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spk01: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to the PetIQ first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask your questions. To ask a question, please press star then one on a touchtone phone. To withdraw your question, please press star then two. Please note that today's event is being recorded. I would now like to turn the conference over to Katie Turner, Investor Relations. Please go ahead.
spk02: Good afternoon. Thank you for joining us on PetIQ's first quarter 2024 earnings conference call and webcast. Gord Christensen, Chief Executive Officer, and Dee Glassman, Chief Financial Officer, will review today's prepared remarks. Before I begin, please remember that during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual events or those described in these forward-looking statements. Please refer to the company's annual report on Form 10-K and other reports filed from time to time with the Securities and Exchange Commission and the company's press release issued today for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please note on today's call... Management will refer to certain non-GAAP financial measures. While the company believes these non-GAAP financial measures will provide useful information for investors, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP. Please refer to today's press release for definitions and a reconciliation of non-GAAP financial measures to the most comparable measures prepared in accordance with GAAP. In addition, PetIT has posted a supplemental presentation on its website for reference. And with that, I'd like to turn the call over to Cord Christensen.
spk10: Thank you, Katie, and good afternoon, everyone. We appreciate you joining us today to discuss our Q1 financial results. I'll begin with an overview of key highlights, then Zee will review our quarterly financials and 2024 outlook. Finally, Zee, Michael, John, and I will be available to answer your questions. We are pleased with our start to 2024. We had a record Q1 with consolidated net sales of $308.4 million at the high end of our guidance. The consistent growth of our product segment fueled our financial results. The strength of Pedicure's brand in Q1 led to favorable leverage of our costs with gross margin expanding 280 basis points to 24.2%. This helped offset higher SG&A expense when compared to Q1 last year, resulting in record profitability. Our net income of 14.9 million, or EPS of 48 cents, increased 47.8% from Q1 last year. And Q1 2024 adjusted EBITDA increased 15% year-over-year to 35.3 million, exceeding our guidance of 31 million to 33 million. This resulted in the highest adjusted EBITDA margin in the company's history of 11.4%, an increase of 80 basis points from Q1 of last year. Based on these strong year-to-date results, we are pleased to raise our guidance for 2024 net sales, adjusted EBITDA, and free cash flow. Focusing on our product segment in more detail, for Q1 of 2024, the product segment contributed net sales of 276.9 million, an increase of approximately 7% compared to the prior year period. The growth in Q1 of this year was broad-based across all product categories. As we've discussed with you the last few quarters, when you look at all the sales channels combined for 2023, it was one of the strongest seasons in the last 10 years for the OTC flea and tick category. We are lapping that record season in 2024, and yet we continue to generate impressive growth from Pedigree's brands, which were up 14.3% compared to the first quarter last year. This growth rate exceeded our expectations for the quarter. Our in-house sales and marketing teams are building significant brands in the pet categories that are growing both online and at brick and mortar retail, while capturing a disproportionate amount of market share. In Q1, we spent an incremental $4.7 million on enhanced advertising and promotional efforts in line with our planned step-up in marketing for 2024. This step-up is included in our Q1 2024 adjusted EBITDA. For Q2, we expect to spend $6 million more in brand building and marketing initiatives than we did in Q2 last year. We are continuing to lean into investments and initiatives that we expect to support the long-term success of our brands. I'd now like to focus on a few of our key category consumption highlights for the first quarter. In the first quarter of 2024, the OTC flea and tick category grew 6.2% and PetIQ's brands increased 10.6%. PetIQ's flea and tick brands gained share across all channels and at each of our top 10 customers while continuing to capture a disproportionate amount of the growth online and dramatically outperforming the broader category as evidenced by our market share results. For the 12 weeks ended March 23, 2024, PetIQ's OTC flea and tick brands captured 15.8% of the category dollars, which is an increase of 63 basis points versus the prior year period. The pet supplement category in total maintained its growth trajectory in the quarter, gaining 14.8% over the prior year period. This fast growing category has nearly tripled in market size over the last five years and is now the largest category within the OTC animal health market. Our pet supplement brands continue to see accelerated consumption and growth. In the