Earnings Transcript for CUK - Q1 Fiscal Year 2023

Josh Weinstein: Good morning. This is Josh Weinstein. Welcome to our First Quarter 2023 Business Update Conference Call. I'm joined today by our Chair, Micky Arison; our Chief Financial Officer, David Bernstein; and our Senior Vice President of Investor Relations, Beth Roberts. Before I begin, please note that some of our remarks on this call will be forward-looking. Therefore, I must refer you to the cautionary statement in today's press release. Consistent with our last business update, we remain on an upward trajectory as we further closed the gap to 2019. We are still experiencing a record wave season, which started early, gained strength and has extended later into the year. We expect these favorable trends to continue based on the traction we're making to our ongoing effort to drive demand globally. In the first quarter, we outperformed our guidance on all measures

David Bernstein : Thank you, Josh. Before I begin, please note all of my reference to ticket prices, net per diems and adjusted cruise costs without fuel, will be in constant currency unless otherwise stated. I'll start today with a summary of our 2023 first quarter results. Then I'll provide a recap of our cumulative book position. Next, I will give some additional color on our 2023 full year March guidance and finish up describing our financial position. As Josh indicated, in the first quarter, we outperformed our guidance on all measures. For the first quarter, our adjusted EBITDA was $382 million, which was $82 million above the midpoint of our December guidance. The improvement was driven by two things

Operator: [Operator Instructions] Our first question comes from the line of Patrick Scholes with Truist Securities.

Patrick Scholes : A couple of questions for you. First off, you talked about only having, I would say, less desirable cabins left to sell. How did that play out in sort of how your booking volumes trended during the quarter and how it's related to pricing? Did you see any -- at the beginning of the quarter, say, December and January, stronger volumes, but then you sold out and then lower volumes later on, but maybe higher pricing as people shifted to longer, say, European vacations or Alaska cruises? Any shift in there. That's my first question.

Josh Weinstein : So this is Josh. No, nothing discernible. I mean the fact is the volumes in the business over the entire wave period were just wave after wave, pun intended, a strength. And so we didn't see anything noticeable. David, just to be clear, mentioned the fact that it's not only insides left. It's just -- that's the majority of what we've got left. And when you're getting down to less than 7 points in Q2 and then finally catching up to historical over the summer, we're talking about just filling things out on the ends. So we feel real good about the fact that we're over 70% booked for the remainder of the year. We're tracking well, and wave has continued.

David Bernstein : And by the way, I wouldn't call them less desirable. They're just different. And people have a great time in those cabins.

Patrick Scholes : Okay. I won't argue with that. My next question, can you talk about trends in book direct. Certainly, from my conversations with the trade, we hear that, especially on the shorter less expensive cruise, you're taking noticeable share in book direct. Can you comment on that at all?

Josh Weinstein : Overall, what we've said, and it's going to be consistent is that our direct business held up well. And we've really been working hard to help the trade get back up to what we know that they can achieve. And the fact is, as you heard me say in the -- in my prepared remarks, many of our brands exceeded 2019 levels with the trade. And overall, we're well on our way to get into those levels. So we feel actually fantastic about the performance that they've made to date, and we expect that momentum just like our own to continue. And we do think that all the work we've been doing on the revenue generation isn't just for ourselves. It's really in partnership with the trade and helps the trade. Because the more awareness we have, the more folks that get interested and the more they can help bring ultimately to our brands.

Operator: Next question from the line of Steve Wieczynski with Stifel.

Steve Wieczynski : So Josh or David, just want to ask about the full year EBITDA guidance you provided this morning. And if we look at what you did in EBITDA in the first quarter, it exceeded your midpoint by, let's call it, about 30%. And that's with a pretty significant fuel and FX headwinds. So if we look at what you're guiding for the second quarter, you're essentially guiding to a little less than, let's call it, $3 billion in EBITDA for the second half of the year. And I guess the question is, that just seems incredibly, incredibly conservative given what you're seeing from a demand perspective, spending perspective, whatever you want to look at it. So have you taken the view that the consumer slow some in the second half of the year? And if I ask that a little differently, is it safe to assume that the consumer does stay kind of where they are right now? There should be some pretty good upside to your guidance range. And look, I understand that David called out some change there in brand mix and cabin mix, but I'm just trying to figure out what that impact could be.

