Hilton Grand Vacations

Q2 2017 Earnings Conference Call

Thursday, August 3, 2017, 11:00 a.m. Eastern

CORPORATE PARTICIPANTS

Mark Wang – President and Chief Executive Officer

Jim Mikolaichik – Executive Vice President and Chief Financial Officer

Robert LaFleur – Vice President, Investor Relations

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PRESENTATION Operator Good morning and welcome to the Hilton Grand Vacations Second Quarter 2017 Earnings Conference Call. Today’s call is being recorded and will be available for replay beginning at 2:30 p.m., Eastern Daylight time today. The dial-in number is 1-888-203-1112 or 1-719-457-0820 and enter PIN number 5231524. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following today’s presentation. If you would like to ask a question, please press star (*), one (1) on your touchtone phone to enter the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing star (*), two (2). If you should require operator assistance, please press star (*) and zero (0). I would now like to turn the conference over to Robert LaFleur, Vice President of Investor Relations. Please go ahead, sir. Robert LaFleur Thank you, Mariah. Welcome to the Hilton Grand Vacations Second Quarter 2017 Earnings Call. Before we get started, we would like to remind you that our discussion this morning will include forward-looking statements. Actual results could differ materially from those indicated by these forward-looking statements, and the forward-looking statements made today are effective only as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the factors that could cause actual results to differ, please see the risk factors section of our previously filed 10-K or our 10-Q, which we expect to file later today. In addition, we will refer to certain non-GAAP financial measures in our call this morning. You can find definitions and components of such non-GAAP numbers as well as reconciliations of non-GAAP and GAAP financial measures discussed today in our earnings press release and on our website at www.investors.hgv.com. This morning, Mark Wang, our President and Chief Executive Officer, will provide highlights for the second quarter 2017 in addition to an overview of current operations and company strategy. Jim Mikolaichik, our Executive Vice President and Chief Financial Officer, will then provide more details on our second quarter and expectations for the balance of 2017. Following their remarks, we will open the line for questions. With that, let me turn the call over to Mark. Mark Wang Well, thank you, Bob, and good morning everyone. This quarter’s results demonstrate the strength and versatility of HGV’s direct-to-consumer business model and the power of our highly aligned relationship with Hilton. Operationally HGV’s business is performing well across the board. Our real estate business had a great second quarter as our marketing teams delivered high single-digit tour growth and our sales teams delivered double-digit contract sales growth.

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Both the Mainland and Asia Pacific region performed well with Las Vegas, Myrtle Beach, Hawaii, and Japan all seeing double-digit sales growth. Overall, second quarter contract sales were up 11% driven by 9.5% higher tours and a 1.6% increase in VPG. Considering the tough second quarter of 2016 comps last year, we are very pleased with these results. As you can see, contract sales growth this quarter was more reliant on tour flow than VPG. Last quarter was more VPG driven, which highlights the dynamic nature of our business and the multiple levers we have to drive growth. While the comps remain tough for the balance of the year, our strong first half results and building sales momentum gives us confidence to raise our full contract sales guidance to 6.5% to 8.5% from 5% to 7%. This quarter’s real estate results and 2017 outlook demonstrate the distinct competitive edge we have enjoyed from combining our powerful sales and marketing platform with the Hilton brand and its marketing reach, and we only see this advantage growing over time. Last week Hilton reported 5.5 million new members have joined Hilton Honors this year, up 20% over last year. Today, Hilton Honors has 64 million members and plans to have a 100 million by 2019. We are Hilton’s second largest fee payer, and our interests are highly aligned. Through our variable license agreement, as Hilton grows, we grow, and we couldn’t be more excited to have them as our partner. Second quarter trends were also favorable in our resort and club business with net owner growth or NOG coming in at 7.2%. As many of you heard me say multiple times, NOG is the foundation of future growth in our business. It drives recurring club and management fees, which increased 3% in the quarter, but more importantly it embeds significant value into our business from future real estate purchases. Over 20 years of internal data shows us that most secondary purchases happen within 7 to 8 years of the owner’s initial purchase; therefore, as long as we sustain healthy NOG each year, we should always have a large pool of owners that are still within that 7- to 8-year window. The ability to leverage our relationship with Hilton in our powerful marketing and sales engine drives new owner growth, but the key to retaining owners, the net side of net owner growth, is building owner loyalty through engagement. This takes time and effort and we are looking for better ways to engage our owners. It all begins with communication. And our owners today want to move seamlessly between the world of digital and personal contact. For example, while over 90% of our owners have created online accounts or signed up for our mobile app, over 80% of our owners have contacted an HGV club counselor for personalized assistance with their membership in the past year. While half of all club transactions now happen online, owners still tell us that the counselor program is the most important resource for helping them understand how to get the most out of their ownership. It really is all about communicating with our owners on their terms And our members are very engaged. Today, every club member that uses our mobile app gets a how-is-your-stay request notification when they are on property and a follow-up shortly after they arrive home. They are asked to rate us with a green thumbs up or red thumbs down button. We are very proud to report that we are achieving a thumbs up in 95% of mid-stay reviews and 94% of post departure reviews.

