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Good evening. My name is Marie, and I will be your conference facilitator for today. At this time, I would like to welcome everyone to DaVita's First Quarter 2018 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. Thank you.
Mr. Gustafson, you may begin your conference.
Thank you, Marie, and welcome, everyone, to our first quarter conference call. We appreciate your continued interest in the company. I'm Jim Gustafson, Vice President of Investor Relations, and with me today are Kent Thiry, our CEO; Joel Ackerman, our CFO; Javier Rodriguez, CEO of DaVita Kidney Care; Jim Hilger, our Chief Accounting Officer; and LeAnne Zumwalt, Group Vice President.
Please note that during this call, we may make forward-looking statements within the meaning of the federal securities laws. All of these statements are subject to known and unknown risks and uncertainties that could cause the actual results to differ materially from those described in the forward-looking statements. For further details concerning these risks and uncertainties, please refer to our first quarter earnings release of earlier today and our SEC filings, including our most recent Annual Report on Form 10-K and subsequent filings. Our forward-looking statements are based upon information currently available to us, and we do not intend and undertake no duty to update these statements.
Additionally, we'd like to remind you that during this call, we will discuss some non-GAAP financial measures. A reconciliation of these non-GAAP measures to our most comparable GAAP financial measures is included in our earnings press release filed with the SEC and available on our website.
I'll now turn the call over to Kent Thiry, our Chief Executive Officer.
Thank you, Jim, and welcome to all on this call. We are, first and foremost, a caregiving company. Therefore, I will start, as always, with some of our clinical results. CMS recently released the latest five-star results for the kidney care community in April, in fact, and the industry mix of four-and-five-star centers increased from 41% in 2015 to 53% in 2016. It says wonderful things about our community overall in terms of improving care year after year after year.
In addition, DaVita's mix increased in the same period from 42% to 56% and we still long for the days of yore when there was a forced curve for these rankings, but very happy with our leadership position with respect to the current system as well. And if we hasten to add and remind people that these improvements in quality of care are not only good for our patients and their families, but they're also great for the taxpayer and that they lead to improved health and reduced hospitalizations.
Now onto the three summary points of this call from a pure business point of view. JR will talk about it in more detail, but the quarter, as many of you have no doubt already observed was a strong one for U.S. Kidney Care. Second, the DMG sale process continues to progress on track. And third and finally and equally significantly, we deployed significant amounts of your cash towards share repurchases.
I'll come back a little later with another thought or two, but now over to Javier for U.S. Kidney Care.
Thank you, Kent, and good afternoon. The first quarter was a good start to the year with solid operating performance in our Kidney Care business. Aside from changes in calcimimetics, which I will discuss shortly, it was a pretty straightforward quarter operationally. Normalized non-acquired growth was 3.4%. Net revenue per treatment was up slightly excluding the positive impact of calcimimetics and the additional Medicare bad debt revenues of $24 million, open enrollment in commercial and ACA plans were stable, and we had good performance in operational cost and G&A, offset by the increase in our workforce costs and seasonal payroll taxes.
Now for some detail on calcimimetics, starting in January of 2018, this class of drug was included in our Medicare reimbursement on a cost-plus basis. This is our first transition of a drug class from Part D to Part B reimbursement. The transition introduced significant operational changes in our clinic, billing and contracting teams. We spent the second half of 2017 developing processes and systems and training teammates for this change. While it is early, I am encouraged with the transition to date. As you know, there are still several open matters, in particular timing of when the generics to be introduced, physicians prescribing patterns between the oral and injectable product, and the future transition of calcimimetics into the bundle.
Now, let me transition into union-backed initiatives we are facing. These initiatives attempt to cap reimbursement by ignoring the costs actually required to operate a clinic. They have already led us to cancel and postpone new clinics in California despite the need due to an already high capacity utilization in the state.
If the initiatives were to pass, we believe a legal or regulatory intervention will be needed to prevent negative impact on access to care for this vulnerable patient population and could have a broader impact on utilization of hospitals and emergency room resources in the state. To counter these initiatives, the dialysis industry and other healthcare groups are working together and have hired experienced advisers. We're committed to advocate and represent the voice of our patients, our teammates, and our shareholders, and do what is necessary to educate voters on the risks and flaws we see in these initiatives.
