Ericsson Lm Telephone Co Q3 FY2024 Earnings Call

Hello, everyone, and welcome to the presentation of Ericsson's Third Quarter 2024 Results. With me here in the studio today, Borje Ekholm, our President and CEO, and our CFO, Lars Sandstrom. As usual, we'll have a short presentation followed by Q&A. And in order to ask a question, you'll need to join the conference by phone. Details can be found in today's earnings release and on the investor relations website. Please be advised that today's call is being recorded and that today's presentation may include forward-looking statements. These statements are based on our current expectations and certain planning assumptions, which are subject to risk and uncertainties. The actual results may differ materially due to factors mentioned in today's press release and discussed in this conference call. We encourage you to read about these risks and uncertainties in our earnings report, as well as in our annual report. I'll now hand the call over to Borje and Lars for their introductory comments.

Thank you, Daniel. Good morning, everyone, and welcome to this earnings call for the third quarter. We delivered a solid Q3, marked by a period of intense focus on strategic and operational execution. Let me start by commenting on our strategy, which aims at building the networks of the future, delivering differentiated performance through programmable networks. These programmable networks will enable applications that can be monetized in new ways where differentiated performance matters. This means creating new use cases for mobile technology, expanding beyond the best effort consumer mobile broadband, which would include new use cases such as enterprise and mission critical. This will also enable our operator customers to add new revenue streams beyond the current best effort consumer broadband offerings. I believe this is crucial for the industry's long-term growth. Many analysts predict a slow market over the next few years, but this is largely only taking the consumer mobile broadband business into consideration. However, we see a significant untapped market opportunity in new use cases that are often overlooked, as they currently require differentiated performance and have largely not generated revenues to date. Our strategy is focused on leveraging these opportunities to drive growth in the mobile networks market. We're increasingly seeing momentum with many customers around the world on high-performance programmable networks, and I would say that's very encouraging. The contract we signed last year with AT&T was the first proof point and it created the initial groundwork for the accelerating interest we're seeing now. The interest in differentiated performance has also increased following our announcement of the joint venture with 12 global CSPs to aggregate and sell network APIs. This is a critical step for the industry to realize the benefits of the full capabilities of 5G. I'll come back to these strategic steps in a bit more detail, but first let me touch briefly upon the Q3 results. We continue to see a very challenged market development. The market ultimately is decided by our customers, so in that context it's critical that we focus on what we can impact and that's really how we run our business. We saw organic sales decline by 1% in Q3, which is less than it was the quarter before, so we can gradually see an improvement in our development. A strong performance in North America helped in the quarter. Of course, we had negative developments in most other geographies. Looking at cross margin, we delivered a solid performance coming in at 46.3%, reflecting significant momentum from our 39.2% in Q3 last year. This is driven by the market mix shift with North America coming in strong and higher IPR sales. A key contributor is how we continuously optimize our business, efforts that we started to implement a few years back. It takes time to get things through and now, in Q3, we see the results. We see lower scrap levels, better inventory levels, and better efficiency in how we run the company. With these improvements, our gross income has increased, and EBITDA grew to SEK7.8 billion compared to SEK4.7 billion last year. Another good indicator is our free cash flow, which came in at SEK12.9 billion. In summary, these results show the strong underlying business we have, as well as the effects from the strategic actions we've been taking. Lars will go through these numbers shortly in much greater detail, but let me first comment briefly on the market development. In Q3, the global RAN market remained challenged, as we have previously noted. However, we continue to leverage our technology leadership and we've seen contract wins in India and Vietnam among others. North America continued to be strong, growing by 55% year-over-year, driven by and helped by strong deliveries related to our recent AT&T contract win, which is now coming into the delivery phase. There are also selective network investments by other large customers. In Europe and Latin America, sales increased slightly, growing by 1%, as growth in Europe was partially offset by a decline in Latin America where we had some footprint losses. In Southeast Asia, Oceania, and India, sales decreased by 43% following a normalization after the record-paced 5G rollout last year. Trends in Northeast Asia, the Middle East, and Africa weakened during the quarter due to a significant slowdown in customer investments. Let me discuss some recent strategic steps we've taken in our enterprise business. Our strategy aims at creating additional use cases and monetization for the networks, and we're pursuing multiple opportunities that will open the network for new revenue streams. Think about fixed wireless access, mission-critical applications, and enterprise applications. We see enterprise as a key opportunity as they will require high performance and differentiated connectivity to fully digitalize. Despite the near-term pressure on our enterprise sales, which we're proactively working to address, we remain focused on strengthening Ericsson for the long term. In Q3, we've taken some key steps to execute on this part of the strategy. We also agreed to sell iconectiv during Q3, which is subject to regulatory approval. The reason for that divestiture is it will allow us to streamline the business, focus on the core opportunities at hand, and maximize the strategic positioning of our portfolio. One of the most important announcements for creating our enterprise area was the joint venture we announced with some of the largest operators in the world to aggregate and sell network APIs. Vonage will play a key role here, as we see network APIs as one of the best opportunities to enable additional network monetization. This opens the network and its unique features to innovation in a completely new way. For example, think about increased security in financial transactions or 3D positioning in a logistics chain. These are just two examples, but there will be many new potential use cases for network APIs. We expect to see some early, followed by many more over time. To scale the network APIs, it's critical to solve the supply side or the availability of network APIs. Before the joint venture, each developer around the world would have to integrate and contract with hundreds of individual CSPs, which is neither practical nor economical. The joint venture removes this key hurdle, speeding up the pace of digitalization and accelerating the growth of network APIs globally. This will allow the global developer community access to network features, similar to how they access communication APIs today. It will be much easier for developers to use and implement the network APIs and the capabilities that only the network can provide. From a strategic point of view, this is a critical step for us. Developers no longer need to be network engineers; the access to these networks has become straightforward. We believe this is a massive opportunity. External estimates suggest the API market could be a $10 billion to $30 billion opportunity in a few years. While it's too early to accurately size this opportunity, it's encouraging to see the growing momentum and interest in some frontrunner markets. There are many opportunities to drive enterprise digitalization in new ways by leveraging the capabilities of the mobile network. This will allow our operator customers to explore a new type of market for enterprise digitalization that's outside of the consumer mobile broadband market and will likely be multiples of the network API market in totality. Now let me briefly touch on the strategic steps we've taken in enterprise wireless solutions. We're developing easy-to-use solutions so enterprises can capitalize on the security, efficiency, and flexibility of using cellular connectivity instead of Wi-Fi. These dedicated networks are transitioning from what I would call a Proof of Concept market to commercial-scale deployments, and this will help re-accelerate the growth in enterprise wireless solutions. We recently launched our latest enterprise 5G portfolio, which has a simplified and scalable architecture compared to the previous version, offering attractive total cost of ownership for enterprises. Our neutral host solution enables one company to allow one or more operators to serve their customers through a single indoor network, ensuring full indoor connectivity. There are many use cases for providing indoor connectivity that will be critical. With that, let me hand it over to Lars to go through the numbers in greater detail.

