Goldman Sachs Group Inc (GS) — Q3 2015 Earnings Call Transcript

Good morning. This is Dane Holmes, Head of Investor Relations at Goldman Sachs. Welcome to our third quarter earnings conference call. Today’s call may include forward-looking statements. These statements represent the firm’s belief regarding future events that by their nature are uncertain and outside of the firm’s control. The firm’s actual results and financial condition may differ materially from what is indicated in those forward-looking statements. For discussion of some of the risks and factors that could affect the firm’s future results, please see the description of risk factors in our current Annual Report on Form 10-K for the year ended December 2014. I would also direct you to read the forward-looking disclaimers in our quarterly earnings release particularly as it relates to our Investment Banking transaction backlog, capital ratios, risk-weighted assets, global core liquid assets, and supplementary leverage ratio. And you should also read the information on the calculation of non-GAAP financial measures that’s posted on the Investor Relations portion of our website at www.gs.com. This audiocast is copyrighted material to Goldman Sachs Group, Inc. and may not be duplicated, reproduced or rebroadcast without our consent. Our Chief Financial Officer, Harvey Schwartz, will now review the firm’s results. Harvey?

Thanks, Dane, and thanks to everyone for dialing in. I’ll walk you through the third quarter and year-to-date results, and I’m happy to answer any questions. Net revenues were $6.9 billion. Net earnings were $1.4 billion. Earnings per diluted share were $2.90, and our annualized return on common equity was 7%. For the year-to-date, net revenues were $26.5 billion. Net earnings were $5.3 billion. Earnings per diluted share were $10.84, and our annualized return on common equity was 8.8%. Book value per share is up 5% relative to year-end 2014, despite recording net provisions for litigation and regulatory matters, up $2.1 billion for the year-to-date. These provisions largely from legacy issues reduced our annualized return on common equity for the first nine months of the year by approximately 3 percentage points. Moving to the third quarter, parts of our franchise performed quite well, while others operated against a more challenging backdrop. Our M&A franchise continued to deliver robust results and our outlook remains positive. We continue to see net inflows in our investment management business. Of course, there are the usual seasonal drivers due to the summer slowdown, but in addition, the third quarter also had more than its fair share of significant macroeconomic developments. Both the Chinese economy and the country’s monetary policy came into focus. Our clients evaluated the potential implications of a slowing Chinese economy, the decision by the People’s Bank of China to devalue its currency, and the resulting volatility in global markets. As it relates to the U.S. economy, our clients remain focused on the Federal Reserve’s interest rate policy. Over the course of the third quarter, clients' expectations for an interest rate hike began to shift. Mixed economic indicators drove uncertainty about the pace of U.S. economic growth. Ultimately, there was doubt about the timing and magnitude of the future rate increase. Another significant macroeconomic theme in the third quarter was commodities. Prices fell across a number of different products. WTI was down 24%. Copper and natural gas were both down approximately 10%. The price slump let the market to focus on the credit risk of commodity producers, trading houses, and those economies with significant commodity exports. These concerns drove an increase in credit spreads, particularly across the energy sector. The sum impact of these various events led to lower levels of client activity and a significant repricing of the equity and credit markets. The S&P was down nearly 7%, the MSCI world was down almost 10%, and the Shanghai Composite was down close to 30%. In the credit markets, European high yield spreads were 107 basis points wider and U.S. high yield spreads were 153 basis points wider. Not surprisingly, we produced lower quarterly revenues across many of our businesses, given both declining asset prices and a reduced level of client activity. Now, I will discuss each of our businesses. Investment Banking produced third quarter revenues of $1.6 billion, 23% lower than a strong second quarter as underwriting slowed. Although issuance declined during the quarter, our Investment Banking backlog remains strong and was up compared to both the second quarter and the end of 2014. Breaking down the components of Investment Banking in the quarter, advisory revenues were $809 million, roughly consistent with the second quarter. Year-to-date, Goldman Sachs ranked first in worldwide announced and completed M&A. During this period, we served as an advisor on nearly $900 billion of completed transactions. This is roughly $350 billion more than our next closest competitor. We advised on a number of significant transactions that closed during the third quarter, including DirecTV’s $67.1 billion sale to AT&T, eBay’s $46.8 billion spin-off of PayPal, and Baxter’s $20.3 billion spin-off of Baxalta. We also advised on a number of important transactions that were announced during the third quarter. These include Energy Transfer Equity’s $37.7 billion acquisition of the Williams Companies, Humana’s $37 billion sale to Aetna, and Procter & Gamble’s $12.5 billion merger of its beauty business into Coty. Moving to underwriting, revenues were $747 million in the third quarter, down 38% sequentially, primarily due to a significant decline in equity issuance. Although global activity was weaker, our franchise remains strong with a number one ranking in global equity and equity-related and common stock offerings for the year-to-date. Equity underwriting revenues were $190 million. This was down substantially compared to the second quarter due to a decrease in industry-wide IPOs and secondary offerings, as higher volatility and a decline in prices reduced activity. Debt underwriting revenues of $557 million were down 8% quarter-over-quarter, as a decrease in industry-wide issuance volumes was partially offset by acquisition-related financing. During the third quarter, we actively supported our clients' financing needs leading HP Enterprises’ $14.6 billion debt offering related to a spin-off from HP, Biogen’s $6 billion debt offering, and Simporno’s $1.4 billion rights offering. Turning to Institutional Client Services, which comprises both our fixed and equities businesses. Net revenues were $3.2 billion in the third quarter, down 11% compared to the second quarter. Within a number of our businesses, the macro concerns I have already talked about impacted both client conviction and activity. FICC Client Execution net revenues were $1.5 billion in the