Pandora A/S Ord

Good morning everyone and welcome to the conference call for Pandora's full year 2022 results. I'm Bilal Aziz from the Investor Relations team and I'm here joined with our CEO Alexander Lakic and CFO Anders Boyer and the rest of the IRT. As usual there will be a Q&A session at the end of the call. If you could kindly limit yourself to two questions at a time that would be great. Please pay notice to the disclaimer on slide two and turn to slide three. I will now turn over to Alexander.

Thanks Bilal and welcome everyone. Let me start by taking a step back and look at 22 as a whole. As you all know, the year was marked by heightened macroeconomic and geopolitical uncertainty. And of course, as well as the ongoing COVID-19 situation in China. Despite all of this, we still delivered at the high end of our expectations. The organic growth ended at plus seven with our sellout growth at plus four. I believe the year very much demonstrates how we are able to navigate uncertain times thanks to the combination of our strong brand and our diverse geographical footprint. As ever, our growth continues to be highly profitable. The gross and EBIT margins expanded and we saw some promising results from the price increase. I also want to highlight that we retained good discipline in our promotional activities. Due to the weaker macro economy, we faced a more competitive environment in general and a sharper promotional pressure during Q4 in particular. Underpinning the resilience is our relentless execution of the Phoenix growth strategy. A couple of key points. Our core remains in incredibly good shape and we delivered solid sellout growth for moments. During 22, we expanded our store network and opened a net 88 new stores. Network expansion is a very productive growth driver which has short payback and is a low risk opportunity in our toolbox. Of course, embedded within our strategy are our ambitious sustainability objectives, and we made good strides on this front as well. We also received some important recognitions that I will come back to in a minute. Now, let's move to slide four, please. Looking into 2023, we are confident, but we remain vigilant due to the macroeconomic uncertainty, although we have so far only seen limited shifts in consumer behavior and have been quite encouraged by early trading this year. However, our job is to prepare for all scenarios, and we have today issued our preliminary guidance for 2023 of organic growth of minus 3% to plus 3%, and EBIT margins around 25%. The wide range revenue range accounts in the lower end for a scenario with a somewhat weaker economic backdrop than what we see today. As usual, we'll look to narrow the range and provide updates as we move through the year. Despite this uncertainty, our starting point is strong. We have a strong brand with a diverse geographical footprint, as I mentioned, a favorable margin structure and a strong cash generation. We have already taken prudent cost measures to protect profitability, and we are able to invest and accelerate. In addition to continued strong marketing and innovation efforts, we intend to accelerate our network expansion plans. A few words on current trading. It is very early days and January is a small month for us. Nonetheless, we've been encouraged by what we've seen so far with a good broad-based pickup in sellout growth in the first five weeks of the year. This will clearly moderate from now as it's helped a bit by easier comps in Jan 22 due to Omnicrom and a slightly earlier timing of some product launches this year. But even accounting for that, we're pleased with the underlying health of the business. We believe trends are stable versus what we witnessed on an underlying base in Q4. Now let's move to slide six, please. Before diving into the Q4 results in detail, I want to give a quick recap of the four pillars of our growth strategy Phoenix and some key takeaways from last year. First, our brand momentum remains strong. We're the most recognizable jewelry brand in the world and will continue to invest in marketing to retain this position. We continue to test new heights for the brand strength, and our recent price increase is a good example of that. Secondly, we continue to elevate our core business. Moments stand strong as the engine that drives Pandora, and we continue to innovate here. Our Spider-Man collection was well received, and we have plenty more to be excited about for 2023, with, for example, the new iconic studded bracelet. We also remain focused on driving new platforms, and last year we brought our diamonds by Pandora to the world's largest diamond market in North America. Thirdly, we are making better use of data analytics to get wiser on how to engage with consumers. One example of this is the launch of targeted marketing in the UK with SMS messages over the Christmas period. We have seen encouraging results from this. Finally, our fourth pillar is about growing our core markets and optimizing our store network. As mentioned already, we added 88 concept stores in 2022, and these are already contributing positively to our performance. We're planning to increase our efforts here for 2023. Please go to slide 7. Sustainability is one of the foundational elements in our strategy. It is about future proving the company. We see that it supports our growth ambitions and aligns our actions with our values. Our three strategic priorities are low carbon business, circular innovation and an inclusive, diverse and fair workplace. The launch of Diamonds by Pandora in North America last year was a very visible mark of our ambitions to become low carbon and circular. Our lab-created diamonds have a footprint of 5% that of a mined diamond. On top of this, it's the first collection made with 100% recycled silver and gold, a major milestone. We have recently received a couple of important recognitions for our sustainability efforts, an A-score from CDP and a leader rating from Sustainalytics. I'm happy that this work is getting noted as our aim is to lead our industry on this agenda. Next slide, please. In the fourth quarter, we've had plenty of great moments to ensure we stay top of mind for our consumers, not least our collaborations where we continue to see great traction and remain excited for 2023 with Disney's 100-year anniversary. You can also see how our diamonds launch has also already started to stretch our brand. And I'll talk more about this in a second. In short, our brand momentum remains strong and we are focused on taking this even higher. Next slide, please. As you may remember, we implemented a 4% global price increase across the portfolio in early October. It was the first time we did something like this in a systematic way. We based it on successful testing earlier in the year. I would like to remind you that we did not change our opening price points on items of strategic importance. We believe the DNA of the brand lies in strong value perception and that will not change. I'm very pleased to report positive initial analyses, which indicate that this has a positive impact on profitability. Given the heightened consumer pressure on discretionary categories such as ours, we interpret these results as very promising for the brand's strength and future potential. We will now be moving ahead with an annual structured review of prices to identify further opportunities. It's