M.D.C. Holdings, Inc.

Hello, and welcome to the MTC Holdings 2021 Third Quarter 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 touchtone phone. To withdraw your question, please press star then two. Please note, today's event is being recorded. I now would like to turn the conference over to Derek Kimmerly, Vice President and a Corporate Controller. Please go ahead, Mr. Kimmerly.

Thank you.

Good morning, ladies and gentlemen, and welcome to the MDC Holdings 2021 Third Quarter Earnings Conference Call. On the call with me today, I have Larry Meisel, Executive Chairman, David Mandrich, Chief Executive Officer, and Bob Martin, Chief Financial Officer. At this time, All participants are in a listen-only mode. After finishing our prepared remarks, we will conduct a question and answer session, at which time we request that participants limit themselves to one question and one follow-up question. Please note that this conference is being recorded and will be available for replay. For information on how to access the replay, please visit our website at mdcholdings.com. Before turning the call over to Larry and David, it should be noted that certain statements made during this conference call including those related to MDC's business, financial condition, results of operation, cash flows, strategies and prospects, and responses to questions may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve known and unknown risks, uncertainties, and other factors that may cause the company's actual results, performance, or achievements to be materially different from the results performance, or achievements expressed or implied by the forward-looking statements. These and other factors that could impact the company's actual performance are set forth in the company's third quarter 2021 Form 10-Q, which is expected to be filed with the SEC today. It should also be noted that SEC Regulation G requires that certain information accompany the use of non-GAAP financial measures. Any information required by Regulation G is posted on our website with our webcast slides. And now I will turn the call over to Mr. Meisel for his opening remarks.

Good morning and thank you for joining us today as we go over our results for the third quarter of 2021 and provide an update on the outlook for our company. MDC generated net income of $146 million or $1.99 per diluted share in the third quarter of 2021, driven by a combination of strong revenue growth, continued price increases, and improving overhead leverage. Home sales revenues grew 26% year over year, thanks to a 13% increase in deliveries and a 12% rise in average selling prices. Our home sales gross margin of 23.5 represented a 300 basis points improvement over the prior year period as our new home pricing stayed ahead of cost inflation. We also made further improvements to our fixed cost leverage as our SG&A expense fell 80 basis points year over year to 9.6%. We are extremely pleased with our financial results this quarter, particularly in light of the supply chain issues that continue to affect our industry. Order activity remained healthy during the quarter at 4.1 sales per community per month. This represents the second highest third quarter order pace for the company in the last 15 years. buyers continue to be drawn to our more affordable price new home offerings, which allow for personalization through our build-to-order strategy. We believe this operating model is a more prudent and capital-efficient way to run the business and leads to better risk-adjusted returns over time. We also believe it results in fewer cancellations as homebuyers naturally become more invested in their purchase when they played an active role in designing and furnishing their home. This is an important differentiator for our company, particularly in light of the lengthening cyclical times. From a capital standpoint, MDC continues to be in great financial shape. we entered the quarter with a debt to capital ratio of 39.7% and a net debt to capital ratio of 23.7%. During the quarter, we issued 350 million of senior notes due in 2061 at an interest rate of 3.966 and made a tender offer for over 120 million of our senior notes due 2024, which carry an interest rate of 5.5%. While the early retirement of debt resulted in a $12.2 million charge this quarter, we now have a lower cost of capital and a debt maturity schedule that extends out 40 years. Our total liquidity position at the end of the quarter stood at just over $2 billion, giving us plenty of capital to scale our operations in the coming years. It will also allow us to continue paying our industry-leading dividend, which currently stands at $2 per share on an annualized basis. I will now turn the call over to our President and Chief Executive Officer, David Mandridge. for more insight into our home building operations. David.