Thank you, Borje. Let me start by providing some additional points on the group before discussing the segments more in detail. Net sales amounted to SEK61.8 billion, and organic sales were flattish. We're seeing very strong growth in North America for the second quarter in a row, with some customers selectively increasing investments. There is slight growth in Europe, but other markets are declining. The largest decline was in India where the investment levels are normalizing after a peak in 2023. IPR licensing revenues increased to SEK3.5 billion from SEK2.8 billion in the third quarter last year. This marks the third quarter in a row where a new 5G IPR agreement was signed, with the current run rate around SEK12 billion coming out of Q3. Expected IPR revenue is anticipated to reach at least SEK13 billion for 2024, with further growth opportunities from additional 5G agreements and the potential to expand into additional licensing areas. As Borje already mentioned, adjusted gross margin was 46.3% in Q3, an increase from 39.2% last year. Margins improved due to favorable market mix, a focus on commercial discipline, cost reduction activities, and higher IPR licensing revenues alongside improved utilization in the entire supply chain; also contributing here was a customer settlement during the quarter. Reported OpEx increased by SEK1 billion compared to last year, mainly due to an increase in restructuring costs by SEK800 million. The cost reduction activities continue to deliver savings, which largely offset salary increases and higher bonus provisions. R&D investments are ongoing to maintain technology leadership and improve operational resilience. On SG&A, costs decreased slightly overall but increased in enterprise as we invest to secure operational effectiveness. Adjusted EBITDA increased to SEK7.8 billion with a margin of 12.6%, marking a significant year-on-year expansion. Cash flow was strong at SEK2.9 billion, driven by improved profitability and lower working capital resulting from strong inventory and supply chain management, along with a favorable market mix. Despite the challenging market conditions, sales stabilization in Q3 is encouraging. The gross margin trend shows that our focus on growing the patent portfolio, improved supply chain utilization, and cost reduction activities are indeed paying off. The market mix was favorable in Q2 and Q3 this year. While the lower top line EBITDA has been challenging in 2024, there was positive development in Q3. Regarding the segments, in networks, organic sales were flat with a slight decline of minus one percent year-on-year. North America grew 80% from very low levels last year, driven by increased investments by certain customers and rollout activities. However, in other markets, customers remain cautious with their investments. The largest slowdown was seen in India following the rapid 5G build-out last year. The network adjusted gross margin was 48.7%, driven by favorable business mix, cost measures, and operational leverage in the supply chain. IPR revenues and non-recurring settlements with customers also contributed to the gross margin improvement in the quarter. In the cloud software and services segment, organic sales were fairly flat with a year-on-year decline of minus 1%, mainly affected by lower service sales. Adjusted gross margin was 38.7%, showing some improvement from last year. The execution of strategy focusing on commercial discipline and accelerated automation is showing positive results. We noticed a small benefit from IPR revenues and customer settlements as well. EBITDA margin was 2.9% and 3.6% on a rolling four quarters basis. In the enterprise segment, sales declined by 3%, with the Global Communications platform experiencing an anticipated decline as we reduced activities in certain markets and focused on more profitable segments. Enterprise Wireless Solutions grew by about 7%, but we observed a slow growth rate in Wireless one. Borje mentioned the launch of the first enterprise 5G neutral host solution during the quarter. The adjusted gross margin increased to 52.4%, with improved margins across the entire enterprise business. The adjusted EBITDA loss was SEK0.8 billion, driven by higher operating expenses mainly in the Global Communications platform, due to two key reasons. First, a non-cash impact resulting from a lower rate of capitalization of R&D expenses starting in Q1 this year, particularly affecting OpEx for the full year at around SEK1 billion. Second, we're investing in operational effectiveness. It's noteworthy that, as Borje stated, investments in the Global Network platform for network APIs continue. We are focused on enhancing the financial performance of our current portfolio while also investing for future growth. Turning to free cash flow for the group, it was SEK12.9 billion before mergers and acquisitions in the quarter. The increase compared to last year is primarily due to improved working capital, driven by a strong focus on inventory and supply chain management through to our customers, and was supported by a significant contribution from EBITDA and favorable market mix. This led to a net cash increase of SEK12.4 billion sequentially to SEK25.5 billion, and the return on capital employed in Q3 was 14.9%. Regarding sales outlook, for networks, Q3 delivered above seasonal patterns, so the starting point is a bit high, meaning Q4 is expected to trend below average seasonality. For Cloud Software and Services, we declined sequentially by 1% between Q2 and Q3, and Q4 is also expected to be below average due to project delivery timing. In the enterprise segment, sales for Q4 are expected to be further affected by our decision to prioritize profitable markets and products. Now looking at profitability, Q3 networks gross margin benefited from retroactive IPR licensing and customer settlements. For Q4, we expect gross margin to be in the range of 47% to 49%. We also anticipate restructuring to be around SEK4 billion for the full year. With that, I will hand it back to you Borje.

