Nov 16, 2018
Executives
Ida Yu - IR Jenny Zhang - CEO Teo Nee Chuan - CFO
Analysts
Justin Kwok - Goldman Sachs Juan Lin - 86Research Carlton Lai - Daiwa Dylan Chu - CLSA Tallan Zhou - Deutsche Bank
Operator
Ladies and gentlemen, thank you for standing by, and welcome to today’s Huazhu Group Q3 2018 Earnings Conference Call. At this time, all participants are in a listen-only mode.
There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, Friday, the 16th of November, 2018.
I would now like to hand the conference over to your first speaker today, Ida Yu. Thank you.
Please go ahead.
Ida Yu
Thank you, Rex. Good morning, everyone.
Thanks to all of you for dialing in, and welcome to our third quarter 2018 earnings conference call. Joining us today is Mr.
Qi Ji, our Founder and Executive Chairman; Ms. Jenny Zhang, our CEO; and Mr.
Teo Nee Chuan, our CFO. Jenny and Teo will present the strategy review and the Q3 results.
Following their prepared remarks, management will be available to answer your questions. Before we continue, please note that the discussion today will include forward-looking statements made under the Safe Harbor provisions of the United States Private Securities Litigation Reform Act of 1995.
Forward-looking statements involve inherent risks and uncertainties. As such, our results may be materially different from the views expressed today.
A number of potential risks and uncertainties are outlined in our public filings with the SEC. Huazhu Group does not undertake any obligation to update any forward-looking statements, except as required under applicable law.
On the call today, we will also mention adjusted financial measures during the discussion of our performance. Reconciliations of those measures to comparable GAAP information can be found in the earnings release that was distributed earlier today.
As a reminder, this conference call is being recorded. The webcast of this conference call as well as supplementary slide presentation is available on the Investor Relations section of Huazhu Group's website at ir.huazhu.com, H-U-A-Z-H-U dot com.
Now, I would like to turn the call over to Jenny. Jenny, please?
Jenny Zhang
Good morning, everyone. I’m pleased to report that Huazhu continued to deliver a very strong third quarter.
The third quarter last year was the first full quarter Crystal Orange was fully reflected in our RevPAR calculation. As shown on page 2, on a fully comparable basis, our blended RevPAR grew 7%, which is one of our top performing quarters in the history, if we exclude the previous five quarters that were boosted by [indiscernible] due to this Crystal Orange deal.
As a result, our net revenues increased by 16%, above our revenue guidance, with a better RevPAR and increasing scale, our operating income margin expanded by 3.6 percentage points from 24.4% a year ago to 28%. Accordingly, our adjusted EBITDA margin has reached 36.4%, up from 35.4% a year ago.
Teo will provide more financial analysis later. Before we walk you through the strategic highlights in Q3, okay, let me remind you about Huazhu’s focuses this year on page 3.
First, we continue the fast expansion of midscale hotels by leveraging multiple brands. Secondly, we focus on continuous improvement in same-hotel RevPAR through quality improvements.
Third is the innovation in upscale hotel segment. Page 4 shows that our fast expansion in mid and upscale hotels is well on track.
At the end of Q3 this year, our mid and upscale rooms inventory increased by 39% from a year ago, accounting for 36% in total rooms in operation. As shown on the right hand side of the page, our pipeline for mid and upscale rooms accounted for approximately 80% of the total number of rooms in the pipeline, up from 66% a year ago.
Our diversifying mid and upscale hotel brand portfolio with profitable hotel operating models continues to [indiscernible] into Huazhu’s hotel network. Please turn to page 5.
The most well-known midscale brand is JI Hotel. Today, I’m thrilled to announce that JI brand has exceeded 500 hotel milestone, covering 125 cities in China.
Meanwhile, a total of 250 hotels in pipeline are under this brand. Since its inception, JI Brands has been continuously delivering excellent results in hotel profitability, RevPAR growth and hotel expansion.
It takes time to build a brand, to fine-tune the design and to improve profitability. If we look back, when we started to introduce JI Hotels, it was almost 5 years we brought JI to 100 hotels.
After that, the expansion has been accelerated. The most recent 100 hotels were accomplished in eight months.
