Good morning, and welcome to the Chatham Lodging Trust second quarter 2023 financial results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Chris Daly, President of DG Public Relations. Please go ahead.
Thank you, Gary. Good morning, everyone, and welcome to the Chatham Lodging Trust second quarter 2023 results conference call. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our most recent Form 10-K and other SEC filings. All information in this call is as of August 2, 2023, unless otherwise noted, and the company undertakes no obligation to update any forward-looking statement to conform the statement to actual results or changes in the company's expectations. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call, on our website at chathamlodgingtrust.com.
To provide you with some insights into Chatham of 2023 second quarter results, allow me to introduce Jeff Fisher, Chairman, President, and Chief Executive Officer, Dennis Craven, Executive Vice President and Chief Operating Officer, and Jeremy Wegner, Senior Vice President and Chief Financial Officer. I'm going to turn the session over to Jeff Fisher. Jeff?
Hey, thanks, Chris. Good morning, everyone. I certainly appreciate everyone being on the call this morning with us. For the fifth consecutive quarter, we've outperformed the industry RevPAR growth, with RevPAR growth over 5% for the quarter, driven by pretty equal increases in both occupancy and ADR. Relative to 2019, RevPAR was down slightly, just a little more than 1% for the quarter. In fact, versus 2019, RevPAR sequentially improved each month of 2023 through June. Relative to 2019, RevPAR improved each month of the quarter, with RevPAR down 3%, 2%, and 1%, a key indicator that business travel continues its recovery across the country. This is particularly impressive given the loss of most of the intern business in Silicon Valley, Bellevue, Washington, and also in Austin, Texas.
The loss of intern business impacted performance for about one-third of the second quarter and will impact two-thirds of this quarter and will make third-quarter comparisons to last year in 2019 tougher. Having said that, interns will return in much larger numbers next year for tech companies, which should provide outsized growth next year and beyond for us. Portfolio occupancy rose to 79% in the quarter, despite the intern loss, which is up from 77% last year and not far off the 2019 occupancy of 83%. Within the week, weekday occupancy reached 78% in the quarter, and June weekday occupancy of 81.3% was the highest level since the pandemic. ADR was up $3 over last year and up $6 over 2019.
Looking at the weekday business traveler, weekday ADR was up $6 over last year, the June weekday ADR was $186. That's the third highest since the pandemic and only slightly behind June and July 2022 ADR of $187. ADRs continue to be pushed by our operators all days of the week. Interesting point is that last weekend's ADR for the company was over $200. Outside of our tech-driven markets, we really are seeing nice growth year-over-year with each of our top markets, other than, of course, the three tech, tech markets, led by Washington, D.C., our coastal northeastern hotels in Los Angeles, producing RevPAR growth of 11%, 10%, and 7%, respectively. Those three markets account for over 25% of our EBITDA.
Leisure travel remains strong, with our leisure markets producing strong RevPAR growth in the quarter. We can look at Destin, Florida, up 8%, Portsmouth, New Hampshire, up 24%, and Anaheim, up 2%. Fort Lauderdale, up 14%, and Savannah, up 4%, with Portland flat, but opportunities are strong going forward. Driven by our 5% RevPAR growth, we were able to generate year-over-year EBITDA, FFO, and FFO per share growth. We delivered 5% FFO per share growth over last year, producing FFO per share of $0.43 compared to $0.41 last year. Our FFO per share of $0.43 exceeded consensus estimates of $0.40 per share.
Operationally, we were able to generate operating margins of 49%, flat to last year, and the 2019 second quarter in hotel EBITDA margins of 41%, just below the prior year in 2019 levels of 42%. The key driver on the expense side was holding hourly wages flat year-over-year. Interestingly, when you exclude the five tech hotels, margins were up 40 basis points to 2019 levels. Again, shows you the inherent upside once those hotels start performing. With good flow-through, we were able to generate corporate-level cash flow before CapEx and common dividends of $22 million in a quarter, up approximately 10% over last year. With the excess cash flow, we were able to repay a $20 million maturing mortgage.