Thanks, Larry, and good morning to everybody on the call. As Larry mentioned, we continue to see robust demand for our homes across our geographic footprint, with the west region posting the best order pace during the quarter at 4.9 homes per community per month, followed by the east at 3.7 and our mountain region at 3.0. Pricing remained firm within our communities, and we did not witness any widespread use of incentives or discounting in our markets, as each of the segments posted home sales gross margins in excess of 20%. As our existing operations continue to thrive, we have started to move into new markets that exhibit similar strong housing fundamentals. Earlier this year, we announced our expansion to Boise and Nashville, and this quarter, we are pleased to announce our entry into Austin, Texas, and Albuquerque, New Mexico. Similar to Boise and Nashville, we believe these two markets should show positive growth directory for new construction thanks to a steady influx of jobs, favorable affordability, and an excellent quality of life. We have land deals in place in both markets and look forward to establishing profitable operations in the years to come. As we head into the end of the year, MDC is focused on delivering homes, and backlog while setting the stage for additional growth in 2022. Our lots owned and controlled at the end of the third quarter increased by 37% year over year, giving us a great opportunity to capitalize on the positive housing fundamentals in our markets. We have several new communities scheduled to open in the coming quarters, which Bob will give in more detail in a moment. With that, I'd like to turn the call back over to Larry for a few additional comments.

Thanks, David. MDC delivered another quarter of strong profitability in the third quarter and remains poised to continue that trend thanks to favorable industry dynamics, our excellent market positioning, and our sizable backlog of homes. While we expect the current supply chain issues to persist for the foreseeable future, we also expect the current demand drivers to remain in place as well, giving us a great opportunity to finish the year on a high note and build on our success in 2022. As a result, we are optimistic about the future of our company. I'd now like to turn the call over to Bob for more detail on our results this quarter in an update of our company's outlook.

