Van Lanschot Kempen NV (VLK) Earnings Call Transcript & Summary

Hello, and welcome to the Van Lanschot Kempen Analyst Call 2021 Annual Results. My name is Josh, and I'll be your coordinator for today's event. Please note that this conference is being recorded. [Operator Instructions] I'll now hand you over to your host, Maarten Edixhoven, to begin. Thank you.

Thank you, Josh, and thank you all for joining the 2021 results call today. Obviously, it's a very sad day in European history, given the events in the Ukraine today. But in that context, it's also important to share our results with you. I'll kick off today with a quick overview, then Constant, our CFO, will take over and dive into the results with you. And then we have ample time for Q&A. I think we are extremely proud as a firm to announce the best results since 2007 to you. With these results, we surpassed for the first time in our recent history all 2025 targets, a very strong result. And also very important to say, and of course, interconnected, combined with these excellent financial results, we also had excellent employee engagement and customer engagement scores. The number shows clearly that our business model and our strategy works with an ROE over 15%, net profit over EUR 140 million and a very strong capital ratio. I think we have shown in 2021 a very strong result. And as a consequence of that, we can also reward our shareholders with a EUR 2 per share dividend. Client assets over 2021 grew to more than EUR 130 billion, the highest ever for our company. And that's a growth both on the back of our organic and inorganic growth, and a special word here on Belgium, where we are very pleased with the partnership of Mercier Vanderlinden, but also our own operations in Belgium showed an excellent growth, and we surpassed the EUR 10 billion client assets under management mark for the first time in Belgium. And we've also seen an increased cross-sell of between the different activities that we have for our clients: investment banking, investment management and private banking activities as well as a very strong demand for our real assets from both our institutional and retail -- and private clients in combination with a very strong pipeline for our fiduciary management business. Of course, like any other financial services institution, we continue to invest in our compliance and risk management capabilities. The advantage we have is that we are very close to our customers, so we know them very well, and that supports our strong risk and compliance culture. And that enables us to keep a moderate risk profile. Our strategy is an independent wealth manager with an integrated approach clearly works. Sustainability, I would like to share that with you as well, is both for our firm, but also personally an extremely important topic. And we made great strides in 2021, but we will intensify our efforts there. We will do this in dialogue with the investments and the companies we're invested in on behalf of our customers and also for our own investments. But also, we do that in a dialogue with our customers, taking them along on our sustainability journey. We are committed and focused on climate, circularity and health and wealth. We are also committed and we were one of the first in the Netherlands to become a net zero wealth manager in 2050. And 2022, we will focus our efforts on introducing new sustainable investment and impact investment opportunities for our customers as well as also new solutions on the mortgage side with a sustainable edge, very important key element of our strategy. Then if you look at our overall strategy, we are continuing our successful strategy as an independent specialist wealth manager in Western Europe, with a clear focus on the activities we have. We have a unique passion for the client, and we have all 3 unique -- all 3 wealth management capabilities under 1 roof: investment banking; investment management, including fiduciary management; as well as private banking. The combination of the 3 makes us unique in our solutions for our customers. It's a name that is recognized for passion for the client with cutting-edge wealth management solutions and strong technology support. We continue to invest in our growth, and we also continue to invest both in inorganic and organic growth on the back of a strong capitalization. And Constant will dive more into that as well later on. Finally, I would like to share with you that we also would like to use this day to announce that we will move towards one brand. and we will do that gradually in 2022 and onwards. A new brand from Van Lanschot Kempen, one brand for all our activities. A leading brand in terms of wealth management solutions for customers in Western Europe, but also important as one brand will lower our cost, but also gives us a unique perspective and a unique position in the labor market. And from an employee branding perspective, that's also extremely important to attract new talent as we grow. So with that introduction, I would like to give the floor to Constant to work with you further through our numbers. And Constant, I think we can be very proud of this very strong numbers in 2021.

