Zevia PBC

Greetings, and welcome to the Xevia PBC Q3 2024 earnings call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star then zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Reid Anderson from ICR. Please go ahead, Sal.

Thank you, and welcome to Xebia's third quarter 2024 earnings conference call and webcast. On today's call are Amy Taylor, President and Chief Executive Officer, and Girish Satya, Chief Financial Officer. By now, everyone should have access to the company's third quarter 2024 earnings press release and investor presentation made available this morning. This information is available on the investor relations section of Xebia's website at investors.xebia.com. Before we begin, Please note that all the financial information presented on today's call is unaudited. Certain comments made on this call include forward-looking statements which are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's current expectations and beliefs concerning future events and are subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release and other filings with the SEC 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. During the call, we will use some non-GAAP financial measures as we describe business performance. The SEC filings, as well as the earnings press release, presentation slides that accompany today's comments and reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures are all available on our website at investors.xevia.com. And now I'd like to turn the call over to Amy Taylor.

Thank you for joining our third quarter conference call, particularly on the morning after the highly anticipated election. We are pleased with the vast improvement we delivered in Q3 adjusted EBITDA, illustrating strong execution of our productivity initiative. While Q3 net sales were slightly below our expectations, We anticipate a return to growth in the fourth quarter largely driven by our expansion in the 4,300 Walmart stores nationwide. We're excited about the rollout in Walmart, and we remain confident in our long-term potential. We believe that we are uniquely positioned to capitalize on the growing demand for healthier alternatives to traditional soda. We offer a distinctive blend of great taste, zero sugar, clean label products, and exceptional value. And so to seize this opportunity, we will execute a robust brand marketing strategy, expand our distribution, and drive unparalleled product innovation. Additionally, our progress and cost savings initiatives will enable us to reinvest in our growth while enhancing long-term profitability. Before I provide an update on our strategic plan, I'll share some highlights in the third quarter. As I mentioned, we've made significant strides in our productivity initiatives, improving our adjusted EBITDA loss to $1.5 million, down from $9.1 million in the third quarter of last year. This also marks a substantial improvement in the first half of 2024. We achieved this through enhanced efficiencies, cost savings, and better product costing, which allowed us to deliver a record growth margin of 49%. As a result of our progress, we now expect annual cost savings of $15 million, an increase from our previous estimate of $12 million. With respect to net sales in the third quarter, we came in slightly below our expectations at $36.4 million. The 16% net sales decline versus Q3 of last year was largely a function of the expected reduction in club distribution and at one of our mass customers. And to a lesser degree, our strategic decision to exit the kids and mixers category to focus on soda. As we look forward, we plan to expand distribution in a very intentional way. Our confidence is underpinned by the strong stealth we saw in key strategic channels during the third quarter. For the third quarter, scan data in the grocery channel indicated dollar growth of 8% and unit growth of 9%. For the four weeks ending October 6th, scan data showed dollar growth accelerating to 14% and unit growth at 17%, reflecting the positive impact of our adaptive promotional schedule. We are also making strong progress in our direct store delivery or DSD initiative, focused in the Pacific Northwest. Grocery store scan data reflected stronger performance in the PAC Northwest market versus our other markets, which we attribute to increased service levels and enhanced merchandising. We are also underway in building our presence in the convenience channel, where we have begun distribution in a number of independent outlets and set the stage to expand in the convenience chain with upcoming spring resets. From a brand perspective, we tested new marketing campaigns reflecting a sharpened brand character to the select metros to the summer and into the fall. These elevated campaigns reinforced our differentiated position as a great pacing, zero sugar, clean label soda in a world awash with fake and artificial. We were pleased to see our message resonating with consumers. The 10 key markets where we ran the campaign yielded growth an average of five percentage points higher than that of control markets across 20 weeks. In 2025, we will leverage these insights, along with our recent breakthroughs in taste and flavor innovation, to continue building our brand. And so with that, let's turn our attention to