PACS Group, Inc. (PACS) Earnings Call Transcript & Summary

Hello, and welcome to the PACS Group, Inc. Second Quarter Fiscal Year 2024 Earnings Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to Derick Apt, CFO. Please go ahead, Derick.

Thank you, Kevin, and good afternoon, everyone. Thank you for joining us for our second quarter 2024 earnings call. I'm joined today by Jason Murray, our Chairman and CEO; and Josh Jergensen, our President and COO. Before we begin the prepared remarks, we would like to remind you that this afternoon, PACS Group issued a press release announcing its second quarter 2024 results. An investor presentation was published and is available on the Investor Relations section of pacs.com. I'd also like to remind everyone that during the course of today's conference call, we will discuss certain forward-looking information. Any forward-looking statements made today are based on management's current expectation, assumptions and beliefs about our business and the environment in which we operate. These statements are subject to risks and uncertainties that could cause our actual results to materially differ from those expressed or implied on today's call. In addition to any risk highlight during this call, you should carefully consider other important risk factors and disclosures that may affect PACS Group's future results as described in our quarterly report on Form 10-Q for the quarter ended June 30 and our other reports filed with or furnished to the SEC. Listeners should not place undue reliance on forward-looking statements and are encouraged to review our SEC filings for a more complete discussion of factors that could impact our results. Except as required by federal securities law, PACS Group and its affiliates do not undertake to publicly update or revise any forward-looking statements where changes arise as a result of new information, future events, changing circumstances or for any other reason. Information discussed on this call concerning PACS Group's industry, competitive position in the markets in which we operate is based on information from independent industry and research organizations, other third-party sources and management estimates, which are derived from publicly available information released by independent industry analysts and other third-party sources as well as data from PACS Group's internal research and are based on reasonable assumption and computations made upon reviewing such data and our experience and knowledge of our industry and markets. By definition, assumptions are subject to uncertainty and risks, which could cause results to differ materially from those expressed in the estimates. During this call, we will discuss certain non-GAAP financial measures, including adjusted EBITDA and adjusted EBITDAR. These non-GAAP financial measures should be considered as a supplement to and not a substitute for measures prepared in accordance with GAAP. For a reconciliation of non-GAAP financial measures discussed during this call to the most directly comparable GAAP measures, please refer to the earnings release and the appendix in the Investor Relations presentation, which are both published and available on the Investor Relations section of PACS Group's website. I'll now turn the call over to Jason.