too early to say how much or when, but we will continue to be guided by the data and are confident we can stretch our pricing architecture further. Slide 10, please. As mentioned, we are pleased with the resilience we have demonstrated. Although we saw pockets of macro-driven weakness in some markets, the core of the group remained stable. To remind you of the numbers through 2022, the first quarter was obviously inflated by the pandemic in the comp base. The sellout growth was plus two in the second quarter, plus one in the third quarter, and basically flat in the fourth quarter if you adjust for the fire at a distribution center in Hamburg. And as you can see in the lower graph, the same is the case for sellout versus 2019. In fact, sellout versus 2019 increased through those three quarters. This stability speaks to the diversified footprint we have and the fact that consumers have a special connection to, in particular, the core of our business moments. This is why Moments was and is the number one priority in the Phoenix strategy. The captive business model is unique. The many millions of installed Moments bracelets enables a strong and highly profitable recurring business stream from our charms portfolio. We not only own this model, we are demonstrating day in and day out that we are the masters of this platform. Let's move on to the next slide to take a detailed look into the growth for the fourth quarter. Trading through the quarter was roughly flat, with November in particular being impacted by the fire. We did see consumer behavior and trading being more in line with pre-pandemic trends, where Christmas shopping happened closer to the day. So in that respect, it was more of a normal year. We ended at minus 1% sellout growth, which is basically flat if you're just for the fire, as I mentioned. As I said before, in Q4, we did see notably higher external promotional environment. We partly expected this given the macro. We remained disciplined and were tactical in our approach. We ran our promotions for slightly longer in some markets, but kept the absolute promotion level consistent. We play in the mass market, so we will sometimes have to react, but it is controlled and it's surgical. In that respect, our promotional days have been back to normal so far this year. Going into the individual markets, you will see that some of our key markets declined in Q4. However, there are reasons for this, so let me talk you briefly through this. Firstly, as I'm sure you remember, we flagged at the start of the year that the US business would decline in 2022 due to the comping effects of the stimulus checks back in 2021. This did indeed take place, but was better than our initial expectation. Our US growth in Q4 improved sequentially to minus seven as the underlying business remains solid. Secondly, our total European growth was encouraging at plus two in the fourth quarter. We did see some macro impacts, mainly in Italy and France. We flagged some of this at Q3 already, and it was a continuation of that very same trend. Elsewhere, Spain was very strong, and the UK remained resilient despite the quite weak macro backdrop in there, in fact. We're generally encouraged by the performance in Europe, and in the few markets where there is broader market data, we believe we are gaining market share. We will continue to invest in marketing to consolidate our position further. China was weak. As expected, traffic was materially down due to the COVID-19 situation. Now, I know some of you may ask what we're seeing today in China. It's still very early days with a lot of uncertainty, but we've seen some clear pickup in the brick-and-mortar traffic across our stores in January. We will be moving ahead with our brand relaunch for China in the second half of the year, but right now it's too early to call how China ends up finally through the year. And finally, in rest of Pandora, we saw good, strong growth driven by many markets, particularly Mexico stood out with plus 34, which also put them at the $1 billion, no, not dollar, DKK revenue mark. Next slide, please. We launched Diamonds by Pandora in North America end of August. We did this with a selected distribution across 269 stores as well as online. We continue to see promising results with the best performing stores adding 10% of incremental sales. There is a large range on this, but we are convinced that the opportunity is vast. We believe the brand is ready to be stretched with the category selling at 15 times the average selling price from Pandora's traditional US products. Looking ahead, we will now be scaling up our efforts and see three main opportunities. First, optimizing and adding more to our assortment. We believe a greater product range will appeal to a wider market. Secondly, improving the salesmanship from learnings in the best performing stores. And finally, continue to sequentially expand into new markets. Our move into this category aligns well with our sustainability strategy. In particular, the relatively low carbon emission profile compared to mined diamonds. We grow the diamonds with 100% renewable energy, and they are set in recycled silver and gold. So for a one-carat ring, this brings us to a carbon footprint similar to a pair of jeans. And arguably, it lasts a bit longer than that. In conclusion, it's a promising start for us. Growth here will not be linear, but we remain convinced of the transformative nature of this move for the brand. Next slide please. Now, this is a slide that I'm sure some of you are getting familiar with, but the network opportunity is very important for us. So let's have a look at it again. Our baseline for growth is strong with a very profitable and cash generative store network. In addition to this, we see an opportunity to expand the store network in areas where we don't have a Pandora store today. We see great untapped opportunities in making our brand more accessible in many of our core markets. Back in 2021 we carried out an extensive analysis of the real estate network in our top 40 markets. We have mapped 13 000 locations and as a starting point we plan to open new stores in the best 600 of those in the next few years. Next slide please. As I mentioned already, our network expansion has become more visible in the numbers through 2022. We ended up opening 88 net new concept stores and 130 owned and operated shopping shops. Combined, this contributed to 3% of our organic growth. We're now targeting an additional 50 to 100 new concept stores in 2023, which would add an additional 2 to 3 points of organic growth. Given the macroeconomic situation, we have the option to keep momentum here as access to good locations could open up. This means we'll be at least towards the high end of the initial guidance we gave in 2021 of 100 to 150 new stores over the period of 2022 and 2023. As always, the deals must be very attractive before we engage. We are focused on expanding our network with quality. There is a short payback of roughly one year on the capex investment, and new lease contracts are in most cases quite flexible and include regular break clauses, which significantly reduces our risks. Finally, we've been hard at work to develop a new store concept that we call Evoke 2.0. This will be rolled out at scale starting this year. And on that note, I hand it over to Anders for a little bit closer look at our numbers.

