Franklin Covey Co (FC) Q1 2024 Earnings Call Transcript

Hello, and thank you for standing by. Welcome to Franklin Covey Q1 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the conference over to Derek Hatch. Sir, you may begin.

Thank you. Hello everyone. On behalf of Franklin Covey, I would like to wish everyone a Happy New Year and hope for a peaceful and prosperous 2024. Before we begin today's call festivities, I would like to remind everybody that this presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based upon management's current expectations and are subject to various risks and uncertainties, including but not limited to the ability of the company to grow revenues, the acceptance of and renewal rates for our subscription offerings, including the All Access Pass and Leader In Me memberships, the ability of the company to hire productive sales and other client-facing professionals, general economic conditions, competition in the company's targeted marketplace, market acceptance of new offerings or services and marketing strategies, changes in the company's market share, changes in the size of the overall market for the company's products, changes in the training and spending policies of the company's clients and other factors identified and discussed in the company's most recent Annual Report on Form 10-K and other periodic reports filed with the Securities and Exchange Commission. Many of these conditions are beyond our control or influence, any one of which may cause future results to differ materially from the company's current expectations and there can be no assurance the company's actual future performance will meet management's expectations. These forward-looking statements are based on management's current expectations and we undertake no obligation to update or revise these forward-looking statements to reflect events or circumstances after the date of today's presentation except as required by law. With that out of the way, we'd like to turn the time over to Mr. Paul Walker, our CEO and President.

