Nexity SA (NXI) Earnings Call Transcript

Good day and welcome to the Nexity H1 2020 Results Conference Call. For your information, this conference is being recorded. At this time, I would like to turn the conference over to Mr. Julien Carmona, Deputy CEO. Please go ahead, sir. Your line is open.

Thank you and good afternoon. I'm happy to be with you, although virtually, together with Eric Lalechère, Nexity's CFO; and the Investor Relations team to report on a very challenging H1 '20. These are certainly not the best numbers ever published by Nexity, but, by and large, they confirm our ability to absorb shocks and the resilience as well as the medium-term growth potential of our business model. Let's start on Page 3 with a quick overview of our financial performance. Nexity's revenue totaled EUR 1,716 million, down 7% from H1 2019. The EBITDA reaching EUR 163 million, down 28%, giving an EBITDA margin of 9.5% versus 12.3% in H1 '19, minus 280 bps. Operating profit drops from EUR 125 million to EUR 50 million, a 60% decline. And the EBIT margin decreases from 6.8% to 2.9%, almost minus 400 bps. Bottom line is barely positive with a EUR 7 million net profit. The shock on our revenue is less pronounced than the mechanical impact of the 2 months of severe health crisis, roughly mid-March to mid-May, because this negative shock was partly compensated by what we call portfolio effect. That is revenue booked in H1 '20 coming from an existing high base of backlog and embedded revenue at the end of FY '19. Let's not forget that until last March, Nexity was on track to deliver a 10% annual growth rate. The second comment, the drop in profit is more severe than the drop in revenue, which is due to the fact that we have a fixed cost base of around EUR 1 billion. And in the short term, we didn't cut costs in a way that was commensurate with the fall in turnover. We have started to beef up our cost-cutting efforts with an almost complete freeze on hiring, in particular, but the strategy today is to wait a little bit longer to see which way the market goes, quick recovery or prolonged slump, to determine the size of the restructuring that is needed. The net financial debt went up, as expected, to EUR 1.38 billion, excluding IFRS 16, plus EUR 463 million since year-end. The debt is under control. The impact of the lockdown on our debt was limited with cash inflows and cash outflows moving in parallel. Most of the debt increase comes from growth initiatives, higher backlog acquisition in Germany, which would translate into revenue and earning in the future. And they also come from the usual negative seasonality in H1. We do expect Nexity's debt to be lower at year-end as was the case last year, for instance. If the debt stands more or less at the level where it should have been pre-COVID, the EBITDA is under pressure. So we do have a challenge with respect to the leverage ratio, net debt to EBITDA. We anticipated the risk. We proactively discussed with our creditors who granted us an 18-month covenant holiday. We expect the EBITDA to gradually recover. However, we will actively manage our debt position in order to be able to comply with our covenants at the end of this period. Finally, Nexity continues to show a healthy level of liquidity with EUR 873 million in cash and EUR 355 million in undrawn authorized corporate credit lines. Page 4, business activity. We were, of course, particularly affected by the 2-month interruption in construction sites, which severely impaired the revenue and earnings generation of our real estate development activities. Nevertheless, the strong recovery in business activity and business sentiment, which started in early June, helped us achieve a half year performance which was better than what we expected a couple of months ago. I'd like to particularly highlight the following. Nexity's new home reservations were stable in H1 '20 compared with last year, and we saw a 5% increase in value. In the midst of the worst crisis we'd ever known, I believe that's an excellent performance. The business indicators for services were resilient with no churn in our property management portfolio, resilient occupancy rates in the serviced residences, even 7 new openings, as well as a strong upturn for the secondhand market in June. We booked EUR 219 million order intake for Commercial Real Estate, sharply up compared with last year and mostly due to 1 deal, the sale of Île-de-Region in Saint-Ouen to BNP Paribas back in April. And we are showing, and to me that's probably the most important figure, a strong increase in the backlog, 11% up at EUR 5.7 billion, a record level, plus 14% for Residential Real Estate. Moving on to Page 5, you can see a graphic visualization of the strong upturn we've seen since the end of May. Technical progress of construction, reservation, notarial deeds and cash inflows, all the indicators are on the rise. What we are experiencing since the beginning of June is almost looking like a V-shaped recovery. But, and it's a big but, it's way too early to extrapolate and to rejoice. And even the short-term future is still fraught with uncertainties. Uncertainty #1, uncertainty about the evolution of the health crisis, the so-called second wave and the impact on our activity of potential new lockdowns. We hope this will not happen, but we are prepared for that. For example, since March, we have inserted in all our key contracts with third parties so-called COVID clauses taking into account the possibility of new outbreaks of the pandemic. Uncertainty #2, consumer sentiment. We don't know yet if the strong rebound of the past weeks is just pent-up demand that will fetter out or a sustainable trend. Lastly, and