Finally, I know you're looking for us to handicap the outcome, but at this juncture, it is difficult to predict. I will note, however, that if the ballot initiative fails, unfortunately, it is not likely to end the union's corporate campaign.
Now moving on to policies that benefit patients, we continue to be excited about the prospect of transforming patient care in the dialysis industry through the PATIENTS Act. We have an unusual amount of bipartisan support in both chambers of Congress with 178 co-sponsors. While it will be a significant lift to get this transformative legislation approved this year, we believe we have a real shot.
During the quarter, we made progress on other important issues to the kidney care community, including legislative provisions that authorize private accreditation for dialysis providers, which could lead us to open new facilities faster in certain states. We also got reauthorization on Medicare Advantage Special Needs Plans, including C-SNPs, which have been set to expire January 1, 2019.
And lastly, we also have now allowed PD and HHD patients and their physicians to substitute two of the three monthly in-person physician visits with a telehealth visit, which we expect to facilitate growth in the home modality. These are all good steps forward for patients and providers.
Now, on to Joel for financial details on our results.
Thank you, Javier. Operating income from continuing operations for the first quarter was $411 million. The quarter contained a few items that are outside our run rate. First, we recognized $24 million in Medicare bad debt recoveries relating to the change in revenue recognition standards. This is in line with what we mentioned last quarter. In the second quarter, we expect to recognize another $6 million to $8 million. Second, we recognized $17 million related to prior period shared savings revenue from our DaVita Health Solutions business. We do not expect this to recur next quarter.
Net dialysis revenue per treatment was up approximately $23 from Q4. Approximately $19 of this came from the calcimimetics change and $3 is from the Medicare bad debt recoveries I mentioned before. Adjusting for these factors, RPT was up about $1 versus Q4.
Our dialysis patient care cost per treatment was up approximately $25 from Q4. Most of this was the result of the addition of calcimimetics to our dialysis cost structure. Other smaller items were the headwind for the 401(k) match we implemented this year, increases in salaries and wages, seasonally higher payroll taxes, and one fewer treatment day in the quarter.
The overall impact on operating income from the reimbursement change for calcimimetics was roughly breakeven, as a small positive margin in the dialysis and lab segment was offset by indirect costs and operating income declines in our strategic initiatives and corporate segment.
Dialysis segment G&A cost per treatment were largely in line with both the first quarter of 2017 and with the full year 2017 average. We continue to expect dialysis segment G&A per treatment to be roughly in line with last year's levels.
Looking at the full year, we're continuing to expect our Kidney Care operating income to be in the range of $1.5 billion to $1.6 billion.
A few words on the DMG sale. We continue to be on track to close the transaction in 2018. As disclosed in March, we and Optum received a second request from the FTC, and we are working diligently to respond.
On to international. In the first quarter, our operating profit in international was $1 million, excluding a $3 million foreign exchange loss from the cash balance in our Asia Pacific joint venture. We continue to expect to achieve sustainable profitability by Q4 2018, excluding any foreign exchange gains or losses. This is incorporated in our enterprise guidance for continuing operations for 2018.
Regarding taxes, our effective tax rate on income attributable to DaVita from continuing operations was 27% in the quarter. We continue to expect our effective tax rate from continuing operations in 2018 to be between 26.5% and 27.5%.
Now, cash flow. Operating cash flow from continuing operations was $206 million for the quarter. This was lower than our expected full-year 2018 run rate, due primarily to an increase in AR from calcimimetics and seasonal decreases in accrued compensation in the quarter. I will note that our DSOs were down one day quarter-over-quarter in U.S. dialysis and lab segment. We continue to expect operating cash flow from continuing operations for the year to be $1.4 billion to $1.6 billion.
Now, on to CapEx. First, I wanted to add some detail to our disclosure about our development CapEx. Included in the development CapEx in Table 7 of our press release is capital that we spend for buildings we develop from the ground-up, which we then sell and lease back, as well as the full CapEx amount for clinics that are owned with JV partners.
For both these items, a portion of the capital outlay is temporary and eventually covered by either the buyers of the building or our JV partners. To ensure you have the details to take these factors into consideration when evaluating our cash flow, I would point you to a new line we added to Table 7 called sale of self-developed real estate projects, and to the contributions from non-controlling interest line in our cash flow statement. We hope these will help bridge an accounting view of CapEx to more economic view of cash generation of the business. We continue to expect total CapEx for continuing operations to be around $925 million for 2018. This includes some non-recurring capital spend in 2018. We still expect 2019 CapEx to be more in line with 2017 spend of approximately $800 million.
