Feb 7, 2013
Executives
William J. Dunaway - Chief Financial Officer and Chief Accounting Officer Sean Michael O'Connor - Chief Executive Officer, Director, Chief Executive Officer of IAHC (Bermuda) Ltd., Chief Executive Officer of INTL Trading Inc and Director of IAHC (Bermuda) Ltd.
Brian T. Sephton - Chief Legal and Governance Officer
Analysts
Justin Hughes William R. Jones - Singular Research
Operator
Good day, everyone, and welcome to the INTL FCStone First Quarter Earnings Call. Today's call is being recorded.
At this time, I would like to turn the call over to Bill Dunaway. Please go ahead, sir.
William J. Dunaway
Good morning. My name is Bill Dunaway, CFO of INTL FCStone, Inc.
Welcome to our earnings conference call for our fiscal first quarter ending December 31, 2012. After the market closed yesterday, we issued a press release reporting our results for the fiscal first quarter.
The press release is available on our website at www.intlfcstone.com, as well as a slide presentation which we will refer to on this call in our discussions of the quarterly results. This slide presentation is available by clicking on the Investor Relations link on the website and then going into the Events & Presentations page.
You'll need to sign on to the live webcast in order to view the presentation. Both the presentation and an archive of the webcast will also be available on our website after the call's conclusion.
Before getting underway, I'd just like to cover a couple of housekeeping items. On these conference calls and in the management discussion portions of our SEC filings, we present financial information on a non-GAAP basis in order to take into account mark-to-market adjustments in our physical commodity product lines, which are included in both our CRM and Other segment.
As discussed on previous conference calls and in our filings, the requirements of accounting principles generally accepted in the U.S., which I'll refer to as GAAP, to carry derivatives at fair market value but physical commodities inventory at the lower of cost or market value may have a significant temporary impact on our reported earnings. Under GAAP, gains and losses on commodities inventory and derivatives, which the company intends to be offsetting, are often recognized in different periods.
Additionally, in certain circumstances, GAAP does not require us to reflect changes in estimated values of forward commitments to purchase and sell commodities. For this reason, we believe that the GAAP numbers do not reflect the commercial results of our physical commodity product lines, and therefore, the company as a whole.
Instead, we assess all of our businesses, as do our banks, on a fully marked-to-market basis in our daily and monthly internal financial reporting. Readers of our Form 10-Q filings should review the selected summary financial information within Item 2 Management's Discussion and Analysis of financial conditions and results of operation for a summary of both GAAP and non-GAAP information.
This section also gives the reconciliation between GAAP and non-GAAP information required by the SEC. Please note that whenever we talk about an adjusted number on this call, we're talking about a non-GAAP number.
Secondly, we're required to advise you and all participants should note that the following discussions should be taken in conjunction with the most recent financial statements and notes thereto, as well as the Form 10-Q to be filed with the SEC. This discussion may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.
These forward-looking statements involve known and unknown risks and uncertainties, which are detailed in our filings with the SEC. Although the company believes that its forward-looking statements are based upon reasonable assumptions regarding its business and future market conditions, there can be no assurances that the company's actual results will not differ materially from any results expressed or implied by the company's forward-looking statements.
The company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Readers are cautioned that any forward-looking statements are not guarantees of future performance.
With that, I'll now turn the call over to Sean O'Connor, the company's Chief Executive Officer.
Sean Michael O'Connor
Thanks, Bill, and good morning, everyone, and thanks for joining the call. Our Q1 2013 fiscal results were significantly better than the prior year, when we recorded an adjusted net loss, due largely to the collapse of MF Global and the impact of that event on the markets, our customers and our revenues.
This year, we saw year-over-year revenue growth and continued cost containment, which produced an encouraging bottom line profit. Our revenues and bottom line also benefited from material non-recurring revenue items.
Paul will deal with these items in more detail in his section. The most significant of which was the profit on our LME shares, which we mentioned on the last call.
Our adjusted operating revenues, net of these non-recurring items, were 15% above last year, but 14% or $17 million below our record result for Q4 2012. We achieved a 9.2% ROE on an adjusted basis as compared to a negative 3.1% return for the prior year period.
Both Bill and I will be referring, later, to the earnings presentation which has been posted on our website. This format has been changed, slightly, to include some additional information, which I will discuss shortly.