With only $70 million of maturing mortgages between now and June 2024, we're in an excellent position to address all remaining maturities this year and next year. We continue to pursue external growth opportunities, though we must, of course, be mindful of our cost of capital while assessing in-place cash flow yield and growth projections on potential acquisitions. With the significant rise in interest rates, brands becoming more focused on renovation requirements, and a bunch of maturing debt occurring throughout the industry, we believe there'll be some opportunities to acquire hotels that fit into our high-quality portfolio in the back half of this year and certainly into next year. With 39 hotels, we can acquire one or two hotels, and it significantly moves the needle with respect to EBITDA and FFO growth.
The good news is we have substantial internal growth upside, as I said, inherent in our existing portfolio, with the ultimate recovery of Silicon Valley and Seattle, as well as the return of the intern business in Austin. If those hotels reach 2019 RevPAR in 2024, that would generate incremental portfolio RevPAR growth of approximately 7% and incremental FFO per share growth of $0.32. If you include the Austin intern business, that will add another 50 basis points to RevPAR and FFO per share of another $0.02. Including all those hotels, those seven, if you use current consensus estimates for 2023, adjusted FFO per share would increase almost $0.34 per share, which alone would represent an almost 30% increase. That certainly is substantial upside as you look at our company and look forward.
Before turning it over to Dennis, I want to spend a few minutes updating everyone on what we're seeing currently in Silicon Valley and Seattle. Obviously, the loss of the intern business hurts our current year results, especially this quarter. Coming off the massive layoffs last year and early this year, big tech is now posting big profit numbers. All of the big tech is talking about investing significant dollars into CapEx and product development. International travel continues to improve, with deployments in San Francisco's, San Jose and Seattle at their highest levels since the pandemic. Seattle deployments are actually up over 2019 levels. Again, encouraging news and a good data point to show underlying trends are getting better and better. International occupancy at our two Sunnyvale hotels was approximately 22% in the second quarter, with most of the demand coming from Korea, China, and India.
General business travel demand trends are encouraging in the valley. We're experiencing an uptick in demand from TikTok. Electric vehicle-related lodging demand continues to grow, of course, and we've recently seen group requests with an increase on size, now hitting into the hundreds for late Q3 and early in the fourth quarter. Though the absolute attendee numbers for Apple's fall programs are down to 2019, they are occurring, and we should hopefully see some demand out of that. Of course, part of this development relates to AI, which will remain a significant growth opportunity across all the industries. Every tech company is assessing and developing generative AI tools into their operations. NVIDIA, ServiceNow, and Accenture just announced a partnership to accelerate AI development further. Additionally, reshoring chip manufacturing and semiconductor tech investment is gonna be a huge tailwind for tech.
In support of this movement, just 2 months ago, Applied Materials, which has forever been one of our top five accounts in Sunnyvale, announced plans to build a $4 billion, 180,000 sq ft R&D facility in Sunnyvale, just blocks from our 2 Sunnyvale Residence Inns. The facility will be a state-of-the-art facility for collaborative innovation with chip makers, universities, and ecosystem partners. Some of those partners include AMD, NVIDIA, and Western Digital, all customers of ours. We've owned these hotels for many years, and we know that these companies are continually evolving, investing, and developing the world's greatest technologies. As these technologies evolve and these companies continue to grow, our hotels, as they always have in the upcycle, will recover, and our earnings will accelerate rapidly. With that, I'd like to turn it over to Dennis.
Thanks, Jeff.
Our portfolio performed significantly better than the industry, with second quarter RevPAR growth of 5%, again, exceeding industry performance by approximately 85%. This trend of beating the industry will be challenged in the third quarter due to the intern loss for two-thirds of the quarter, but certainly will continue into 2024. Silicon Valley, our largest market, comprising 15% of EBITDA, saw occupancy grow slightly year-over-year, despite the loss of most intern business, and still down a little bit to 81% occupancy in 2019. ADR is where the most opportunity is, and we need to see continuing demand growth to be able to drive ADR.
ADR was $184, down 3% versus last year and off 23% versus the 2019 second quarter ADR of $240. RevPAR was off 28% versus 2019 levels. Weekday occupancy in the Valley was 77% in the quarter. Silicon Valley EBITDA was $4.6 million, which was down about $600,000 from last year and down about $3 million versus 2019 levels. In other key tech markets, Seattle RevPAR is off 9%, which hides a favorable underlying trend. Occupancy was actually up 1% year-over-year to 73%, but still down to 84% occupancy in 2019. Second quarter ADR of $187 was off 5% versus 2019.