first quarter of 2024, where offerings in the space grew 51.2% compared to the prior year period. This growth is driven by our Vet IQ brand, along with the successful launch of Rocco and Roxy into the premium segment of the category. Strong household penetration trends along with expanded need space in the pet supplement category give us confidence that these double-digit growth rates should continue for many years to come, and PetIT is positioned very well to continue to gain share in this market. In addition, our pet dental and treat offerings also outperformed the category in Q1. The Minty's and PureLove brands both grew at three times the total category, leading to significant share gains. The Minty's brand grew 48% and gave 89 basis points of share in the dental tree category. The Pure Love Tree brand also continues to gain momentum as it posted outstanding growth of 65% in Q1 versus a year ago. The newest brand in our product portfolio, Rocco and Roxy, grew 23.4% from the first quarter of 2024. This growth was driven by our launch into the supplement category, and the core stain and odor offerings also saw healthy growth and grew share within the market. Shifting to the services segment, we had a slight net sales increase of 0.2% to 31.6 million compared to Q1 last year. We ran more mobile community clinics across the country than a year ago and increased our pet counts to grow our services segment net sales and essentially offset the lost sales from the 149 wellness centers we closed in the second half of 2023. Our services team continues to do an excellent job managing our contract vet labor to offer pet parents convenient and affordable pet health and wellness options. We are also pleased with the significant operational improvements we achieved in Q1 of this year, which led to gross margin expansion of 810 basis points for the services segment. That completes my Q1 highlights. Before I turn it over to Zvi, I would like to thank our team across the country for their commitment to our mission of providing smarter pet healthcare and their continued support of PetIT's core values. I'd like to now turn the call over to Zvi.
spk09: Thank you, Cord. Today I will discuss our Q1 financial results in more detail and our outlook for 2024. We're pleased with our start to the year. Our seasoned team generated strong growth across PEDACU's brands to increase both sales and profitability year over year. And the services segment optimization we completed in the second half of 2024 is already generating significant operational improvements for our business. For Q1 of 2024, the company reported net sales of $308.4 million. an increase of 6.2% compared to Q1 of last year, driven by growth in the product segment. This was at the high end of our guidance for the quarter, driven by broad-based growth across sales channels and product categories, as Cord mentioned. First quarter 2024 gross profit was $74.5 million, an increase of 19.7% compared to $62.3 million in the prior year period. Gross margin increased 280 basis points to 24.2% from 21.4% for Q1 of last year. The growth and success of our higher margin manufactured brands was the primary driver of our margin expansion as well as operational efficiencies in our facilities. We also benefited from our services segment optimization with a closer of 149 wellness centers in the second half of 2023. From an STNA perspective, as we noted on our Q4 call, we are spending more on marketing in 2024 to support our manufactured brands. As a result, first quarter adjusted SG&A increased $7.8 million to $47.1 million, and as a percentage of net sales, adjusted SG&A was 15.3%, an increase of 180 basis points compared to the prior year period. The increase in SG&A was primarily due to an increase in marketing expense of $4.7 million, and the remainder was mostly normal increases in annual compensation expenses. Adjusted net income was $18.5 million, and adjusted EPS was 53 cents, an increase of 32.5% year-over-year. EBITDA increased 20.2% to $32.2 million, and adjusted EBITDA increased 15% to $35.3 million above our Q1 adjusted EBITDA guidance. Our adjusted EBITDA margin increased 80 basis points year-over-year to 11.4%, the highest in the company's history, even with the step-up in marketing expense. Turning to our balance sheet and liquidity, the company ended Q1 with total cash and cash equivalents of $25.4 million. For 2024, we are raising our guidance for annual free cash flow from an excess of $45 million to an excess of $50 million. From an inventory perspective, our inventory at the end of Q1 was a bit higher than normal for this time of the year. This is due to our planned seasonal build and the timing of available inventory from our distribution partners. As we progress through the flea and tick season in Q2 and into Q3, we expect our inventory to be more in line with our historical levels. The company's total debt, which is comprised of its term loan, ABL, and convertible debt, was $443.9 million as of March 31, 2024. In addition to our cash on hand, the company's $125 million ABL is undrawn. Total liquidity, which we define as cash on hand plus debt availability, was $150.4 million as of March 31, 2024. While we continue to have no intention of making additional borrowings, we would note that our liquidity is