Corporacion Inmobiliaria Vesta, S.A.B de C.V. American Depositary Shares, each representing ten (10) Common Shares

Greetings, ladies and gentlemen, welcome to the Vesta third quarter 2024 earnings conference call. At this time, all participants are in listen-only mode. A question and answer session will follow today's prepared remarks, and as a reminder, this call is being recorded. It is now my pleasure to introduce your host for today, Fernanda Bettinger, Vesta's Investor Relations Officer. Please go ahead.

Good morning, everyone, and welcome to our third quarter earnings call. Presenting today with me is Lorenzo Laminique Perot, Chief Executive Officer, and Juan Sotil, our Chief Financial Officer. The earnings release detailing our third quarter 2024 results was released yesterday after market close and is available on the company's website along with our supplemental package. It's important to note that on today's call, management remarks and answers to your questions may contain forward-looking statements. Forward-looking statements address matters that are subject to risk and uncertainties that may cause actual results to differ. For more information on these risk factors, please review our public filings. VESTA assumes no obligation to update any forward-looking statements in the future. Additionally, note that all figures included herein were prepared in accordance with IFRS, which differs in certain significant respects from U.S. GAAP. All information should be read in conjunction with and is qualified in its entirety by reference to our financial statements, including the notes thereto and are stated in U.S. dollars unless otherwise noted. I now turn the call over to Lorenzo Vero.

Thanks, Fernanda. And good morning, everyone. We again deliver strong financial performance with steady operating performance during the third quarter 2024. Total income for the third quarter 2024 was $63.7 million, a 14.4% year-over-year increase. Adjusted NOI margin and adjusted EBITDA margin reached 94.2% and 84.5% respectively for the quarter. And Vesta FFO ended at $40.4 million for the quarter, a 20.3% year-on-year increase. Importantly, we have upwardly revised guidance for the full year 2024, as Juan will discuss in more detail shortly. Vesta is focused on creating value through disciplined, highly strategic investment activities that will continue to deliver long-term growth in cash flow, funds from operations, and which ensures we maintain the industry's strongest balance sheet, as Juan will discuss further. Importantly, our best-in-class properties enable us to be extremely selective in the tenants to which we lease. Third quarter leasing activity reached 1.3 million square feet, 476,000 square feet from new leases, and 787,000 square feet in renewals. We're seeing our markets expand, and I'm pleased to note continued recovery and heightened activity in Mexico City and the Bajio. During the quarter, Vesta closed three new leases in Querétaro with new and existing clients, which are directly aligned with Vesta's exacting criteria. Two European companies and one American in the automotive and mixed automotive and electronics space. Also, most of the companies Vesta is currently in discussions with in our primary regions are European, American, and nation companies in the automotive, electronics, consumer, logistics, and aeronautical industries. We continue benefiting from longer-term client commitments with a contract lease term at approximately 10 years for the majority of new leases, as well as attractive rental rates and an 8% spread for renewals and releasing during the third quarter 2024. During the third quarter, we made a strategic investment in nearly 36 hectares of land bank in Tijuana, Baja California, adjacent to our Vesta Park mega region, which will be comprised of six world-class LEED-certified buildings on one million square feet. As with all Vesta properties, this new acquisition has assured access to energy, water, drainage, and infrastructure. As a related comment, Vesta's high-quality assets designed to Vesta's consistently high standards includes security at our properties, which enables clients to focus operations not on their safety. And this ensures Vesta maintains a solid foothold in this important region. New sharing trends remain robust. An example of this was Foxconn's recent announcement that the company has committed to build the largest plan for NVIDIA's GV200 super chip servers in Mexico, aiming to produce 20,000 units by 2025 to meet global AI demand. Today, Foxconn, which is Vesta's third largest tenant, has its digital twin within one of our facilities in Vesta, Mexico's electronics industry hub, where Foxconn's engineers are defining processes and training robots in this virtual environment, enabling the physical plant to highly efficiently produce the next engine of accelerated computing, which is the NVIDIA Blackwell HGX systems. This underscores Mexico's growing appeal for high-tech manufacturing while decoupling global technology supply chains from China. So, while there were no new construction starts during the third quarter, Vesta's development pipeline remains robust. with 3.4 million square feet under construction and 1.3 million square feet delivered during the third quarter 2024. We are seeing continued strength in the Mexican market and expect to close 2024 with leasing activities similar to that of 2023. We are executing on a strong pipeline with a land bank that's shovel-ready and an eye towards sustained but strategic land-backed growth that ensures clients' access to logistic corridors and energy infrastructure that is critical in today's environment. Our portfolio and strategic footprint cannot be replicated, and our close relationships and deep Mexico presence ensures we will have privileged access to the unique opportunities which continue to surface. We remain focused on consistency and discipline as we pave the road for Vesta's next phase. Let me now turn it over to Juan to review this quarter's financial results.