EBITDA was $1.3 million in the quarter, down from 2022 second quarter EBITDA of $1.8 million and $2 million in the 2019 second quarter. In Austin, RevPAR was off 5% versus last year, again, due to the loss of the intern business. The summer is the, in Austin, is the seasonally slower months, so it's certainly more difficult to replace that lost intern revenue there. Excluding the interns, RevPAR would've been up approximately 3%-4%. In our other top market, top markets, our coastal hotels in New Hampshire and Maine continue to outperform, with RevPAR up 10% in the quarter, driven by 24% growth at our Hilton Garden Inn in Portsmouth and 11% in Exeter. From a leisure standpoint, Portsmouth certainly reminds us of kind of where Portland was five or so years ago.
Los Angeles, with three hotels, represents 9% of our EBITDA, and we saw RevPAR grow 7% in the quarter. All three L.A. area hotels grew RevPAR in the second quarter. Washington, D.C., which comprises 8% of our EBITDA, we were able to generate meaningful RevPAR growth of 11% in the, in the quarter. Again, all three D.C. hotels grew RevPAR. Our Embassy Suites in Springfield saw RevPAR grow 17%, as we are finally seeing some return to office and business travel back in the market. As a reminder, in Springfield, TSA moved its headquarters there in the early stages of the pandemic and is just really starting to return to office.
Our Residence Inn Foggy Bottom produced RevPAR growth of 8%, and interestingly enough, for the second quarter, RevPAR was $212, the highest of all hotels in our portfolio in the quarter. Last of our top markets, the Greater New York and Dallas markets, continue to edge higher, with both seeing RevPAR growth in the low single digits. Our five highest hotels with absolute RevPAR were, again, top of the list was our Residence Inn Foggy Bottom, which had ADR of $267 in the quarter, followed by our Marina del Rey Hilton Garden Inn, with RevPAR of $202, and then our Residence Inn Fort Lauderdale, Hampton Inn Portland, and Residence Inn San Diego Gaslamp, all with RevPAR over $190.
A post-pandemic high of 21 of our 36 comparable hotels achieved RevPAR higher than the 2019 second quarter. Additionally, 27 of our 36 comparable hotels, or approximately three-fourths of the portfolio, achieved ADRs higher than 2019 levels. We continue to see an average length of stay approximately 10% longer than our historical levels. It's come down, certainly from pandemic-related stays, but on a long-term basis, should remain a bit longer due to the more flexible work arrangements that exist in today's business climate. For the quarter, total hotel revenue of $84 million was up 3% to last year. We generated an incremental GOP flow-through of approximately 30%. In a challenging operating environment, we were able to maintain margins essentially flat year-over-year, primarily by holding hourly wages flat.
This was offset by approximately 150 more hotel employees compared to last year. At this point, we're pretty close to being fully staffed at most of our hotels, and that would represent a, if we kind of stabilize at these levels, would represent about a 17% headcount reduction over pre-pandemic levels. If you look at our five hotels in Silicon Valley and Seattle, our operating margins were over 51% in the quarter versus 58% last year. Operating margins on that business, very profitable, given the less amount of services required. Our top five producers of GOP in the quarter were our Gaslamp Residence Inn, the sixth straight quarter it's led the portfolio, followed by our Embassy Suites Springfield, and then notably, our two Sunnyvale hotels, and in fifth, our SpringHill Suites in Savannah. Just missing out was our Residence Inn Bellevue.
Despite a huge gap to make up with the loss of the intern business, three of our top six GOP-producing hotels in the quarter were our tech-driven hotels. With respect to CapEx, we spent approximately $8 million in the quarter and expect to spend about $30 million total in 2023. That includes $22 million of renovation costs at five hotels. During the third quarter, we have commenced the renovation of the Courtyard Charleston Summerville, which is expected to, to be done by the end of the third quarter. With that, our, I'll turn it over to Jeremy.