Thank you, Derek. Hello, everyone. Happy New Year. Thanks for joining us today. We're glad to have the opportunity to talk to you and we just want to start out by expressing our appreciation to you and we're grateful to be with you today. Joining me on the call are Steve Young, our CFO; Jennifer Colosimo, President of the Enterprise Division; Sean Covey, President of the Education Division; as well as other members of our executive team. We're pleased that though the results in the first quarter were essentially even with last year's first quarter, both revenue and adjusted EBITDA came in stronger than forecasted. Even though we also expect the second quarter revenue to again be about even with or slightly above prior year, we expect to achieve significant growth in revenue in the back half of the year with a high flow-through of this revenue driving growth in adjusted EBITDA to our target of between $54.5 million and $58 million. We expect this growth in the back half to be driven by several key factors including the following: First, we're entering the back half of the year with much more billed and unbilled deferred revenue on our balance sheet than a year before. At the end of the first quarter, the sum of our billed and unbilled deferred revenue was $169.7 million, a level $18 million higher than at the same time last year. A meaningful portion of this will flow through into revenue in the back half of fiscal '24 and into fiscal '25. Second is that our invoice subscription revenue is increasing. After flattish All Access Pass invoiced subscription growth in the second and third quarters last year, our invoiced All Access Pass subscription revenue grew significantly in the fourth quarter and again in Q1 this year. We expect this growth will continue in Q2 and for the remainder of this year and beyond, resulting in additional amounts of deferred revenue going onto the balance sheet and flowing through to revenue in fiscal '24 and beyond. Third is that we expect our subscription services attach rate to improve. We expect our subscription services attach rate, which declined from 66.5% to 61.5% in the back half of last year and through the first quarter of this year, we expect that it will return to its historic rate of around 66.5% in Q3 and Q4 of this year, driven by a combination of services delivered to new schools that were brought on late in last year's fourth quarter and by the impact of the launch of the 3.0 and 5.0 versions of the Speed of Trust and 7 Habits, two of our historic blockbuster solutions, as well as the launch of our new solution on Difficult Conversations. I'd like to now provide a little bit of additional context about the first quarter itself. Our total revenue for the quarter came in at a higher-than-expected $68.4 million. Revenue for the latest 12 months grew $8.6 million or 3% to $279.6 million, and our rolling two-year growth is a very strong $42.4 million or 18%. Adjusted EBITDA also came in at a higher-than-expected $11 million. With this, adjusted EBITDA for the latest 12 months grew $3.8 million or 9% to $47.6 million. And again our rolling two-year growth in adjusted EBITDA is $13.4 million or 39%. Our subscription and subscription services sales in the first quarter reached $54.8 million, a level 4% higher than prior year. Subscription and subscription services sales were $224.7 million for the latest 12 months ended Q1, which is $13.6 million or 6% higher than the same period of the prior year. And again, our rolling two-year growth was an extraordinarily strong $56.7 million or 34%. And finally, our balance of billed and unbilled deferred revenue increased $18 million or 12% to $169.7 million from the end of the first quarter last year, and grew $48.5 million or 40% over the last two-year period. Stepping up a level, our results in the first quarter put an exclamation point on three key strengths we've been building for years. The first of these is the strength of our unique strategic position in the marketplace. We focus on the most important strategic and durable position in our space, specifically that of helping organizations achieve results that require the collective action of their people. And we help organizations achieve these results with a combination of best-in-class content delivered through a broad range of delivery modalities and world-class coaching and facilitation that's very difficult to replicate. The most important thing on the minds and priority list of CEOs is achieving the type of results that require the collective action of their entire organization. Our second key strength is the power of our revenue-generating engine. As previously noted, despite being up against some extremely strong post-pandemic accelerated comps over the past four quarters, which have impacted our reported year-over-year percentage growth in those quarters, the continued strength of our underlying revenue-generating engine is reflected in four key metrics: first, growth in revenue on a rolling two-year basis; second, growth of revenue compared to our pre-pandemic high; third, growth of our strategically important subscription and subscription services revenue; and fourth, growth in our balances of deferred subscription revenue both billed and unbilled. The third key strength is that of our powerful business model, a model where a combination of increasing revenue per client, high revenue and client retention, high contribution margins, upfront invoicing, low capital intensity, and disciplined reinvestment for growth, all combined to drive significant growth in both adjusted EBITDA and free cash. I'd like to address each of these three key strengths in just a bit more detail and with some data. The first is shown on Slide 6, the strength of our strategic position. As I just noted, the most important strategic and durable position in our space is that of helping organizations achieve the kind of seismic results that can result from mobilizing the large-scale collective action of their people. Each year the Conference Board, the Advisory Board McKenzie and others conduct surveys to identify the most important things on CEOs' minds and priority lists. Excluding macroeconomic and geopolitical issues, the vast majority of CEOs' top priorities are those areas that require the collective action of the entire organization. The three examples I would like to provide are as follows: We're working with the CEO of a large and rapidly growing manufacturing company to develop their top 500 global leaders. They recognize that culture is established by the collective behavior of leaders and they've chosen Franklin Covey as their sole leadership development partner. They've done this due to the impact of our powerful principle-based content, its direct relevance to building the type of winning culture they desire, and our ability to scale our solutions across their global population. The second example is where we're partnering with the Chief Human Resource Officer of a large firm to deploy multiple Franklin Covey solutions across the entire organization. They want us to develop common mindset, skillsets, and a consistent language across the entire organization or what we refer to as 'collective action'. The third example is where we're partnering with a large transportation company that has a clear strategy for winning in their chosen market. This client is engaging us to equip their leaders with the skills and tools to create a culture of execution where people at the front line can engage to execute the critical priorities that will translate strategy into results. The partnerships we build translate into a number of powerful outcomes, including consistently winning new clients, achieving strong attachment of subscription services, retaining substantially all of our subscription revenue, increasing our average contract size, and achieving a high and growing lifetime customer value. The sales of All Access Pass to new logos in the Enterprise Division and Leader in Me subscriptions to new schools in the Education Division remained strong in the first quarter. Our revenue retention levels remained very high in the first quarter and for the latest 12-month period. An increasing percentage of clients are also entering into multiyear contracts. The percentage of All Access Pass clients entering into multiyear contracts increased to 54% from 48% at the end of Q1 fiscal '23. Importantly, 60% of All Access Pass subscription revenue is now under multiyear contracts, up from 55% a year prior. These long-term contracts provide a tremendous foundation for both the predictability and acceleration of future revenue growth. The second key strength I'd like to focus on today is the power of our revenue-generating engine. The strength of our underlying revenue-generating engine is reflected in four key metrics: tremendous growth in revenue achieved over the past two years; significant growth of our revenue compared to our pre-pandemic high; even more rapid growth of our strategically important subscription and subscription services revenue; and tremendous growth in our balances of deferred subscription revenue, both billed and unbilled. This dramatic growth in deferred subscription revenue establishes a very strong foundation for continued strong revenue growth in the coming quarters and years. The third key strength is the strength of our business model. As you know, our business model results in a significant portion of incremental revenue flowing through to increases in adjusted EBITDA and free cash flow. Key elements of our business model drive high and increasing adjusted EBITDA and cash flow, including increasing revenue per client, high revenue retention, high contribution margins, upfront invoicing, low capital intensity, and disciplined reinvestment for growth. In the eight years since our conversion to subscription, we have generated cumulative adjusted EBITDA of $210.6 million and cumulative free cash flow of $204.3 million. We have returned more than $143.5 million or just over 70% of the free cash flow we generated to shareholders through the repurchase of over 5.3 million shares of common stock, including more than $51 million over the past 12 months and $72 million over the past 24 months. In conclusion, I would say that we expect the combined power of these three key strengths, the strength of our strategic position, the strength of our revenue-generating engine, and the strength of our business model to continue to generate strong and accelerating growth in revenue, adjusted EBITDA and free cash flow. I would now like to turn some time over to Steve to discuss our results for the first quarter and the latest 12 months in more detail. Steve?