Given JI Brands’ characteristic design and a superior profitability, we believe this brand will continue to accelerate its growth momentum in the years to come. In addition to further penetration and expansion in China, we also bring an exciting news to our customers and investors that the first Ji hotel outside of China will be opened in Singapore next year, as shown on page 6.
It’s a leased hotel located close to the CBD area of Singapore. As we talked in previous calls, our global expansion will start from Asian countries, following Chinese travelers’ footprint.
By leveraging our current loyalty program, we hope JI Hotel in Singapore will become our member’s first choice when they travel on their business and leisure trips. Huazhu’s other relatively young [indiscernible] brands have also started to build their own momentum for fast expansion, supported by our strong direct sales channel and the centralized operating platform.
We believe a number of these brands will follow JI Brands growth trajectory to become a much bigger brand in the years to come. On page 7, we demonstrate a huge potential for our midscale brand.
From the geographic expansion perspective as well as the muni growth perspective. There are about 400 cities in China that we believe are suitable for midscale hotels.
Their estimate hotel market size is over RMB200 million each. They are the cities above prefectural level in China.
This means a huge market, well above what we’ve already penetrated in our midscale brand, even for JI brands. Based on our current hotel operations and the trends in those markets, we become more confident for our midscale hotel expansion.
In the future, we aim to have two or more midscale brands to reach or exceed 2000 hotels for each. In addition, a few of midscale brands will grow above 500 hotels for each.
We remain optimistic on the industry prospects and confident in our quality brands to outperform in market share and gains. As mentioned in the last few pages, we have a good progress in the midscale segment.
As a result, the revenue contribution from our mid and upscale hotels have continued to increase. In Q3, 2018, the revenue from mid and upscale hotels increased by 36% to RMB1.4 billion, accounting for 61% of total net revenue, up from 43% a year ago.
This is the first quarter that even upscale hotels contribute more than half of our revenue. Turning to page 9, although the last year comparable RevPAR base was high, we continue to report a 4.2% same hotel RevPAR growth in Q3 2018 with an increase of 6.7% in ADR and 2 percentage points drop in occupancy.
The decrease in the occupancy is due to the slowdown in demand in the first couple of weeks of July and the last week of September due to the Moon festival. In July this year, the summer vacation started late as compared to previous years.
And in September, the change in timing of Mid-Autumn or Moon festival this year compared to last year negatively impacted the normal business and leisure trips pattern. Also, if we take a step back, our same hotel RevPAR grew by 0.5% and 9.5% in Q3 2016 and Q3 2017 respectively.
So the average growth during the past two years has been around 5%. Compared to that trend, we believe this quarter has demonstrated a very healthy performance.
Let’s turn to page 10. The same hotel RevPAR growth was mainly driven by ADR growth as we continued to attract customers who are looking for better quality products.
Similar to what we shared with you on last call, our quarterly occupancy remained at high levels and is 3% for our mature hotels in Q3. Outperforming the China industry average by 20 percentage points.
We are also pleased to see the industry is also doing well in general. We continue to see the positive occupancy and ADR trends in Q3 today.
Let’s move on to upscale hotels. I’m pleased to report our progress in the upscale hotel segment.
Please turn to page 11. We showcase the results from one of our Joya Hotel.
Opened in December 2016, this Joya hotel is located in High-Tech Industrial Development Zone of Chengdu, the capital city of Sichuan Province. This Joya hotel achieved RevPAR of RMB363, with an occupancy of 82% in the trailing 12 month ended September 2018.
Its GOP margin is 73% and EBIT margin, 34%. This is quite phenomenal for an upscale hotel.
By leveraging our large member base, and our cost efficiency and management of projects, we successfully generated a profit for our upscale brand. Together with the new flagship in Shanghai, we expect Joya to grow into a flagship upscale brand in our portfolio.
Finally, let’s turn to page 12. The Grand Mercure flagship hotel in the CBD of Guangzhou is expected to open in Q1 2019.
We are very excited about this new project. Grand Mercure targets the customers who look for superior experience in CBD locations of tier 1 and tier 2 cities.
The typical price range is RMB800 to RMB1200 per room night. Hopefully, we will have more to share with you on Grand Mercure’s development in the coming quarters.
We are quite confident about our innovative product design. And we expect to spend some time with us in this new hotel in the future.
With that, I will turn the call over to Teo who will walk you through our Q3 operational and financial results in more detail.
