Brigham Minerals, Inc. (NYSE:MNRL ) Q2 2022 Earnings Conference Call August 5, 2022 9:00 AM ET

Bud Brigham - Founder and Executive Chairman

Rob Roosa - Founder and Chief Executive Officer

Blake Williams - Chief Financial Officer

Jacob Sexton - Investor Relations

Chris Baker - Credit Suisse

TJ Schultz - RBC Capital Markets

Derrick Whitfield - Stifel Nicolaus

Hello, everyone. Thank you for patience, and welcome to the Brigham Minerals Second Quarter 2022 Earnings Conference Call. My name is Emily, and I'll be moderating the call today. [Operator instructions].

I will now turn the call over to our host, Jacob Sexton from the Brigham Minerals. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to the Brigham Minerals Second Quarter 2022 Earnings Conference Call. Joining us today are Bud Brigham, Founder and Executive Chairman; Rob Roosa, Founder and Chief Executive Officer; and Blake Williams, Chief Financial Officer.

Before we begin, I would like to remind you that our remarks, including the answers to your questions, contain forward-looking statements, and we refer you to our earnings release for a detailed discussion of these forward-looking statements and the associated risks. In addition, during this call, we make references to certain non-GAAP financial measures. Reconciliations to applicable GAAP measures can also be found in our earnings release. We have a new investor presentation titled Second Quarter 2022 Investor Presentation, available for download on our website, www.brighamminerals.com. We recommend downloading the presentation in the event we refer to it during the conference call. Lastly, as a reminder, today's call is being webcast and is accessible through the audio link on our IR website.

I would now like to turn the call over to Bud Brigham, Founder And Executive Chairman.

Thank you, Jacob, and thanks to everyone for joining us on our second quarter 2022 earnings conference call. I want to thank the Brigham Minerals team for yet another exceptional quarter of operational and financial performance. Like the first quarter, we saw strong DUC conversions that drove quarterly production from approximately 12,000 barrels of oil equivalent per day in the first quarter, to 13,000 barrels of oil equivalent per day in the second quarter. That represents an 8% sequential increase in our volumes. When compared to the fourth quarter of 2021, our production volumes are up 45%, substantially more than that of most energy companies, a direct indication of the power of our assets. Very few companies are achieving growth of this magnitude. Furthermore, we continued to reload in the second quarter, with a record number of gross wells spud on our asset, which maintained our net DUC inventory at a relatively flat 6.8 net wells. Importantly, given our strong DUC inventory at the end of June, we are prepared to generate production volumes exactly when you want them, during a period of sustained positive macro fundamentals.

With respect to the macro, I believe the recent relative weakness improved to be short in duration, and that over the remainder of 2022, we will see a solidification of the oil macro environment. In fact, the performance of crude prices remarkable, given the magnitude of volumes released from the SPR, which are temporary, and which, for the sake of national security, will require refilling. As I've said before, and my view has not changed, we are in the midst of the early stages of an energy super cycle, exceptional, both for its amplitude, and duration. In fact, we recently sought confirmation from the Saudis that they lack meaningful spare capacity, and that it could take until 2027 for them to add one million barrels of the incremental capacity. Here in the US, energy companies remain constrained by supply chain constraints, including sand equipment and people, and a continued focus by public companies to deliver on investor demand to return capital. We also continue to see the US DUC inventory dwindle, albeit at a slower pace, thereby further limiting the industry's ability to meaningfully ramp up supply. This is particularly true outside the Permian, given that many of the domestic basins can only deliver limited growth. As a result, much of the required production growth will come from the Permian, where, as evidenced by our strong performance, Brigham Minerals enjoys superior assets.

With that, I will now turn the call over to Rob.