third quarter and included $147 million of DVA gains. Net revenues were down 9% from the second quarter and market-making conditions continued to be challenging. Currencies improved sequentially, as the devaluation in the Chinese yuan sparked significant client activity within our emerging market franchise. Commodities increased relative to a more challenging second quarter, as declining commodity prices and higher volatility benefited results. Interest rates were significantly lower, as uncertainty related to the direction of U.S. interest rates impacted activity. Credit decreased, as client activity remained generally low amid continued spread widening. Mortgages were significantly lower as conditions remained challenged with limited client activity. In equities, which includes equities client execution, commissions and fees, and security services, net revenues for the third quarter were $1.8 billion, down 12% quarter-over-quarter and included $35 million in DVA gains. Equities’ client execution net revenues decreased 29% sequentially to $555 million. Broadly speaking, client activity declined versus the second quarter, as higher volatility and global equity market weakness impacted investor conviction and risk appetite. However, as is often the case in more volatile markets, we did see activity pickup in our lower touch electronic channels; as a result, commissions and fees were up 7% quarter-over-quarter to $818 million. Security services generated net revenues of $379 million, down 14% compared to the seasonally stronger second quarter. Turning to risk, despite an increase in volatility, average daily VaR in the third quarter was down $3 million sequentially to $74 million. Moving onto our investing and lending activities, collectively, these businesses produced net revenues of $670 million in the third quarter. Equity securities generated net revenues of $370 million. The declining global equity markets negatively impacted net revenues from public equities during the quarter. Net revenues from debt securities and loans were $300 million with the majority coming from net interest income. The Investment Management reported third quarter net revenues of $1.4 billion, down 14% from the second quarter, as incentive fees declined. Management and other fees were down 3% sequentially to $1.2 billion. Assets under supervision reached a record $1.19 trillion, as long-term net inflows more than offset market depreciation. With respect to long-term flows, organic net inflows were strong at $23 billion. We also closed the Pacific Global Advisors acquisition during the quarter, which added $18 billion of assets. This represents our 7th acquisition since the beginning of 2012. Over that timeframe, total long-term net inflows were $195 billion. $71 billion of these net flows came from acquisitions. Moving to performance across the global platform, 72% of our client mutual fund assets were in funds ranked in the top two quartiles on a three-year basis, and 70% in funds ranked in the top two quartiles on a five-year basis. Now, let me turn to expenses. Compensation and benefits expense, which includes salaries, bonuses, amortization of prior-year equity awards, and other items such as benefits, was accrued at a compensation to net revenues ratio of 40% for the year-to-date. This is 200 basis points lower than the firm’s accrual in the first half of this year and consistent with the year-to-date compensation ratio at the end of the third quarter of 2014. Third quarter non-compensation expenses were 30% lower than the second quarter. Substantially all the decrease was driven by a larger litigation charge taken in the second quarter. In the third quarter, net provisions for litigation and regulatory expenses were $416 million. Now, I’d like to take you through a few key statistics for the third quarter. Total staff increased by 2,000 to approximately 36,900, which was up 6% quarter-over-quarter. Roughly half of the new staff was from the federation, largely technology and operations. The other half was primarily spread across Investment Banking and Investment Management. The increase was dominated by campus hires and reflects both the activity levels in certain businesses and our continued investment in regulatory compliance. Our effective tax rate for the year-to-date was 31%. Our global core liquid assets averaged $193 billion during the quarter. Our common equity Tier 1 ratio was 12.4% using the Standardized approach, and it was 12.7% under the Basel III Advanced approach. Our supplementary leverage ratio finished at 5.8%. And finally, we repurchased 5.4 million shares of common stock for $1.1 billion in the third quarter. As we have discussed related to our share repurchase capacity, any potential share repurchases over the next three quarters will be more back-end weighted compared to the last two quarters. Before we turn to Q&A, I’ll share some thoughts around the market and industry broadly. The third quarter served as a reminder of the fragility and sensitivity of markets, investor sentiment, and the path to strong global economic growth. As you know, over the last several years, the financial services industry has faced a series of headwinds. These pressures have forced many within the industry to rethink their footprint or their level of commitment to a variety of businesses, particularly within the more capital-intensive businesses of fixed income, currencies, and commodities. At Goldman Sachs, our strategy remains intact to be the leading advisor, underwriter, liquidity provider, financier, and investment manager. To that end, we are always looking for ways to deliver more differentiated value to our clients. We’re also keenly aware of the challenges facing the industry. While some of our businesses are experiencing year-to-date growth, for example, Investment Banking and Investment Management, other parts of the business are in a more difficult part of the cycle. However, we are hardly complacent. For example, within FICC, we are proactively responding to industry-wide challenges, including asset sales, expense initiatives, and balance sheet reduction. The goal of these various efforts is to maintain margins, improve returns, prudently manage risk, and protect the global client franchise. We will always look for additional opportunities to improve our FICC operations. However, we will also never lose sight of the tremendous value that we can bring to our FICC clients over the long term. In closing, we believe that our long-term prospects are quite favorable. Our global pipe franchise is as strong as ever. Our lead table rankings and track record of superior returns are a byproduct of that strength. In addition, we have the people, the risk culture, the embedded operating leverage, and clarity of purpose to deliver superior value to you, our shareholders, particularly as the environment improves. Thank you, again, for dialing in. And I’m happy to answer your questions.