Thank you, Lorenzo, and good day, everyone. Let me begin with a summary of our third quarter results. Starting with our top line, total revenues increased 14.4% to $64 million, mainly due to rental revenues coming from new leases and inflationary adjustments on rental property during the quarter. In terms of current mix, 89% of our third quarter revenue was denominated in U.S. dollars, up from 86% in the third quarter 2023. Turning to our profitability, adjusted net operating income increased 11.4% to 57.6 million, and the margin increased 87 basis points to 94.2%. This increase was driven by higher rental revenue from our rental properties and lower property costs, resulting in a higher margin. Adjusted EBITDA resulted in $51.6 million in the third quarter, a 15% increase compared to the same quarter last year, and the margin expanded 322 basis points to 84.5%, primarily due to lower expenses during the third quarter. Administrative expenses, including audit, legal, and consulting fees, benefited from the peso depreciation relative to the same period last year, as well as a positive effect from expenses which were reimbursed during the third quarter. We closed the third quarter of 2024 with a pre-tax income of $63 million compared to $131 million in 2023. This decrease was mainly due to lower gains and revolutions of investment properties and higher exchange loss. Vestas FFO, excluding current tax, increased 20.3%, reaching $40.4 million, as Lorenzo describes. Turning to our balance sheet, cash and equivalents stood at $281.2 million, and our total debt decreased to $845 million at the end of the quarter due to the payment of $65 million, corresponding to the first tranche of Vesta's private placement bond, which matured on September 2024. Net debt to EBITDA was 2.9 times, and our loan-to-value was 21.6%. Reflecting on our ongoing strategy to optimize our capital structure, as Lauren has noted, in October, we signed a mandate letter for a $500 million syndicated credit loan comprised of a U.S. $300 million term loan and a $200 million revolving credit facility, replacing our existing revolving line. Furthermore, during the quarter, we opportunistically bought back approximately 5 million shares, totaling nearly $15 million, in line with our objective of delivering the highest possible return to our shareholders through disciplined strategic capital allocation. Along these lines, after quarters end on October 14th, we paid a cash dividend of $16.2 million for the third quarter. Finally, I would like to provide an update on our 2024 full year guidance. We are upwardly revising our revenue growth to exceed 17% from our prior guidance range of 16 to 17% revenue growth for our full year 2024. Adjusted NOI margin has also been revised to 94.5% from 94%, and adjusted EBITDA has been revised to 83.5% from 83%. This reflects best of financial discipline and continued strength on leasing activity during the year. This concludes our third quarter 2024 review. Operator, can you please open the floor for questions?

Thank you. We will now begin our question and answer session. If you have dialed in and would like to ask a question, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, simply press star one again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Thank you. Your first question comes from Bradesco BBI. Please go ahead.

Good morning, everyone. Thanks for taking my question. Just a couple on my side. We saw good occupancy, but down quarter over quarter. So just wanted to get a little bit of sense of how your commercial discussions are going on with your clients, whether the recent volatility around Mexican politics or US election, whether this has had some clients delaying you know, being in those final steps, perhaps pulling the trigger. So I wanted to get a sense there on your commercial discussions. And secondly, you know, when you think about your development going forward, you know, you have some developments in the Bahia region. You commented, you had very positive comments around the automotive industry. So just wanted to see what your outlook is more medium term, whether you would expect more activity in the Bajio region to make more use of your land bank instead of more strategic acquisitions in the north. Just wanted to see if you could have higher utilization of that part of your portfolio.

Thank you.