Thank you, Paul. Good afternoon, everyone. It's a pleasure to be with you today. I would like to briefly provide more detail on the factors underlying this performance, focusing on our Enterprise business in North America, the Enterprise business internationally, and our Education business, which is also primarily in North America. Results in our Enterprise business in North America continued to be strong in the first quarter and the latest 12-month periods. Reported sales were $38.4 million in the first quarter, a level almost equal to the prior year. For the latest 12 months, revenue grew 2% on top of 17% growth in the prior year. Subscription and subscription services sales in North America are even with prior year in the quarter. Our balance of deferred revenue in North America grew 7% in the quarter on top of 25% growth in last year's first quarter. The percentage of North America's All Access Pass clients that were for multiyear periods increased to 54% from 48% in the first quarter last year. Revenue from our international operations decreased by $0.6 million or 7% in the quarter primarily due to declining legacy sales. However, our international licensee partner sales increased by 3% in the quarter on top of 9% in last year's first quarter. Finally, in our Education business, sales grew 3% for the quarter on top of the 23% growth achieved in the first quarter last year. Education subscription and subscription services sales were flat in the quarter but strong in the latest 12 months, growing $4.6 million or 8%. We invested $16.3 million to purchase 409,000 shares last quarter. Our liquidity remains strong with $96.5 million, including $34 million in cash. Compared to Q1 of FY '23, the sum of billed and unbilled deferred subscription revenue increased 12% to almost $170 million, giving us increased visibility into future sales results. Adjusted EBITDA in the quarter was a strong $11 million. As you know, Franklin Covey's financial strategy is to consistently grow revenue and simultaneously experience a high flow-through of that increased revenue to increased adjusted EBITDA and free cash flow. Consistent with that strategy, we affirm our previously issued guidance that adjusted EBITDA will increase by approximately 17% compared to the prior year, reflecting our expectation of achieving low double-digit net sales growth in the back half of the year and particularly strong results in Q3 and Q4.

Thank you, Steve. We appreciate your insights. We are pleased with our performance in the first quarter and optimistic about the future. Now, we would like to open the line for your questions.

Thank you. Our first question comes from the line of Dave Storms with Stonegate. Your line is open.

Good afternoon. Happy New Year everyone.

Yeah, you too. Thanks, Dave.

I appreciate it. So, looks like calendar year 2023 turned out to be the year without a recession. But just curious how you see clients reacting after a lot of aggressive belt-tightening the majority of 2023, and if you see any additional bump in demand during calendar '24?

It's a great question. This year has surprisingly been one without a recession, and it's certainly an interesting time. What we’re observing is that over the past few months, our clients are clear about their budgets and plans. They are moving forward, and we feel optimistic about the current selling environment. There’s a greater sense of certainty as clients have their budgets and plans in place, unlike the uncertainty we saw with some clients in Q2 last year, which has largely diminished. Additionally, in times of uncertainty or challenging growth, companies are seeking solutions like the ones we offer. Currently, leaders are focused on whether they have the right capabilities to execute their initiatives, how to attract and retain talent in a tighter labor market, and whether their organizations are adaptable and ready for change. These are the challenges that are on the minds of CEOs and leaders at our client companies, and we’re fortunate to provide solutions for these issues, which gives us confidence moving forward.

