CareTrust REIT, Inc. (CTRE) Earnings Call Transcript

Hello, everyone. Thank you for joining us, and welcome to the CareTrust Third Quarter 2026 Earnings Conference Call. [Operator Instructions] I will now hand the conference over to Lauren Beale, Chief Accounting Officer. Lauren, please go ahead.

Thank you, and welcome to CareTrust REIT's Third Quarter 2026 Earnings Call. Today we will make forward-looking statements based on management's current expectations, including statements regarding future financial performance, dividends, acquisitions, investments, financing plans, business strategies and growth prospects. These forward-looking statements are subject to risks and uncertainties that could cause actual results to materially differ from our expectations. These risks are discussed in CareTrust REIT's most recent Form 10-Q filing with the SEC. We do not undertake a duty to update or revise these statements, except as required by law. During the call, the company will reference non-GAAP metrics such as EBITDA, FFO, and FAD. A reconciliation of these measures to the most comparable GAAP financial measures is available in our earnings press release and Q3 2026 financial supplement, which are available on the Investor Relations section of CareTrust's website at www.caretrustreit.com. A replay of this call will also be available on the website for a limited period. On the call this morning is Dave Sedgwick, President and Chief Executive Officer; Derek Bunker, Chief Financial Officer; and James Callister, Chief Investment Officer. I'll now turn the call over to Dave Sedgwick, CareTrust REIT's President and CEO. Dave?

Thank you, Lauren, and good morning, everybody. Thank you for joining us. Normalized FFO per share is up 20% over last year. And year-to-date, we've set another record of approximately $2.9 billion invested across all 3 growth engines, setting up 2027 to be another strong year of growth. Let me put those figures in context. Over the last few years, since Q4 '22, health care REITs have grown assets by 27%. CareTrust's asset base has grown by 375%. And looking at FFO per share growth from '23 through estimates for this year, health care REIT FFO per share will have grown 30%. CareTrust will have grown 47%. Looking at forward estimates, today, CareTrust trades at the lowest growth-adjusted multiple of all health care REITs. Rates have certainly moved against everyone this fall. If you've ever wondered why we have maintained extremely low leverage and stockpiles of dry powder while simultaneously growing at a record pace, it's precisely for a market like this. In times of rising rates and uncertainty, sellers prioritize the buyer who will close, and that's us. I'll remind you that our meteoric growth rate began and in no small measure was due to the Fed's aggressive rate hiking in '22 and '23, and during the subsequent higher-for-longer environment. With last week's announced term loan and upsized revolver, Derek will walk you through how well positioned the balance sheet is today for today's market and for being able to comfortably close on a robust pipeline of accretive investment opportunities ahead. Now on October 1, we crossed the start line on a strategic relationship with LNT. This deal combines 2 growth engines, U.K. care homes and SHOP, with LNT acting as the multiplier. Let me say a word or two about LNT. The owner of LNT, Lawrence Tomlinson, has built more than 250 care homes in his career, and his team is now engineered to deliver around 30 care homes per year. No other developer in the U.K. comes close to that pace. Standardization, vertical integration, and a talented and driven team are the special ingredients that make LNT one of one. When the ramp-up phase flips from triple-net to SHOP, our first-year NOI yield will be in the high 7% range with a strong runway of growth from there to conservatively achieve our target of double-digit returns. It will be the only portfolio of scale across the U.K. that is brand-new, high-quality, affordable private pay, purpose-built with 100% ensuite wet rooms competing with a market of much older, often converted buildings, 1/3 of which have ensuite wet rooms. So in a season of fierce competition for SHOP assets, LNT provides us with a truly differentiated SHOP growth engine that will deliver double-digit returns with futureproofed real estate. In addition to LNT, the core growth engines continue to compound. In the third quarter alone, we closed approximately $740 million of investments at a blended stabilized yield of 8.3%, which James will talk to in a minute. This rate of growth can only happen with the right skilled nursing tenants and SHOP management companies. Lease coverage set another record this quarter. Skilled nursing EBITDAR lease coverage hit 2.62x and EBITDARM of 3.26x across the stabilized portfolio, up again from last quarter. 100% of the skilled nursing facility real estate that we own is licensed and run by independent operators under a triple-net lease. This financing structure gives 100% of the operating control to the tenant, which is why when they improve the financial performance of the facilities like you see here, 100% of every dollar above our fixed rent is retained by the operator. So what does this mean in light of our sector-leading lease coverage? It means our operators have the financial capacity to both reinvest into their people and processes and to adapt to an ever-changing operating environment. So here's where we stand as we begin to close out another extraordinary year. The CareTrust flywheel is delivering and accelerating. The LNT relationship is just getting started and the pipeline continues to reload and our balance sheet has capacity to fund it all. And with that, I'll turn it over to James.

