Earnings Call Transcript - BRBR Q4 2021

Operator, Operator

Welcome to BellRing Brands' Fourth Quarter 2021 Earnings Conference Call and Webcast. Hosting the call today from BellRing Brands are Darcy Davenport, President and Chief Executive Officer; and Paul Rode, Chief Financial Officer. Today's call is being recorded and will be available for replay beginning at 1:30 p.m. Eastern Time. The dial-in number is (800) 753-9146. No pass code is required. At this time, all participants have been placed in a listen-only mode. It is now my pleasure to turn the floor over to Jennifer Meyer, Investor Relations of BellRing Brands, for introductions. You may begin.

Jennifer Meyer, Investor Relations

Good morning, and thank you for joining us today for BellRing Brands' fourth quarter fiscal 2021 earnings call. With me today are Darcy Davenport, our President and CEO; and Paul Rode, our CFO. Darcy and Paul will begin with prepared remarks, and afterwards, we'll have a brief question-and-answer session. The press release and supplemental slide presentation that support these remarks are posted on our website in both the Investor Relations and the SEC filings sections at bellring.com. In addition, the release and slides are available on the SEC's website. Before we continue, I would like to remind you that this call will contain forward-looking statements, which are subject to risks and uncertainties that should be carefully considered by investors as actual results could differ materially from these statements. Additional information regarding these risks and uncertainties is discussed under the Forward-Looking Statements section in the press release we issued yesterday and posted on our website. We also note that registration statements, proxy statements and prospectuses and other documents related to the proposed distribution of Post's interest in BellRing Brands will be filed with the SEC when they become available because they will contain important information. These forward-looking statements are subject as of the date of this call, and management undertakes no obligation to update these statements. As a reminder, this call is being recorded, and an audio replay will be available on our website. And finally, this call will discuss certain non-GAAP measures. For a reconciliation of these non-GAAP measures to the nearest GAAP measure, see our press release issued yesterday and posted on our website. With that, I will turn the call over to Darcy.

