Good afternoon. My name is Alex. And I will be your conference operator today. I would like to welcome everyone to the KB Home 2021 Fourth Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Following the company's opening remarks we will open the lines for questions. Today's conference call is being recorded and will be available for replay at the company's website kbhome.com through February 12. Now I would like to turn the call over to Jill Peters, Senior Vice President Investor Relations. Jill, you may begin.

Thank you, Alex, good afternoon, everyone and thank you for joining us today to review our results for the fourth quarter of fiscal 2021. On the call are Jeff Mezger, Chairman, President and Chief Executive Officer; Matt Mandino, and Rob McGibney Executive Vice Presidents and Co-Chief Operating Officers. Jeff Kaminski, Executive Vice President and Chief Financial Officer; Bill Hollinger, Senior Vice President and Chief Accounting Officer; and Thad Johnson, Senior Vice President and Treasurer. During this call, items will be discussed that are considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are not guarantees of future results and the company does not undertake any obligation to update them. Due to various factors including those detailed in today's press release and in our filings with the Securities and Exchange Commission, actual results could be materially different from those stated or implied in the forward-looking statements. In addition, a reconciliation of the non-GAAP measures referenced during today's discussion to their most directly comparable GAAP measures can be found in today's press release and/or on the Investor Relations page of our website at kbhome.com. And with that, here is Jeff Mezger.

Thank you, Jill good afternoon everyone and Happy New Year. We had a remarkable year in 2021 producing revenue growth in excess of 35% and an increase in our earnings per share of more than 90%. We achieved our objectives of expanding our scale and profitability driving our return on equity up by over 800 basis points to 20%. Our results are even more notable considering they were accomplished despite the supply chain challenges and municipal delays that were pervasive throughout the year as our teams have been successfully navigating these issues. As we begin 2022, we're poised to continue delivering returns-focused growth. Our backlog value of $5 billion, which grew 67% year-over-year provides a strong base to support our roughly $7.4 billion in expected revenues in 2022. This represents substantial top-line expansion which combined with our expectation of a dramatic increase in our gross margin to nearly 26% will drive our return on equity meaningfully higher. With respect to the fourth quarter, we generated total revenues of $1.7 billion and diluted earnings per share of $1.91 representing a year-over-year increase of more than 70% on the bottom line. We achieved an operating income margin approaching 12% resulting in a 28% expansion in our operating profit per unit to over $56,000. In addition to this significant profit growth, our business is generating a healthy level of cash flow, and we remain consistent in our balanced approach toward allocating this capital. Disciplined investment in community count growth is our top priority, and in 2021 we put over $2.5 billion to work in land acquisition and development. We expanded our lot position to nearly 87,000 lots, owned or controlled, which is almost 30% higher from year-end 2020. Our lot position is diversified both across and within our regions, and we own all…

Thank you, Jeff, and good afternoon, everyone. I will now cover highlights of our financial performance for the 2021 fourth quarter and full year as well as provide our outlook for the 2022 first quarter and full year. We’ve finished 2021 with strong fourth quarter results including significant year-over-year growth in revenues and a 310 basis point expansion in our operating margin that drove a 71% increase in our diluted earnings per share, while we faced supply chain issues that extended our cycle times as well as construction cost inflation challenges during 2021, our exceptional portfolio of communities and solid operation execution along with the strong housing market generated impressive full year results that I will summarize in a few minutes. With a robust 2021 and in backlog value of nearly $5 billion and 29% year-over-year expansion in the number of lots owned or controlled, we are well positioned for continued meaningful growth in revenues, community count, earnings per share and returns in 2022. In the fourth quarter, our housing revenues of $1.66 billion were up 39% from a year ago reflecting a 28% increase in homes delivered and a 9% increase in their overall average selling price. Housing revenues were up significantly in all four of our regions ranging from a 28% increase in the central region to 114% in the Southeast. Looking ahead to the 2022 first quarter, we anticipate housing market conditions will continue to be favorable with strong home buyer demand while we navigate expected continued supply chain challenges. For the 2022 first quarter, we expect to generate housing revenues in the range of $1.43 billion to $1.53 billion. For the 2022 full year assuming no change in supply chain dynamics we're forecasting housing revenues in the range of $7.2 billion to $7.6 billion up over…

Thank you. At this time we will be conducting a question-and-answer session [Operator Instructions] Our first question comes from the line of Truman Patterson with Wolfe Research. Please proceed with your question.

