the entire year. It's pretty consistent.

Speaker 3

Okay. And last question, in terms of the guidance, so you updated the dilution that you expect From C of O and value add acquisitions, it was $0.25 initially, it's $0.23 Is that What's driving that? And is that related to the guidance going forward for the balance of the year? Or I mean, is that the full year dilution that's actually been increased and or decreased and is an improvement relative to the initial guidance?

Speaker 1

It's actually an improvement of $0.02 compared to initial guidance and it's from 2 things. Leased up properties are filling up faster and then it assumes that The timing on a couple of the CFOs and acquisitions has bumped back slightly.

Speaker 3

Okay. All right. Thank you.

Speaker 1

Thanks, Doug. Thank you.

Operator

One moment for our next question. And our next question comes from the line of Michael Goldsmith from UBS. Your question please. Michael, you might have your phone on mute. Moving on.

Operator

One moment. Our next question then comes from the line of Juan Santabergia from BMO. Your question please.

Speaker 4

Hi, thanks for the time. Joe, I think you mentioned at the top, the remote storage Acquisitions, could you just talk a little bit about what you're seeing early days there? And what the opportunity set Could be going forward and any thoughts about how that could tie in with Life Storage recognizing its early days there?

Speaker 2

I don't know if everyone's having this problem. We have a very bad connection. Could you repeat the question please? We couldn't hear it here.

Speaker 4

Sure. Is that better?

Speaker 2

A little bit, yes. Just curious, Joe,

Speaker 4

you talked about the remote storage investments in the Q1. And we

Speaker 2

can't hear. We can't Jeff,

Speaker 5

we need to

Speaker 1

One, give us just one minute or just

Speaker 6

a second.

Speaker 4

Sure. Is this any better?

Speaker 1

Okay, Juan, go ahead and try that again.

Speaker 4

Sure. No problem. Just curious, Joe, you mentioned remote storage acquisitions in the Q1. Just curious on what early learnings are And what that opportunity set is and if there's any tie ins or expansion opportunities to that opportunity With the Life Storage pending transaction, just curious on bigger picture thoughts on what that could represent for you guys?

Speaker 2

Sure, it's a great question. So with respect to the opportunity set, I think it's massive, right. The number of Small stores in our markets that we traditionally would not look at for acquisition because we could Not efficiently manage them without permanent 100% on-site management is huge. And not only existing stores, but just vacant space we can turn into storage that is small. And then we will undertake an effort to go through the Life Storage portfolio and see which of their stores You would be candidates for this type of different management model.

Speaker 2

So it is

Speaker 4

And is there a different margin that these Remote storage spaces are capable of generating?

Speaker 2

I think the margin is not different, but the Efficiencies gained by managing them through the remote platform makes the margins Acceptable, right. You can get to the right margin because you have the reduced expenses.

Speaker 1

Okay.

Speaker 2

That makes sense.

Speaker 4

Yes, it does. And then just curious, you talked about and seemingly are very confident on the synergies From the pending LSI transaction, I was hoping maybe you could just unpack a little bit what's driving that increased enthusiasm

Speaker 2

Well, we're certainly learning more About the opportunities within the Life Storage portfolio and The synergies we could gain by combining that portfolio with ours. I'll give you just one simple example. In our underwriting, We assumed we would need to have 6 new regional offices. We've now gone through everything and we're going to end up with 4 regional offices. So that's just one example of many kind of incremental savings that we think we can achieve.

Speaker 2

And we also have become more and more confident on the revenue synergies as we learn more and more.

Speaker 4

Appreciate the time. Thank you, guys.

Speaker 2

Thanks, Glenn.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Samir Khanal from Evercore ISI. Your question please.

Speaker 5

You've implemented, just trying to whether it's markets, Regionally, anything you've seen, clearly, we've had the headline risk out there with the banks, The regional banks, just wondering is there any signs that you're seeing at all at this point?

Speaker 1

So, Pierre, we only picked up about the second half of your question. Could you repeat the full question?

Speaker 5

I was asking about whether you're seeing any pushback from existing customers on price increases, Whether it's we've seen a lot of headlines over the last few months, right? Regional banks having issues. I don't know if you can make Some comments around markets where you've seen maybe occupancy drops or bad debt pickup. Just trying to see any sort of things that may On the negative side or pushback that you may have been getting from existing customers on the price increases?