Looking forward, we are evaluating opportunities that could lower the capital intensity of our business and are working with physicians, patient groups, payers, and regulators to increase capacity utilization, lower the cost of center construction, and grow home dialysis. If successful, we think these efforts could lead to a stronger ecosystem that works better for all stakeholders.
Finally, on share repurchases. Through May 2, 2018, year-to-date, we have repurchased 8.5 million shares for $574 million, representing nearly 5% of our shares outstanding. This includes approximately $500 million of stock repurchase since our last earnings call. We view this as an early deployment of the enhanced liquidity we expect following the close of the DMG sale. To facilitate these buybacks, we have taken on higher leverage in the short term and have put in place an incremental Term Loan A as an extension of our current credit agreement. We expect to enter into new financing arrangements subsequent to the close of the pending DMG transaction.
Now, I'll turn it over to Kent for some closing remarks.
Thank you, Joel. Before we transition to Q&A, please allow me six quick restatements. Number one and perhaps most important, U.S. dialysis operations are once again strong in every regard. Number two, the DMG sale continues to be on track. Number three, we do have some active swing factors on both sides of the fence, negative things like the union corporate campaign and positive things like the good shot at the PATIENTS Act in integrated care.
Number four, we continue to be very well-positioned long term to provide integrated care to the large American kidney disease population. Number five, we're seeing some nice improvement in our international results. And finally, number six, we continue to generate strong cash flows, which we continue to deploy with discretion towards growing our business and towards significant share repurchases.
And with that, operator, can we please move to Q&A?
Thank you. We will now begin the question-and-answer session. As of the moment, we have four questions on queue. Let's start with Kevin Fischbeck of Bank of America. Your line is now open.
Great. Thank you. So, on the – couple clarification questions first, the Medicare bad debt number, I guess as the way to think of the quarter from a normalized basis is it's kind of just take out that $24 million number to kind of see what a clean quarter would be. Is that the way to think about it?
I think that's fair. And I'd also point to the $17 million from the DHS as a non-recurring item. So if you really wanted to normalize, you'd take out both of those.
Okay. But both of those things were already contemplated in the guidance, so that's not a back-out versus the guidance. It's just more kind of back out to a clean base number.
That's fair.
Okay. And I guess, I'm trying to figure out how to think about the calcimimetics for the rest of the year. I just had to model it. My guess is the answer is that it's not going to be a big earnings driver no matter how it plays out. But is the assumption that that number should kind of decline over time throughout the year as the company gets better at kind of moving to generics and managing the utilization of that drug, so we should be kind of assuming less of a boost to revenue and also less of a cost (17:20) number be relatively stable to Q1?
I think the beginning, Kevin, is – where you started out is the right way to think about it, which is in aggregate, it'll be economic neutral to slight positive, and there would be a temporary up if generics come out. So, that's probably the best way to think about it.
Okay. But we should kind of think of a revenue cost effectively it comes down a little bit as the year goes on?
I think, right now, we don't have visibility of that because the best way to think of it is we've had some operational changes in where it goes and what line item. But clinically, we're not seeing any change of yet, so hard to predict what you're asking.
Okay. And then, maybe the last question. It's in the commentary around the CapEx spending and it seemed like for the first time – I don't know if you guys were ever against home hemo certainly. I think you always viewed it as an important part of the benefit. But it almost sounded like you were planning on doing it a lot more prospectively and that was a maybe initiative that we haven't really seen from you in the past. Has something changed there about your view about the need for – or the opportunity in home hemo over the next few years versus how you thought about it over the last few years?
I don't know. Kevin, this is KT. We have been a leader in growing PD and HHD for the last decade relative to most of the community, big or small, for profit or not for profit. And so, it's been a significant part of our last decade. It's had an impact on de novo decisions and CapEx decisions, et cetera. And so, we are continuing to consider it as one of the very important variables in making regional strategic decisions. And so, maybe it's a slight change, but it's actually just pretty darn consistent with what we've been doing for a decade, and we're going to maintain the same intensity level going forward as far as to where we are today compared to ten years ago.
