Spire Inc.

Good morning and welcome to Spires fiscal 2024 third quarter earnings conference call. Today all participants will be in a listen only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero on your telephone keypad. 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 that today's event is being recorded. I would now like to turn the conference over to Megan McSale, managing director of investor relations. Please proceed.

Good morning and welcome to Spires fiscal 2024 third quarter earnings call. We issued an earnings release this morning. You may access on our website at spireenergy.com. There is a slide presentation that accompanies our webcast. And you may download it from either the webcast site or from our website. Before we begin, let me cover our safe harbor statement and use of non-GAAP earnings measures. Today's call, including responses to questions, may contain forward looking statements within the meaning of the private securities litigation reform act of 1995. Although our forward looking statements are based on reasonable assumptions, there are various uncertainties and risk factors that may cause future performance for results to be different than those anticipated. These risks and uncertainties are outlined in our quarterly and annual filings with the SEC. In our comments, we will be discussing non-GAAP measures used by management when evaluating our performance and results of operations. Explanations and reconciliations of these measures to their GAAP counterparts are contained in both our news release and slide presentation. On the call today is Steve Lindsay, president and CEO, Scott Doyle, executive vice president and COO, and Steve Raschi, executive vice president and CFO. Also in the room today is Adam Woodard, vice president and treasurer. With that, I will turn the call over to Steve Lindsay. Steve?

Thanks, Megan, and good morning, everyone. We appreciate you joining us for SPIRE's fiscal third quarter earnings call for a review of our quarterly performance and an update on recent developments and outlook. Earning slide three, let's start with our quarterly results. This morning, we reported a net economic earnings, or NEE, basis, fiscal third quarter loss of 14 cents per share compared to an NEE loss of 42 cents per share a year ago. The improvement year over year reflected improved results across all of our business segments. Scott and Steve will provide a deeper dive into these results and an outlook in a moment. Throughout the year, we have maintained our focus on cost management and creating efficiencies across the organization. This is important as we strive to keep bills as low as possible for our customers. This past quarter, we heightened these efforts and launched an initiative to improve long-term customer affordability. These efforts are targeted at lowering our overall cost structure and improving operational efficiency, securing the benefits of our investments in technology and infrastructure upgrades. Most of the benefits this word will come in fiscal years 2025 and 2026. We're seeing some of these savings during the fiscal year and we expect them to partially offset headwinds experienced at the gas utility during the year. As you'll recall, this winter we saw lower than expected margins due to warm winter weather in Missouri and higher interest rates overall.