Hi. Thanks very much.

Hey, good morning, Glenn.

Good morning. Harvey, maybe we pick up where you left off on the whole cyclical versus structural debate in FICC. And I heard everything you said and I think you’re right, and I think you are who you say you’re for your clients. But I look at the backdrop and I say, the Europeans are actually starting to need to adjust their balance sheets and shrink parts of the business. And so the thought of Goldman maintaining is optionality all these years. This would seem like the pay off and yet a pickup in volatility in several asset classes, it feels like actually the world that was coming your way, but yet the revenue reduction for Goldman relative to peers, and I’m not just talking this quarter, last couple of quarters is more pronounced. I’m just trying to do the smell test of all, why is that, because I actually do think that things are lining up that you would be more important to your clients, not less and there would be more opportunities, not less.

So, well, first of all, I completely agree with that thesis, maybe let’s back up a little bit. And I think it’s worth having a discussion, because I think the easy way to have it is sort of break it down into three parts. Let’s just talk about the quarter for a minute. Obviously, it’s a tough quarter for us in fixed income. But if you think about how we’re running the business, I think that’s the more important two parts. If you look back over the last several years at the expense initiatives we’ve taken where we have reduced headcount in fixed income by more than 10%. We have shrunk the balance sheet by 20%, and if you actually look at it on RWA basis since we switched over to Basel III, we really managed the capital deployment very softly. So in this part of the cycle, we have been very disciplined about how we managed those resources. Now, of course, your thesis is our thesis, which is we’re in a deep and somewhat long cyclical part of the fixed cycle. But when you think of the forward, our construction simplified is twofold. Our level of engagement with our clients tells us clients still need the services. It’s like M&A, Glenn. M&A, the services weren’t active in 2009 and 2010, people questioned whether or not M&A would come back. But our dialogue told us that client engagement and the services we provided to the liquidity provider were important. So when we think about the forward and we hear the announcements and we’re in this part of the cycle, but it’s going to take a while for that to transition through, because I think so far it’s been more than announcements than a retrenchment, and you won’t really see it happen in all the steps we’ve taken until you see a pickup in client activity and the competitive environment continue to shift, that may take a while. But in the meantime, look, we’ll benefit as a firm because we would diversify until you saw a pickup in certain part of equities; you’ve seen the strength in banking. But certainly, a tougher quarter for us in fixed income this quarter.