Thanks, Derick, and thank you all for attending today's call. We continue to take great pride and responsibility with our mission of delivering better post-acute clinical care across the country and ensuring we elevate care for America's most vulnerable. We're proud of the work of our more than 38,000 employees across the country provide each day, and we are inspired by their commitment to quality and excellence. They are the foundation of our success. We're proud to report that we have built upon our strong first quarter performance into the second quarter of this year. We saw an increase in the number of buildings with 4- or 5-star quality measure ratings as well as continued strong financial performance from our buildings. Clinically, our teams continue to push for better outcomes for our patients and residents. Our leading indicator of better clinical results is the CMS quality measure or QM star rating. Over the second quarter, we had 7 buildings moving to 4-star rating, resulting in 165 or 75% of our skilled nursing portfolio having achieved a 4- or 5-star CMS QM rating. To better illustrate our facilities' dedication of quality, I'd like to share a quick anecdote from one of our facilities. In Q1 of this year, we acquired a highly distressed facility in the state of California. The facility lacked the clinical capability to admit higher acuity patients, resulting in a depressed census of less than 60%. Since the acquisition, the facility leadership has invested heavily in the recruitment, the training and education of staff as well as adding additional tools and resources to improve care. These efforts have yielded impressive results, and more importantly, the facilities earned a higher level of confidence in the community it serves. So as a result, during Q2, the facility achieved and maintained an average daily census of over 95% and had increased its skilled mix from less than 10 patients daily at acquisition to over 60. The facility was recently approached by one of their local hospitals and asked that they'd like to be a preferred partner to take care of their higher acuity patients. The facility now has the staff and the clinical confidence to serve its community in a meaningful way. The improvement of clinical outcomes is truly the most important factor in our financial strength. This is represented in our revenue growth year-over-year of 29.1% or $221.2 million for the second quarter and a 35 -- 30.5% increase or $447.5 million year-over-year for the first 6 months of the year. Our revenue was driven higher by several factors when compared with the same quarter last year. In addition to maintaining 90%-plus occupancy in our Ramping and Mature facilities, we also saw revenue per patient day increases. For example, our average daily Medicare rates increased by 9.5% for the second quarter of 2024 compared to the second quarter of 2023 and 10.3% for the 6 months ended June 30, 2024, compared to the same period last year. And our average Medicaid rates over the same period increased 3.5% and 4.3% over the same periods, respectively, due to the state reimbursement increases and/or participation in supplemental Medicaid payment and quality improvement programs. Both increases come from our efforts to keep health care local by recognizing and serving patient acuity needs locally. This also allows us to properly meet the continuing shift of higher acuity patients being discharged from acute care settings into skilled nursing facilities. Outlook for continued growth remains strong, with a robust acquisition pipeline and continued improvements both clinically and financially in the operations we've recently acquired. To support further growth, we continue to focus efforts on our robust administrator and training program, where we have a pool of talent ready to take on leadership roles at new facilities. The AIT program success includes roughly 200 PACS AITs hired since our founding, with 157 still employed with us and licensed administrator and other leadership positions, a retention rate of about 75%, which we're very proud of. We currently have 31 AITs in our program to help facilitate further strengthening existing facilities and to support our growth. In addition to training new leaders, the PACS leadership model allows our local leaders to make operational decisions as close to our patients and employees as possible, which is ultimately better for the residents and community in which they live. With support from PACS Services, our back-office, clinical, compliance and business support team, our teams are able to stay laser-focused on providing quality clinical care while creating a culture that attracts the best employees to our sector. Not only is our growth supported by our leadership pipeline and robust clinical processes, the PACS also enables our facilities with technology and data-enabled resources that allow our clinicians and administrators to make decisions more quickly with a higher positive impact on patient care. We provide real-time data that allows both our local teams and PACS Services to prioritize the most important KPIs that lead to more consistent clinical outcomes for better financial performance. So we look forward to the second half of 2024, the improvements that we have planned and the 28 new facilities we've already added in Q3. The quality of our people helps ensure we stay in a strong business position moving forward. So with that, I'll now turn the call back over to Derick to cover our financial highlights from the quarter.

Thank you, Jason, and thank you to our employees for continuing to push to meet our mission of excellence in serving our patients, residents and communities where we operate. First, I wanted to highlight, since the close of the second quarter on June 30, we have successfully completed the acquisition of 28 additional facility operations and entered into 4 new states. Additionally, we closed on a JV investment, which purchased the real estate of 37 facilities. A few financial highlights from the quarter. We had $981.8 million of revenue for the 3 months ended June 30, a 29.1% increase over prior year period, and we had $1.9 billion of revenue for the first 6 months of the year, a 30.5% increase over that same period in 2023. Adjusted EBITDAR was $318 million, and adjusted EBITDA was $188.2 million, respectively, for the first 6 months ended June 2024. Adjusted EBITDA grew by 53.8% year-over-year for the first 6 months. And last, our earnings per share for the quarter was negative $0.07, which was driven by an increase in stock compensation expenses of $90.9 million associated with the restricted stock units granted at the time of our IPO in April. Total facility occupancy was 91% during the second quarter compared to an industry average of 76%. Specifically, our Ramping and Mature facility occupancy increased by 1.4% and 1%, respectively, over the prior year quarter while our New facilities ended the quarter with 84.2% occupancy, a 0.9% increase over the prior quarter. Historically, this occupancy improved to 90%-plus during the first 3 years of PACS's operations. We attribute our revenue growth, in part, to adding 3,947 operating beds to the company over the past year, which represents 24.8% increase in patient days. Additionally, we realized improvement on revenue per patient day in our Mature and Ramping facilities. We continue the growth of our overall bed count in the second quarter, with the addition of 2 new operations. And as previously mentioned, we added 28 facilities since June 30, which have added 1,450 skilled nursing beds and 831 assisted living and senior living beds to our portfolio. Our average Medicare revenue per patient day grew through the second quarter across all facilities at $952 per patient day compared to $870 in Q2 of 2023. And our overall revenue per patient day for Q2 was $459 per patient day. Our teams continue to make operational improvements in our newly acquired facilities, which resulted in a 29% year-over-year increase in cost of services, Additionally, net of stock compensation expenses, we realized a 15% decrease in G&A over the same period prior year and an 18% for the first 6 months of 2024 over the same period in 2023. Finally, we exercised 2 purchase options and acquired one additional real property in the quarter. The addition of these facilities brings our total owned facilities to 38. We currently own or have joint venture real estate interest and purchase options on 37.7% of our beds, with a long-term goal of owning 50% of our overall portfolio. Of our facilities that we lease, we have an average of 14 years remaining on the initial term. And now I'll turn to guidance. We look forward to a second -- a great second half for 2024 with our growth year-to-date, including the closing of 28 operations in the last 6 weeks. We are updating our guidance for the full year as follows. We expect annual revenue to be between $3.85 billion and $3.95 billion. The midpoint of this range is a 25% increase over 2023 revenue. And we expect adjusted EBITDA to be between $370 million and $380 million for 2024. I'll now turn the call back over to Jason.

