Earnings Call Transcript - SPOT Q2 2022

Operator, Operator

Good morning. My name is Julianne and I will be your conference operator today. I would like to welcome everyone to Spotify’s Second Quarter 2022 Earnings Call and Webcast. I would now like to turn the call over to Bryan Goldberg, Head of Investor Relations. Mr. Goldberg, you may begin.

Bryan Goldberg, Head of Investor Relations

Thanks, operator, and welcome to Spotify’s second quarter 2022 earnings conference call. Joining us today will be Daniel Ek, our CEO, and Paul Vogel, our CFO. We will start with opening comments from Daniel and Paul, and afterwards, we will be happy to answer your questions. Questions can be submitted by going to slido.com and using the code #SpotifyEarningsQ222. Analysts can ask questions directly into Slido, and all participants can then vote on the questions they find the most relevant. To the extent you have follow-ups, we will be happy to address them, time permitting. If for some reason you don’t have access to Slido, you can email Investor Relations at ir@spotify.com, and we will add your question. Before we begin, let me quickly cover the Safe Harbor. During this call, we will be making certain forward-looking statements, including projections or estimates about the future performance of the company. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed on today’s call, in our shareholder deck, and in filings with the Securities and Exchange Commission. During this call, we will also refer to certain non-IFRS financial measures. Reconciliations between our IFRS and non-IFRS financial measures can be found in our shareholder deck, in the Financials section of our Investor Relations website, and also furnished today on Form 6-K. With that, I will turn it over to Daniel.

Daniel Ek, CEO

Alright. Hey, everyone and thank you for joining us. I hope you had a chance to take a look at our new approach to sharing our earnings results. We would love any feedback you have. Because as I mentioned on our Investor Day, we want to improve how we communicate with you. And I see this revised format as an important first step and Paul will speak to this further in a few minutes. And with that, let’s jump into the quarter. We had another very strong quarter in Q2 building on the momentum and success we have now seen for four consecutive quarters. The acceleration in our user growth continued. We had a very strong beat on MAU growth, coming in about 5 million users ahead of forecast. As a reminder, this was one of the weak spots for us in Q2 of 2021, so I am really glad to see the hard work from our teams has paid off. In addition, our global subscriber growth exceeded expectations by 1 million, while revenue was in line. Going forward, while the macro environment continues to present uncertainty, we are currently not seeing any material impact on our expectations for user or subscriber growth from the economic downturn. In fact, we are seeing several markets trending ahead of our forecasts. That said, in anticipation of a potential slowdown, we already shared that we proactively reduced our hiring by 25% and instituted a double-down weekly revenue monitoring. I have said this before, I do believe only the paranoid survive, and we are preparing as if things could get worse, but it’s hard to be anything but optimistic given what I am currently seeing. Looking further ahead, recession or not, my confidence in our business and the unique Spotify machine that we are building is really unwavering. Audio is growing and Spotify with it. Hopefully, after last month’s Investor Day, this is a term you are all familiar with. For those needing a refresher, we believe the Spotify machine is what differentiates us from other tech platforms. It leverages one consumer experience powered by three revenue-generating business models: subscriptions, ads and marketplace. As I detailed last month, we are confident in our ambitions to get to 1 billion users by 2030, while at the same time, we are also focused on improving our gross margins and continuing to generate positive free cash flow. This rinse and repeat approach and the machine behind it that bundles multiple business models with multiple verticals into one user experience is what we will continue to invest in. Not only will this investment benefit Spotify and its shareholders, but it also creates tremendous upside for listeners, artists, songwriters, creators and advertisers. For those who want to learn more, I’d really encourage you to go to our investor site to capture a replay of our recent event. We highlight the big bets we are making, the incredible opportunity on the horizon and detail how we are measuring success. And with that, I will hand it over to Paul to go deeper into the numbers and then Bryan will open it up to the Q&A.