Hey, good afternoon, everyone, and thanks for taking my questions. So, first on your 2022 gross margin guidance of about 26%, I think the highest in 15-plus years, just trying to understand this might be an unfair question, but trying to understand how much of the improvement is being driven by pricing outstripping costs, and versus some of your internal initiatives such as working down the legacy land, streamlining SKUs, simplifying offerings and partnering with the national suppliers?

Right Truman, yeah there is - as you point out, there is a number of levers impacting 2022. As we went through the detail, certainly the decreased interest amortization is a driver. We have, I would say - the number one driver is just the performance of the communities. With our existing communities, we have seen pricing outstrip cost increases as we’ve gone through the year, and a lot of that is coming through the deliveries in 2022. But I think also importantly, I think it is very important actually to point out that we opened 130 new communities in 2021 and the performance of those communities have been very, very encouraging as we are seeing the backlog build and nice margins coming off those communities. So that rotation of communities from 2021 to 2022 I think we have a large impact on the margin. So, at the point in time when we underwrote, we’re seeing those communities open at much higher margins and nice pace, in fact in most cases higher pace than where we under wrote, and those are the main drivers for the 2022 improvement.

Truman, this is Jeff. If I could expand on it a little bit, and we are not spiking a football here because we have a lot of work to do, and we have our eyes set on even better results, but the transformation of the company is pretty much complete now. You were with us back in 2016 when we went on the returns-focused growth initiative and part of that was to shore up and really strengthen the balance sheet and create a growth platform. And we did very well with that. We laid out a plan, shared with the analysts community and off we went. We delivered on what we said we would do, and coming out of 2019 it was about quality growth and continuing to refine and enhance and retool, and we were on that path, the pandemic hits, you deal with that, you managed through that and I would say the two-step transformation is now complete, and it’s all about running the business with quality growth and continuing to improve profitability. And there is things I touched on in my comments like our studios are performing better. And we know how to - we get a good idea in one studio and we can share it across the system, and boom everybody enhances their studio revenue. Then we come up with some ideas on lot premiums, we share it across the company, boom you get more lot premium across the system through a best idea that’s shared across the footprint. Your absorption per community is up a couple a month from where it was three/four years ago, and that helps your financial performance. We're out of the old communities and into the new; and as Jeff shared, they’re performed at well above our average. Is it the location, is it the product, is it the strength of the market, I think it's all the above. So, I wouldn't just pin it on riding the wave from the pricing environment that we're in. We structurally changed how this company's operating. And I think we’ve taken ourselves to a new level and it’s reflected in our guide for this year.

Yeah, no thank you for that and I remember that call in 2016 well. My next question just two-part question. Omicron has clearly been flaring up here; hopefully this is the last wave, but just hoping first part, just hoping to get an idea how that's impacted labor availability, and if you could quantify any impact that might be baked in the first quarter closings guide, and then Omicron and the COVID flare up aside, have you all started to see any incremental improvement in availability of certain products by the end of 2021?

I can kick that to Rob and Matt, and obviously we're seeing a little flare up in Omicron like you're reading about in the media, whether it's in the subcontractor base. We've seen some within our own business where we have very good playbook, and we’ve locked it back down and people go away for five days or ten days depending on symptoms and what state they are in. And then they come back to work, so you have these little flare ups and then they go right away and you move on to the next one. What’s unknown for me is whether it's having an impact on the supply chain relative to manufacturing or not, and I don't think that's played out yet and as the thing keeps moving along, I think as a society we're getting smarter about how to manage through it and we're sensitive to it. And companies are responding better than we were when it first hit back in 2020, but Rob do you want to give any thoughts on what you are seeing out in the field?