Teo Nee Chuan
Thank you, Jenny. Good morning, everyone.
Please turn to page 14. As of the end of Q3 2018, our hotels in operation exceeded the 4000 hotel milestone to 4055.
We opened 235 hotels and closed 83 hotels in Q3, giving a net opening of 152 hotels in this quarter. We are well on track to achieve our full year opening targets.
Page 15 shows that our pipeline hotels continued to increase during the last four quarters, reaching a historical high of 924 at the end of Q3. With the gradual maturity of a number of our younger and newly acquired brands, we continue to attract increasing interest from our franchisees to join our hotel network.
Therefore, we are not only confident in achieving our operating target for 2018, but also to further accelerate our opening target in the coming 2019. Turning to page 16, in Q3, our group level RevPAR grew by 7.1%.
This was driven by an increase of ADR by 9.8% year-over-year, mainly due to the increasing mix of midscale and upgraded hotels, economy hotels and also the strong domestic travel demand. The impact increase in ADR was partially offset by the lower occupancy due to the impact of the deferment of the Chinese school summer holiday in July and mid-autumn festival in September.
Let’s move on to the financial results on page 17. Our net revenue grew by 16% year-over-year in Q3, exceeding the high end of our guidance of 10.5% to 12.5%.
Our net revenue from leased and operated hotels improved by 11% year-over-year while the net revenues from managed and franchised hotels was up 33% year-over-year, contributed by our network expansion and blended RevPAR performance. In Q3 2018, the revenue contribution from our managed and franchised hotels continue to increase, accounted for 25.3%, up by 3 percentage points from 22% a year ago.
As demonstrated on page 18, our Q3 operating profit grew by 32.9% and operating margin expanded by 3.6 points year-over-year to 28%, mainly driven by improved operating efficiency from scale. The hotel operating cost and other operating cost as a percentage of net revenues decreased by 3.2 percentage points year-over-year.
This is mainly due to our improved blended RevPAR and better operating efficiencies from scales. The pre-operating expenses as a percentage of net revenue, decreased by 0.6 percentage points because a number of our leased hotels has completed their renovations and commenced operations in this quarter.
The SG&A expenses and other operating income as a percentage of net revenue, increased by 0.2 percentage points year-over-year. The G&A expenses, as a percentage of net revenue, was higher at 8.4% compared to 6.4% last year, mainly due to a higher professional fees related to a number of our potential hotel investment activities and we also increased the payroll costs due to increasing headcount for our development team in our various brands to expand our hotel network, new business initiatives surrounding our cost of core hotel business and increasing headcount for our IT services to service our network.
In addition, given our better profitability of a number of our brands, we also increased accruals of our long-term incremental profit sharing bonus paid about in 2020. Last year, we accrued the entire sum of bonus in Q4.
Moving on to the cash flow status on page 19. In Q3 2018, our net cash from operations was 914 million, while the capital expenditure for maintenance and new developments totaled 349 million.
As a result, the free cash flow generated in Q3 was 565 million. We invested approximately 1 billion in the third quarter, including 450 million to acquire Grand Mercure and another 550 million as a partner in several hotel investment related funds.
In Q3, we raised 518 million in debt financing. In order to utilize the dividend received in our Singapore holding company that was to be restricted in Singapore for a 12-month period for tax planning reasons, we made a fully cashback debt financing of 200 million in order to utilize the cash outside Singapore.
This arrangement is interest neutral, because the interest expense of this loan is fully offset by the interest income from the cash deposits. In addition, we drew down a revolving facility of 300 million to increase our investment in our apartment service businesses.
At the end of Q3, we had cash, cash equivalents and restricted cash of 4.55 billion. Finally, our guidance on page 20.
We expect our year-over-year Q4 net revenue at grow 17% to 19%. In this connection, we expect the full year revenue to grow at the high end of the previously full year guidance which is close to 22%.
For next year, in 2019, we expect our gross hotel opening to further accelerate to 800 to 900 hotels with 75% to 80% of which are mid and upscale hotels. And we expect the hotel closures to be in the range of 150 to 200 hotels.
With that, let’s open the floor for questions.
Operator
[Operator Instructions] And our first question comes from the line of Justin Kwok from Goldman Sachs.
Justin Kwok
Perhaps, I'll start with two questions. The first one on the RevPAR and the growth guidance and then the other one on your pipeline of conversion.