Thanks, Dave. Good morning, everyone. As Dave mentioned, in the third quarter, we closed on investments totaling approximately $740 million at a blended stabilized yield of over 8.3%. The largest of these was the 20-facility skilled nursing portfolio in the Southwest that we announced in September. We sourced that transaction off-market and acquired it through a joint venture with a repeat partner. It is triple-net leased to an operator that we know well, and it is a strong example of our off-market pipeline at work. In total, third quarter investment activity largely consisted of: one, the acquisition of the Southwest skilled nursing portfolio for approximately $399 million; two, approximately $269 million of senior housing triple-net investments, led by a 16-home U.K. care homes portfolio sourced and executed by our London-based team; and three, a 2-community addition to our SHOP platform in Utah for approximately $65 million. We have remained busy since the end of the quarter, closing on just over $1 billion of investments. Headlining that activity was the acquisition of the first 23 LNT homes for approximately $733 million, exclusive of transaction costs. As previously announced, these homes are triple-net leased to LNT's operating company, Crystal Care, with the ability to convert to SHOP as this asset stabilizes. We also funded approximately $241 million of loans and preferred equity investments with existing operator relationships at a blended yield of approximately 10.9% and closed on the acquisition of 3 care homes in the U.K. for approximately $33 million. Taken together, our 2026 investments now stand at approximately $2.9 billion year-to-date at a blended yield of approximately 8.1%. That includes $1.2 billion in U.K. care homes, roughly $1.1 billion in U.S. skilled nursing and seniors housing triple-net, approximately $481 million in loans and preferred equity, primarily secured by skilled nursing facilities and closed either concurrently with asset acquisitions or anticipation of them, and approximately $80 million in SHOP. Turning to what lies ahead. Our pipeline currently sits at just over $1.2 billion. Roughly 1/2 of that is the 21 remaining LNT homes under development, which we expect to close between January and September; roughly another 20% is U.S. SHOP; and the balance is skilled nursing, U.K. care homes, and loan activity. As a reminder on methodology, our pipeline includes only those deals we have a reasonable level of confidence we can close within the next 12 months, and it does not always include larger portfolios we are reviewing. Looking ahead, we expect to keep growing the way we always have, underwriting with discipline, backing operators we trust for the long term, a committed focus on relationships, and structuring deals creatively and collaboratively so that both sides win. This same approach opens the door to more off-market opportunities, and we expect these principles to power our growth going forward. And with that, I'll turn it over to Derek for the financial results.