Thank you, Alexander, and good morning and good afternoon, everyone. And please turn to slide 16. The key takeaway for the quarter was that performance was in the high end of our expectations, and not just on the top line and on the bottom line, but also on some of the other KPIs, such as cash conversions and earnings per share. I'll comment on revenue on EBIT on the following slide. So on this slide, I'll just pick out some of the other KPIs. On gross margin, it remained strong and it expanded at 50 basis points year over year. And that's despite 90 basis points of headwind from foreign exchange in the quarter. So there's an underlying gross margin expansion of more than 100 basis points, and that reflects a combination of, for example, our price increases and channel mix, and it's also a testimony to our good promotional discipline in the quarter. On cash conversion, we saw, as expected, a big improvement sequentially and landed at 110% in Q4. And that number includes a decrease in the inventory level to just above just around 4 billion kroner as we also flagged back in the third quarter announcement. And most of you know that we decided to increase inventories during the initial part of 2022. And this obviously impacts the cash conversion for the full year. But with this behind us now, that also means that in 2023, this year, we expect cash conversions to be back to the long-term sustainable level of around 70% for the full year. And then go to slide 17, please. This is the revenue bridge for the quarter. Organic growth came in at plus 4% for the quarter, and on a three-year stack versus 19, that's an acceleration to 17% growth up from 13 that we delivered back in the third quarter. The first building block in the revenue bridge on the slide is sell-out. And the sell-out growth was negatively impacted by the fire in the European distribution center by around one point. There's no insurance compensation for the revenue loss included in the Q4 numbers, and that will be a potential income in the financial statements for 2023. On top of sell-out, we saw, as already mentioned, a solid contribution of three points from network expansion. And the network, by the way, doesn't just drive top line, but also bottom line. And then go to slide 18, please. On the EBIT margin bridge, I'd just like to draw your attention to the dotted box in this bridge. and that shows that our underlying EBIT margin was up 110 basis points versus Q4 of 21. The reported EBIT margin was up even more, 280 basis points, and that was partly helped by some one-off costs that we had in Q4 back in 2021, and we've illustrated that in the left part of the bridge here. Then let's move on to slide 20 and the guidance for 2023. We have obviously spent more time than normal reflecting on the financial plan for 2023 and our financial guidance. Let me just start by giving you a few corner posts for our thinking behind the guidance. And the first corner post is that, as Alexander showed, that revenue growth has been resilient during the last three quarters despite the growing micro headwinds. And quarterly sellout growth has also been broadly flat both year over year and also versus 2019. The second corner post is that the external data, external experts continue to show a challenging backdrop for consumers and a general consensus that macro is going to be weak in 2023 and with some markets being in a recession. And the third corner post we would like to mention is that we continue executing on the Phoenix strategy in 2023. The macro environment does not change that. We're just making a few twists in terms of priorities, and of course we also have a harder push on cost. And all of that has led us to give a relatively wide guidance on organic growth from minus three to plus three. And as you can see in the bridge, the guidance includes a flattish to mid-single digit decline in sell-out. And the midpoint of that range is obviously a slowdown compared to the last couple of quarters, and it's a slowdown compared to the underlying current trading, because the underlying current trading, as Alexandre already mentioned, is at the high end of this guidance range. But it's still early on in the year, and we prefer to be cautious, and let's see where we land the year. But to put it in another way, our key message with this guidance is that, first of all, that we are preparing for a difficult trading environment entirely driven by macro. We don't really see this in the numbers yet, not in Q4 and neither in the current trading. But now we have set the cost base to prepare for a difficult macro environment and thereby protecting margin in 2023. And then go to the next slide, please, the EBIT margin. We're guiding around 25% EBIT margin for this year. And this may probably look a bit narrow, given the range on the top line guidance. But the way we think about it is that the current macro environment requires an extra element of flexibility and quick reaction on the cost side in Pandora. In short, if macro hits harder and growth lands towards the lower end of the guidance, we will take cost actions that we believe can keep the margin around 25% despite lower top line. And if growth lands towards the upper end of the guidance, we would like to have and retain the flexibility to invest more in future growth if we decide to do so. We've laid out the building blocks for the margin guidance on the slide here, and we are happy to dive more into that if you have questions either here or in a follow-up afterwards. There's just two things I would like to note. And the first is that the recent combined adverse movement of foreign exchange and commodities gives us a net 40 basis points headwind on the margin versus last year, versus 2022. And the second thing is that within the guidance, we have absorbed the margin impact coming from higher than normal salary increases that we expect here in 2023. Then some of you may also ask what the current guidance means in relation to the capital market day targets that we issued back in September 21. And clearly, the world has changed significantly since we issued those targets with the weaker macroeconomic backdrop and the ongoing COVID-19 situation that we are still facing in China. Despite that, our new EBIT margin range is actually currently just within the targeted range that we set out back at the CMD in 2021. And for the growth guidance, I want to stress that as a greater element of uncertainty, but the upper end of the new guidance would place Pandora within the CMD range despite the macro situation. And let's see where we end up when the year has gone. Then let's go to slide 22, please. On this slide, we have the other guidance parameters for the year. And Alexander has already covered the store, network, ambition. So the other one to mention is the pick-up in capex to 6% of revenue this year. And this pickup mainly reflects our investments in the store network, both new stores as well as refurbishments. And it also reflects our new ERP platform and a number of other digital investments. And the six points of revenue is in line with the target from the CMD back in 2021. And finally, we expect the effective tax rate to be in the same range as we guided for last year, being 23 to 24%. And then go to the next slide, please. I'll finish off with an update on our cash distribution for the year. Our cash distribution for 2023 is a signal of confidence and a signal of strength. We have ample liquidity. We have a fairly low leverage. and we will continue to generate good cash in 2023. We are therefore announcing this morning a total cash distribution to shareholders of up to 6.4 billion Danish kroner. And at the full amount, 6.4 billion, that will be around 11% of the current market cap. This includes a proposed dividend of 16 kroner per share, and that's in line with last year, and it reflects actually a shift in our dividend policy from previously targeting a 2% dividend yield to now a progressive dividend per share. And on top of this, we also this morning announced a new share buyback program of 2.4 billion kroner running until the end of June, and then with a clear ambition to get to 5 billion kroner as we move through the year. And with that, I'll hand it back to Alexander, and please go to slide 25.