Thanks, Larry. Good morning, everyone. During the third quarter, we generated net income of $146 million, or $1.99 per diluted share, representing a 48% increase from the third quarter of 2020. Home sale revenues grew 26% year over year to $1.26 billion, while gross margin from home sales improved by 300 basis points. The growth in home sale revenues and margin expansion resulted in a 62% increase in pre-tax income from our home building operations to $165.2 million. As Larry mentioned, we accelerated the retirement of $123.6 million of our unsecured notes due in January 2024 through a cash tender offer during the quarter. The retirement resulted in a loss of $12.2 million, which is included in homebuilding pre-tax income. Financial services pre-tax income increased 13% year-over-year to $27.5 million. All of our financial services companies benefited from the increased volume of our homebuilding operations during the quarter. Our mortgage company also benefited from a $3.5 million gain recognized on the sale of conventional mortgage servicing rights during the period. This increase was mostly offset by increased competition in the primary mortgage market, increased compensation-related costs, and a temporary decrease in our capture rate. Our tax rate increased from 21.5% to 24.3% for the 2021 third quarter. The increase in rate was primarily due to a decrease in tax windfalls recognized upon the vesting and exercise of equity awards, which was partially offset by a year-over-year increase in home energy tax credits. For the remainder of the year, we currently estimate an effective tax rate of approximately 24.5%, excluding any discrete items and not accounting for any potential changes in tax rates or policy. Homes delivered increased 13% year-over-year to 2,419 during the third quarter, driven by an increase in the number of homes we had in backlog to start the quarter. Our ability to convert backlog into closings continues to be negatively impacted by increasing permitting times and labor and material shortages. As a result, we saw cycle times increase by approximately two weeks sequentially from the second to third quarter of 2021. The number of homes delivered during the quarter was below our previously estimated range of 2,500 to 2,700 units and was a direct result of the extended cycle times that we experienced. The average selling price of homes delivered during the quarter increased 12% to about $520,000. The increase was a result of price increases implemented across the majority of our communities over the past 12 months. For the fourth quarter, we are anticipating home deliveries to reach between 2,700 and 3,000 units with an average selling price between $530,000 and $540,000. Gross margin from home sales improved by 300 base points year over year to 23.5%. We experienced improved gross margin from home sales across each of our segments with our West segment showing the largest increase year over year, as well as having the highest absolute level overall. These improvements were driven by price increases implemented across nearly all of our communities over the past year, which have been partially offset by increased building material and labor costs. While we have seen lumber prices decrease in recent months, we continue to experience cost pressures on other building materials and labor costs. Gross margin from home sales for the 2021 fourth quarter is expected to increase to between 23.5% and 24%, assuming no impairments or warranty adjustments. Our total dollar SG&A expense for the 2021 third quarter increased by $16.5 million from the 2020 third quarter, driven primarily by increased general and administrative expenses. Our SG&A expense as a percentage of the home sale revenues decreased 80 basis points year over year to 9.6%. General and administrative expenses totaled $59.9 million during the third quarter due to increases in compensation-related expenses, including increased bonus and stock-based compensation accruals. We currently estimate that our general and administrative expenses will grow to between $65 million and $70 million for the fourth quarter of 2021. Marketing expenses increased $900,000 as a result of increased master marketing fees relating to increased closings volume. However, marketing expenses as a percentage of home sale revenues were down 50 basis points year over year as we were able to continue limiting advertising expenses in this high demand environment. Our commission's expense as a percentage of home sale revenues decreased 60 basis points year over year as we have taken steps to control these costs during this period of strong demand for new housing. The dollar value of our net orders decreased 21% year-over-year to $1.31 billion due to a 32% decrease in unit net orders. This decrease was driven by a 33% year-over-year reduction in our monthly sales absorption pace. Our sales absorption pace for the third quarter of 2021 was a healthy 4.1 orders per community per month. While this represented a year-over-year decrease from the third quarter of 2020, it was a 14% increase from the pre-pandemic levels experienced in the third quarter of 2019. The year-over-year decrease in our sales absorption pace was due to the return of more normal seasonal patterns, as well as our efforts to moderate sales activity, as we have mentioned on prior calls. Overall, we believe demand levels remained highly favorable during the third quarter. We're also pleased with the start of the fourth quarter from a demand standpoint, based on the net orders we've seen to this point in October. The average selling price of our net orders increased 16% year-over-year as we have raised prices across most of our communities over the past 12 months. While price increases slowed during the third quarter, pricing remained firm and continues to more than offset the higher input costs related to building materials and labor. Looking at backlog metrics on slide 11, the dollar value of homes in backlog increased 38% year-over-year despite the decrease in third quarter activity. While cycle times remain the biggest challenge to our backlog conversion efforts, we believed we are well positioned entering the fourth quarter with construction started on 84% of our backlog and 42% at frame stage of construction or beyond. We approved 5,892 lots for acquisition during the quarter, representing a 54% increase year over year. This brings the total number of lots approved for acquisition during the year to 15,978 lots and marks the third time in the last four quarters our approval activity exceeded 5,000 lots. We closed on 3,214 lots during the third quarter, which included about 100 finished lots within our first subdivision in Austin, Texas. Total land acquisition and development spend for the quarter was $420 million. As a result of our land acquisition and approval activity, our total lot supply to end the quarter was nearly 37,000 lots, representing a 37% increase from the prior year quarter. In addition, 34% of our lot supply was controlled via option as of period end. We believe that this lot supply, combined with a continued lot approval and acquisition activity, provides us with a solid platform for growth in 2022 and beyond. Our active subdivision count was at 203 to end the quarter, up 5% from 194 a year ago. We saw an increased number of active subdivisions in both the east and west segments, with the east segment experiencing the largest increase. Active subdivisions in the mountain segment were down 8% year over year. We're actively selling out of our first Boise subdivision as of quarter end, and with the acquisition of finished lots in Austin during the third quarter, we expect to be open for sales in this new market by the end of the year. New community openings remain challenging in the current environment due to delays in municipal approvals and the strain on the available resources to complete development work. Also, we have a number of legacy communities on the verge of closing out, as you can see from the number of soon-to-be inactive communities as of September 30, 2021. This indicates that our active subdivision count could decrease over the next few months as we work to open and begin selling out of our new communities. Through this potential short-term volatility in our active subdivision count, we are not reiterating any year-end guidance for this metric. However, we do expect to see an increase from our 203 active communities at the end of the third quarter before we reach the end of the 2022 first quarter in time for the spring selling season. While we expect further active subdivision growth from that point through the end of 2022, we will wait to provide further guidance until we have more visibility as to the timing of these community openings. In summary, we are pleased with our financial results for the third quarter and believe the housing backdrop remains favorable. While we expect the current supply chain issues to continue in the near term, our current backlog and land position have us poised for continued growth into 2022. Our financial position remains strong, with over $2 billion of total liquidity and a net debt-to-capital ratio of 23.7% as of quarter end. providing us with the ability to continue to grow our business and invest in our new markets. On behalf of the company, I would like to thank all of our employees and subcontractors for their hard work and tireless efforts as we continue to work together to mitigate the supply chain issues impacting our industry. Without their efforts, we would not be in the position we are today, poised to deliver more than 10,000 new homes to our homebuyers for the 2021 full year. With that, I will now turn the call back to the operator for our question and answer session.