May just a last follow-up on the FICC conversation is, how if any, does the new vocal reporting requirements changed? How you managed the business? How you reported? I’m just curious, because we can’t see any of them?

No chance that we managed the business. Any steps in terms of vocal adoption happened a number of years ago, where we shut down certain business. And all of the U.S. firms are subject to the same rule set in vocal, so not an issue. I really think it’s a question of client environment. In the third quarter, the environment for all the factors I mentioned was very challenging; it was hard for us. And if we go back to the first quarter, the first quarter environment was one with more activity and better performance on our part, but we don’t want to overreact to a particular quarter.

Okay, I appreciate that. Thank you.

Thanks, Glenn.

Thanks, Harvey.

Hi, Michael.

Hi. Just first, you mentioned some of your comments on the commodity, I guess pressures in the quarter. Just wanted to get kind of an update. When you guys look at commodities and that everyone call it asset class. Just how do you view your exposure to that part of the market or the economy? And then, when you look at it from a client base, what has been happening, meaning our – the clients in those areas lot – less active, more active, and are you seeing that spread to any other areas of the economy?

So in terms of the exposure, we’re not a big lender to the energy space. I think the best way to characterize it for you is just to take a look at two parts of that. First, any of our funded exposure to non-investment grade parts of the sector is a bit over $1.5 billion, $1.6 billion. And the other sector, which obviously came to focus in the quarter is the trading houses. And we’re less than $200 million in exposure to those trading houses. So they’re not, as I said, we’re not a big lender; not an important part of our business. In terms of the aggregate impact, in terms of client activity, things have been moving so quickly that sometimes it’s advantageous to client activity and intensity when things are more trending. I think the whole world is adjusting to basically a longer-term consideration of commodity prices being lower in the intermediate term. And ultimately, that will be a catalyst for activity, as clients consider hedging strategies, as they think about financing alternatives, as clients and companies struggle for refinancing. So lower for longer in commodity prices, while very good for the consumer and the global consumer and the broader economy, which is also a tailwind, certainly, it should be a catalyst for client activity also.

Okay, thanks. And then just as a follow-up, maybe on capital and the ratios, if you have the CET1, maybe like the fully phased immerse of the transitional, and then just given the decent buffers, just any outlook in terms of where you think you would run that? In the buyback pace, just seemed like it ramped up. I know you guys have been saying it’s backward weighted, but it just seemed like this quarter was probably a bit sooner than expected. So just wanted to understand, is that because of the movement in the stock or is it just the plan with the CCAR process being pretty normal from what you guys expected?

Yes. So on the capital ratio, so with the G-SIB buffer finalized that what you said 10%, and obviously we have a lot of capacity above that. Our target zone would be 50 to 100 basis points above that. If you’re just looking at that set of metrics and obviously our supplementary leverage ratios in very good shape at 58, but CCARs are binding constraints. And so, at least, it has been. In terms of the share repurchase capacity and what we’ll do, obviously as you know, we don’t disclose that; we don’t disclose it for the very simple fact that we don’t want our shareholders to think of share repurchase as dividends. And we also reserve and really look forward to actually deploying the capital back into the business. Now, in terms of the mechanics of what is possible part of the profile that you saw over the last two quarters certainly dictated by the specifics of the test. But to an extent, which we use the capacity over the next three quarters, as I said in my early remarks, you should expect it to be more back-end weighted than you’ve seen in the prior two. Does that helpful?

Okay. And – yes. And then just to see if you want, if you had the fully phased in, and I think you guys gave the transitional?

The results showed a transitional rate of 12.7%, a fully phased-in rate of 11.9%, a standardized rate of 12.4%, and a fully phased rate of 11.7%. As mentioned, there is substantial capacity above our 10% minimum and our operating range of 10.5% to 11%.

Got it. Thanks a lot.

Hey, Chris, good morning.

Hello, good morning. Can you hear me now?

Yes, sure.

Yes, sorry about that. I will ask the FICC question another way, as it’s a focus of investors this morning. I guess, three of the last four quarters, performances lagged peers. How do you rationalize this? Is it a business mix or customer mix issue? And then looking forward just a bear market backdrop, or is there any proactive steps you can take to improve performance?