Paul Vogel, CFO

Great. Thanks, Daniel and thanks everyone for joining us. As Daniel mentioned, we have moved away from our shareholder letter, transitioning to a slide-based presentation. Our goal is to make our performances as easy to understand as possible and we hope this new format resonates with the investment community. Please reach out to me or the IR team with any feedback. Now turning to the quarter, I’d like to add a bit more color on our strong operating performance and what we are seeing with respect to the macro environment and touch upon our outlook. Let’s first start with our strong user performance. Total monthly active users grew to 433 million in Q2. This result was 5 million ahead of our guidance and was the largest Q2 net additions in our history after adjusting for our exit from Russia and the March outage, which we discussed prior. Moving to premium, we finished the quarter with 188 million subscribers, 1 million ahead of guidance, thanks in part to broad-based strength across regions, particularly in Europe and Latin America, where upside was helped by an extra week of promotional activity and traction in our multi-user products like Family Plan and Duo. Revenue finished ahead of guidance, which was helped by currency movements and we saw another strong quarter in advertising, which grew 31% year-on-year. With respect to gross margin, on a reported basis, Q2 finished below guidance, but gross margin was modestly ahead of our expectations when adjusting for one-time charge related to our decision to stop manufacturing Car Thing, as well as the positive net royalty impact we saw from prior period accrual adjustments. Looking specifically at Car Thing, our decision to stop manufacturing the device was made based on a few factors. First, we tested a number of price points and we frankly haven’t seen the volume at the higher prices that would make the current product financially viable. Second, rising inflation and component costs, coupled with the expanded lead time needed to order parts, has significantly altered the risk-reward of continuing product development. Our decision resulted in a one-time charge of $31 million, impacting gross margin by 109 basis points in this quarter. This decision will minimize further gross margin impact and cash flow expenditures moving forward. As we discussed during our recent Investor Day, much of our operating expense growth we saw in Q2 was a result of decisions we made through the end of 2021, mainly to expand our global sales team, invest in our platform and increase marketing to drive user growth. We have also added incremental costs associated with our acquisitions of Podsights, Chartable and Whooshkaa. Lastly, while we did forecast higher growth, a significant portion of our operating expenses are in U.S. dollar denominated and foreign exchange movements added nearly 1,000 basis points of growth in expenses and this was more than expected. Despite the increase in operating expense, we generated our ninth straight quarter of positive free cash flow. Looking at our free cash flow growth on a trailing 12-month basis smooths out seasonality, showing a very consistent trend. We have averaged over $200 million of free cash flow for the past 3 years. We believe this is a key way of looking at our business and also smooths out the lumpiness we see quarter-to-quarter. Looking at Q3 and beyond, as Daniel said, we continue to monitor the global macro outlook, but to-date, we have seen no real impact on our user or subscriber outlook. Specifically, we expect to see another quarter of accelerating MAU net adds and expect subscriber net additions similar to Q3 of last year. On the premium side, which is still the majority of our revenue, we expect ARPU to be up in the mid single-digits. For advertising, we did see some softening in trends over the last 2 weeks of June, but with that as context, we still expect solid growth in Q3, albeit slower than we might have forecast earlier in the year. Our gross margin outlook of 25.2% for Q3 is in line with our full year commentary and reflects our expectation for continued core operating improvements across our music and podcasting business, offset by select growth initiatives. We anticipate elevated operating expense growth consistent with Q2’s run-rate for the next few quarters, with the benefits of our previously announced 25% slowdown in new headcount additions, showing up later in the year. Currency will continue to be a negative drag on OpEx as well. In closing, despite an uncertain macroeconomic environment, we continue to be highly encouraged by the trends we have seen year-to-date.

Bryan Goldberg, Head of Investor Relations

Thanks, Paul. Our first question today is from Matt Thornton regarding Premium subscribers. Can you share your insights on gross intake and churn, along with how the additional week of promotion impacted the second quarter and the outlook for the third quarter?

Paul Vogel, CFO

Yes. In general, really positive trends. We know – we haven’t seen any change at all in the trajectory of gross intake or churn. We don’t give out specific churn numbers. But I can tell you churn was in line with expectations and down on a year-over-year basis. So, no impact on either of those. The extra week definitely helped a little bit in the quarter. I would say some of the outperformance came from the extra week, but not all of it. We see that carrying through into Q3. The expected growth in Q3 is the same that we thought heading into Q2 as it is heading into Q3. So, the outperformance was strong in Q2 and we also see strong growth in Q3 as well.

Bryan Goldberg, Head of Investor Relations

Alright. We have got another question here in the queue from Matt Thornton. This one is on our Live initiatives. What’s been the early uptake and reaction from artists or content creators? How are we driving awareness? And what’s been the early willingness of artists and fans to want to sell and buy Live experiences via Spotify?