I absolutely share it, Maarten. So thank you for that. I'll take over from here and take you through the financials in the presentation. And I'll take the slide deck and I start at Slide 8, which summarizes our results. As Maarten said, we had a strong result in 2021, a net profit of EUR 143.8 million, which is driven by a strong growth in commission income. Also, we recorded some book profits on our participating interest portfolio. Next to that, we're very proud of the record inflow we see in Private Clients. However, also, we report an outflow in Wholesale & Institutional Clients. However, given the respective fee levels at both elements, overall, we see a significant progress in our fee base during 2021. Also, we made good progress in our footprint in Europe. Already Maarten referred to the growth that we see in Belgium, but also in the U.K. and Switzerland, we see a significant growth. And of course, the partnership with Mercier Vanderlinden that we agreed upon in 2021 resulted in the fact that our size in Belgium has doubled in 2021. Now moving to the main numbers on the next slide. These are the numbers. And of course, you see the significant increase in commission income. You see also that our interest income is relatively stable. Operating expenses up but I'll explain later the reasons behind it. And our capital ratio at the end of the year stands at 23.7%, which is slightly down from the year before. Then on the next slide, you see our detailed P&L. Most items I will explain later in this presentation, but you see also that maybe more than usual we record some special items in the P&L for which I would like to provide some comments at this stage. As you can see, we report a line called expenses related to accounting treatment of Mercier Vanderlinden. As you know, we acquired a 70% stake in the Mercier Vanderlinden, but we already agreed upon a firm transaction on the remaining 30% in a couple of years' time. As a consequence, IFRS requires us to report 100% transaction and fully consolidated, whereas for the remaining 30%, we record the liability. However, based on the specific terms of this deferred tranche, IFRS also requires us to recognize certain expense items along the way, in particular, interest and personnel expenses. On an annual basis, this amounts to approximately EUR 11 million. Of course, only for the period until the final tranche has been executed. Next to this, given the fact that 30% deferred tranche is linked to the operating performance of Mercier Vanderlinden in future years, we'll have to adjust the liability when the outlook changes. Based on the fact that Mercier Vanderlinden had a very good second half of 2021, we already increased the liability and the charge of this is flowing to our P&L and is also taken into this line. Another special item I would like to comment is the provision for revolving consumer credit. We already committed a month ago that we will as part of an industry-wide development, compensate clients and former clients for interest charge on revolving consumer credit in the past. For this, we have put aside an amount of EUR 3.3 million. You also see a line of restructuring charges that simply relates to the integration of project Hof Hoorneman during 2021. Then you see a final line, which is called other one-off items. This item refers to the fact that with the sale of Mercier Vanderlinden, we agreed upon a specific earn-out for the year 2021. As already mentioned, Mercier Vanderlinden had a very good performance. So this earn-out is payable. A small part of this charge is being offset by the release of an earn-out provision for Hof Hoorneman, which is also recorded at the same line. So I think it's good to elaborate a little bit on these items because they won't come back in the remaining part of our presentation. Now let me move to the next slide. There you see the bridge between the result of 2020 and 2021. Of course, you see that the large increase in commission income, almost EUR 90 million more compared to the year before. You also see a strong increase of income from securities and associates, which has to do with our co-investment portfolio, but also the participating interest portfolio. You see also a plus on the result on financial transactions. That can be explained by the negative results we recorded in 2020 related to our structured products. We did had it in 2020, and in 2021, we didn't have that. We will deal with the expenses later in the presentation. I think also important to note that we have also a positive difference of EUR 20 million on impairments that mainly relates to the release of impairments on our credit portfolio but also we see some reversal of previous impairments on our participating interest in that line. Now let me move to the business, and I'll start with our Private Clients business. As we already mentioned, there we see a strong inflow across the board. I think if you look back to 2021, I think you can conclude that in the previous years we invested in our propositions, we invested in IT, we invested in our people, and it seems it's paying off in a year like 2021. As I said, it's across the board. We see strong growth in all areas. But I would also mention specifically the progress we made in our entrepreneurial segment. There, we see good progress. And of course, that segment also, we see larger tickets, also you see a little bit of the dynamics changing from, let's say, larger tickets in the inflow. On this slide, it's also good to see that now 63% of our revenues in Private Clients is fee-based, which I think is an important element in the environment we have currently in. On the next slide. Just to refresh your memory on the inorganic steps we've made over the last 2 years. Early 2020, we integrated the