Josh Weinstein : Yes. Look, I mean, we set our guidance based on a lot of variables, right? Some of the things, like I mentioned already, we're already 70% booked. We get to pull forward a good amount of our onboard spend, which has been an active initiative, as you know. We give a range to some extent because there are some things that can move, little bits and pieces here and there. Overall, just like the first quarter, we are working incredibly hard to beat our own expectations. And so we'll continue to do that. We have not seen a decline in consumer activity, and that's with respect to both the booking pace and onboard spending level. So despite the fact that there's some volatility out there, it hasn't yet -- if it ever does, it has not shown up in our business, and we want to maintain that and hopefully can lead to even stronger EBITDA as we work our way through the year.

Steve Wieczynski : Okay. Got you. And then, Josh, you made it very clear in the press release that you believe the company is now in a very solid liquidity position and the use of equity won't be needed moving forward. So you've sat in your seat now for not a year, but let's call it over six months. Have you given any thought as to a time line now as to when Carnival, the corporation, could return to that important investment-grade status?

Josh Weinstein : Our goal is certainly to get there. I'm a former treasurer, so that's quite important for all of us. The trajectory is going to be driven by significant free cash flow over time. We are working on longer-term views of the world. This is our first quarter. We just gave a full year outlook. So give me a little more time. And we'll certainly start talking about longer-term targets and initiatives going forward.

David Bernstein : But remember that getting back to investment grade is twofold. It's both improving EBITDA and paying down debt. And so as Josh mentioned in his prepared remarks, in 2024, we do expect to see considerably improved adjusted EBITDA as a result of the occupancy. And with the lower CapEx and only four ships on order and none for 2026, we do expect to be able to accelerate the paydown in debt.

Operator: Our next question from the line of James Hardiman with Citi.

James Hardiman : So maybe I'd ask one of the previous questions in a different way. Obviously, there's a lot of mix affecting per diems over the course of the year. Is there any way to sort of tease out the mix and the inter cabin impact? I guess I'm just trying to figure out if like-for-like per diems are getting better or getting worse, right? Obviously, throughout the rest of the consumer space, investors are bracing for a deceleration in pricing power as we work our way through the year. Obviously, the travel space is at a very different spot given where we've been. Maybe any way to think about sort of like-for-like pricing and what that tells us about the consumer?

Josh Weinstein : Sure. So thanks for the question, James. Like-for-like, the pricing is up. So we're very happy. As David said, I wish I had said, it was a really good line, they're not undesirable cabins. They're very desirable up and down, our fleet and our portfolio based on what particular guests are looking for, and they are paying more for it and spending more onboard. And you got to remember -- and I've been here for a long time and I remember hearing this for the last 20 years, good times and bad, our business model holds up very well. And the reason why it holds up so well in a recession, if one comes, is because we are an incredible value to land. Anywhere from 25% to 50% lower than the land-based equivalent. And so when people are looking to figure out how do I make my dollar go further, we can provide better value for their money for their vacation, which is still incredibly important, even more so now than it used to be in the past that people will not give up. So we feel very good about our position.

David Bernstein : The only thing I can add to that is I did say in my prepared remarks that we did expect the fourth quarter yields to be up compared to 2019. And that is sort of an indication of the higher pricing that we're expecting. And by the time we get to fourth quarter, a lot of the mix issues that we were talking about have disappeared.

Josh Weinstein : Pretty much all of them.

David Bernstein : All of them, yes.

James Hardiman : Got it. Makes sense. And then maybe on the cost side. So I think costs were up roughly 6% in the first quarter. Constant currency, 10.5% to 11.5%. The second quarter, it seems like there was some moving around of costs within those numbers. But then 8.5% to 9.5% for the year. So presumably the back half of the year, those numbers are coming down. I guess I'm just trying to think about sort of an exit rate. You said you're still going to be spending on advertising later in the year. But ultimately, is there an opportunity for net cruise costs to come down in '24 versus '23? Or should I think about more of a normalized growth rate as we move beyond sort of the base level of 2023?