We're also

seeing stronger performance at our marketing and mid-stream businesses. With three quarters of this fiscal year behind us, it's not possible for us to claw back all of the shortfall. As a result, we now expect to earn between $4.15 and $4.25 per share this fiscal year. Our efforts set us up well for fiscal year 25 and beyond. We remain confident in our long-term strategy to grow our businesses, invest in infrastructure, and drive continuous improvements to deliver value over the long term with a steadfast commitment to safety. A key component of our long-term success is attracting new and growing businesses to our communities and states through economic development. We operate in states that serve as great partners to attract projects that bring significant jobs and investments to the communities we serve. Several factors come into play when a company looks for a location to build a facility, with one of the biggest being access to reliable, affordable energy, energy like natural gas. This fiscal year in Missouri, we've seen 25 publicly announced economic wins since the beginning of FY24. These projects represent an expected investment of nearly $3.5 billion in our state's economy, resulting in the creation of over 3,500 jobs. Further in Alabama, the latest state report for calendar year 2023 includes 184 wins in new and existing projects, creating more than 8,000 jobs and $6.4 billion of investment in the state. We are committed to our collaboration with key stakeholders on this important topic. Earlier this month, we hosted Missouri business and government leaders to discuss economic development and ways to drive new business going forward. In Alabama, we remain actively engaged in strategic planning for the state, led by the Department of Commerce to support future growth. As natural gas remains a fuel of choice for economic development, we'll continue to collaborate and drive further investment in our communities. Before moving on, I'm pleased to say that in June, we published our sixth sustainability report covering our continued progress across four key priorities, the environment, safety, people, and governance. This comprehensive report highlights our sustainability commitment to all key stakeholders, including reducing emissions and efforts that support our commitment to the communities we serve. I encourage you to learn more about our sustainability efforts in the report, which is available on our website at spireenergy.com. With that, I will now hand the call over to Scott to provide an update on the utilities. Thank you, Steve, and good morning, everyone. Let's turn to slide four for an update on our gas utilities. During the quarter, our employees continue to deliver for our customers, providing them safe and reliable energy with a focus on excellent service and customer affordability. This important work is supported by the constructive regulatory mechanisms across our jurisdictions that allow us to make significant investments to deliver natural gas to our customers and receive timely recovery of associated costs. In Alabama, our rates are set on a forecasted budget, and our annual RSE rate-setting process will begin this fall. In Missouri, our semiannual infrastructure writer, IZRIS, allows us to recover revenues for certain eligible projects in between rate cases. We currently are benefiting from revenues reflected in this writer with an annualized run rate of $36.9 million, and earlier this month, we filed a new IZRIS request with the Missouri PSC for an additional $17.7 million, representing our fourth request since our last general rate case. This request covers investment and system upgrades through August of this calendar year. Looking ahead, we expect to file a general rate case in Missouri in the last calendar quarter of 2024. Our top priorities include updating our cost of service, rate base, and rate of return. We will also look to improve our recovery of and conservation. This could be through a modification to the existing weather normalization adjustment writer, WNAR, or through a newly proposed mechanism or rate design. We look forward to working with key stakeholders throughout the process. As Steve mentioned during the quarter, we launched a customer affordability initiative to lower our overall cost structure and improve operational efficiency across the organization. This initiative included expense reductions across shared services and utility business units, including a targeted reduction in workforce and a retirement incentive program. Other areas we are targeting include streamlining our leadership structure, standardizing our work processes, and capturing the O&M benefits associated with our capital investments. Further imperative is incorporate alignment of our field workforce through optimization of available resources and efficient deployment of capital. I would like to highlight that earlier this week, ahead of schedule, we renewed our labor agreement with our largest union representing employees in our St. Louis market service territory. This three-year agreement is a win-win as it provides stability to our workforce and allows us to focus on operational excellence. Bringing back to the broader customer affordability initiative, we expect to see these cost savings and improved efficiencies across the organization support our long-term growth expectations. And let me reassure you, none of these actions will impact the safety and reliability of our natural gas system. Moving to our quarterly results, utility earnings benefited from new rates in both Missouri and Alabama compared to the prior year. Utility run rate O&M was lower than last year, driven by lower operational expense, partially offset by higher bad debts. Slightly better interest expense was more than offset by lower gas carrying cost credits, reflecting our successful conclusion of collecting deferred gas costs from winter storm Uri and the winter of 2022. We are seeing increased appreciation expense year over year as we continue to spend on infrastructure to provide safe and reliable energy. Turning now to slide five for an update on our capital investment plan. We continue to invest significant amounts of capital focused on modernizing infrastructure at our gas utilities. For the first nine months of fiscal 2024, capex totaled $631 million, which was primarily at our gas utilities. Year over year, our gas utility capex increased 14% to $501 million with a focus