ample and our credit facilities are flexible. Our net leverage as calculated under terms of our credit facilities at the end of Q1 was 3.6 times, an improvement from four and a half times in 2023. Keep in mind, Q1 is always our highest leverage quarter of the year based on seasonal changes in working capital due to the annual increase in inventory to position us well for the flea and tick season. On April 30, 2024, subsequent to the end of the first quarter, we completed the sale of the company's farm subsidiary within the product segment. Mark and Chappell for approximately $4 million in net cash proceeds, and the company will receive future royalties for certain licensed trademarks and related intellectual property. As a result of the transaction, we expect to recognize an approximate $1.7 million loss subject to normal working capital adjustments in the second quarter of 2024. Now, turning to our guidance. As stated in today's earnings release, we are raising our full year 2024 net sales and adjusted EBITDA guidance that we previously provided on February 28, 2024. Our 2024 full-year outlook remains inclusive of the services segment optimization, the sale of the company's farm subsidiary mark and chapel, and a return to a more normal flea and tick season as compared to the record seasonal patterns experienced in 2023. These three items total approximately $52 million in net sales and $8 million of adjusted EBITDA on an annual basis. If you take these into account, our growth in 2024 would be significantly higher or represent a net sales increase of approximately 11% and an adjusted EBITDA increase of approximately 19% as compared to 2023. We've broken these variables out for reference in the Outlook section of today's earnings presentation posted on the Investors section of our website. Inclusive of the variables I just mentioned, for the full year 2024, we expect net sales of $1,135,000,000 to $1,185,000,000, an increase of approximately 5% based on the midpoint. An adjusted EBITDA of $112,000,000 to $117,000,000, an increase of approximately 10% based on the midpoint, including our step-up in marketing compared to last year. For the second quarter of 2024, we expect net sales of $325 million to $335 million, an increase of approximately 5% based on the midpoint. Adjusted EBITDA of $34 to $36 million, an increase of approximately 6% based on the midpoint, including the approximate $6 million in incremental marketing spend compared to Q2 of last year. Additionally, I want to reiterate that for modeling purposes going forward, our share count will vary during the course of the year due to the accounting rules regarding the company's convertible notes. This will depend on a number of factors, including quarterly earnings. For certain quarters in 2024, the share count will increase by approximately 4.8 million shares, and our diluted EPS will be calculated on the same basis. Importantly, we currently have no intention of satisfying our convertible debt obligation with shares, but are required to report the company's share count based on the theoretical increase. That concludes my financial review. Cord, Michael, John, and I are now available for your questions. Operator?
spk01: Thank you. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your telephone keypad. If you're using your speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw it, please press star then two. At this time, we will pause momentarily to assemble our roster. And today's first question comes from Rupesh Parekh with Oppenheimer. Please proceed.
spk00: Good afternoon. Thanks for taking my question. And also congrats on a really nice quarter. So maybe just starting out with the gross margin line. So, you know, really strong performance across both the product side and the service side. So I know the product side typically mix can impact the delivery there. But at least on the service side, just hoping to get some more color in terms of how you guys think about the sustainability of the level of gross margin delivery we saw in Q1.
spk10: John, do you want to take that one? Okay, John.
spk04: Yeah, there's three key factors that are driving it, as you called it, Rupesh. So we just talked about the services element. So that's a key component of it. And then when you look at the mix of what's growing in our business, it's the manufactured portfolio versus distributed is really benefiting in a big way. We expect that trend to continue. And then I'll let Z talk specifically to some of the key things we expect to continue as we trend into Q2 and 3 and 4.
spk09: Well, I think if you're thinking about the services specifically, we're going to see a lot of increases in services for the balance of the year. There's always some seasonality, but we are going to be anniversary and closing 149 wellness centers. In terms of some of the improvements in product, yeah, you're right. Some of that came from mix, but also we'd like to highlight that we had a fair bit of operational improvements, and some of those are in our base in the back half of last year. So in total, we feel really good about margins moving up and to the right this year. We had previously guided 50 basis points plus a margin improvement. We think it's more like 75 plus now. We will tell you that every quarter won't be linear.