Thanks, Lars. Despite the continuing challenges in the overall RAN market, our Q3 results exhibit the underlying strength of our business, and we are encouraged by the strong delivery we saw in North America. We expect our network sales to stabilize year-over-year during Q4, driven by continued good growth and progress we're making in North America. However, we anticipate further pressure in Enterprise in the near term as we focus on more profitable segments. Ultimately, investment decisions and market developments will rest with our customers. In the meantime, we will continue to focus on what we can control: specifically, operational excellence and optimizing our business to reinforce our technology leadership through dedicated R&D investments and achieve strong financial results. This is something we are committed to, regardless of market conditions. For the long term, for the industry to truly return to growth, it is essential to find new revenue streams for our customers that go beyond consumer mobile broadband subscriptions. We are noticing a shift in current customer discussions as the interest in our programmable networks is clearly accelerating. This is influenced by the increased monetization opportunities our customers see through differentiated connectivity. Network APIs remain one of the best chances for us and the industry to realize the full potential of 5G, and we are making solid progress on this component of our strategy. As you have heard, we are also pursuing additional opportunities to broaden the use cases of mobile networks in the future. Of course, creating new markets and monetization models takes time, but we are very encouraged by the traction we are beginning to see. The foundation for this strategy will always be our mobile network solutions, and we are committed to taking all necessary actions to ensure we maintain our leadership position. With that, we are ready to take your questions and move into the Q&A session. Daniel.