Darcy Davenport, President and Chief Executive Officer

Thanks, Jennifer, and thank you all for joining us. Last evening, we reported our fourth quarter and fiscal 2021 results and posted a supplemental presentation slide. 2021 was a strong year for BellRing. Net sales grew 26% to just under $1.25 billion with adjusted EBITDA of $234 million. Due to supply chain disruptions, our fourth quarter net sales finished strong at $340 million, up 20%, and adjusted EBITDA was $60.5 million. Consumption meaningfully grew across both brands, with Premier Protein ready-to-drink shakes up 30% and Dymatize powders up 50% across both tracked and untracked channels despite both brands experiencing some out-of-stocks. Margins remained strong but were lessened by rapid escalation in protein and freight costs. Paul will provide more detail about the quarter, but I want to step back and reflect on how the COVID-19 pandemic has affected the convenient nutrition category as well as our brands. Since the pandemic started, people went from being reactive recipients of health care to proactive consumers of health and wellness solutions. In response, consumers adopted more engaged ways to keep themselves and their families protected from this virus. The result was a massive consumption increase of nutrition products, especially functional drinks that offer energy and immune health benefits. The trend of preventative and proactive health existed before the pandemic, but COVID-19 drastically accelerated the importance of self-care. Then in mid-2021, as the country was reopening, the convenient nutrition category benefited from an additional tailwind: the renewed desire by many consumers to get back in shape and lose their COVID-19 weight gain, driving additional households into the category. As of September 30, household penetration of ready-to-drink liquids and ready-to-mix powders were both at all-time highs. Both Premier Protein and Dymatize brands are perfectly positioned to take advantage of these long-term trends as they are trusted leading brands with strong loyalty. In 2021, BellRing largely drove this incremental category expansion with strong execution across our growth strategies, including successful distribution gains, effective marketing campaigns and new product trials. Premier Protein became a $1 billion brand this year and Dymatize proved to have strong mainstream appeal, becoming a significant growth contributor to BellRing. We now have two leading brands with strong prospects. However, this year's expansion came with some growing pains. Our sales outpaced production for both shakes and powders. Supply chain disruptions affected our entire industry, including labor shortages and equipment delays impacting our ability to access the anticipated level of flex production. As a result, we depleted safety stock, and year-end inventories are too low, leading to out-of-stocks in the marketplace. We are partnering with our retailers, and as the number one brand in our segment, they are working with us as we make strategic adjustments to improve our service levels. The good news is inventory levels are starting to improve. We are adding shake capacity with our existing co-manufacturers and expanding our co-manufacturing network. In 2022, we expect shake production to increase in the low to mid-teens. However, this is not enough to satisfy our robust demand and build back safety stock at the same time. As a result, we are temporarily reducing some of our lower-velocity tetra shake SKUs in addition to pulling back on promotion and marketing. Expect our production growth will outpace shipments because much of the new production will be used to replenish safety stock and return to adequate service levels. Beyond 2022, we are aggressively investing in shake production through numerous long-term volume commitments. I'm pleased to announce that we have entered into an agreement with Post to build a shake processing facility, which will be dedicated to Premier Protein. We are excited to leverage our relationship with Post, specifically the aseptic manufacturing knowledge in its food service business. Now to our outlook. As you saw in yesterday's press release, we expect fiscal 2022 net sales and adjusted EBITDA to grow between 9% and 13%. This guidance is consistent with our long-term algorithm despite our outsized growth in 2021 and capacity strength in 2022. Net sales growth is back half weighted and sequentially grows every quarter as new capacity comes online. Growth in powder volumes, price increases on both brands and reduced trade promotions drive year-over-year sales growth. This growth, coupled with reduced marketing and improved SG&A leverage, will ultimately drive EBITDA gains despite significant inflation. Before closing, I would like to share that, in October, BellRing and Post signed a transaction agreement related to Post's previously announced intention to distribute its interest in BellRing to Post shareholders. We believe, upon completion of the proposed transaction, BellRing will have increased strategic flexibility to manage our capital structure and should benefit from more liquidity in our shares. As part of the agreement, Post will continue to provide certain services to BellRing for up to three years to facilitate a smooth transition. We had a phenomenal 2021 and the future remains bright for both our products and our categories. Our growth is firing on all cylinders. Despite current supply constraints, we continue to invest in our innovation pipeline, bringing product news to consumers and growing our category. Our strong demand, combined with supply chain challenges, create a clear organizational focus for 2022: aggressively build supply and be ready to turn on our demand-driving engine as soon as supply allows. I want to thank our employees and our co-manufacturing and retail partners for all the hard work that made 2021 such a successful year. I will now turn the call over to Paul.