spk10: Mix will impact it, and we're not really prepared to give margin guidance by quarter, but we feel really good about the trajectory of our margins over time. As we continue to contribute or add additional... I know we highlighted in our release our comments, and I'm sure you'll have more comments about it as this call goes on.
spk00: Great. And then maybe just two related questions just on the environment. So you guys have tremendous momentum throughout your portfolio, but the pet category is clearly a challenge out there, and some concerns about the US consumer as well. So just love to hear just what you guys are seeing in the pet category and then just any shifts you're seeing from a consumer behavior perspective.
spk10: We're best in accord and thanks for the questions. We're watching the product categories more than we were. There's definitely pressure on some of them that is different than what we're seeing. Our categories are still in good organic growth and obviously we're growing significantly faster than the categories. So we have not seen the consumer deprioritizing their pets' health care where they are able to trade down and some of the other categories or go without.
spk00: Okay, great. And then just my final question. So just on the flea tick season, or I guess in terms of how you guys plan the year, any changes versus what your initial thoughts were on planning for an average year? Is that essentially how it's playing out so far?
spk10: Michael, why don't you take that one?
spk05: Yeah, Rupesh, when we modeled the year, we call it a five on a scale of one to 10, kind of an average year. If you were to look at the first three to four months of the season, we would say that the year to date scored more like a six. And what we are projecting for the rest of the year would be consistent with that early read that we're seeing on the season. So slightly favorable compared to our original modeling, which had the category growing 3%, categories actually growing closer to four to 5%. And as Court mentioned, We're well north of that performance for our portfolio, and we would expect pretty consistent trends throughout the rest of the year, looking at the weather patterns, a variety of different metrics that we get to read the tea leaves, if you will, on the quality of the season, tell us we should expect something like a 5 or 6 on that scale of 1 to 10.
spk00: Okay, great. Thank you. I'll pass it along.
spk01: The next question comes from John Anderson with William Blair. Please proceed.
spk03: Good afternoon, everybody. Congrats on the quarter. I wanted to ask about the marketing spending. Are you still planning on, at this point, spending, I think it's an incremental $12 million for the year. What is the cadence of that? And if you can talk a little bit about how you're applying those dollars, obviously you don't want to talk too much from competitive reasons, but kind of maybe big picture where those dollars are being applied in the products and or services businesses. Thanks.
spk10: Hey, thanks, John. Thanks for the question. Yes, we are adding the $12 million. It's on a base of 44. We have significant investments already being made across the entire year. The incremental $12 million is heavily front-year loaded. So you'll see us spend close to $10 million in the front half of the year. And then a balance will be spent in the back half. But we have ample spread across that. We don't love talking about where and how we're spending it for competitive reasons. But I can tell you that, as we've said before, we are measuring it. We're seeing the return, why we're exceeding our projections and the categories. And we feel good that we're still going into the right amount of spend for how we can affect our company's brands and our sales and profits. So you definitely can see it in the numbers.
spk03: And are you seeing on the products business, are you seeing both healthy demand on the distributed side of your business, which maybe is more national or premium, and as well as your own, or is there trade down that's helping manufactured brands? I don't know if there's anything you can kind of tease out from what you've seen so far in terms of consumer behavior.
spk10: Michael Smith, would you like to take that one, please?
spk05: Yeah. I would say the overall health of the category is solid, right? So our outperformance isn't necessarily coming at the demise of other players in the category. So if you look at the health of our distributed brands, consumption, it is close to the expectation that we built for the year. If you look at our manufactured brands, we're obviously well ahead of the expectations that we had modeled. And again, a lot of that growth isn't necessarily coming as cannibalization. We are seeing some new customers come into the category, or we're seeing some lapsed customers come into the category that's helping to generate kind of an overall bigger pie than we expected, and we are getting a bigger piece of that pie than we modeled in the beginning of the year. So it's not that our distributed businesses are performing poorly. It's just that our manufactured brands are really accelerated and exceeding that performance.
spk03: Yeah, that's helpful. One quick one. I think, I may be wrong on this, but I think it's fairly unusual for you to raise at this point of the year. Could you talk a little bit about, you know, what gives you the conviction? Maybe there's one or two things. I don't know if it's the release season for the consumer, if it's that incremental marketing spending. What you're seeing that gives you the kind of conviction to raise at this point? Thanks.