Yes, thank you. At this time, we will be in the question and answer session. To ask a question, you may press star then one on your touchtone phone. If you're 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 the roster. And the first question comes from Stephen Kim with Evercore ISI.

yeah thanks very much guys congratulations on strong quarter a couple questions for you one is I was curious if you could give us a sense for whether you're seeing a little a difference in the profitability I'm thinking primarily gross margin between homes that you are selling on a dirt sale basis which is your core model and the homes that you are selling after they've canceled or in some form of construction already underway. I know that's not your core business, but I also know that there are some of those sales that you make. I'm curious whether those spec margins are higher than your dirt margins at this point.

I guess going through closings, certainly the spec margins are higher at this point, benefiting from current pricing. Whereas for the dirt units, they're a little bit lower, but will probably come up over time as the price increases start coming through the closing levels.

And Bob, you've got a rough range of how much more margin you're seeing with the spec units right now. Are we talking a couple of hundred basis points kind of thing?

Right now, it's probably... call it five, 600 basis points.

Yeah, got it. That makes sense. Okay. And then second question relates to the issue of affordability. You know, what we've been hearing from folks is that builders want to be very judicious about, you know, pushing prices. They're cognizant that there's a psychological aspect to home buying and that, you know, particularly with the entry level or first time buyer, they want to make sure that they're not you know, sort of crossing any lines, you know, psychological lines that may trigger a buyer strike or that kind of thing. At the same time, we're hearing that whenever there's product available to be sold, it sells very quickly and that buyers seem to be having, you know, plenty of opportunity, plenty of ability to come up with extra cash if they need to, all of which suggests that there is still plenty of room ahead for price increases and and that actual affordability is absolutely fine right now. I was wondering if you actually agree with that characterization or if there's any color you can provide around, you know, the effort and the interest in sort of keeping your product, quote, unquote, affordable. Is it actual affordability or inaffordability that you're bumping up against or not?

Steve, this is David. You know what? I think we got a couple of positive things happening with this. A, we're doing a lot more affordable product, which, you know, you've seen the seasons. And then, two, we've got some new products coming out that's even a little smaller and more affordable. But, you know, the third leg of the stool is really interest rates. Interest rates are still pretty darn affordable. So I think when you look at down payments and house payments, you know, we're in a pretty good place, Steve.

Yeah, no doubt. And I would add on to that, Steve, Steve, just with a couple of the metrics for Q3, you know, being at 4.1 from an absorption rate standpoint, that's the second highest in our history. And that's after having increased prices probably close to 25 to 30 percent over the preceding 12 months. So, you know, that is something that we're very pleased with considering that level of price increases. I guess the final thing is at the end of the quarter, we only had 21 finished specs out there, which is down even from last year. So, you know, clearly it's hard to keep any finished inventory around. It's going pretty quickly.

Yeah. Great. Thanks very much, guys.

Thank you. And the next question comes from Michael Riho with JPMorgan.

Hi. This is Maggie on for Mike. First question, I noticed that during the quarter there was a pretty large sequential step down in the number of homes that you started to around 2,400 homes. And I was wondering, as you look to 2022, can you talk about the timeline and your level of confidence in ramping that start pace back up?

Yeah, I think we feel pretty comfortable with the timeline. the starts part of things. I think 2400 really just marries up with the number of houses we sold during the period, which also happened to be about 2400. In prior periods, we were well in excess of 3000 units started. So I think we do have the ability to ramp up fairly significantly from what we did in Q3.

Got it. And second, you mentioned that You're seeing some cost pressures from other building materials besides lumber and some increases in construction costs. I was wondering, as you look at your cost basket, can you quantify any of those cost increases, maybe year-to-date or from last quarter? And how are you thinking about that inflation and kind of those increased costs relative to lumber still being below peak levels as you think about 2022?

Well, I guess going through closings, you know, we're probably up somewhere between 13 and 15 bucks a foot for costs, I guess, direct costs going through the P&L. And that's versus, you know, call it 25 bucks a foot on prices. haven't gone up per foot year over year. And I guess as we look towards next year, as we see lumber and other things come through, lumber's probably peaking out in our P&L sometime in, call it Q4 and early Q1, and then should start to see some improvement going through our P&L from there. The rest of the costs, you know, it's tough to say. I think we're still battling through trying to make sure we're getting the houses closed, so don't want to put any predictions out there on that one.

