Laird Superfood, Inc. Q3 FY2020 Earnings Call

Thank you. Good afternoon, everyone, and welcome to Laird Super Foods Third Quarter 2020 Earnings Conference Call and Webcast. On today's call are Paul Hodge, Chief Executive Officer; and Valerie Ells, Chief Financial Officer. By now, everyone should have access to the company's third quarter earnings press release filed today after market close. This is available on the Investor Relations section of Laird's Superfoods' website. Before we begin, please note that all the financial information presented on today's call is unaudited. And during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements. Please refer to today's press release, the company's quarterly report on Form 10-Q for the quarter ended September 30, 2020, filed with the SEC and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. And now I'd like to turn the call over to Paul Hodge, Chief Executive Officer of Laird Superfood. Paul?

Thank you, Ashley, and aloha, everyone. It's a pleasure to be speaking with you on our first earnings call as a public company. On today's call, I'll briefly provide an overview of who we are and our business model and review some highlights from our third quarter and discuss the reasons why we believe Laird Superfood is well positioned for long-term growth. Valerie Ells, our Chief Financial Officer, will then review our third quarter financial results in more detail before we open the call to Q&A. Laird Superfood is a high growth, plant-based natural food manufacturer with an open-ended growth opportunity in the $695 billion grocery industry. At Laird Superfood, we believe better food leads to a better world, because when people are healthier and feel good, they make better decisions. Our products provide daily, sustained energy, nutrition and hydration that we need to excel throughout our days, from sun up to sun down, as part of our daily ritual, starting with our Superfood creamer and coffee. Our mission is simple. We make products that deliver great taste and great quality. We want our products to be convenient, easy to use, affordable, and available to all. We are proud to be known as a global leader in the food industry who shares our vision of a world of healthy and sustainable foods and provides us incredible expertise. Our flagship product line is our line of functional coffee creamers, where, in a short amount of time, we established the #1 natural powder creamer in the United States. Our products are designed around daily use, and we're building a broad-based natural food platform, reflecting the authenticity of our founders. That authenticity and trust in our brand is a critical differentiator driving our revenue growth. So our omni-channel sales strategy allows us to reach our customers where they are. We primarily sell online and wholesale. We also have a foodservice division with tremendous promise for the long term. We are native digital, and our online business accounts for around half of our total revenue today. The online presence is a powerful customer engagement tool, and the online revenue is highly recurring, with approximately 2/3 of our direct website sales coming from repeat or subscription orders, despite our significant new customer growth, all indicating a unique level of trust in our brand. In wholesale, our customers span major grocery chains as well as Costco and CVS, and we expect our presence to grow to multiples of the 7,200 retail doors we are in today. In our wholesale channel, this quarter, we witnessed better-than-expected shelf turns in our beta launch of liquid creamer up to 6 turns per week for our vanilla creamer, and we really consider this outstanding, especially in the early trajectory for that product, and it's a further nod to the resonance of the Laird brand. Consumers love our brand for its authenticity synonymous with high-performance in healthy living, combined with great tasting products. And it's no surprise that we continue to see evidence of this across both the online and wholesale channels. In wholesale, we grew 223% in Q3 this year over Q3 of 2019, a growth impacted by both adding total door counts as well as adding more SKUs in the existing doors with our valued wholesale customers. Online, our Q3 new customer acquisition rate increased 149% year-over-year. We're really pleased with the improvement year-over-year in converting first-time customers to repeat