Thanks, Dennis. Good morning, everyone. Our Q2 2023 hotel EBITDA was $34.7 million, adjusted EBITDA was $31.9 million, adjusted FFO per share was $0.43, and cash flow before capital was $22 million. While we've seen costs increase due to the reinstatement of certain brand standards and the impacts of inflation on a number of key line items, we were able to generate a solid GOP margin of 48.5% and hotel EBITDA margin of 41.3% in Q2, which were only down 60 and 70 basis points, respectively, from our margins in Q2 '22. Our balance sheet remains in excellent condition, and we are continuing to execute on our plan to address debt maturities.
As of June 30th, Chatham's net debt to LTM EBITDA was 4.1x , which is significantly lower than our pre-pandemic leverage, which was generally in the 5.5x- 6x area, despite the fact that EBITDA has not fully recovered to pre-pandemic levels. In Q2, we used the final $15 million of availability under our delayed draw term loan to repay the maturing loan on the Courtyard Houston. Subsequent to the end of Q2, we repaid the $19.7 million loan on the Hyatt Place, Pittsburgh, with available cash. Year to date through July, we have refinanced or repaid $109 million of debt, which leaves us with only $40 million of remaining debt maturing in 2023.
We expect to access the CMBS market over the course of Q3 to raise approximately $50 million-$100 million of proceeds, which would address our $40 million of remaining 2023 maturities and a portion of our 2024 maturities. The cost of this financing is likely to be in the mid 7% area. We expect the total proceeds from our planned Q3 financing activity, together with our undrawn $260 million revolving credit facility, will provide enough liquidity to cover, cover all of our 2024 debt maturities. While we're not gonna provide guidance at this point, I would like to provide some color around how one could think about potential performance in Q3.
Quarter-over-quarter comparisons have been pretty noisy over the last few years on both revenue and expenses due to the pandemic and the recovery from it, as well as different demand drivers, staffing levels, franchisor requirements, and volatile utility pricing. If you look back to both 2018 and 2019, in each of those years, our Q3 RevPAR was approximately $3 higher than our Q2 RevPAR. That may provide some general context for how to think about what we might expect for Q3 RevPAR versus our Q2 RevPAR of $144. On the expense side, with the loss of the interns in Silicon Valley, Seattle, and Austin for two-thirds of the quarter, third quarter margins will be pressured as we benefited from higher RevPAR and minimal housekeeping requirements for that business in Q3 2022.
Additionally, incremental headcount year-over-year to fully staff our hotels going into the summer will impact Q3 more than Q2. In Q3, interest expense, net of interest income, is also likely to increase by about $500,000 versus Q2 due to both our planned financing activity and the impact of increasing SOFR on our term loan interest expense, although the exact amount of any increase in interest expense will depend on the ultimate amount of financing we complete, rates at the time of execution, and transaction timing. This concludes my portion of the call. Operator, please open the line for questions.
We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then two. At this time, we will pause momentarily to assemble our roster. Our first question is from Ari Klein with BMO. Please go ahead.
Thanks, and good morning. On the expense side, you know, it looks like, yeah, hourly wages were flat year-over-year, which I thought was a positive. Could you just talk about the sustainability of that or how you're expecting that maybe to grow moving forward as, I guess, headcount overall maybe is? It sounds like you're almost fully staffed there.
Hey, Ari, this is Dennis. Yeah, I mean, I think, listen, certainly the wage pressures of, you know, the last several years have come down, and I think you're probably hearing that in a lot of people just from an hourly wage perspective. You know, it's still a tight labor market, but I think even going back to, to last summer, you know, as, as occupancy levels ramped up, you know, we were, you know, and because we run a higher occupancy, we were able to, you know, retain as many people as possible and provide them full schedules. You know, that certainly helped in terms of, you know, stabilizing the workforce, and yeah, we feel pretty good there. I mean, listen, there's certainly gonna be inflationary increases on wages, but we've absorbed over a 25% increase in the last 3+ years.
You know, it's expected as the labor pool, you know, continues to come back to work that, you know, hopefully, the, the significant increases moderate here.
Thanks. Then, Jeremy, just maybe on, on the balance sheet, you, you mentioned tapping the CMBS market later this year, which will address, you know, the maturities this year and a portion next year. There's still a significant amount out there for next year. How should we think about the timing of, of addressing some of those?