on upgrading distribution infrastructure and connecting more homes and businesses. Investment in our midstream segment totaled $130 million fiscal year to date, and we remain on track for completion of our Spire Storage West project in the last calendar quarter of 2024. We continue to install advanced meters for residential customers across our service territory. In fiscal year to date, we have installed approximately 265,000 advanced meters, bringing the total number of customers benefiting from this technology to 750,000. We've increased our total meter investment by $30 million this year, taking our expected FY24 capital investment targets to $830 million from $800 million. Our expected total capital expenditure plan remains $7.3 billion over the next 10 years. Our focus will continue to be on infrastructure upgrades to support the safety and reliability of the system. To sum it up, we are well positioned for success over the longer term as we execute on our robust capital investment plan to support the performance of our utilities and our gas-related businesses. We believe in the ability of our experienced management team and employees to successfully lead us into the future. I will now hand the call over to Steve Rasche to provide a financial update. Thanks, Scott, and good morning, everyone. We reported a fiscal third quarter loss on an economic earnings basis of $4.3 million, or $0.14 per share, compared to a loss of just $319 million, or $0.42 per share, last year. We saw a -over-year improvement across all of our segments. Our gas utilities improved to a loss of $11 million, $1.3 million better than last year, reflecting new rates offset by higher depreciation and bad debt expense. Gas marketing results were $3.5 million higher due to improved transportation margins. Our midstream business posted higher results driven by additional storage capacity at Spire Storage West and new rates across both of our storage businesses. As a reminder, new rates kicked in effective April 1st, the beginning of injection season, and we are benefiting from higher demand and rates for both our new capacity as well as our re-contracted existing capacity. Midstream results also benefited from the acquisition of MOGAS and the inclusion of salt plains in net economic earnings this year. Other reflects higher interest expense, partially offset by lower corporate costs. Slide 7 provides detail on key variances, and we'll focus on the net variance column, which removes the cost of our customer affordability initiative, principally employee severance and other related restructuring costs. Hitting on a couple of the highlights, contribution margins overall were higher across the gas utilities, marketing, and midstream, the reasons I just touched on. Looking at operations and maintenance expenses, for the gas utility, O&M expenses decreased by $1.7 million, as a $4.4 million increase in bad debt expense offset a $6.1 million reduction in other expenses. For the nine months of our fiscal year, our run rate utility costs are down $7 million excluding bad debts for a -over-year decline of 2%. Finishing up our O&M expenses, marketing is in alignment last year, and midstream was higher due to the addition of salt plains and MOGAS. And interest expense was higher by $2 million, driven mostly by higher interest rates and short-term debt balances this quarter. Our three-year financing plan is largely unchanged from last quarter. Our ATM program has placed roughly $33 million in forward settlements so far this year. This leaves very modest equity needs through 2026. I would also note that we repaid our $200 million term loan in May, and we continue to target FFO debt at 15 to 16% on a consolidated basis. Now, turning to our outlook. As we look at our -to-date results and our forecast for the final quarter, including the pull-through of our customer affordability initiatives, here's how we think about fiscal year 24 and more importantly, fiscal year 25. As Steve mentioned, we certainly had headwinds coming out of the winter, essentially in two areas. First, lower than expected margins at a Missouri utility due to warm, unmitigated weather. Second, higher than expected interest expense at both the gas utilities and corporate. We did have one strong tailwind, O&M cost control. This is not a new trend, as we have worked for over many years to keep our discretionary costs low, taking advantage of our investments in technology, innovation, and infrastructure upgrades. And we continue to show good trends this year. However, the timing of those savings, higher bad debt expenses, and the realization that the added benefits of our customer affordability efforts will only partially offset the shortfall of margins and interest we carried into this quarter. So, we've adjusted our earnings guidance for the remainder of this year as follows. We are lowering our gas utility range to $213 to $221 million, down $8 million from last quarter's update, down $18 million at the midpoint from our initial guidance for the reasons I just mentioned. We raised the ranges for gas marketing and midstream to reflect the strong performance this year, with each up $8 million at the midpoint compared to our initial guidance. The corporate cost estimates moved up $6 million at the midpoint to between $24 and $28 million, reflecting the impacts of higher interest expense and the timing of cost savings. Putting it all together, we've lowered and narrowed our earnings target range for fiscal year 24, $4.15 or $4.25 per share. Now, despite the lower finish this year, we are well positioned heading to fiscal year 25. We expect to get back to normal margins in Missouri. We've also collected the deferred gas cost, as Scott mentioned, which should relieve some pressure on our short-term borrowings going forward. Add the benefit from a lower cost structure, and we expect to return to the planned growth trajectory that we introduced at the beginning of this fiscal year. As a result, we remain confident in our long-term net economics earnings per share growth target of 5%. Thanks again for your confidence and trust you placed in us, and we look forward to speaking more about 2025 and beyond in our year-end earnings call in November. Steve, let me turn it back over to you for some final comments. Thank you, Steve. Spire has delivered a solid third quarter, and we are laser focused on finishing our fiscal year well positioned for success and growth over the