All of our business lines, except FX, showed positive revenue growth in a difficult environment. On the FX side, our Payments business did very well, but was overshadowed by declines in our Arbitrage business due to reduced market volatility.
Our OTC Structured Product business also had a difficult quarter, especially when compared to Q4 2012, due to a lack of market volatility and customer demand for their products. Generally, we believe that market condition remain tough for us and most of the external proxies such as market volumes, performance by competitors and such indicators.
We are critically dependent on customer volumes, generally, and market volatility, specifically. While we cannot control either of these factors, we continue to grow and expand our core customer base at a very high rate.
We still have about 400 new accounts being opened every month, which helps to offset these macro factors. We are pleased to see that after 2 or 3 years of rapid growth and expansion, we are now seeing our expenses flatten.
This has been a core focus for the management team and we are now seeing tangible signs of progress on the cost side. Most notably, compensation, which includes both fixed and variable components, was only up 2% versus a year ago, while revenues, excluding the non-recurring items I mentioned, were up 15%.
The clearing and introducing broker costs were up more significantly, but these items tend to be pass-through costs to our end customers. On the last call, we mentioned that our Securities business had closed the Tradewire transaction.
While it's still in the early days and still in the process of getting customer documentation opened up, we are very encouraged by the results so far. This is a young and energetic team that has deep and extensive institutional relationships throughout Latin America, which can be leveraged into almost all of our product areas.
Early results indicate that the acquisition of this team should be immediately accretive to the bottom line, and in due course, could be a meaningful contributor. As we have mentioned in our last 2 calls, we continue to make positive incremental progress in our many organic growth initiatives.
While none of these items these is material in isolation, small changes can have a material impact on the margin, and the number of these can be meaningful when added together. Investment banking, which is part of our Securities segment, has now turned from being a drag on earnings to turning a small profit.
The number of mandates has increased, with many customers now paying us meaningful retainers, and the prospect for material success fees continues to increase as the pipeline builds. We also continue to make incremental progress in Australian, Singaporean, European and Chinese initiatives where we're trying to push out our core capabilities into new regions, which we still believe hold long-term potential growth for us.
Management's primary objective is to sharpen our focus on integrating all of our acquisitions, growth initiatives and new capabilities to realize revenue synergies and cost efficiencies. It's worth noting that our net margin on incremental revenue is a little over 50%, and therefore, smaller and perhaps mainly insignificantly changes in gross revenue can have a meaningful impact on the bottom line.
The objective is to continue with what we have seen in Q1, a steady top line growth with a flattening cost base resulting in operational leverage to the bottom line. The best way to see this is to look at our longer-term results, and I would like to refer you to the third page of the slide presentation that's been posted on our website.
This slide lays out the quarterly operating results for the prior 5 quarters, both on a GAAP and an adjusted basis. It is clear from this slide that our current quarter was significantly better than a year ago, but also not quite as good as the immediately prior quarter in which we had some very positive market conditions due to increased volatility.
This slide also shows the timing differences between our GAAP and adjusted results. While the GAAP results currently show a smoother trend, we believe that the adjusted results better reflect the commercial results of the company, although these differences tend to net out over the medium term.
We have added a new slide on Page 4, which shows the trailing 12-month adjusted net earnings and EBITDA. This provides an even longer-term picture of how the company is performing.
This chart shows the effect of the tougher market conditions that prevailed around the MF and Peregrine debacles, and the subsequent recovery as market conditions improved, and our own expansion initiatives gain traction, combined with some cost-cutting and efficiency gains. Both trailing earnings and trailing EBITDA have hit a new high for the last 5 quarters.
Trailing 12-month net adjusted earnings are up 61% from a year ago and up 160% from the low point hit in Q3 2012. EBITDA is up 35% from a year ago and up 75% from the low point in Q3 2012.
With that, I'll hand you over to Bill Dunaway for a more detailed discussion of the financial results. Bill?
William J. Dunaway
Thank you, Sean. I'd like to start my discussion with the review of the quarterly results, and will refer to the fifth page of the slide presentation titled Quarterly Financial Dashboard.
This slide lays out the quarterly operating results, as well as some related balance sheet information in comparison to the prior year period, as well as, in some cases, the internal target which management has for our operating results. Adjusted operating revenues were $116.5 million for the current period, up 25% from $93.1 million in the first quarter of 2012.
