USA Compression Partners, LP (NYSE:USAC) announced stellar operational and financial results for the fourth quarter and full year ending December 31, 2023. The company reported record revenues, adjusted gross margin, adjusted EBITDA, and distributable cash flow, along with an increase in average revenue generating horsepower. Additionally, they have managed to reduce their leverage ratio to 4.1 times and their common unit prices approached near all-time highs. As the company looks forward to 2024, they aim to enhance operational efficiency, activate idle units, and maximize returns on growth capital while maintaining a conservative approach to capital expenditures and financial flexibility in the face of global uncertainties.
Key Takeaways
- Record revenues, adjusted gross margin, adjusted EBITDA, distributable cash flow, and average revenue generating horsepower were achieved in Q4.
- The leverage ratio was reduced to 4.1 times, and common unit prices neared all-time highs.
- Plans for 2024 include improving operational efficiency, activating idle units, and maximizing returns on growth capital.
- The company intends to reduce capital expenditures and maintain financial and operational flexibility.
- Optimism remains for the long-term prospects of the natural gas compression industry due to expected growth in US natural gas production.
- A commitment to safety was underscored, with 2023 safety performance surpassing industry averages.
Company Outlook
- Focus on internal efficiency and optimization.
- Plans to reduce capital growth and improve financial metrics.
- Prioritization of deleveraging.
- Exploration of equipment sourcing opportunities and potential mergers and acquisitions.
Bearish Highlights
- Challenges in the supply chain persist, including long lead times for critical equipment.
- Supply chain bottlenecks are expected to continue due to geopolitical conflicts and onshoring activities.
- High-yield debt maturities looming in 2026 and 2027.
Bullish Highlights
- New competition in the industry is seen as an opportunity for growth.
- Discussions with customers regarding new units are showing progress.
- Strong banking relationships and financial capacity for future growth.
Misses
- No specific misses were discussed during the call.
Q&A Highlights
- The company is comfortable with current revolver utilization and has a strong relationship with their bank syndicate.
- A preferred unit conversion is expected to continue based on economic incentives.
- No further questions were raised, indicating investor satisfaction.
In 2023, USA Compression Partners made its 44th consecutive quarterly distribution payment of $0.525 per unit. The company's maintenance capital expenditures amounted to $6.6 million, while expansion capital spending included the delivery of 47,500 horsepower of new large horsepower units. Furthermore, an additional 52,500 horsepower of new units is expected to be delivered in the first half of 2024.
The company is in a robust financial position with a $700 million notional float to fixed commitment at an effective interest rate of 3.9725%. Management aims to optimize the capital structure and maintain a balance between fixed and floating debt. They also possess a unique capital access and capacity compared to peers in the compression industry.
The emergence of a new third player in the industry alongside the two dominant players is viewed as a positive development that could bring more opportunities. The company is also considering refinancing their high-yield bonds and is comfortable with their Asset-Based Lending (ABL) facility, which could serve as a growth platform and potentially transition into a high-yield facility in the future.
USA Compression's focus on maintaining financial flexibility and a conservative approach to capital allocation is evident in their strategy to address high-yield debt maturities before making any changes to the distribution policy. They also plan to continue the preferred unit conversion as long as it remains economically beneficial, with the investor showing satisfaction and no rush to exit. The earnings call concluded on a positive note with no further questions from participants.
InvestingPro Insights
USA Compression Partners, LP (USAC) has demonstrated a strong financial performance in the past year, with a notable increase in revenue and profitability. The company's strategic focus on operational efficiency and maximizing returns is reflected in the real-time data from InvestingPro. Here are some key metrics and insights that investors may find valuable:
- The company's Market Cap stands at approximately $2.26 billion, indicating a sizeable presence in the industry.
- USAC has a P/E Ratio of 149.87, which adjusts to 135.0 for the last twelve months as of Q3 2023. This high earnings multiple suggests that investors may have high expectations for the company's future earnings growth.
- Revenue growth remains strong at 20.29% for the last twelve months as of Q3 2023, supporting the company's report of record revenues.
InvestingPro Tips highlight that USAC is expected to grow its net income this year, and analysts predict the company will be profitable. Additionally, it has been paying a significant dividend to shareholders, with a current dividend yield of 8.79%, and has maintained these payments for 7 consecutive years. This consistency in returning value to shareholders, coupled with the company's strong return over the last five years, can be particularly appealing to income-focused investors.