Thanks Borje, thanks Lars. We'll now move to Q&A. Thanks everyone. With that, we'll move to the first question. The first question today is coming from Alex Duval at Goldman Sachs. Alex, your line should now be open.

Yeah, hi everyone. Many thanks for the question. You talked today about the AT&T ramp having started in the quarter, and revenues overall were clearly stronger than expected. I wondered if you could please clarify why you then gave this Q4 outlook for sub-seasonal quarterly networks revenue growth. How should we think about the effects of that AT&T contract ramp on revenue seasonality in the next couple of quarters? And what does that mean for group margins? Many thanks.

Thanks, Alex. I think the ramp-up regarding North America was evident in Q2, and in Q3 it was quite an intensive quarter with a high ramp-up level, positively impacting net sales. However, we expect that this will normalize a bit going into Q4 and also for next year. So that's a little bit of what we see. The ability to estimate a ramp-up is closely tied to our operations and our close relationship with customers. So we have seen better than anticipated results as we approached Q3.

Thank you very much.

Thanks Alex. Moving on to the next question. The next question comes from the line of Joachim Gunell from DNB. Joachim, your line is now open. Please go ahead.

Thank you and good morning. You've guided quite conservatively here in six out of your seven previous next quarter outlooks on gross margin, even if we strip out IPR catch-ups. Can you just comment a bit on whether there is some visibility issue, or why things continue to go so much better than your internal expectations?

I think, to some extent, there are impacts as you mentioned. Fundamentally, I believe it's due to the effectiveness of our cost reduction and productivity improvements coming through our supply chain faster than expected. This is part of the explanation. There are always product and market mix impacts, but over time, I think we are experiencing improvements that have come sooner than we anticipated when making our forecasts in previous quarters.

Understood. Briefly, the iconic sale roughly equates to one annual dividend deal for you, and given your strong capital position and cash flows projected for 2024, can you comment on whether the board prefers extraordinary dividends, buybacks, or pursuing M&A at this stage?

I think that’s a discussion for the board. You know that decisions regarding share buybacks, for instance, are ultimately up to the shareholders. We are focused on what we can control, and that’s an area that falls into the board's purview. However, you are correct that we are generating solid cash flow, and we have a strong financial position that gives the board and shareholders certain decision-making freedom.

Thank you.

Thanks Joachim. Moving on to the next question. The next question will come from Francois Bouvignies from UBS. Francois, your line is open. Please go ahead.

Thank you very much. You delivered a very strong gross margin and mentioned cost-saving programs impacting profitability, but when I look at the gross margin, it seems to align with when North America contributed heavily to your revenue. How should we consider the geographical mix moving into next year as you anticipate contract normalization in the U.S. and other regions?

For Q3, North America was a contributor, but it was not the primary factor. The main contributors came from long-term improvements, including restructuring activities impacting gross income, and better supply chain utilization. We appreciate the favorable market mix but believe the bulk of margin improvement stems from these long-term initiatives.

Thank you.

Thanks Francois. Time to move to the next question, please. This next question will come from Andreas Joelsson at Carnegie. Andreas, your line is open.

Thank you and good morning. A question on the strategy and perhaps for Borje. It's a bit challenging to grasp the potential in programmable networks. How do you foresee this impacting Ericsson moving forward? If operators earn more, will the main effect be realized directly from the APIs, or do you see other impacts, such as operators investing more in networks?

That's a very good question, and I will admit we are uncertain how the world will evolve. However, we view the launch of the enterprise opportunity as requiring enterprises to become more self-sufficient. The success of network APIs needs to create a profitable business in its own right, which we see as an opportunity. Our strategy with enterprise wireless solutions is to create specific investment cases, encouraging customers to generate new revenues from enhanced capabilities. The relationship between these elements is somewhat intertwined; as we see interest grow in network APIs, we expect demand for programmable networks to also increase. The move reflects a significant change in the industry as we progress from consumer mobile broadband to more-based models focused on profit-generation. We are observing greater traction in these areas, especially following recent announcements, which has led to higher customer inquiries about monetizing networks and building the necessary capabilities.