Yeah. I think after we do what we're planning on doing in the balance of this year, sort of all the remaining maturities will be backstopped by the revolving credit facility. I think we'll probably there's, there's no kind of gun to our head to take out the rest of it and replace, you know, 4.5% money with 7.5% money right away. I think we'll probably be, you know...
Q1-ish next year before we start doing more CMBS. Hopefully rates are lower by then. In any case, don't want to pay the higher rate sooner than we need to on that.
Got it. Last one, just on Silicon Valley. you know, I think you made up about 63% of lost interim business in the quarter. Jeff, you talked about some of the positive tech trends you're seeing. Do you think that number goes higher in the third quarter? you know, I think you also mentioned expecting the interim business to come back next year. Is that based on conversations you've had with some of the companies, or how are you thinking about that?
Yeah, I mean, listen, this is Dennis. I'll answer, and Jeff can chime in. I think the 63% replacement, you know, we'll be in the range of that, whether it's, you know, 60 or 65, I, you know, can't say. Certainly, we're, we're, we're pleased with, you know, basically coming right in the middle of that 50%-75% range that we provided last quarter. That's all a good sign. I think with respect to intern programs, they are, you know, there are intern programs happening this year, it's just significantly down from, from prior years. It's, you know, it's able to be absorbed by other housing, or, you know, especially in the Seattle and Sunnyvale market.
You know, any discussions we've had, there's been nothing concrete for next year, but you know, we've, we've owned these hotels for a long time, and the intern business has been part of that. You know, we, we know they're going to come back. It's just a matter of the magnitude of it, so.
Appreciate the color. Thanks.
The next question is from Anthony Powell with Barclays. Please go ahead.
Hi, good morning, everyone. I guess another question on the intern business. You know, I was surprised about Austin being a big contributor there. I mean, I should have expected that, but what percent of total EBITDA on an annual basis or total revenues is-- comes from the intern business on a stabilized basis? I just want to understand just the magnitude of the business throughout the portfolio.
If you go back to pre-pandemic levels, Anthony, total intern EBITDA, was around... I guess, total, total intern revenue, sorry, was around $6 million for the five hotels, not including Austin. So EBITDA, you know, at kind of a 60% margin, was around $3.5 million.
Okay.
You add another $2 million of, or about $1 million of revenue, sorry, for Austin. You know, $7 million of revenue on $300 million pre-pandemic, was kind of the, the order of magnitude and where I think on a stabilized basis, you know, we would want to play, as opposed to, you know, taking almost $12 million of it last year.
Okay, got it. Understood. Okay, just going to acquisitions, I think, I think you talked about maybe doing some deals in the back half of this year, early next year. Your cost of debt is about, you know, 7%. It seems like on, on your line or close to that on your line, and 7.5% on CMBS. Are you seeing yields on, on acquisitions that are above that? I'm just curious how, how you're underwriting as the cash on cash when you account for cost of capital in doing acquisitions.
Yeah. Hi, Anthony. Look, there's very few deals being done, as you know, and, you know, expectations have certainly changed a little bit on the part of the sellers. You know, we're working on, you know, one thing now that certainly has a yield in excess of 7%. It's in excess of 8%. They're far and few between, and some of that yield, frankly, comes from our ability to just manage better and complex positions in, in a cluster of other hotels that we've got in the neighborhood. It's kind of that special opportunity, you know, that we're able to use Island Hospitality for, to really maximize, you know, the cash flow and the return. As, you know, as Dennis said, and as I said, we're looking at cost of capital, don't worry.
You know, we're certainly not interested in doing anything that's not at least marginally accretive. That may come from, you know, recycling of capital, from the sale of a hotel, and simply, you know, matching, almost matching, you know, the funds on an acquisition with an in-place return that is in excess of 8%.
Got it. Thanks. Maybe one more on Los Angeles. Any impact of the writer strike and the actor strike that you've seen in recent weeks?
Yeah, we haven't really seen any, any real material impact, Anthony.
We're in the valley, so a little bit, you know, on the edge there, and hotel has been performing very strong.
All right. Thank you.
Yeah, I think the only thing I'll say, I would add to that, Anthony, is Marina del Rey , one of our, you know, largest pieces of business there is airline FedEx related, as opposed to entertainment related.
Yep.
That business continues.
Got it. Thanks.
Thank you.