Thanks, Bud. Similar to Bud, I want to thank our team for quarterly results that are nothing short of exceptional, and clearly demonstrate that our business is firing on all cylinders. Our operational and financial results compare favorably to any business in any industry. For example, year-over-year, we generated 45% production growth, 159% EBITDA growth, 120% dividend growth, as well as implemented our base plus variable dividend, and increased that base dividend almost immediately by 14% as a result of last year's DJ Basin acquisition. To summarize, we've achieved a rare combination of highly profitable production growth, while maintaining balance sheet discipline, and seeing our adjusted EBITDA margin expand to 88%. In the second quarter, we complimented these achievements with our continued highly successful asset rationalization efforts. During the quarter, we closed on our largest single asset divestiture to date, totaling approximately $67.3 million, with the sale of largely undeveloped minerals in the Anadarko Basin that were anticipated to produce 200 barrels of oil equivalent per day in the third quarter. We partially redeployed these proceeds to our ground game, with approximately $33.2 million in acquisitions during the second quarter that were, one, 100% Permian basin focused, two, are anticipated to be developed by top tier operators, including Endeavor and Chevron, three, encompassed 95% PDP, DUC, and permitted net locations, and four, are anticipated to add 400 barrels of oil equivalent per day in production in the third quarter. Further, we were able to reduce our net debt to $49 million at the end of June, as compared to $87 million at the end of March. To recap, our team was able to divest Oklahoma assets, generating a mid-teens next 12 months cashflow multiple, and redeploy those proceeds into immediately cash flow generating Permian basin assets at six times next 12 months cash flow multiple, while reducing our debt balance, which will provide runway for future accretive acquisitions and our return of capital program.

Moving to our operational results. Our production volumes were an all-time company record 13,019 barrels of oil equivalent per day, growing 8% from the first quarter 2022. Our production growth was driven by 2.4 net wealth converted from DUC to PDP during the quarter, which represents our third highest conversion quarter in our history, and follows closely behind our record 2.7 net conversions in the first quarter. Our DUC balance is converting at an extremely rapid rate, driven by significant change in cycle times across the entire industry. For example, in some cases, we have seen permit to reduction times compressing from 18 months, all the way down to nine to 12 months for a number of operators in specific basins. Shorter cycle times greatly benefit our production and cash flow, by bringing wealth online much faster than we would've expected, and has proven to be yet another source of optionality generated by our high-quality minerals portfolio. Importantly, we saw yet another quarter of record drilling activity on our assets, which helped to replenish our DUC inventory. During the quarter, we had a 6% sequential increase in gross well spud to a record 253 gross well spud, which implies an annualized quarterly run rate in excess of 1,000 gross wells per year. Our spuds and asset acquisitions have driven our gross DUCs in inventory as of the end of June to over 1,000 gross locations. Given the latest EIA DUC inventory data, which was published on July 18th, Brigham Minerals has an interest in approximately 24% of all the gross DUCs in the United States, is in roughly 38% of the gross DUCs in our basins, and has an interest in approximately 50% of the gross DUCs in the Permian basin. Our ability to acquire in the best of US shale, which operators then consistently drill and convert to PDP, is a clear differentiator, and will continue to play itself out in our operational and financial performance.

Looking ahead, our net activity well inventory, which represents the combination of our DUCs and permits, continues to be very strong at 11 net locations. Our net DUCs and inventory at the end of the second quarter, stayed roughly flat versus the first quarter, despite our previously mentioned strong DUC conversions. We anticipate that, PDC, Endeavor, Chevron, Huber, Pioneer, and Oxy, will convert the majority of our DUC inventory. With the first half of 2022 in the rearview mirror, we have solidly outperformed our initial 2022 production guidance that we provided in February. As a result, we are increasing our full year 2022 production guidance 9% to a midpoint of 12,650 barrels of oil equivalent per day. Our new midpoint represents year-over-year production growth of approximately 40%. We will provide initial 2023 guidance in February with our fourth quarter 2022 results. Finally, we're pleased to announce a 28% increase in our dividend, driven by our record production volumes and strong commodity pricing, to $0.77 per share, which is inclusive of our $0.16 per share base dividend. In summary, just a terrific job by our team.

I'll now turn the call over to Blake so he can summarize our financial performance. Blake?

Thank you, Rob. Our daily production for the quarter was 13,019 barrels of oil equivalent per day, up 8% sequentially. And our oil cut increased to 52%, driven by 24% growth out of the Permian basin. Our portfolio generated another quarter of record royalty revenue of $90.4 million for the quarter, up 29% sequentially, due to a combination of an 80% increase in production volumes, and an 18% improvement in realized pricing. Realized pricing was strong, as our unhedged volumes continue to allow us to completely capture the increase in prices. Our oil differential remained in the plus or minus 100% of WTI. Gas differential reversed from a roughly $0.50 premium to a $0.50 deduct, driven mainly by softer realizations in the Permian. We also collected $0.5 million in lease bonus during the first quarter. Strong leasing opportunities in our basins have allowed us to increase the midpoints of our lease bonus guidance 25% for the full year.