the product portfolio. We are pleased to see that each new Zevia flavor continues to outperform the last, with the success of creamy root beer and vanilla cola, followed by our summer 2024 innovation, Crayon Raspberry, which has become the top media contributor to growth in the natural channel. Most recently, we saw a very strong response to our limited-time e-commerce exclusive salted caramel flavor, which is tracking the sellout well ahead of expectations. Looking ahead, we are optimistic on the path forward. There's a growing movement in Better For You Soda, a category which is expected to go three times faster than CSB over the next five years. And we are at the forefront of that movement. Through amplified marketing, focused distribution expansion, and product innovation, we believe we are well-positioned to be the long-run leader in natural soda. We are building a clear path to both re-accelerate growth and deliver significant improvement in adjusted EBITDA. I will speak to our top line strategies while Giris will speak to margin expansion initiatives. The evolution of our growth strategy is underpinned in building our brand marketing muscle. We have shifted our focus to a more compelling emotionally driven storytelling. Our relatable content inspires brand trust and love with media consumers by owning the real in a never ending battle against the fake. We're building relationships with relevant TikTokers, YouTubers, and podcasters to build reach and relevance. The overhaul of our social content contributed to a 55% sequential increase in engagement versus a second chorus and a more than 500% increase in organic views. We also plan to focus our marketing investments on broad reaching campaigns spanning digital and out of home to drive awareness, our sharp new creative, to be seen across Los Angeles in the company's largest out-of-home campaign yet. We're leaning our marketing strategy toward introducing new consumers to Xevia. And once they try us, we see that they stay and they spend more. Xevia shoppers' brand spend is 57% higher than that of all other better-for-you soda brand spend. And Xevia holds repeat rates at 40%. While we anticipate it'll take time for brand-building investments to support pull-through, Qualitative and quantitative indicators give us confidence that we are on the right path. Our marketing efforts are also expected to help fuel distribution expansion across channels, but we know, again, it'll take time to build that momentum. This week marks an important step forward in strategic distribution gains for the brand. We are rolling out Zevia to over 4,300 Walmart locations this month, thanks to the strong sell-through we experienced in our initial 800 stores. We believe our presence in Walmart will be instrumental in increasing brand awareness nationwide, especially in underpenetrated regions, such as the Southeast, where we are seeing the fastest growth. Additionally, ZVS singles at the value channel retailer Aldi performs well, and 2025 will feature new distribution of ZVS six-pack at several hundred stores. We are well on our way to better penetrating shoppers at all income levels. who have been significantly underserved in better-for-you affordable zero-sugar beverage options. With respect to our DSD or direct-store delivery strategies, we are still in the early stages of execution. We are focused on magnifying our presence in the grocery channel to better placement, and it's working based on improved grocery velocity in the DSD equipment. In the convenience channel, we will look to accelerate brand discovery and increase conversion with singles distribution, and the help of our brand building. We are expanding our DSD footprint into the southwest with Crescent Crown in Arizona on board, and we'll pursue adjacent geographies in the coming months. Touching on products, we've made strides in product development, innovation, and taste evolution. We are creating a more sugar-like taste experience, and this will be evident in the exciting new flavors we are rolling out in spring 2025. In addition to the creamy and indulgent flavors we've become famous for, including root beer, and more recently, the salted caramel, we have an accelerated cola business, from straight cola to caffeine-free cola, to cherry cola, and most recently, vanilla cola, a top growth driver. And now, we will be able to expand the zero-sugar, clean-label grape taste into new major flavor segments. In addition to introducing new flavors, We're also introducing an eight-can variety pack at Walmart this month, and for the first time, a 12-can variety pack across retail in 2025 with a focus on driving trial. Before I turn the call over to Girish, I want to briefly address our near-term revenue expectations. As we have stated in the past, the emerging natural soda business is dynamic, and we have faced channel-specific distribution challenges that have impacted our sales performance. With that recognition, we realigned our strategy with a focus on marketing, on portfolio strength, and on quality sustainable distribution, highly encouraging early signs. We expect that our growth path will be gradual at first as we build sustainable momentum and pave the path to strong profitability. With that, I will turn the call over to Girish.