For those looking to delve deeper into the financial health and future prospects of USA Compression Partners, there are additional InvestingPro Tips available at https://www.investing.com/pro/USAC. These tips include insights on valuation multiples, stock volatility, and the company's performance relative to analyst predictions. To access these insights and more, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are a total of 10 InvestingPro Tips listed for USAC, offering a comprehensive view of the company's financial landscape.
Full transcript - USA Compression Partners LP (USAC) Q4 2023:
Operator: Good morning. Welcome to USA Compression Partners' Fourth Quarter 2023 Earnings Conference Call. During today's call, all parties will be in a listen-only mode. At the conclusion of management's prepared remarks, the call will be opened for Q&A. [Operator Instructions] This conference is being recorded today, February 13, 2024. I would now like to turn the call over to Chris Porter, Vice President, General Counsel and Secretary.
Chris Porter: Good morning, everyone, and thank you for joining us. This morning we released our operational and financial results for the quarter and year ending December 31, 2023. You can find a copy of our earnings release as well as a recording of this call in the Investor Relations section of our website at usacompression.com. During this call, our management will reference certain non-GAAP measures. You will find definition and reconciliation of these non-GAAP measures to the most comparable U.S. GAAP measures in our earnings release. As a reminder, our conference call will include forward-looking statements. These statements are based on management's current beliefs and include projections and expectations regarding our future performance and other forward-looking matters. Actual results may differ materially from these statements. Please review the risk factors included in this morning's earnings release and in other public filings. Please note that information provided on this call speaks only to management's views as of today, February 13, 2024, and may no longer be accurate at the time of a replay. I will now turn the call over to Eric Long, President and CEO of USA Compression.
Eric Long: Thank you, Chris. Good morning everyone, and thanks for joining our call. I'm joined on the call today by Eric Scheller, our COO. This morning we released our fourth quarter and year end 2023 results. We are extremely pleased that we were able to deliver another quarter and full year of outstanding results. We continue to increase distribution coverage and decrease leverage. Our results reflect our continued and incremental movement towards our previously mentioned leverage ratio goal of 4.0 times, providing us increased financial flexibility and positioning us well for when our senior notes mature, which is not until Q2 of 2026 and Q3 2027. Of note, for both the full-year and quarterly results, we achieved many record results including revenues, adjusted gross margin, adjusted EBITDA, distributable cash flow, distributable cash flow coverage, average revenue generating horsepower and average revenue generating horsepower. We also reduced our leverage ratio to 4.1 times, and saw common unit prices over $26 during the fourth quarter, nearing all-time highs. Finally, we were added to the VettaFi Alerian MLP Infrastructure Index, the AMZI, resulting in approximately 8.8 million common units added to index funds. I feel comfortable saying we had a great year. As we look forward, we are continuing to position USAC as a resilient player in the natural gas compression service industry as we have always done. 2024 will be a year that we focus on improving internal operational efficiency, the continuation of converting idle units to active status, continuing price improvements, and maximizing returns on growth capital through opportunistic purchasing of equipment that enables USAC to capture margins in line with our fourth quarter results. As we mentioned in last quarter's call, our customers and others in the industry have not yet begun to accept the pricing required for USAC to purchase new compression units. That statement continues to be true. We are also mindful of the near-term geopolitical and economic uncertainty ahead. The most recent reports from the Federal Reserve indicate that rates will be terminally higher than what we have experienced over the last decade. The worldwide economy, including China, has slowed. We are continuing to see escalating geopolitical tension in the Middle East and in the ongoing Russia-Ukraine conflict. And finally, there is the never-ending U.S. Federal government budget fight and 2024 election cycle. We believe these factors suggest the prudent course of action is to remain financially and operationally flexible. With that in mind, we believe one strength we have proven over time is our management's ability to weather the storm. If you review USAC's history, you will notice a common theme that has been core to our stable historical growth. USAC grows when the industry and geopolitical environment are supportive of that growth. In times of uncertainty, however, you will notice that USAC has reined in growth, battened down the hatches and focused internally on efficiency and productivity. It's easy to show high utilization and growth when you are the new fresh face to the compression space that is yet to experience significant lasting downturns. USAC's management has a proven track record during those times such as 2008 to 2010, 2015 to 2017 and most recently during the COVID downturn. Throughout those cycles, USAC continued to maintain utilization, revenue and adjusted EBITDA at levels strong enough to maintain our distribution while sustaining manageable levels of leverage. While we do not expect the near term to be as dramatic as those prior cycles, we do see general uncertainty ahead and believe our current 2024 plans match the USAC story that you have all become accustomed to, one of cash flow and financial stability through prudent capital spending at the right times. The uncertainty is not without some clarity specific to our industry. We still maintain a very bullish view of the long-term prospects of the natural gas compression industry. As we have said before, our business is not directly tied to commodity prices, but rather production and demand. The future looks bright on both fronts. The EIA expects U.S. production of natural gas to likely continue growing to meet rising global demand through the end of their forecast period, which is 2050. U.S. natural gas exports