customers. We saw a 40% improvement there, which we attribute to a number of things, including effective marketing. We're using our trusted brand platform to roll out new products and family products addressing large total addressable markets or TAM. This includes coffee, an $89 billion total addressable market, where we've been working on a deep pipeline of highly innovative functional coffee products, which we will continue to release in the coming quarters. We have solid data from wholesale partners and online sales supporting this expanded functional coffee launch, and the early read on our initial blend is very strong. Functional coffee is an adjacent line to our already established presence in creamer, expanding our reach to consumers who don't use whitener. So we're really excited about the opportunity to address and innovate in the even larger coffee market and also better-for-you snacks, addressing the $101 billion snack category. In early fourth quarter, we released our first-ever Snack Rock Pili Nuts. This was an intentionally limited launch, and the results were eye-opening. We quickly sold out on the day of launch, and we think the sell-through results and adoption by our customers were indicators of how we can eventually expand sales in feed products and the overall platform. The third quarter was another record quarter for us. Net sales increased 118% to $7.6 million relative to last year. We drove a significant expansion of our customer base in both online and traditional wholesale channels. We are and remain hyper-focused on the launch of our liquid creamer, which contributed more than $0.5 million of gross revenue in the quarter. Our liquid creamers are now in more than 1,200 retail locations, and our initial read is that our highly differentiated liquid creamers are on trend and selling as expected. We are hearing from customers that this product is a game changer for them. They love the added functionality, uniqueness, and the true clean label. There's great shelf velocity here. Customers love it. Stores love it. We talked during the roadshow about the supply-demand mismatch that we're solving to increase margins. And since, we have also learned that the shelf life in our current packaging is just too short for the distributors to manage effectively. And this ultimately means high fluid rates, which in the quarter, undermined our gross margins. So the good news is we believe we have a solution for a packaging change that will extend our shelf life from 45 days to 4 to 6 months to solve this issue. We anticipate having the updated version on shelf by mid-2021 as pilot runs are underway currently. The much longer shelf life has many advantages. It makes it far easier to manage supply and demand. It gives the distributors ample time to deal with logistics, and it also improves the customer experience by giving them longer to use the product before spoilage. The same solution with some minor tweaks will also enable us to sell the creamer in a shelf-stable format, which gives us the upside next year for D2C and Amazon sales to further balance margins. This is a really exciting solution for Laird Superfood. We are learning all the time and in real-time how to optimize our business and particularly the liquid creamer business. That said, this was a record-breaking revenue quarter, and we could not be more excited about what lies ahead for us. We have strong confidence that the Laird brand can operate at world-class margins profitability, and we are constantly analyzing, evaluating, and executing the path to get us there. Helping us on that path, I'm delighted to announce our new Chief Operating Officer, Scott McGuire, who joins our team next Monday and brings many years of operating, manufacturing, and supply chain experience to Laird. Scott has led operating roles at CPG and fresh food companies, including Nestle, PepsiCo, and Bond Wall Fresh Americas. We're so excited to welcome Scott to the Laird team. In summary, our third quarter was record-breaking. Revenues in all channels are up, and we have made great strides in identifying specifically where we can continue to improve our operating efficiencies and a project in motion to take Laird Superfood to the next level. I want to give a huge mahalo to our amazing team who remained focused and true to our mission. And I'd like to now turn the call over to Val, who will walk you through our financial highlights.