Daniel Ek, CEO

Yes. I would just say it’s early days on experimentation on our Live initiatives, both the physical and digital ones. We have been experimenting quite a bit during the pandemic. Obviously, it’s been hard to do that with physical live events, but we did a bunch of them on the digital side. I think the reality is much of those learnings are inconclusive because the world we are in now, in a sort of post-pandemic world, is very different from the experiences that people were willing to pay for during the pandemic. So we are in the early days of learning and iterating. What gives me optimism is really kind of looking at how prevalent this format is in many Asian markets, however. So there, you see a great bunch of everything from live shopping to formats, where you see NFTs, and you see consumers wanting to participate in the live stream with their favorite creators. There’s a lot of innovation going on in Asian markets in the space. That’s where we are looking for inspiration, but it’s not something that you should expect to be a rapid improvement in the near quarters, but this is a multiyear effort from us.

Bryan Goldberg, Head of Investor Relations

Okay. Next question is from Rich Greenfield on new verticals. At your Investor Day, you talked about new categories, having closed on your audiobooks acquisition. How should we think about the impact of this new category in the back half of ‘22? And when should we expect to hear more about the other categories you teased at the Investor Day?

Daniel Ek, CEO

Yes. We are very pleased in closing Findaway. Happy to do that integration work now and starting to work with the team. You should see us quite imminently get something to market. Think of it as early in the coming months, coming weeks, something to the market and then rapidly improve and iterate upon that proposition. Nevertheless, you will probably see more of the full extent in the first half of ‘23 of the audiobook efforts. It is really first half of ‘23 to second half of ‘23, when you start seeing some of our work in the other categories we are pursuing, but there is nothing that I can announce at this point about what those will be or what kind of investments we are making in those categories at this moment. However, we are experimenting with them. We do plenty of experiments and bets internally and ‘23 will be a very big year for Spotify.

Bryan Goldberg, Head of Investor Relations

Okay. Our next question will be from Maria Ripps on the ads business. Your music advertising business saw double-digit growth in CPMs and a mid single-digit increase in impressions. Can you share your thoughts on opening up more ad impressions and can that be an additional growth driver? What’s – where is your ad load today versus where you would like it to be?

Paul Vogel, CFO

Yes. So I’d say if you take a step back and look at advertising in general, there are a number of factors that will drive the ads business. For us, we are focused on a couple of things. One is just growing overall for users and user growth; two is actually on the engagement side. One of the best ways to actually get increased inventory is to increase engagement. So we are constantly improving and testing products within the free offering and you will continue to see more innovation on the free side to drive more usage and more engagement, because we think that’s actually the best way to increase impressions, have people return more often and improve both the engagement and the DAU to MAU ratio. We don’t really talk about ad loads. We think there’s probably some room to expand it over time. A lot of it will depend on the product and the person and sort of how we dynamically serve ads to different people at different times and in different amounts. You will see us continue to innovate on how and when we sell ads to individuals.

Bryan Goldberg, Head of Investor Relations

Alright. Next question from Justin Patterson on our gross margin and advertising business. Paul, in the wake of the CRB ruling and in an uncertain advertising market, how should we think about the puts and takes towards gross margin ahead? Then related to advertising, what gives you confidence that podcasting is not viewed as an experimental channel for advertisers?

Paul Vogel, CFO

Yes. With respect to the CRB ruling, at a high level, we have been accruing at the rates that were reaffirmed. There is really no major change to anything from a forecasting or modeling perspective. There were some modest benefits to us both retroactively and prospectively based on some of the nuances within the language. That’s a little bit of what you saw in the positive accruals that we accounted for in Q2. There will be a minor small benefit to gross margin moving forward, but it’s pretty minor. For the most part, the ruling has pretty minimal impact on our numbers or forecasts. With respect to advertising and podcasting not being experimental, I mean, I will start, I don’t know if Daniel has any comments on this. We have seen continued strong growth on the podcasting side, significant year-over-year growth. Again, we are seeing an increased number of advertisers and increased demand. We think podcasting is becoming a core buy for people. It’s always tough to know, but we are really encouraged with the trajectory and the year-over-year growth we saw again in Q2.