Adjusted operating revenues were a record $124.8 million in the fourth quarter of 2012. Adjusted operating revenues in the current period include $9.2 million in realized gains on the sale of our London Metal Exchange and Kansas City Board of Trade shares, in conjunction with the closing of the sale of those exchanges to the Hong Kong Exchanges and Clearing Limited, and the CME, respectively.
Every segment of the company experienced growth in adjusted operating revenues in the first quarter, as compared to the prior year, with the exception of the Foreign Exchange segment. Looking at our revenues on a segmental basis, adjusted operating revenues in our Core Commodity and Risk Management Services segment increased 10%, from $46.8 million in the prior year period to $51.4 million -- or $51.4 million in the first quarter of 2013.
Adjusted operating revenues decreased $17.8 million as compared to the record fourth quarter revenues of $69.2 million, primarily as a result of lower structure OTC volumes, as Sean mentioned earlier, and lower market volatility. Our CRM segment is further broken down into 3 product lines: Soft commodities, precious metals and base metals.
Starting with soft commodities, operating revenues were relatively flat in the first quarter of 2013, at $40.5 million, as compared to the prior year. Exchange traded contract volumes increased 3% and OTC contract volumes decreased 10%, respectively, over the prior year period.
The increase in exchange traded contract volumes contributed to an increase of 12% or $1.7 million in commission and clearing fee revenues compared to the prior year. In addition, the prior year period was affected by lost revenues from clients introduced by RMI and Hencorp Futures to MF Global.
The decline in OTC contract volumes, primarily in agricultural commodities, contributed to a $1.8 million decrease in overall OTC revenues. Average investable client balances were $1.4 billion for the current period, a 23% increase over the prior year.
A 32% decrease in the number of relatives[ph] traded, primarily in Far Eastern markets, drove a $1.6 million decline in adjusted operating revenues, in our precious metals product line, to $2.6 million. Adjusted operating revenues in our base metals product line increased $6 million, from $2.2 million in the first quarter 2012 to $8.2 million in the current period, primarily as a result of the revenues contributed by the LME Metals Team.
The LME Metals Team, which is added in the middle of the prior year period, contributed $7.7 million to adjusted operating revenues in the current quarter as compared $1.4 million in the prior year. Moving onto the Foreign Exchange segment, operating revenues decreased 9% in the first quarter, to $16.2 million as compared to the $17.9 million in the prior year.
However, the current quarter represents a 7% increase over the fourth quarter operating revenues of $15.2 million. Operating revenues in the global payments product line declined slightly off a record $10.5 million in the prior year period to $10.1 million in the current period, despite a 4% increase in the volume of trades as spreads bare on in the business.
Operating revenues in the customer speculative foreign exchange product line declined $200,000 to $2.1 million in the first quarter as compared to the prior year. Operating revenues from the customer hedging activities increased 18%, as compared to the prior year, to $1.3 million.
And the proprietary foreign exchange arbitrage desk, which I regard as the cash versus the exchange traded markets, experienced a 30% decline in operating revenues, to $2.7 million as compared to the prior year, and was flat with the fourth quarter of 2012. In our Securities segment, operating revenues increased by 30%, from $9.9 million in the prior year to $12.9 million in the current quarter.
Operating revenues in the fourth quarter of 2012 were $11.1 million. This segment includes 2 product lines: The equity market making business and the debt capital market.
Operating revenues in the equities market-making product line were flat as compared to the prior year period, at $7.7 million. However, this represents a 24% increase over fourth quarter 2012 operating revenues of $6.2 million.
The transfer of institutional accounts from Tradewire Securities LLC, which occurred late in the first -- or 2013, contributed $200,000 in operating revenues to the current period. Operating revenues in our debt capital markets product line, which includes both investment banking activities, as well as debt trading, increased from $2.2 million in the prior year period to $5.2 million in the current quarter, primarily driven by a $1.9 million increase in investment banking revenues, as well as an increase in debt trading in Argentina.
In the Clearing and Execution Services segment, operating revenues increased 27%, from $16.7 million in the prior year period to $22.4 million in the first quarter of 2013. This represents a slight decrease from the $22.9 million in the fourth quarter of 2012.