Thank you, Paul, and good afternoon, everyone. It's great to be speaking with you on our first earnings call as a public company. As Paul noted, we are very pleased with our third quarter financial results. Our net sales increased 118% to $7.6 million relative to the third quarter of 2019, reflecting a combination of growth in online and wholesale channels, where online grew 67% year-over-year with our direct website sales up 122%, and wholesale grew 223%, reflecting continued success with key partners as well as our strong liquid creamer performance and ongoing success of our shelf-stable business. We saw 135% growth in our coffee creamers platform, 278% growth in coffee, tea, and hot chocolate products, and 63% growth in hydration and beverage enhancing supplements. Gross margins were 24.7% during the third quarter. Although a slight increase over Q2, the sequential decline in margin from the last year was a result of the following: spoilage and waste related to our liquid creamer launch and process refinement; elevated co-packing fees related to our liquid creamer line as that product launch continues to grow, but also from outsourcing some of our shelf-stable business, while we awaited our recently installed second in-house production line to become fully operational; and the combination of elevated shipping expenses and reduced shipping income for our direct online business, where we have continued the free shipping initiatives; and on an absolute basis, outbound shipping costs also increased approximately 10% during the quarter. Regarding liquid creamer spoilage, as Paul alluded to, we have two key steps to create a clear and realistic path to a more optimized operation where quarter-to-quarter spoilage should be less of a concern. We are planning a new package design that will dramatically increase the shelf life of our products, extending from 45 days to 4 to 6 months. This gives us a line of sight to spoilage rates in line with industry standards in the single digits. We are also evaluating a separate shelf-stable liquid option to launch at some point in 2021, which would enable us to sell our liquid products online and through Amazon, which, as we see with our other products, can provide a higher blended gross margin between direct retail and wholesale. Regarding full packing of our shelf-stable products, our second production line is now installed and operational, though it is still ramping up to running at full speeds. Between our two production lines, we are working hard to build up our safety stock of finished goods on hand ahead of any potential impact from the COVID-19 resurgence. We have been very fortunate to avoid any material production impact thus far due to COVID, but we do not want to take any chances for our stock or missed opportunities for growth, so we will be building our inventory on hand over the coming months. As a result, we will likely continue to use co-packers into 2021 until we feel we have adequate safety stock on hand. So to summarize, sometime after the first half of 2021, expect margins to improve as we plan to revamp our liquid creamer packaging to extend our shelf life and cut down on our spoilage rates, ramp up our second production line, and simultaneously increase our inventory on hand. After that point, if all goes as planned, we would be looking to reduce the outsourced work and shift back to supporting our growth with our existing infrastructure and reap the benefits of the fixed cost leverage available to us via our vertical integration. Regarding shipping, after testing the removal of free shipping in the third quarter, we reviewed the data and decided to keep free shipping turned on for now. This is a margin impact, though we believe the investment is justified by the top line at this stage of aggressive market share growth. However, shipping rates have increased. In fact, we received notice of an additional 15% increase in shipping costs in October. And so this is an important area of focus for us as we optimize the fulfillment part of our business. While we can't control shipping rates, we certainly hope that post-COVID and post-holidays, with some changes in our fulfillment process, we can identify a more optimal solution for this cost. Moving further down the income statement, OpEx remains firmly in our control. And as we have done historically, we continue to show very effective management of these expenses across the board. We have significant fixed cost leverage in this business, particularly in OpEx, and the efficiency and effectiveness of our teams continue to show here as we make progress toward our long-term goal metrics as a percent of sales. With an eye on high growth, we anticipate the opportunity to invest capital on road, whether it be in online spend or other forms of marketing and advertising, so long as the returns justify the spend. And that will always be the biggest delta here, the sales and marketing numbers. But across the board, we have very flat expenses outside of the non-recurring go public costs, and we expect this to be the case moving forward. We believe we have scaled this company to be public, and this will continue to be a source of leverage for us. Now on to CapEx. We would like to reiterate how minimally capital-intensive our core business is as it stands right now. Our CapEx remains low, even now with our second line in place. We have tremendous fixed cost leverage and excess capacity once our second line is running at full speed. As many of you know from our roadshow, we do not believe this is a business to guide quarterly. We intend to issue annual guidance in 2021, and we operate with long-term target demand. Those long-term targets, which we discussed on the road show, have not changed. Over the next 3 to 5 years, in 2023 to 2025, we believe this business can run with annual revenue growth in the double digits, gross margins north of 40%, and EBITDA margins in the mid-teens. Our breakeven EBITDA margin target coincides with total revenue of $67 million. But today, it is the nature of the business at this early high stage of growth to be choppy in both directions, quarter-to-quarter as we experience changes in the timing of orders and a variable cost environment. In the days following our IPO, our sell-side analysts published a 2020 revenue consensus at $23.4 million, and we continue to feel comfortable with that initial revenue expectation. On the gross margin side, expectations should take shipping factors into account as we navigate the optimal balance of free shipping and increasing shipping expenses for our DTC business, including increased shipping costs beginning in the fourth quarter, and should also take spoilage into account potentially through the first 6 months of 2021, following which, our margin should begin to slowly float upward. We intend to discuss full-year 2021 expectations when we report our fourth quarter early next year.