Absolutely, thank you.

Thanks.

Thanks, Andreas. Time for the next question. The next one is coming from Sebastien Sztabowicz from Kepler Cheuvreux. Sebastien, your line is now open.

Hello everyone, and thanks for taking my question. Regarding Enterprise Wireless Solutions, we noticed significant growth slowdown in Q3. Can you clarify the reasons behind this temporary slowdown? Is it tied to macro developments or specific issues? When can we expect a recovery in this segment?

There is a lower growth rate, and our focus on profitable market and product segments has influenced sales this quarter. The transition to more private network solutions is underway, and while this growth hasn't fully materialized yet, we expect it will help support future growth.

I would add that we also launched new products in Enterprise Wireless Solutions, leading to a typical slowdown during product transitions. We're observing encouraging signs regarding the dedicated enterprise connectivity, and we expect this to escalate towards commercial deployments, but we're not ready to project explicitly yet.

Thanks for the question, Seb. Moving on to the next question please. The next question comes from Erik Rojestal from SEB. Erik, if you hear me, please go ahead.

Yes, good morning, Lars and Borje. Thank you for taking my question. North America is clearly turning around, but the overall market remains weak. Your rolling 12-month EBITDA margin is around 10%, and considering your margin target of 15%-18%, do you believe you'll need to implement more cost measures in 2025 to achieve this target?

We are already taking cost actions, which are offset by salary inflation and bonuses. These pressures will persist into next year, and we also need to consider how to adjust our cost base accordingly, so it’s likely we will have to maintain that trend as we reach our target.

If you’re operating in a stagnant market and facing inflationary pressures, cost reviews will be ongoing. We aim to incorporate this as part of our standard business practices in the future.

Thank you.

Thanks for the question, Erik. Moving to the next question, which is coming from Jakob Bluestone at BNP Paribas. Please go ahead, Jakob.

Thanks for taking the questions. Could you provide an update on the competitive environment specific to the RAN market? Any updated thoughts on pressure from Chinese vendors or other factors?

The competitive landscape remains stable, with no significant changes. We continue to experience both footprint losses and gains. It’s crucial that we maintain commercial discipline, carefully considering the contracts we pursue rather than aggressively seeking every opportunity available.

Thanks.

Thanks Jakob. Moving on to the next question, which comes from Rob Sanders at Deutsche Bank. Please go ahead, Rob.

Good morning. Could you discuss the situation with the other two operators in North America? Have they responded to AT&T's modernization program by increasing their investments for next year? Do you have visibility into spending recovery from those operators?

That's an interesting question, but unfortunately, I won't comment specifically on individual contracts as the market is competitive. However, I want to emphasize that the increase in North America is broader than just one contract, and you will need to draw your own conclusions about it.

Thanks for the question, Rob. Moving on to the next question, which is coming from Sandeep Deshpande at JPMorgan. Sandeep, please go ahead.

Hi, thanks for having me on. I’d like to go back to the contract you signed to establish a new company for monetization of APIs. Can you talk about the expected timeline for this company to operate, and how the monetization process will proceed? How will Ericsson collect payment for their contributions?

We can only discuss this at a high level as the regulatory process is underway. In the meantime, we're working to build up the company and establish the platform. We hope that with regulatory approval, we can launch in the next few months. The key aspect of this venture is to make the network APIs easy to access, and the JV will serve as an aggregator for these APIs, similar to existing communication APIs but more broadly for network APIs. Our aim is to guide the development of this venture and ensure global availability of network APIs. This will generate new revenue streams for our operator customers and enable them to resell network APIs. Vonage will play a critical role in leveraging the developer ecosystem, ensuring a unique developer experience as they implement network APIs. While we cannot provide a direct timeline for revenue in our P&L today, we are encouraged by the growing interest from both operators and the developer community.

Thank you.

Thanks for the question, Sandeep. Moving to the next one from the line of Daniel Djurberg at Handelsbanken. Daniel, your line is open. Please go ahead.