Yeah, I'll just touch on outside of Omicron, some of the similar things that we're seeing. I mean we're almost two years into this. 18 months, two years into it and we are seeing some improvements in several areas, a lot of that just because we're far more experienced in developing workarounds for the supply chain gaps. We have developed methods that are continuing to progress our homes despite missing parts and pieces, and we've adjusted our process to sync up with the delays and extended lead times, and we're in lock step with our trade partners and suppliers and communication around our future needs and what their capacities are, but we are seeing some areas improved, but at the same time others get worse. For example, in Q4 garage doors is one of our biggest challenges. And there are still real issues around garage doors but we’ve taken some action to minimize the disruptions from that through finding alternate suppliers and manufactures. We’ve worked to minimize the door styles that we offer to match what’s more readily available in the supply chain. And allows our suppliers and partners to focus on producing a smaller range of those products but then on the flip side. When we solve one issue or one issue improves another one tends to pop up. Like earlier in the year the phone that we used for wasn't really an item on our radar, but now the supply of that has become scarce, so while one issue kind of gets traded for another we’ll call back time in one area and loose some in another. That’s led to what we are seeing in the stabilize cycle time just at an elevated level.

Thank you. Our next question comes from the line of Alan Ratner with Zelman & Associates. Please go to with your question.

Hey guys, Happy New Year and nice job in the quarter in the year. Congratulations. First question obviously very strong gross margin guidance and you guys have a lot of visibility into that based on your backlog and build-to-order model. I’m just curious when you look at the cost and pricing environment today, as it sits we’re obviously seeing a ton of inflation across the board lumber has spiked back up. Close to those teak levels we saw 6/9 months ago. Presumably those costs won’t roll through with much this year maybe towards the tail end, but that’s probably more of a 2023 early 2023 dynamics. So in the current environment do you have pricing power that's sufficient to offset the - what seems like accelerating cost pressures we're facing today. Just talk a little bit about how you are faring on the pricing side if it is strong as it was earlier in 2021?

Yeah, Alan lumber is moving back upwards. It’s interesting to me and I think you’ll see it bounce around some. But at this point in time as I shared in the comments we’re seeing price ahead of cost So costs are going up at a different level in every city, but we’ve been able to move pricing up more than the costs have increased.

Right, that’s good to hear. Second question on the community count growth. Again very bullish outlook there and I think a lot of your peers have similar growth outlooks. Maybe not to the same extent. I’m just curious if you have any sense for what the community growth outlook looks like in your MSAs on a competitive landscape. And do you think the six, six and a half per month absorption pace that you guys put on in 2021 can be sustained with 20% plus more communities hitting the market over the next 12 months?

Our internal goals Alan is to have committed to growth of at least 10% a year and obviously this year we’re going to do a little better than that, it’s not dynamic right now because the markets are so supply constrained I do know that if there is a limit on how many communities you can open in a city, it’s more about how many you can get approved and develop community and brought to market, it’s not that the demand it is today so I couldn’t tell you what the community count growth is the per city and it couldn’t be with our rates that were taken share and may be the market aren’t getting larger, but we will take share because we successfully brought more communities to market. When you look at our absorption rate right now, if the world stayed where it is today and the margins we’re generating weaken our sales stayed where they are today you’d see it continue to run a month, it’s a healthy pace. We like to turn the assets, there is benefits to have that kind of volume per community with subs and supplies and I think that’s what we do, if the markets were to slow up a little bit you could see our pace drop back down may be margins move a little bit, I don’t know but right now heading to 2023 we like how we’re positioned and what we’re seeing in price and pace.

Thank you. Our next question comes from the line of Stephen Kim with Evercore. Please go to with your question.

Yeah, thanks a lot guys, I appreciate the gross margin guide, makes a lot of sense, but it is certainly nice to hear somebody stayed. I wanted to ask you a question, kind of higher, sort of a bigger picture question regarding what the potential ability of housing demand to remain robust in a rising rate environment obviously that's questions that all of us are wrestling with and getting all the time and the presumption is that demand is extremely strong and it is going to weaken when rates rise -- kind of like what we saw in 2018 is what people way, my own personal view and I’ll be curious is to yours is that demand right now is more much need based than it was in 2018. If you at the survey it seems like everybody thinks it is a horrible time to buy a house and most people are very mistrustful with actually where home prices are and so I think unless you actually need a house you’re probably not looking to buy one right, which means by extension that if rates are rise you probably won’t see as much of a sticker shock or buyer strike like you did in 2008? How do you think about that?