Thanks, James. For the quarter, normalized FFO increased 37% over the prior year quarter to $129.2 million, and normalized FAD increased 36% to $127 million. On a per-share basis, normalized FFO was $0.54, an increase of 20% over the prior year quarter and normalized FAD was $0.53, an increase of 20% over the same period. During the third quarter, we settled all of the 14.4 million shares outstanding under our May forward equity offering for gross proceeds of $578 million. We also issued 7 million shares under our ATM program at a weighted average price of $40.11 for gross proceeds of $280 million. Subsequent to quarter end, we closed on a new $700 million unsecured term loan maturing in 2032, and we expanded our unsecured revolving credit facility to $2 billion. We use the term loan proceeds to repay borrowings under the revolver and to fund investment activity. We're grateful to our bank partners, existing and new, for their support on both the term loan and the revolver upsize. Together, they provide a deep, reliable source of capital, extend our runway, and position us well to keep funding our growth. In yesterday's earnings press release, we raised the low end of our full year 2026 guidance, which we last increased in October. We're now projecting normalized FFO per share of $2.08 to $2.09, and normalized FAD per share of $2.04 to $2.05. At the midpoint, that represents growth of 18.5% in normalized FFO per share and 16.2% in normalized FAD per share compared to full year 2025 results. Our guidance is based on a weighted average diluted share count of 240 million shares and includes the following key assumptions: first, no new investments, loans, or dispositions beyond those made or announced year-to-date; second, no new debt or equity issuances beyond those made year-to-date; third, 2.5% inflation-based rent escalators under our long-term triple-net leases; fourth, $147 million of loans to be repaid throughout the year, of which $111 million have been received so far to date; and fifth, no material change in the pound sterling to U.S. dollar spot exchange rate. Additional guidance measures are detailed in the press release yesterday. Looking forward, our liquidity remains strong. As of today, it stands at approximately $2.3 billion, including approximately $100 million of cash on hand, $1.6 billion of availability under our $2 billion revolving credit facility, and $599 million of capacity available under our ATM program. Net debt to annualized normalized run rate EBITDA was 1.4x at quarter end. Pro forma, including all investments year-to-date, it's approximately 2.7x, still well below the low end of our long-term target range of 4x to 5x. Our fixed charge coverage ratio was 10.5x at quarter end, and we continue to have no scheduled debt maturities prior to 2028. It's worth underlining that with the added capacity from our credit facility upsize, we have more than sufficient funds to close on our pipeline and keep leverage below our stated target range. We typically allow about 12 months to close on our stated pipeline. All else equal, if we were to utilize that capacity to fund the pipeline, by the end of 2027, we could be reporting another year of double-digit normalized FFO per share growth while keeping pro forma leverage still well below that range, all without accessing capital markets. And later next year, we expect to begin converting our LNT homes to a RIDEA structure by acquiring the opcos at a 20% yield on in-place EBITDA. SHOP would then become a more meaningful portion of our run-rate FFO with multiple years of strong growth thereafter, given the quality and vintage of LNT homes. Simply put, our balance sheet is built for the identified and actionable opportunities ahead with flexibility to pull other levers for further accretive investments we source and close. And with that, I'll turn it back to Dave.

Great, thanks, Derek. Looking ahead to 2027, with all of its uncertainty, I think after today's update, you understand why we are as bullish as ever about our ability to deliver meaningful per-share growth for our shareholders. Our recent outsized growth in assets and FFO per share has been a result of a differentiated strategy. With LNT, we are again differentiating ourselves by partnering with the envy of the U.K. care home development sector. We look forward to sharing more of the progress as that and our other pipelines deliver. We're happy to take your questions now.

[Operator Instructions] Your first question comes from the line of Farrell Granath with Bank of America.

About what makes LNT's development model different from other providers and how that's translating into better returns for CareTrust? And then is this an opportunity you could replicate with other partners? Or is it fairly unique to LNT?

You were, I think, muted for the beginning of that question. If you wouldn't mind, could you repeat it?

Could you just talk about what makes LNT's development model different from other providers? And is this an opportunity you could replicate with other partners?

Yes. Thank you. Thanks a lot for the question. I realize this is our first conference call since announcing the LNT deal. So allow me to take a few minutes to provide you maybe a little bit more color than you bargained for with that question, if that's okay. The way we view this deal, we've called it strategic for a reason. If you look at the going-in triple-net yield, that's not really how we measure the value of the deal nor why we characterize it as strategic. That triple-net yield in 2 to 3 years will be in the high-7% to low-8% range for our first SHOP NOI yield, with plenty of room to run toward our unlevered double-digit returns. So we view the deal in a couple of ways -- we view this pricing in a couple of ways. We bought SHOP at -- if we bought SHOP at a 5.8% cap rate and underwrote year 3 at 7.8%, that's a 16% CAGR for those first couple of years. And essentially, we traded 2 years of growth for downside protection while retaining 28-plus years of upside. And the 7.8% yield is based on a trailing 3 annualized EBITDAR. If we assume some growth in year 1 of SHOP, call it just 5%, that's actually an 8.2% year 1 SHOP yield. So if you compare that first-year NOI yield for a newly built home to how older assets trade in the U.S. today, I think you see how we view it. If we only measure the value of this acquisition of 45 LNT care homes by the same unlevered return targets we have in the U.S., we would do the deal all day long. But even earning those returns starting from a higher, safer yield is too simplistic of a way to measure the value of the LNT deal or why we characterize it as strategic. So a little bit more specific to your question. LNT is really the most prolific developer of care homes in the U.K. Their proprietary, vertically integrated, fanatically standardized approach iterated over 30 years, builds homes to an unparalleled yield on cost in the mid-to-high teens, and they're currently capable of delivering around 30 homes per year. And their development pipeline beyond the next homes that we have under contract to buy stand at over 150 sites and counting. It's really why we call them one of one. So our deal with LNT delivers 45 newly developed care homes in initial lease-up phase without prohibitive lease-up risk or dilution. And the relationship and current deal provide a path to lock up not only that massive and growing SHOP pipeline for ourselves for many years to come, but also to capture those yield-on-cost economics. So the bespoke structure that we have really solves the problem that traditionally prohibit REITs from developing or buying brand-new properties and lease-up. And so, that gives, I think, a lot more than you bargained for, but it describes why LNT is so strategic for us. Would we do other development? Sure, we could here and there, but on a programmatic way at scale, I think LNT is really one of one.