Net income for the quarter was $50.2 million. Record adjusted EBITDA for the quarter was $80 million. And adjusted EBITDA, excluding lease bonus, was $79 million, which was up roughly 31% sequentially. On costs, gathering, transportation, and marketing expenses were $2.2 million, or $1.90 per BOE. Operator commentary continues to point towards higher costs. However, our GTM costs have remained well below our expectations. For that reason, we are reducing our guidance midpoint 25% versus our initial guidance. Severance and ad valorem taxes were $5.4 million, or 6% of mineral and royalty revenue, and in line with historical levels. We expect this number to trend higher, as property values in Texas increase to reflect higher commodity prices.

Cash G&A expense was $3.6 million, down $800,000 from the first quarter, and on track to achieve our full year guidance. As our results and guidance showcase, our business model clearly stands out as an optimal structure to gain exposure to the commodity and the best inventory without the direct impacts of the current inflationary pressures.

Moving to our balance sheet, our large divestiture has allowed us to reduce debt, and we exited the quarter with $24 million of cash, and $73 million drawn on our revolving credit facility, for net debt of $49 million, down $38 million from the first quarter. The debt reduction gives us a leverage ratio of 0.2 times net debt to last quarter annualized adjusted EBITDA. After adjusting for our divestiture, our borrowing base sits at $290 million, which leaves us with liquidity of $241 million, versus $213 million in the first quarter. Lastly, as Rob already stated, we declared a dividend of $0.77 per share of Class A common stock. This represents a 75% payout of our discretionary cash flow, excluding lease bonus. As we look to continue to capture value for shareholders, we will use our cash flow from operations and available liquidity to ensure we are optimizing our current and future return of capital program and acquisition strategy.

I will now turn the call back over to Rob to wrap things up

Again, we appreciate you joining our second quarter 2022 conference call. Our outperformance this quarter is no one-time event, and I fully expect our business to continue to outperform. Finally, we appreciate your questions and engaging with us on our conference call. However, we do not comment on rumors or speculations.

Operator, I’ll now turn the call back over to you to begin the question-and-answer portion of our conference call.

Thank you. [Operator Instructions] Our first question today comes from Chris Baker With Credit Suisse. Chris, your line is open.

Yes. Good morning, guys. Great results this quarter. Congrats. I was hoping you could just touch on the organic year-over-year production growth implied by the revised guidance. Obviously, a few puts and takes with DJ and some different A&D transactions, but it looks like it's a pretty good number. Could you just remind us what that sort of implies on a total production growth basis?

Yes, Chris, appreciate the question, and thanks for joining us. So, I think pretty typically, as we stated in the past, or in particular last quarter, a significant amount of our activity was organically based, meaning pre even COVID. So, even today, we're seeing kind of organic development of our asset, meaning asset - wells are being turned in line to production, or neither PDP, DUCs or permits went acquired, but entirely undeveloped. We're typically seeing 60% to 70% of our activity levels being undeveloped when acquired. And so, we are seeing a pretty significant transition or development of our asset on an organic basis. If you looked at this quarter in particular, us signaling the transition or the deal in the Midland basin, and then offsetting that with the sale in Oklahoma, we did - through acquisition, we’re anticipated to add about 200 barrels a day of production in the third quarter through the deal, but largely, we're seeing terrific development of our asset, and really that's our thesis of buying tier one assets under well-capitalized operators. We see a significant ramp in our drilling activity on our asset. So, if you looked at, for instance, Page 7 of our presentation deck, you can see the significant ramp really from the second quarter of 2020 to today, where over 253 wells were drilled on our assets. So, what we mentioned was that run rate of about 1,000 rigs per quarter. So, really a tremendous result that we're seeing that level of activity on our asset.

That's great. Thanks. And then, just given where shares are trading, could you maybe just update us on your thoughts around a buyback, and perhaps just any comment on what Viper has kind of outlined with their 2Q release? I realize it's a bit different than your current strategy, but just around that flexibility, any thoughts would be appreciated. Thanks.