For the first question, can I ask what are you kind of baking in, in your assumption, when you look for the 17% to 19% growth in revenue in terms of the RevPAR? And how do you see the recent trends shaping up, especially in the last quarter, you discussed the potential positive impact from the CIIE.
Are you seeing that or what are you seeing on the ground? The second question is about the pipeline.
It is very encouraging to see that you have now a record number of conversion in the pipeline and you’re now raising your opening in to 2019, but I guess the investors’ question is more on the slower macro that they’re expecting, do you sense that there could be a slowdown in your pipeline addition in the next few quarters or you're confident that this relatively high lift of conversion pipeline will continue to sustain?
Teo Nee Chuan
Regarding your first question is on the RevPAR assumption, we expect our RevPAR to grow approximately mid-single digit growth. And the reason why we have a higher 17% to 19% of growth, it is because that we see that the revenue generated in October is actually lightly better than what we have expected.
So – and if you also have a number of new account opening in Q4, that we’ll generate through the increase in the revenue.
Jenny Zhang
Yeah. On the second question about macro economy, honestly, so far, we haven’t seen slowdown in our pipeline.
It has been month over month, exceeding our internal guidance. So I haven’t seen any indication there might be a slowdown to our unit growth so far.
Operator
And our next question comes from the line of Billy Ng from [indiscernible]
Unidentified Analyst
I also have two questions. The first question is regarding your overseas expansion.
I know it's still a fairly small part of our portfolio, but congratulation on opening the first location in Singapore. Can you walk us through your strategy of your overseas expansion?
Is that going to be mainly leased and operated models and how many hotels are you going to open in the next one to two year plus in terms of profitability and return, those leased and operated hotels in overseas, how are they compared to the one that we can open in tier 1 cities in China.
Jenny Zhang
China is a very huge market. Our penetration in China is still very limited.
If you take the room count perspective, China lodging accounts for only 3% of the total rooms supplied in this market. So clearly, our top priority of expansion will still be domestic expansion.
With that said, we are very interested in learning more about other markets. So we have started a few tests in different countries and areas in Asia and the Singapore hotel is our first hotel going overseas.
We're still in the learning phase, so I cannot really give accurate prediction about how many hotels we’re going to open in the next few years. And the leased and operated model I think is very useful when we try to learn the new market, we need to do it by ourselves first.
After the learning, we will go into many times in the new franchise model gradually. So this is the basic thinking.
Unidentified Analyst
And a follow-up question, it’s probably for Teo. I think you mentioned about bonus accrual in Q3.
And you mentioned that the company booked that bonus in Q4 last year. So would you mind to quantify the exact numbers, how much bonus accrual being booked this year in Q3 and potentially, are they going to have another bonus accrual in Q4 and also extend if there are any one-off items that may affect the Q3 margin, are there anything we should be aware of.
Teo Nee Chuan
The bonus accrual for Q3 is actually 18 million, because it is the -- due to better profitability than all the area expected, we make the first quarters accrual. So at the end of – I mean, we expect that for the entire year of 2019, we expect to meet full accrual of approximately 44 million.
Okay. So because it's – this bonus is actually payable in 2020 based on the 2019 EBIT – incremental profit compared to 2016.
And the maturities that – we have a number of one-off items in Q3 as well and it is mainly related to a number of things. Number one, it will be the professional fees that will be approximately 970 million, coming like – 9.7 million.
This is mainly due to professional fees that we paid to investment opportunities for the hotel business, we paid some of the money for the lawyers, for the professional commercial due diligence, et cetera. And in addition to that is that we – as I mentioned in the previous call, there are a number of recurring investments into our new business initiatives as well as our brand building purposes.
So, as I mentioned to you, that the higher payroll costs is for the, number one, is for the hotel development team and also for a number of new business initiatives we show people with the results in the coming years.
Operator
And the next question comes from the line of [indiscernible]
Unidentified Analyst
I do have a question regarding 2019. So as we are planning to add more hotels in the mid and the higher tiers, so I wonder what is the trend for the RevPAR growth, occupancy growth and the ADR growth.
That’s number one question. Number two, so we think that it was a event in Shanghai is the China International Imports Expo and there seems it is a pretty big event.