Speaker 2

So it's a good kind of health of the customer question. And to answer specifically your question, we have not. We You know, peaked out at about 800 basis points greater move out from customers who received DCRIs Then those who didn't and that has trailed back down towards the more normal rate And it has stabilized in a number that's a little higher than normal, but our ECRIs are a little higher than normal. So still a very manageable number and justifies the program. But we also see signs of health in the customer in Our very low bad debt under 2% and willingness of customers On the demand side, the strength of demand, which frankly isn't as good as it was during the COVID years.

Speaker 2

But if you look at Demand statistics compared to pre COVID years, it's pretty comparable. Demand is still strong in this sector.

Speaker 5

Okay, got it. And I guess for Scott, just as a second question. I know in the last earnings call, you spoke about expense pressures that you could face this year. I You're doing about 3.5% growth in the Q1. Maybe talk us through kind of what you're expecting for expense pressures And maybe what are you seeing so far sort of year to date?

Speaker 1

So if you look at our expenses, payroll is progressing as expected. We expected it to go back To a more moderate pace than what we've seen in the past year and we saw that at 3.9% in the Q1 and we would Expect that to continue to moderate as we move throughout the year. Moving to the other big expense items, payroll property taxes were actually a benefit to us in the quarter. We were negative and we would not expect that throughout the remainder of the year. We would expect that to be an inflationary plus.

Speaker 1

The other one that was a benefit in the quarter is snow removal, which Living in Utah, we never would have guessed we had lower snow removal throughout the rest of the U. S, but it was actually a benefit for us in the quarter. In terms of other expense items that we expect some potential pressure moving forward, we do our property we renew our property and casualty insurance 1st June, and we would expect that to see another sizable bump similar to what I think everybody's experiencing.

Speaker 5

And what's just as a follow-up, what's the size of all, can you just sort of quantify that as we think about From a modeling perspective?

Speaker 1

We're still in the early phases, but it's definitely double digits and could be significant. The other expense item that ran at 11% in the quarter is marketing and we'll use that as needed throughout the year If we find that we find positive returns on our marketing spend and we can spend that instead of cutting rates, obviously, that's the first area we'll look.

Speaker 5

Got it. Thank you everyone. Thank you very much.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Kegan Kopf from Wolfe Research. Your question please.

Speaker 7

Yes. Thanks for the time, guys. Maybe first, just on your same store pool breakouts, can you help us better understand the outperformance of the 2023 pool relative The 2022 pool, especially given that occupancy was higher in the 2022 pool?

Speaker 1

Yes. Your benefit comes from adding properties that are finishing the final stages of lease up and those properties either came from C of O properties or acquisitions and so as they stabilize rates typically continue to Outperformed the same store pool. Our definition goes back to our IPO of our same store pool and that's 80% occupancy Or we have to own them for a year. So we do see some benefit if you look at the 3 pools in our subs and each year it gets a little slower.

Speaker 7

Okay. No, that's helpful. And then I guess on the acquisition market, just kind of curious, what are you guys seeing as far as Volumes and cap rates and how should we be thinking about it the rest of the year? And I guess, as an adjacent one to that, I mean, how is it impacting your bridge lending program?

Speaker 2

Good question. So volumes in the transaction market are significantly down. There's not a lot of distress in the self storage market. So sellers don't have to sell and if they don't get the price they want, they Don't sell, so there's a significant bid ask spread. The deals we do see trade all seem to have some unique Story, I'm not sure there's enough of a market to tell you what cap rates are because everything seems to be unique.

Speaker 2

And unfortunately, our bridge loan volumes were slower in the Q1 than we expected. Now that being said, there is some seasonality to this business. If you look back at the 3 or 4 years we've been doing this, we always end up closing The most loans are proving the most loans in the second half of the year. So we hope we follow the same pattern, But we were a little slower than expected in the Q1.

Speaker 7

Great. Thanks for the time, guys.

Operator

Thank you. One moment for our next question. And our next question comes from the line of Michael Goldsmith from UBS. Your question please.

Speaker 8

Can anyone hear me?

Speaker 9

We can hear you now.

