Ladies and gentlemen, thank you for standing by. Welcome to Avery Dennison's Earnings Conference Call for the First Quarter ended on March 30, 2024. This call is being recorded and will be available for replay after 4:00 p.m. Eastern Time today and until midnight, Eastern Time, May 1. To access the replay, please dial 1 (800) 770-2030 or 1 (609) 800-9909 for international callers. The conference ID number is 3299441. I'd now like to turn the call over to John Eble, Avery Dennison's Vice President of Finance and Investor Relations. Please go ahead, sir.

Thank you, Mandeep. Please note that throughout today's discussion, we'll be making references to non-GAAP financial measures. The non-GAAP measures that we use are defined, qualified and reconciled from GAAP on schedules A-4 to A-8 of the financial statements accompanying today's earnings release. We remind you that we'll make certain predictive statements that reflect our current views and estimates about our future performance and financial results. These forward-looking statements are subject to the safe harbor statement included in today's earnings release. On the call today are Deon Stander, President and Chief Executive Officer; and Greg Lovins, Senior Vice President and Chief Financial Officer. I'll now turn the call over to Deon.

Thanks, John, and hello, everyone. We're off to a strong start to the year. In the first quarter, we again delivered sequential earnings growth, with earnings up significantly compared to the prior year and slightly above our expectations. We grew volume in both segments, significantly expanded margins, generated strong free cash flow and delivered significant growth in Intelligent Labels. The Materials Group once again demonstrated its resilience, delivering significant volume growth and margin expansion both above expectations as downstream inventory destocking subsided and volumes continued to normalize. Label volume in Europe was particularly strong, as our teams managed through the now concluded Finnish port strike, which resulted in slight customer order pull forward in the quarter. Volume in North America was up compared to the prior year and improved significantly on a sequential basis as inventory destocking moderated in the quarter as expected. Overall, emerging market volume was strong with particular strength in India and the ASEAN region and China was up mid-single digits in the quarter. The Solutions Group delivered strong top-line growth, driven by high-value categories and expanded margins, despite apparel imports continuing to be below demand. While the apparel import trend has started to show slight signs of improvement in North America, retailers and brands remain cautious in their near-term sourcing plans. We continue to expect apparel industry volumes to normalize midyear. Enterprise-wide Intelligent Labels grew mid- to high teens in the quarter, with particular strength in non-apparel categories, while apparel began to recover. In the quarter, logistics volumes, while strong, were below expectations due to lower domestic parcel volume. Overall, the ability of our solutions to help address industry challenges, such as labor efficiency, waste, transparency, and consumer connection in very large volume categories like logistics and food, is increasingly resonating with customers. Key pilots and rollout are delivering significant value for our customers and compelling proof points for broader segment adoption. We continue to invest to capture the significant opportunity ahead as we grow the size of the overall industry, further advancing our leadership position at the intersection of the physical and digital. As we continue to see adoption in new categories and a rebound in apparel, we are targeting to deliver roughly 20% growth in our Intelligent Labels platform in 2024. Stepping back, the underlying fundamentals of our business are strong. We're exposed to diverse and growing markets with clear catalysts for long-term growth. We are the industry leaders in our primary businesses with clear competitive advantages in scale and innovation. We have a clear set of strategies that have been key to our success over the long term and across a wide range of business cycles, and we are uniquely positioned to connect the physical and digital to help address some of the most complex problems in the industries we serve. We remain confident that our strategies, along with our team's ability to execute in dynamic environments, will enable us to continue to generate superior value creation through a balance of GDP-plus growth and top quartile returns over the long term. In summary, we delivered a strong quarter in a still uncertain environment and reaffirm our full year guidance to deliver strong earnings growth in 2024. I want to thank our entire team for their continued resilience, focus on excellence and commitment to addressing the unique challenges at hand. And with that, I'll hand the call over to Greg.