former a.s.r. bank clients into Evi. In the course of 2020, we announced the transaction of Hof Hoorneman. During 2021, we were able to complete the transaction of Hof Hoorneman but also complete the integration and move all the clients of Hof Hoorneman to the Van Lanschot Kempen platform. During 2021, we also started with the transaction of Mercier Vanderlinden, which closed in July. I think it's nice to say that -- at the time, we have announced the transaction with Mercier Vanderlinden, which was in April, the assets under management stood at EUR 3.4 billion. When we closed the transaction, it stood at EUR 3.8 billion. When we ended the year, the assets under management of Mercier Vanderlinden stood at EUR 4.3 billion. So also, since the announcement, very good progress has been made with Mercier Vanderlinden. That is a good bridge to our overall position in Belgium, which you can see on the next slide. There you see that overall, we have made a significant step in Belgium, from EUR 4.1 billion of assets under management to EUR 9.7 billion, so more than doubled. It's, of course, the result of the transaction with Hof Hoorneman, but next to that, we also see that there was healthy inflow in our business during the year. Of course, in 2022, we will continue to tap on the synergy potential that fits within the transaction within Mercier Vanderlinden. We hope also that the Mercier Vanderlinden clients will -- the [indiscernible] will serve as a [ trusty ] bank for the clients of Mercier Vanderlinden. We already started to see more Lombard credit provided to Mercier Vanderlinden clients but also, we will look into cross-selling opportunities between the 2 entities in Belgium. Now on the next slide, a few words about Evi. Evi has made good progress in 2021. Evi is, of course, part of our Private Clients business. But if you look at it on a separate way, you see that there's an increase of assets under management of 34% during the year. And we see also a significant inflow in Evi, both from existing and new clients. So Evi had good traction during the year, and we are now looking at assets under management of well over EUR 1.5 billion in Evi. Then moving to the segment, Wholesale & Institutional Clients. There, we report a net outflow of EUR 4 billion. If you break that into pieces. I think you can distinguish a few pieces. First of all, we see an outflow from some fiduciary clients. Notably, 2 of them is as a result of mergers that took place with these clients. So they withdraw the money because they merged into -- with another institutional client. Also, we see an outflow in government bonds and in the credit mandates. The latter, of course, is also a little bit the aftermath of the loss of a part of the team that we experienced in 2020, which trickled down also in 2021. That has been offset by a significant growth in the U.K. And also this has been offset by a growth in our small cap and real assets capabilities. And the good news is that although there is a net outflow of EUR 4 billion, given, let's say, the movements of the underlying asset classes and the related type of fee, the impact on our fee base of this outflow is almost neutral. So we don't see an impact on our fee base despite the fact that we had to report a EUR 4 billion net outflow. Looking a little bit closer to our U.K. business on the next slide. There we see good progress, already mentioned, I think, when we reported our half year numbers that we saw good momentum in the U.K. While that has materialized in the second half. And you see here that we report net inflow but also basically moving assets under management from EUR 6 billion to EUR 8 billion, which is predominantly in the fiduciary management part of our U.K. business. As part of our Wholesale & Institutional activities, but also more in general, I think we see a stronger focus on less liquid solutions in our business. It's a topic that is -- that catches attention of our institutional clients but also from our private clients. And in 2021, we were able to launch 4 new solutions that generated in total size of EUR 850 million of inflow or commitment. This also includes our second private equity fund which had its first close in 2021. Another highlight in this area is our sustainable farmland funds, which we developed in co-creation with one of our clients. But now we see also there some other institutional clients have signed up for this product. So this product has, I think, a great prospective. In total, if you look at our overall suite of less liquid solutions, total number in the meantime already well over EUR 2 billion. Then getting back to our fee levels that you see on the next slide, Slide 19. There, we see a strong increase of our annualized recurring management fees. So our fee-base is based on the recurring part of our fee is strongly increasing. You see here the numbers over the last 3 years, which shows an increase of 67%, for which I think 2021 accounted for half of that. It's also good to mention that overall margins on assets under management were stable. We reported 62 basis points for Private Clients and 12 basis points for also an institutional and these fee levels look very consistent over the last time. Then our investment banking unit. Also, they had a good year. We see 13% more commission income also with a significant deal flow in our niches. Also good to mention that more and more we see cross-fertilization between the various entities within our firm, so in particular, between the investment bank and our private client business. So I think that's good to see what's happening there. On the next slide, a few comments about our interest income. Well, as I mentioned before, overall interest income is stable, although the interest climate is not helping