Thank you Anders. So, to conclude, we are very pleased with what we achieved in 2022, especially given the numerous challenges which emerged during the year. As I said, I believe the year reflects that Pandora can navigate uncertain times thanks to the combination of a strong brand, unique captive business model and a diverse geographical footprint. The brand has shown good resilience in a very turbulent environment. We are confident that our brand position in affordable luxury will continue to support financial performance during a potential recession, and we've already taken a number of precautionary steps to protect profitability. We enter 23 with confidence while well prepared for a range of scenarios. And our ambition is to yet again deliver a strong performance. Slide 26, please. Before we open up for Q&A, I would like to invite all of you for our Capital Markets Day in London on October 5 this year. And I hope to see you there for an exciting program and a great dialogue. And with that, we'll open up the lines for Q&A.

Thank you. If you have a question for the speakers, please press five star on your telephone keypad. To withdraw your question, please press five star again. We will have a brief pause while questions are being registered. And the first question is from the line of Martin Brenner. Please go ahead. Your line will now be unmuted. Martin Brenner. We will take another one. The next question is from the line of Lars Togholm from Carnegie. Please go ahead. Your line will now be unmuted.

Yes, a couple of questions from me. First of all, congrats with another excellent quarter. Well done. I have some questions to QVON, also to the trends you have been seeing in January. You, of course, commented on current trading, but I wonder if you can Put some words on the ASP if you're seeing the consumer trading down in your product range, for example, and maybe also some colors on individual markets. And you know I'm very fond of you guys, but for example, why isn't it a red flag that the U.S. is only 38% up versus 19% in Q4, but 56% up in Q3? that would imply some kind of slowdown. And then a second question, if I may. So on your store expansion plans of 600 new locations, I assume that is concept stores, but maybe you can elaborate a bit on what kind of expansion you see within other points of sales. And then, Anders, I'm sure you have done the math. Theoretically, 600 new concept stores and some other points of sale, what would that add to revenue, everything else equal, and how much of that has already been captured with the store expansion you've already made? Thank you.

So if we look at when I say current trading, I mean, we could include, let's say, Q4 into January. So we have a slightly longer time horizon. At the end of the day, it's a rather low frequency type of category. And we are not really seeing anything on the basket nor on the ASP. If I take, let's say, the global average, there might be some ups and downs between the countries, but generally speaking, there is not a major difference. The difference in terms of outcomes is... And in fact, I should also add that traffic actually continues to be was good in Q4 and continues into this year. The delta is purely in some markets where we know that people are a little bit more cash strapped, like Italy and France. As an example, we can see that that impacts a little bit the conversion rates. But that's pretty much it. So this kind of down trading at the full level is not something that we are registering, to be honest with you. U.S. This one is quite difficult. I haven't thought about it like this. The way I suppose we view the U.S. is we saw a sequential improvement from Q3 to Q4. It went from a sellout growth from minus 9 to minus 7. So that would have lead a bit more towards... Actually, that was on a much easier comp, wasn't it?

But this is now versus 19. I'm just trying to remember back in 19.

Whether that was such an easy comp for the U.S. I don't think so really. Because the big push in the U.S. came the following year in August. If you remember Lars. When we actually changed a bit the marketing approach in the U.S. So that's not really what I would see.

That's a fair point, actually. You were down 18 in Q3 2019 and only fall down in Q4. That actually answers my question.

But I think that, yeah, I know you guys always divide the world up in quarters, and that's fair enough. But the underlying business in the US, I think, is given kind of the stimulus backdrop, actually, the way I'm thinking about it is held up surprisingly well. And based on some market data we have, it seems like December was more of a normalized month, whatever that's supposed to mean. But I find that the business in the US in general is in pretty damn good shape, given everything that's going on.

So that's probably how I would think about it. What else? There may be stores, Anders, maybe you can help a little bit there.

Thanks for the question. Just going back to the US, the organic growth, the drop that we see on the three-year stack in 2022 is actually coincidentally exactly the same as we saw from Q3 to Q4 of 2021, where it went from 60 to 42. And this year around, in 22, from 56 to 38, so 80 points dropped. So it sits all the way back in the base in 19 after the brand relaunched in, what was that, August 19, late August 19. On the network, the 600 new locations, at the capital market day, we said it would be roughly 80% concept stores, 20% shop and shops. That was a split. I think last year it was more evenly, actually with more shop and shops being opened. So it might skew a bit more towards shop and shop than what we thought back in... back at the capital market day but still we Once executed everything, you can think about this as an additional incremental revenue of around 4 billion Danish kroner and give and take 1.5 billion kroner in EBIT. And so far, we've only done a third of that in round numbers. A little bit less, but still quite some way to go. A lot of both for 2023 and for the years to come. And then, obviously, this is the first 600 location, the best of those. But that doesn't mean that it's only the 600, but there's a limit to how much we can execute at a time. But even if you start digging below from store number 601 and below, so to speak, it's still a lot of opportunities, but we'll have to take it in steps.

thank you very much the next question is from the line of martin brain from nordea please go ahead your line will now be unmuted hi thank you so much do you hear me now yeah thanks martin

Okay, thank you. First of all, congratulations with a strong ending to a difficult year. I just have a couple of questions and then I'll come back in the queue. First of all, I think that you were alluding to it and the EBIT margin guidance is a bit narrow while you have quite a wide top line guidance. Can you maybe help me understand a little bit the dynamics? So just elaborate a little bit more for me, because it's a difficult sort of... There are a lot of moving parts, and I think that the EBIT bridge is getting longer and longer for each year. It sounded to me like you are already taking sort of the precautionary measures to sort of a recession scenario. So you're ready for that. And then in case the organic growth is higher than sort of ending in the high end, then you will invest more money. Is that sort of the correct way to understand it? And maybe also just understanding what is the Phoenix investment? Is that sort of related to the China reopening? Or how should you think about that? Thank you.

Thanks, Martin, for the questions and fair questions. I think the way to think about it is that if we ended up in the lower end of the range, let's say the minus 3% top line, then I think that would trigger cost actions that might not otherwise normally be triggered within a guidance range. Let's say in a normal year we have been guiding 5% to 7% growth, let's just use the capital market day range, then it's a bit different cost dynamics. And so if we get into that negative territory on the top level, then things like, of course, we would have to take another look at the staff levels. We would have to take another look at things like travel restrictions and things that would not be in play in a normal year. And that's why we are saying that it's... We're framing the EBITDA marketing guidance in a different way than we would normally do. On the upside, then if we ended at the plus 3% organic growth, then at least we would like to have the flexibility to invest even more if need be. It's not a given that we would do it, but we would like to have the flexibility to do it. We saw back during the pandemic that opportunities arose or came up when times are difficult to invest and that might be the case here as well. That could be in the brand, in media, but it could also be in other parts of the business. So I hope that explains a bit on our thinking. Then on the Phoenix investments that we have included, here just to mention uh a few uh we have the erp um sits um uh sits in here at the erp uh investments where we that we started back last summer uh there's a number a range of other digital investments uh personalization among others that we keep putting uh incremental money behind. We actually keep investing incremental money also on the people side, on the talent development that ends up being a bit of money as well. And then another fairly large pocket in there is incremental depreciations coming from Evoke 2.0, the new store format. We have been investing actually very little in store refurbishment since 2018 and as you know we have been working on the new store concept for quite a while and in the meantime we have been holding back and we do have a catch-up need on store refurbishment and that will that capex will feed into incremental depreciation in 2023. I hope that helps.