Thanks, Deon. Hello, everybody. In the first quarter, we delivered adjusted earnings per share of $2.29, up 6% sequentially and up 35% compared to the prior year, driven by benefits from higher volume and productivity. Compared to the prior year, sales were up 4% ex currency and 3% on an organic basis as higher volume was partially offset by deflation-related price reductions. Adjusted EBITDA margin was strong at 16.3% in the quarter, up 270 basis points compared to the prior year, with adjusted EBITDA dollars up 25% compared to the prior year and up 4% sequentially. We generated strong free cash flow of $58 million in the first quarter, up $129 million compared to the prior year. And our balance sheet remains strong with a net debt to adjusted EBITDA ratio at quarter end of 2.3x. We continue to execute our disciplined capital allocation strategy, including investing in organic growth and acquisitions while continuing to return cash to shareholders. In the first quarter, we returned $81 million to shareholders through the combination of share repurchases and dividends. Turning to the segment results for the first quarter. Materials Group sales were up 2% ex currency and on an organic basis compared to the prior year, driven by low double-digit volume growth, partially offset by deflation-related price reductions and mix. Looking at label materials organic volume trends versus prior year in the quarter, North America was up mid-single digits and up mid-teens sequentially as downstream customer inventory destocking subsided in the quarter as expected. Europe was up significantly, more than 30%, as Q1 2023 was the low point in the destocking cycle. Volume was also strong sequentially, up low double digits. Emerging regions delivered strong volume growth as well, with Asia up mid-single digits with particular strength in India and ASEAN and Latin America up mid-teens. Compared to the prior year, sales in both Graphics and Reflectives and Performance Tapes and Medical categories were down mid-single digits. Materials Group delivered a strong adjusted EBITDA margin of 18.3% in the first quarter, up 4 points compared to the prior year, driven by benefits from productivity, higher volume and the impact on margin percentage from deflation-related price reductions, partially offset by higher employee-related costs. Regarding raw material costs, globally, we saw modest deflation sequentially in the first quarter as expected. Towards the latter part of the quarter, we began to see raw material cost increases in certain categories, particularly paper in Europe. As such, we anticipate modest inflation sequentially in the second quarter and are addressing the cost increases through a combination of product reengineering and pricing actions. Given the timing of these pricing actions and our annual employee wage increases, we expect Materials Group margins will moderate slightly in Q2. Shifting now to Solutions Group. Sales were up 10% ex currency and 6% on an organic basis, with high-value solutions up low double digits and base solutions up low single digits. In the quarter, enterprise-wide Intelligent Labels sales were up mid- to high teens, with strong growth in non-apparel categories, particularly logistics and general retail, and with apparel categories up both sequentially and compared to the prior year. Solutions Group adjusted EBITDA margin of 16.1% was up 40 basis points compared to the prior year driven by benefits from productivity and higher volume, partially offset by higher employee-related costs and investments. Margins were down sequentially, driven by apparel and logistics seasonality and higher employee costs, including higher incentive compensation accruals following lower payouts for 2023. We anticipate sequential margin improvement in the second quarter, driven by higher volume and additional productivity initiatives. Now shifting to our outlook for 2024. For the year, we continue to anticipate adjusted earnings per share to be in the range of $9 to $9.50, up 17% at the midpoint, reflecting a more than $0.05 increase from our operational performance, offset by a similar size headwind from currency translation. And as you will recall, our outlook includes four key drivers of earnings growth in 2024, which are all on track: the normalization of label volumes early in the year, the normalization of apparel volumes midyear, significant growth in Intelligent Labels as apparel rebounds and new programs continue to roll out, and ongoing productivity actions. We've outlined additional key contributing factors to our guidance on Slide 12 of our supplemental presentation materials. In particular, and focusing on the changes from our assumptions in January, we estimate roughly 4% organic sales growth, 50 basis points higher than our previous outlook due largely to the slightly higher pricing than previously anticipated. We continue to expect high single-digit volume growth, partially offset by deflation-related price reductions for the year. We expect incremental savings from restructuring actions of more than $45 million. And we now anticipate a headwind from currency translation of roughly $5 million in operating income for the year, up from our previous outlook of modestly favorable. We estimate the Q1 customer pull-forward benefit that Deon mentioned earlier was roughly $0.05 of EPS and will come out of Q2. Overall, in Q2, we continue to expect improvement in the underlying business, and we anticipate EPS will be down slightly from Q1 due to the customer pull forward. We continue to expect earnings in the second half of the year will be stronger than the first half with apparel industry volumes normalizing midyear. In summary, we continue to strengthen our results as we advance our growth initiatives and our markets normalize. We continue to expect a strong rebound in 2024 throughout a variety of environments, and we remain confident in our ability to continue to deliver exceptional value through our strategies for long-term profitable growth and disciplined capital allocation.