We certainly appreciate the additional color there. And maybe just to follow up, beyond the initial 45 homes, how do you see the relationship growing? And what drives the decision to keep acquiring completed homes versus maybe exercising the option to acquire the broader platform in the future?

Yes, I think some more color on it is, originally, we were working with LNT to figure out how to acquire the whole development company. And that's where we spent a lot of time this year for 6 months plus, we were trying to figure that out. Ultimately, we decided that the more prudent approach would be to take this first step of doing an asset deal that will allow us to show our investors how they do deliver, in fact, on time, how they lease up, how the NOI performs, and all these other development metrics, so that as we see that proven to ourselves and proven to our investors, I think the decision to proceed and acquire all of LNT will become self-evident.

Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Maybe sticking with LNT. Given the basis that these assets have been developed at for all the reasons you cited, one, does that really put them at a competitive advantage from a RevPOR perspective relative to the quality of the assets? And two, does it give them a longer runway or ability to push RevPOR relative to where other developers need to set rate, I guess, to make the economics work for construction?

Yes. We believe that that's exactly what it does. You answered the question in your question, but the product positioning here is really what we would consider the sweet spot. We entered the U.K. by acquiring a midmarket portfolio that performs very well. Incredibly high lease coverage, high occupancy, and there's certainly a market need for that. A lot of development in the U.K. and in the States targets that high-end luxury sector. And what the LNT targets is that upper-middle class, so private pay only, but about 10% below that real high-end RevPOR that gives a ton of pricing power and super attractive, especially because it's competing with -- in a market that has about 1/3 of the U.K. care homes today have ensuite wet rooms. And of course, LNT with 100% and being brand new and priced as it is, I think there's going to be a ton of upside there.

Maybe could you just frame what that RevPOR spread is versus market or what it would take to develop a new asset today?

Yes. Austin, it's James. I think typical development we see in the U.K. runs about GBP 250,000 per unit or so. LNT develops for about GBP 100,000 less than that per unit, I would say. I think their average weekly fee is around GBP 1,500, which I think, like Dave said, is 10%, 15% below what we see in the luxury market above them, which is a great sweet spot, we think, that allows for room to grow in the future given the new nature of the asset, given that it's ensuite wet rooms that are in markets that are pretty significantly under-bedded when it comes to ensuite wet rooms.

And then just last one for me, Dave or Derek. Appreciate the commentary about the balance sheet flexibility you've built. But how much does the shift in funding alternatives or how you're thinking about funding, does it change your ability to be competitive with any of the acquisition channels?

Austin, it's Derek. I don't think so really. If we look back at similar historical periods in a rising rate or higher-for-longer environment, we've been able to capture more of that market share and deal flow. And I think we came into the most recent higher-for-longer environment this year really well positioned, not just from the balance sheet but the other intangibles, the team in place, the momentum. And that all carries through and keeps that flywheel going. And I think the pressure, if we do face any, is probably perhaps more significant on other players and capital providers. And we're starting to see, I think, a little bit of that generally, if you look at the HUD market, in particular, where rates are pretty sticky tied to the Treasury. And that's such a common takeout or exit for some of the bridge or alternative financing deal flow, allowing us to be positioned for that growth we feel is just as strong as ever. So we're still very excited. We like our positioning right now and feel like we can keep performing as we have over the past few years.

Your next question comes from the line of Jamie Feldman with Wells Fargo.