Daniel Ek, CEO

Yes. My only addition is, if you think about it broader and not just around podcasting, but think about audio more as a category. One of the very unique things about audio is really how differentiated it is from all the other media that’s out there. Consider how audio can reach consumers in the car, which is a massive use case, particularly in North America. Radio usage is going down. Digital consumption of content is going up. It’s evident that audio ads will be a dominant driver for reaching people, unless they are in the car. When you also consider how many people walk around with headphones, there is a huge opportunity in local advertising too. I believe that audio will greatly benefit from this. So as you evaluate this from a structural standpoint, it’s clear that audio and audio advertising will be a massive category on its own. In addition to that, we see great results for advertisers and the retention of advertisers that we have is increasing, which clearly shows that the format is working.

Bryan Goldberg, Head of Investor Relations

Okay. Next question from Rich Greenfield. You are generating cash and you’re sitting on nearly $3 billion of cash on the balance sheet. With investors continuing to dislike your stock because you are investing to win audio long-term, how do you think about share repurchases given where your stock is trading here?

Paul Vogel, CFO

Yes. We talk about cash and capital allocation all the time. Given the uncertainty, on one hand, and also some of the acquisitions we made and the pipeline we’ve had, we feel comfortable with the cash we’ve had on hand. With interest rates rising and some uncertainty, it’s safer to have a little more cash on hand and not have to return to the market for any internal investments we might want to make or continued M&A. We think about it constantly. We are fully aware of where our stock price is and fully believe in the opportunity that lies ahead. It’s something we weigh all the time. We have an authorization in place, and we’re always looking at capital allocation in the best way to run the business.

Daniel Ek, CEO

My only addition is, if you think about it, there are three ways we can utilize our cash. One is obviously to invest in our business. The second is to do share buybacks, and the third is to offer dividends, in that order. Every now and then, we see more opportunities to continue investing in the business than for share buybacks or dividends. Right now is one of those moments. For all those reasons, we’re focused on investing in the business. We feel great about it, with the expansion of formats we’re entering and the podcast investments we’ve been making.

Bryan Goldberg, Head of Investor Relations

Okay. Next question from Matt Thornton, on advertising. What are the key drivers of ad growth through the second half of ‘22, for example, international, recent measurement in acquisitions, political, World Cup or anything else?

Daniel Ek, CEO

I will start, and then you, Paul, can chime in. The primary thing, as we discussed during our Investor Day, is that a lot of our inventory is still not available to advertisers just yet. Expanding that inventory will be by far the single biggest contributor to the growth of the ad business. Additionally, one-time events that are typically strong for ad businesses, such as elections and sporting events, will be impactful for Spotify, too. In essence, increasing the amount of inventory available for advertisers and improving targeting so they can drive even better results are the top priorities.

Paul Vogel, CFO

Yes. Just to touch on those specific questions, I think a lot of the investments we’re making internationally will bear fruit in 2023, possibly at the tail end of this year, but definitely more so next year. Political is new for us. We’ve just entered back and we’re doing so in a targeted manner, so we will see how impactful that will be. Honestly, we don’t know yet. As Daniel mentioned, improving measurement and tracking is definitely beneficial, and we will continue leaning into that, as it has been a driver of growth for us.

Bryan Goldberg, Head of Investor Relations

Okay. We’ve got a question from Mario Lu on operating expenses. Historically, we’ve seen operating income dollars improve sequentially from the second quarter to the third quarter. And the third quarter guidance calls for negative sequential growth. Outside of FX, are there incremental investments, content or OpEx to call out that would cause this decline?

Paul Vogel, CFO

Yes. For starters, it’s hard to not include FX. FX is going to have a significant impact on Q3, approximately $80 million in headwinds towards higher expense growth. Just to refresh everyone, we report in euro, and nearly every currency we operate in, particularly the U.S. dollar, has appreciated relative to the euro. We definitely see benefit on the revenue side from currency, but a bigger drag on OpEx from currency as we have more operating expenses in U.S. dollar than our revenue. Outside of that, we had already planned to continue our global sales force expansion and increase marketing to grow users in some of our newer markets, and that hasn’t changed.

Bryan Goldberg, Head of Investor Relations

Okay. Next question from Justin Patterson, on subscriber conversion opportunities. Daniel, MAU growth in the rest of the world continues to be a bright spot, but subscriber conversion is still in the early innings. What do you need to do from a pricing and plan perspective to convert those MAUs into more subscribers?