I would agree with you Stephen and if you put it in the context of the demographic you’ve heard everyone about the millions and how large it is a group how big the cohort is and how they differed the home buying decision for a decade so you have 70 million people out there that are not seeing their needs met, they’re getting married, they're getting better jobs, they’re relocating they’re working from home all these things you hear about that are creating strong demand and then right behind that you have another generation of 70 million people that are now hitting the home buying years that are just now starting their home ownership journey so we see demand very strong right now and if rates go up a little bit I think you will see demand stays strong. We have analyzed our backlog and if rates went up a percentage it’s not a real impact and that if everything stayed the same when rates went up one point think of a profile I shared with you, here we are predominantly a first-time builders and our buyers are putting down on average $67,000 in down payment. They have all the flexibility in the world to navigate a little bit higher interest rate and they all want the house and at the same time you go to the resale side there is no inventory there much [indiscernible] where the 1,000 homes available for sale in the City of four to five million. So, there is no product on the market as we bring communities to each of these cities we have a waiting list that are our interest list I would say 300, 400, 500 people waiting, and it is not unique to just one submarkets a national phenomenon.

Yeah, that's good to hear. I guess my only other question for you would to be related to market share gains, we’d seem to be in an unprecedented period were scale really matters and I am curious as to whether you are seeing any indication that some of the smaller builders are actually able to accelerate their product or starts and production the way you are or whether this is going to be yet another year of market growth for builders such as yourselves?

Yeah, I think you will continue to see the larger builders take share but if you're a plumbing contractor would you rather get a commitment for five to ten 10 homes a week or one home every other week and if they are going where the volume is and the relationships that the large builders have created with the trade partners and we certainly have a great relationship nationally, it helps yeah. And within our business our larger division are definitely having better success navigating the navigating the supply chain challenges we're Vegas as opposed to where we're just getting going in Charlotte compared it to we’re well down the list in Charlotte from a framing contractor in Vegas where it is at the top of the list and I think if you use that as a proxy for what's going on out there with a small privates, they're struggling compared to what we can get done.

Thank you. Our next question comes from the line of Matthew Bouley with Barclay. Please proceed with your question.

Good afternoon, everyone thank you for taking the questions and congrats on the results. So on the 2022 outlook, clearly guiding a significant step up in net income just purely on a dollar basis, you have always reinvested a large portion of the cash generation back into the business but as we think about this sort of large step up here in 2022 you know is there any thoughts sort of excess capacity from the balance sheet and cash perspective that could be deployed to something more shareholder friendly perhaps a more programmatic share repurchase just sort of how do you harvest the type of cash flow you will be generating this year? Thank you.

I'll let Jeff add on that Matt, so it's a good question and we shared in our comments that it's a balanced approach just like we have over the last five or six years. First and foremost, it's key profitability growing quality investments, quality growth, take market share and grow our EPS and in turn improve our returns. But we always will look to the balance just like we did in 2021 where we bought back some shares at a good price, we upped our dividend, paid more in dividend and we took down debt while investing $2.5 billion in growing our company. So, it's a very balanced approach and I would rather stay and keep putting a periscope up to the year unfolds and see how things are going and where we are headed and how we're doing in our growth initiatives and profit projections and then will make a call on how are cash is running and what we should do with it. But I think I have some better approach for us when we’re going to buy back some of these shares as stock at a quarter, we're going to do this, we're going to do that and if you want to add any…

Yeah, no, I'll only add only a couple of comments I think first and foremost increasing our scale and expanding our returns as much as we're look at I think we're extremely shareholder friendly and we're open to see some repricing in the shares obviously in the multiples and everything else reflecting the strong return potential of the business and sustainability out beyond 2022. So that's first and foremost but as Jeff said we are focused on reinvestment, we like the opportunities that we're seeing, we think that's a really good use of capital we're always open to it, we’ve opportunistically made share repurchases in the past with excess cash and we try to look at doing the same in the future, we don't have the huge goal that had years ago of reducing the debt side of things, we [indiscernible] we have that fairly in line and I think we're really well-positioned right now in that scale and return expansion I think is really meaningful for the company and should be very meaningful for the shareholders.

Got it, now that's really helpful. Thank you for that and the second question you know zooming in on the near-term you gave kind of that decline in orders quarter to date and I hear you loud and clear you know it's a difficult year-over-year comparison obviously we're talking about December and January here, so how much you should really read into that and clearly you gave the assumption around Q1 orders but it just simply begs the question given there is a relatively large decline in orders can you just kind of elaborate a little bit on that? Why do you look at all that and say that you're still -- that there isn't some kind of signal around underlying demand there over the past six weeks? Thank you.