Understood. Very helpful. And then just one more, and this might be more for Sean. If I remember correctly, there was some funding that needed to be renewed at the end of 2023 for the Education business. Just wondering if we could get a quick status update on how that all shook out.

I'm not exactly sure what funding you're referring to.

I believe it was ESSER funding that you mentioned needed to be renewed.

Oh, the ESSER funding. Sure. Okay. Sure. Yeah, well, the ESSER funding, which is the emergency relief funding the government gave out during COVID, that's been out since COVID began and goes until the end of this year. About two-thirds of it has been spent. So, about a third is remaining. We have a lot of our schools and districts that have signed up with multi-year contracts using some of this funding. But as we look to next year and when this funding runs out, we fall back on Title I and Title II grants, which have been there for decades and will remain. And we also, as I shared before, we have a large foundation that's dedicated to starting up Leader in Me districts and schools. That's actually funding and helping schools get started with millions of dollars, and there will be hundreds of schools that will be funded through them. So, yes, that's where that stands. Is that responsive to your question?

Absolutely. No, that's very helpful. I appreciate you shedding some light on that. Okay. Thank you very much, and good luck in the next quarter.

Thanks, Dave.

Yeah, thank you.

Thank you. Please standby for our next question. Our next question comes from the line of Nehal Chokshi with Northland Capital Markets. Your line is open.

Yeah, thank you for the question.

Hi, Nehal.

Hey, it's great to hear you're noticing a change, specifically regarding subscription and invoice bookings. The main point I want to focus on is free cash flow. This quarter, it seems you had strong cash from operations. However, I want to clarify how that performed in comparison to the expectations set during the previous earnings call for this same quarter in November.

Steve, you want to...

Yeah. So, Nehal, as you know, our free cash flow in the first quarter last year was a lot lower than it was this year. We did talk in prior quarters about the fact that we expected our free cash flow to rebound significantly, and it did. The areas where free cash flow improved was not only related to operations, but also in the working capital balances, accounts receivable, accounts payable, accrued liabilities, and deferred revenue had a very positive change in this year's first quarter compared to last year's first quarter. So, we were very pleased with our free cash flow in the first quarter, and it was even more than we expected, because all of those working capital elements that impact cash flow at the end of Q1 were positive in our direction, and all went positive quite a bit. So, we thought it was a very good free cash flow quarter.

Okay. Great. That's helpful. And then, fiscal 4Q was a poor free cash flow quarter. And so, I believe that benefited your fiscal 1Q. But do you expect these working capital accounts to continue to tilt back favorably as we work through the remainder of fiscal year '24 and therefore, help us think about modeling free cash flow relative to your EBITDA guidance for fiscal year '24?

We haven't provided specific guidance on free cash flow. The significant changes in working capital we saw in Q1 are expected to continue, although they may not change at the same rates each quarter. This year, we anticipate generating a considerably larger amount of free cash flow compared to last year, driven by our business operations and the cash generated from our subscription services, along with the positive behavior of working capital. We expect strong free cash flow for the year. Last year, we noted that our second half performed significantly better than the first half after Q2, but we don't expect that same level of increase this year. The first half will still show good free cash flow. Overall, I can confidently say it will be much higher than last year without providing a specific forecast.

Okay. I mean, when I look at fiscal year '19 and fiscal year '22, your free cash flow has systemically been above your adjusted EBITDA. I think what you're trying to signal here while fiscal year '23 was a clear deviation from that fiscal year '19 to fiscal year '22 trend, you expect an improvement from that fiscal year '23 level, but perhaps not quite to the free cash flow to EBITDA ratios that you're achieving in fiscal year '19 to fiscal year '22. Is that correct?

Yes. I think in our future years, we will reestablish a clear relationship between adjusted EBITDA and free cash flow that will generally be maintained. But yes, we would model out free cash flow to be a bit lower than adjusted EBITDA.

Is that largely because you expect to be saturating on the percent of customers that are going to be paying upfront?

I believe the percentage of customers paying upfront will remain stable. If you analyze adjusted EBITDA in relation to free cash flow, you'll see that our investments in CapEx and CAPD are significant factors. While CapEx expense appears as depreciation, CAPD costs are included in cost of sales, albeit with a timing lag. Thus, increases in our CapEx and CAPD spending affect the income statement but fall below adjusted EBITDA. This creates a mathematical distinction between the two metrics.