Our first question comes from George Staphos from Bank of America.

It has been a solid start to the year. I have a quick question regarding Intelligent Label. For this quarter, you're forecasting organic sales growth for IL at approximately 20%, or maybe even higher. Could you provide some context on that? I recall you mentioned a couple of factors for the first quarter, including parcel shipments being a bit slower than anticipated. Is that the main reason for the slight adjustment in your IL guidance? Additionally, could you update us on the margins in Solutions? Were they in line with expectations for the first quarter, or did you encounter any challenges that you expect will improve in Q2?

George, thanks for the question. As it relates to our IL guidance, we did see slightly lower volumes than we anticipated in logistics on lower parcel shipments. But we did also continue to see some apparel IL growth ahead of our base business as well in apparel at the moment. That's largely because some of the new programs that we've been rolling out, including Inditex, where we're driving loss prevention, continues to be very strong as well. As we look forward, we still see the recovery of the apparel business in the second half to be a key driver of our IL growth as well. In addition, the continuation of our programs that are in flight and rollout and some of the conversion of our pilots and trials to rollout as well. And those, George, as you know, can be episodic; they can switch from quarter to quarter. We fundamentally believe in the strength of the opportunity that lies ahead of us. I'll remind everybody that all of these industries outside of apparel are still in the nascent stage. There are significant growth opportunities ahead, and we're going to continue to invest to drive and deliver on that 20% growth.

Yes, regarding your second question about apparel or overall Solutions margins, we anticipated a sequential decline primarily due to seasonality in apparel and increased logistical impacts in Q1 compared to Q4. This was part of our expectations. Additionally, we are experiencing some employee cost increases as we compare quarters. We previously mentioned temporary cost savings from last year, which included measures like reducing expenses and volume-related actions, as well as changes in incentive compensation. Last year, our incentive compensation was significantly lower than our target due to the discrepancy between our results and initial expectations, which created a sequential headwind that we had anticipated. Looking ahead to Q2, I mentioned earlier that we expect Solutions margins to improve quarter over quarter. This improvement is partly due to the volume, as the seasonality that negatively impacted Q1 will begin to benefit Q2. The business is also focused on increasing productivity, so we expect some sequential improvements in Solutions margins as the year progresses.

Our next question comes from the line of Ghansham Panjabi from Baird.

I guess first off, on the apparel market assumption that normalization by the middle of 2024. Can you just give us a bit more insight as to what supports the confidence associated with that? And then on Materials, I'm sorry if I missed this if you already called this out, but what was the pricing impact specific to the first quarter which it seems like it would be quite significant and perhaps one of the biggest you've seen in multiple decades? And how should we think about that evolution into the second quarter and the back half of the year?

So Ghansham, on the apparel recovery, and I'll let Greg handle the Materials question. On the apparel recovery, we're seeing a couple of factors in play. I think we've been pretty clear all along that apparel imports continue to be significantly below 2019 levels. What we saw in the last quarter is some slight improvement in our apparel import rates, particularly in North America, not yet in Europe, but particularly in North America. We also know, having spoken to many of our customers that their inventory volumes that they're having now are at the place where they feel very comfortable generally across the board. That hadn't been the case up until we got into the first quarter. In conversations as we speak with all of our customers, we know that while the environment is still uncertain and they're certainly weighing in that uncertainty into their near-term sourcing, the combination of slowly seeing some apparel imports starting to recover as well as where their inventory levels are and the fact that we are seeing some of that sentiment come back would underpin the fact that we believe, by midyear, we'll tend to see apparel volumes normalize.

Yes. And on your second question, Ghansham, when we look at Materials in the quarter, overall, as we talked about, our volume was up low double digits in the quarter. And that was offset by partially offset by two factors. One of those was price, which was down mid- to high single digits in the quarter versus last year, then also mix down low single digits as well as some of that or more of that destocking took place in our base business, with generally less lower prices per unit. Now on the price piece, Q1 from a year-over-year perspective is the biggest headwind. We're really starting to see some of that sequential deflation last year, really starting in the second quarter, and our pricing kind of followed that. The biggest year-over-year pricing headwind will be Q1. And as I think I mentioned earlier in the prepared remarks, we are doing some pricing actions to deal with some of that targeted sequential inflation that we see in the second quarter as well. So we expect pricing sequentially to go up a bit from Q1 to Q2.