Paul Rode, Chief Financial Officer

Thanks, Darcy, and good morning, everyone. This morning, I will briefly review category and brand highlights, followed by our financial results and close with our outlook. The convenient nutrition category continues to show remarkable growth. Ready-to-drink beverages grew 20% versus a year ago with the ready-to-mix powders growing 18%. RTD beverages, once again, added two points to household penetration with the average buy rate growing 11% versus a year ago. As Darcy discussed, strong consumer tailwinds are driving these gains. Our growth strategies are working well. Premier Protein's household penetration reached another all-time high of 8.4%, up 20% over prior year. Our repeat rate and buy rate on our 30-gram shake line remains strong and stable. We saw tremendous distribution gains this year. However, our TDPs declined this quarter pressured by out-of-stocks. Premier Protein powders are showing great momentum with tracked consumption up 76% for the quarter. We're pleased with this year's performance of Premier powders and look forward to growing this product further in 2022. Dymatize continues to benefit from expanded distribution across mainstream channels. Velocities remain strong, and it continues to perform in the top third of categories where it's sold in the U.S. Moving to our financial results. Net sales for the quarter were $340 million, up 20.3%. Adjusted EBITDA was $60.5 million, up 6.7%, and EBITDA margins were 17.8%. Our top-line performance remained very strong across all brands but our sales growth was negatively impacted by supply chain disruptions. This caused lower-than-anticipated production, which exacerbated already low inventories and drove missed sales for the quarter. Despite these challenges, Premier Protein net sales grew 18.2% primarily driven by RTD shake distribution gains and strong velocities. Net sales outpaced volume growth, reflecting price increases taken to offset milk protein and freight inflation and favorable product mix. Dymatize net sales grew 41% driven by strong distribution gains and velocities. Domestically, the brand was up 31% growing in all channels. International was even stronger, up 67% as we lap the negative impacts of COVID in the prior year. Last, favorable product mix drove an improvement in average net selling prices. Gross profit of $96 million increased 6.9% this quarter with an expected decrease in gross profit margin to 28.2%. As we have discussed, this decline resulted from higher input and freight costs as well as planned promotional activity. Whey protein costs moved sharply higher this quarter, ahead of our October price increase on powders, which weighed heavily on margins. Our price increase on shakes is offsetting higher milk protein costs. SG&A expenses were $38 million and, as a percentage of net sales, declined 130 basis points to 11.2%, reflecting leverage of our SG&A base. Turning to full year 2021 results. Net sales of $1.2 billion grew an impressive 26.2% over the prior year with gross profit of $386.2 million, growing 14.3%. Gross profit margins declined to 31.0% reflecting higher input costs and planned incremental promotional activity. SG&A expenses were $167.1 million and, as a percentage of net sales, declined 200 basis points to 13.4% despite $6.1 million in higher marketing and advertising expenses and $5.2 million of restructuring and facility closure costs related to our business realignment. Adjusted EBITDA increased 18.6% to $233.9 million with a margin of 18.8%. Before reviewing our outlook, I would like to make a few comments on cash flow and liquidity. We had a strong fourth quarter on cash flow, generating $80.2 million from operations and $226.1 million for the year. A decrease in inventories drove a favorable benefit in fiscal 2021, which we expect to largely reverse next year as we rebuild inventories. We have $152.6 million of cash on hand and full availability under our $200 million revolver at quarter end. As of September 30, net debt was $457.4 million, and net leverage was 2.0x. Since the IPO, we reduced net debt by approximately $280 million. Now to our outlook. We expect fiscal 2022 net sales of $1.36 billion to $1.41 billion and adjusted EBITDA of $255 million to $265 million. The midpoint of our outlook implies double-digit top-line growth with adjusted EBITDA margins just under 19%, both of which are in line with our long-term algorithm. Sales and adjusted EBITDA growth are expected to be weighted to the second half. Gross margins are expected to be pressured by double-digit input cost inflation primarily whey and milk proteins. Our powder portfolio is facing significant cost headwinds as whey proteins are at historical high prices. These inflationary pressures are expected to be offset by price increases, including a double-digit price increase on our powder portfolio effective in October. We continue to closely monitor inflation and are prepared to take further pricing actions as warranted to combat these pressures. Heading into the first quarter, we expect mid-single-digit net sales growth as higher net pricing was partially offset by volume declines in RTD shakes as we start to rebuild inventory. We currently expect adjusted EBITDA to modestly decline from prior year with margins improving sequentially from the fourth quarter. Compared to prior year, higher whey protein costs and logistics inefficiencies are expected to weigh on margins. Finally, as previously announced, Post and BellRing expect the distribution of a significant majority of Post's ownership interest in BellRing in the first calendar quarter of 2022. In connection with the distribution, we expect an increase in net debt at BellRing with pro forma net leverage no greater than 4x upon incurrence of new debt. More details will be provided as progress is made in implementing Post's plan. In closing, there is no doubt we are facing challenging short-term dynamics with high inflation and capacity constraints. However, the long-term fundamentals of this business are solid. The convenient nutrition category has dramatically accelerated and is at the center of health and wellness trends. Premier Protein and Dymatize are leading mainstream brands with incredible loyalty. Current and future co-manufacturers who are looking to expand are eagerly seeking to partner with us because of our leadership position and growth trajectory. While we and our industry are facing short-term challenges, the long-term opportunity for our business has never been brighter. I will now turn it over to the operator for questions.

Operator, Operator

The operator provided instructions for the question-and-answer session. And we will go first today to Andrew Lazar with Barclays.

Andrew Lazar, Analyst (Barclays)

First, I want to start out maybe with some of the strategic adjustments that you mentioned that you're working with retailers to manage through some of the supply constraints. Maybe you can talk a little bit about what you're seeing along these lines on the competitive front. Are others having similar issues? Or could there be some risk of more permanent shelf space losses even though velocity of Premier clearly remains very strong?