next year. We will now begin the question and answer session. As a reminder, 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. If at any time your question has been addressed and you would like to withdraw it, please press star then two. At this time, we will pause momentarily to assemble our roster. Today's first question comes from Richard Sunderland with JPMorgan. Please proceed.

Hi, good morning. Thanks for the time today. Starting with the cost efforts, what is the potential magnitude of benefits here, and is this directly in response to the 2024 headwinds? I guess I'm trying to understand how much is embedded in 2024 for cost savings versus what you can realize in 2025 and 2026.

Hey, Rich. It's Steve Lindsey. I'll start with kind of the overarching themes here. First of all, cost management is not new to us. I think we've got a very strong record of doing this. I think what we did say is that we need to ramp this up a little bit. We're going to get a little here at the end of 2024, but really the focus is on 25 and 26 and that this is a not one and done. This is comprehensive. It involves looking at really through the lens of what is adding value for the company and then maybe in some cases, what can we stop doing that's really not adding value. It could be optimizing workforce. It could be process improvement that we continue to focus on. It could be really leveraging the investments that we've made in infrastructure and technology, even things like logistics where you start to pair workforce with fleet and supply chain. I think it's comprehensive and it's intended to be long term. I'm going to turn it over to Scott and Steve to follow up a little more, but I just want to keep kind of the overarching theme of this isn't something that we just started in terms of we've been managing costs. This is an initiative that is accelerated and it's bigger than we've done in the past, but we think again, it's not a one and done. It's really a change as we move forward into the future. Hey, good morning, Rich. This is Scott and maybe just to give you a few categories of things that have come out of this initiative that we're working on and then I'll hand it over to Steve to get a little more color on the financial implications. But as Steve was Steve Lindsay was mentioning, one of the things we targeted was leadership consolidation, particularly in our shared services and in our operating units as well so that we're to a common model and have some consolidated leadership in places where we didn't have it before. Some other places we've looked are in our corporate facilities. We have both in Birmingham and in St. Louis plans to consolidate facilities in those locations where we will reduce maintenance expense, reduce lease expense associated with operating two facilities and bringing them into one, for instance, here in the St. Louis downtown area. As we talked about our reduction in force and our early retirement incentive, both those programs have concluded and so we have have are now experiencing the benefit associated with those reductions in force. Those are 24 implicate or 24 impacts, but those will continue into 25 and then beyond that there's some of these other things such as software licensing or conclusion of certain IT projects for which either the workforce or the effort of the consulting expense has been brought to a conclusion that we're able to eliminate at this time as well. So I'll hand it over to Steve for some additional color on the financial implications. Hey Rich, good morning. You know, to answer your question directly, we were in the process of going through this initiative at the time of our last call. If anybody who's been through it knows it's not fun, you want to do it in a thoughtful way and I think we did. Our focus is on bending down the cost curve for our cost structure. Think about it as long term. Here are the things that we need to do in order to create headroom in our bill and continue to see those cost savings. In terms of we didn't really see a lot this quarter. In fact, as Scott mentioned, the bulk of the savings actually landed at the beginning of July. So we should see some benefit in the fourth quarter. We'll talk about that when we get to November, but I wouldn't want to oversell that because when you're trying to carve up some of your cost structure, those are generally one to two year initiatives. We clearly see a lot more benefit going into and through 25 because these kind of cascade out as time goes on. And we'll speak a bit more to that when we get to the year end call. And I would say that if you look at our results for cost management in the gas utility this quarter for the first three quarters, that's a pretty clean analysis without a lot of benefit of the things we've done to add on top of it.

No, that's very helpful. Thanks for laying out all of that. And I guess a follow up here, digging into that 5 to 7% growth language from the script versus the lower 2024 guidance, do you expect 2025 to be at the midpoint of the 5 to 7% range or are you trending lower in the range as cost efforts ramp? It's

a great question, Rich. And again, we'll get to year end and talk about 25 at that point, specifically for 25. But you're right, if you think about the pushes and pulls, and we spoke to them on the call so I won't repeat them here, we've got a lot of tailwinds and a couple headwinds that we're going to have to deal with. We clearly are targeting, as we always would, the middle of the range. And the real question that we'll debate as we go through the next three months or four months because it would be November is what's the timing of the cost savings and how does that impact 25? And then, as you know, we'll be in a rate case in Missouri so we'll have to deal with that. But clearly being two years plus out in Missouri, we should have a little bit of regulatory lag in Missouri. We've done a pretty good job of offsetting that and as Scott highlighted in his comments, we're getting good pull through with a lot of cooperation in Missouri so that does a pretty good job of offsetting a lot of the regulatory lag in Missouri. So the short answer is we always target the middle of the range. The long answer is we've got some work to do between now and then and we'll speak more to it when we get to the year end call.

Understood. Thank you for the time today.

The next question is from David Arcaro with Morgan Stanley. Please proceed.