Thank you, Amy. Good morning, everyone, and thanks for joining our call today. As Amy discussed, we are excited about the meaningful progress we've made on our productivity initiative. By realigning our costs across the P&L, we are able to reinvest in growth while strengthening our balance sheet. Xevia is uniquely positioned to win within the fast-growing natural soda category with a great taste, zero sugar, and clean label product at price points significantly below that of other brands. We are confident that the foundational work we are doing now sets us up to capitalize on this tremendous opportunity and deliver long-term profitable growth. As a reminder, our productivity initiative encompasses three pillars, brand maximization, margin enhancement, and improved operational discipline. Since we commenced this initiative in the second quarter of 2024, we have made meaningful progress against our targets. With a focus on driving substantial and sustainable improvements in unit economics, We continue to find significant opportunities to reduce our product costs while maintaining or even enhancing our product quality. We have also implemented cost savings via warehouse consolidation and network optimization. Lastly, we've made progress on eliminating unproductive SG&A spend. From a margin enhancement standpoint, these efforts yielded a 370 basis point improvement in gross margin to 49.1%, as well as reduced selling and warehousing expenses as a percentage of sales. We have also seen cash flow improvements from the prior quarter as a result of the changes we've implemented. The progress we have made enabled us to increase our expected annual cost savings target to $15 million from the $12 million we previously provided. We begin to see these cost savings in Q2, but expect these savings to be more fully realized through year-end 2025. Lastly, we continue to employ a philosophy that emphasizes returns across growth initiatives and discipline around working capital. I will now discuss our third quarter financial results. We delivered net sales of $36.4 million, just shy of the low end of our guidance. versus prior year, net sales were down 15.6%, reflecting a decrease in volumes of 12% associated with the impact of the aforementioned loss of distribution at club and one mass customer, as well as the exit of our kids and mixers lines. On an equivalence case basis, our net ASP declined 3.9%, reflecting our efforts to liquidate excess obsolete inventory, which is transitory and expected to be completed by the end of 2024. The slight miss to net sales was attributable to lower than expected response to one of our promotional tests, as well as shipping challenges related to the hurricane in the southeast. Gross margin was 49.1%, an increase of 370 basis points versus the third quarter of last year. This improvement reflects the impact of our productivity initiative previously discussed, as well as the shift in channel mix and lower inventory losses versus prior year. as we lap the transition to our turnkey manufacturing model. This was partially offset by investments in enhanced graphics to improve on-shelf visibility and increased promotional activities, which reflects a return to historical levels. In addition to the temporary increase in promotional spend to liquidate excess and obsolete inventory, we have also been testing a variety of new promotional strategies over the last several quarters. We've seen encouraging signs of effectiveness of this new approach, with a 15 percentage point increase in lift versus prior year in select grocery customer tests. We will continue to refine our promotional strategies and are encouraged by the returns we are beginning to see in our new approach. Selling and marketing expenses were $12 million, or 32.9% of net sales in the third quarter of 2024, compared to $20.5 million, or 47.5% of net sales in the third quarter of 2023. The decrease was primarily due to a decline in freight transfers as a result of the impact of supply chain logistics challenges in the prior year, lower repacking costs due to automation, a decrease in freight costs due to optimization of freight lanes and favorable spot rates, and a reduction in warehousing costs due to the consolidation of warehouses and reduction in inventory levels. These decreases were partially offset by investments made in marketing to drive brand awareness. General and administrative expenses were $7.4 million, or 20.3% of net sales in the third quarter of 2024, compared to $8.3 million, or 19.1% of net sales in the third quarter of 2023. The decrease was primarily driven by a decline in cost as a result of our productivity initiative. Net loss was $2.8 million, compared to a net loss of $11.2 million last year, an improvement of $8.4 million. A Justin D. Bedell loss was $1.5 million compared to an adjusted EBITDA loss of $9.1 million in the prior year period. This improvement was primarily driven by the lapping of a number of expenses related to the supply chain transition from last year, as well as the impact of our productivity initiative. We anticipate that we will continue to achieve improvement in quarterly losses as we balance business reinvestment and bolstering profitability. Turning to our balance sheet, We ended the quarter with approximately $32 million in cash and cash equivalents and have an undrawn revolving credit line of $20 million. Turning to guidance, our revised 2024 net sales outlook largely reflects the slight miss in our third quarter performance. In addition, going forward, we will be providing adjusted EBITDA guidance, giving greater visibility into our business. For the fourth quarter, we expect sales of between $38 million to $40 million, reflecting approximately 3% growth at the midpoint of the range as compared to the fourth quarter last year. This reflects the impact of the Walmart pipeline sale, as well as more effective promotional programming at our key grocery customers. We expect Q4 adjusted EBITDA to be in the range of negative $1.8 million to negative $2.2 million, reflective of a shift in marketing spend from Q3 to Q4. This compares to adjusted EBITDA of negative 6.2 million in the fourth quarter of 2023. For the full year, this translates to a net sales outlook in the range of 154 to 156 million and adjusted EBITDA loss of approximately 13 million. While we do not provide formal guidance on gross margins, as mentioned previously, we expect to remain in the mid to upper 40s over the next several quarters as we realize the benefits of the improvements we've made to our cost structure. We expect that gross margins will also fluctuate based on our DSD mix. Looking beyond this year, we expect modest growth in 2025 as we focus on building brand momentum and expanding distribution across channels, which we recognize will take time. We will continue to balance investing and growth with our goal of achieving positive adjusted EBITDA in 2026. In closing, we believe that the work that we are doing positions us to deliver long-term, sustainable, profitable growth as we capitalize on the enormous opportunity within natural soda. I will now turn it over to the operator to begin Q&A.