Any reaction to the CVS announcement around they're trying to push into home hemo on dialysis?
Yeah. Kevin, this is Javier. I've gotten the question asked by many people, and the reality is that we don't know exactly what they're going to do since there's not a lot of details out there. As you know, we've had intense competition in the past, and we are working hard and we will do so to compete effectively going forward.
All right. Thank you.
Thanks, Kevin.
Thank you. Thank you. Our next question comes from Justin Lake of Wolfe Research. Your line is now open.
Thanks. So just want to go back and make sure I'm crystal clear on the $47 million. So you're saying whatever number you end up with this year in terms of EBIT or operating income, I should take $47 million out of that number as the right jump-off rate to go into 2019?
I'm sorry, Justin. It's Joel. I apologize. Can you say that again? You're asking about the annual run rate against which you would compare 2019?
Yeah, Joel. Basically, what I'm asking here is if you do $1.5 billion in operating income, right, Kidney Care income, I need to back $47 million out of that to think about the right jump-off rate for growth in 2019, because that $47 million is not going to recur next year.
Yeah. I think it's $41 million. It's $24 million plus $17 million. But I think you're thinking about it correctly that these are non-recurring, not...
Well, there's going to be another $6 million to $8 million next quarter.
I'm sorry. Yeah. So that's fair. Yeah.
Okay. Just wanted to make double sure I'm clear there. So then in terms of commercial mix, can you give us an update there on any changes in the quarter? And maybe even tell us the impact on revenue per treatment, either sequentially or year-over-year from commercial mix change?
Justin, as you know, we don't guide quarterly on mix. What I can sort of state because it feels so important is that we are in a normal environment, and in the past quarters we tried to give you a little sense of what that meant in our portfolio. And right now we're in a stable period, and that's reflected in our revenue per treatment and in our guidance.
Okay. So stable commercial mix?
There's nothing that I'm – that I would give you additional detail. How's that? It's embedded in our guidance.
Okay. So – okay. So maybe I can come at it another way, then Kent. I think you talked fairly positively about commercial pricing and contracting coming into 2018. So I just want to try to understand how this squares up to, it looks like about a $1 increase in core revenue per treatment. I know the Medicare rates are almost zip, but I think you get $1 there. So why is the commercial price driving a little bit more of an increase there if mix is stable?
I'm going to take a stab at it, Justin, although there's a lot of puts and takes, of course, but I think the primary point that we made last quarter or last quarter and the prior quarter was that we had an unusual and positive level of long-term stability baked into five out of the six largest contracts we have. And so it was more about the stability at what we think are reasonable rates. That was a distinction from much of their prior year's history.
Okay. And when you talk about reasonable rates, I always have thought about those as more like 2% to 3%. Is that what we're seeing there, kind of inflationary-type rates?
Yeah. I don't think we want to start giving answers on specific percentage changes, given we're always involved with all sorts of negotiations with all sorts of payers.
And again, the point we made, which was a positive one for shareholders, was about the longer-term nature of a lot of the contracts, especially the big contracts, and at rates that we think are reasonable and fair. So those were words we hadn't been able to say for the prior year or two or maybe even three. And so it was good for you all to know that.
But we really have never gone quarter-by-quarter or year-by-year talking about weighted average commercial increases, because that then can get in the way of our negotiations.
Okay. I'll jump back in the queue. Thanks, guys.
Thanks, Justin.
Thank you. Our next question comes from Gary Taylor of JPMorgan. Your line is now open.
Hey. Good afternoon. I just want to go to the shared savings in the quarter. Maybe could you just remind us a little bit, what participation you have that's driving that? Because I know it added about $14 million in the fourth quarter, and I guess technically you said, don't assume that would recur in the fourth quarter. You didn't necessarily say it may not recur ever. So was this quarter a surprise? But just kind of remind us where you're participating and the scale of that? And why you don't think you might have equivalent earnings from the program next year?
I'm sorry, Gary. Could you repeat?
Yeah. On the shared savings, earnings contribution, the $17 million you're talking about. In the fourth quarter, you had about $14 million and you suggested we probably shouldn't assume that recur. So it looks like this came in better. Could you just kind of remind us the scale of your participation and why you don't think these types of earnings would continue going forward?