spk10: Yeah, thanks for the question, John. We, you know, obviously we've historically not raised guidance in the end of the first quarter because we want to see second quarter consumption and get a real solid read on some of the seasonal parts of our business. I think first and foremost, we're starting to see our other brands that aren't seasonal pick up steam and they're, you know, continuing to gain momentum and their top line is drawing at a higher percentage than what we did last year or projected. Slee and Tick at a six adds some incremental to it as well. And so right now, the consumption rates we're seeing, the way that we're seeing the market, we felt very good about raising all three of those lines and leaning in that way. And we hope to see continued acceleration. If we can, we, you know, maybe do the same thing at the end of the second quarter or third quarter. But we're definitely seeing the right trends right now.
spk07: Great. Thanks so much. And as a reminder, if you do have a question, please press star then one on your telephone keypad.
spk01: The next question comes from Bill Chappelle with Truist Securities. Please proceed.
spk07: Thanks. Good afternoon. Can you hear me? I can hear you, Bill. Can you hear us?
spk08: Yeah, sorry. Is there any way to kind of bridge the gross margin expansion in terms of product mix versus being manufactured versus distributed as compared to just channel mix? I'm just trying to understand how much of this was your product versus manufactured products. I mean, versus third-party product distribution business, and how much of this was actual just gains in efficiency and overall?
spk10: Yeah, I think, Bill, we said it a couple times that, look, our products are doing extremely well, much higher margin. You know, we're seeing the overall average margin in that portfolio move up a little above where we were talking about from before, so we're better than the 56-plus market. Right now, and when your growth rates are 14.3 overall, and you have categories where we're, you know, 50%, three times the category, flea and tick being up, you know, better than two times, that's going to be a contributor. We are getting extremely good in our plants, and as you get more throughput and get bigger with the efficiencies we find, are paying dividends at a faster rate. And then, you know, closing down stores that had a drag on it and picking up the 810 basis points, and services that we believe that we can retain throughout the year gives us a lot of confidence that we're doing the right things with the margin and heading in the right direction. So our mix for the quarter was really in line with what our normal mix is. And so it wasn't a significant mix change. It's the other things we just talked about. I don't know, Zvi, if I missed something or... Yeah, of course.
spk09: Cord said it right. We had a little bit of benefit in the mix, but it was not the biggest part of the story. It was, you know, 1% or 2% higher manufactured versus distributed versus last year. But by the same token, our manufactured businesses, our health and wellness brands, and our dental treats are growing faster, and they carry a slightly lower margin than our flea and ticks. So, you know, I think everything Cord said is right. This is the margin improvements are a real thing. We expect them to continue, albeit at a different rate throughout the course of the year. That's why we signal that we'll be up 75 bps plus in margin for the year.
spk08: Got it. Well, maybe just to follow up, I thought there was a a distributed product, a new product in the market, kind of a three in one that was started last year that you thought was going to drive a lot of the revenue growth, which would have pushed down margins. Was that not the case that I guess I was thinking there was, there were some headwinds just from that standpoint.
spk10: Yeah. I mean, the product is launched. It's, uh, doing extremely well. We're starting to see a pickup. It was a direct contributor to the excess inventory that people will refer to as you look at, as we talked to, um, But, again, the timing of the season and what's going on, you had first quarter, it's not enough volume, and the consumption rates we're watching, we've taken that into account. So I feel like we can still capture that 75-plus basis points improvements in margin we talked about.
spk08: Okay. And then in terms of kind of what you're seeing for Roku and Roxy, I thought this was a quarter where you'd see – pretty meaningful distribution gains. I think that's right. Did you get those gains? Are they on the shelf? And should that show up more as we move forward through this year?
spk10: Michael, do you want to take that one, please?
spk05: Yeah, we had a few big expansions planned that have played out as expected. Last quarter, we talked a little bit about the launch of Rocco and Roxy into the supplement space. Those points of distribution have played out as expected and they were later in Q1 and will have a bigger impact in Q2 and the rest of the year. Our large bone launch under the Menti's brand also hit our expectations and a little ahead of that in the quarter. And a couple other expansions within our flea and tick portfolio that all have played out as expected as these planograms, modulars for the kickoff to 2024 have hit the stores.