Thanks, Derick. With that, operator, I believe we're ready for questions.

[Operator Instructions] Our first question is coming from David MacDonald from Truist Securities.

A couple of questions. Just curious, look, M&A has been a little bit more robust since the IPO than we had expected. I guess just any general comments on the opportunity that you see among skilled mix, occupancy, et cetera, within either the recent or even the pending acquisitions kind of relative to the overall company. And then I got 1 or 2 others.

Okay. Well, thanks, Dave. Good to hear from you. And yes, the opportunities out there continue to be robust is the best way to describe our M&A pipeline since IPO and even prior to that. But the acquisitions that we've announced for Q2 and then more robustly already in Q3, the opportunity to move skilled mix in those buildings is pretty large. For the most part, the buildings are operating less than 50% of where we operate our skilled mix at. And the occupancy is much lower than our average. It's closer to the national average. So we see a lot of upside in these opportunities to kind of execute on the PACS playbook of both increasing the clinical outcomes, moving the occupancy and the skilled mix/the acuity of those patients to yield better financial results as we acquire these and mature them through our process.

And then, guys, I guess just one quick follow-up on that is when we hear about -- it sounds like the pipeline is pretty full. How do we think about the internal governors in terms of M&A? Obviously, it's a decentralized model. So it's not what we traditionally think about is there's only a certain amount that you can kind of do in a certain period of time. So I'm just curious how you think about the pacing of potential further M&A on a go-forward basis and how you think about that just given, again, what our checks suggest is a pretty full opportunity in terms of ongoing consolidation.

Yes. Yes. Great follow-up question there, Dave. From our perspective, when we review opportunities, we stay disciplined and strategic in looking at the most opportune set of buildings that we could acquire, whether that's in a new state or that's a tuck-in in an existing region. And typically, when we sit down and discuss that through, we're looking at what is the deal cost? Is the real estate involved or not? Is there any limits on the balance sheet and the capital? And then also, we always bring in the human capital component, right, because we have to have the human capital to make the necessary clinical outcome changes to get our product the best it can to yield those financial results. So as we look to the future, we're always evaluating that, whether that's only adding 2 buildings in Q2 or adding the 28 we have so far in Q3, and we'll continue to go through that same process for every deal that we look at. As we roll out, it's hard to predict the future as far as what buildings are going to come through the pipeline. And I think we've talked in the past, and throughout this year, we've always guided towards we feel that there's a pretty easy path to acquiring 20 buildings per year. And that's what's in our out-year models because at the end of the day, those can be tucked into our existing regions without the presence of good M&A for maybe an expansion to a new state or a new region because those deals take a little longer due diligence, and we have to wait for the right opportunity to be able to expand the actual geographic footprint. So as of today, we're not changing from kind of that's what we believe the future path will be. Now that number may go up and down depending on the quarter. But from our perspective, we're going after the best opportunities that are in front of us versus chasing a specific deal or a building count.

And then, guys, just last one for me. When you look at the quality scores, can you just talk about a little bit the impact that has on the conversations with payers and especially as you start entering new states, new markets, kind of the halo effect that, that potentially has just in terms of, again, the overarching conversations that you're having with some of the payers in your market?