Thanks, Val. So before we go to questions, I just want to let you know our #1 priority today is to optimize the fast-growing business we have immediately before us. We feel confident about the plans in place to optimize the liquid creamer business, and we feel this effort is worth the time and resources because the consumers are there, the brand has traction. Our customers love the Laird products, and we know we can take a meaningful share of the multibillion-dollar creamer opportunity in front of us. All in all, this quarter was huge for us and for the brand, and we are hyper-focused on the market opportunities in front of us. We are so delighted with the expanded team we have in place, and now let's go to questions.

And your first question comes from the line of Bobby Burleson from Canaccord.

So I think my first one is just on the spoilage impact on gross margin. Just curious if you guys can kind of zero in on what that was in terms of basis points?

Yes. Sure, of course. So the overall liquid creamer spoilage, over the past two quarters, each quarter has been between 100 to 300 basis points in margin. But again, like we've mentioned on the call, we're pretty excited and confident about this solution we have in place and it comes with a lot of upside potential and potential e-com option down the road.

Okay. Great. And so just the kind of incremental spoilage, I guess, versus expectations. Because I don't think we've talked much about this before. Is there a way to kind of isolate what that was in terms of how it would probably weigh on margins?

Yes. So historically, when we talked on the Road Show and in those conversations, we initially attributed it really to a mismatch in supply and demand. If you recall, we had a minimum run quantity with our co-packers and we were initially launching in the second quarter. I mean that was the main driver. And Paul, actually, I'll let you speak to the subsequent.

Yes. I mean what we've realized just in the past, really, over the past month is that as that sort of mismatch was corrected for the most part, we still had spoilage. So as we dug in with the distributors to see what's going on, what we really learned was that the distributors themselves were not able to handle the product in an efficient enough manner with the 45-day shelf life to get it from our co-pack to the stores, say, East Coast to West Coast, and get on the shelves with enough shelf life to be useful. In some cases, distributors might pick up the shipment late as much as like a week late from our factory after we produce it, and then by the time it gets to their warehouses on the West Coast, they can't accept it, because it has less than a 75% shelf life capability. So it was a surprise when we dug in to look at what was going on there. With the help of Danone, we found a great solution for this extended shelf life, and it's going to essentially eliminate that problem. We're taking it from 45 days to 4 to 6 months. We're pretty comfortable with those ranges. And that will eliminate this logistics issue, so to speak, that we've been having with the distributors. It was a bit surprising, so this spoilage was continuing to happen even after we corrected that mismatch, and we are making strides in the meantime to reduce that in some ways, but it won't be completely fixed until we go to this new solution. We are in trial runs already with the new packaging, and we're driving this as quickly as we can without sacrificing quality.

Okay. Great. Great. And then just a quick follow-up here. You guys mentioned the extremely high turns for your vanilla-flavored liquid creamer. I noticed that my local stores have the vanilla stuff almost sold out, but the unflavored wasn't. I'm just wondering, are you guys making adjustments in real-time in terms of your inventory planning? Because it seemed like it was incredibly lopsided toward lots of demand for vanilla.

Yes. Yes, absolutely. We're currently analyzing that and producing the products as needed. But don't underestimate the unsweetened and the original flavors; they're also turning very well. There's great turn on that product. Yes, vanilla is the highest, but the others are all three flavors performing well by kind of established standards, especially being that they're brand-new in the marketplace. The good sign I look at is the weekly turns are actually increasing still, which is encouraging. It basically means that people are getting and using the product and coming back for more, and we're building a customer base in the stores. We're still seeing those rates ramp-up, which is really exciting, and we get feedback from consumers through our customer service portal that people just love the product.

Yes. It seems like I had some conversations with the checkout people at the stores I shop at, and they were saying they were aware of the product, and there was a kind of buzz building, it seems like. Good. And then I guess the last one, just on online. Curious, you tried to shut off free shipping a little bit. I thought you guys were always planning on keeping that turned on a little bit longer. Was that a change in strategy there? Or was this an experiment that you've been planning all along?

We're going to constantly be testing the free shipping initiative. It's hard to measure the effectiveness of it unless we have times where we can measure the opposite. So we wanted to turn it off to get a new measurement of returns. There's also a lot of different new creative ideas that we're implementing to test various different versions of it, to look at ways that we can reduce our shipping costs while providing a solid customer experience and be able to compete with Amazon's free shipping initiatives. We're really excited about the tests we're going to run over the next 3 to 4 months to look at how we can fully optimize that initiative. It's important to continue to play with it and measure the data.

And you said that shipping costs were up 15% in October. Is that correct?

Yes. We received notice from a couple of our primary carriers that there is a rate increase. We're going to be hyper-focused on this area of the business because we feel that there's a lot of room here to find some improvements. By the way, Scott McGuire, our new COO, is highly experienced in supply chain fulfillment logistics. He's what I consider a global expert in this area. And he starts on Monday. We’re really excited to get him on board, and one of his first initiatives is going to be to dig deep into this area of the business.