It helps a lot, thank you. On your China question, in the current guidance, we have not included out-of-plan investment behind China. Reason being, obviously, that we're still kind of waiting for the China, you know, let's say the fog to clear in a way. And there are two aspects there which we are looking at. One is that we see that consumers actually come back into the stores. Even though we, as I mentioned in my opening words, that we've seen sequential growth in brick and mortar throughout January, it's still coming from rather low levels. So we need to see that that actually continues to grow and comes back a bit more to what we were used to in 19. So that's point one. The second one is also that we have a proper line of sight of what the government is thinking about when it comes to the pandemic. So at least so we know that they're not going to turn on a dime and close down because then a lot of this investment would be wasted. So that's kind of things which we watch. Then the approach on investment, we're not going to go national in the first pass. We're going to pick a couple of major cities and double down and make sure that the model which we've been working on actually is working. And then once we're comfortable with that, then we'll probably put even more firepower behind it. But then we're into 24 as far as I'm concerned. So maybe Q3 would be a timing that we currently have in our mind on when a kind of... A brand relaunch as such would happen. But again, as I said, it would be in the top five, six cities. But just to put some color to that, each city there is like 20, 25 million people. So when you put five of them together, you're talking about half of Europe or half of Western Europe. So it's not nothing. So the current investment level that sits in the base plan for China is similar to a going level in any other market. But of course, that's not going to be sufficient to give it an extra punch. So that's an out of plan item, which is also why we are thinking about this kind of doing a couple of cities to begin with.

The last thing I forgot to mention, Martin, on the investments in Phoenix, it's the sustainability agenda. It's not massive money, but it's actually still meaningful money in that bucket of 100 basis points of Phoenix investments, not least the premium that we are paying on recycled silver.

The next question is from the line of Autumn Birch from BNP. Please go ahead. Your line will now be unmuted.

Yes. Hi. Good morning. It's Autumn Birch from BNP. I have two questions. First of all, coming back on the store load plan, Is it fair to say that there is an acceleration or maybe initially that put a bit of pressure on the margins this year with maybe some stores that are yet to achieve maximum profitability? Could that mean maybe a bit of a seasonality in terms of the quarters with whatever improvement in the margins maybe more happening And my second question is more broadly on the different moving parts of the course margin in 2023, if you maybe would add a bit of granularity. Thank you.

Yeah. Hi, Antoine. Thanks for the questions here. The line is a little bit shaky, but I think we got the questions. On the store openings, I was almost tempted to see, I would expect none of the 100 to 150 stores in total to be margin dilutive. that's that's not the that's not the plan so almost disregarding when they're being open even though they might only be open by by the back back half of of the year which we by the way do expect that most of the stores will be in the back half of 23 they should still be as a minimum ebit margin neutral for the company and on on average there's definitely still margin accretive so it's It's sometimes, when we speak internally in Pandora about it, I call it a CFO's dream to have this margin driver because it is quite mechanical, low risk, a lot of hard work, but with almost instantly being EBIT margin accretive after a very, very short period after opening up the stores. So maybe elaborating a bit of that, then you may ask why not then go even faster. And again, there's two main bottom legs. One being that we don't want to jeopardize quality. We would rather wait another year or two to get the right location in that city, on that street, rather than getting second-level quality. And the other being organizational capacity. It is taking quite some time and effort across many parts of the Pandora value chain to open up a new store. um i hope that that's it on the uh on that piece then on the gross uh margin uh bridge um it's true that that be i think you should think about the gross margin as being up next year or this year in 2023. And that's also what we talked about back at the Q3 announcement. And since we spoke back at the third quarter announcement, we have had quite some headwind from foreign exchange A bit from silver as well, but that's mostly headspot, but from foreign exchange. So now on the gross margin, the net impact of those more external factors, commodities and FX, it's a net headwind. this year, 60 basis points of help from silver give and take, but then 80 basis points of headwind from foreign exchange as it looks at the current foreign exchange rates. But on the other hand, the gross margin will be driven up by the network expansion. It will also be helped by a bit lower forward integration than last year. You probably remember there's a temporary hit on the gross margin when we do a forward integration. That's probably going to be a I think we've set 50 basis points help on the gross margin this year. And then there will be a bit lower non-recurring cost from... Hopefully, we don't have any extraordinary cost related to the pandemic in Thailand. So net-net, the gross margin will be up a bit here in this year. And then, of course, you can also buy that conclude that the OPEX ratio will be up as well. Otherwise, the bottom line EBIT margin guidance doesn't quite make sense. It is true that we expect the OPEX ratio to be up a bit, especially in the first half of the year. Our base case is that a recession is going to be a bit harder impact in the first part of the year than the second half of the year. I'm almost saying, who knows? Let's see how it plays out. But that's our base assumption. And that also means that the OPEX ratio will be a bit harder hit in the beginning of the year than in the later part of the year.

Thank you. That's very clear.

Thank you too, Mr. Persh. And while they turn a few dials in Copenhagen, we will just give you a reminder that if you have a question for the speakers, you should press five star on your telephone keypad. If you find that the question you are having is already answered, please go ahead and press five star again. And we'll just have a brief pause while they switch to another line in Copenhagen. And the next question is from the line of... Good morning, everyone.

Can you hear me? It's a bit of echo. Okay, I'll go ahead. My first question on your revenue guidance. Last year for the 22 revenue guidance, you provided some details on the moving parts by region. And remember, there was quite a big divergence between the US which you guided all the way down, and the rest of the world, which was up low tease. How would your 23 guidance look like if you have to split, let's say, Europe and the rest of Fendora? Would you actually all be close to each other and rest of Fendora strongly? And on that rest of Fendora, which is about 30% of your business and outperforming, so much last year, I guess, these are smaller markets where you may be interpenetrated. Do you feel you still have plenty of room to grow, you know, close to double-digit? You can determine those markets, whether that's Spain, Mexico, you mentioned other countries like Portugal, Holland, or Scandinavia. My second question on the salary increase, you mentioned a new EBIT bridge and a 100-bid solution due to higher-than-normal wage inflation, would that imply around 4% or 5% wage inflation globally? Is that a fair assumption this year? Would it be split differently between Thailand and the sales associated in your core markets, between the manufacturing workforce and the sales associated in your core market? How does that compare to 2022? Do you think that level of wage inflation is here to stay? for two years, which would obviously put a bit of a cap on profitability. And to clarify one last thing, Alexander, you mentioned that the change in dividend policy from 2% yield to flat to growing dividend, what is the rationale for that? Is it to allow potentially for more flexibility towards more buybacks and a lower payout ratio? Thank you.