This is [ Jesus ] on for Jamie. Just staying with LNT over here. Just sticking with LNT. Once the LNT home ramps towards stabilization, can you talk about the factors that determine whether you convert it immediately to SHOP versus continuing to collect the triple-net rent?

Well, I think we're going to be eager to convert. In fact, if there's opportunities to convert buildings that are well on their way to stabilization, we may have conversations with the LNT team about bringing them on earlier. So I think that's going to be our bias is to bring them on earlier rather than later.

Great. And on the $274 million of the recent loan and preferred equity investments you guys made, just how should we think about the durability of that 10.6% yield? And any potential path to future ownership on those assets?

[ Jesus ], it's James. So I think the durability is good. Those are great borrowers with great tenants running the buildings. So we really like those investments. Most of those were done with past relationships that we have where either we've already acquired assets with that group or have future deals with them anticipated already that the loans were done in connection with our lending with a purpose. So that's what I would say on the loan since the end of Q3.

Your next question comes from the line of Juan Sanabria with BMO Capital Markets.

This is Robin Haneland sitting in for Juan. I just wanted to touch on active asset management opportunities. Just given elevated lease coverage in SNFs and senior housing triple-net, do you see any opportunities to monetize some of that profitability and perhaps bring forward earnings growth from rent resets either via asset transitions or otherwise?

Yes, it's a great question. First, just philosophically, I think I would say that we have always believed that as far as skilled nursing lease coverage goes, the stronger the better. When underwriting new deals, we regularly sacrifice a little bit of yield for higher tenant coverage. We do not have a short memory about how often tailwinds can turn to headwinds for our tenants there. Having said that, not all tenants and leases are equally strong, and our asset management team is always actively evaluating the portfolio. Last year we talked about proactively replacing a skilled nursing tenant whose coverage was slipping, and the replacement tenant came in the same rent and immediately brought us better credit and brought the facilities improved stability. And just last month, we again proactively replaced a Midwest SNF operator with a longtime CareTrust tenant who was willing to increase rent by 6%. And that's an example of a replacement tenant leveraging their strong coverage that they have with us to facilitate their growth while improving rent for us. So our asset management team will continue to look for win-win portfolio repositioning just like that. And like you alluded to, given some of the extremely high covering master leases and evolving plans for some tenants, we expect there to be more opportunities like that in coming years.

And on the pro forma leverage, now closer to 2.7x, low but above prior trend levels. How are you thinking about equity to help fund the remaining LNT transactions at the close and/or other future opportunities? And then also the ability to maintain your financial flexibility despite a flattish share price year-to-date and then also being able to generate double-digit growth in '27?

Yes. I would just say that from our perspective, we look at where we sit today through the same lens as we have over the past year or 2. We try to look beyond short-term noise. We feel, like I said earlier, pretty well positioned from a balance sheet to flex it either way. And really part of the bank debt rework was to set the table and make sure that we extend the window for us to be opportunistic. So we'll always be price sensitive along with all the other factors that go into how we capitalize our deals. I'll say that if you look at our track record, we've been very active. And so it would be hard to say that we wouldn't continue to be active in that regard, just to find the balance between really maximizing value for our shareholders while retaining as much flexibility and positioning to keep pursuing the pipeline and beyond because we still feel like we're in early innings of a multiyear growth phase.

Your next question comes from the line of Vikram Malhotra with Mizuho.

I guess just first on the LNT deal and thinking about if and when this converts to RIDEA, I think you've talked about roughly a high 7% yield on conversion or anticipated. And I'm wondering what's the likelihood of that yield being higher, perhaps higher RevPOR or higher margins because I think the occupancy on stabilization is more of a fixed number. But what's the likelihood of that yield being higher based on other top line parameters?

I'd say there's a good likelihood, it is. As Dave mentioned, that high 7% going-in yield when we do flip to RIDEA, which is what we're planning on and what LNT is planning on, is on trailing 3 annualized EBITDA. And so assuming no growth, that's year 1. Assuming very modest growth, you're getting into the low 8% yields. And at stabilization, it's really low-90% occupancy, still very, I would say, strong positioning from a RevPOR perspective, given their situation in the market being all private pay, 100% ensuite wet rooms. But at a cost that's 10% to 15% below similar higher-quality assets in the markets that they're competing in. So we think there's a lot of organic growth beyond that. And I think to be able to step in on proven in-place high 7% yields for 2- to 3-year-old vintage assets at scale with a partner that's developing more and more, I think that is really where we start to get super excited about not just that yield but what the full portfolio, and then some, can do for us.