Thanks so much, and good morning Borje and Lars. I’d like to ask about fixed wireless access, which has triggered significant network builds. Can you discuss progress in various markets, for example the U.S., along with other regions?

You're correct that this has served as a key use case. While it hasn't yet driven widespread network investment, it demonstrates numerous benefits, such as offering performance comparable to fiber, which remains the gold standard. Fixed wireless access is fast to deploy and user-friendly, leading to higher satisfaction in markets where it is rolled out. We’re optimistic about the growth of fixed wireless access, even if its direct contributions are currently limited. North America has been the leading market, with substantial growth in broadband subscriptions over the last 18-24 months attributed to fixed wireless access. Other markets, including India, are starting to see progress in this area.

Thank you, Borje. I'll rejoin the queue.

Thanks, Daniel. Moving to the next question. The next question comes from Andrew Gardiner at Citi. Andrew, please go ahead.

Thank you, Daniel. Good morning. I wanted to ask a follow-up on the AT&T situation. You mentioned that revenue related to AT&T has improved significantly in Q3, yet it feels like this contract is still early in the deployment phase. Can you share where you currently stand with the contract? Given its unique nature, do you feel you have better visibility than usual? Why wouldn’t we anticipate growth coming from this contract next year?

The pace of our work with AT&T has been quite high in Q3, and we expect this to normalize by Q4 but remain at a level reflective of the customer rollout pace, which determines our revenues moving forward. There is potential for continued revenue growth throughout the duration of the full contract rollout.

So your visibility into next year is clear in that regard?

Yes, it will continue into next year for sure.

Thanks, Andrew. Moving to the next question, which comes from Sami Sarkamies at Danske Bank. Sami, please go ahead.

I'd like to continue discussing the Q4 guidance. Your gross margin suggests you anticipate sub-normal seasonality in other markets besides North America. Even though there have been several deals announced in Q3, why aren’t these translating into Q4 revenues?

We announce deals every quarter, and the pacing of these contracts varies depending on our different agreements. This is our best estimate regarding Q4 based on the information we have concerning anticipated developments.

Keep in mind the AT&T contract was announced in November last year and began to impact our business in late Q2 and into Q3. Thus, announcements in Q3 will typically take some additional time to produce revenue gains.

Thank you for the clarification.

Thanks, Sami. Moving to the next question, which will come from Felix Henderson at Nordea. Felix, please go ahead.

I have a couple of quick questions regarding OpEx. Can you provide some context on OpEx developments leading into Q4? Do you still expect the H2 OpEx to be roughly stable compared to the first half?

We indicated previously that second-half OpEx would be similar to the first half, and that remains the case, though it may be slightly higher due to better results and bonus provisioning.

Could you confirm any details on the benefits for Q3 connected to the IPR deal and commercial settlements?

The impact from the retroactive IPR and customer settlement contributed around a percentage point to the margin in Q3.

Thank you.

We have time for a couple more questions. Next question please. The last question will come from Terence Tsui at Morgan Stanley. Terence, please go ahead.

Can you elaborate on how you expect performance in India to develop? Given the strong sales decline in 2024 after last year's boost, do you anticipate a material rebound in 2025? How have margins evolved in this region?

It’s fair to say we will provide guidance for 2025 when we have clearer visibility, so we will return to that in the Q4 setting. However, we do see potential in India due to ongoing digitalization, coupled with recent contract wins. There is substantial demand as the networks are being utilized more, and we anticipate growth long-term, albeit uncertain on timing.

Thank you.

The final question will come from Didier Scemama at Bank of America. Didier, please go ahead.

Two quick questions. Regarding gross margins, while structural improvements are evident, the quarter benefited from strong geographical mix. Can you provide insight into your expectations for normalized gross margin moving forward? Additionally, on OpEx, can you clarify your projected base?

Let’s revisit guidance in a longer-term context. The company is on a structural high gross margin trend compared to previous years. Our investments in technology, coupled with driving efficiencies, will result in continued margin improvements, although it's challenging to provide exact targets now.

Regarding OpEx, the inflationary pressures we mentioned will require ongoing adjustments to ensure we maintain competitiveness, which will influence the base comparisons.

Thank you.

The announcement regarding the divestiture of iconectiv will be shared upon completion for clarity in terms of revenue impacts.

Thank you for your questions. That concludes our Q&A. Thank you everyone for joining today's call.

Thank you everyone.