I wonder what’s the impact on you guys’ occupancy rate. So that’s number two.
One more question is regarding the overseas expansion, now you start to have a hotel in Singapore, what’s the plan going forward for overseas expansion? So that’s the third question.
Teo Nee Chuan
To answer your questions on the RevPAR, which is occupancy and ADR, we expect that the active number of things that we need to consider for the next year growth in RevPAR. Number one, China Lodging’s occupancy is already at a very high level.
So we expect that the occupancy will be more or less stabilized and this occupancy may actually be fluctuated a little bit at high levels of stage. And number two is we expect that the ADR will continue to grow, but to what extent, we are not sure yet.
But having said that, we expect the RevPAR to grow, I would say, in the mid-single digit of like a range, but it is also very much depends on the overall macro economy situation, particularly during the conversation between [indiscernible] at the end of this month and a number of the domestic, economy boosting policy by the Chinese government. And number two, regarding the impact of import and export, I would say that, as I mentioned earlier is that our revenue for October is actually better than what we already expected.
So the impact is positive to our occupancy and as well as ADR. And number three is, as mentioned is regarding the overseas expansion, Jenny mentioned that we are actually opening up a new hotel in Singapore is to learn about the international market.
So we’re still learning. So we have nothing much to comment.
In fact, it’s that the hotel openings of our overseas expansion has not been baked into our hotel opening for next year yet, because we don’t expect the number to be significant.
Operator
And the next question comes from the line of Juan Lin from 86Research.
Juan Lin
So the first question is for Teo. You mentioned the reason for G&A increase for the quarter and potential increase for next year, could you please remind us about your margin target for the next few years and whether the plan of increasing payroll cost for hotel development team will impact your target for the margins going forward?
And second question is about Blossom Hill hotel, could you please remind us about the revenue contribution for the third quarter and maybe Q4 from here and disclose some operating metrics of this hotel, including occupancy rate, ADR and RevPAR. What are the targets for operating metrics for this newly acquired brand going forward?
Teo Nee Chuan
The first question is, I would say that the expenditure for the -- the increase in general expenditure is mainly due to, I would say, a number of one-off costs, as I mentioned, professional cost of approximately like 10 million. This is one and number two is that the increase in payroll cost in a number of the initiatives like to expand our hotel network, let me share with you that because we increase headcount for development team, for the new business initiatives, this is to prepare China Lodging for a high growth going forward.
The new hotels in the pipeline, the effort has been put all by increasing in pipeline and we expect that the – as I mentioned earlier, our hotel opening will accelerate next year to 800 to 900 hotels. These hotels will generate positive income and improve our profitability in the coming years.
However is that though, we need to invest a few sources to expand the network now. So the investment that we’ve put in the development team, you will see it is more or less constant and going forward to next year is that we expect these expenses to incur but for next year and in the coming years, the new hotels will generate a much bigger revenue and profitability to more than offset this additional cost.
So in short is that we still expect the profit margin to improve marginally as I mentioned in the past that the more reasonable task will be approximately like 1% to 1.5% year-over-year. So, yeah, it’s number one.
The second question is on the Blossom Hill, the Blossom Hill acquisition, the revenue contribution and the profitability is still very small. And what we expect to do is to actually restructure this spend so that it will set the table for a bigger growth and faster growth going forward.
Operator
And the next question comes from the line of Carlton Lai from Daiwa.
Carlton Lai
I think two simple ones. First of all, I just want to know if you can give us a sense of the RevPAR trends by peer in China.
Are we seeing -- in terms of tier 1, are we seeing slightly more -- bit of a slower growth compared to Q3 and Q4, perhaps more cautious business travel. And my second question is really on just gross margin.
I think you hit a all-time high this quarter. How much improvement you expect in 2019?
And how much are you modeling in terms of that?
Teo Nee Chuan
Okay. If you look into the bigger picture, we see that direct the RevPAR trend has been continuing to grow.
Even in the third quarter, I would say even in October. And from a statistic, we see that the higher tier cities, the RevPAR trend is stronger compared to the lower tier cities.
This is number one. And number two is, as I mentioned to earlier is that we expect the operating margin to improve say by approximately 1% going forward, but although we are increasing cost, having said that is that, our hotel is expanding at a very fast rate.
So and because we are adapting asset light model, so we expect that the profit contribution from the increase in scale will more than offset the increase in our cost.