Yes, sure. Firstly, we evaluate - we obviously always evaluate buybacks. In fact, to bring to your attention, we bought back in 2020, when largely no one else was at a price around $8. So, obviously, we're proven opportunistic buyers of our stock. We've seen - obviously, over time, we've seen significant value in acquisitions, and have remained focused on those acquisitions. I think it's worth highlighting that, much like Rob was saying about the organic, our acquisitions that we made in 2020 and 2021, are vastly exceeding our expectations. And at the time, were very clearly fantastic uses of capital. Now, all that said, I think our business has matured rapidly, as well as our views on our return of capital plan. So, given that we're trading at low double-digit yield, we do believe that the capital allocation becomes more dynamic amongst acquisitions, share purchases, as well as maintaining a conservative balance sheet. I think we're still finding good value in mineral acquisitions, but the competitive market can be challenging at times. As a result, we are constantly evaluating the best way to add value through acquisitions and return capital to our shareholders. I think there's something eloquent about the Viper model, and when we originally set up our base plus variable dividend structure, we did envision the variable dividend providing us with the flexibility to optimize our return of capital via dividends or buybacks as appropriate, just like they outlined. So, I think you can expect us to shore up that framework on or before our next earnings call.

Our next question comes from Jeanine Wai with Barclays. Please go ahead.

Hi. Good morning, everyone. Thanks for taking our questions. Our first question maybe on just the Anadarko divestiture in the portfolio, can you provide a little color on how that deal kind of came together? Were you specifically looking to prune your position in that basin in favor of high grating to the Permian, or was this really more opportunistic, with just a very interested buyer?

Yes, Jeanine, appreciate the question. We definitely want to highlight that transaction as a major execution positive from the team during the quarter. Just rewinding the clock a little bit and going back to COVID itself, one of the reasons we were able to do this deal at such an opportunistic time, is because we've consistently maintained a conservative balance sheet. So, when you think about the depths of COVID in 2020, when many were forced to fire sale many deals out there in the marketplace, we were able to, through that very disciplined balance sheet, wait for an opportunistic time to divest our assets. And so, we began those divestitures in second quarter of 2021 did a couple of deals that quarter, continued on in Q3 with a stack divestment in Q4 of - sorry, Q1 of this year, had our merge divestment. So, through that period, had divested about $22 million in assets.

This deal was really us staying in tune with the marketplace, continuing to evaluate who's in active in areas. Our team is always looking. We have our ground game, but always looking to, is there a way to optimize our portfolio and move forward? And so, our team staying in touch with those that are active in the basin, outreaching to them, dialoguing with them, working with them to look at the asset and decide. One of the ways that we looked at this is looking at the intrinsic value of the asset relative to their offers. And so, very disciplined in that process. So, I think in my mind, it's a combination of multiple different factors that allowed really this deal to happen in the second quarter. One, us maintaining a conservative balance sheet allows us to opportunistically hit the market when we feel it's the best time. We are also very in tune with who's out there in the marketplace. And then us very being very disciplined in our process, making sure we're maximizing value to the shareholders by generating the best possible bid and then executing upon that.

Great. That's really helpful commentary. Thank you. Maybe just on the other side of the coin here, you announced a nice Permian acquisition in the quarter, and you increased your budget for acquisitions by about $40 million. So, can you comment on how you see Brigham positioned in terms of scale versus peers, since the broader market trend has really been one of consolidation. Thank you.

Yes. When I think about the broader market and the deals out there in the marketplace, I really in the past have talked about really there being three types of deals, the ground game, which our team just accelerates at tremendously really exciting results, not just this quarter, Jeanine, but also in the first quarter. Really, the bulk of the increase in our CapEx budget this year, taking that from a midpoint of $70 million to $110 million, driven by the tremendous success that we've had in the ground game. If you look back at the first quarter, the Midland basin deal largely under Pioneer and Endeavor. And then in the second quarter here, adding a record 95% of our locations either via PDP, DUCs or permits, and again, under very high-quality operators, Endeavor and Chevron. So, we've had tremendous success there. And really in essence, us increasing that ground game budget from that $70 million midpoint, to $110 million, speaks to the great job the team's doing in terms of generating deals, taking it from a $10 million quarter run rate to about $16 million to $17 million. So, we're seeing good success there.