us, I should say. The driving factors to keep this stable is twofold. First of all, we see nice loan growth, in particular in our mortgage book. And the other part is that increasingly, we are charging negative rates to our clients. As you see on the graph on the right-hand side there, you see the volume of savings and deposit money that's now being charged with negative rates, and the negative rate in our case is minus 50 basis points. And now you see that it's EUR 4.1 billion which is basically 35% of our total balance of savings and deposits, which has been charged right now. Then some specific items, and I'll start with the income from securities and associates that relates to the results we are reporting on our participating interest and the portfolio of co and seed investments. There, we report a very strong result, EUR 65 million you see here. That's a result of book profits on participating interest and also on a significant valuation gain on one of our private equity investments. Also, the co-investment portfolio did well in 2021. I should note that this is the gross result because the part of the risk in the co-investment portfolio has been hedged. The hedge is not reported here, but is reported on the results on the financial transactions. And if you look to the net result, our co-investment portfolio, it is around EUR 13 million. And a few words about our structured products. As you recall, that was one of the issues where we reported a negative [ price ] last year. At that point in time, also, we decided to change our hedge strategy and also starting to run off the book that is based on the macro hedge. And in the meantime, switch for new issues to back-to-back hedging. On this slide, you see the development of both books and you see that the outstanding volume of structured products based on macro hedging is current half since March 2020 and is going down further, of course, during this year. And overall, if you look at the P&L for our structured products for 2021, we report a very small negative result, which I think in the perspective of derisking this portfolio is a very good achievement, I would say. Then our expense base. On the next slide, Slide 24. Our expense base, we see the expenses going up in 2021. Of course, it should be noted that the year 2020 expense levels were reduced as a result of COVID. And now we see, let's say, in 2021, an increase. The main drivers here are the 2 acquisitions that took place of Hof Hoorneman, which wasn't in the P&L for 2020, is included now for a full year. Mercier Vanderlinden is included for a half year is also in the expenses. Also, we see a significant increase of our variable compensation, which relates to the group's financial results and some incidental payments that we made to all our employees in 2021. Furthermore, you see that overall expenses increased also to some extent related to an increase of regulatory charges, but also you see that we did invest also in our organization. And I would like to note that also in the coming years, we will continue to invest to provide for future growth in our business. Now moving to our loan portfolio. I already mentioned that we see a healthy growth of our mortgage group, about 5%. Next to that, also, we see a growth in the block other loans. That is mainly related to a number of Lombard credits. In particular, in Belgium and Switzerland, we see a strong appetite for that. That's all within, let's say, the strategy we want to execute. So overall, a healthy development over here. Also, I would like to note that if you look at the impaired ratio, it stands now at 1.7%. The year before, it was 2.2%. So it shows that the health of our loan portfolio has improved in 2021. That's also visible in the release of loan loss provisions that we report. We report a net release of loan loss provisions of EUR 11.7 million in total. Part of this release relates to the so called management overlay. At the end of 2020, we decided to put the management overlay on top of the normal provisions because of the uncertainties related to COVID. During 2021, we released, say, 2/3 of that provision and so that's part of also the total release that we show here. Now moving to capital on the next slide. Net-net, we report a small decrease of our capital ratio from 24.3% to 23.7%. However, it should be noted that, of course, the Mercier Vanderlinden transaction took 3.7% points out of our capital ratio. This has been offset to a large extent by retained profits and the number of projects that we executed to further optimize our risk-weighted assets. As you know, on January 2020 the Dutch Central Bank requires banks to hold more capital for residential mortgages. In our case, that leads to a decrease of our CET1 ratio by 3.2 points starting in January '22. This means that if you do the math, our capital ratio effectively stands at 20.5% for early January '22. This is still a very solid capital ratio and well above our target range of 15% to 17%. This provides sufficient dry powder for possible further M&A transactions. And furthermore, going forward, we might also resume our tradition to pay out excess capital to our shareholders, which, of course, is subject to approval by our regulators. Then I move to the last slide, where we summarize our financial targets and our performance against these targets. And as it shows, we are well meeting all our targets that we had set, including the efficiency ratio, which has been the most toughest one over the last years, but now we report an efficiency ratio of 68.9%. Also, our return on CET1 is above 15% so that an overall shows the good performance for 2021. That's where I want to leave it. I think this is the point where I'll go back to the operator and open the floor for questions.