Yeah, okay, Matt the one you kind of touched on one thing that I didn't include in my shared comments is the softest five or six weeks of the year in the industry, so a negative comp there verses February, March or April is a much smaller number and it’s really the timing of weeks and how many communities we have opened. But one thing I would like everybody take way on the call, we're seeing no weakening in demand and homebuyer interest right now. The markets remain very strong. We have a lot of waiting list. We're continuing to balance price and pace like we have been for the last year and we think we're going to see a very strong spring selling season. This is very good out there right now on the demand side.

Thank you. Our next question comes from the line of Susan Maklari with Goldman Sachs. Please proceed with your question.

Thank you, good afternoon, everyone and congrats on a nice end of the year. My first question is you've talked in the past about reducing the SKUs in the design centers by about half and taking down some of the structural options in the business as well. Can you talk a little bit about to where you're within that process and how you're thinking about the contribution about simplification to 2022?

Sure, Susan. Rob, looking inside what I can share from my end, strategically we're dropping SKUs right now to help ease the supply chain and if you're offering the three or four of an item take it down to one or two and you reduce twice a little for the customer but you improve your ability to get the product and compress build time, so our mantra right now is to retain the personalization that's required, to give the customer choice but it has to be something that doesn't get in the way of the supply chain and build times and that's what Rob is working on. So, Rob do you want to provide some color for Susan?

Sure Susan, I would just clear it, it's an ongoing process. It’s not an event. It is something that we're going continue to be focused on just simplification and speed throughout the whole organization and as Jeff mentioned part of that is just finding the right of the appropriate balance of the sweet spot between personalization for our customers and construction speed, but there are not some of that are win-wins all the way around, example with Whirlpool our appliance supplier and we converted to stainless steel appliances as they included feature in all of our homes and just that action alone minimized the SKU count from over 400 appliances under 150 which significantly improved our lead times that simplified our internal processes and it also add value for our customers, so they are getting a better product.

Yeah, I guess just following up on that, I just guess that even as the supply chain normalizes and some of these headwinds today that perhaps you can stick to something that is just a bit more refine for the consumer because it doesn't seem like you're having any push-back on it from the consumer’s perspective, you're sort of getting to still that personalization that they are looking for but at the same time just making things a bit more efficient for everyone.

Yeah, I think that's a good way to look at it, I mean it's almost a necessity right now because of the supply chain issues and we're focused on maintaining the SKUs that are most readily available in the supply chain but even once those both supply chain and the cycle time issues go away, it allows us to run a more efficient operation. So again it's just finding the right balance between what our customers want and personalization and what's efficient for our business.

Our next question comes from the line of Michael Rehaut with JPMorgan. Please proceed with your question.

Hi, good afternoon, everyone, congrats on the results. First question I just wanted to circle back a little bit to gross margin trajectory and it makes a lot of sense that you know side obviously from a lot of the hard work that you guys have done over the last couple of years repositioning the company from the timing perspective looking for gross margins to start expanding in the first quarter, I am sorry, second quarter. It’s pretty important for me kind of in our view at least coincides with potentially some of that lumbar benefit coming down, coming through the Pike and I was hoping it’s possible to try and isolate that particular factors that impact on gross margin as you think about 2Q and 3Q of 2022 and also Jeff K. you had mentioned lower interest amortization if you had a sense of from a basis point perspective what type of differential that might be in 2022.

Sure, Mike, interest and I think it’s going to be somewhere in the neighborhood of 50 basis points for the full year of improved margin coming off of that relating to the cadence second quarter we're looking at a pretty nice step up in margin right now through what we have seen in the backlog that obviously how it changes depending on mix and what we deliver out in Q1 and supply chain and constructions toggle time and everything else but we should start seeing that nice step up beginning in Q2. If you think about those Q2 and Q3 deliveries when those sales were booked in those homes were started lumber was at a relatively low points as we saw dipped down and now coming back up again, so it's probably more risk I would say in the fourth quarter and in lumber moving and we see earlier in year but we urge expecting to see [Indiscernible] it’s more or less new relative portfolio that we’re seeing coming through strong margins in 2023. So we're not I mean strictly guide out as far at this point. This is the last [Indiscernible] between now and the end of the year to consider but I am really quite happy to see sequential improvement as we move through the year because it just gives you in that [Indiscernible].