Darcy Davenport, President and Chief Executive Officer

Right. So I'll give a little more color on our temporary SKU reductions. We are looking at reducing the lower-velocity SKUs temporarily. Specifically, we are considering reducing four SKUs on our 30-gram line. From a competitive standpoint, this is absolutely an industry-wide problem. Anybody who produces 330 mL shakes, which is our size of shake, is facing capacity constraints and looking for incremental volume. The other thing is on bottles: some of our competitors produce bottles and they're facing supply constraints as well. They have different issues, for example with the foil seal on bottles as well as EVOH film. So there are a lot of different supply constraints that are affecting the industry. If you go out to the marketplace, you see out-of-stocks across the competition landscape.

Andrew Lazar, Analyst (Barclays)

And then you've talked more recently about your sort of volume elasticity assumptions in regard to some of the pricing and that you were taking a somewhat conservative view, not assuming that others necessarily follow pricing. I'm assuming the whole industry, obviously, in facing all of this, has been taking pricing pretty aggressively. Maybe you can update us on what you're seeing from an elasticity perspective, even though I know it's still somewhat early in the game with all the pricing coming through.

Darcy Davenport, President and Chief Executive Officer

We've really seen zero elasticity to date. We took price and our volumes went up. Competitors have followed in the RTD space. We've seen rapid escalation on whey, specifically, which is the predominant ingredient on our powder side of the business. We took price as of October 1st on our powder business, and we are also seeing competition take price on whey as well. Over the last month, whey has continued to increase further. So I expect competition to follow and that we will be looking at additional pricing on powder.

Operator, Operator

And we will take our next question from Chris Growe with Stifel.

Christopher Growe, Analyst (Stifel)

Just had a question, a bit of a follow-up to Andrew's question. I know, Paul, you had mentioned double-digit inflation in the first half of the year. As you see it today, what's the sort of inflation you expect overall for the year? And then do you expect pricing to be up as you—based on the inflation you see today—to offset inflation as you know it today?

Paul Rode, Chief Financial Officer

Yes. My comment was double-digit inflation for our full year. When we— as Darcy mentioned, we have seen a run-up in the last 30 days, especially on whey proteins, a little bit less on milk proteins, but whey protein continues to be sharper. When you asked us this question three months ago, the expectation was that whey protein would be a significant headwind in the first half and then the pricing would start to come down in the second half. What we're now seeing is that costs stay elevated throughout our fiscal year, and so that puts a lot of pressure on our powder margins because of that. As Darcy mentioned regarding the latest increase in whey cost, it seems likely that we need to take further pricing to offset cost on our powder business. The inflation on our shake business is in the single digits; we are continuing to monitor and assess if we need to take further pricing actions on our shake business.

Christopher Growe, Analyst (Stifel)

Okay. And then just a quick question, Darcy, around the new production manufacturing capacity that Post is putting in place. I know that when you went through this situation a few years ago, you had a pretty clear plan, a multiyear plan for building capacity through your third-party manufacturers to levels that would fully support your business and your growth outlook. Obviously, little things have happened, the pandemic and caused it to be a little short. I guess I'm trying to understand: presumably, before Post announced this new facility, you had a plan for incremental capacity to meet your demand. Is Post displacing some of that capacity? Or is it incremental or additional? And do you need it—do you think you have the capacity you need once that new facility is online?

Darcy Davenport, President and Chief Executive Officer

Yes. So we have a multiyear strategic plan around adding co-manufacturers. We currently have five locations and are looking at having eight to ten in roughly five years. Post is a part of that and an important part, but we are continuing to diversify our co-manufacturing locations throughout the country. One change in our strategy is that we're leaning into volume; we're being more aggressive at moving forward. We see what our business can do. We still believe we are in the early innings of household penetration of the category and our brands, and distribution as well as we still have not fully marketed Premier Protein. So we are absolutely leaning into the high side of our models, and Post is a part of that. Our fifth location is a dedicated facility to Premier Protein. We like that because it increases our control, and the partnership with a sister company gives us more control. Think of the Post expansion and partnership as the same path but accelerated.

Operator, Operator

We will go next to David Palmer with Evercore ISI.

David Palmer, Analyst (Evercore ISI)

Just a question on the points of distribution. That's great detail. How much do you think that 25% reduction in points of distribution since June hurt your consumption?

Darcy Davenport, President and Chief Executive Officer

It's interesting. We grew 30% this quarter. One of the fascinating things about Premier Protein is the loyalty. For example, in 2018 when we had to pull back to two flavors—chocolate and vanilla—many of our retail partners held the space for us and we actually didn't lose household penetration; our consumers just bought chocolate and vanilla. We have such loyal consumers that our consumption doesn't really go down. Yes, we temporarily lost some TDPs last quarter because of out-of-stocks, and our consumption still grew 30%.