Oh hey, good morning. Thanks so much for taking my questions. Hey, I'm wondering if you could just elaborate maybe on some of those puts and takes into 2025. Just thinking about, you'll get a recovery hopefully in terms of weather normal sales but then what persists I guess into next year? Like does the interest rate headwind potentially persist? Could you see some of the strength that you had in the marketing and midstream segments? Could that continue into next year? So yeah, we'd love to impact a few of those drivers.

Yeah, it's a great question. Let me start on the last part, the marketing and midstream and then we can come back to the other and to the utilities. Clearly we're seeing the step up in the midstream business that you would have expected given the amount of capital that we've invested both in the expansion of spire storage west and adding salt plains and mo gas over the last two years and the guidance that we talked about last quarter, stepping that up in a material way is what you should expect. Now when we get to next year, we're getting closer to run rate for that business and so we'll step into the range that we would expect and you would expect us to attain given the returns on investment that we should get from deploying that capital. And so what you see now is us kind of stepping in a lot closer to where that terminal value or run rate is going to be. Clearly for the existing facilities and I would put salt plains in that category along with the pipelines. Spire storage west will continue to play into the remaining capacity as we get into 25 as we've talked about before. Marketing, we view the business the same in terms of where the baseline earnings are for the business and guidance that we launched this year reflected where we believe the earnings power for that business is given normal market conditions. We did have the ability as we talked about earlier this year to create value especially early in the winter season and we're seeing a little bit of opportunity now and we adjust real time our expectations there generally on the upside. We will rebase, I know folks don't like that word, but our expectations for that business are it should grow in its base business but we're not expecting outside growth that you would expect if you were to look at the guidance raised that we saw this year. But it's clearly a very valuable component of our overall business and we like the earnings that it drives because it helps us to get some capital that we can redeploy and invest in utility rate base. With that, let me turn it over to the team on the utility side. Yeah and thanks David, Steve. I would say yes, I mean our assumption would be around more normal weather not as warm as we had but in addition to that we're going to get a full year of the O&M impacts that we're talking about and so I think even if we do have some weather issues that we're going to look to be able to overcome that by having a full year of the O&M benefits. So that's from the utility perspective I would think about it and then Adam you want to talk a little bit about our thoughts for all the interest? Right, you know we're not trying to play interest forward at all but I feel like there's you know certainly some we are seeing balances start to move down and which would give us some mitigation there as well relative to this year. I would add too that you know as Scott Doyle mentioned earlier we

would

also see some bolstering of revenue in the utility around new interest coming in.

Got it, thanks. Yeah that's clear that makes sense and then let's see I was wondering if there's any early indications or that you might offer in terms of how much of a rate increase you might be requesting in Missouri with the rate case coming up. Any important dynamics to consider there whether there's a lot of lag to catch up on or if it could be a smaller ask overall?

More to come on that David. You know we're clearly would look to as we've talked about look to address the weather normalization mechanism and then just really looking to recover the capital that we've laid and true up cost of service.

Gotcha okay thanks appreciate all the color.

As a reminder if you do have a question please press star then one. The next question comes from Gabe Maureen with Mizuho please proceed.

Hey good morning everyone I know the cost saving stuff has been addressed quite a bit but I just had one more which is on I think some of the restructuring charges that showed up this quarter I think the 4.4 million just wondering to what extent you expect those to show up in 25 or just ongoing basis and you know whether you care to quantify what those may be kind of going forward.

Yeah hey Gabe this is Steve let me take a shot at that and as I mentioned anybody who's been through these know that they're they're not fun and you want to try to get them down and get them in the rear view mirror just for the benefit of the team and culture and that's exactly what we did. We made our best faith ever on the cost associated with that and as you alluded to and I think I spoke to on the call most of those are related to employee separation costs a few restructuring costs. Now having said that we have a lot of initiatives that are in flight and we continue to work them. At this juncture I couldn't tell you whether there will be additional costs associated with those. We try our best to estimate those should there be any we would highlight those at the at the end of the year and I think you could rest assured that if we're encouraging any of those there are great benefits associated with the lower cost associated with them going forward in the 25.

Thanks Steve and then maybe if I can ask a bigger question kind of on the dividend and the payout ratio here and I know you talked about the five to seven percent your confidence in that longer term but it sounds like between the cost savings as well as the rate case there's some work to do. Any thoughts to maybe slowing the dividend growth as you kind of work through that over the next 12 to 24 months?