In the mid-size deals, we are very active and have had recent success. So, if you think about the DJ Basin deal that we did in the fourth quarter of last year, it's been tremendous for us in terms of being additive. If you look at our volumes in the fourth quarter of last year, did about 1,400 to 1,500 barrels a day of production in the DJ Basin. Those levels are now at 2,800 to 2,900 barrels a day. So, almost a doubling of our production volumes in the DJ Basin as a result of that deal. So, to me, that deal is outperforming in terms of the cycle times that our operators, primarily PDC is attacking the asset. We've seen really nice development under the DJ Vega Pad, Lightning, Thunder, Volt Pads. So, all really nice and additive to the quarter. So, we're seeing a tremendous response there. And in particular, you think about just having put that or executed that deal in the fourth quarter of last year, we've now recouped about 20% of the dollars related to that deal. So, over a six-month period, a tremendous return.

And so, the key with all those deals, though, is being very disciplined in our underwriting. We've always signaled that we want to make sure deals are accretive on a near-term cash flow basis, as well as an NAV basis. So, applying those same - that same methodology, those same standards to large deals, we haven't maybe been as successful with the large deals, but in my mind, that's potentially - it's really due to us wanting to be very disciplined in our underwriting, making sure we are conservative in terms of our balance sheet, maintaining flexibility. So, all those are facts, different things that we look at when we're looking at deals across the entire spectrum. So, I think when I think about the three potential buckets, very successful in terms of two of the buckets, and we're working on that third to close that deal. But I think the important point there is us being very disciplined in our process, making sure we don't over-lever as we go forward, and think about the potential impact of over-levering to the business into the future.

Yes. And I think I would just add to that, with all that said, just answering your scale question, we obviously believe that scale is important, which is why we're trying to do all these acquisitions. So, we think it's important to our business’s long-term success. A larger asset base obviously helps us diffuse our G&A costs, while more trading liquidity via higher share price and more shares, if the acquisition were to call for it, does offer us better access to debt and equity capital markets. So, with these variables that are obviously directly linked to cost of capital, which is critical to any business, but especially a natural resource acquisition business.

Great. Appreciate all the color. Thank you, gentlemen.

Our next question comes from TJ Schultz with RBC Capital Markets. Please go ahead, TJ.

Great. Thanks. Good morning. Maybe just following on that last set of questions on some of these larger transactions, or the potential to do some of the larger transactions. We've seen - what we've seen completed in the market, has required certainly larger cash components or all cash. So, just trying to understand what is your appetite to use the balance sheet to look at larger transactions right now, or under your risk parameters? Do you think those will require sellers to take back some of the Brigham equity? Thanks.

Yes, TJ, one of the main things that we've talked about is being very disciplined in the use of our balance sheet. So, maintaining conservatism, kind of a one and a half to two times leverage ratio. And so, that's what we're kind of targeting when we look at any transaction. So, obviously, smaller deals, more in the DJ Basin size deal, $100-million deal, we have the flexibility today to do those deals entirely with cash. I think with the scale and the right deal, there's potential to upgrade the cash flows such that you could potentially access the high yield market into the future, and partially fund that via debt. So, I think there's a lot of optionality there, but I think also preferentially, we'd like to potentially include some equity in these transactions, and it helps to keep the balance sheet conservative and provide runway into the future to continue to do ground game yields.

Yes. And I think just to put some numbers to that, obviously, our current leverage is 0.2 times net debt to EBITDA, and our liquidity sits at almost $250 million. So, we've got plenty of flexibility and ample space to be able to execute on those if we wanted to add more cash for the right deal.

Okay. thanks. And then, Rob, I think you probably answered this at the end of your prepared remarks, but clearly there was a press report out this week that indicated you all are working with an advisor to explore options that may include a sale or merger of the company. If there's not any comment around that, can you just generally provide your perspective on - or your view on valuations for public oil and gas royalties, versus what is transacting in the private markets? Thanks.

Yes. no, appreciate your question, TJ. And as I indicated in my opening remarks, we just don't comment on rumors or speculation. So, I think when you think about Brigham, kind of what we've seen written today, as analysts have digested the second quarter results, we're trading in that kind of 12% or so yield, based - 12$ to 13% yield based on cash flow. So, that's out there. I think one of the research notes I did saw was that that's a little bit wider than we’ve typically seen at kind of a mid-9% yield. So, there does - has been some widening of that yield, which we're obviously evaluating. Blake indicated one of the ways we're evaluating that is through potential changes to our return of capital program, which we'll get back to you on or before the November conference call.