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We also know that vacation options and destination choices are critical satisfiers for owners. As we started to deploy our own capital, our goal is to announce 2 to 3 new projects a year that will expand our footprint and allow us to accelerate growth. Depending on the scale and deal structure, it can take between 12 and 36 months before a new project produces reportable results. By layering in 2 to 3 project announcements a year, in a few years we will have multiple projects coming online to support future growth. Looking at some of the areas of future growth, last quarter we spoke about introducing product directly into the Japanese market to leverage our 56,000 Japanese owners. We are making progress there. We are working with local development partners and we still expect to announce new project details later this year. Our brand resonates with the Japanese consumers, and we are expanding our sales infrastructure with the opening this week of our 9th Japanese sales center in Sapporo. Outside of Japan, we continue to look at both urban and resort projects in highly demanded destinations in the US as well as Mexico and the Caribbean. Executing on our strategic objective to pursue opportunistic ventures, we invested $40 million in a joint venture with Blackstone to purchase the Elara Property in Las Vegas. This is a property we have been operating under a fee-for-service contract since 2011. Getting this deal across the finish line was an important milestone for us, and I would like to publicly thank the team members in our development, asset management, legal, resort operations, and other groups for their hard work on this very complex transaction. Jim will provide some more details on this in a minute. While Elara didn’t give us new distribution, the deal terms were very attractive and allow us to participate in the project’s development and consumer financing economics. Beyond Elara, we are still looking at bulk purchases of remaining inventory at some of our other seasoned fee-for-service projects. For a final project update, our third property in Myrtle Beach is now under construction. This is our fourth fee-for-service deal in the Carolinas with Goldman Sachs and Strand Group. This 330-unit high rise is planned to open in the spring of 2019. So we will be able to start selling this sequel project early next year. When we entered the Myrtle Beach market in 2012, it was our first entry into a drive-to market with a mostly regional draw. It introduced HGV to a new base of customers and in a short period of time this market became a meaningful growth driver. In closing, we had a very strong first half of the year. The operational momentum we built gives us confidence to increase our 2017 guidance in contract sales and other areas which Jim will take you through shortly. Behind the scenes, we are managing through the expected challenges of standing up a public company as we continue to bring in-house many of the functions Hilton previously provided. This includes the full build-out of our own technology infrastructure in functional areas like finance and human resources. While most of the heavy lifting should be done by year-end, some projects may spill into next year.