Thank you very much for being on the call and for giving us the opportunity to address further on some of the items coming through your question. Definitely, we have seen throughout the year occupancy levels being quite good. Even that we, in some market, there has been an uptick in vacancy, We're coming from record low vacancies in the last couple years, and that's why it's the nature of the market to have some sort of adjustment. But still, we believe that current market conditions are strong, as well as Vesta's occupancy levels, even that we had a minor tick. on the total portfolio, but positively on the same store portfolio, we saw an increase in occupancy, but still at a very high level of 98%, which represents, well, the commitment from existing clients committing to longer term renewing 90% of retention rate throughout the year, and actually having very little move outs. Maybe the only way, the only reason why we saw a little bit higher, lower occupancy is because of new projects coming online that we have been in this upstage and that have taken, in this case, a little more than, now more than 12 months. So we feel comfortable with year end occupancy levels and year-end leasing activity. And this comes from our discussions with our commercial team with tenants and potential tenants, which, interestingly, they are following more, I would say, economic trends or market trends regarding taking up space. more than even political considerations. The reason being that many of these companies already have long-term contracts with OEMs, for example, or they have already, so have contracts with, let's call it retailers in the US. So they need to start operations in 2025, 2026, and they have long-term contracts with many of these companies. And that's the reason why they continue to take on space and pretty much care less about the political impacts, which they know that there's always uncertainty. So for that reason, we feel confident that we're going to end up a good year and 2025, we will continue to see some positive demand and those commercial discussions are We keep on doing them actively. I take the opportunity to remind everyone that we have local presence in all of the markets that we operate. We have immediate access to clients and potential clients. And that's one of the key reasons of being vertically integrated and internalized management team and not leaving external management structures to talk on behalf of the company. Having said that, we believe that the development going forward will continue to come from the demand that we see on the market. As long as we see demand, we will continue to develop buildings. And for the moment, we see that there will be demand, so we will have an active development pipeline. We see industries being strong in the Bajio, northern central Mexico, e-commerce playing playing quite well. You've seen the big names expanding and expanding and doing major investment announcements. We also see that's on the e-commerce front and logistics. We also are seeing a supply chain integration with North America, which is a strong statement that new shoring is not only robust, but will stay for a while. And we're seeing industries like the auto industry also integrating further. Mexico has been playing out well in the last years in terms of manufacturing and in terms of integrating supply chains. And today, we continue to see the same trend. Obviously, we will remain cautious on companies' decisions. And luckily, Vesta has a lot of flexibility to adjust according to the market reaction. And for that reason, we will continue to follow very closely.

Thank you. Your next question comes from the line of Alejandra Obregon from Morgan Stanley. Please go ahead.

Hi, good morning. Thank you for taking my question. It's a couple of follow-ups on your development portfolio and your leasing activity. The first part of the question is, I guess, you're coming, I mean, we're all coming from a period of leasing during the construction period, but it seems like we could be back to normal, at least for now. So we're seeing the normal course of stabilization happening. Just wondering if you can talk a little bit about What's the base case or the fair assumption for construction and stabilization cycle these days? How long is it taking you to build a project? And more important, to roll it into the portfolio and go through the natural leasing curve. So that's the first part of the question. And then on the pace of starts. So you mentioned on the starts in this specific quarter. So given how things are shaping and the velocity that you're seeing on the ground, do you think that maybe the pace at which you underwrite new projects for construction could change or is it just too early? A lot of moving parts to make that call. So those are the questions. Thank you.

Thank you, Alejandra. And maybe I think, yeah, this is a little bit of follow up on development. So I will elaborate further. So currently, we have a pipeline of approximately three point, under construction, 3.5 million square feet. Actually, almost half of it is already leased. So if you look at only this number, you can see that there's still strong pre-leasing activity while projects are under construction. So this is actually very positive. and we feel confident that we will continue to see this trend going forward just because vacancy levels are still very low in most of the markets. Now, having said that, our underwriting has not changed. We have always had some leasing up time, and we are confident that that leasing period of time is actually positive when it comes to selecting the type of tenants Selecting the quality of the tenants, we have always said that we'd rather have an empty building than a lousy client, and we will continue to keep that discipline on having good tenants. We have really only a few buildings that have taken us longer than 12 months, but the rest have been way below that, and many of them have even been pre-leasing. Four of these buildings that were incorporated, two of them are in Tijuana, which is a strong market. And actually, we have seen an increase in rent in 12 months, which is also very positive. And the other two markets are Juarez and Guanajuato. So we're confident with the strategy on Vesta to develop a spec building in hot markets. As long as we continue to see a good occupancy and good leasing activity, this strategy should not change materially. We did not start building this quarter. However, we will continue. We will start some buildings for next quarter. And we have a good pipeline building up for next year in some of the land reserves that we own and actually in some land that we have recently acquired or that we will be acquiring soon.