I'm moving to Page 6 for macro elements. We do have uncertainties about the impact of the recession, which is really very large. The French economy today is still under anesthesia, if I may. We expect to see the first large layoff to start in September and to see a worsening of the crisis into 2021. The forecasts are pointing toward a 1 million increase in the number of unemployed in France. And although the government will do its utmost to alleviate that, we don't really know what the actual impact of the 10% recession will be. In terms of credit and liquidity, we can expect at this stage that interest rates will remain low for a long time. So our concern is not the mortgage rates, which increased a little bit, but rather, mortgage availability. And today, this morning, we're seeing an increasing volume of credit applications from our buyers rejected by their banks. That's a combination of the crisis on one hand; and on the other hand, of the delayed impact of the stringent guidelines issued by the French financial regulator, HCSF, earlier this year. Two more remarks before concluding my part. Despite the fact that I probably repeated 10 times the word uncertainty since the beginning of this presentation, I feel and we feel strongly confident in our business model and in the future of our businesses. Housing. Housing is a fundamental need and an essential public good for society. It became even more clear during the lockdown period. Second, I think we'll all agree that there's a consensus today among investors that residential has proven its resilience and is today the most favored, most coveted asset class. It has gained safe haven status. And in the first half of the year for Nexity, the decline in demand from Individual Clients was completely offset by a major surge in reservations from institutional investors. And as you can see on Page 9, the number of units sold to professional landlords rose by 85%, accounting for 52% of total reservations compared to only 28% a year ago. A significant portion of that growth was due to the large deal with CDC Habitat done in April, 7,450 units, of which, 2,686, those with a definitive building permit, were booked in the first half. With its acquisition plan of 40,000 units, CDC Habitat is clearly the largest player on this market, but they're not the only one. Action Logement is also ambitious, even aggressive. And perhaps more importantly, insurers, pension firms, asset managers and the like are now moving onwards into this market. So in our view, our challenge today is not demand. It is supply. And as you can see on Page 11, we had a sharp reduction in the existing supply for sale. We experienced a stronger-than-usual slowdown in building permits in the run up to the March local elections from an almost complete freeze during the lockdown period. And after that, particularly in the large cities where the majority changed to green NAV, but not only every -- in every place we have, there was a change. We are likely to see today the usual post-election hangover -- sorry, post-election reassessment of housing policy that shouldn't be conducive to a strong rebound in building permit before 2021. The consequence of this supply shortage is that house prices, which should logically adjust downwards given the crisis, haven't gone down. In Nexity's case, the average selling price for new homes went up by 6.5% in the year. On the other hand, faced with the worst recession in nearly a century, the government should logically include housing and construction in the stimulus package recovery plan, which will be presented this autumn. We are working on that, and we do hope that this package will address both supply and demand. While housing offers very solid prospects, the office space market is expected to be affected in the short term with probably a wait-and-see phase from investors and users. Let's be clear. Regarding Nexity, the transactions already in the setup phase are not affected, particularly the Engie campus in La Garenne-Colombes, which is moving ahead despite the difficult conditions and should be signed before year-end. But it's obvious that the way offices are designed and used is going to change, and we are ready at Nexity to meet this need with innovative offers and services. To sum it up, there are trends, there are changes, there are shocks. But we believe that Nexity is very well placed to benefit from all these trends. We are the #1 partner of institutional investors in housing with over 20% market share. And we expect to see a large increase in our total market share in the French new homes market this year just because of that, not mentioning the other 2 important factors. Second, we are a leader in green and sustainable and low-carbon real estate. And in the new political landscape, that's going to become a real competitive advantage. In the context of changing usage patterns and very rapid fluctuations in demand, we view Nexity's services businesses and their close integration with development as another competitive advantage. Last but not least, I strongly believe that our asset-light model, no land bank, no long-term ownership of real estate property, is very adaptive to kinds of shocks and surprises like the one we live in. Some asset values will be under pressure, and we expect to see interesting land opportunities that reduce prices. These are, in essence, the messages I wanted to share with you. I will skip at the moment the other slides about business activity, including the one on our recent building to Germany, but I'll be happy to come back to it if you do have questions. And I leave the floor to Eric Lalechère for a detailed presentation of our financial statements.