spk08: Okay, great. And then one last one on services. Any changes on kind of just the overall vet population in terms of hiring and even for the mobile clinic side?
spk04: The key pivot for us is we've been really focused on the key wellness centers that generate the most income for us, and we've had success in landing vets in key locations that we need. But more importantly, we have a very healthy vet population on the community clinic side. So continuing to have on average around 3,500 vets in that population. As a reminder, kind of peak COVID timeframe, we only had about 800. So we're really happy with how that's climbed back up. And we're seeing it in our cancellation numbers, which was called out by CORD. Cancellation numbers are as low as they've been back in 2019. So really proud of the team in rallying there and getting the vet population back in.
spk07: Great. Thanks for the color.
spk01: The next question comes from John Lawrence with The Benchmark Company. Please proceed.
spk06: Yeah. Good afternoon. Thanks. Good quarter. Congrats. Court, good to talk about following that last question. Just a little bit more on that services optimization. obviously getting that sort of the fill rates and everything in that business better than what it's been in the last couple of years. Can you dig in a little bit more of what you did to optimize that mobile clinic business? Is it all just stopping the absenteeism? What did you do that really optimized the mobile clinic business?
spk10: Yeah, it's across all the services business, not just the mobile. It's also the wellness centers that contribute. Look, when you close stores like we did, there's going to be a pickup from underperforming stores. We've put a lot of controls and operational controls on all of the stores. We're running more community clinics, and they have a higher profitability and margin that they drive. And I think just in general, we've really made sure that as we've kind of got further and further away from all the closures that took place during COVID and all the cancellations to where we're really solving for a lot of those problems. So you're, you're overcoming labor issues that we had coming out of COVID. We're closing stores that were just never going to be great. Like we said, and you add all those up together and that's why you're seeing the margin improvements and the contribution going the right direction.
spk06: Right. Thanks. Secondly, um, Rocco and Roxy, can you, can you, Go back and talk about the plan when you looked at that acquisition. Now you've had it for a period of time. It's doing extremely well. Is that the best example or a base case of how we should look at possibilities, how you extend the business and extend the categories going forward?
spk10: Yeah, thanks for the question, John. I feel like we're running all of our brands, all of our categories in the same way, and We're seeing great results across all of the business by doing that. Rocco & Roxy is a great example of when we make an acquisition that we have line of sight to very quick improvement in placement, product extensions, and a number of ways to improve it. And we've done it a number of times. Frankly, most of our acquisitions have been very similar to that. So I would say we're very smart to find acquisitions that are great brands that we can then put our ability to – really improve everything about it, whether it's manufacturing, whether it's efficiencies across just people, its store count, its products, you name it. It's a great example, and yes, it's done extremely well, and the team has done extremely well at getting placement for the extensions, and we're seeing the brand really performing well across all channels right now. We hope to continue to do that across our existing brands, that brand, and all the ones that come in the future.
spk06: And not to go too far with that cord, but Would that be even, when you look at that example, it's both top line and bottom line from where the original strat plan, is that right?
spk10: Yeah, we're ahead of our plan on the growth rate for the top line. And we've said many times that we paid eight, eight and a half times trailing and expected to be kind of that four to five on a run rate basis within six months. And we've been ahead of schedule on both top and bottom.
spk07: Great, congrats, and thanks. Thanks, John. And once again, if you do have a question, please press star, then 1.
spk01: And at this time, we are showing no further questioners in the queue, and this does conclude our question and answer session for today. I would like to turn the conference back over to Cord Christensen for any closing remarks.
spk10: First, I'd like to thank all the great people at PediQ that keep delivering such great work, that deliver great results, and just feel really, really great about how the company continues to get better and better every day at what we do. And thank all the shareholders and analysts and everyone that show up and challenge us and we get to interact with as we talk about those great results. So look forward to talking to many of you over the next few days, and definitely look forward to talking to you again when we get to the end of the second quarter.
spk07: Thanks for joining us today, Pradeep. The conference is now concluded. Thank you for attending today's presentation, and you may now disconnect.
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