Yes. Good question there, Dave. This is Josh Jergensen. I'll take that one here. We talk often as a company and you hear us discuss quality measures and, in general, quality care because it is what we do, it's our product. We lead out with that all the time. We genuinely believe having operated nursing homes for a long time that if that is the primary focus of the company in each individual facility, then the financial results follow. One of those results is the ability to get a seat at the table when you're talking to managed care providers as well as other referring partners. Managed care has a certain set of criteria that they want to see a facility perform at. That involves things like star rating, quality measure rating, rehospitalization rates, other things that all revolve around care. And I think each of you understand the reason they do that is they want to make sure that there's a financial incentive as well for them to get great outcomes for their patients. And so we believe that as we continue to improve, particularly in these new facilities that we take on, the quality of care, improving quality metrics that we'll be able to go to those providers, gain confidence in them, either negotiate for the first time or renegotiate contracts that will allow for us to take on a more clinically acute patient, take a higher volume of those patients, improve reimbursement rates and continue to build a positive reputation with them and the community to take care of those patients. So for sure, we're seeing an impact. You see that in the revenue, the increased revenue that we're pointing towards. We believe all of that is ultimately a result of the care that we've provided.

Next question today is coming from Scott Fidel from Stephens.

First question, just I thought it would be helpful if you want to give us some of your thinking around the pacing of EBITDA in 3Q and 4Q that's embedded in the applied guide without giving obviously explicit quarterly guidance. But just thinking in particular about, one, just sort of seasonality or indicators in the KPIs for the buildings that you had in force through the end of the second quarter. And then second, just sort of the pacing of the new acquisitions. Clearly, I assume that, that probably has a little bit more dilutive effect on EBITDA in the 3Q relative to 4Q just as you start the integration of those facilities.

Yes. Certainly, Scott. This is Derick. And starting from kind of the last going backwards, the EBITDA accretion from newly acquired facilities is pretty much negligible to maybe a little bit. You're talking a couple million dollars because at the end of the day, our goal is to transition these buildings from 0 to 18 months and build that from kind of the breakeven to negative EBITDA in some situations to low single-digit EBITDA margins. And so our EBITDA uptick in our guidance really isn't driven from the new acquisitions, but it's driven from, as you see in the results, both our Mature and our Ramping cohorts. The occupancy has not seen a cyclical seasonal drop that we did most summers. The occupancies remain strong. The skilled mix has hung in there. And most importantly, our revenue per patient day continues to grow with capturing the acuity mix across the patient population. So really, the EBITDA uptick is driven from that. And then kind of going to your first question on how that breaks down for latter in the year. I mean quickly speaking, the winter months typically are better with higher acuity just due to more respiratory viruses and/or illnesses going through the communities. So I would anticipate maybe it picks up a little stronger towards the end of the year versus where we're pacing right now on a quarterly basis. But really, what that blends out to for the second half of the year is making up the rest of the guidance versus what we've done for the first half of the year of $188 million.

Okay. Great. And then following up on that and sort of implied in your comment, Derick, just around the acquisitions that you've done in 3Q really not contributing to EBITDA. I thought it would be helpful if you wanted to give us an update on when thinking about the embedded EBITDA in the acquired facilities, clearly, a quarter or so ago, you had sort of $100 million -- up to $100 million of embedded EBITDA opportunity in the recent tranches of deals. It looks like you're already harvesting that nicely in the first half. So just interested in sort of how you're thinking about that embedded EBITDA opportunity just given the new facilities that you're bringing on right now with very little EBITDA that are going to ramp up the forward embedded EBITDA opportunity looking out to 2025, for example.

Yes. Yes. And not to -- because we're still refining our '25 and '26 guidance. With Dave's questions and yours, obviously, the opportunity set of M&A was a little more robust than we originally started out in the year. So as we are looking to the future, what I would point to, roughly speaking, is our new buildings, we typically see somewhere between 0, 2% to 3% EBITDA margin, that Ramping, which is 18 to 36 months of ownership, that builds to high single-digit EBITDA margin. And then as we're seeing right now in our Mature facilities as well as some of the Ramping facilities that are near the end of their maturity and moving into that Mature bucket by the end of the year, those buildings producing low teens EBITDA margin. And so ultimately, as we point to that, if you think you bring in 28 so far in the quarter and the rest of the Prestige deal will be closing here by the end of Q3, you fast forward a year, those buildings should be producing 3 to -- 2% to 3% EBITDA margins as we roll into late '25. And that's what we're refining now as we look forward. But I think ultimately, we wouldn't be doing the deal if we didn't think it fit the road map of maturing the buildings that we've experienced over the other 220 buildings we have acquired prior to these.