Yes. Understood. Moving to a different topic, and then I'll let someone else speak. But why are you expecting the services attached to remain depressed in Q2? And then, what will drive that improvement in Q3 and Q4?

That's a good question. The improvement we expect in Q3 and Q4 will mainly come from a couple of factors. Firstly, the delivery of coaching services and service days to schools that signed on late in Q4 will contribute positively in the latter half of the year. Secondly, we are excited about three new solutions set to launch. Typically, new solutions lead to an uptick in service delivery, and we just launched Leading and Working at the Speed of Trust last month. Additionally, 7 Habits 5.0 will be available late in Q3 and early Q4, and Difficult Conversations, which we believe our clients will heavily utilize, will be released in the next month or so. These initiatives will certainly help boost activities in the second half of the year. Regarding the first half being down, one factor is the Unconscious Bias solution we introduced a couple of years ago. While it was highly sought after during significant DEI initiatives in the U.S., the landscape around that topic has changed significantly, leading to a decline in demand. Fortunately, our other offerings in leadership development, trust, and strategy execution continue to be in high demand. So, that's why we are optimistic about Q3 and Q4 and why Q1 and Q2 were softer.

Okay. Great. Thanks. I'll get back in queue.

Thanks, Nehal.

Thank you. Please standby for our next question. Our next question comes from the line of Jeff Martin with ROTH MKM. Your line is open.

Thanks.

Hi, Jeff.

Good evening, everyone. How are you doing, Paul?

Great. Good to hear from you.

Paul, I wanted to focus on something specific. On Slide 28 of your presentation, there's a total contract signed figure of $51.6 million. Could you provide some insight on that? It appears to be down 23.6% year-over-year, which seems to be the first decline in some time. I'm trying to understand the reasons behind this. Do you think it's due to the macro environment, something else, or possibly the DEI-related headwinds? Any clarification would be appreciated.

Yeah. Thanks. Great question. So, not macro-related, not related to the DEI thing I just talked about. It's related to a contract. So, we signed a contract in the first quarter of last year. It was a fantastic contract for multiple years. It was a five-year contract for around $10 million. This quarter, we didn't sign another large contract. However, the base of contracts that we did sign this quarter was what we would have expected. So the base was very stable and just what a normal Q1 would look like. We don't have anything like that, that we're up against in Q2, Q3 or Q4 that I can think of. So, I think it is kind of a one-time thing that therefore shows up as a decline here.

Okay. And then I was just curious if you could characterize the sales environment in terms of lead flow, pipeline, conversion, et cetera?

Yeah, certainly. I would say the environment is pretty good. Our clients are looking to address the challenges we're focused on. We’re seeing good demand for our execution business, and we're excited about a new sales performance solution we launched this fiscal year. Pipeline conversion continues to be strong. We've seen great attendance at our marketing events, both online and in-person events, which have been well attended. So, we feel good about the general environment and what we're hearing from our clients.

Great. And then just one, something that I discussed with your team earlier in December, was penetration into lower areas of an organization and how that might affect future subscription services-related attach rates. And maybe you could just give us your view there.

So, a couple of thoughts. One, we do talk about the attach rate as a percentage. I think that percentage could go up or down a little bit over time. But the dollars themselves will continue to go up. The percentage could go down if we expand to larger populations but the attach rate will continue to be strong. And I think we can expect to see increasing base of subscription and an increasing number of multi-year contracts. That rate continues to increase year after year.

Great. Appreciate the insights.

Thanks, Jeff.

Thank you. Please standby for our next question. Our next question comes from the line of Alex Paris with Barrington Research. Your line is open.

Hi, guys. Can you hear me?

Yeah. Hi, Alex. How are you doing?

Good. I'm doing well. Thanks for asking. Congrats on the strong quarter. I'll be quick, we're late in the call here, and I just have a few quick follow-ups. First of all, in your prepared comments, you didn't speak to China and Japan. That's been a topic of conversation. It's roughly 50% of international sales. I just wondered for a little update there.

In China and Japan, things continue to improve there. Japan had a relatively nice quarter, with Japan getting back to its pre-pandemic high, and we expect that it will get back above that this year. China has been up and down, but that business is returning as well. Overall, I think we feel relatively good about what's happening in both those countries.