David Bernstein : Sure. So to start with, you mentioned the first to the second quarter, and it did go up quite a bit, but there were really two things that drove that. There was -- remember, we increased occupancy from the first quarter to the second. You're talking about a 7 percentage point increase in occupancy. And so I'm very happy. That was a couple of points of the difference. The other was dry dock, which was also worth 2 points because of the number of dry docks between the quarters. So 4 of the 5-point differential is just those two items. And there was also timing of R&M expenses. But as we've said many times before, judge us on costs for the full year and not any particular quarter. And we gave you our guidance for the full year, but we'll work hard as we always do, to do better than that. And that's a fairly reasonable run rate to think about going forward.

Josh Weinstein : One thing I just want to clarify because we're still in a little bit of a bizarre comparison structure that we're operating under this year. So when you talk about this year and then exit rates, you got to remember, we're talking about 2023 versus 2019, which is a 4-year gap in the comparison. When we talk about what does '24 look like, which we're not talking about yet, remember, that's '24 versus '23. So that picture will look very, very different from the environment that we're describing to give a better sense of how we're doing versus the last normalized year of the industry, and which was 2019.

Operator: Next question from the line of Fred Wightman with Wolfe Research.

Fred Wightman : I wanted to follow up on the European consumer specifically. I know you sort of talked broadly about the North American consumer. But if we just look at that booking curve, which is trailing North America, I think you guys also made some comments about bookings picking up there recently and then just piece that all together with the cost of fleet coming back into service a little bit sooner. Can you sort of help us bridge the gap for all that and maybe where the European consumer is specifically?

Josh Weinstein : Yes. And it is all good news from our perspective. All of our brands over in the UK and Europe are experiencing strong demand. They've continued to outperform expectations on the closer environment that they have been operating under. But as we said, the good news is despite the fact that they're generating even more close-in demand than normal, they've also managed to extend their booking window over this period. So what that tells you is not only are they getting demand for the short term, but they're also beginning to normalize and think about making their holiday choices well in advance. And so pretty much across the board, we're really -- we are being supported by strong consumer sentiment in Europe for our European brands.

Fred Wightman : Perfect. And then just on the ship pipeline, zero ships for '26, that's consistent with what you guys have talked about previously. But I think there was also in the past to comment about expecting one or two ship deliveries annually for several years beyond that. Is that still sort of the cadence and plan?

Josh Weinstein : It will certainly be -- that's certainly the plan, one or two. Whether that starts in 2027 or it starts after 2027 is still a question mark. And so we're very much focused, if you think about the pipeline over the next 4-plus years, it's the lowest it's ever been and it will continue to dwindle down as we get our way through the year.

Operator: Next question from the line of Robin Farley with UBS.

Robin Farley : Just wanted to clarify to your comments on the yield outlook. You talked about Q4 yields would be above 2019 levels, sort of suggesting that Q3 would not be. But I think you said that occupancy will be back to full by Q3. And I think you said elsewhere that per diems in each quarter would be higher than 2019. So it seems like that should get to yield above 2019 levels in Q3. So if you could just clarify that, there's maybe a piece there I'm not factoring in.

David Bernstein : Yes. Well, we didn't give guidance for each and every quarter. I was trying to just indicate the fourth quarter for the specific reason that we talked about before in terms of with all of the mix issues we have, I wanted everybody to fully understand that pricing was up on a like-for-like basis. And I'd rather not sit here and give guidance for each quarter. But basically, we said what you had indicated, and we'll work hard to do better than that.

Robin Farley : Okay. Great. So you understand you're not guiding for Q3, but you're definitely not saying that it can't be above yield in '19, right? I just wanted to clarify that. Thank you. And then also just wanted to -- you talked about your price being higher for the year, and in the release, you give the expression that like adjusted for FCC discounts. I think elsewhere, you said pricing per diems will be up 3% to 4% for '23 versus '19. When you say that pricing will be adjusted for FCC, are you suggesting that if you include the FCC discount in that, that you would not be above '19? Because I would think that FCC discount would only be a percentage point or so. So I'm just wondering why you're sort of calling out that it's higher if you adjust for the FCC? In other words, I don't know if I'm asking...

Josh Weinstein : Yes. No problem, Robin. Just to be clear, we are projecting net per diems up 3% to 4% for the year, and that's inclusive of FCC drag. So without that drag, it would be even higher.

David Bernstein : It would be up either way. We just -- we've been calling that out every quarter going after the last couple of years. So I guess we continue to call it out, but it'd be up either way.

Robin Farley : And is the FCC drag, is that right thinking that it would only be about 1% -- somewhere in the 1% range or...