Let me start with the revenue guidance. I mean last year it was an anomaly given the stimulus checks in the US and that was the sole reason for us to pull that out given the sheer weight the North American business has in the group. But it's certainly not something we will continue with. So we're not guiding even by region. That's just not how we're structured. But then your question, which I think is interesting, is on the rest of Pandora, the Spains and the Mexicos and all of those guys. Of course, we had a really good run in Mexico, not just last year, but in fact, over the last five years, we've had a super run in Mexico. And it looks like there's plenty of steam to go. So we do expect a good outcome in Mexico. There might be some other countries in the Latam that maybe we could kind of, you know, look for a similar type of trajectory. Of course, not of the same weight and size yet, but that's of interest to us. Portugal, we just took over, I think, midways through last year and then, you know, posted quite some good numbers post the takeover. But it wasn't without pain, let's say, in the beginning, which is not unusual when you take over, you know, a whole country, to be honest. But there should be some interesting underlying performance that we could eke out of Portugal. And that's probably true in a couple of other places as well. But that's probably as specific as I would get now. As the year goes by, we're happy to kind of share a bit more detail on those geographies. Then on the ASR piece, I mean, it is in the range that you suggest. It's different by market essentially, but it's probably fair to say that 4% to 5%. is probably the top end, or is the higher ASR, as we call it, that we've seen over the last few years. But it's also a reflection of what's going on around us, and we want to try to support our employees as much as we can. And then I'll leave the dividend question for the two gentlemen next to me here.

Thanks for that, Alexander, on the dividend policy. The 2% dividend yield policy that we've had since the capital market day, it makes very good sense in a stable environment. And since September 21, I think the interest rates have gone up quite significantly. That was one of the reasons to set a 2% dividend yield. That was a reflection of what's the general interest level on the market. And then obviously there's been some share price volatility. So if we had been six months ago and sitting on announcing our full year results back in the autumn last year, then a 2% dividend year would have resulted in a 8 kroner of dividend, 50% down from 21, which just doesn't make sense. So while we would like external circumstances to be more stable, they are not. So we think It's a better reflection of how we think about the business, saying we pay out a dividend that's going to be flat to up every year. Now it was 16 kroner in 2021. We are proposing the same this time around, meaning that we are skewing this year the cash distribution towards share buybacks. But we think that the concept of a progressive dividend, as we've called it, or flat to increasing in absolute terms makes more sense in this environment.

Thank you, Anders.

The next question is from the line of Maria Laura from Bank of America. Please go ahead. Your line will now be un-muted.

Thank you very much for taking my question this morning. Just one question on my side. With respect to the EBIT margin guidance for 2023, what are the underlying assumptions that you have both in terms of price because during the call you mentioned that you could have incremental full prices potentially coming through this year and perhaps on an underlying basis can you discuss the type of promotional environment that you are seeing and what is the promotional environment assumption that you have in your EBIT margin assumption? Thank you very much.

Thanks for that question. The EBIT margin guidance in the bridge that we have put into the announcement, there's a bucket called cost reductions and price increases, 110 basis points. And so give and take, half of that is assumed to be pricing increases. And you can probably do a little bit of math in that that assumes in very round numbers, a one-to-one elasticity on the price increases. That's our base assumption. So 50 basis points.

Sorry, just to be clear, it's not new price increases. No. This is the roll-over effect of the price increase we did in October, just to be very clear on that.

Exactly. So in other words, we have not factored in additional price increases into the EBIT marketing guidance. And then on the promo level, assuming that it's probably still going to be quite a promotional environment, but that we will remain disciplined and on a relative basis, if you can call it that, detoxing compared to the outside world. We'll obviously look at how the other brands and what they are doing, but we will not go crazy. We will remain disciplined like we did in Q4 and like we've been doing in uh in in in in general so it will be sort of in round numbers i think the the base assumption is that it will be on unchanged the promo level the next question is from anib smith from hpsp

Please go ahead. Your line is now open. Ann-Eve Smith, your line is open. We will check the next one in line. That is Karine Nijl from Goldman Sachs. Please go ahead. Your line is now open.

Brilliant. Thank you very much for taking my questions. Just two quick ones from me. So firstly, you've seen an increase in your inventory levels as a strategic measure to increase availability. Could you help us think about what the right level of inventory is for the business and also how you're approaching your inventory strategy this year? And then secondly, you've accelerated your store network expansion plans. Can you just give us some colour on what criteria you look at in terms of location or economics when you're opening new stores? Thank you.

I'll start with the inventory. Thanks for the questions. If you take the midpoint of our revenue guidance for 2023, so call that 0% organic growth, you should think about that in the year with inventories that are flat and maybe a touchdown, depending a bit on how we think about the... pandemic insurance premium that we have had in the inventories for a while. So the inventories are very healthy as we stand and we're quite happy with the level and we see that the availability that we have across our products is generally quite good and so even though inventories at this point in time is higher than where we were one or two years back. It helps drive availability and good availability on our individual products drives conversion and thereby revenue. But the cash conversion drag from higher inventories is behind us.

And then in terms of the location, I think if you go back to page 13, it partly answers your question. As I mentioned there, we've looked at our top 40 markets, analyzed 13,000 locations. And then you kind of boil this down. And of course, what we're looking for is where we get the highest incrementality of putting up a store. So if I'm in a place where we have no Pandora presence, and there are plenty of those still in particular in parts of the U.S., as we've been discussing in the past. then that is the key driver. Other than that, I think we use normal econometric metrics when we look at where to place a store. We make an assessment on the cost of establishing the store, running the store, and what type of revenue we can generate. So there's nothing peculiar about it. But I think the point here was more that in the US, we found ourselves quite under-penetrated in rather large geographies. And in the past, we've spoken to the west of the U.S., the south of the U.S. If you look at the east coast, there we have a higher store density. But even there, you could argue if you compare to a U.K. or an average European country, then we're still, you know, the density is on the low side. But we focused on where we get a bigger bang for the buck, which is so now we're focused on the west and the south primarily. And of course, the same goes for for Latin America, which was the second focus area where, you know, it was a matter of there is no Pandora at all. Where is the best location in the given kind of retail environment? China, similar story. And as you know, we've been a little bit more conservative. of adding new stores to the China portfolio. It went a little bit low. In China, you have to swim to stand still in a way. And if you miss a beat, then actually your network can go backwards. So we're essentially just right-sizing it back to where we think is the right level at the current business size. But of course, once we can kind of unlock the China opportunity in a like-for-like performance, then we believe that there's still plenty of opportunity to drive the network in China, which is part of the 600 that we identified. So there's no particular magic to it, but we have lots of white space where we still think the brand has a role to play.