Daniel Ek, CEO

Yes. The first piece of context I want to give everyone is essential, as it’s important. Generally, we observe what we call the bandwagon effect at Spotify. People want to believe there is a linear relationship between user growth and subscriber growth, but they actually flip-flop at times based on our focus. At some points, we focused more on user growth, and at others, we focused more on conversion. But history indicates that growth spurts in MAUs always lead to better subscriber numbers over time. So it simply takes time. Depending on the users’ origin, we have to figure out how best to convert them. The team is currently focused on growing users, and I’m proud of their work and results. I am positive the results we are seeing will impact the remainder of the year, reflected in our guidance. As this trend continues, the team will prioritize converting more of these users into paying customers, and historically, a year after user growth, we typically see acceleration in subscriber growth. Exactly how we will achieve this remains uncertain; however, the team is resourceful.

Bryan Goldberg, Head of Investor Relations

Okay. Our next question is from Deepak on marketing. With the Barcelona partnership kicking off in July, can you talk about your expectations for subscribers and MAUs from it in the second half of the year? Can you also help us size the incremental impact on OpEx from the partnership for the second half?

Daniel Ek, CEO

Alright. I will do the first part, and Paul can do the second part regarding OpEx. One reason we’re excited about the Barcelona partnership is the impact the club has globally, particularly in LatAm and Southeast Asia, our top growth markets. It provides us with tremendous exposure to younger audiences, Gen Zs, making it a perfect overlap as we think about our potential for future growth. This partnership will create growth opportunities in markets that are notoriously hard to target. However, the expectation should not be about immediate results in the second half; this is a multiyear partnership. We will use this period to learn and iterate on what works. Expect to see ramping effects in 2023 as we refine our strategy. For now, observe the social channels where contributions from FC Barcelona and Spotify are rolling out, and the engagement has been strong, but it’s early days.

Paul Vogel, CFO

Yes. I would echo what Daniel said. Follow on social media. Barcelona is conducting friendlies in the U.S., including in Miami and Vegas, and they will be at Red Bull Stadium in New York shortly. The combination of athletes and musicians is incredible, and the mutual appreciation on social media has been exciting. Our data suggests that Barcelona reaches over 700 million unique people annually, particularly in Latin America and emerging markets, where our next phase of growth will occur. Regarding OpEx, we’ve absorbed about 80% of the incremental costs and reallocated other funds. However, about 20% will be incremental and relate to additional marketing spending in the second half of the year.

Bryan Goldberg, Head of Investor Relations

Alright. Next question from Steven Cahall on gross margin. The vast majority of your gross profit comes from premium subscribers, and premium subscribers by region are slowly skewing more towards LatAm and rest of the world. Does the growth in these regions present any premium gross margin mix headwinds?

Paul Vogel, CFO

The short answer is no. We don’t see any impact from that at all from a premium perspective.

Bryan Goldberg, Head of Investor Relations

Okay. And actually, conveniently, there’s a follow-up from Steven Cahall in the queue. On premium pricing, premium ARPU reportedly benefited from price increases in the quarter. Are you considering any in the U.S.? And how did churn perform in regions where you implemented price increases?

Paul Vogel, CFO

I will start, and if Daniel has any comments. We have seen no impact in churn. Most of the price increases are now a couple of quarters old, and we have previously mentioned that we saw no material change in churn relative to those price increases. In general, our core churn was down year-on-year in Q2 compared to Q2 of last year. On price increases, we aren’t commenting on specifics, but we believe we have pricing power over time. That said, macro uncertainty will influence our decisions carefully regarding any future implementations.

Daniel Ek, CEO

No. We feel confident in our ability to translate the value we provide into price increases over time. However, given current macro uncertainties, we will be cautious about these decisions. Long-term, we believe we hold pricing power, but short-term considerations about macro conditions influence our decision-making.

Bryan Goldberg, Head of Investor Relations

Alright. Our next question is from Ben Swinburne on advertising. How are you innovating in the Spotify Audience Network to attract more third-party publishers who have other options to monetize? Additionally, can you discuss the potential for building significant revenue off Spotify through the Spotify Audience Network?