David Bernstein : Yes, 1% on total net yields for the year. A little bit higher in the first half and a little bit lower in the second half.

Robin Farley : Okay. Great. And then by next year, by '24, is it fair to assume that there wouldn't be any FCC use after '23?

David Bernstein : Less than 0.1 point. It's minimal. It's just a few left over.

Operator: Next question from the line of Ben Chaiken with Credit Suisse.

Ben Chaiken : On the last couple of calls and this one, you've spoken about higher advertising expense. Are you able to ballpark either on net cruise cost, basis points or absolute dollars, what this incremental spend is? And then is it the right run rate? Or does it normalize in the future? And then I've got one quick follow-up.

David Bernstein : Yes. So the net -- on a net cruise cost basis, it's about versus 2019, 1.5 points, of net cruise cost increase. And as far as the run rate is concerned, Josh?

Josh Weinstein : Yes. So we're up 1.5 points, which means we're still spending less than others in the cruise space on a per ALBD basis. We're very pleased with the results because by very nature, we can throttle up and throttle back. We can literally take it quarter-by-quarter and work with the brands to understand what's working and what's not, some things. Frankly, didn't work as well as we had hoped. And so the brands have stopped doing it and they're leaning into other things. So it will be pretty fluid as what it should be. But what I can tell you, if you take a step back and you think about the results that we've experienced really over the last six months and accentuated over the last quarter, we think that's a significant tailwind for what the brands have been able to achieve.

Ben Chaiken : Understood. And then on the last call, you provided a fuel FX impact for 1Q relative to '19. You said it was 150 million. I think subsequent to that, it kind of moved to 181 million. What does it look like for 2Q at the moment? And then any color on 3Q, 4Q…?

David Bernstein : So let me get the detailed numbers for you. You're talking about versus 2019?

Ben Chaiken : Yes. On the last call, you mentioned that -- you mentioned on the 4Q call, for 1Q, you said there'd be $150 million headwind relative to 1Q '19 for FX and fuel.

David Bernstein : Yes. Okay.

Ben Chaiken : I'm saying what does that look like for 2Q at the moment? And then what -- any color on 3Q, 4Q would be very helpful as well.

David Bernstein : So Q2 would be about $75 million of fuel and currency headwinds. I don't have Q3 and Q4, but I can give you the full year. Let's see. For the full year, fuel and currency is -- let's see, it's $430 million, call it.

Operator: Our next question comes from the line of Brandt Montour.

Brandt Montour : So just starting with yields, the fleet overhaul that you guys did in during the pandemic hypothetically would have a large positive mixed impact for net yields now versus '19. It's a little hard to see that in your guidance, but there's plenty of residual drag in '23 and obviously much of the book was put in place before the advertising push, right, in last year. So I guess when you adjust out all of the drags that you have this year and maybe take out Australia and Asia and Eastern Europe, are you seeing -- do you feel like you're seeing a tailwind -- a material tailwind from that overhaul?

Josh Weinstein: So, the answer is yes, we do. And one of the difficulties of looking at a four-year period and trying to piece together everything that builds up to where we are, I mean there's a lot that's happened over a four-year period. You think about, when you just say exclude Asia and exclude Australia's restart and then exclude St. Petersburg, and which was 7.5% of our business in 2019 Q3, there's quite a lot that we have overcome in order to be able to deliver higher per diems as we get to close the gap. So, we can probably banter you and I, I see you enough Brandt, we can banter about all the bits and pieces that go in different directions, but I think we've tried to boil it down to what we think are the real drivers of the business.

Brandt Montour: And then maybe just a follow-up to Ben's question on looking at EBITDA per ALBD ex-fuel and FX, I noticed that, Josh, your commentary about exiting the year, rivaling 4Q '19 was -- that commentary was essentially unchanged from three months ago. But again, three months ago was before this record wave season. I guess the question is, do you feel any better about that comment three months later?

Josh Weinstein : Yes. You bet I do. So we're working hard. We outperformed in the first quarter. We're expecting 50 and we got to 60. We're about 2/3 forecasted for the second quarter on that basis. And we're just working -- everybody is working incredibly hard to make that come to fruition as quickly as we can.

Operator: Next question from the line of Assia Georgieva with Infinity Research.