Commission and clearing fee revenues increased 30% from $16.7 million in the prior year to $21.7 million in the first quarter of 2013, as a result of 29% increase in exchange traded volumes. Average investable client balances were $678 million for the current period as compared to $550 million in the prior year period, a 23% increase.
Operating revenues in our Other segment, which contains both our asset management and commodity origination and financing product lines, increased from $3.1 million in the prior year period to $4.9 million in the first quarter of 2013. Assets under management, as of December 31, 2012, were $484 million compared with $369 million as of December 31, 2011.
Operating revenues in the asset management product line increased from $1.2 million in the prior year to $1.8 million in the current period, and operating revenues in the grain financing and physical commodity origination product lines increased $1.1 million to $3 million in the current period. Back to Slide #5 of the dashboard, non-interest expenses were $130.4 million for the first quarter of 2013, an increase of 9% over the $94.9 million in the first quarter of last year.
However, this represented a slight decrease as compared to the $104.2 million in the fourth quarter of 2012. Internally, the company targets to keep variable expenses, as a percentage of total expenses, in excess of 50%.
During the current period, the majority of the non-interest expenses were variable, with 50.8% of total non-interest expense being variable in nature as compared to 51.8% in the prior year period. Non-variable expenses including -- include fixed expenses, as well as bad debt and impairment.
During the first quarters of both 2012 and 2013, we recorded no significant bad debts or impairments. Fixed expenses were $50.8 million for the first quarter of 2013, which represents a $5 million increase over the first quarter of last year, primarily as a result of acquisitions made during fiscal 2012; a $1 million increase in professional fees, primarily driven by Dodd-Frank implementation costs; a $1.5 million accrual for loss contingencies; and a final $400,000 contingent consideration accrual related to a premerger acquisition.
Fixed expenses were $46.5 million in the fourth quarter of 2012. The company targets to keep total compensation expense, as a percentage of adjusted operating revenues, in less than 40%, and for the first quarter 2013, we are slightly above this goal, at 40.1%.
In the prior year period, compensation and benefits were 49.2% of adjusted operating revenues. Compensation and benefits were $46.7 million in the current quarter, as compared to $45.8 million in the prior year, the variable portion of compensation and benefits decreased 8% from $21.5 million in the first quarter, to $19.7 million in the current quarter, while the fixed portion of compensation and benefits increased 11% from $24.3 million in the first quarter of 2012 to $27 million in the current period, primarily as a result of the acquisitions noted earlier.
The average number of employees increased to 1,086 for the first quarter of 2013, as compared to 963 in the prior year period. The adjusted net income from continuing operations for the first quarter was $7.5 million versus a loss of $2.4 million in the prior year.
Looking at the trailing 12 months, adjusted net income and adjusted EBITDA increased 61% and 37%, respectively, over the year ago period. The company looks to achieve a minimum return on equity of 15% or greater on its adjusted stockholder's equity, and through the current period, the company achieved a 9.2% ROE as compared to a negative 3.1% return for the prior year period.
Looking at the balance sheet. Total assets on the balance sheet increased 22% to just under $3 billion, while adjusted stockholder's equity closed the period at $329.1 million, a 10% increase over the prior year.
And November 14 -- on November 15, 2012, the company's Board of Directors authorized a repurchase plan in which the company may repurchase up to 1.5 million shares of its outstanding common stock. This replace the company's prior repurchase plan, which is authorized to purchase up to 1 million shares.
During the first quarter of 2013, the company repurchased 110,018 shares of a -- in the common stock in open market transaction, in the aggregate amount of $2 million. Another key metric the company focused on is keeping a 1:1 ratio between revenue-generating employees and administrative or operating employees.
Along these lines, the company targets to have at least $500,000 in annualized revenues across the entire employee base. For the current period, this metric was $429,000 per employee as compared to $387,000 for the prior year period.
Finally, in closing out the review of the quarterly results, the trailing 12 months results have led to an increase of 9% in the book value per share, closing out the quarter at $17.26 per share. With that, I'd like to turn it back to Sean to wrap up.
Sean Michael O'Connor
Thanks, Bill. While the quarter's results were amplified by non-recurring items, we were encouraged to see continued revenue growth, while at the same time seeing good cost containment.