So, I think that there's potential mechanism there that we can utilize to enhance shareholder value further. And so, I think there does seem to be some near-term disconnects with respect to the current yield relative to more historic yields. But I think you have seen a pretty significant reigning in of the energy space in general since June. Many stocks have traded down. And so, I think, when I think about the market, and some of Bud's comments, and the overall crude market, we're very bullish in that we've seen long-term structural advantages to being in energy. You think about US E&Ps, the inability to really ramp up production because of the supply chain or the return of capital pieces that many are undertaking. You think about the current potential issues in Russia and the potential embargo that's going to happen here at the end of December, the need to refill the SPR, because we've drawn down on those volumes significantly, and then really kind of the lack of OPEC’s ability to ramp up production here, with our most recent announcement this week, is really indicative to me of fundamental positives as we think about the second half and into 2023. So, I think you're going to see an improvement in energy markets going forward, and hopefully that yield compresses as well.

[Operator instructions]. Our next question comes from Derrick Whitfield with Stifel. Please go ahead, Derrick.

Good morning, all, and congrats on your strong quarter and you’re A&D updates.

Yes. Appreciate it, Derrick. Thanks

Sure. With regard to US supply constraints broadly that Bud spoke to, how are you guys thinking about just conversions in an environment where operators are continuing to add rigs and we're not seeing a commensurate increase in frack spreads?

I think, interestingly, operators continue to seek efficiencies in those, and especially the completions. One of the things that I think was interesting to date, when you think about the EOG press release today, they spoke to efficiencies, not having to increase their CapEx budget because their operations are becoming so efficient. When you think about DUCs in the utilization of frac crews, there's been a lot of discussion over the past several quarters regarding simul-fracs and the ability to more effectively use your frack equipment. And so, I think consistently throughout time, operators have found ways to use equipment very efficiently. And so, I think, although you perhaps aren't seeing completion crews move at - or increase at a rate commensurate with the rigs, I think there's many ways which operators can still enhance the efficiencies of those assets.

I mean, regardless of that, I mean, we continue to see some really nice conversions of our asset as we think about this year. When we think about the 2.7 net wells that were converted here in the first quarter, that was a record for us. We converted then 2.4 net locations this quarter. Again, a tremendous result. I think our third highest conversion quarter out there in our history. And so, when you think about the first half of this year, we had over five net locations converted for us, and that's relative to three in the entirety of 2021. So, really a tremendous result. Again, I think it speaks to the quality of the asset, the tier one asset that the team has put together in terms of buying the very best geology under the best operators that have the best equipment, utilize the deck technology to complete their wells. So, that preferentially leads to our asset being converted over time.

Yes. I think as we highlighted on the first quarter call, last year we did see a drawdown in that DUC inventory as referencing the EIA data. So, in our minds, this is just kind of a replenishing of that DUC inventory this year. So, it should just be steady state.

Sure. That makes sense. And as my follow-up, over the last couple of quarters, your ground game has been particularly successful in the Midland, and even more so when you think about it from an allocation perspective relative to past. Is there a notable value discrepancy you're seeing in Midland assets, or is that simply a function of opportunity?

I think it's the team really capitalizing on the opportunity that's out there, being very aggressive, attacking Midland basin in particular. There's many ways which we've utilized to enhance the outreach to potential sellers. Obviously, we're not going to disclose those. But obviously, as we - you point out, Derrick, the last several quarters, the outreach and responsiveness by Midland basin owners, has been in particular very positive for us. And again, reiterating, as you've mentioned, being able to add locations under Pioneer Endeavor, Chevron, really the top operators in those basins, Pioneer, Endeavor, both with the most rigs in the basin, again, points to improvement of cycle times for us, our asset converting from undeveloped to permitted DUC, and then PDP. So, our team is extensively outreaching to all the potential sellers in the Midland basin. And in particular, we've seen some very good results given that kind of change in philosophy that we've undertaken. But again, don't want to speak to - in particular, to the details there because we are seeing some really nice response in those base - in that basin.

That's great. Great update, guys, and congrats on the quarter.

At this time, we have no further questions. So, I'll hand back to Rob to conclude today's call.

Again, we appreciate you joining our second quarter conference call, and look forward to reporting back to you in November with our third quarter results. Thanks again for joining.

Thank you, everyone, for joining us today. This concludes our call. You may now disconnect your lines.