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With that said, we could not be more excited about the future. Our owners are highly satisfied and engaged and our owner base continues to grow, which embeds significant future value in our business. With the Elara deal, we have begun executing on our strategy to invest in growth and our development options are bigger today than at any time in our company’s history. We’ve got a compelling organic growth story, and we are working to deploy our capital on new markets and customer channels that will allow us to generate strong earnings, growth, and returns. I couldn’t be more proud of the dedication, hard work, and execution of our team this year. I continue to believe that HGV is uniquely positioned in the timeshare industry to create meaningful value for our owners, our team members, and our shareholders. With that, I would like to turn the call over to Jim for some more details on the quarter and the balance of the year. Jim. James Mikolaichik Thank you, Mark, and good morning everyone. As Mark indicated we had another quarter of high quality performance. While 2016 set a high standard for growth comps, we remain focused on the balance of the year and, in fact, are increasing the guidance for many of our key measures. I will review the updates to our guidance after discussing our operating results. Looking at our 2017 second quarter results, our key financial and performance metrics demonstrated strength across business lines. With the real estate line leading the way, second quarter revenues were $439 million, an increase of $48 million, or approximately 12% in comparison to the second quarter of 2016. Real estate revenues increased by $30 million led by a 25% increase in sales of VOI net and a $10 million one-time benefit related to a change in accounting estimate related to marketing packages. Net income in the quarter was $51 million, and this represented a $4 million increase over second quarter of 2016 as some of the operating gains were offset by the year-over-year increases in general and administrative expenses. We also benefited from a lower income tax provision, which resulted from the lower expected interest due on our tax deferred revenue that we discussed last quarter. As a result, our effective tax rate decreased to 39% in the quarter from 41% in the second quarter last year. And at this point, our full-year tax rate is likely to normalize at approximately 39% for 2017, which is lower than expected and reflected in our updated guidance. Turning to our operating segments, total segment adjusted EBITDA increased by 12% in the second quarter to $151 million. Second quarter results in the real estate business line experienced an increase in contract sales of 11% with owned sales up 31% and fee-for-service sales down 3%. We saw strong results from newly developed projects such Washington, D.C., which began sales in the fourth quarter of last year. And total real estate revenues increased by 14% as commissions and other fees were relatively flat in the quarter. Real estate margin was up $18 million compared to the second quarter of 2016, while the real estate margin percentage rose 380 basis points to 32.8%. Product cost coupled with sales and marketing cost net were both higher in the quarter with higher owned sales driving product cost and higher contract sales driving selling cost.

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While sales and marketing costs increased on an absolute basis due to sales growth, they decreased as a percentage of contract sales by 240 basis points. While we continue to witness higher costs from ramping our new market distribution channels and building our tour pipeline, this was more than offset by the one-time benefit from the change in accounting estimate in marketing packages. In our financing business, revenues increased 6% on higher receivable balances and financing margin decreased 4% while financing margin percentage declined to 69.4% as higher non-recourse debt balances related to the spin led to increased interest expense. At the end of the quarter, our consumer finance portfolios stood at approximately $1.2 billion and carried an average interest rate of 12.1%. Delinquencies remain low on an absolute basis of 2.1% and 10 basis points lower than they were at the end of the first quarter and our default rate was essentially unchanged from year-end it just under 3.7%. And our long-term allowance for loan loss stood at approximately 11.2%, a 30 basis points increase from last quarter. Combining these two business lines into our real estate and financing segments, second quarter segment revenue increased 17% and segment adjusted EBITDA increased 17.9%. Real estate sales and financing segment adjusted EBITDA margin increase 30 basis points to 30.7%. Turning to our resort and club management business line, second quarter revenue increased 3%. The increase was the result of net owner growth, price increases, and incremental management fees from recently opened properties. However, the increase was partially offset by one-time fees earned last year on a prepaid contract. Resort and club margin decreased 4% on higher costs related to a larger member base and newly opened properties coupled with the one-time fee earned last year. In our rental and ancillary business line, second quarter revenue decreased $2 million, as rental revenues were down 5%. The second quarter 2016 results include a one-time $2 million payment on an insurance claim that affected comparability. Ancillary revenues were flat and rental and ancillary expense increased 3% due to higher subsidy expenses from newly opened properties and higher Hilton Honors expenses related to the increase in club members. Rental and ancillary margin decreased 16% in the quarter and margin percentage contracted 480 basis points. Combining these two business lines into our resort operations and club management segment, second quarter segment revenues increased 3% and segment adjusted EBITDA increased 2%. Resort operation and club segment adjusted EBITDA margin percentage decreased 80 basis points to 56.5%. Bridging the gap between segment-adjusted EBITDA and adjusted EBITDA, second quarter license fees increased 15%, and general and administrator cost increased $10 million, reflecting the additional public company expenses. And this resulted in second quarter adjusted EBITDA of $106 million, a 3% increase year-over-year. Turning to inventory management, we remain capital efficient with three quarters of our contract sales in the quarter coming from either fee-for-service or just-in-time inventory sources. And our fee-for-service sales mix was 51% for the second quarter. Year-to-date, we are within our 2017 guidance range of 52% to 57% and still expect to finish the year in that range.