Management is focused on achieving operational efficiencies and revenue synergies, and this is now starting to show up in the numbers. Our margin on incremental revenues is very high, and this operational leverage can provide a strong ongoing push to earnings.
We are now in the thick Dodd-Frank regulatory changes that we spent almost a year preparing for. The changes are extensive and expensive, and will have lots of knock-on effects for our business and industry.
Some negative and some positive, and some potentially unintended. We suspect that many in our industry are not fully prepared.
They may be in denial or just unwilling to change. While costly and disruptive, this is our new reality, and we are trying to embrace it and use it to our advantage.
It is certain to me that this creates a barrier-to-entry, and ultimately will drive small players from the business and force consolidations as customers look for better capitalized and regulatory-compliant firms to deal with. We have to be a recognized and preferred destination for midsized customers, and believe this will be a positive for us in the medium and long term.
We were interested to see that we were the only nonbank to register the swap deal on December 31, 2012, which may result in us having an interesting and unique position in the market. With that, I'd like to turn it back to the operator and open the question-and-answer session, if there are any.
Operator?
Operator
[Operator Instructions] We'll take our first question from Justin Hughes from Philadelphia Financial.
Justin Hughes
I was just wondering, if we look at Slide 3, where it shows the progression of your income from continuing operations, does that include the gain on the LME shares that were sold this quarter?
William J. Dunaway
Yes.
Sean Michael O'Connor
Okay. and they were - I mean, just to be clear on that, and I think Bill has given you some of the numbers in there, and they'll certainly be laid out in our 10-Q.
They were positive and negative non-recurring items that netted down to, Bill, about a $5 million number?
William J. Dunaway
Yes, that's correct.
Justin Hughes
That was a $5 million benefit or $5 million...
Sean Michael O'Connor
A net $5 million benefit.
Justin Hughes
Okay. So, I mean, really, the kind of one-timers really could take out $5 million from that number?
I mean, I assume, next year, when you look at this for a comparison you'll take out $5 million?
William J. Dunaway
Correct.
Sean Michael O'Connor
Correct. That will be a good assumption, what you just said.
Justin Hughes
Okay. What were the other non-recurring items?
Sean Michael O'Connor
Do you want to run through them quickly?
William J. Dunaway
Yes. I mean, the other 2 that we're kind of looking at was a $1.5 million loss contingency and then the $400,000 payment for a premerger acquisition that -- because it was premerger, we have -- we just expressed it when it's certain that the payment's going to be made.
That's about $1.9 million netted off.
Justin Hughes
Okay. And there was no comp or anything against the LME gain, was there?
William J. Dunaway
No, there was not.
Justin Hughes
We could just tax effect that number?
William J. Dunaway
Correct.
Sean Michael O'Connor
Some of the -- sorry, Justin, on the $1.5 million loss provision, there was no tax shield on that either. So it was a pre and post-tax number effected there.
Justin Hughes
Okay. And you filed an 8-K a couple of weeks ago, about the ruling in the Sentinel case.
Is there any charges, in this current quarter, to account for that?
William J. Dunaway
No. There's no current charge against that.
We reviewed that matter and determined it's not probable at this point, that a loss has occurred there, and we're going through the appeals process now.
Justin Hughes
Okay. So there's no accrual for -- there wasn't one in previous quarters either?
William J. Dunaway
No, there's nothing in the current quarter nor has there been anything in prior quarters. Unless you go all the way back to 2007, FCStone, when it originally happened there was a $5 million charge then.
Sean Michael O'Connor
But we can't make a charge on accrual unless everyone believes we have a probable loss, and we didn't cross that threshold by our attorney's judgment.
Justin Hughes
Okay. And then my last question.
Your 10-K mentioned that you received a Well's notice. Can you just update on that?
And if any employees are taking a leave of absence?
Sean Michael O'Connor
Okay, Brian, I think our Chief Legal Officer's on. Brian, do you want to take that?
Brian T. Sephton
The Well's notice we received, I think, that you're referring to is the one in connection with the CFTC matter that we've disclosed for quite a few quarters now. And that is something that we're in discussions with the CFTC at the moment.
That disclosure will be appearing in the 10-Q.
Justin Hughes
Can you give us a little more color about what it's regarding?