Brilliant, thank you.

The next question is from the line of . Please go ahead. Your line will now be unmuted.

Yeah. Hello. And a question related to a current trading and just to make sure that I understand what you are trying to say. But basically, you are saying that here in the beginning of January, you are seeing a flat like for like and a positive effect from network expansion. meaning that your organic growth must be in the range of 3% to 4% here in January. Is that correctly understood? And then just a follow-up question to that, because I would actually have expected that you would have a more negative development here in January due to the tough comps. Because if I look at your organic growth in Q1 last year, then you actually had very high organic growth. So is there anything in the comp base for January that is making this way to look at it wrong? That would be my question.

Thanks for the question, Klaus. The way to think about it is that we've actually seen a pickup in the reported, if you like, sell-out growth in the first five weeks of 2023. And it's broad-based, so it's not sort of one country, but across the globe. But it's a fairly short period to look at five weeks. Obviously, in January, it's not a big month. It's an average, a little bit below average size month. So as usual, we have to be careful when we look at the numbers. But that's a broad-based... pick up in sell-out growth for the first five weeks of the year. But two things to note there. And that is, one is that there is some Omicron in the base in Jan or the first five weeks of 22. Omicron was an issue in Europe. and the US as well, not hard lockdowns. Most countries were still a lot of people being infected. So there's some of that in the base, especially in the first few weeks of the year. And then this year we have launched a couple of products earlier than the new products that came into the market last year. Last year in Q1 of 22, one of the main new products in Q1 was the Marvel collaboration that came in mid-Feb. Now we have launched a new iconic studded bracelet chain in in early Jan of this year, and all of that obviously impacts the numbers. So what we're trying to do to hopefully help you is saying, well, underlying, when you filter out pandemic, filter out timing of product launches, the underlying sell-out growth is in line with Q4. Let's call that flat. So what we're trying to convey is that everybody talks about macro headwind. We didn't see that really in the numbers in a big way in Q4, and we don't see that yet either for the first five weeks of this year. But when you go back then and look at Q1 of last year with the significant growth numbers that you're referring to, Klaus, then that was clearly held by the pandemic impact in Q1 of 21, where there were a lot of markets were in hard lockdown. So in that way, it looks like a hard comp base, but it's not really a hard comp base from that perspective. But hopefully we have all of that pandemic noise behind us soon, at least when we get into the second quarter of this year, then we only have China. There's a bit of noise in the base from a pandemic perspective.

Okay. And just to be clear, that also means that your organic growth, if we look at your organic growth, so including your network expansion, then you are tracking at, I don't know, 3%, 4%. for the first five weeks.

Correct? If you look at the full year, then we have said two to three points of growth from network, and that keeps rolling. There will be swings within the months, but for the full year, then the organic growth will be above the sell-out. So I think that the line of thinking is right. Okay.

Great. Thank you very much.

The next question is from the line of Freddie Wilde from Jefferies. Please go ahead. Your line is now unmuted.

Good morning. Just a couple of words from me. First of all, on the end of the guidance, I just want to probe a bit how apocalyptic you expect that macro environment to be. You know, give me ASP, that implies volume down more than 5%. a sort of consumer pressure in line with the magnitude you've seen during the financial crisis. Is it more or is it less? How bad do things have to get to get to minus three? And second is, on a capex of 6%, I've seen the step-up is largely due to that ongoing existential expansion program. Given this is expected to continue and, you know, we've got the evoked 2.0 model coming up, uh do you still expect capital percentage of sales to drop from 24 to 24 thank you

I don't know whether you can hear us clearly, but the line is super bad, so we hardly hear it.

But I think the first one is on how bad the macro is. I mean, the guidance, I mean, in the way we've been thinking about, just to repeat what Anders said earlier on the call, is, you know, the midpoint of the guidance is kind of what we see and experience as we sit here today. The low end of the guidance suggests that it's going to deteriorate somewhat. And the higher end of the guidance suggests that maybe the macro is a bit better or some of our programs actually yield more than what we necessarily had initially expected or a combination thereof. I mean, this is not science. I mean, we don't have the crystal ball of the macro, which we did, but But that's kind of how we've been thinking about it. And, you know, don't try to read more into it because we haven't. So then, okay, you can make your own theories if you want. But then actually on the CapEx question, it was so bad a line. We didn't catch your question, Paul. So could you maybe repeat that just so we make sure we answer the right question here?

Sure.

Can you hear me a little better now? Yeah. Yeah.

So the court's question is, do you still expect CapEx's percentage of sales to drop in 2021 and beyond, given that the store expansion programme is continuing to take place?

I think that was one of the younger guys here who have better hearing than I have here. But it seems like you're asking whether the capex to drop in 24 and beyond. It's a bit too early to say. When we go back to the capital market day in 21, we said that capex would be elevated in 22 and 23. The long-term level probably being, let's call that 5% of revenue. And then we said for a couple of years, we will be at the 6% to 7% level at least in 2022 and 2023. That might stretch a bit further into 2024 because we do have some backlog of store refurbishment ahead of us. We might have a bit of elevated capex while we build the new manufacturing sites in Vietnam. We'll talk more about that at the capital market day, but that's nothing that has changed in the business that doesn't mean that as an average or a longer cycle than we are at this 5% of revenue as the capex. Sometimes it's a bit above, sometimes it's a bit below. It's been below in 18, 19, 20, 21. And now we'll have a couple of years where it's above.

Thank you.

The next question is from the line of Pinar from Societies General. Please go ahead. Your line is now unmuted.

Hi, thanks. Thanks for taking my question. Just one quick one on the like for like. So you said that for your 2023, it assumes a zero to mid single digit like for like decline. But you said that the prices of the products have been increased by 4%. So just to be clear, are we expecting a volume decline for 2023? Looking at just that.

So when we did the price increase, the assumption going in that the elasticity would be such that there was no revenue pickup based on the volume, sorry, on the price items. So meaning that you structurally improved the unit P&L, but not necessarily get the volume gain coming out of it. Sitting here today, it's a little bit too early to say exactly what the revenue impact is. It's not worse than our ingoing assumptions, but I think we need to sit through another couple of months because we did it in early October. Then we went straight into a fair amount of noisy months with Black Friday and Christmas shopping, etc. So we need to see this kind of more in a, let's say, non-promo environment to see exactly what the effect is. So probably in the next quarterly announcement, we can come back and report on what the revenue impact is on that pricing. So as we built the budget, we kept the assumption that the elasticity is going to remain one, i.e. no revenue benefit necessarily. But we put the EBIT in the bridge, as you've seen, as I underspoke to before.