[Operator Instructions] The first line comes from Cor Kluis from ABN AMRO ODDO BHF.

Congratulations with the strong sales. Few questions. First of all, on Mercier Vanderlinden. Last year, I think in April, it was EUR 3.4 billion AUM and today or at least at the end of last year it was 4.3 billion. So EUR 900 million growth, it's quite impressive. Which part of that EUR 0.9 billion AUM growth was from net inflows? And the other parts were market effects. So that's my first question. Second question is, given what's currently going on the stock markets due to what's happening in Russia. We see, of course, [indiscernible] around EUR 0.3 billion stakes in firms and associates. Can help us a little bit to create [indiscernible] with 20% lower stock markets for the P&L from that book, which also hedges on it and probably [indiscernible] equities and not [indiscernible] liquid. So could you help us a little bit with that? . And also on the expense side, is there something you can say for the expenses for 2022? Or is it more an approach that we will see step-by-step depending on stock markets will develop in the rest of the year? And maybe last question, more qualitative for Maarten. Looking [indiscernible] in at this stage, you could on the company and especially related to today's situation. Can you give your views on how you look at M&A versus capital return to shareholders and what opportunities do you see? And what your view on allocated capital going forward? Those are my questions.

Okay. Thank you, Cor. Let me take the first 3 questions, and I think that Maarten can explain the last two question. With respect to Mercier Vanderlinden, while we were very pleased with the developments over there. And I mentioned the numbers, I mentioned 3 numbers at the announcement, the closing and the end of the year. I don't know exactly the numbers between announcement and closing, but I know the numbers between closing and the end of the year. And for that amount, I know that the inflow in the second half, basically was more than EUR 200 million. So the part is market performance but also the significant inflow we saw in Mercier Vanderlinden during the second half. Your other question about exposure to stock markets, specifically related to what we call securities and associates. That indeed the book, with a book value of EUR 300 million. I would like to note that, that book is not only equity investment but significant investment in credits, but also in alternatives because basically also there, the tradition is that you show also your commitment to these products by co-investing. If there is an equity exposure, sometimes we also have the tendency to hedge it. So I would say don't take the EUR 300 million at full value in this respect. But yes, if, let's say, we are facing pressure on equity markets, it will certainly, I think, also put some pressure here, but certainly not at the levels of EUR 300 million, a large part of this is not in equity exposure. Your question about expenses '22. That's a difficult question to answer specifically. I think I made a note that we would keep investing in our organization and our team. We feel and I think the numbers show that we have good momentum in our business. It also justifies that we keep investing. I don't think that we'll be distracted by some movements in the equity markets right away. So I would say, we will stick to our strategy, and we keep building our organization. And I think that will be visible to some extent in our expenses. But you know our style. We are very conscious about the cost management as well. So no worries.

Yes. Let me take your last question, Cor, on deploying our capital for M&A or capital returns. We will continue the existing strategy there. I think for our organic growth, given our business model, we need very limited capital. For our inorganic growth, I think the company has an excellent track record as we've also shown with Hof Hoorneman and Mercier Vanderlinden transactions to deploy capital wisely. And we will be looking at and continue to look at opportunities in the market for M&A, especially in the Netherlands and Belgium for private banking. For investment management, we look at selected Western European countries. So a very focused approach in segments we know very well and where we can create great synergies and continued growth strategy. Having said that, if those opportunities don't arise, then we will assess each opportunity on its own merits, then we will continue our policy of, as Constant already said introduction of returning that excess capital to our shareholders and -- which has been done, I think, with over EUR 400 million over the last couple of years as well, excluding the 2021 dividend.

Our next question comes from the line of Benoit Petrarque from Kepler Cheavreux.