Operator? Thank you, Sal.

At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star and then 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and then two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. Again, if you would like to ask a question, please press star and then one now. The first question that we have comes from Bonnie Hazzock of Goldman Sachs. Please go ahead. All right, thank you.

Good morning, everyone. I was hoping for a little more color this morning on, I guess, the loss distribution you called out in your club channel and then the one customer in your mass channel. I was wondering if you could give us a sense of maybe the impact from this loss distribution on your top and maybe bottom line. And then the expanded distribution that you highlighted, expanded distribution to Walmart, that is. you mentioned you're expanding this month so guess i'm trying to reconcile that with you know your outlook for i guess modest one to six percent sales growth this quarter thanks yeah thanks bonnie let me let me talk a little bit about uh the retail side um and then when it comes to the impact on top and bottom line and the outlook i'm going to turn that over to gears to make a few comments so

You know, the softness in the quarter really came down to the volume impact of reduced store selling in-club and a few promotional timing variances. And I'll just note that velocity remains strong. That's across channels and most especially in key channels like grocery and accelerated in the last four weeks, which is consistent with our growth expectations and the return to growth for Q4. specific to club, as we've mentioned in the past, and especially for emerging brands, it can be a region by region or rotation by rotation business. And so we remain engaged with both national club operators, and we're optimistic that we'll make progress in sustainable club distribution for 2025. But in the meantime, as you mentioned, throughout the month of November, we'll be rolling into 4,300 Walmart stores, and that will include a variety pack. Variety pack is what's sold at club. And we're also seeing strong growth in e-commerce. So we're targeting the shopper and making sure that a variety pack is available to continue to drive trial when new consumers for Xevia across channels. So again, I'll just remind us that velocity is the metric that tells us how demand is faring. And so we expect a return to growth based on our velocity performance in Q4. And I'll turn it over to Girish to talk a little bit about the top line and bottom line impact when we think about club and distribution and then the outlook.

Yeah, so I would just add, you know, as Amy mentioned, most of the change in the outlook was really driven by distribution, primarily at the club level, and as noted, the lost distribution at the one incremental mass customer. From a bottom line perspective, You know, really the change in EBITDA is really driven by incremental investments in marketing as we look to drive trial and support the launch at Walmart. So, you know, continues our approach to really balancing for long-term growth, long-term sustainable growth by mixing, you know, dropping savings to the bottom line as well as reinvesting into the business.

All right, thank you for that. And then maybe just a second question, if I may, because, you know, as you talked through that, you know, I did also have a question on your marketing spend. So hoping you could give us a sense of what this will be as a percentage of sales over the next few years. And I guess I'm asking that in the context of, you know, profitability. I mean, you know, this has been a key focus for you. And I know, you know, you've implemented a lot of different initiatives and I'm recognizing you're not going to provide guidance next year, but could you maybe help us understand how realistic it might be for you to generate profitability in the next couple of years, given all of the efforts that, you know, you've kind of laid out for us? Thank you.