Well, there are always things we can do better; we’re not perfect. So we always look at them. Christian, we don’t see as much value in comparing revenues; certainly, revenues quarter-to-quarter movements, but we certainly study them and we look for any valuable insights. But I think if you really look to the quarter-to-quarter noise, you run the risk of oversteering the business. So, for example, in the first quarter, we didn’t glean huge value out of that in terms of comparing competitors; I don’t know how much value we’ll get out of this quarter. So we don’t have a lot of visibility into their businesses. Our focus has to be on a hand of things, most importantly, our client engagements, and then our profit margins, the risk management, and the ultimate returns. And so that’s really what we’ll focus on. In fact, now it’s interesting because you brought up the issue of volatility of revenues, and I make a couple of important points. If you look over the years, revenues don’t really tell a great story. And as a shareholder, if you want a collection of businesses, and if you actually look at our performance, consistency of ROE and returns and earnings, we’re the most stable. And so it really is about wide earnings, not revenues. Anyway, I don’t know if that helps you or not.

Yes, no, that helps, and thanks for the clarifications. Maybe just a broader question on pricing power in the business. I guess, what lessons have you learned from the price increases implemented in the prime brokerage business from what we can see revenue generation has not suffered at all for any of the top players. Maybe does that tell you that the industry has more leverage in pricing, and maybe can we expect this and other businesses to maybe offset some of the weaker activity trends?

So I think there are two things driving. Your first is a question of really the strength of the franchise. And we’ve had a long, long history of being a dominant player in the prime brokerage business, and I think it really is the value proposition that we offer our clients globally, that is the differential in that business. I think the capital rules, as they come into play and the balance sheet impact of those capital rules in the class has forced a very natural repricing in terms of how much balance sheet we and the industry can provide to clients. And clients are being very judicious about that, but they’re also been making a differentiated judgment about who the best value providers are, and we’re certainly one of those. And so we’re seeing pricing power.

And any other businesses you think you can accept that pricing power?

So certainly in, as we talked about in the past from time-to-time when activity has picked up, I don’t know necessarily I would call it pricing power as much as I would call it an absence of competition. But certainly in the commodity space several quarters ago, there was a lot of activity where certainly competition, which if you want to call that pricing power, I think of it a little bit differently. But certainly clients were going to engage us differently. And then in the derivative businesses globally, as you’re seeing firms exit parts of the CDS business and other parts of the equity derivative businesses, I think it’s early days, but certainly, you’re seeing a reduction in competition, and that translates into pricing power or maybe better said better returns.

Great. That’s helpful. Thank you, Harvey.

Thanks, Christian.

Hey, Matt.

Actually first is the quick follow-up to that very last comment you made about some repricing in parts of equity derivatives. I just I haven’t heard that before. Maybe I haven’t been paying attention. But what areas there?

So it’s really two parts we’ve seen some of it in Europe where competition used to be sort of more significant, but also given the requirements around collateral worlds and things like that where you may have at times had marginal participants actually pricing that levels where we would have thought the risk return didn’t make sense. Now you’re seeing more rational and improved pricing I’d say that’s a general trend.

Okay. And then just separately, can you give us an update on the bank deposit and lending strategy? You obviously announced a deal to acquire some deposits and have had a key hire in the lending side I think in the second quarter. So just give us an update on what you are thinking there and will we see this business grow to be meaningful at some point?

Sure, great question. And the way the first thing I will emphasize on that question is really the separation between a liability strategy and potential asset strategy. So these two things are completely separate, but I think it’s natural that people would link them. The online deposit strategy is where we requested approval for the deposit platform that really is all about funding diversification. We have spent some time contemplating building our own platform; this platform became available, it seemed attractive and timely for us and for GE. And so, we would do that independently of any asset-driven strategy. Now, in terms of the digitally led lending strategy, which you talked about; not a lot to update you on since we last talked. We’re thrilled to have Harvey on board as our partner; he brings a wealth of knowledge and we feel like there are a handful of reasons why we may be able to have an impact on this space here. One, our real core competencies, and risk management and technology. And we feel like we may be able to provide a differentiated product that is accretive to the firm’s current returns, but it’s going to be slow going obviously; we built lots of business at Goldman Sachs; this is a new business. Again, it’s great to have Harvey here, because he brings all the expertise, and when we have more to talk to you about we’ll certainly update you, but it’s going to be very deliberate in terms of its development.