David Palmer, Analyst (Evercore ISI)

Yes. It's amazing. Just thinking about your margin guidance, it would seem that your gross margins for fiscal 2022 might be in the 30% range or so, which would be well below where it was in fiscal 2019. I just wonder do you see a path back to mid-30s gross margins. And if so, when do you think you would get there?

Paul Rode, Chief Financial Officer

Sure. If you go back to 2019, dynamics were much different and inflation is obviously much different now. In 2019, we took a price increase that was a bit ahead of inflation and we saw very high margins. As we look at 2022, you described it correctly: there is margin compression largely on our protein powder business. The magnitude of the whey protein increases—we're looking at roughly two times protein costs versus a year ago and even more meaningful pressure in the first half—are a key driver. Two main things are impacting margins: whey protein costs and logistics inefficiencies. We saw some logistics inefficiencies in the fourth quarter and expect to see more in the first half; this is related to our lower inventory levels requiring cross-country shipments, expedited freight and other actions to get product to our retail partners quickly. That is also weighing on margins. We do see a path back to improved margins. We believe whey protein costs are transitory and will come back down from historical highs. We also expect geographic diversification of co-manufacturers to improve freight and logistics, and we believe we have pricing power on the brand. So there is a path to get back to past margins, but the inflationary environment makes it more challenging.

Darcy Davenport, President and Chief Executive Officer

I just wanted to add one thing: pricing power is rooted in brand loyalty, and we have that on Premier Protein and also on Dymatize. We've shown we can price for inflation and consumers have stuck with us. This inflation is affecting everyone in the category, so we feel we're in a good position.

Operator, Operator

We will go next to Ken Zaslow with Bank of Montreal.

Kenneth Zaslow, Analyst (Bank of Montreal)

So I'm going to go a little bit earlier in the planning question. I look back at your last quarter and you were fairly confident in the structure. So what actually failed in your planning process? And how do we ensure in two years from now that we don't have to go through this again and this doesn't become a two- to three-year episodic event?

Darcy Davenport, President and Chief Executive Officer

We grew two years in one this year; we ended the year up 26% largely due to Premier Protein. We usually plan three years out, and when you grow two years in one, that accelerates demand. What happened, combined with the co-manufacturing network, is that expansions were delayed and we experienced attainment misses by co-manufacturers because of COVID-related issues and labor shortages. What we've learned and what changes we're making are: one, diversification of co-manufacturing locations; two, leaning into the high side of our demand model—guaranteeing more volume instead of relying primarily on flex capacity; and three, investing in dedicated locations focused on Premier Protein which increases our control. Historically we relied more on flex capacity and take-or-pays that protected downside, but the pandemic removed much of that flex capacity. Going forward we'll guarantee the high side and diversify co-manufacturers. A few years ago most of our volume was on one co-manufacturer; we now have five locations and plan to roughly double that over time. These changes should reduce the likelihood of this issue happening again, but it's hard to recover from growing two years in one.

Kenneth Zaslow, Analyst (Bank of Montreal)

I'm not minimizing that. I was questioning the planning from last quarter to this quarter in terms of planning, but I'll take that offline. And then the other question I have is when I think about 2023, with all this behind us, do you think that your earnings potential changes or you're on a new base from which you will grow? How do you frame the 2023–2024 thought process in terms of earnings power or earnings base with growth off that? Can you recover?

Paul Rode, Chief Financial Officer

Ken, I would just add that this category accelerated beyond expectations. Growth rates more than doubled over the last six to nine months and it happened very quickly, catching a number of companies off guard. You can see it on the shelves across the category. To Darcy's point, we are doing a lot to anticipate and grow the business, but the rapid acceleration did catch some off guard.

Darcy Davenport, President and Chief Executive Officer

From a 2023 standpoint, history suggests that when we've had demand shaping in the past, the following year has accelerated growth. We will have added capacity coming online throughout 2022—capacity coming on each quarter. In 2023 we will be reintroducing flavors that we pulled back on and re-engaging marketing and promotion. There is an opportunity to be above the algorithm on the top line. With the new capacity, we would expect to fill that capacity and build sales as we reintroduce SKUs and marketing. So yes, the capacity expansion becomes a base to grow from.