Speaker 8

Okay, great. My first question is just about the cadence through the quarter. You talked about street rates Moving from down 14% to down 3% January through March and then, kind of returning back down to 7% in April. It sounds like from a lot of your peers that March was a particularly challenging month. So I was wondering what you were seeing that are you able to kind of parse out what was going on between The demand side relative to where you set rates or and versus just kind of like the overall demand environment In March and how that translated into April.

Speaker 2

Yes, I don't want to overstate the difficulties of March, right. I think we Pushed a little harder with rates than maybe we should, which is fine, right? That's what the algorithm should do. They should try to find that point of resistance. And We went from minus 11 in February all the way to minus 3 in March and we did see that there was some weakness at that level and the Systems brought things back and we're recovering.

Speaker 2

So yes, March wasn't the best month in our last 4 months, But overall, the last 4 months have been strong, have been good for us. As Scott says, we're over performing our expectations.

Speaker 8

Thanks for that, Joe. And my follow-up is related to the bridge lending program. You provide a little bit more color on Just kind of the reasoning why deals may have been falling out, I would think this would be a good environment for Bridge Lending. And sort of related to that, there was a nice pickup in the 3rd party management net Stores that you added. So can you just talk a little bit about the appetite for kind of independent players looking for 3rd party management in this environment?

Speaker 8

Thanks. Sure. So with respect to bridge loans, you have a couple

Speaker 2

of things going on. 1, you have seasonality, which I mentioned. The second is We had a couple of deals get dropped, deals we had already signed a term sheet, collected a commitment fee, Within our numbers for pipeline and they the borrower walked on the commitment fee and then we had a couple that were delayed. So normal, I think, volatility in a business and we will hope to pick it up In the second half of the year. With respect to management, we had a great quarter.

Speaker 2

We picked up 11 stores From NextPoint as part of our strategic relationship with them and 37 other stores and the churn is much less in the management business. We only lost 4 stores in the quarter because the transaction market is so slow. And one of those we bought into a JV. So we had a great start to our management business. We expect to have a great second quarter as well.

Speaker 2

And it's one of the advantages of having multiple growth drivers is that When one might be growing a little more slowly, another one could be growing a little more quickly and it always allows us

Speaker 8

Can you provide a little bit more specifics around why some of the bridge lending deals would be dropped? Are they Is it a reflection of the self storage environment? Is it reflects like the lending environment, the appetite For others to lend, I'm just trying to get a sense of kind of the factors surrounding that bridge loan program.

Speaker 2

So some of our bridge loans are commitments to issue the loan upon completion of construction, right, because we won't lend until The property has a CO and is operational. And when the Project gets built and the CO is issued, if the owner has a different plan, maybe he sells the property instead of borrowing it Or maybe finances it some other way. They have the option to walk from their commitment fee and not take the loan.

Speaker 8

Very helpful. Thanks Joe.

Operator

Thank you. And one moment for our next question. And our next question comes from the line of Ki Bin Kim from Truist. Your question please.

Speaker 9

Thanks. Good afternoon everyone. So first question, Your New York City metro area seems to revenue decelerate a little bit further than your portfolio average. I'm not sure what was the cause, if It's a comp issue or if you're seeing additional pressures in the new supply deliveries in Northern New Jersey, but any kind of color you can share would be helpful.

Speaker 2

I think those certainly are both important factors to that. I think You'd circle that, Ki Bin.

Speaker 9

Okay. And in terms of the LSI merger and the synergy math that you've talked about, A lot of the focus has been about getting the synergies from the LFI portfolio, but I was wondering if you can maybe Take a different perspective and look at it from a combined basis. What is the upside from the combined company in terms of Improving the overall NOI picture, NOI margin picture and maybe close the gap between you and your larger peer.

Speaker 2

What was the gap in terms of margin? Yes. So I think margin is a difficult Thing to compare because it's not apples and apples, right? So for example, if one company Has a much larger deductible on their insurance program. They may have a lower insurance costs, but they're taking more risk.

Speaker 2

Neither one is right nor wrong, but they're just different strategies that will affect your margin. Secondly, margin Is affected by what you include at a store level cost and what you include at G and A level cost. So I wouldn't look at compare our margin to our largest peers and assume that it's an apples to apples comparison. But I really appreciate your question, which is, do we think there are additional synergies In the overall portfolio that aren't in the underwritten number that we've given and it's absolutely true. I mean just things like Densification, right.