And I guess just a quick follow-up, on the funding side, as we think about the deposits growing over time, is that something that will benefit you in downturns or is it also something that will benefit the earnings incrementally from lower funding costs?

I think it’s twofold; I mean, we have always been very conservative about our liquidity profile, and part of being conservative is about being diversified, and so we’re always looking for diversification, and I’m always looking for cost-effectiveness. But when we think about liability management, again, it’s really about making sure we have the strongest financial footing at any given point of time.

Okay great, there were no other questions.

Yes, hi. First question relates to commodities; you mentioned, so you talked about the lending exposure, but frankly I’m not really interested in that I’m more interested in how you manage your counterparty exposure. And if you can talk a little bit about how you think about these trading entities that you deal with, how you are managing counterparty exposure considering rating downgrades that we have seen, but also concerns about some of these entities. And if you can just run us little bit through how you manage counterparty risk on your off-balance sheet exposure?

Yes. Hi Kian. I’m sorry you must’ve missed what I was saying before; our exposure whether it’s lending or through any derivatives or counterparty exposure to the trading entities is less than $200 million today.

So that’s your net exposure off balance sheet and on balance sheet?

Yes, correct; that’s for the trading out. Again, they are often positioned as more as competitors than clients.

And just in that context, clearly you must adjust to rating downgrades as well as your own view around some of the counterparties, the margins or collateral calls etcetera. Can you just explain a little bit to us how you do that? You said the adjustment happening beside the credit ratings, which will drive it?

We have a long history obviously managing counterparty exposure, which has been tested through pretty volatile markets. And again the most important decision made at any point in time is when you establish that credit line; it’s really no different than lending; but obviously, the dynamics are different. And we have a very diligent marking policy and we monitor collateral calls very vigilantly as you would imagine. And obviously as sectors are weaker you’re very thoughtful about it, but when we make these decisions over long-term, we have a lot of experience doing it.

Okay and in respect just coming back to your fixed-income business the way I at least explain the weakness and please correct me if I’m incorrect is the fact that you are weak on macro and weaker in corporate so just probably correlate it and you’re strong in credit and hedge fund business. And first of all, is that an incorrect assumption relative to your peers, I mean, especially some of your money-centered peers? And secondly, if I’m correct, what are you doing? Do you think about diversifying more as a business into and particularly as a macro business? And what are you doing to adjust that mix?

So, again, I don’t have great visibility into the competitors. I would say, I do think there are two obvious things which I talked about before. We’re not big in emerging markets; again, we don’t have a footprint in hundreds of offices and we’re not a big lender to corporate. Our competitors are much greater lenders than we are. And so that certainly can influence your client base. In terms of macro, I think, you are wrong about that. And certainly, in commodities, we’ve had a long history being in commodities and it feels now like we’re bigger in commodities as the number of competitors have pulled away from the business. Those are the effects I would give you in terms of what I can say. In terms of things we’re trying to do, we feel pretty good about the diversified business. I mean, if you think about the course of the year to be sitting here basically nearly flat revenues with our fee-based business is picking up activity, which is compensating for our capital-intensive parts of the firm, which you would expect to be more challenged in this kind of market environments. If you look at end of the day when you adjust for legacy costs, we’re nearly a 12% ROE. I know the business grows pretty diversified.

So you don’t this argument valid off of the nimble credit geared to rather than macro in certain periods of the environment, depending on the environment we will just perform slightly differently from some of our peers, you don’t see that against your money-centered peers?

I think a lot of the peers have different footings; some are more domestic, some are more emerging-market base; I think the comparables are harder. Again, take a look at the first quarter; in the first quarter, the way you look at it, we would have outperformed all the peers; that’s information for us. But we’re not going to steer the business in a different direction, because of that; we’re not going to oversteer it. Their revenues on the surface would be greater than ours. We’re always going to look for ways to improve the business. So that you should just incorporate by reference.

Okay, very helpful. Thank you.

Thanks, Kian.

Since there are no more questions, I’d like to take a moment to thank all of you for joining this call. Hopefully, I and other members of the senior management will see many of you in the coming months. If any additional questions arise, please don’t hesitate to reach out to Dane; otherwise, enjoy the rest of your day, and look forward to speaking with you on our fourth quarter earnings call in January. Take care, everyone.