Thank you, Julien. The first half year was marked by the near total shutdown of our activity for 2 months, followed by a progressive restart of the containment. This [indiscernible] the results even though the relatively small share of fixed costs limited this impact. However, half year period is not representative of the full year and sharp improvement is expected in H2 '20. Revenue stands at EUR 1.72 billion, down 7% from H1 '19. EBITDA decreased by 28% at EUR 163 million. Current operating profit reduced to EUR 50 million, down 60%. The net financial expense was EUR 36 million, remaining virtually stable despite the increase in average debt. The tax expense is very small at EUR 6 million because of lower taxable profit. The group share of net profit came to EUR 7 million for H1 '20 versus EUR 52 million for H1 '19. This change was mainly due to the impact of the lockdown on business activity in the first half of the year. Income from the second half of the year is expected to be higher, given the upturn in the activity that will not likely reach the same level as in second half of '19. Page 19, H1 '20 revenue. Revenue for the first half of 2020 was EUR 1,716 million, down EUR 124 million or only 7% compared to H1 '19. The decrease in activity during containment was partially offset by some of the growth at December 31, '19. The drop in revenue for the first half reflects the lack of technical and commercial progress during the lockdown with respect to development and distribution activities. But the lost revenue is not lost. It would shift into the next period. We estimated the COVID-19 impact at around EUR 430 million, comprising EUR 380 million for Individual Clients and EUR 50 million for Commercial Clients. This drop was strongly offset by the growth in business activity carried over from December '19, which accounted for an increase of approximately EUR 300 million in revenue. For the Individual Clients, it is estimated at around EUR 130 million increase in the Residential Real Estate backlog as of December '19 increase in the number of serviced residences. For Commercial Clients, it is estimated around EUR 170 million, mainly thanks to the sale of the completed Influence 2.0 building in April 2020 with all the revenue for this program being recognized upon the sale. Revenue for the Individual Clients division was down EUR 250 million or minus 15% versus H1 '19. The change was mainly due to the negative impact of the public health crisis. Revenue for June offset this trend with a sharp upturn in activity in construction sites, and the highly satisfactory number of this is staying fine. The decrease in revenue was more limited on the services businesses, decreasing production, limited attrition in managed residence, resilience in property management. Revenue rose for Commercial Clients at EUR 126 million or plus 55% compared to H1 '19, mainly arose from the sale of the completed Influence 2.0 building for more than EUR 200 million. In the following page, we give more details about the EBITDA. Nexity generated EBITDA for EUR 163 million during H1 '20, representing the decline of 28% on an EBITDA margin of 9.5%, down 2.8 points from H1 '19. The decrease in revenue translated into a decline in EBITDA. EBITDA for Individual Clients decreased by EUR 99 million and reached EUR 110 million. EBITDA for Residential Real Estate amounted to EUR 27 million, down sharply compared to H1 '19, down EUR 71 million due to the drop in revenue and reduction in the gross margin. This decline was amplified by the weight of overhead costs that were not rebilled to real estate development programs during the lockdown period. The business line EBITDA margin went from 6.3% to 2.8%. The gross margin, before taking non-inventory expenses into account, remained stable compared to H1 '19. The gross margin could be affected in the second half of 2020 depending on the possible increase in the cost price of operations linked to the additional costs of restarting work, and the change in the customer mix in favor of bulk sales, for which margin levels are lower. EBITDA for Real Estate Services to Individuals were down by about EUR 28 million. The drop of EUR 17 million in revenue led to a decrease of EUR 13 million in EBITDA due to the high level of fixed costs. The rest of the decrease comes from a high basis of comparison as H1 '19 include the capital gains from the disposal of the Guy Hoquet l’Immobilier franchise network. The EBITDA margin remained high at 20% versus 25.9% in H1 '19. EBITDA for Commercial Clients increased significantly at EUR 34 million compared to H1 '19, mainly driven by the Commercial Real Estate business, sale of the Influence 2.0 building and good progress on ongoing projects. The EBITDA margin for Commercial Real Estate, 17.5%, up 6.1 points compared to H1 '19, is exceptionally high and does not reflect the group expectation of normative levels of around 9%. EBITDA for other activities showed a loss of EUR 7 million in '19 (sic) [ H1 '20 ] compared with a loss of EUR 10 million in H1 '19, reflecting good control of overheads. Nexity launched a program to control its overhead costs with a systematic review of all commitments and immediate payroll measures, including a selective hiring freeze. We look at the reconciliation between EBITDA and current operating profit on this slide, Page 21. Current operating profit came to EUR 50 million for H1 '20 compared with EUR 125 million for H1 '19. The change in current operating profit, down EUR 75 million compared with '19, was in line with the decrease in EBITDA, down EUR 63 million. The difference between EBITDA and the current operating profit mainly resulted from the depreciation of right-of-use assets under IFRS 16 in the amount of EUR 82 million compared with EUR 76 million in H1 '19. The EUR 50 million current operating profit is practically equal to the profit from Commercial Real Estate. If we look at business lines, they reflect with positive current operating profit, except from managed residence and