Paul Vogel, CFO

Yes. There are a couple of things. The acquisitions we've made have been geared toward improving measurement, attribution, and personalization for advertisers, so they receive higher value on Spotify. This will attract more publishers to join SPAN and optimize advertising on the platform. We will continue to enhance our ad tech and ad stack through internal development and acquisitions, integrating these into a broader offering for advertisers. Additionally, we are building our self-serve tools to attract more small and medium-sized advertisers, which will contribute to the growth of both publishers and advertisers.

Daniel Ek, CEO

I would add that it’s really a trifecta of three things. First is what we can provide as a platform, then the numbers of advertisers, and lastly, the number of publishers. What we provide includes better data, improved targeting abilities, and more effective ad formats, ensuring advertisers receive better value. If we have enough advertisers, publishers should also benefit. Our sizable ad sales team helps cover a lot of advertiser and publisher relationships globally. We are a platform that can scale in many markets unlike any other. If you are a publisher with audiences across various regions, Spotify stands as the most viable option due to our data and ability to drive results, helping both advertisers and publishers.

Bryan Goldberg, Head of Investor Relations

Alright. Our next question is from Mario Lu on market penetration. Much of the MAU growth in the second quarter came from Latin America and Rest of World, while growth in North America and Europe was lower. How should we think about user saturation in the developed western markets and growth there going forward?

Daniel Ek, CEO

I will start, and then maybe Paul can add. Naturally, the Total Addressable Market (TAM) in emerging markets is far greater than in existing developed markets, while the inverse is likely true for the short-term revenue potential. Thus, envision a mental model of near, mid, and long-term combined with developing and developed markets; most near to mid-term user growth will likely come from emerging markets, but we foresee our revenue story will develop more in established markets. A great opportunity remains in upselling podcasting, leading to increased time spent and resulting in more revenue opportunities in audiobooks as well. User growth will likely stem primarily from developing markets, while revenue growth will trend from developed markets.

Bryan Goldberg, Head of Investor Relations

Okay. Next question from Ben Swinburne on audiobooks investment. Now that you have closed on Findaway, can you give us an idea of the investment requirements for audiobooks over the next 12 to 18 months? Should we expect this vertical to materially impact OpEx or gross margin in 2023?

Daniel Ek, CEO

I will start, and then Paul maybe can add. We are in the early stages of integrating Findaway, and we’re cultivating plans. As previously discussed, we expect to start experimenting and rolling out soon. If we observe positive results, we will ramp up investment in that direction, which will, of course, impact OpEx. The gross margin considerations for this vertical will differ from others, albeit positively.

Paul Vogel, CFO

Yes. Daniel mentioned our expectation for the first iteration of audiobooks to occur in Q3. Some OpEx that we’ve highlighted has already been allocated towards preparing for that launch. As we approach 2023, we’ll convey more guidance on what to expect.

Bryan Goldberg, Head of Investor Relations

Alright. We have got time for one more question, and that’s going to come from Doug Anmuth on net additions. Do you still expect 2022 MAU and subscriber net additions to be in line with 2021 levels? What factors would change your view here?

Paul Vogel, CFO

Yes. Let’s start with MAUs first. As you’ve observed through Q2 and our guidance for Q3, we are pacing well for MAUs this year. While we aren’t giving Q4 guidance, the numbers imply we are on pace to meet or exceed 2022 MAU figures. Regarding subscribers, we have performed well and, while considering some adjustments for exiting Russia and our expected growth therein, I would say we are on track for roughly similar styles of growth as last year. For MAUs, we look to be slightly ahead, while for subscriptions, we are steady.

Bryan Goldberg, Head of Investor Relations

Alright. Great. So, that’s going to conclude our Q&A session on today’s call. I will turn it back over to Daniel for some closing remarks.

Daniel Ek, CEO

Alright. Thank you everyone for joining the call. I just want to close by saying that I am really confident and have a lot of optimism in our business. Hopefully, this quarter was just a great testament to all of that. I look forward to the rest of the year. For more detail, please check out the record podcast that should be dropping tomorrow or the day after. Thank you everyone for joining.

Bryan Goldberg, Head of Investor Relations

Alright. That concludes today’s call. A replay will be available on our website and also on the Spotify app under the Spotify Earnings Call replay. So, thanks everyone for joining.

Operator, Operator

This concludes today’s call. You may now disconnect.