So the first one will be on also kind of strategy, and I was wondering here on the wholesale and institution business where scale is important, especially on the low-margin business. Whether you think you are the best owner for these type of assets. Van Lanschot has been focusing really on high-quality and high-margin business. But I was wondering how you see the low margin business going forward? Do you also see room for acquisition and M&A? And yes, what are you seeing there on that business? Because 2021 has been a bit of a tough year with somewhat slows on that segment. The second question is on the payout ratio of 53%. I was wondering here why -- well, this is on the low end of the 50%, 70% despite a very strong capital. So first question will be is the 2 percentage points efficiency gain on capital kind of a recurring level and distributable level potentially. And also on the timing on the kind of distribution versus M&A, do you want to keep an M&A buffer for some time? Or can we already expect some special distribution in 2022, say end of 2022, if you've not seen or not found any opportunities on the M&A front? Third one will be on the cost side. Yes, here I was just wondering in terms of -- I know you will remain disciplined, but how much kind of cost inflation do you see in 2022 for your business? That would be third question there. And then the last one is on the kind of net inflow. You had a very strong start of the year in 2021. We see a little bit of a slowdown in H2, still very strong, but a bit of a slowdown. And obviously, the financial markets are quite complex into 2022. There's volatility, rising rates, low equity, geopolitical uncertainties. So what is -- what will be the appetite from private bank clients towards more risk on the portfolios you think, on this -- in this context.

Thank you, Benoit. I think the strategy question, I'll leave that to Maarten, but let me deal with the financial questions you raised. Yes, first of all, the payout ratio of 53%. I believe I think EUR 2 per share, it sounds nice and I think it's a nice number. It is almost 3x dividend for [ 2020 ], so I think we think that is -- well, the adequate number. Your question where, let's say, the RWA optimization that we executed in 2021, whether they're sustainable? I believe it is because this is mainly things we did, yes, on the background in terms of connecting systems, et cetera. So we think that is sustainable. I'd also like you to note that we squeeze the lemon here. So don't expect anything like that going forward. This was a one-off effort with money subprojects, which we executed, and I think we completed successfully. On the cost side, your question about inflation. Yes, interesting question. I think at this point in time, it's all okay, but at the same time, we experienced quite some pressure from labor markets. So labor market, in particular in professional services, and we consider ourselves as a professional service organization. We see that labor markets are tight. So -- and we want to have the good people on board. So yes, in particular, in that part, I could see some upward pressure, but of course, there also we will take a very conscious approach on how to do that. With respect to your question regarding net inflow and -- well, the current situation, I'm not going to comment on, let's say, how we started '22. But overall, our feeling is that there's still a lot of money in the market. You see entrepreneurs selling their business and looking for ways to deploy the money in an investment portfolio. And I think that's our experience last year that we see that these type of prospects or clients come our way, and we can help them very well. And I don't see the reason why that wouldn't continue in '22. And of course, people are sometimes driven by sentiment on stock market. At the same time, I think we are a house, there is more focused on long-term investments. So from that perspective, yes -- well, we have good hopes that also '22 might be a successful year in that respect.

Yes. Thank you, Constant and Benoit, on the question on our strategy on the wholesale institutional side. We are very committed to that segment. Obviously, indeed, the margins are lower than in the Private Clients segment. But what we do see is that we are changing, let's say, the mix in terms of in and outflow of the lower margin segment within also the institutional towards the higher margin. For example, we lost a mandate in EUR 1 billion in government bonds, but we are increasing our -- as Constant also explained in the introduction, our exposure to more, let's say, the less liquid, higher-margin business, which is now already EUR 2 billion, and we see healthy inflows there. We see also a very healthy growth of our U.K. fiduciary management business, which also has higher margins compared to the Dutch business. So it's a combination of changing the mix within the Wholesale & Institutional Clients business, but -- and that's also extremely important. We see increasing cross-sell within the Wholesale & Institutional Clients segment and the Private segment, where you see the higher end of individual clients also taking up products and services that we offer to our institutional clients. And that's really, I think, a very strong trend, which really plays well into our business model. In terms of M&A, yes, like I said before, we will be deploying capital very wisely. And obviously, there, we will be looking for also candidates that are fit with our chosen market segments within the investment and within the Wholesale & Institutional business that would strengthen our model there. But also without M&A, we believe we can run a very healthy and profitable segment there.

Thank you very much. We have no further questions in the queue, so I'll hand you back over to the speakers.

All right. Thank you all very much, and thank you for the active dialogue. Once again, we are very proud of the trust we have from our customers and our shareholders, but also all the work that has been done by our staff to make these results happen in times of corona and volatile markets. We are confident also given our pipeline on the future. We are looking forward to see you and have a much deeper dialogue even on May 11, when we will have our Capital Markets Day, where we will give an update on the progress of our a well-defined strategy, and I'm looking forward to meet you personally there as well. Thank you on behalf of the crew here for your attention.

Thank you very much for joining today's call. You may now disconnect your handsets.