Operator, Operator

We will go next to Pamela Kaufman with Morgan Stanley.

Pamela Kaufman, Analyst (Morgan Stanley)

You mentioned that you expect production to exceed shipments in fiscal 2022. How do you think about the trade-off between rebuilding inventories versus meeting the strong demand in the market and preserving your market share performance?

Darcy Davenport, President and Chief Executive Officer

Right now, inventories are just too low. We need to be able to service our customers on a consistent basis, and that requires a minimum level of inventory and safety stock. We need to get to that minimum amount and then we can turn demand back on. The differential between shipments and consumption is really just rebuilding and getting to that basic amount of safety stock so we can service customers consistently.

Pamela Kaufman, Analyst (Morgan Stanley)

Okay. And then you also mentioned that you're adjusting your marketing and promotional activities in light of the supply shortages. Can you talk about what changes you're making? Will there be a different cadence of promotional events this year or just less marketing?

Darcy Davenport, President and Chief Executive Officer

We will be pulling back on promotion and marketing. We'll continue some social and digital activity because a core part of our loyalty is one-to-one communication via social and digital. But we will not have the television advertising that we've had in the past. We'll be pulling back on promotion, focusing marketing on sustaining brand loyalty rather than heavy above-the-line spend while we rebuild inventories. I'll pass it to Paul to discuss cadence.

Paul Rode, Chief Financial Officer

If you look at 2021 from a marketing perspective, it was heaviest in our second quarter, which will be a benefit to EBITDA growth year-over-year relative to 2022. Q4 and Q2 are our biggest promotional quarters with Q4 being the largest. By pulling back on promotion, that will be a net positive to EBITDA. From a marketing perspective, I would expect marketing to be a bit lighter in the first half of 2022. Then, as we sequentially grow our top line, we'll grow marketing and start to add back marketing in step with volume.

Operator, Operator

And we will go next to Ben Bienvenu with Stephens.

Benjamin Bienvenu, Analyst (Stephens)

Want to ask first a quick question about guidance and then a follow-up just about the capacity ramp. On guidance, Paul, you talked about pricing increases that you're planning on taking. You also talked about considering additional pricing increases on our RTD shakes. Does the guidance you provided include taking more price to offset inflation? Or would that be incremental to the guidance you provided?

Paul Rode, Chief Financial Officer

It would be incremental. To clarify, there are two price increases that we have already taken that will affect fiscal 2022 versus fiscal 2021. We took a price increase on our shake business in April, so we'll get a half-year benefit of that. And we took a price increase at the beginning of fiscal 2022; in October we took a double-digit price increase on our powder business, so we'll get the full-year benefit of that. Our guidance does not contemplate further price increases outside of the promotional pullback we've discussed. That said, with the recent ramp-up in whey pricing, it's likely we will need to take further pricing on the powder side.

Benjamin Bienvenu, Analyst (Stephens)

Okay. Perfect. My second question is related to the capacity you expect to see during the year. With discontinuities in the supply chain, to what extent does that impede your ability or your visibility into the ramp in that capacity? And concurrent with that, to what extent does diversifying your co-man footprint mitigate the risk of supply chain discontinuities to hitting the schedule on ramping your capacity?

Darcy Davenport, President and Chief Executive Officer

We are adding capacity in the mid-teens percentage and it adds every quarter. We're adding to existing co-manufacturers as well as bringing on additional co-manufacturers in Q2, Q3 and Q4. Key milestones for adding capacity include ordering equipment, delivery and installation/startup. All three have risk, especially delivery and shipments in today's environment. Of three locations adding equipment, two have already received equipment, which derisks much of the plan. The third is expecting equipment later this month. That reduces risk significantly. Then it becomes a matter of installation and labor, and these additions are expected to come online in Q2, Q3 and Q4. The bulk of 2022 volume is actually coming from existing co-manufacturers, and we've been conservative in the attainment targets baked into our guidance. Diversifying co-manufacturers absolutely mitigates risk, and that's a key aspect of our strategy. We have already diversified over the last several years and plan to continue; within three to five years we expect to roughly double the number of co-manufacturers, which will further reduce risk.

Operator, Operator

We have no further questions at this time. This does conclude our call for today. Thank you, everyone, for your participation, and you may disconnect at any time.