Yeah. Those were non-recurring settlements with one of our clients. And so they don't reflect any sort of ongoing profit flow. And that's why we used the phrase non-recurring. So that reflects some good business success, but it's not a regular operating result. It was more a negotiated result after the first phase of a big project.
Got it. Two more quick ones. I thought Joel said excluding – I presume this is what he meant – excluding the calcimimetics impact that dialysis segment revenue per treatment would be in line with last year. Were you speaking to the quarter or were you talking about 2018 overall versus 2017?
So, Gary, I said it would be up about $1, which is Q1 2018 over Q4 2017. That's backing out calcimimetics as well as the Medicare bad debt recovery.
Okay. You didn't make a comment about the full year of 2018? Maybe I just didn't understand that correctly.
No, I didn't.
Okay. Last question. So you called about $19 of revenue per treatment impact from calcimimetics. Fresenius this morning said $11. Any thoughts on why your number is more sizable than theirs? I know you guys do plenty of market intelligence.
No. We obviously were told of their number, but we don't have a good reason for the difference.
Okay. Thank you.
Thank you.
Thanks, Gary.
Our next question comes from Lisa Clive at Bernstein. Your line is now open.
Hi. A few questions. First, just on the California situation, thank you for the detail on that. We heard from Fresenius earlier today that it sounds like Arizona may not be moving forward. It would be great to just hear your views on where things stand on whether a question gets on the ballot in Arizona and Ohio. And also SEIU has apparently budgeted about $15 million to push the initiative at least in California. I believe Javier mentioned that it wasn't just the dialysis industry joining the fight on this. So I assume that means you'll get sort of financial help from other interested parties, but it would just be helpful to understand the approach here.
And second, you mentioned the Dialysis PATIENTS Care Act is getting a lot of attention. Do you have any specific piece of legislation that you have your sights on as a vehicle for this? Do you think there's enough time before election season and campaigning really kicks off? Or will this more likely be a 2019 event?
And then just lastly, could you just give us an update on the acute market in U.S. Dialysis? FMC seemed to allude to, I think, losing a contract in acute care. I was just wondering if you've picked up anything in particular there and whether that was part of your fairly strong organic growth in the quarter.
Okay, Lisa. Let's take them in order. The first one on Arizona and Ohio and what's going on with the ballot initiatives. While we hear rumors, there's no real confirmation whether it has dropped out in Arizona and Ohio. So we continue to be optimistic in both states. And as it relates to the size of the investment, of course, we're going to try and get as many people to participate economically, and we will do what it takes to make sure that our patients' and our teammates' voice, shareholders' voice is represented. So too early to tell. As you know, these campaigns can have major fluctuations in the size of the investment depending on how they play out. And so I don't know. Did I get to all the points on the ballot there?
Yeah. Actually, just one follow-up, there is still no real major costs for fighting these initiatives included in the guidance. Correct?
That's correct.
Okay.
Okay. On the last one, and I think I'll let Kent talk about the policy point. Let me just take on the acute. We have worked very hard in our acute business to make sure that we keep pricing discipline and we work hard to stay profitable. We win and obviously sometimes we lose accounts, but the business continues to be a good contributor for us. And this high flu season actually had some give and takes from our center into the hospital, but it is a good business for us.
And on PATIENTS Act, it's just really hard for all the reasons you know to guess what might be available as a vehicle. There's certainly going to be some legislation that passes before January 1, 2019, because they have to do certain things, although sometimes they seem to be able to avoid doing even what they have to do. So I say that without total certainty but certainly very high probability, and we'll be competing with other people for whatever vehicles exist. And whether that's in the second half of 2018 or the first half of 2019 is just pretty difficult to handicap.
Okay, thanks.
Thank you.
Thank you. Our next question comes from Justin Lake of Wolfe Research. Your line is now open.
Thanks. One more numbers question in terms of the revenue per treatment. Just want to confirm that the shared savings dollars don't flow through revenue per treatment, that $17 million, right. That flows through ancillary?
Correct.
Okay. And then getting back to the SEIU and, Javier, I know you said they're coming on multiple avenues, so maybe we could just talk about a couple of the other ones. The SEIU and some plans joined to send a letter to CMS on patient assistance. Curious if there's any feedback from CMS here on their thoughts regarding their willingness to reengage here.