Got it. That's helpful. Thank you.

Thank you. And the next question comes from Truman Patterson with Wolf Research.

Hey, good afternoon, everyone. Thanks for taking my questions. First, I wanted to start off, Bob, when you were talking about community account growth in 2022, I didn't catch it in the prepared remarks. Did you actually quantify that? And what I'm hoping to think through for the communities that are coming online, was this land bought more recently in 2021? If so, is there any way to quantify this? Or is this, you know, earlier vintage land that's a bit more self-developed, if you will? That's a lot in one question, but I'll take it. So as far as the community count goes, you know, essentially, you know, we had said we thought we'd be up 10% year over year, and we actually did. see an increase year-over-year as at the end of Q3, but there's a little bit of volatility there. So that 10% increase year-over-year, we may have to wait a couple months after the year end to see that come through, essentially is what we're saying. So we might not be up 10% year-over-year right at 12-31-2021. But we still think we're going to be up from where we were at at the end of the third quarter by the time we get to the spring selling season, which is really the most important part of things. In terms of the vintages of the land, I think it's a mix. We've been able to get some finished lots on board. So those would be lots that we approved in 2021. But I think we've also got some coming through on a development basis that would have been approved in 2020 or maybe even a little bit earlier since development is taking a longer period of time nowadays. So I guess it's a little bit of both on that front. Okay. Okay. Thanks for that. And then second question, you know, how should we think about some of the startup costs through recent market entrances and Is continued geographic expansion a part of your strategy going forward, or are you pretty comfortable with your footprint now?

Yeah, Truman, this is David.

We're very comfortable with our footprint today, but we really saw these four new markets that we're going into, very similar in nature to the ones we're in, We think our products are going to be great. We've been able to get a decent land supply to start. And our startup costs are fairly minimal. So we've done startups in the last couple of years that have ended up being very successful. We expanded in Riverside County three years ago. Now we're one of the leading builders in Riverside County. So we just think it's very natural for us to do organic growth versus going out and trying to buy another home builder.

All right. Thank you all for your time.

Thank you.

Thank you.

Thank you. And the next question comes from Deepa Raghavan with Wells Fargo.

Hi. Good morning, everyone. Thanks for taking my question. One for you, Bob, and one for Dave and Larry. Bob, can you talk about allocation trends across your community? I mean, the second highest absorption pace is somewhat in contrast to that. Are you even on allocation? If so, what percent of your communities are on allocation? And any thoughts when you can be meaningfully off of it?

Yeah, you know, I think we're not really operating under allocation. And we've been fairly consistent about this, not doing that versus trying to manage through price increases and then you know, to the extent that we do allocate it would only be because we don't think we can start the homes within, call it the next 60 to 90 days. So if we end up in that situation, then we would be likely to maybe hold back on some lots. But I would say for the most part, we're not doing that allocation across the country.

Okay, so is four then a normalized number for us to expect? Is there more normal, an absorption phase that you're comfortable with even on some lowered community count? Or is that going to probably change a bit on the momentum side of it?

I mean, four is a pretty darn good third quarter. It's second highest in the last 15 years. only eclipsed by last year, which was way off the charts at 6.1. So even if you saw it a little bit lower than that, I think it still would be a really good third quarter or fourth quarter. I think longer term, being somewhere in the four to five range on an annualized basis, that's more where we seek to be. So that's kind of where we stand on that part.

Okay, last one, more bigger picture. So can you talk to how your recent foray into your Boise and other markets have progressed so far? Any surprises, positive or negative, given that you're opening communities in a pretty challenging time environment? And also, can you talk to what are the newer upcoming markets you're probably excited to enter in? Thanks, and that's it for me.

Yeah, this is David. I think I can answer it this way. I think we're enthusiastic that in all the new markets that we've started in, that we've actually been able to get a land supply. We know we got the right product for the market. So in the four markets we're starting in, we feel pretty good about it. The developers have embraced our product and our build-to-order strategy. So we're feeling pretty darn good about starting those new markets.

Thanks so much. I'll pass it on.

Okay, thank you. And the next question comes from Allen Ratner with Zalman and Associates.