Operator
And our last question comes from the line of Dylan Chu from CLSA.
Dylan Chu
I have got two quick questions. The first one sort of for and could you please maybe just comment a little bit in terms of the RevPAR trend between business and leisure travel with sort of the really economies to, did you see any risks in terms of in the travel next year and how would you manage that scenario.
That’s the first question. The second question, just in terms of hotel pipeline for next year, obviously, very strong, accelerating in terms of scale.
Just wondering if you think that’s a function of your stronger products and profitability or do you think the entire industry is sort of similarly accelerating in terms of how would you assess the China situation in upscale next year and with two to three years forward.
Teo Nee Chuan
Okay. Firstly that to answer your questions on the RevPAR trend and I suppose is that, your main concern will be on the impact of the slowdown in the economy that would impact the business travels.
I would suppose is that up to now, the numbers appear to be pretty robust and approximately 50% of our travel are leisure and 50% is actually business travel. So far, we have not seen a significant fluctuation, I would say, a slowdown in both the sector as yet, but going forward is that, we need more data to actually see that in the trend going forward.
Number two, sorry, can you repeat the question on the pipeline?
Dylan Chu
Yeah. Sure.
The pipelines are very strong and accelerating, so it seems to be a little bit of countercyclical, so just wondering is that a function of – or company specific or do you think the industry also is accelerating in terms of sort of mid and upscale pipeline going into next couple of years and how would you assess the supply and demand situation?
Teo Nee Chuan
Okay. In terms of our pipeline, our pipeline has been increasing.
I would say that it is due to a number of factors. Number one is that, our product has been – is a pretty attractive kind of product for our franchisee, because it brings in, it has a good profitability and it is very attractive to the end customers.
So this is what is evidenced by number one is that our hotel product has consistently delivered superior RevPAR performance compared to combinations over the long historical period of time and number two is that you may actually see that our product actually delivered a very high occupancy even compared to our competition. So this is our hotel product, as you generate very positive returns for our franchisees.
And number two is that, we also see that as a increasing trend, interest in investing in hotels, because -- not only that, it is profitable product, but also that the – also being in investment, we generate usually very high returns I would say, like the stock market, the developments, the crypto currency and the B2B, that kind of investments haves been, the opportunity for that has been reducing. So I suppose is that this is a good ultimate investment for our franchisees.
In terms of the overall trend, I would say that approximately 50% of our pipelines are actually conversional from other hotels. So in fact the difference in net supply, it is not as big as it was we expected, because 50% of our conversion are from hotels.
And I understand from other -- some of the other hotel groups, this is the similar trend they see in the market as well and what we’re doing is that we’re not, a big portion of their new hotel additions for the 10 hotel, actually the conversion of the single brand hotels.
Operator
And one more question comes from the line of Tallan Zhou from Deutsche Bank.
Tallan Zhou
I've got two simple questions. First question is about the next quarter's revenue guidance, 17% to 19%.
Can you provide some breakdown, because your blended RevPAR growth is like middle single digits so that mean a new hotel going to come through with the rest of the growth? The second question is I see hotel closure is 150 to 200 for next year, any reasons for closure, for example, how much percentage is from expiry of lease or how much percentage is just from business reasons?
Teo Nee Chuan
Okay. The very first thing I would like to re-iterate that the revenue guidance that we have for 17% to 19% and while I was referring to the same hotel RevPAR growth of mid-single digit, not blended.
Okay. This is one.
This is the same hotel RevPAR growth of mid-single digit, not the blended rate increase. And number two is that, sorry, what’s your second question, sorry.
Tallan Zhou
Second question is about the reasons for hotel closure next year, like how much percentage is form leased contract expire or how much percent is just because of business reasons?
Teo Nee Chuan
Okay. Approximately like 50% of which are actually due to lease expiries and lease expiries and the balance can be due to some of the properties, which is related to say a resounding et cetera and a small number, maybe one set of that is actually relating to quality issues.
Operator
Thank you so much. There are no further questions at this time.
Please continue.
Jenny Zhang
Thank you, operator and thank you everyone for dialing today. And we look forward to talking to you in the next quarter, March next year.
Thank you. Goodbye.
Operator
And that does conclude your conference for today. Thank you for participating.
You may all disconnect.