Yeah. Yeah, of course. And appreciate the question. And you know, as noted, we're really focused on, you know, building a sustainable, profitable, and, you know, consistent grower for the future. And we are really bullish about the long term growth opportunities head. And so I think from our standpoint, you know, we're continued to be focused on driving profitability in 2026. As you know, really, as we invest in marketing and brand building to really drive future sales growth. And so know i think from our perspective uh we're really uh going to continue to balance the um you know dropping savings to the bottom line but really re but with more of a focus on reinvesting uh so that we can drive uh future sales uh and future distribution uh gains which will in turn drive higher profit so um you know i think the as we alluded to you know we're really uh focused on hitting that sort of profitability marker in 2026. But you know, continuing to balance until then, between continued reduction in losses as well as investment in building this business.

All right. Bonnie, I would just say in closing on marketing,

Critical to our ability to invest in marketing is our productivity initiative where we take costs out of operating expenses and put it into marketing. There is room for us to invest more in brand building. We have very strong repeat rates and we have very high brand spend once consumers enter the funnel and we must invest in brand and drive awareness to continue that virtuous circle. So that's our expectation and the productivity initiative gives us a lot of confidence in our ability to execute that accordingly.

All right, thanks again. I'll pass it on.

Thanks.

Thank you. The next question we have comes from Andrew Strelzyk of BMO Capital Markets. Please go ahead.

Hey, good morning. Thanks for taking the questions. I wanted to ask about the gross margins, which were much stronger than we, and I believe you anticipated as well. Was there anything, you know, kind of one-time or non-recurring in there, and maybe what was the biggest, deviation relative to kind of what you had thought for the quarter. And I guess as we kind of zoom out, I know you talked about some variability based on DSD and those types of things, but is there any change kind of the way that you're thinking about the margin potential of the business given some of the structural improvements you've made?

Yeah, thanks for the question. And, you know, I think one of the biggest drivers is really improved inventory management. And really what it comes down to is the biggest driver on a year-over-year basis was the significant reduction in excess and obsolete inventory. You can see that in inventory balances when you look at the balance sheet. But we've made a lot of progress on renegotiating core input costs, rationalizing unproductive SKUs. you know, going forward, you know, we do believe we've kind of reset the bar here at a higher clip from a gross margin perspective in that sort of upper, you know, mid to upper 40s. And as noted, there will be some variability depending on, you know, how quickly we add new DSD partners. And, you know, I think there continues to be opportunity to enhance gross margin. I think, you know, similarly, we've balanced uh driving gross margin with also um incremental dna spend uh which you know we've returned to historical levels uh inclusive of uh driving higher uh margins so again we're balanced we're creating this balancing act across the p l um to really uh really with a focus on how do we drive um you know how do we drive velocity and how do we drive uh value okay that's helpful and then um

I wanted to revisit the promotional activity, promotional strategies discussion that you referenced in the press release and then in some of the prepared remarks. Can you talk about exactly what you've been testing, what's been working, and kind of what the timing is to which you might settle on kind of how that's going to look and what that means for trade spend over time on a go-forward basis? Thanks.

Yeah, absolutely. So, you know, I think we've, you know, Historically, or over the last several years, the company had reduced DNA spend pretty dramatically. And so we've really been testing a variety of new strategies, really around frequency, depth, and breadth of promotion. And so as we've continued to sort of hone and refine these tests over the last several quarters, I think what we've really dialed in is the highest ROI spend and that mix of depth and frequency. And so, you know, I think we will be really settling in, I'd say, in the first quarter of 2025, particularly as we learn with the nationwide Walmart launch and testing a few new promotional strategies as well that we haven't tried in the past. And so we believe we've kind of settled from a dollar perspective on the appropriate amount, and I think we'll be able to really dial that in. you know, by the first quarter of next year.

And Andrew, just note that we saw, as mentioned in prepared remarks, a 15 percentage point increase in lift across all of grocery for the period. And we did that concurrently with significant improvements in margin. So it builds our confidence and the efficacy of our promotional strategies based on what we're learning and what Girish just described as driving. hand in hand with improving the path to profitability.