Great. And I guess since Dave started the precedent of the third question, I'll continue that trend and sneak one more in here. Just thought it would be helpful. You talked about 3.5% rate growth for Medicaid in the first half. Interested if you could give us sort of what you're seeing on visibility into Medicaid rates in the back half of the year. And as you're seeing some of the FY '25 rates come in and sort of how you would think about that underlying Medicaid rate trend in the back half of the year compared to the first half. And that's it for me.

Yes. No, and that's great. I think part of the -- we revised guidance because of the performance, some of the Medicaid rate increases. Both from base rates and also from acuity/quality mix rate increases were a little stronger. I think as I've reviewed prior, our model in the out years kind of shows a 2% to maybe 2.5% depending on the state growth in Medicaid. But as we enter more states with case mix index, we have the ability to control that and kind of control our own destiny with taking higher acuity long-term patients. And as you look at the rest of this year, we have had some strong rate increases in a couple of states. Specifically, Kentucky and Colorado just had the large rate increases in July. We also had another rate increase in Ohio. And so we anticipate that to continue, and then as we blend through making sure that the case mix and we're capturing the acuity that we need in those longer-term patients, then we should see a healthy growth in that Medicaid rate. Now further out than that, it's super hard to predict, mainly because we cannot sit here and tell you we know exactly what different Medicaid programs or state politicians will do. But as we look to the future, we'll probably continue with our modeling of 2% to 2.5% Medicaid rate increases and depend on our operators to make sure they're maximizing that and capturing any additional rate that could be possible from quality programs or acuity programs.

Next question is coming from Jason Cassorla from Citi.

Congrats on the quarter. Maybe just picking up on the rate side. I wanted to ask about the 2025 Medicare rate note that's up a strong 4.2% at the headline level. I guess just curious on how you're thinking about how that rate translates for you, guys. Is there any considerations in terms of the wage index changes or any components of the rule that are kind of worth noting at this point?

Yes. Jason, this is Derick. I don't think there's anything that jumps out worth noting. Anecdotally, if you look back last year, I believe the rate increase from CMS overall was under 3%. But as you see, our Medicare rate for the first half of the year, we were able to drive up, I believe, 9%, 9.5%. And really, that comes from capturing higher acuity. With PDPM, we're getting rewarded financially for taking care of those clinical needs of the higher acuity patients. So instead of just taking a base Medicare patient, if somebody with comorbidities, Medicare is paying for that. And that's really our model is taking the higher acuity needs of the local patients and the communities and making sure that we're satisfying them with good quality outcomes.

Okay. Great. Maybe just shifting gears a little bit. I wanted to ask about the purchase option opportunity on your book. It looks like you have 31 kind of currently, but maybe could you just help unpack that opportunity set for you, what timing on executing those options would look like? Or just any other color as we think about the purchase options as a source of EBITDA upside kind of down the line.

Yes. This is Derick. So the options, as we view them, all the options that we have in front of us are really fixed purchase price options. And as we view those over the next, I believe, it's 3 to 4 years by the time they all kind of option windows open, is the goal would be to step in and exercise those options because ultimately, as we have the ability to step in and capture that internal rent that we're paying to third parties, it provides incremental upside for us. Instead of having that rent go elsewhere, we're able to capture that in the EBITDA upside. So that number will continue to evolve as we get more and more options because if we're not purchasing the real estate, we push hard in our deal structures to have options or access to real estate at some point in the future to be able to capitalize on the equity upside that we're generating through the strong financial results.

Next question is coming from Ben Hendrix from RBC.

Just a quick follow-up on that last one. Would the same be true for the joint venture that you entered into for the owned real estate of your latest acquisition? I think it's, what, about 25% of that you own. Would you be looking to increase your ownership percentage of that JV over time?

Yes. As of now, we're not entering into it to look to kind of change the ownership spectrum. We have a good relationship with our partner on that JV investment. It's the same partner that we've utilized in a prior investment in South Carolina. As we look through the portfolio and try to make sure we're maximizing both the leverage and the JV investment, we have the ability to work closely with them. For example, in the South Carolina, some of those buildings have been taken to HUD, with HUD financing mortgages and others. We purchased and just put on our balance sheet versus kind of staying in the JV. So it's something that we're constantly under evaluation, but we really don't start evaluating or trying to maximize the JV investment return until the buildings are at a stable point, and we believe we're getting close to stabilization and maximization of those financial results from the underlying buildings.