No thought of it right now. We'll engage in that discussion with our board as we go to the year end which is when we change our dividend going forward into the next year. We've been at or near five percent increases for the last couple years so at the low end of our growth range to your point we want to make sure to watch that payout ratio but we would clearly there's no indication that we wouldn't continue to grow the dividend. It might be at the lower end of our range of our growth for the factors that you talked about.

Okay great thanks Gus.

Thanks.

The next question comes from the Solomon Accio with Stiefel. Please proceed.

Thank you. Two quick ones for me. Given the success that you've seen in midstream I'm just curious as you think about capital allocation on a go forward basis in capex spending would you anticipate putting more in that area?

Hey well Greg, great to hear from you this morning. I think right now our focus is on completing the project and delivering our expectations on that. I think any other investments in that facility or anything else are down the road but right now our focus is really delivering on our commitments and so that's where we're looking at right now. So the additional capital that's been deployed we're very comfortable that the returns are going to exceed our initial expectations and so we think this investment continues to be the right approach for that facility. Yeah and Solomon if you look at our long-term capital forecast which was included in the material you'll see that that investment drops off to maintenance capex. There'll be a little bit in the first fiscal quarter of 25 because the construction will continue in spire storage west through the beginning of the heating season so fourth calendar quarter of this year but after that it's really more maintenance capex and if there are some small organic investments that make sense we would clearly take advantage of those and that's I think where it will sit for a while.

Understood and then I know there's a number of ads and subtracts in your FFO debt in your targeting 15 to 16 percent but can you say where it's at now?

Sure and S&P have put out a report in early June that have laid out approximately 11 percent on their calculation. Based on that equivalent we're above 12 now and you know we look at a little bit differently as far as the construction of that metric and would cite something a little closer to 13.

Understood thank you so much.

And the next question comes from Paul Fremont with Lidenburg. Please proceed.

Great I guess my first question is if you could elaborate a little bit on your assumptions for growth longer term in the marketing business what is driving sort of that growth?

Hey Paul this is Steve Rashid. Let me take a shot at that and good morning. You know we've tended to see our marketing business the base business again remember the base business for the marketing group is to gain customers you know gain penetration into what is a large market and procure transport store and deliver natural gas to those customers which are commercial industrial other utilities and the like. And that the growth in that business is generally through adding to the team adding to the relationships adding to the contracts and we would expect that growth to be in the growth range that supports our overall growth for the business. When you see outsized growth in terms of actual reported numbers that's generally an additional volatility or market opportunity to optimize the assets that we have to invest in and have our portfolio to meet our customer needs. But we continue to think about that base business as we did at the beginning of the year and as was asked earlier and we'll think about it again as we go to 25 and we don't want to get too far out over our skis because although the market has been more volatile and there's been opportunities for three of the last four years we've been through markets where the opportunities are less and we don't want to bank on that or plan for that but we'll clearly take the opportunity if it presents itself. And the only piece I would add to that is is that part of our business line is very asset light in terms of it doesn't require a lot of investments similar to midstream and so Pat and his team have done a great job over the years of developing the relationships that Steve has mentioned delivering on the commitments that we make and I think reputationally they're in a very good spot they operate on a lot of pipelines and they're continuing to grow from a geographic perspective so we think that's a good business to continue to be in.

Great and then I guess my second question is you mentioned interest rates as part of the revision and this year guidance were were you anticipating lower interest costs in your original guidance or how did the interest rate change? How was interest sort of a variable?

Paul great question this is Adam. No we weren't expecting lower interest rates it really was and we had mentioned this a little bit earlier in the year you know we had a bit of given the warmer weather our some of our deferred gas costs hung around longer and it stuck around longer and those balances were a little bit more than what we had expected so you know I think we were not too far off of where interest rates are from in our internal forecast it was really the balances that didn't meet our expectations.

Great thank you very much.

Paul.

At this time we are showing no further questioners in the queue and this does conclude our question and answer session. I would now like to turn the conference back over to Megan McPhail for any closing remarks.

Thank you for joining us this morning we look forward to speaking with many of you in the coming weeks have a great day.

The conference is now concluded thank you for attending today's presentation and you may now disconnect.