Again, if you have a question, please press star, then one. The next question is from Tyler Batory with Oppenheimer. Please go ahead.
Thank you. Good morning. I just want to unpack some of your commentary a little bit more here. When we look at RevPAR on a year-over-year basis, looks like a deceleration in June and into July. I mean, I know the intern business is impacting that. If you kind of X that out, just talk a little bit more about performance in the portfolio. Maybe it's helpful, I don't know if you can kind of quantify just how much of a drag this lost intern business is going to be on Q3 RevPAR overall.
Yeah, I'll start and if anybody wants to add. Yeah, Tyler, this is Dennis. I mean, generally, those 5 hotels are impacting our RevPAR by about 700 basis points. So, it's a significant impact. I think it will be a little more difficult in the third quarter to replace that lost business, just given kind of the amount that we took last year. Having said that, like I said, 63% recovery, at least through June. All in all, I think it's pretty noteworthy to be able to be where we are as a portfolio.
Okay. Some of the leisure numbers that you provided, you know, some of your peers talking about that business slowing a little bit more, you know, some issues in terms of, you know, not being kind of having as much pricing power. Just talk a little bit more about, you know, what you're, you're seeing in some of your leisure markets, Jeff. I think the, the commentary on some of the weekend ADRs, you know, seem, seem pretty optimistic there.
Yeah, I mean, I think, you know, in Jeff's prepared comments, he talked about, you know, I think he listed out separately each of our, what we would kind of, you know, characterize as primarily leisure markets, with the only one that wasn't up was, was Portland. Quite honestly, you know, we left some money on the table there, so it really would have been. You know, the other ones, including even Destin, Florida, up 8%, and Fort Lauderdale, up 14%, I think is, you know, noteworthy, given, I think, what you've seen probably from some of the other REITs that have already reported with, you know, pretty significant RevPAR declines.
I think, again, it's just kind of a testament to not only the locations, but also just, you know, the assets are, are in slightly different markets compared to some of those white-hot markets previously.
Yeah, I mean, you look at... Look, you know, another advertisement, frankly, for being in the select service business. You know, it's just, these are not resort 4 and 5-star or even 3-star resorts that are fly-to markets. You know, these locations were specifically handpicked for what they are, and these kind of numbers prove it out, especially in a general leisure pullback, certainly compared to 2022, that some of the other full-service hotel REITs are probably going to report or already have reported. You know, we are definitely pleased with the resiliency of the model, you know, and the cash flow that we get out of these hotels.
Okay. Okay, that- that's helpful. Then in terms of business travel, I mean, if we exclude the, the Silicon Valley hotels, you know, some of your peers have talked about corporate travel, that recovery kind of maybe being a little bit more, a little bit more slow. I mean, kind of, what are, what are you seeing? What's your, what's your opinion on, on the, the future trajectory, in terms of, in terms of business travel?
I mean, listen, I think, you know, our, you know, our weekday occupancies in the second quarter, even, even including Silicon Valley, you know, as a portfolio, our weekday occupancies were, you know, 76%, 77% for the entire portfolio, which, you know, fairly comparable to weekend occupancies for the quarter. You know, I think in terms of our markets and our customers, it's been pretty stable, and it continues to edge higher. You know, I think, you know, for us and for our markets that we're in, you know, that continuing. You know, it used to be a year ago that, you know, Monday, Tuesday, Wednesday were the lowest RevPAR nights of the week, and for our portfolio, they're now becoming our highest RevPAR nights of the week.
You know, I think for our overall portfolio, and even including Silicon Valley, that occupancy, you know, underlying occupancy strength is, and continued growth, even if it's from 75% to 78% or 78% to 80%, is encouraging.
Okay, great. I think I'll leave it there. Appreciate the detail.
Thanks, Tyler.
This concludes our question and answer session. I would like to turn the conference back over to Jeff Fisher for any closing remarks.
Well, again, thank you all for being on the call. you know, we've kind of set the table a little bit for a Q3 that, you know, perhaps certainly won't be as good as last year. That does not indicate any kind of go-forward trend at all, other than what we focused on relative to that specific business. As we move out of that quarter, and especially into next year, as I commented, we really do see some pretty substantial upside here and, you know, growth in earnings. Appreciate that, and we'll look forward to talking to you again soon.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.