Congratulations on a really nice quarter here. I wanted to ask about the subscriptions that you have on lairdsuperfood.com. I know that's been a pretty meaningful contributor to revenue for you historically. Can you share how much of the third quarter online sales were generated by subscriptions? Or any color you can give us on how your number of subscriptions has been trending throughout the year would be really helpful.

Yes. Of course. Subscription and repeat business continue to make up about 2/3 of our direct online business despite that strong new customer growth in the third quarter. That was still around 31%. Repeat was still slightly north of that, 32%, 33%. In terms of just subscription accounts, we were up about 24% over the second quarter. When looking back a year, we're up 277% over Q3 of last year. So continued strength in that part of the business, and subscriptions are always going to be a focus for us because the LTV of a subscriber is dramatically improved over a one-time purchaser or repeat purchaser. And we're going to pay a lot of attention there.

That's really helpful. And then just trying to put it all together. It seems like you're seeing really nice continued momentum on the online sale. Wholesale is going to be a little bit choppier, and you had the big sell-in with the liquid launch here in the third quarter. It looks like you guys have grown revenue quarter-over-quarter pretty consistently for a long time here. Is it reasonable to think that, given the magnitude of the liquid creamer sell into retail in Q3, that Q4 is probably going to take a step back before resuming growth next year?

Yes. I'll just say that at this stage of our business, it's very hard to predict quarter-to-quarter, which is why we're guiding annually. We've got some great programs in place; we're hoping to make an impact on Black Friday. But we don't know how to forecast that exactly. There's a big wholesale order to come in or it could get pushed into Q1, and those are hugely impactful in those numbers. What I would say is we gave the annual guidance, and we'd stick to that. At the end of the next quarter, we'll provide our guidance for next year. We are definitely not trying to hide anything from anybody. This is just a very high-growth, dynamic business, and it's very hard to predict on a quarter-to-quarter basis right now. Once the company matures down the road in a couple of years, I’m sure that will change, and we can adjust that process. In the meantime, we’re happy to share every little business issue in great detail and keep those discussions going.

I appreciate that, Paul. That's really helpful. Lastly, if I could just ask about the pili nuts that you mentioned sold out quickly in the trial. It seems like that's an exciting new area, just the category of snacking in general. I'm curious, was that mostly your existing customers that quickly reacted to that product? Just curious who is buying it and what the timeline is to get that product back out there?

Yes. Assuming shipments are all happening as they should be, we should hopefully have those back in stock by the end of next week. Our existing customers really responded well to that, but they were also some of our biggest customer acquisition days we've had in a long time due to our marketing programs getting out there. It was quite an eye-opener for us, honestly. It far exceeded our expectations as to how quickly the product would move. We got incredible response from our customers that received the product and have a huge waiting list for people wanting more. We're excited about the snack category. It was our first jump into that field. We have some other healthy snacking products coming out in the near future. It just shows the power of the brand platform that we have here. We're building this trusted customer base and company based on this authenticity. Customers that get it will continue to be here, and it shows the power of this brand platform, in my opinion.

And your next question comes from the line of George Kelly from ROTH Capital Partners.

So I just have a few for you. I guess to start, continuing the dialogue you were just having on pili nuts, can you maybe more broadly talk about your new products pipeline? And I'm curious if there's more still coming this year. And then I guess just not sure sort of what you want to tell us or what you can't tell us, but what's next year? Like what should we expect as far as new products for next year?

I will frame it by saying that we are probably more excited about our new product pipeline for 2021 than we've ever been. We've got a solid line of what we consider exciting and innovative products. For the rest of this year, these product launches may move around because some of the things are out of our control for printing and packaging timelines, it can be a busy time of year for printers. We talked on the road show about having some additional functional coffee products coming out that we're really excited about. I think the future of the coffee space is functional, and we have some products that will resonate well. Our first functional product coffee did exceptionally well as a Performance Mushrooms product. Some of these other functional coffee launches are clearer in terms of their functions, and we are excited about that. That should be out in Q4 here. We have our daily essential greens planned to go down to the marketplace in the next 30 days. There may be one other product I can't say exactly, but it's going to hit this year. There are continued product launches happening this year, of course, with the pili nuts coming back as well.