are expected to continue growing in 2024, 2025 and beyond, especially as new LNG facilities already approved and scheduled to come on stream in the U.S. increase current capacity from about 15 Bcf a day to more than 40 Bcf a day. To be clear, that is incremental capacity not impacted by the recent announcement from the Biden administration to pause further approval of LNG export terminals. We believe these long-term dynamics will dovetail well with our current 2024 plans to focus on maximizing unitholder value through internal process optimization and efficiency, and less through capital expenditures, which we currently believe will be significantly reduced in comparison to 2023. We believe this will allow us to continue improving our balance sheet, provide us the financial flexibility to opportunistically improve our capital structure over time, including potentially refinancing indebtedness at attractive rates, allowing us to further pursue capital cost improvement, leverage reductions and distribution policy changes. One point I would like to mention in regards to our capital structure, in January, we had $40 million of the preferred units convert into common units. When combined with the common units issued pursuant to previous warrant exercises by the preferred unitholders, this resulted in an additional 4.9 million common units outstanding in the aggregate, at least 80% of which have been absorbed into the open market to date. The good news is that this increases our public liquidity with a de minimis impact on our distributable cash flow coverage, which we have highlighted in a recently published investor presentation you could find on our website. As always, we will continue to look for ways to maximize the capital structure and the value that can be derived there from, 2024 will be no different. Switching gears, I would like to recognize our hardworking field employees. During the recent winter storm that swept across the country in mid-January, our employees were called upon to battle ice and sleet, keeping our compression units at the ready as our customers' natural gas compression needs changed in response to the storm. As always here at USA Compression, we are all about serving our customers and our communities, helping to keep the lights and heat on when it mattered the most. Our field employees' actions during this recent storm is just another proud example of our dedication to a high level of service. I am very proud of this company and our employees' commitment to serving the baseload power generation that we all need during those times. One more point before I turn the call over to Mr. Scheller. I'm pleased that our 2023 safety performance continue to outperform the industry average. As always, the safety of our employees, our contractors and our customers and employees remain the number one priority of our organization. We are extremely proud of our employees' continued focus on being safe in all we do each and every day. With that, I will turn the call over to Eric Scheller, our COO, to discuss our fourth quarter highlights.
Eric Scheller: Thanks Eric and good morning all. As Eric noted, we are extremely pleased with our full-year and fourth quarter results, and I am extremely proud of our employees. In addition to the record results Eric mentioned, we continue to increase utilization during the fourth quarter to a near all-time high, all while continuing to capture contracts with extended tenure and enhanced pricing that we think generates strong, stable baseload cash flows, while providing opportunistic upside as market condition evolve. During the fourth quarter, our revenue growth trend continued and was driven primarily by continued utilization and pricing improvements. Our revenue increased 4% in sequential quarters and 18% compared to the year-ago period. The fourth quarter also saw an increase in our margins, bringing them back in line with historical averages since our initial public offering. This increase is the result of our steady determination to offset inflationary costs through both productivity improvement and contractual pass-through adjustment. We believe the utilization of both the continued productivity improvement and the continued use of CPIU rate adjustment will continue to support our margins in line with current levels should inflation increase again in the near term. Fourth quarter 2023 net income was $12.8 million, operating income was $68.5 million. Net cash provided by operating activities was $91.6 million and cash interest expense net was $43 million. Cash interest expense increased by approximately $1.6 million on a sequential quarter basis, primarily due to higher average outstanding borrowings on our floating rate credit facility. However, higher cash interest expense was mitigated by $2.5 million of cash payment received under our $700 million notional principal fixed rate interest rate swap, which we modified and extended in October and now locks in 30-day SOFR until December 2025 at 3.9725% compared to current 30-day SOFR that currently exceeds 5%. Turning to operational results, our total fleet horsepower at the end of the quarter increased by 1% to approximately 3.8 million horsepower as we accepted delivery of 47,500 horsepower on the new large horsepower unit during the quarter. Our revenue-generating horsepower increased by 1% on a sequential-quarter basis, primarily due to the addition of these new large horsepower units. Fourth quarter 2023 expansion capital expenditures were $90.1 million, and our maintenance capital expenditures were $6.6 million. Expansion capital spending continues to consist of reconfiguration and make ready of idle units, along with the aforementioned delivery of 47,500 horsepower of new large horsepower units during the quarter. We currently expect to take delivery of an additional 52,500 horsepower of new large horsepower units during the first half of 2024, with almost all expected during the first quarter, plus additional and ongoing conversion of current fleet idle units to active status. The new units represent the remainder of our late 2022 order. Additionally, throughout 2024, we anticipate the deployment of between 85,000 and 115,000 horsepower of existing uncontracted fleet assets at capital costs substantially below those of new organic growth equipment builds. Finally, I am pleased to share that on February 2, we made our 44th consecutive quarterly distribution payment, the $0.525 per unit distribution was flat to the previous quarter's distribution. And with that, I'll turn the call back over to Eric Long for concluding remarks.