Our next question comes from the line of John McNulty from BMO Capital Markets.

I wanted to dig into the Materials Group margin, which looks like it was a record because it seems like there's a lot to unpack. You had a bit of pull forward in Europe. At the same time, look, you've made a lot of cost cuts; you're getting back to kind of more normalized levels or volume levels to think about. So I guess can you help us to think about the sustainability of this margin level as we kind of look through '24 and go forward?

Yes. Thanks, John. So I think you called out a lot of the buckets; really, the big driver of margin when you look year-over-year and even sequentially is the volume increase. So year-over-year, obviously, it's very significant. And sequentially, we had an improvement as well as we still had some destocking back in Q4 that we talked about being behind us now. The other thing that the Materials business has been significantly doing is driving productivity. So we've got some large restructuring actions as well as just ongoing ELS type of productivity initiatives that the team is continuing to drive. Those volume and productivity initiatives are really driving the significant margin expansion and they're largely offsetting wage inflation in that incentive comp headwind I talked about a minute ago. So the teams have been doing a really good job driving that. When we look forward, I think I talked about last quarter, we set our targets back in 2021 for the cycle that ends in 2025. We talked about Materials margins getting around that 17% EBITDA level. Now clearly, we've delivered that here in the first quarter and gotten pretty close to that in the back half of last year as well. Our focus is continuing to deliver on that long-term target as we stated. And as always, in the Materials business or in all our businesses, really, it's a focus on balancing our top line growth, balancing our margins, our capital efficiency to drive EVA growth over time. This business has been a big EVA driver for us for a long time, and we're going to continue balancing all those drivers to deliver incremental EVA into the future as well.

And John, let me just add from a market perspective, we were very clear that we thought destocking ended in Europe last year in the third quarter and the U.S. roughly at the end of the fourth quarter of the year. We're seeing that play out in conversation with our customers, where there had been more limited visibility to end CPG demand that has expanded. They're seeing more confidence there, and their own volumes of inventory are much more normalized now than they have historically been over the last sort of 1.5 years as it were. That also underpins the fact we're starting to see more normalized volumes. I put that also in the context of we continue to see macro retail volumes still being relatively low, both in the United States and in Europe. That speaks to also just the forward outlook being while confident in our continued normalization. There is still some caution out there as well.

Our next question comes from the line of Anthony Pettinari from Citigroup.

It's actually Bryan Burgmeier sitting in for Anthony. Just on the rising paper costs in Europe, I know you cited a bit of a margin headwind next quarter. Can you just remind us how Avery has handled this type of inflation in the past? Or how long it typically takes you to get caught up on net price? And do you believe with the finished strikes now resolved, order patterns and paper costs can kind of normalize maybe in the second half of the year?

Yes. Thanks, Bryan. So traditionally, we've talked about it taking about a quarter to implement pricing from the time we start to see some of that sequential inflation, and we expect to stick at least. Back in the '21, '22 timeframe when we were seeing pretty significant sequential inflation each quarter, we had narrowed that gap a bit from that three months to a much smaller amount. I think we're just starting to see this sequential inflation over the back part of Q1. We would expect it to take a couple of months to get that in place at some point in the mid- to late part of Q2. Overall, we don't see in our visibility on Materials markets, our raw materials aren't that far in front of us. So we're really focused on what we're seeing right now in Q2. So right now, we don't have a lot of visibility past that but not expecting too much to happen past Q2 from a raw material perspective at this point.

And Bryan, all I'd add is that unlike in '22 and then into '23 when we saw that significant inflation period and then followed by deflation, this one over here, in particular in Europe, is related to the Finnish port strike, which has now ended and concluded. That's the good thing. I think we're still going to see some of those ripple effects come through, as Greg has alluded to. But as the market leader, we tend to be very disciplined in our pricing approach. When we see inflation, we tend to respond both with productivity and price increases. And when we tend to see deflation, we tend to unwind those as well appropriately to make sure that we are custodians of the industry, managing the health and the balance of the industry as well.

Our next question comes from the line of Jeff Zekauskas from JPMorgan.