Makes sense. Thank you very much for the call. I appreciate it.

Thanks. Thank you. Just a reminder, if you would like to ask a question today, please press star and then 1 now. The next question we have comes from Jim Solera of Stevens, Inc. Please go ahead.

Hi, guys. Good morning. Thanks for taking our questions. I maybe wanted to start on the salted caramel LTO and just see, do you guys have any insight if that's driving frequency among existing customers or trial with new customers? And if I can maybe make that a two-part question, just in this new world of advertising that's more and more digital, just any learnings that you guys have from engagement on some of the the digital ad spend and how that converts to whether it's frequency or trial.

Yeah, so to directly, thanks, Jim, to directly answer your question, it is too early for us to sort of disaggregate the excitement around salted caramel and tell you exactly whether that's coming from our existing base or for new consumers. But directionally, we could tell you both because what we're seeing is that the reach that we have been able to extend through our scaled now influencer network on third-party channels. So now we're speaking to people that are not on Zevia channels, has been very effective and very engaging, far more so than the past. So we see our marketing initiatives outperforming marketing initiatives of the past. And I think salted caramel is just an example of exactly that, but it's also in driving engagement within our existing base. So our expectation is that salted caramel and other brand buzz building initiatives does both things for us, continues to engage our highly engaged base and reaches new consumers. And to your point on digital, our distinctive brand identity can be seen and heard across really an overhauled social media channels through new brand ambassadors at scale that I mentioned, through supported events and partnerships. And then most recently through some of our new out-of-home advertising, complementing the digital campaigns that we piloted in several cities. Reminder that the digital campaigns we piloted across a 20-week period drove a five percentage point increase in sales in those markets relative to the rest of market. So our brand marketing spend have been insufficient to support this brand. And now what we see, especially over the summer and early fall, in very limited and targeted initiatives, are green shoots of what we need to scale going forward. And why are we confident that we're going to be able to do that? Because our productivity initiative is there to be able to fund it in a self-sufficient way. So I would mark Salted Caramel Campaign as an example of what good looks like for Zevia in both engaging our base as well as reaching new consumers and driving trial.

That's great. And then maybe as a follow-up to that, Can you give us an update on the DSD network in Pacific Northwest? And I would imagine there's probably kind of a similar visibility dynamic with some of the instore activation. If you guys can give any updates on like branded cooler placements. But really what I'm curious about is if you've seen any noticeable difference in those markets relative to kind of the broader footprint. Yes.

Yes, that's a very important consideration, Jim. Thank you. So we're pleased with the impact of DSD. So direct store delivery, the service levels have had an impact on velocity in our base business in the footprint where DSD is activated. So the Pacific Northwest and specifically grocery across all chains in that footprint outperforms the rest of market in the period of time where DSD has been active. So grocery outperforming rest of market thanks to DSD. ZSD partners have also started to penetrate independent convenience outlets. And I outline independent because, of course, chains are reset next spring. So we're partnering with ZSD operators to be ready for that kind of next big moment in convenience rollout, which would be the spring. So that's sort of early take on the impact of ZSD in the Northwest. And then, as mentioned in prepared remarks, our next target being the Southwest. We've signed with Crescent Crown in Arizona. and adjacent geographies should fall in the coming months, and we expect a similar result. Again, increased velocities and core channels, and then being enabled to start to drive distribution for convenience, which drives against our most important initiative, which is singles trial to expand the base hand-in-hand with our brand building.

Great. Appreciate all the thoughts, Amy. I'll hop back in, too.

Thanks, Jim. Thank you. Ladies and gentlemen, that concludes the question and answer session of the call. I will now turn it back to Amy Taylor for closing remarks. Please go ahead.

Yes, thank you. We appreciate everyone joining the call today. And as you can hear, we're confident Azevia is well positioned within the growing natural soda category. And our productivity initiative, which we've mentioned several times, sets us up well to capitalize on this opportunity while putting us on what we see as a very clear path to profitability. So we look forward to providing you an update on our progress on the fourth quarter call.

Thank you very much, everyone. Thank you. Ladies and gentlemen, that then concludes today's conference. Thank you for joining us. You may now disconnect your lines.