Eric Long: Thank you, Eric. Our 2023 full year and fourth quarter results again reflect USAC's commitment and ability to continue delivering meaningful value to our stakeholders. Over the past five years, our total unitholder return has been 236%, beating the S&P 500 of 107% over the same time-period. We are grateful for the value we've been able to deliver to our stakeholders. We believe that our near-term reduction in capital growth, while focusing on internal efficiency and optimization will provide USAC greater financial flexibility and our stakeholders a compelling value. While we are all facing some general economic and political uncertainty in the near term, we believe we are well-positioned to weather this uncertainty and continue improving our financial metrics for further capital cost improvement, leverage reductions and distribution policy changes. To conclude, we are extremely pleased with our 2023 full-year and fourth quarter results, highlighted again by record quarterly revenues, adjusted EBITDA, distributable cash flow and distribution coverage, and which also featured continued improvements to utilization and contract pricing. We expect to file our Form 10-K with the SEC as early as this afternoon. And with that we will open the call to questions.
Operator: [Operator Instructions] The next question comes from the line of Jeremy Tonet with JP Morgan. Your line is open.
Unidentified Analyst: Hi, everyone, this is [Eli] on for Jeremy. Just hoping the team could provide updated color around lead times for Cat engines and overall compression equipment. How should we think about those lead-times dynamics in the near and medium term? Thanks.
Eric Scheller: Hi, Eli, this is Eric Scheller. Lead times for Cat equipment now are exceeding 40 weeks to 45 weeks just to receive the engines. And then you still have packaging time that goes on top of that. We are always talking to customers as they're looking at their production profiles and checking out what demand is in excess of the current forecast we have for our horsepower.
Eric Long: Eli, this is Eric. I'll give a little additional color because there's more than just new engine sourcing from Cat and others. We continue to see supply chain bottlenecks. We've got sub-component inventory issues, we've got manufacturing issues. So the misnomer that inflation is passed and supply chain problems are fixed, it's quite the opposite. As we continue to onshore more and more activities, as we continue to have some of these geopolitical conflict escalations worldwide, we see continued pressure on supply chain into the future. So things are not getting better. They roll around. One day it's a wiring harness, the next day it's bolts and nuts and gaskets, the next day it's related to turbochargers or heads and valves and various things that go into keeping our engines running. So I think that's one of the differentiators that some of the major players can bring to the table, is long-term stable relationships with manufacturers or other alternative suppliers of equipment so that we can make sure that our equipment continues to run. So I think it's important for everybody to keep in mind. It's not just access to new equipment, but it's making sure you can keep your existing equipment up and operational and running. And trust me, in this environment, it is not an easy task right now.
Unidentified Analyst: Got it. Yes, I totally understand that. And then maybe just if we could pivot to kind of some of the 2024 DCF guidance you guys provided, recognize there might be reduced growth CapEx, you mentioned in the opening remarks, but just wondering if you could dive further into your latest capital allocation prioritization, how should we be thinking about deleveraging, especially as you approach your leverage target versus growth CapEx levels? And then how do kind of equity shareholder returns fit into that thinking about the dividend and what you guys might do with that in the near term?