coworking spaces due to the [ weight ] of France as well as as-usual other activities. Moving on the balance sheet on Page 22. On the assets side, the goodwill at EUR 1,664 million is up EUR 66 million and reflects the acquisition of a majority stake in pantera, a residential real estate developer in Germany. This goodwill is including the Individual Client cash-generating units. The impact of the first consolidation of pantera is mainly reflected in a goodwill of EUR 64 million and a working capital requirement of EUR 60 million. The public health crisis, though exceptional and severe, does not call into question Nexity's business models. The impairment tests show that the discounted future cash flows are much higher than the value of the cash-generating units. The sensitivity analysis carried out at 30th June did not call into question the value of goodwill. Right-of-use assets amounts to EUR 803 million at 30 June '20, down EUR 26 million (sic) [ EUR 25 million ] compared with year-end '19. This change arose from depreciation and impairment for the period exceeding the amount of new leases due to lesser residence opened during the lockdown. The working capital requirement increased by EUR 290 million and reached EUR 1,309 million, and we shall explain this in detail in a minute. On the liability side, Nexity consolidated equity was EUR 1,666 million at end June '19 (sic) [ '20 ] compared to EUR 1,757 million at end December '19 as the dividend paid during the period was higher than net profit for the half year period. Lease liabilities, IFRS 16, amounted to EUR 887 million. Net debt amounted to EUR 2,268 million at 30 June '19 -- '20 compared with EUR 1,826 million at 31 December '19, up EUR 442 million. The group net debt before lease liabilities amount to EUR 1,381 million compared with EUR 918 million at 31 December '19. The gearing ratio stood at 53% of equity. Moving on Page 23, working capital requirement. Working capital at 30 June '19 (sic) [ '20 ] was EUR 1,309 million. The increase of EUR 290 million comes mainly from Residential Real Estate development and includes the progression in work capital requirements generated by external growth in Germany, EUR 50 million, including the international subsegment. For Individual Clients in France, you're right, this EUR 150 million comes from Residential Real Estate activity and is in line with growth linked to the brisk pace of reservation in previous years and reflects future revenue. Its working capital requirement rose by 19% compared to end December '19. The working-capital-to-backlog ratio was comparable to its historical levels, around 20%. Working capital requirement was only slightly affected by the lockdown as revenue and expenditure flows exhibited symmetrical trends. For Commercial Clients, overall working capital requirement increased slightly to EUR 18 million. For other activities, working capital was up EUR 68 million mainly due to Villes & Projets, which comprises most of the group's new land position -- land bank. June 30, generally a peak in terms of working capital, and you should expect Nexity working capital requirement to be rather stable in H2. Page 24, change in net debt position. The EUR 463 million increase in net financial debt before lease liabilities, IFRS 16, mainly results from: the increase in working capital, excluding the impact of internal growth; the full year impact of the dividend payment and share buybacks carried out in early '20; and the consolidation of pantera, EUR 124 million. Our net debt, before IFRS 16, is about 4.2x our last 12 months EBITDA. This reflects the high point due to the weakness of EBITDA, which was particularly affected by the lockdown. The new debt essentially financed the working capital requirements that enables the future growth on real estate development activities. The group's cash position remains very strong with EUR 873 million in cash at 30 June '20 and EUR 355 million in undrawn authorized corporate credit lines. The group's high liquidity bolsters its capacity to withstand the public health crisis. Nexity has also secured an exemption from all its creditors and bondholders from its undertaking to respect its 3.5x leverage ratio threshold. This exemption will apply until the approval of the 2021 financial statements. At 30 June '20, Nexity was still in compliance with the 3.5x limit threshold on the contractual bodies. As of June '20, the average maturity of the group's debt was 3 years with limited repayment in 2020 and '21. And the average cost of borrowing was 2.4% compared with 2.3% at year-end '19. Let us go to Page 25 and cash flow statement. Cash flow from operating activities before interest and tax expenses totaled EUR 160 million during H1 '20, down EUR 46 million relative to FY '19, mainly as a result of the decrease in EBITDA over the period. Operating investments rose to EUR 32 million with most of the increase due to the IT investments. Nexity's free cash flow in the period to end-June '20 was a net outflow of EUR 133 million compared with a net outflow of EUR 117 million in the period to end-June '19 due to the increase in working capital requirement at a level quite similar for both periods. The negative free cash flow during the half year period resulted from the seasonality of development activities, which see high cash inflows at the end of the year. Net cash used in financial investment totaled EUR 43 million in the first half of 2020, comprising the acquisition of pantera in Germany, in particular. In the first half of '19, the net inflow notably included the disposals of Guy Hoquet l’Immobilier. Net cash from financing activities, EUR 140 million, comprised the net change in borrowings, a net inflow of EUR 169 million. H1 is not representative and it is especially low in terms of free cash flow tied on one hand by the increase in the working capital requirement, given the seasonality of our business, and on the other hand, the impact of lockdown on EBITDA. And now Julien will conclude with the outlook.