Speaker 2

If we now have a district manager, our district managers cover about 17 stores and because Of our portfolio footprint there have 8 stores in one city and 10 stores in another that's inefficient and has travel costs and other Negative impacts. Well, as we get more and more stores and those footprints of the district managers get smaller, 1, they can take on more stores, which reduces the number of district managers we need. And second of all, just become more efficient in their coverage So there's a lot of those types of synergies that we absolutely expect To achieve that are not in any of our numbers. The other thing is the testing with running a second brand And whether the revenue uplift from the second brand will more than cover the cost of Containing a second brand and we were hopeful and optimistic that we are going to figure that one out as well.

Speaker 9

And Joe, you talked about the benefit of having more data, but there's obviously a diminishing return to that, because it's 50% more data doesn't mean you're 50% more better. So can you just talk a little bit more about that and what the upside looks like from a more tangible standpoint?

Speaker 2

So if you wouldn't talk to our data scientists, I'm not sure they'd agree with that. They can't get enough data. But yes, I mean, I think logically you're right. It's not one for 1, but it's certain there certainly is a benefit If there's nothing else and just the speed in which you can get statistically significant results, Right. We can run tests faster and then implement whatever the optimized solution is quicker Because with more data and a bigger pool, you get this statistical significance quicker.

Speaker 9

Okay. Thank you.

Operator

Sure. Thank you. One moment for our next question. And our next question comes from the line of Ronald Ken Mundy from Morgan Stanley. Your question please.

Speaker 6

Hey, just two quick ones for me. So one is on the Just going back to the tenants that are coming through some of the online or the mobile, just after a Couple of years, couple of quarters removed from COVID now. Any sort of learnings in terms of how they're behaving versus for tenants that are coming into

Speaker 2

So we always observe differences Of tenant behavior depending on what channel they come through, both in terms of What's an effective tool to capture that tenant and what their behavior is in terms of unit size, length of stay, Other factors and we're constantly refining The difference is in our different channels that is the results of those learnings.

Speaker 6

Great. And then the just going back to the expenses, The property tax being negative, I know you touched on it, but can you give a little bit more color sort of what happened there on the negative growth on the property taxes? Thanks.

Speaker 1

That's primarily appeals that were won during the quarter and then revised numbers going forward. So It really relates primarily to prior periods as you win those appeals from prior periods.

Speaker 6

Okay, great. That's it for me. Thanks so much. Thank

Operator

you. One moment. And our next question comes from the line of Michael Mueller from JPMorgan. Your question please.

Speaker 10

Yes. Hi. I guess a couple of questions. First of all, going forward, should we think of the bridge loan program and balances As kind of going up and down based on acquisition opportunities or should we really be thinking about that business as being completely independent regardless of what you're thinking about the acquisition markets.

Speaker 2

I think the latter. I think Our capital position is such one that we can fund bridge loans that we feel are good deals And do so in a capital light manner because we can sell the A notes and not restrict ourselves From good acquisition opportunities because we're making bridge loans and vice versa.

Speaker 10

Got it. Okay. And second question, I apologize if it was discussed before, but part of Scott's comments, I think, were a little garbled at least on my end. But can you touch on the percentage of customers that have been in place over a year and over 2 years? And if you're seeing any Degradation in that ratio?

Speaker 1

Yes. So if you look at our customers that have been with us for more than 2 years, That number is now in the upper 40s, about 47%. Customers

Speaker 10

that have

Speaker 1

been with us 12 to 18 months, That's in the low 60s. That number has actually come down some. So long term customers beyond 2 years is increasing. That midterm customer has actually come down a little bit.

Speaker 10

Got it. Okay. Thank you.

Operator

Thank you. And this does conclude the question and answer session of today's program. I'd like to hand the program back to Joe Margolis for any further remarks.

Speaker 2

Thank you. Thank you everyone for your time and your interest. I want to thank the LSI team for their great cooperation, Professionalism and efforts over the past many weeks. I've been very impressed with every individual we have interacted with, How they've handled themselves and I'm very grateful. I also want to assure our shareholders that while We're spending a lot of time preparing for this merger and it's time consuming and a significant effort.

Speaker 2

Everyone at Extra Space Storage remains focused on the fundamentals of our business, which is driving performance at our stores. Thank you very much. I hope everyone has a good day.

Operator

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

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