Assia Georgieva : Congratulations on the very good results for Q1. Josh, I had a question kind of longer term question again, in terms of new builds. Given the fact that it usually takes three to four years from the point when we put in the order, are you thinking of -- and again with the treasury background being more conservative, are you thinking of continuing to sort of reduce the rate of new build growth, the capacity growth, or can we see acceleration once we get to investment grade?

Josh Weinstein: We tried to, I think, give that philosophy by using our one to two ships a year once we start ordering again. And so, by its very nature that will be a lower capacity rate of increase than we have experienced for a very, very long time. I feel, with four ships on order, plus a small expedition ship and that's it through 2025, we know we're not getting anything for '26, '27 to push, we'll see. It sets us up incredibly well to be able to generate free cash flow, pay down debt. As David mentioned, our EBITDA increases, get back to 3.5x debt to EBITDA, and be much better positioned to be making new build decisions frankly for the future.

Assia Georgieva : Okay, that makes perfect sense. I believe that in the past we were looking to maybe one or two ships per year per brand as opposed to per the corporate entity?

Josh Weinstein : No, no, no, no. That would have been a much higher growth rate. We were probably somewhere between three and five ships a year depending on the brand. Remember, we have nine brands. So we've got plenty to diversify our newbuild growth strategy over time.

Operator: Next question from the line of Stephen Grambling with Morgan Stanley.

Stephen Grambling : Just thinking about the ship pipeline. You talked about the gross adds, but the other side of the equation is any attrition. Are we now in the normal retirement cycle for the fleet where we should more or less expect maybe one to two per year? Or did you pull forward some retirements that could actually be lower going forward?

Josh Weinstein : Yes, we definitely pulled forward some ships that could have been done at a later time. So not anticipating anything of significance over the next couple of years, and then we'll probably pick back up the cadence that you're talking about over time, but nothing imminent.

Stephen Grambling : That's helpful. And then you talked about a few of the non-ship related projects, Grand Bahama, private islands, et cetera. Can you talk a bit more about how those could potentially impact yields and how the investments may compare to what you've done in the past?

Josh Weinstein : Yes. Well, I mean, as a starting point, we have a phenomenal footprint in the Caribbean. I think I mentioned in my prepared remarks, Half Moon Cay being pretty much a jewel of the Caribbean in the Bahamas. With the ability for us to generate more differentiated experiences through Grand port, that will absolutely help the Carnival Cruise Line brand, not only on the yield side, but also on the cost side. We're talking about being able to put another incredibly attractive destination in a very short distance from South Florida, the East Coast of the United States, which helps us tremendously on the cost side, on the carbon footprint side. And with what we're doing on Half Moon Cay, by adding a pier, that will open up a lot more opportunity for us to bring bigger ships to that island, more guests, a better guest experience and more opportunity to generate not only enhanced ticket pricing because of that, but also onboard spend in the form of spending on board our destinations.

Operator: Next question from the line of Chris Stathoulopoulos with Susquehanna.

Chris Stathoulopoulos : Josh, you spent a lot of time going through these various revenue and marketing initiatives in your prepared remarks. Could you help frame or give some color, as we think about the guide here for EBITDA for the full year, how we should perhaps we could put those in buckets, how we should think about incremental revenue for these initiatives here versus any cost and efficiency related efforts net of what's, as you said, likely to be elevated marketing costs for the midterm?

Josh Weinstein : So I'm going to try to answer your question. Some of the things that the brands have been working on, what we've seen is a fairly immediate in-year benefit, right? The ability for us to be better at our search engine optimization, driving more people to be looking for us to begin with. We can measure those things, and we can see results. There are other things that we're doing specifically with respect to introducing fare types that brands have never had before, some brands doing non-refundable deposit fares, that have never done that. We can weigh that up in here pretty quickly. There are other things that are going to be having impacts not just for this year, but frankly, on a much longer-term basis as well, primarily around how we're managing our booking curve and being able to extend that out further, being able to be better differentiated in the market, driving more demand over time. So candidly, I'm not sure I'm answering your question, but I don't think it's so easy to try to fit into particular buckets of particularly for this year, if that's what you were looking for.

David Bernstein : The only thing I want to add is that there are a lot of different efforts -- efficiency efforts going on all around the company. We did build all of that into our cost guidance. Remember, the cost numbers, as Josh pointed out, are over a four-year period. This is in comparison to 2019. So there has been a lot of inflation during that four years. But we have built a lot of efficiencies as well.