Hey, good afternoon. Thanks for taking my questions. First question, you know, Bob, just on the corporate G&A guidance, that's a bit of a step up from where you've been running at previously. And I know, David, you just mentioned the startup costs with the new markets is not overly material. Just curious what's driving that, if the startup markets have any impact there, and if not, is that 65 to 70, kind of the new run rate we should think about going forward?

Yeah, it's a good question. I would say the bulk of it is compensation-related costs. So it's not so much the new markets, but we just see compensation-related costs going up across the board. because of the competitiveness of the job market. We've got a couple things coming through there. You know, the PSU units tend to be somewhat volatile, and when we recognize that expense, and part of it is anticipation that we might reach some hurdles set forth in those PSU units. So that can be a little volatile, you know, but other than that, I think we're probably in that 65-plus range going forward here.

That's helpful, Bob. Thank you. Second question, I forgot if it was David or Larry that made this comment early on, so I apologize for not remembering. But referring to your cancellation rate and the idea that the bill-to-order model kind of invests the buyers into the home and kind of keeps them in backlog. And, you know, I certainly would agree with that. But, you know, on the other hand, your current can rate is still running well below kind of where you historically run at. And, you know, I would argue that that's a function of the strong price appreciation that those buyers have seen since they've written the contract. You know, with your comments that pricing has kind of normalized a little bit here, are you at all concerned about cancellations starting to you know, creep back up to those more normal levels if the buyers don't have that embedded equity like they do today, especially with cycle times extending and buyers having to wait as long as they do today for their home.

David, I look at it a couple different ways. Number one, you know, our consumers are invested in their house with their colors, their personalization. But the other thing, we're in a really healthy market, so it's not – A lot of demand and lower supply. So when people get in, I think they're happy to have their house on their lot. So we feel very good about our business model today.

Got it. Appreciate that, Dave. Thanks a lot.

Thank you. And the next question comes from Alex Barron with Housing Research Center.

Yeah, thanks, guys, and good job on the quarter. I wanted to ask... So you guys just raised the dividend, which was good to see, but wondering if you could share your thoughts around potential share buybacks.

Well, I mean, it is something we have in our arsenal.

We have an authorization outstanding as we speak. That said, we haven't done that in about 20 years. So, you know, clearly our preference has been to reward shareholders through the dividend and increases in the dividend, as you've seen just this quarter. But we haven't taken share buybacks off the table.

And how big is the outstanding authorization, Bob?

It's 4 million shares.

Got it. Okay, and one last thing. On the supply chain issues, what would you say are the top two or three things that are the most pressing at this point?

You know, this is David. It's a mixed bag. It's different from market to market, so I can't really tell you that it's one category or the other, but we're seeing what I call spotty supply chain in each one of our markets, and So overall, I don't think it's just one thing.

Okay. Thanks so much.

Thank you. And once again, as a reminder, please press star then one if you would like to ask a question. And the next question comes from Jamie Canlis with Bedbush Securities.

Hey, good afternoon. What was the cancellation rate in the quarter and what was it last year?

I guess, so about 7% relative to beginning backlog.

A year ago, I think it was about 12%. And then if you're looking for relative to gross, I think we were about 19% during the quarter.

And a year ago, I think it was 14% or 15%.

And was that increase in the gross focused on any certain area of the country or many color you can give us behind that?

Well, I think we had a much higher absorption rate last year, and that's why we like to refer to it relative to beginning backlog. The absolute number of cancellations was actually lower year over year, and that's really what's important to me, considering we have a much bigger backlog.

So, Larry and David, what finally pulled you over the fence on Texas? I thought that was a market historically you guys didn't want to operate.

Well, I'm going to give you a good answer because I think both Larry and I would, and I watch Larry laughing because we're actually going to Austin, Texas, okay? And so, we're getting started there. We think that market has got... A lot of demand for our kind of product. And so right now we've just made the decision to go to Austin, okay? And we think it fits into our business model. Larry, what's up, Dad?

Yeah, I can say over 40, 50 years from time to time we change our mind.

Well said. All right, well, thanks, guys. Appreciate all taking my questions. Thank you.

Thank you. And this concludes the question and answer session. I would like to turn the call to Bob Martin for any closing comments.

Thank you. We appreciate everyone being on the call today, and we look forward to having you when we conclude our fiscal year on our fourth quarter earnings call.

Thank you. The conference has now concluded. Thank you for attending today's presentation. We now disconnect your lines.