And then what about -- just can you clarify the tax impact, either what the rate is likely? Is there room to lower the rate or lower the dollar amount in the U.K. given that high 7s, maybe like a 7-or-something. But are there factors that can drive that tax rate lower?

Absolutely. We have opportunity to -- there's some leakage there that we can make some progress on that we're eager to. And I think that's something that we will spend some time focusing on over the next 12 to 24 months, not just for the LNT portfolio, but all of our U.K. assets as well. And so that's achievable. It might take a little time and a little bit of strategy, but we're able to probably capture or to protect about, call it, 1/4 of the leakage we're experiencing right now.

And then just maybe last one. there was a question asked about, I guess, rent step-ups given coverages in the triple-net SNF portfolio. But I'm wondering within U.S. SNFs, are there other ways to perhaps accelerate the growth, whether it is perhaps taking a position in an opco or perhaps like a RIDEA-like structure in certain select SNF relationships. Any color there, if there's a way to accelerate the -- or take advantage of the still improving operations in your tenants?

Yes. Thanks, Vikram. We don't have any plans today to take a RIDEA position with skilled nursing assets. But other things are certainly on the table. I think investing, taking a minority position in an opco could be interesting, as others have done. And I think at the end of the day, like I said a moment ago, we do not have a short memory about skilled nursing and things always tend to change, regulations tend to change, and we really do value our operators having a lot of cushion to be able to adapt to however the regulatory landscape changes. Having said that, we are actively looking to answer that question, and there's multiple ways to answer it, and we have such massive lease coverage that in our portfolio, in particular, there's going to be interesting ways to tap into that in the coming year.

Your next question comes from the line of Dave Rodgers with Raymond James.

I wanted to ask about the 150-plus sites and counting at LNT that you mentioned. And I think you've alluded to the idea that you guys could be able to get access to those sites. Can you talk about the agreement or any additional agreements that you might have or could structure with LNT that would get you access to those? And should we think about those looking similar to what you're doing now? Or would the time frame be different, negating the current structure?

Yes. I think what I would say is that we have a general high-level agreement that would lock up that pipeline in connection with locking up LNT Development Company, that would not just lock up that pipeline, but also as we incorporate LNT would provide a truly differentiated story, which is that we would then capture that mid-to-high-teen yield on cost for all of those for ourselves after we've paid for the company. So there's a really long-term strategic play there that we're considering. But the relationship is such that I think we're really pursuing with LNT a win-win approach. And I think in coming quarters, we'll get closer to some more specifics that we'll be able to share with you.

And then maybe one for James on the SHOP acquisitions. I think of that $250 million of the pipeline or so, plus or minus, sounds like it's in U.S. SHOP. Can you just talk maybe a little bit more about what you're seeing there, what you've been targeting, and where you're having success relative to what you've been doing in the U.K.?

Yes. I think that when it comes to SHOP, Dave, I think that we really don't like boxes, I guess I'd say. I think that we want to look at everything, and we want to do the right deals. I think that what we're seeing, a lot of what everybody is seeing, and I think that -- we love to always see newer product in great markets. I think that there's a lot of that out there. We're focusing on those deals where we have particular relationships with the seller or with the operator going forward, or we have the right operator solution in place. And I think we're seeing success in tying a number of those deals up, as you see in the pipe. I think that those deals are really priced pretty consistent with what you're seeing in the market and cap rates in the market, but because of relationships we have with the operator or the seller, we've had success in tying those up. And they create really exciting opportunities going forward. But again, I don't think we're really looking at any particular box. I think that we recognize, given how much capital is chasing SHOP right now, that you're going to have more success when you can sharpshoot deals that are off-market or that you have a particular in to go and get, and that's what we're focusing on.

I think I would just add one little note to that. We're coming up on our first year in the SHOP space as a company. And given what's in our pipeline right now, there's some real near-term SHOP investments that I think will close in Q1. We'll have done about $400 million of SHOP in the U.S. in our first 12 months, give or take 1 month. And as active as it is right now and seeing what the funnel of deals look like that the team is pursuing, I would be really surprised if next year wasn't quite a bit more than that for U.S. SHOP. No pressure, James.