All right, okay so I appreciate that Jeff and just to be clear what you're implying from my perspective obviously makes all the sense is that [Indiscernible] full year average. Kind of the second question and correct me if I'm wrong there but the second question just on going back to sales pace obviously roughly 6% or 6.5% for the full year and I believe by Jeff Mezger said earlier that you think and given the fact is effectively sustainable for the upcoming year. I was curious if in the most recent quarter what roughly what percent of communities might have been still on restriction or restraining sales to better match production capacity and cross matching and things to that nature, because if you’re doing the rate that you have done in 2021 with this sales restrictions credit sold was even better rates and therefore kind of add confidence to review that maybe 6% to 6.5% is still the right number for the next 12 months.

Yeah, Michael, it’s a good observation and it’s what I shared in my comments, you can say we're limiting releases because we’re managing to no more than six months and that’s the average. Every asset got a different story, if it's a high end community with limited number of lots and we're not going to replace it you have a lower sales right because you want to mind all the price you can in that location if it is easily replaceable out in the suburbs in their vacant land area and so it's not a cost intensive market place in Texas you go and you later run. And then you go replace it with the next one and that my comment was that the market stayed where it is to leverage everything, get the benefit of scale and you grow your returns. There is a lot of benefit to doing six months instead of four months in our business model. So we think it’s sustainable right now.

Thank you. Our final question comes from the line of Michael Dahl with RBC. Please proceed with your question.

Thanks for fitting me in. This first question just wanted to follow-up to put a finer point on some of the cadence I mean it certainly as you kind of ramp through the year and need to get that level to maybe if you could put any context around whether that's fair and then within that I know someone asked about what you're seeing on cost currently but maybe just what is the net inflation number that's embedded in your full year guide?

Sure, so first of on the exit rate and play point high in the range for target more 27%, 28% but we will find that as we go through the year in the quarters. Obviously we haven't sold a lot of homes yet. Most of that selling will take place in the spring selling season for deliveries out in the fourth quarter, so it still a little bit of a paper forecast with those too looking at your backlog it’s probably higher and I would expect that in a year, but we will see. The second part of your question was, remind me, Mike.

Just what is the net inflation assumption embedded in that?

Right, so what we do on cost and on the margins and anything in backlog where we have lot cost and a lot price, we're just looking up at your backlog margins. So, in action, there is no further cost inflation assumed on those sales you make an assumptions on a little bit of sold and delivered speck inventories that was for the year and that is happening there and was happening on pricing but we're not because of the way we locked the cost we’re pretty safe on that. The uncertainties for the year is mainly in the back half and especially in the fourth quarter involves some of the pricing coming off new open communities in the spring selling season and what happens with cost as they move particularly over the next three or four months that where we had more risk on that cost price relationship but from what we're seeing today and what we’ve seen week after week after week as we gone through particularly over the last six or nine months, we have seen margins expanding almost every single week. So we're pretty excited about where the markets and very excited about the portfolio communities that we’ve right now.

Yeah that makes sense thanks for that Jeff, and then my follow-up question is and that you work at which aren't showing any signs of stress from an affordability standpoint Jeff and I think your opening comments still said you give, still want to be watchful around affordability, so the question is, you've got pricing power today clearly. How do you expect to approach your pricing decisions through the spring, through the year and to keep an eye on that and how much may or may not pick up in value what you end up seeing on rates.

Well, that's a weekly look and every community like we always do Mike, and we work through what's the right run rate at this community at this margin to give us the highest return with how many loss we have left and what's coming behind it and there is a process that we literally go through every week and in today's environment it's been a nice combination where we're lifting pace and lifting margin at the same time, if rates go up we will have realtime feedback on what that means if anything with those customer today and part of what I was trying to get across buyers of putting into their home the high credit FICO score that they have and their desire to be homeowners, it is nowhere near even close to what's stress buyers today. They have a lot of flexibility to navigate these things with us and we'll have indications along the way. So, we will continue to toggle price and pace and as I said a few times now we really expect a strong spring, really strong spring selling season demand is very strong for us.

Thank you. Ladies and gentlemen, this concludes today's teleconference. Thank you for your participation. You may now disconnect your lines.