Thank you, Eric. Just a quick word on the backlog, Page 26. We already covered that. The group's backlog at end-June stood at EUR 5.7 billion, EUR 5.3 billion for Residential Real Estate, EUR 0.4 billion for Commercial. Reservation in the first half fueled backlog growth, up 11% since December '19, while the consumption of the backlog was postponed due to lower revenue during lockdown. Furthermore, development business potential at end-June totaled over EUR 14.9 billion in revenue, EUR 12.1 billion for residential, EUR 2.8 billion for Commercial Real Estate, providing Nexity with a high visibility in its future business. So in total, a EUR 21 billion pipeline coming from real estate development. And that's not counting the services, which also offer the potential of a few more billion euro of potential revenues already embedded in long-term management mandates. Moving on to the next slide, trends and conclusion. Well, the crisis has hit us hard. Let me remind you one more time that we suffered a big loss with the passing of Jean-Philippe Ruggieri, our CEO, who passed out from the coronavirus and who did so much for the company. We, as you know, managed -- the Board managed immediately a transition with the recombination of a Chairman and CEO roles with Alain Dinin taking over the CEO role for Nexity. And also, we announced today the setting up of a new Executive Committee of 12 members in a separate press release in order to give a broader base to the general management of the company. So even after this loss, we are fully operational. We are organized. Nexity is up and running. The health crisis, as you saw, led to a sharp downturn in the group results. This was partially offset by the growth carried over from previous years. Recent activity in the first half showed the resilience of Residential Real Estate. We have business challenges in the coming quarters, including signing deeds and obtaining planning permissions, particularly for the La Garenne-Colombes project. And these challenges will be, of course, critical in securing Nexity's full year financial performance. In this respect, what we would like to stress, as Eric said already, is that this half year period is not representative of the full year. A sharp improvement in profit, whether EBITDA, operating profit, earnings, is expected in the second half of 2020, much better than H1, but although not returning to same level as H2 2019. That's a kind of guidance. But in light of all the current unknowns, we believe that it will not have been quite prudent to give more guidance at this stage. However, we are firmly convinced that our business fundamentals have been tested and confirmed, and we are working on various initiatives to come back as soon as we can to a sustainable medium-term growth path, solid profitability and prudent financial structure. Thank you, and we are now ready to take your questions.