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And at the end of the quarter, our pipeline of inventory represented 5.1 years of sales at our current pace, including 2.6 years of owned inventory and 2.5 years of fee-for-service inventory. Just under 90% of our pipeline is capital-efficient, reflecting either fee-for-service or just-in-time sources, and we continue to focus on new development opportunities and believe we have sufficient inventory to support our sales strategy. Our capital structure remains flexible and supportive of new developments projects and growth. We ended the quarter with $486 million of corporate debt and $645 million of non-recourse debt. Our corporate leverage is approximately 1.2 times on a trailing 12-month basis or 0.8 times using net debt. From a capacity standpoint, our $200 million bank revolver is fully available and we have over $320 million capacity on our timeshare facility. We also have approximately $253 million in cash comprised of $191 million in unrestricted cash and $62 million in restricted cash. In the second quarter, we generated $31 million of free cash flow compared to $46 million in the second quarter of last year. Year-to-date we have generated $156 million of free cash flow compared to $74 million of the first 6 months of 2016. And as we discussed last quarter, some of the year-to-date strength in free cash flow and spin related to payment timing and timing of inventory spend at our Ocean Tower property in Waikoloa, where we have shifted construction by 3 months. Given these items, we believe free cash flow for the year is likely to come in above the high end of our original full-year 2017 guidance range of $140 million to $160 million. As such, we are updating our full-year free cash flow guidance to $180 million to $200 million. That being the case, we would like to point out that the timing issues this year are one-time in nature, and as a result our guidance longer term remains at a normalized run rate of $140 million to $160 million. It is also worth noting that we consider the $40 million invested in the Elara joint venture to be outside of our definition of free cash flow. I will wrap up by walking through our updated guidance and some data points for modeling the Elara joint venture. We now expect full-year contract sales growth of 6.5% to 8.5% delivering net income of $180 million to $198 million. We are increasing our adjusted EBITDA guidance range to $380 million to $410 million. This increase reflects our expected adjusted EBITDA contribution from the Elara joint venture for the last 2 quarters of the year and continued strength in contract sales. Given the strong operating trends, our segment EBITDA expectations have continued to increase; however, incremental public company-related G&A costs are affecting adjusted EBITDA growth in 2017, but should level off as we close out the year. We indicated that income statement G&A would increase 18% to 20% this year and at that time we did not indicate the breakdown between recurring and one-time G&A expectations. With half the year behind us, we are maintaining the overall guidance with an 18% to 20% increase in income statement G&A, and we now expect 80% will be recorded above the adjusted EBITDA line with the balance split evenly between stock-based compensation and non-recurring items. The EBITDA impact is slightly higher than we originally anticipated, which does impact the flow through of segment EBITDA to adjusted EBITDA.

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Finally, for modeling the Elara deal, we paid approximately $40 million for our 25% interest in the joint venture. It will be treated as an investment in an unconsolidated affiliate and our share of the earnings will be shown on our income statement as equity in earnings from unconsolidated affiliate. The JV carried approximately $211 million of debt when the deal closed and the joint venture is expected to contribute approximately $5 million to our adjusted EBITDA over the next 2 quarters. This completes the prepared remarks and we will now turn the call back to the operator and look forward to your questions. QUESTIONS AND ANSWERS Operator If you would like to ask a question, please press star (*) and one (1) on your touchtone phone to enter the queue. If at any point your question has been answered, you may remove yourself from the queue by pressing star (*) and two (2). Once again, star (*) and one (1) if you would like to ask a question. We will take our first question from Harry Curtis with Nomura Instinet. Harry Curtis Hi good morning everyone. Quick follow-up question on Elara. If you could discuss the environment for the possibility of additional Elara-like transactions, and are you likely to continue taking minority positions or is their appetite for majority positions? Mark Wang Yes, Harry its Mark. Yeah, the Elara deal, just a little background on that. We have been involved with Elara since 2011. We looked at it as very low-risk deal for us. And in our opinion, it’s the finest timeshare in Vegas, incredible location on the strip, 1200 units. It’s a single biggest timeshare ever built in one building. So, when the process was, when Centerbridge went through the process, we were a logical buyer. We ended up with a 25% stake, which we thought made the most sense, and it aligned our interest on the project. And it is also generating very strong returns on our investment. I think as we look at future deals, we have a number of other deals that are maturing. And so I think there are some other opportunities but nothing at this point that we can talk about in detail. James Mikolaichik I think Harry, we are open to minority or majority. I think minority made sense to us on this deal because it was less strategic and more economic for us. It wasn’t a new distribution area and as a result we thought putting some money to work to improve the economics made a lot of sense for good returns, but we didn’t put too many of our eggs in one basket because we do have quite a rich development pipeline beyond that. Mark Wang Yes, and I would also add, I think it really shows our ability to bring in new deals with varying structures, which gives us flexibility on how we can best allocate or our capital going forward. Harry Curtis