Excellent, Lauren. That was very clear.

Thank you very much. Your next question comes from the line of Joril Giloti from Goldman Sachs. Please go ahead.

Good morning. Thank you for taking my questions. I have two. One of them is I wanted to understand a little bit more demand on a market-by-market basis. I mean, the numbers we've been seeing from CBRE or other brokers essentially are showing a slowdown in net demand in northern markets like Tijuana, Juarez, Reynosa. And, you know, sometimes going to, I believe, negative net absorption, they can see increasing. And so when you comment about the strength that you're seeing from in-demand, particularly in the insuring sector, I was wondering how your comments fall within a market by market context. The broker comments that we've been seeing, are those what you've been seeing as well on the ground in terms of perhaps a softening of demand in these northern markets in particular? And then the second question is related to the first one. It's how do you think about lease up? You increased your GLA by 3% in this quarter. And we do understand that the way you develop is more focused on speculative development. You deliver and then you lease up. So I was wondering, in this context, how do you think about the lease up of your portfolio? Do you think that it can go at the same pace that you've seen in the past? Could it go a little bit slower, particularly in the markets that are in the north? Those are my questions. Thank you.

Thank you. Thank you, Gerald, for your question. Sure. Well, I think that the analysis that we do is the same. We analyze market by market, and we analyze short-term behaviors as well as long-term trends. Thinking about the north, for example, where we have seen a minor uptick in terms of vacancies, We continue to see the long-term trend where companies are strong, we continue to seek for expansions, and we will continue to deliver high quality buildings in order to be able to attract good companies. Tijuana, for example, is a market where we continue to see strong rent increase. And we have seen also a good demand coming from companies that are strongly related to the U.S. economy. And the U.S. economy is just doing fine. Juarez is a similar situation. We saw also an increase in vacancy, but it was coming from maybe 1% to 2% vacancy to now 7% to 8%. We still think it's a good number, and we will follow closely to see how it behaves in the upcoming quarters. Interestingly, we have a strong pipeline of potential clients that want to line up and want to take space in not only the north part of Mexico, but also in other regions. So our communication is key. And for that reason, we believe that leasing activity will remain in very healthy levels. Therefore, we will continue to focus on our strategy to select the most dynamic markets where leasing still is absorption as well. and also in the markets that we have seen some adjustments and some corrections. For example, Bajio. We recently saw in this throughout the year, we have seen good demand coming from aerospace industry, auto industry, as well as consumer, local domestic consumer demand. So we are in a good spot. We think that the strategy that we have, which actually has been a long-term strategy, will continue to pay off. We will continue to develop very attractive returns. We're more than happy with having returns of 10% to 11% return on cost. And actually, while FX has devaluated and might develop, could devaluate further, we could even see an uptick in returns, which is incredibly positive. And that's why being able to anticipate to the market by developing inventory buildings will pay off. Maybe it was not part of your question, but we're happy to see that on the acquisition front now that even interest rates are dropping, we have seen transactions in the market at attractive cap rates. Some acquisitions have been done at between 6% and 7% cap rates, which shows also that there's strong appetite for good institutional quality real estate. And other players are able to pay returns in the 6% cap rate. So if you consider that we are developing above 10% and acquisitions are done at a 6%, spread is what we will continue to look for, and that's a way that Vesta will deliver profitability.

Thank you. Very clear.

Your next question comes from the line of David Soto from Scotiabank. Please go ahead.

Hi. Good morning. Thanks for taking my question. Just a quick one. It's related to the Lita. We have seen that there are still some properties located in Juarez and in Tijuana that are still pending to be leased. So could you please provide more detail about how are the marketing efforts going? And as well, if you could remind me the market dynamics from the streets, please.