Okay, thank you.

We have a final follow-up question from Karnicky. Please go ahead. Your line is now unmuted.

Just one question on the refurbished stores. if you can comment on how they are performing compared to the normal stores. Thanks.

So we have, I mean, essentially you have three types, I would say. So one is the stuff that we forward integrate. Then you have newly established stores. And then you have the stores where we put in the new Evoke concept. So, you know, we can, I don't know exactly what you have in mind, but Let me comment on the overall, on the whole network expansion, if I kind of put that under the umbrella. They perform at least in line with the average of our own and operated, so I think that's 0.1. When you then look at the Evoke stores that we have done, and they are Evoke 1.0, so it's not the 2.0 that we're actually going to roll, and the difference is more look and feel rather than the actual store operation as such. In general, of the stores that we have up and running for a while, they perform better than the comparative stores. Now, then we can always debate what's a comparative store. Is that a neighborhood store or is that kind of in a region of the country or the country? But literally across all those three metrics, they seem to be more productive stores. than what we have in the current evolution concept, which is that that's kind of the typical Pandora store. You would walk into the white stores with glass and chrome, etc. So the Evoque 2.0, we hope to do at least as good as Evoque 1.0.

Very clear. Thanks. Thank you very, very much.

And the final question is from the line of Annibi Smith from HSBC. Please go ahead. Your line will now be unmuted.

Yes, hi. Thank you for taking my question. So the first one is on the investment side and the fact that if assuming that things turn out to be better than expected and you end up at the higher end of the guidance range in terms of organic growth, what is embedded in terms of marketing spending? given the fact that you flagged that you could invest even more, you would get the flexibility to invest even more. So where the marketing to sell ratio could land in that case. The second question is about, can you remind me, what do you need in terms of organic growth? What is the minimum threshold you need in order to get operating average? And maybe a final one, on the rollout of AVOC, you mentioned that you are planning to scale that up this year, so we know in the sense that you plan to roll out the concept. Thank you very much.

Okay, I'll do a sandwich.

I'll take the top and the bottom and leave the middle to Anders. So when it comes to marketing, as I've said all along, we have a range of 13 to 15% of revenue. And as I said, it depends on the year, depends on the initiative, etc. But that's kind of the level at which we cruise Then, of course, last year we did a global pitch on the media, which also rendered lower GRP costs. So, of course, with a lower spend, essentially, I get the same bang for the buck. Sometimes we reinvest that, sometimes we put that in our pocket. But from a modeling standpoint, if that's what you're actually asking, then the 13 to 15 is the range. The only kind of, let's say... Outlier to this conversation would be an additional investment in China that would sit on top of that 13 to 15 range if and when we decide to go in a bigger way. But we really haven't built that into the base plan, as I mentioned. Then on the Evoke 2.0. So what we have to do is we're going to do this in batches because what we need to do is we rolled out Evoke 1.0 in a number of places last year. Now, of course, we've changed some of this furniture. We changed some of the material. And before we then push the button and say, you know, we're going to change, you know, two and a half, three thousand stores all around the world, we need to ensure that actually the material works properly. So we're going to roll out a few now here in the first half. And on the basis of that learning, you know, that everything from a quality standpoint holds up to what we expected, then the kind of acceleration point happens in the back half of this year. So right now, I think we're probably planning something like 50 odd. And should everything go well, then that number will increase as we go through the year. And remember, when we talk about the store expansion, we talk about net stores. So it means that in some instances, we shut down an evolution store. And then when we then put the equivalent up, that's going to be an evoke store. So the actual gross number of stores is higher than the net that we keep quoting here. But we talk about the net because if you do your modeling, you know, you put a revenue number against a net opening, not the gross number, just not to confuse things. So, yeah.

And then, Anne-Laure, on the question about operating leverage, if I heard the question right, otherwise you'll correct me at the end here, but a couple of thoughts. One, if you look at operating leverage in a bigger scheme, rolling forward and modern for some years, then obviously there will be salary increases every year at a certain level, and typically also some inflation across the OPEX base. But if you think about a normal year, if that exists of a, let's call that three points of salary increases across the globe as an average, and then maybe one point of opex inflation on on other types of of opex then then the free the first three points of growth every year two to three points of growth every year would offset that in inflation unless you of course can find cost efficiencies cost reductions that can that can offset the the salary increases that that's the bigger part of of of that annual sort of automatic headwind, if I can call it that. That's one way to think about, if we couldn't find additional cost efficiencies, yeah, then the first three points of growth or so, that would be funding the salary increases and other types of objects in place, and there might be, in the numbers, there will be constant, Cost efficiencies, obviously, we've done a lot, as you know, since 18. We still have a couple of ideas. We have actually a dedicated team of a few people that just sits hunting and looking for ways that we can run the company more efficiently and find cost reductions. But then we move above, and having funded that automatic headwind every year, then there will be, let's call it, 25 basis points of operating leverage on each point of organic growth, just around that level. I think that's the number that we've talked about for a while. i hope that helps otherwise we're happy to follow up and make some more model modeling questions if needed as there are no further questions i will hand it back to the speakers for any closing remarks

Thank you very much. We certainly appreciate your interest in Pandora. We are passionate about it, as I hope you can note. Before I do my closing remarks, I know that you guys represent a lot of companies, and I hope you do like we did to put a donation into the suffering children in Turkey and Syria. I think it's close to our heart. We have a big cooperation with UNICEF, so that's a good thing. destination for any funds that you may want to put to help people in need. Then on the closing remarks for the company, I think we proved last year that Pandora is very good at navigating all these uncertainties and curveballs thrown at us. We put a record year out there. Underlying the brand is very good. As I spoke to, we have a captive, rather unique business model. We have a diverse geographical footprint, which reduces risks. And, you know, we took a number of precautionary measures last year to shore up our cost base. So we stand ready to, you know, first of all, deliver our promises to our shareholders. But secondly, also having the agility to jump on any opportunities that we see in front of us. And, you know, there are always opportunities when things are rough around the edges. So our ambition is, as it's been all along, to continue delivering a very strong performance. And on that, I once again thank you for the attention, and I'll probably see you around on road shows, et cetera, out there. Have a nice day. Thank you very much.

Thank you.