Brian T. Sephton
It is to do with the energy account which has been the subject of lawsuits and has been disclosed in all of our Qs over the last 3 years since the merger. It's an old FCStone matter which occurred back in 2008, 2009.
The loss that was incurred by FCStone gave rise to that. So we had a shareholder lawsuit, a class-action lawsuit, there was a derivative lawsuit, there was an SEC investigation.
Those 2 lawsuits are currently settled, in principle, just awaiting sign-off by the court. The SEC has completed its investigations without any further comment and this, if you like, is the last shoe to drop.
Sean Michael O'Connor
And just, Justin, just to be specific at this point. We don't believe it's going to impact any of our employees.
Justin Hughes
Okay. None of the former FCStone employees have taken a leave of absence, anything, from this?
Sean Michael O'Connor
No one has taken a leave of absence at this point. But we have accrued for a potential enforcement action and fine, although that matter is not finalized yet.
Brian T. Sephton
Justin, one thing to add to that. Since this was a 2008, 2009 matter, there were certain employees who left FCStone back at that time.
No current date.
Operator
[Operator Instructions] We'll take our next question from Bill Jones with Singular.
William R. Jones - Singular Research
Just to be clear, can you remind us on the $9.2 million gain on the sale of the shares from the LME? Remind us how that transpired, because you picked up these assets, LME assets, at pretty much a bargain price.
Sean Michael O'Connor
Yes, just the high-level overview of that. About 18 months ago, we decided to join LME and become a member of that exchange.
We were in the metals business, we were never a member of the LME. It was kind of a missing piece of our portfolio.
We decided to go ahead and join the LME. And while in process of doing that, we picked up Ambrian's license.
And if you remember, you saw an announcement about us acquiring Ambrian and a small team resulting from that acquisition, which was really done at kind of cash value. We didn't really pay anything for it.
With that acquisition, we picked up some LME shares. And at the time, these were traded, not on an official market, so it was sort of traded OTC.
We didn't particularly want the shares at that point, as it happens. But we did take over the shares, the price point we used for that was the last trade in the market.
We took those shares over, and within a couple of months, the LME announced it was for sale, and obviously, the value of those shares increased dramatically. Now that has been a year-long process.
We had taken some marks up through to APEC [ph], which is what we're required to do in our September quarter. But we were only permitted to show the gain through the income statement when we received the cash.
And that happened just before Christmas. So that's, really, the genesis of that story.
So not something we did. I have to acknowledge up front, not any great foresight we had as management.
Sometimes you get lucky. I think we got lucky in this instance.
But, certainly, it's not in our business to find and sell exchanges or try and enter into that game. This was incidental to an acquisition we made, which happened to kind of work out great for us.
William R. Jones - Singular Research
Excellent. And then you mentioned in -- Bill had mentioned in Q1, you're still buying back shares, about 110,000.
You spent about $2 million. So that's $18 per share?
Sean Michael O'Connor
Well, I think that's about right.
William J. Dunaway
Yes, it's right around there, Bill.
Sean Michael O'Connor
I mean, as always, with stock buybacks, we have a very disciplined approach as to price. And over and above that, we put a factor in the company's liquidity and growth prospects and figure out how much surplus cash we have.
So, the first decision point is, do we have surplus cash we want to spend on this. If we do have surplus cash, are the shares at the price where think it's accretive to our shareholders to buy those shares.
William R. Jones - Singular Research
Right. And that, with an adjusted book value of $17.26, you're getting your share back now?
Sean Michael O'Connor
I mean, we don't want to pay any meaningful premium to book value, because as you start to do that, it doesn't become very accretive. So we have kind of our very scaled approach where we've put internal guidelines on how we're going to do that.
We just want to make sure that we don't fall into the trap where I think some management teams fall in of trying to second-guess the market price, trying to support the share price, trying to send a message. We're not trying to do any of that.
We are trying to exercise control and make transactions that we feel are accretive for us, the shareholders, not to try and second guess the market.
Operator
[Operator Instructions]
Sean Michael O'Connor
Operator, if there are no other questions, I think we can probably wrap up.
Operator
Very good. There are no further questions at this time.
Sean Michael O'Connor
Okay. Well thanks, everyone, for joining us.
We will speak with you in about 3 months. Thank you.
Operator
That concludes today's conference. We thank you for your participation.