Great. And just one more. I appreciate the corollary you offered on that one California facility and its ability to kind of ramp up into a preferred provider relationship. I wanted to kind of get the landscape of the 4 new states that you're in, kind of what the provider relationships are there that exist and kind of your opportunity to get more of a preferred relationship in those regions. Do you know those regions well?

Yes, good question. I mean this is Josh. For us, as we enter into these new states, it's always important that we begin establishing relationships in the community. I already mentioned the quality measures that we start with, but as we go in there, that's a key component. Fortunately, in this situation, as we've evaluated not only the states that we're in, but we also evaluate the operator and the facilities that we're purchasing to see what their relationship was before. We're fortunate because in this particular deal, there are actually some very beneficial relationships that we feel we're going to be able to enter into and leverage, relationships with hospitals that have wanted to work with these facilities. Part of the reason is quality. We think there's still some areas that we can improve. But we also recognize that the outgoing provider has worked hard to build density in key markets. And so when you look at these states, a number of them are new for us. You have Alaska, Washington and Kansas, our most recent ones that we feel there's nice density from the location of the facilities close to hospitals. So as we hit the ground in any of these places as we're driving care and quality, we're also going out into the community and making sure people are aware that there has been a change and that they understand what our intentions are as far as investment into the people, to the systems, to the physical plants in these environments so that we can build confidence in those communities. So as we've done that, we feel with the ones we've just recently taken on that we're already making great progress in the couple of weeks that we've been there, and we intend on the remainder of those buildings to execute the same game plan.

Next question is coming from Tao Qiu from Macquarie.

I think I heard you have 31 leaders in the AIT program, and you are acquiring at a faster pace when we account for the Prestige transaction. Do you feel like you have adequate leadership pipeline to continue the brisk pace of acquisitions? And also maybe remind us how fast you're training out these leaders and how you make sure they adhere to the same culture and operating models.

Yes. This is an area that we emphasize internally and we talk about often because we believe this is an area where we have a significant advantage to go and grow. And as we evaluate talent in these facilities, each deal is a little bit different. Again, as we look at this particular deal that we just most recently did, although the facility count is high, we feel that there are a number of leaders that were already in place that are doing a lot of good things and will be a good fit in our model. We want to be prepared with a bench of talent in the event we need to make changes. But in this particular deal, we've met with a number of the administrators. They're local to the area. As I mentioned, a number of them have great relationships with the hospitals. There's certainly an adjustment as they come into our more decentralized model. But we believe a number of these individuals are capable to adapt to our model and get good results. And so in the event that happens that we maintain a higher number of administrators that are already in place, that just continues to allow the bench to be deeper as we evaluate other deals that we're looking at into the future.

Got it. That's helpful. And then a clarification. You initiated a stock incentive program this quarter. Help us understand what will be the run rate of stock-based comp going forward and any G&A target you can provide.

That's a great question. So of the $90 million that we booked in Q2, approximately 80 -- about $80 million was for immediate vestings on the IPO. And the remainder was for May and June entries. So roughly -- and slightly part of April for accrual for vestings next year. So that run rate comes out to a little over $4 million a month.

All right. And last question from me. In terms of the Medicaid supplemental program, could you size up the impact for the quarter from that program?

Specifically in which state or overall?

Overall. I mean California is probably a big piece there, but if you can provide any color, that would be helpful.

In Q2, is negligible. In Q1, we had some entries from the WQIP program, but California staged the payment of those this year. And so some was paid out at the end of Q1, and the remainder is set for the state to be paid in September. And so we have not recognized all of that onto our revenue for the books until the state actually pays us.

Okay. How much of that is in the guidance?

None of that is in the guidance due to -- we wait for the state because there's been years past where California stretches out for many months. And several years back, they stretched us clear into the next year. So we have taken the approach to wait for that to be paid before we recognize it to ensure that the state is going through with their commitment to pay it.

We have reached the end of our question-and-answer session. I'd like to turn the floor back over to management for any further or closing comments.

Thank you, operator. We appreciate that, and thank you all for joining us. We look forward to speaking with you soon. Have a great rest of your day.

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.