Josh Weinstein : Yes. And taking a step back from advertising, but just the concept of how are we looking at our business overall we've tried to stress throughout. We're starting with an industry-leading cost structure, and we certainly want to maintain that. We're always looking from an operational standpoint, how can we do better? How can we improve? And we're doing things like benchmarking, the same class of ships across multiple brands. We're looking at ways to further leverage our spend through our global sourcing initiatives. That's ongoing, and that will continue, some of which the benefit we know we're seeing already. Some of which will factor in as we make our way through 2023 and really start benefiting in 2024.

Chris Stathoulopoulos : Okay. And to follow up, a little bit of a tougher or more direct question, if you will. So your capacity guide is up about 1.5 points from December. The cost guide is up and there's some confusion around here around your brand and cabin mix, if you will. And I think part of the reason, if we look at January into mid-February around some of the enthusiasm around the stock was at that time, that 3% or kind of sort of a typical capacity guide for Carnival and believe that, that would help sort of accelerate your unit margin recovery. So what would you say in response? And this is a question I've gone today that sort of Carnival -- liquidity, I would say, for the first half, at least risk here is off the table. But what would you say in response to that with the guidance update today that Carnival is not going to revert back to its sort of old playbook, if you will? And then what I mean by that is really just some of the numbers here where we have the 4.5 or mid-single-digit capacity growth and the higher cost guide and then concern around the pricing integrity here?

Josh Weinstein : Sure. So just to be clear, the only difference in our capacity from what we were saying last quarter until now is because of the strength in demand that we're seeing for the cost of brand because of what we've been doing. We have the opportunity to introduce a ship earlier than we expected, which is going to actually help liquidity because it's going to drive EBITDA. So we feel very, very good about that decision. We actually have a track record of doing real well on the cost side. So I think if we can maintain that type of discipline, then we'll be well served. Everything else that we talked about in the last quarter still holds. We're more enthusiastic now given the fact that we just had record breaking wave, brands are more set in their plans, and we're pushing forward.

David Bernstein : And I would like to add on the cost. The majority of the increase was associated with higher occupancy. And remember, we put together our forecast back last November. We give -- we have our earnings call in December, very early in the month. And so that was a forecast that we had put together prior to Black Friday, Cyber Monday and all of the record bookings that we saw throughout December, January and February. So when you've got extra occupancy on board the ship, your costs are going to go up on a unit basis a little bit because remember, the ALBDs don't change or the denominator doesn't change. So it's all very good news, driving adjusted EBITDA higher, driving liquidity -- improved liquidity. And so we are far more confident than we -- today than we were back in December, as Josh indicated before.

Josh Weinstein : I think this has to be the last question. Operator?

Operator: Yes, sir.

David Bernstein : One more question.

Operator: We'll take one more. The last question from the line of Paul Golding with Macquarie Capital.

Paul Golding : I wanted to ask around other ship operating from a dry dock perspective. Is there a potential quantification of this for us in terms of what's left? I think a lot of us were under the impression that through COVID and warm and cold layup, a lot of this has been worked through, and I recognize that this is for a reinstatement of the ship. But is there a way to quantify that? And then secondly, on marketing, anything we think about on cadence, not necessarily total spend, but cadence relative to the offset in Australia and Asia restarts as we look at the next year, year and change?

David Bernstein : Yes. So as far as dry dock is concerned, yes, there were a lot of ships that went into dry dock last year. But keep in mind, depending on the ship, depending on the age of the ship, either ships have to go into dry that once every five years or twice every five years. So it's -- there are lots of differences, and we're always going to have dry docks every year. They do vary, and we try to give an indication. 2022 was an unusually high year because of the restart, but we do expect that dry docks this year and every year thereafter on a regular basis as we go forward. And as far as the cadence on the restart is concerned?

Josh Weinstein : On the advertising front, it's pretty consistent quarter-over-quarter for the rest of the year. Things do slide from quarter-to-quarter, but nothing, I think, is worth pointing out.

David Bernstein : And our plans might change, as Josh indicated before. So it's very hard to give that level of detailed guidance.

Josh Weinstein : So with that, I have to say thanks, everybody, for joining and talk to you next quarter. Thank you.

Operator: That concludes today's call. We thank you for your participation and ask you to please disconnect your lines.