I was looking at your Slide 11 in your description of the organic growth in Solutions. And I looked at your percentages. And so if Intelligent Labels is 32%, growing 17%, that's up 5.5%. And if your high-value categories are 28%, growing at low double digits, that's up another 3% and then you get something from base categories. So if you simply follow your percentages, it looks like your organic growth should be, I don't know, close to 9%. Is there some acquisition that's included and maybe the Solutions, high-value categories? Or is it something else? And then secondly, did your Intelligent Labels revenues shrink? Were they flat? Did they grow sequentially?

Yes. Thanks, Jeff. So I think to your point, high-value categories in total that includes Intelligent Labels and Solutions on that chart shows it's around 60% of the segment. So when you look at that, it is a large portion or a significantly large portion of the overall growth in the quarter. And as we said, the base business is up kind of low single digits there in addition to that. There are acquisitions in the high-value categories last year. We did three acquisitions in our External Embellishment space, which is part of that high-value segment category piece that's in our ex currency growth year-over-year as well.

And Jeff, to your second question, our Enterprise IL revenue in dollar terms was sequentially lower than Q4. Recall Q4 is a high watermark for logistics. Q1 sequentially is a lower quarter from an overall both apparel and logistics as it were.

Our next question comes from the line of Josh Spector from UBS.

So I wanted to dig in a little bit more on the cadence of earnings into the second quarter. So if I look at history, typically, you're up something like $0.20 sequentially. Greg, you called out the $0.05 to pull forward. I guess if I say Materials margins are down modestly, maybe that's $0.05. I guess what else would be the other factors that would drive that lower sequentially and offset frankly, all of the normal seasonality here?

Yes. So as you said, Josh, seasonality in the last few years has been pretty unique with a lot of the destocking in 2022 and 2021 and then the destocking we saw in 2023. But generally, we would expect some seasonality benefit moving from Q1 to Q2 just like we talked about in the first quarter; we had a seasonality impact from the inland base apparel in our Asia business from Lunar New Year. We get a little benefit of that volume from Q1 to Q2. At the same point, as I talked about, we have a little bit of sequential inflation that takes us a little bit as I mentioned a few minutes ago to cover that. Our annual wage inflation for us kicks in on generally April 1st each year. So that's a sequential headwind from a cost perspective as well. We'll obviously be implementing productivity initiatives to cover that, but it is a sequential impact when we look Q1 to Q2. Again, and then that pull forward kind of brings it down. Without the pull forward, our underlying business, as I said, would be up sequentially without that.

Our next question comes from the line of Chris Kapsch from Loop Capital Markets.

So my question is focused a little bit more on strategically addressing the Intelligent Label opportunity. It's that RFID adoption expands beyond traditional, say, item level apparel and into other verticals. Based on sidebar conversations we've had and at our recent conference, we talked about this, but your efforts to use sort of value selling techniques to capture more of the value that a program brings to bear in a given application or vertical beyond just sort of a cost-plus pricing paradigm that might be the case with a more straightforward solution like logistics, shipping labels, for example. So I'm just wondering in terms of that value proposition for a use case that brings something like inventory accuracy or to help with shrink or replenishment or to prevent stock outs or to help sales. Just wondering if that approaching these potential new use cases with more of that value selling proposition? How is that going? And is this something that could sort of change the paradigm in terms of potential margins for this business as growth persists going forward?

Thanks, Chris, for the question. Yes, so I'll just remind, Chris, in the discussion that we had as well, is one of the reasons why we have such conviction around the growth potential of the business is just the scale of the opportunities in these adjacent categories. I think I said before, food is in an order of magnitude, 4 or 5 times larger than our apparel opportunity in total. We're only about 40% penetrated there. Logistics is 60 billion units relative to apparel of 40 billion. All those segments are still in the nascent stage where we see an opportunity to help sort of connect the physical and digital by leveraging both our RFID capability and some of our other capabilities we have around data management and material science as well. That gives us the confidence as we look forward to know that we've been investing in this. Now as these markets slowly start to adopt, we're starting to see that the benefits that we think are there manifest in those segments, and we believe will also be ubiquitous when you look at broader segment adoption as well. I think the approach that we've taken, as we've looked into these segments is one that we've been building on for a while, Chris, which is what is the scale of the differentiation of the total solution we're able to bring to bear in those opportunities. The more differentiated, the easier it is for us to have more of a premium value that we're able to recover, but also the scale of the opportunity of the value we're providing our customers is actually large in that regard. We're seeing some of that come to bear in some of the trials and pilots and small rollouts that we're doing right now. I think as we move forward, the concept of having a broader solution sell, including hardware, software, sensing technology, material science is at its infancy, but I think it will play a larger part in our future as we move forward in the years to come.