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Okay and thank you for that. And then my follow-up question, Jim, you mentioned, threw out in rapid succession, some of your expectations for G&A, and I’m just wondering if you can specifically address the extent to which your expenses this year are impacted by one-time items, you mentioned may be 80% to 90% number, but I’m not sure if that was apples-to-apples. James Mikolaichik I think we are looking at about $92 million of P&L expense in 2016. From a G&A standpoint, we guided to 18% to 20%, which is approximately $109 million to $110 million, I think. And 80% of that we are expecting to be above the line recurring and the other 20% split evenly between stock-based comp and one-time. And of the one-time expenses, we do think some of those don’t really fit the name because they are going to creep into next year. Largely I think its system driven on financial and benefit systems. So we are expecting a couple of million dollars to creep out of it roughly $10 million into next year. Harry Curtis And as you look into next year you had mentioned developing new tour channels, new marketing and distribution. Is there likely incremental expense next year that we should factor in? James Mikolaichik We are looking at a couple of new distribution opportunities, nothing that we have discussed or have concrete plans on at this point. So, I think what we are looking at right now is more business as usual and really incremental. So, I would expect margins to remain relatively consistent. We do think that we have got really healthy margins to begin with so we don’t see a ton of upside. If we did have something that was a brand-new opportunity from a distribution or tour generation, we would probably come back out and give you some additional guidance on that, but right now it’s incremental and more business as usual. Harry Curtis Okay, that does it for me. Thanks very much. Operator And as a reminder, if you’re on a speaker phone, please make sure your mute function is turned off to allow your signal to reach our equipment. We will take our next question from Brandt Montour with JP Morgan. Brandt Montour Hi. Good morning, guys and thanks for taking my questions. Your revised contract sales guidance, it implies a modest deceleration in the second half obviously due to tougher comps that you had coming up. Is it fair to say that the main driver in the second half of that contract sales growth will be tour growth? and can you, maybe, shed some light on maybe forward tours booked and how comfortable you are with that and maybe the ongoing ramp of your two new sales centers as well? Mark Wang

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So, Brandt, I think in the back half of the year we continue to see some of the trends we saw in quarter 2 where we are getting a higher percentage of new buyer tours. It’s outpacing our owner tours, which is great for embedding future value in our business and it did achieve our goal of strong NOG. But with that, it’s really a mix shift, and so I think what you are going to see is you are going to see a slight reduction year-over-year VPG on the back half. And, again, as we talked about, the last few quarters in 2016 represented very high comparables. Also, we are lapping the start of sales in DC and Hilton Head, which started contributing back in Q3 of last year. So, I would say the back half of the year you are going to see a bit of a slowdown in VPG, but our tour flow visibility is looking good. In fact, we’ve got a good ramp up. Our pipeline grew considerably in Q2, and that’s some of the pressure we had on our cost is we started investing in future customers. Brandt Montour Great, that helpful. Thanks. And just a follow up, regarding Japan and kind of early strategy there, I just wanted to ask you about potentially the ramp there versus other markets. And basically given the fact that you have that solid base owners already living there, would you consider that a relatively low risk market for you versus other new markets that you are thinking about? James Mikolaichik We do, because of this base of owners. I don’t think anybody out there in our space has been able to develop a market to scale like this in any other country other than the US and we have got 56,000 members there today. Our net owner growth continues to be slightly better in that market than what we are seeing in the US, and so we’ve got an incredible team, an incredible distribution network as I said in my prepared remarks. We just opened our 9th sales center there in Sapporo. And importantly I think from a development risk stand point, we are not looking to be the lead developer on the project. More than likely these will be just-in-time deals, and we will be working with very seasoned and experienced developers there that know how to get development done there in an efficient manner and in a timely manner. Brandt Montour Great, that’s it for me. Thanks guys. Operator We will take our next question from Bradford Dalinka with SunTrust. Bradford Dalinka Hi good morning everybody, I guess it’s still morning. Just a quick housekeeping question on Elara first, if I can. On the capital structure, as I recall the securitization last year. Is that $211 million of debt inclusive of that? Is there consumer paper sitting in there? I saw something about the possibility for a sequel project in the agreement. Should we just look at kind of your share of $211 in the EBITDA or is there more to it? Mark Wang