Yeah. Thanks, Justin. As it relates to the letter to the Secretary, I would just say that it is normal for the new Secretary to get involved and for some of the people to try to respin-up the story because of their special interest. We, of course, have responded, and the AKF has responded because that letter has a lot of misleading allegations and a lot of things that had been debunked by the community, just factual things that need to be debunked.
So in general, we have not heard back from them, but we know that the counter-response that the American Kidney Fund letter has on their website is very, very good and very clear. And so we're happy at the response, and we have not heard whether they're engaged.
The other thing that's important to consider is that the numbers speak for themselves. The individual market medical cost attributable to ESRD is just lower now than the group market. And so what that means is that the risk distribution is now in favor of the plan. And so the numbers speak for themselves that there's no there-there. And so I'm hoping that when they look at the facts, they will reach the same conclusion.
Got it. And then just in California, on the legislative side, looked like there was some legislation introduced to, I guess, force the dialysis community or the AKF, I guess, to disclose any patients that are getting charitable assistance.
So I want to make sure I'm understanding that correctly, and what you think the potential impact? I'd love to hear your thoughts on whether it passes or not. But if we just assume that it did, what would the potential impact be that you should think we should consider?
I think, Justin, you're talking about SB 1156, the Senate Bill, which is again a payer and a union with a different agenda and trying to put some kind of restriction on CPA and sort of the typical thing that we've disclosed where the payer is wanting to avoid coverage for the sick, and the union is trying to lever the dialysis industry. So what we're trying to do is obviously, work with the legislation to educate them.
And this bill is more extensive than dialysis, not just the AKF. And so we will be working with other constituents to make sure that legislators are educated.
Okay. And just following up on Gary's question around the run rate, or this $17 million or the run rate on the shared savings, is there a run rate that we could think about as being a reasonable contribution for your participation in these plans that we should think? And maybe it's not $17 million. Or – but should we assume that they're zero next year?
Yeah. I think zero is a safer assumption going forward.
And given that you're participating in these, are you saying that you don't see yourself participating going forward? Or you don't think there will be any savings to share? Why would it be zero?
It's a very small startup operation, Justin, with disproportionate expenses relative to its business base. And so there's going to be ups and downs and puts and takes. In the context of the broader enterprise, they're going to be really tiny. And so it just, I think, makes sense to call it a neutral, and then we'll wait and see if at some point it starts to generate numbers that are worthy of your attention.
Got it. Got it. In terms of, Joel, you gave us some helpful numbers in understanding what your true economic CapEx was, and I really appreciated that. You mentioned you're evaluating opportunities to lower CapEx. You talked about center construction cost by adding capacity. I assume you mean you're going to increase capacity at existing centers? Meaning almost knock down a wall and put another set of chairs in there, relative to building an entire another center? Decreasing...
I'm sorry, Justin. My comment was about increasing capacity utilization, not about increasing capacity. So it actually would not require any marginal CapEx.
Okay. So I guess what I was really trying to get to here is just if you saw yourself as being successful there, relative to the $800 million run rate that you talked about for next year, if you hit on all of these things, how much of a dent in CapEx do you think that could make?
So I appreciate the question. I know exactly where you're coming from. It is just too early for us to speculate on if this initiative will be successful and at what magnitude.
Okay. I apologize. I'm rambling off because I think I'm the last person to ask a question here. So I won't get back to jump in the queue. So I got one more for you. In terms of – it's good to see that you're looking at your stock as an attractive investment. You're buying it ahead of the expected DMG close. So, one, it makes everyone, I assume, think that you feel pretty confident that this deal is going to close despite the regulatory timeline.
But as importantly, when this does close, it sounds like it's going to close before we might have clarity on the ballot initiative. Do you see yourself potentially stepping forward and doing something even more material once you have full visibility on the close and have access to that cash while the stock is in this limbo, or do you think that's not something that you could see yourself doing?
Yeah. Justin, we're not going to speculate on timing and process and methodology for the share buybacks. We're committed to the buybacks as we've talked about in the past. How exactly those will play out is very hard to predict.
Okay. I'll leave it there then. Thanks, guys.
Thank you.
Thank you. We show no further questions on queue.
Okay. Thank you all very much for your time, attention and questions. And we'll work hard for you in between now and our next quarter. Thank you.
Thank you. That concludes today's conference. Thank you for your participation. You may now disconnect.