Thank you. Looking back at the second quarter of 2023, the renewal rate was good, and the retention rate remained consistent with previous quarters. However, a few large clients did not renew on time. Have those large clients returned yet? What measures are you taking to increase the chances of their return?

To that point, one of them has, one of them hasn't come back. We have a category of clients we call win backs. When a client doesn't renew on time, they go into a category of win backs. Fortunately, we don't have a lot of those, but when we do, we have a process we run because our mantra is clients for life. We take the approach that if we lost them, it's a temporary thing. We're doing that on those clients from Q2 and will continue to do so.

Great. That's helpful. And then, this was probably for Sean. You had a record year in signing new schools in fiscal 2023. One of the issues in the fourth quarter that contributed to the revenue shortfall was the inability to deliver the services associated with it. When you miss it in the summer, when do you get it back?

Yes, that's typically what happens. Professional development usually takes place during the summer. If it's too late in the year, they say, we'll do coaching throughout the year, but professional development that goes deeper with everyone in the same room usually has to be delayed until next summer. So that will help us this year. We have lots of large new contracts in the pipeline. So, we expect a nice second half for the reason of last year coming in late as well as a really nice building pipeline for this year.

Excellent. Thank you. So, not only was there a shortfall because of that last year, there'll be a little bit of a doubling up on onboarding activities this coming summer?

Yeah, I think so. And we're also pushing everyone hard to get in early this year, trying to bring on as many schools as we can. It's always better to bring them on sooner than later.

For sure. Okay. Great. And then two last ones. I think the target for this year, Paul, is 40 new client partners and other support roles. How many did you hire in the first quarter? And is it going to be level-loaded, or is it more back half loaded?

It will be a bit back half loaded. So, we ended the first quarter with 300 client partners and then roughly 150 or so of the other client-facing roles, so about the same 450 that we reported on at the end of Q4. We are still committed to adding the number for the year, and those will be back loaded, but not all at the very end.

Okay. This question is for Jen. At the end of Q4, you mentioned that the majority of English-speaking clients are on the Impact Platform, but you're working on adding more languages. Can you update us on that progress? How many clients are currently using the platform?

We are thrilled that as of October, we had launched in all of our core languages. It was a really effective launch, and we're seeing more of our clients globally move to the Impact Platform. Obviously, it makes a big difference to our client base in the U.S. as well. Deployment went extremely well. There's a couple of our more less-used languages that haven't yet deployed, but the majority happened in October.

Great. And what can we hope for or expect from the rollout of Impact Platform? Is it a higher initial selling price? Is it higher retention rates? Both?

The primary benefit is the value proposition that we're driving collective behavior change. What we're seeing with those that have deployed is we're better able to track that behavior change, and the ability to scale with lower staff is a big win for our clients.

Excellent. Very helpful. Thank you very much, and that's all I have for now.

Thanks, Alex.

Thank you. Please standby for our next question. We have a follow-up question from the line of Nehal with Northland Capital Markets. Your line is open.

Yeah, thank you. Paul, at the beginning of your prepared remarks, you talked about how invoice subscription value was flat in fiscal 3Q and 4Q, but up in fiscal 1Q. What was actually the precise level in fiscal 1Q? And do you expect that to continue to increase in fiscal 2Q?

So, invoice subscription levels, U.S./Canada AAP were flattish in Q2 and Q3. If memory serves, they were up about 8% in Q4, and then up around 13% in Q1. And we expect that they'll continue to be good in Q2.

Okay. Great. And then, Steve, real quickly, do you have thoughts on EBITDA for the February quarter?

We talked about adjusted EBITDA being between $6.2 million and $7.2 million.

Okay. Thank you. I missed that. And what about the currency headwind for the full year on EBITDA?

Our constant impact of currency was insignificant in Q1. If the rates stayed exactly what they are now, we would have some impact through the remainder of the year. But there was no significant impact on adjusted EBITDA and an insignificant impact on sales in Q1.

Awesome. Great. Thank you very much.

Thank you, everyone, for joining. Thanks for your great questions and your time that you take to understand the business. We appreciate you, and hope you have a wonderful evening and a great start to 2024.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.