[Operator Instructions] Mr. Carmona, it appears that there are no questions at this time.

Yes. Maybe let's give you a few more seconds. If you have second thoughts, don't hesitate.

And we will take our first question from Mr. Christophe Chaput.

I hope the line is good. Two questions for me. The first one is on profitability for Residential Real Estate. So there is a drop due to volume effect plus overhead structure in a certain extent. Could you remind the figure of the overhead structure impact that you gave us for the first half? And how is it going to do, let's say, for the second half of the year? Will you be able to, let's say, book or -- yes, let's say, book those other overhead costs, please?

Christophe, just a good question. The impact of the drop in operating profit or EBITDA from Residential Real Estate, that's about 50/50, 50% less gross margin coming from less revenue, and 50% coming from the overhead. Now I'm going to ask Eric to provide more precise figures, if he wants.

Yes, of course. We said that our overhead for Nexity is about EUR 1 billion. If you look at the overhead figure, we may have about EUR 300 million for our full year overhead. So if you have 2 months lockdown, you see that you have about EUR 50 million that can be covered by the activity. In real estate activity, we make the actuation, the invoicing of overhead of the program during the construction side has to pay for the managing of program. So as the program was stopped during 2 months, we don't make any actuation from our overhead to the inventory cost. So that is what we have a strong impact during the containment period. But for the second half of the year, we don't have no margin effect, so that our EBIT margin will increase mechanically.

Absolutely. And maybe if I may add two things. First of all, in the short term, the fixed costs are fixed. There's not much that we can do unless we really destroy the industrial tool, which helps Nexity achieve its position and define its leadership. At this stage, as I said, we believe that there's a recovery underway and which still has to be confirmed. If that's the case, there's no need for restructuring. If that's not the case, we will be ready to act as we did in the past during previous crisis. The second thing is that we decided quite consciously not to result on earning a very limited fashion to the Chômage partiel, partial unemployment scheme, from the French government for 2 reasons. First of all, the sort of image reason and the value of Nexity as well. We don't want to be perceived as a company depending on state aid. That's quite important for us. So we did that on a really selective basis, targeting activities where business has completely disappeared because of the lockdown. But for Residential Real Estate, that was not the case. And the second thing is that even that meant lower productivity, we kept all our teams very busy during the lockdown period to call clients, to call prospective clients, to work on new processes, new ideas. And we believe there will be a benefit to that. So we see how the business goes or, let's say, how the market goes. But if necessary, we'll be ready to cut costs in a much more significant fashion. The second thing, as Eric said, in the second quarter, we will have normally less impact or at least a very limited impact from these overheads. On the other hand, regarding the gross margin, we -- it may be the case that it will diminish, slightly diminish or diminish in the Residential Real Estate business. Why? First of all, before someone else asks the question, there are some additional costs due to the health crisis, due to the new health and safety measures. When you reopen a construction site, we had to concede to our subcontractors a few more hundred thousand euros here, hundred thousand euros there. So that's the case, and this impact will be spread out over the duration of the project. That will not be huge, but it does exist. And the second thing is that as you saw, we shifted part of our production from sales to retail clients to sales to institutional clients. And logically, the margin will be lower, although I can tell you that we sold our projects to CDC Habitat and other buyers at quite decent margin levels. But by nature, the margin rate is a little bit lower than -- for project sales to individual clients.

Okay. That's clear. And on the commercial side, do you think you are able, if I may, to book some sales regarding the Eco Campus Engie in 2020?

Okay. That's the scenario. When we say that we expect to sign the transaction in 2020, admittedly, at the end of 2020, it means that there should be revenue as well as profit booked in 2020. And that's the consequence of IFRS 16 where as soon as you sign the first deed, you start to book the revenue, which is linked to the land -- to the value of the land. So today, that's the preferred scenario. If it moves one way or another, we will notify you. But that's today part of our budget and part of our current thinking about this year. And we would have other -- we should have other sales as well, which we're expecting at year-end.

And we will take our next call from Mr. Nicolas Tabor.

The first one on would be on -- to have an update on the pantera and to reconcile the EUR 40 million M&A spending for the H1 was only pantera. There was something else I missed. Second one was just a follow-up on the working capital. Obviously, you said it's always following closely the backlog, but I want to see what could be the impact from the Eco Campus entering the backlog and creating some moves. So as soon as you sign the notarial deed, what would be the impact on the working capital side? And then on the CapEx side, I wanted to see if there's anything to think of in terms of, first of all, increase or decrease. And then fourth question would be on the managed residencies planned openings. How many openings do you plan by the end of the year and what pace for next year? Do you have already planned something? Or is it too early?