Eric Scheller: Yes, really good question. It's probably front and center on a lot of our investors' minds from retail, as well as from hedge funds and institutionals. So, as we pointed out, we've got maturities coming up in '26 and '27 on roughly $1.5 billion worth of high-yield debt. We want to make sure that before we address our distribution policy that we've been able to go through the refinance cycle that's coming up here in the coming years. You'll note that our distribution coverage was pushing 1.5 this time. You'll notice that our leverage is just a scotch over four and declining rapidly. So we also, flip side of that, saw an increase in 10-year treasuries this morning. The probability of a rate cut in March that was almost 100% a few weeks ago is now less than 10%. So the ten-year treasuries today are back to almost 4.3%, a dramatic increase. We had a net income hit of $10 million, which was due to swap valuation. Well, needless to say, that swap has increased in value here in the short-term. So what we're basically trying to do is fix our capital structure and improve our capital structure. We don't have any novated debt sitting up at the parent company, that is an overhang. What you see is what you get with USA, and our intent is to work on our capital structure with those two tranches of high yields. We've got plenty of time to address those things. EIG recently, as we noted, converted roughly $40 million of preferred into common. We actually like that. It gives us some additional liquidity and float in the marketplace. We've had a couple of large institutions who've been holders of our security since the IPO, who've trimmed their positions recently. So I think what we have going on here is a longer-term secular rotation from some of the folks that have been in for a long period of time to some new players, the index funds, and then some new institutions that have been coming into our securities. And what we want to do is just continue to methodically de-lever the balance sheet, get some clarity in the marketplace. With a year lead time on sourcing new equipment, and with the cost associated with this new equipment, we think we've got, honestly, better returns for our shareholders and continuing to slow the growth, look opportunistically at some equipment sourcing opportunities that we have. We continue to focus on the decarbonization world with dual drive and various other elements associated with that. Electrification is not the panacea that everybody expects that it is. And you think the compression business has supply chain bottlenecks, boy, the folks in the electric business have some very serious limitations and bottlenecks in equipment sourced from China and India and places that we can't control the supply chain. So long-winded way to say right now we're focused -- laser-focused on maintaining financial flexibility. Our Board, of course, makes the policy decision related to distributions. But I think from all indications of what I see and my reading of the tea leaves, we're going to continue to be conservative over the coming quarters, continue to de-lever, build distribution coverage, we'll get our capital structure fixed up for the next round of 5 years to 8 years or so. And at that point in time is when we will address what do we do next? We've been through this rodeo many, many times. And when everything is from the bottom left of the page to the top right of the page and bluebirds and rainbows, it's easy to manage through. We've always pulled our horns in a little bit before it appears. And because of that we've been able to weather and manage the inevitable downturns that come. Pointed out to the fact that our unit price hit near a record high and we've been public for ten years and we bumped up $26 a unit here recently. So, good times when they get here, short times till they're gone. So we want to make sure that we are positioned for stability. There are growth opportunities that at the appropriate time, we'll be able to capitalize upon. But for right now, a little bit of choppy waters ahead, and we intend to pull our horns in and make sure that we're here for the long haul. What does that mean for shareholders? You look at our total shareholder returns over the last five years, it's outperformed the S&P, outperformed our peer group. And we're here to tell you that you look into the crystal ball five years from now and you look in the rear-view mirror, we intend that our TSR will be at the top decile or quartile of performance versus our peers and versus alternative investments.
Unidentified Analyst: Got it. Yes. I appreciate all the detail. I'll leave it there. Thanks.
Eric Scheller: Thank you.
Operator: Your next question comes from the line of Gabriel Moreen with Mizuho Securities. Your line is open.
Robert Mosca: Hi, everyone, it's Rob on for Gabe. So there's been some consolidation in the compression space. Wondering how and whether you see that affecting the competitive dynamic in the space? And from your vantage point, are there bolt-on opportunities available out there for compression? And is that what you're alluding to in referencing equipment sourcing opportunities?
Eric Long: You know, Rob, we never speculate on M&A opportunities. We look at everything that's out there. Anything that we do would need to be strategic, it would need to be accretive. We don't need to grow just for the sake of growth. We grow to enhance returns for our shareholders. So there are some things out there that we've looked at, there are things that we've passed on, there are things that we'll continue to look at. So at this stage, I think it will be more opportunistically driven. Consolidation is a positive. There is -- historically we had an oligopolistic situation with two major players, and now we almost have a triumbrant with a new third. So it remains to be seen if the discipline that becoming a larger, more stable player in our industry brings, if that discipline remains there. We expect that it will, because frankly, there is far more opportunities for the three large players to go around than there is, frankly available equipment. So, so far so good. I think we'll stay the course. And if and when there's any M&A opportunities, you'll be the first to see in a press release.