Our next question comes from the line of Michael Roxland from Truist Securities.

This is Nico Piccini stepping in for Mike today. You touched on it earlier, but I would like to go into more detail. Recognizing that the timing of these IL deployments and pilot programs can vary each quarter, could you provide a preliminary outlook for 2024 regarding the deployment schedule for IL this year? I believe there is a large logistics company you are still working with in the first half. Are there any other industries that might benefit this year?

Nico, our current forecast shows that the year is progressing with the rollout and expansion of all our programs, and we are confident they will continue to do so. There may be occasional changes across departments and categories each quarter. Our focus is particularly on accelerating the adoption of our pilots and trials in food and logistics beyond our current timeline. This acceleration is essential for achieving the broader industry adoption we expect. Looking at the bigger picture, the advantages in some of these new segments are quite strong, but success will depend on getting a couple of customers onboard and ensuring those benefits are clear across the industry. That’s usually when we start to see adoption take off. It’s important to note that these instances can be irregular and inconsistent, much like we have observed in apparel. One key difference between apparel and other segments is that during the initial rollout phase, we need to demonstrate both the technology and the business case. However, this is no longer necessary for the new segments since the technology is already proven. In our current pilot and trial discussions, we clearly see the benefits and are working diligently, including with a broader array of logistics and food companies, to ensure we achieve full rollout on time.

Our next question comes from the line of George Staphos from Bank of America.

I'll ask them in sequence just to clear the backlog and then turn it over to everybody else. So on the Finnish strikes, I know that for now, they're over, but it's still not clear whether they are ultimately not going to resume again recognizing they're much more political in nature this time around versus a couple of years ago. I assume the experience from a couple of years ago, you've improved your supply chains and your ability to access paper if you need to, but could you sort of affirm that and give a little bit of color on what you've done there just to make sure that if the strikes resume, you're still in good position? Secondly, it seems like there's been a bit of a weather factor across a lot of the larger regions in North America in terms of being a little bit cooler in weather. Has that had any effect from your vantage point on parcel shipments and your label consumption that you might see come back later in the year? And then lastly, I assume it's just because we've gotten back to normal, but that helpful slide that you've had over the last couple of quarters where you show some of your internal indicators. I didn't see it in this deck; should we assume that means we're back to normal, and that's a good thing?

Thanks, George. I'll address the first part, and then Greg can handle the last question. Regarding the Finnish strike, it has been resolved, but it's important to note that future developments could change that situation. We've learned two key things from our recent experiences with significant supply chain constraints. First, we've significantly diversified our supply chain. Our raw material sources have expanded from single regional suppliers to multiple regions and suppliers. This diversification is why we haven't faced interruptions during this period; in fact, our service levels around the world have improved due to the resilience we've built into our supply chain. Second, we've focused on gaining a deeper understanding of consumption patterns, utilizing process insights and data to relate them to the inventory levels of consumer packaged goods, our converters, and retail customers. This understanding enhances our confidence in managing our supply chain. Regarding parcel shipments, we've observed a decrease in local domestic parcel shipments, which is now well-known. We expect parcel shipments will largely depend on the state of U.S. retail and GDP, though this situation remains somewhat uncertain for now.

Yes. Thanks, Deon. So on the internal indicator slide, George, to your point, yes. I think as we've talked about, our materials business is getting back to normal. We think the destocking is behind us, as we've said. Part of why we didn't really need to provide those indicators as well, given that we are back to normal in that business or getting there at least. In apparel, as I think Deon talked about a couple of minutes ago, we're also heading in the right direction there. We continue to feel confident that by midyear, we're kind of back to more normalized levels there. So just as you said, we're getting back to a more normalized state here as we move through the course of the year.

Mr. Stander, there are no further questions at this time. I will now turn the call back to you for any closing remarks.

Thank you all for joining the call today. While the environment does remain dynamic, we remain extremely confident in our position and our prospects and our ability to deliver GDP-plus growth and top quartile returns over the longer term. Thank you to you all. Good day.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.