That's great. And then maybe back to liquid creamer. I just want to try to understand your commentary from your prepared remarks. Are there any changes or will the existing form continue being sold through mid-2021?

The ingredients won't change at all. Same ingredients, same formula; it's going to taste exactly as it does. It's really just a packaging change. The package is still the same size, but it's just the way the packaging itself is designed to better protect the product. This provides its extended shelf life. There is a small tweak to this solution that uses a slightly different version of the packaging. But through the same production line process, that will also give us the ability to have a fully shelf-stable aseptic product, which would provide a 12-month shelf life with room temperature storage conditions. That’s exciting for us as we can then move the product on Amazon, selling it B2C for online business, achieving our blended margin approach. We're eager for that. Timing is tough to say. We're doing trial runs now. Everything is looking strong. We plan to have it on the shelf by the middle of the year and then see the margin impacts and improvements.

Yes. George, to round that out, we will definitely keep the existing version on the shelf until that solution is in place, and then we'll swap it out. Because when it is on the shelf, it's selling really well. The sell-through data is fantastic, especially for being early on in the launch. We hope to continue to see that trend of weekly improvements. Ultimately, we believe we found the right solution here, and we're looking forward to having it in place in 2021.

Okay. Great. And then last question for me. Just a modeling question. Can you break down the online revenue between lairdsuperfood.com and everything else?

Yes. Overall channel mix for the quarter, online sales were about 49% of that. It was about a 60-40 split this quarter between lairdsuperfood.com and Amazon. Wholesale made up about 50% of the total sales, and foodservice rounded it out with the remaining 1% to 2%.

Congrats on the strong first quarter out of the gate.

So I was just wondering, on the new products you guys are talking about that are happening here in Q4 and over the next 30 days, are those all capable of being shipped direct? Or are some of them wholesale only at this point?

Actually, these products will initially be direct only. Then we will gauge their performance and look at the wholesale channels. I will say we do expect the functional coffee blends that are coming to go into wholesale early next year due to strong wholesale demand for these products. Our typical playbook emphasizes starting products online; we're building an online daily ritual around our products. We want to understand performance, customer feedback, and determine if we need packaging changes or other tweaks before making a big investment in wholesale. The functional coffee will sort of be the one exception we are going to accelerate because we already know it’s going to do well. We also want to invest to get that into wholesale channels as soon as possible.

And any feedback on how that's going with Costco?

Yes. It's been going well. Even with the Performance Mushroom blend, which we feel probably wouldn't resonate as strongly with the mass market consumer, Costco is continuing to reorder and keep it in their age stores. We're supporting them in that, and it started out. And one reason I think we're selling in 3 regions now with the coffee is because there’s been some regional expansion as well.

Great. It seems like you guys have a good pipeline of new products slated for 2021. I'm wondering, if we think about the cadence of introductions this year versus 2021, is there a deceleration in the number of SKUs coming out? And are you also culling the portfolio of some stuff that's underperforming? What are the trade-offs like there?

Absolutely. We're going to be constantly looking for underperforming SKUs. There have been a few we’re looking to replace, and that's just part of the process. It's hard to talk about the future pipeline because it's quite the process. I would say that for every 10 product ideas that come to mind, one makes it to the stage where we're planning to launch and schedule it. There are still a lot of variables affecting the timing of those. When we look at the number of products we have next year, however, there are probably more products we insist on launching next year than in any prior year.

Great. And in terms of retail distribution with your wholesale customers, there are obviously opportunities at Target and others like that. I'm wondering how about someone like a 7 Eleven. It seems like they're building out their better-for-you sections of their food aisle. Is that a company that's on your radar?

Some products we have slated for next year are designed and engineered for the c-store environment. We're considering that in our development pipeline. Our new VP of Sales, who came on in Q3, has great experience in that area. We are anticipating exploring those sales channels eventually and having products that fit, built from the ground up for that.

There are no further questions at this time. Mr. Paul Hodge, I turn the call over to you for some closing remarks.

Okay. Well, thank you, everybody, and have a great holiday season. Be safe. We're excited for the future. We're looking forward to talking to you during our next call. We'll be giving 2021 guidance and summarizing 2020. Really appreciate everybody's support in this growth journey with Laird Superfood.

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