Robert Mosca: Thanks. Appreciate that, Eric. And maybe if you could unpack, in your prepared remarks, you said that those commercial discussions for new units still kind of at an impasse for customers not willing to commit on the rate or term. Maybe could you provide some more color into whether there's been some softening around that dynamic, or is it still pretty similar to what you saw last quarter?
Eric Scheller: Hi, this is Scheller. I think it's like the ice cube starting to melt. We're now in the middle of the first quarter. We are taking some inbounds and discussions as people are looking at their production curves, trying to figure out what available capacity we could shuffle around to optimize networks and to optimize flows into the pipe. So we always have these conversations on a continuous basis with our customers to figure out what that forward looks like, especially given that we're talking about a year out to get new units.
Robert Mosca: Got it. Appreciate the time, everyone.
Eric Scheller: Thank you.
Operator: Your next question comes from the line of James Spicer with TD Securities. Your line is open.
James Spicer: Hi, good morning. You spoke about the need to refinance the high-yield bonds at some point and wanting to address the capital structure. Another component there is the revolver. You ended the quarter with $872 million of revolver borrowings, that's about $260 million year-over-year. Maybe you can just speak a little bit about your comfort around that level of revolver utilization and how that factors into your overall plans for the balance sheet?
Eric Long: Yes, James, obviously the revolver is our lowest cost of capital that we have in our capital stack. We've had a long relationship with our bank syndicate, literally we're talking 12 years, 14 years associated with, I think that our first financing was 2006, back with that Group. So we're in excess of 15 years to 16 years now. We've got a $1.6 billion commitment with, as you pointed out, [850,875] drawns. So we've got plenty of capacity. When you look at the availability, we got plenty of availability to finance future growth to the extent we opt to do so. The bank group is very, very stable. We've actually had a recent entrant who was able to consolidate a couple of smaller players, or some of the European institutions in energy who are migrating out of the domestic energy business. So we solidified that with a much larger, longer-term strategic type of financing institution who has an appetite to be in compression and in energy in general. So we're very comfortable with that ABL facility. I think our vision has always been, let's use that as a growth platform. And at some point when it gets large and it grows to a certain point, rather than moving that from all floating rate debt, we'll turn some of that up and move that into a high yield facility. So at this stage, we did put a $700 million notional float to fixed commitment in place. Our effective interest rate is sub 4%, 3.9725% or so on that facility. So it's an attractive cost of capital for us, and we just need to continually look to optimize and balance fixed versus floating. We do have capacity and do we have access to capital, unlike, frankly, most of the peers in the compression industry are pretty tapped out. So we've got line to play with should we so desire. And I think this is what your management team is paid to do, is every single day and every single quarter, every single year to look at that capital structure, figure out how we optimize that, how does that fit in with our growth plans, and we'll balance accordingly.
James Spicer: Okay, that's great color. I appreciate it. And one more if I could. I was just curious about the drivers behind that preferred unit conversion and what your expectations are around additional conversions in 2024?
Eric Long: That is something we really don't have a lot of insight or color into. I think that was probably done opportunistically, points you to the public docs, you can figure out that they've got a conversion price of $20.01. And when the units are running in that $25, $26 range, clearly there are some economic incentives for them to do so. They did have warrants associated with the preferred. We put that together. Those have all been cash settled and cleared out. There were some converted to common, and those have all been disseminated out into the public hands. They did convert $40 million. Depends where the unit price is. If the unit price is, we look at underwriter discount or the current strike price minus underwriter discount, less than 2001, if it's economic, they may continue to do so. If there's some softness in the security price, probably not. So they're happy with the investment. It's a 9.75 current pay, so there's no big incentive for them to exit the facility. And we got plenty of time and tenor associated with it. So I don't see them in a rush to exit. I see them, like any investor, being methodical and trying to optimize their financial returns over time. And with EIG, I would expect nothing less than that in the future.
James Spicer: Okay, makes sense. Thank you.
Eric Long: Thanks very much.
Operator: There are no further questions at this time. This concludes today's call. You may now disconnect.
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