Thank you. Thank you, David, for your question. Yes, so Tijuana, Vesta is the market leader in Tijuana. We have local presence, and we have been incredibly active. We were very lucky to be able to acquire the land adjacent to the existing park, which is Mega Region. If you have been lately in Tijuana, Mega Region is a project that we have been developing over the last couple of years. We have developed six buildings. Four of them are leased up to high-quality companies, such as Home Depot, ERDES, Amphenol, and TCL. well diversified for, again, home depot for local domestic market, food and beverage for the same market, logistics for TCL. And we have electronic components with Amphenol and TCL doing components for flat screens. So it's a well diversified park where we still have two buildings available on marketing stage, which are the ones that are vacant. And actually, Mega Region is a park that has energy. People ask about energy in the region, and maybe Vesta is the one that has the most energy in a park. So that's why we feel very confident that we have the right buildings. And while we continue to see rents ticking up, we think that we're going to be able to make the returns that we expected, which were above 10%. when we lease up these particular properties. And down the road, this particular project is going to be quite attractive. We acquired land, if you saw a cost, at a very attractive cost of land of, let's say, less than $40 per square meter, which is maybe compared to market land prices of $100. E.J. $50 this is a major discount, of course, it needs improvements, but it's already part of adjacent to our piece of land, so this is very positive.

E.J. Okay, thanks. E.J. Well, please.

Okay, is there any other questions, operator?

Yes, it seems that our participant had his question cut off. He's still on the line.

Yes, sorry. Do you hear me?

Great. Yes, Felipe?

I'm sorry.

It's still Mr. David Soto.

Thanks.

Okay.

Just a follow-up question. Could you remind me, could you remind me, please, the dynamics inquiries as well, please?

Absolutely. So Juarez is a market where we have been also very active throughout the year. Interestingly, in this year, we list up several spaces, and I will use the opportunity to remind everyone what we did throughout the year. So we list up, and maybe this is a good example of how Vesta focuses on quality. We list this year to an existing client, which is Eton, they took an additional space. We also leased to BRP for the side-by-side vehicles and logistic facility, another great company. We also leased to Harman, Harman being a part of Samsung Group. And they are doing infotainment systems for auto industry and electronics and technology base. And we have a good pipeline. for a couple of great quality buildings that we have in the Vesta Park Juarez Oriente. If you visit Juarez, this is probably the best location in Juarez where you can find assets close to the border and very close to labor pool with infrastructure. So we feel confident that these good quality buildings are on top of the list of the broker community. way better than most of the market availability, which is in lower quality projects or let's say further locations, which are not necessarily that attractive for many companies. So we believe that our strategy to buy good locations, land with good access to logistic corridors, good access to labor, energy, water,

Pace off over time. Okay. Thanks.

Your next question comes from the line of Felipe Barragan from BPG Pactual. Please go ahead.

Hey, guys. Good morning. Thanks for the call, and thanks for taking my question. I have a couple. One is on the land bank pipeline. Just curious on any updates on that if you guys are closing in on some acquisitions. And my other question is on a delay in Punta Norte 2. Just wanted to understand what happened there to have that delay. Thank you.

Sure. Yes, absolutely. I think that on your second question, Punta Norte dosis is related to the leasing to a company and finalizing tenant improvements for the client. So it will not affect the income producing of the asset as much. And to your first question related to land bank, Yes, we have been working hard to find good pieces of land with urban infill characteristics. And we have a strong pipeline, a good pipeline of potential land acquisitions we might be doing over the next quarters, which will be very helpful to address a future development pipeline. So we currently have, and we have ample room to do more acquisitions since we currently have a little bit more than $100 million of land. And this will replenish the land that we are currently using as part of our construction pipeline. We will replenish land in Monterrey, in Mexico City, in Ciudad Juarez, Guadalajara, and Guadalajara mainly. So with this, we think that we will continue to have strong, a key advantage to our peers by having well-located land. and where we can develop to the clients that we have that need expansions or clients that are new that match our tenant criteria. And current land reserves are quite good. We're happy with the activity that we are seeing in some markets, as I mentioned, like Querétaro. and in other markets. So we think that land will still be one of the main advantages for Pesta.

Got it. That was very clear. Thank you.

Your next question comes from the line of Isabella Salazar from GPM. Please go ahead.

Thank you for the question.

Could you provide some and what your deployment expectations are for year end? Thank you.

I'm sorry. Could you please make a question again? I think you cut off at the beginning.