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We are treating it purely as an investment. So, we are getting a stream of earnings from it. The debt and the securitizations, everything lives within that entity and ultimately it lives in an entity below the JV that was purchased by the entity that we bought into. So, I think you really need to look at it as the earnings that come off of it, and we look at it more distinctly as the cash flow stream that’s coming off of the deal, which we think returns after tax something in the high teens to low 20 if it meets our modeling expectations. The $211 is the piece of corporate debt and beyond that there is some securitizations, but that all lives within the enterprise, and I think it’s probably easiest if you just think about as an earnings stream. James Mikolaichik And Brandt, on the question on the additional land, there is potential for an opportunity to add some more units there, but we valued and Blackstone valued that opportunity as zero. So we didn’t price that in, in our purchase price. We think it is more unlikely that any future development will happen at that site other than the conversion of the top 4 floors where we have the opportunity to convert what was designated for penthouse units into additional HGV timeshare units. Bradford Dalinka Understood, and one more if I could sneak it in there. When you guys took up the contract sales guide, was there any geography or channel that outperformed the expectations or was it just general to everything clicking on all cylinders? Mark Wang Yes. I have to say pretty much across the board we had great performance, but if you look at just contract sales, Vegas and the Carolinas were both up 12% and 13% respectively. We had strong performance in Japan, up 12%. And in Waikoloa our teams in Waikoloa continue outperform and we’re up 19%, so it was pretty much across the board. And then, of course, we benefited from our new distribution in DC and Hilton Head which really contributed about close to 40% of our growth in tour flow. Bradford Dalinka Got it. Thank you much. Operator As a reminder, if you would like to ask a question, that is star (*) and one (1). We will take our next question from Chris Agnew with MKM Partners. Chris Agnew Thanks very much. Good morning. With respect to the free cash flow guidance that you increased and talked about timing issues, so just to be clear, as we are thinking about 2019, and I’m not asking to give guidance, but just to make sure that if 140 or 160 is kind of your long-term goal, we would be thinking more along the lines of the 100 million to 120 million in 2018, because that timing issue comes out next year. Mark Wang It probably depends on where we are with working through the construction in some of our development projects, but I mean I don’t know if it will be quite that low. I think it might an even share between the next two, and I think it also had something to do with the shift of some of the payment timing. We expected to pay license fees at the beginning of the year, which we

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actually ended up sweeping late last year in 2016. And so that shifted and there was a tax payment that went in our favor as well. So, I do think it will be down a little bit to kind of level that out to 140 to 160 but I don’t think it will be as low as what you are thinking. Chris Agnew Okay, thank you. And then as you think about urban versus resort, the new projects, are either one of those more or less suited to fee-for-service or sort of just-in-time, and does that influence your thinking about the timing on executing on either one of those or do these deals fall when they fall? Thank you. James Mikolaichik Yes, I mean that’s an interesting question. I think for us we are fairly nimble in how we look at this and it’s a dynamic marketplace and so we are going to be opportunistic on the model. I think part of it really has to do with the potential partner and how they are looking to structure the deal. I would say we are heavily focused on just-in-time deals right now, as we have got a good pipeline of fee deals. And as I announced earlier we just added a new deal in Myrtle Beach. So, I would say though, anything that’s coming out of the ground that’s vertical, we tend to be more focused on doing those as fee deals because here’s tremendous amount of capital that has to put in the ground to go vertical. Anything that’s horizontal, where units can be built in phases, we prefer to do it just-in-time where we can take those on ourselves. Chris Agnew Excellent. Thank you. Operator Ladies and gentlemen at this time, we will conclude the question-and-answer session. I would now like to turn the call back to Mr. Mark Wang for any additional comments and closing remarks. Mark Wang Alright. Well, I want to thank everyone who joined us on the call today. Some great questions. We covered a lot and look forward to talking you after Q3. Thank you. Operator And this concludes today’s call. Thank you for your participation. You may now disconnect.