Can you hear me okay now?

Now is better. Thank you.

Okay, perfect. We saw that during the quarter you deployed around 42 million. Could you provide some color on the factors influencing the pipeline's progress and what your deployment expectations are for the year end? Thank you.

Thank you, Isabella. We do not, I mean, without being a major guidance on construction starts, We currently have 42 million, which encompasses the existing portfolio as well as construction in progress. So we'll add on some projects. But more importantly, I think that is that Vesta has been developing more than 3 million square feet per year. And we think that this is something that we will continue to see down the road over the longer term. And it's part of the advantages of Vesta that we can have a development pipeline and develop to a spread. So we will continue to focus on markets that have strong dynamism. And if you compare the 42 million square feet to what we had last year, it has been a major growth. But it's not only about a year. It's more about what we can deliver over time. We have 42 million. I can remember when we listed the company in 2012, we had 11 million. So we have seen major growth and development, and we'll continue to do it and focus on defining where we want to invest, the type of assets we want, and also the type of tenants we want. And maybe to give more detail, we're incredibly happy with our diversification in terms of regions. and industries in our sector. And we have focused and been able to learn more about new sectors or other sectors that are thriving and are coming stronger into Mexico. And we're happy to say that nowadays we have industries and e-commerce players in our top 10 roster. Also, we have companies in the electronic sector like Foxconn, which is one of our top three clients right now. Aerospace industry is still increasing. So we will continue to develop to these industries that have been strong, that have invested on the long term in Mexico, that have created a lot of jobs, and will continue to grow their manufacturing and logistic footprint throughout the country.

Perfect. Thank you.

Your next question comes from the line of Armando Rodriguez from Signum Research. Please go ahead.

Hello, everyone. Thank you for the call. Two questions, if I may. The first one related to your balance sheet and considering your comments, Loren, about these strong, fundamental, strong trends in the market and the land bank acquisitions. The first question is if you are foreseeing some changes in your loan-to-value levels, you have a reduction in your total debt compared to previous quarters. So you are foreseeing some changes on that. And my second question is about the buyback program, considering the levels, the nowadays levels of the stock. So if you are foreseeing maybe some major activity on your buyback program, that's my Only two questions. Thank you.

Sure thing. Thank you for the question. Well, we had a bit that matured on September. We stated just a month ahead. We typically don't wait until the last moment. Sure, our leverage is very low, even the capital raising of last year. What is noted on our report, we are engaging some new debt over the next 18 months totaling about half a billion dollars out of which 300 are on a syndicated loan and the other 200 are just in my mind rolling over the line that ends sometime October next year. That will increase my leverage, but very manageable levels. We are proud of having a very strong balance sheet, and one of the focuses of the company is to continue to have a very strong balance sheet always. Regarding the buybacks, look, I believe that one of the strongest objectives of a good management is capital allocation. And we will continue to do that very actively. Capital allocation is not only about developing new buildings for our commercial pipeline, it is also about buying back stock when we think that the market pricing of our assets through the price of the stock is not what we believe our assets are worth. So during the quarter, we bought about close to $15 million worth of stock. And we will continue to do that if we, I mean, the implicit cap rate at which we bought it at over next year's earnings is quite attractive if you compare it to our development pipeline. And when we see that, we will be very active on the buyback, and we will continue to be very active on the buyback. That's a good capital allocation decision. And there's the third level, which is if we see opportunities to do some sales of buildings, we will activate that. As we see demand for high-quality buildings, we might consider that in the future.

Perfect. Thank you very much, Juan, for your comments.

Thank you. Thank you for the question.

Again, if you would like to ask a question, please press star followed by the number one on your telephone keypad. As there are no further questions at this time, I would now like to turn the call back over to Mr. Berho for closing remarks. Please go ahead, sir.

Thanks, operator. And thank you, everyone, for joining today's call. Vesta, again, delivers strong financial performance with sustained operating results for the quarter. I would like to take this opportunity to remind everyone we will be hosting a Vesta Day 2024 on November 25th at the New York Stock Exchange, when we will be presenting our detailed plan for Vesta's next stage of growth. And I would again like to thank the entire Vesta team for their important contribution to our continued performance. We hope to see you in November.

This concludes today's conference call. Thank you for your participation. You may disconnect your lines at this time.