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Central European Distribution Corp. (NASDAQ:CEDC)

Q4 2007 Earnings Call

February 28 2008 8:30 am ET

Executives

James Archibold - Director of Investor Relations

William Carey - President, CEO and Chairman

Chris Biedermann - Chief Financial Officer

Analysts

Gary Giblen - Goldsmith & Harris

Amy Greene - Avondale Partners

Katie Ruci - JPMorgan

David Kadarauch - Wood

Operator

Good day, everyone, and welcome to this CEDC fourth quarter and full year 2007 Earnings Call.

For opening remarks and introductions, I would like to turn call over to the Director of Investor Relations, Mr. James Archibold. Please go ahead.

James Archibold

Thank you. I'd like to welcome everyone today to CEDC's fourth quarter and full year 2007 earnings conference call. Joining me this morning are William Carey, our President and CEO and Chairman; and Chris Biedermann, our Chief Financial Officer.

Note that the content of this call contains time sensitive information that is accurate only as of the date of the live broadcast, February 28th, 2008. The online replay will be available shortly after the conclusion of the call. You may also view a copy of yesterday's press release on our website.

Please also note that statements made during this conference call, other than those related to historical information, constitute forward-looking statements within the meaning of the Private Securities Litigation and Reform Act of 1995. Without limiting the foregoing discussions, the forecasts, estimates, targets schedules, plans, beliefs, expectations and the like are intended to identify forward-looking statements. These forward-looking statements which are based on Management's current beliefs and assumptions and current information known to Management involve known and unknown risks and uncertainties and other factors that may cause actual results, performance or achievements to differ materially from any future results, performance or achievements expressed or implied by forward-looking statements.

Additional information concerning factors that could cause actual results to differ materially from those forward-looking statements are contained in the press release issued yesterday, 2007 Form 10-K to be filed with the SEC by February 29. CEDC is under no duty and undertakes no obligation to update any forward-looking statements made in this call.

With that, I'll turn the call over to William Carey, our President and Chief Executive Officer. Bill?

William Carey

Thank you, Jim. I welcome everyone again to our 2007 fourth quarter and full year earnings call. I will just take you briefly through how we outline the call formats and then get into the content. First off, I will be discussing the economic trends that we see happening here in Poland. Also going into market trends and dynamics. Second, then I will give you the fourth quarter and full year P&L. I will turn it over to Chris Biedermann, and take you through the balance sheet and the financial items in our P&L. I will discuss a bit of our Russian strategy, a bit about the Whitehall announcement yesterday. And also on Parliament, what's happening with all the news coming from Parliament. And then just summarize really for 2008.

So first off, I just want to say about the economic trends, what we see in Parliament, there continues to be a strong growth with over 5.5% GDP growth expected for 2008. And we see unemployment continue to tick down, December-to-December it was under sub-10%, so what the expectation is to be in line with 9% to 10% unemployment this year. Inflation has picked up with the wage inflation. In Poland it has ticked up about 3.5, 3.6 expectation this year. And the government is doing a lot in terms of raising interest rates. They have raised interest rates slightly in January, February by 25 basis points each, to cut down inflation, which is also driving a very strong currency. What we have seen already, not only in the fourth quarter of 2007, but further strengthening of the currency in 2008 by another 5% for the first two months of this year.

Also the new government took effect from November of last year and what we are seeing is that there was an announcement on the personal income tax rate, reduction from 2009 and also further talk about flat tax in 2012, which will be certainly beneficial for our company. And also news that are very encouraging is that, there was an article last week in the UK, it was a first time that UK is seen a net outflow of Polish employments, people leaving UK, coming back to Poland. And again some of the key reasons being that the growth in salaries here, the opportunity, the exchange rates, negative gain for them when you start translating foreign currency back to zloty, with an extremely zloty, it's about the same return for them when they are sending money back and just the overall job opportunity that they see here in the country. I think that will continue to take shape. I think you will start to see; certainly a net inflow of people coming back into the country than has left the country over the last two years.

If you look a little bit at the market dynamics that we see in the marketplace; pretty much a continuation with that strong zloty is that you've seen in spirit pricing, we get a lot of questions on spirit pricing, because as you know in the U.S, it's, wheat pricing has certainty continued to rise, but what we are seeing in Poland is exactly the opposite. And the maim reason moving that is the currency. We've seen reduction coming in the first two months of this year in grain pricing, a small reduction and that’s mainly the attribute of the 5% appreciation of the zloty. And what we see is that the Europeans are not buying the grain as they were, as the translation is just too expensive. So, what we are seeing is a Polish farmer starting to move more grain on the marketplace and there's evidence of decreasing pricing, which we've seen this year. So, again a very positive on the spirit development.

We are also moving ahead with our spirit tanks in terms of putting our spirit tanks in by May, that we will be able to store spirit up to 5 months to 6 months and take advantage of this longer -- to buy at the cheaper prices and take advantage of fluctuations in the spirit pricing, as we move forward into summer.

Also if we look at the different sectors of the spirit market in Poland, we continue to see positive dynamics as the economic sector continues to decrease. The mainstream market is showing small growth and with the biggest growth coming from the premium and super premium market, where it's about 5% to 10% of growth that we see coming out really that was replacing the economy sector.

The import market is growing the most, not only from the strong currency, which have enabled people to keep more margins as well. We're seeing still 20%, 30% growth. Our growth is much higher as you see from our press release yesterday of 46%, not only for the quarter but also for the full year, we're seeing, again the local consumer again is just experimenting in the different types of spirits of whiskey, tequila, gin, liqueurs everything is growing quite robustly.

Also as a positive element that we don't see any excise increase spirits that has been established for 2008 from the new government. We don't anticipate any, which is also good news.

The wholesale market continues go to a rapid consolidations, not only the consolidation that we have been doing but also companies like Belvedere and other companies forming groups of wholesale groups I think within the next two to three years you're probably going to have 10 key players operating in the wholesale market.

The government has also stepped up plans to privatize the last distilleries that have yet to be sold. There are two, three others also that are targeted for bankruptcy. We will probably not participate in these small distilleries as brands they represent don't really have lot of market leverage. Even though there is a market share, but it's not really profitable market share and we will probably not participate in those privatizations. What we are interested in though is the V&S process, the process is moving forward, that's the Vin & Spirit Company from Sweden, that's currently being sold. And part of that asset is a very good local distillery in Poland. That process should be moving towards selecting an eventual buyer by late April-May, from what we hear from the advisors. And we would certainly like to talk to the eventual buyer of that full company in terms of us being able to purchase the Polish subsidiary if they were willing to sell it. And that's something that we will be targeting once the V&S process moves later in the second quarter. But overall in the marketplace it's a very buoyant market for local and imported spirits and wine products and we're very excited about the market this year.

We move a little bit into the P&L, starting in the fourth quarter and full-year. We look at the top-line growth. We had another fantastic fourth quarter with 32% growth in the top line, full-year growth of 46%. So again, you can see the fourth quarter accelerating growth over the full year. We achieved a record, over 9 million cases of production from our own brands, that's a record for our two distilleries. And excluding currency, our pure organic growth was 8% for the quarter and 7% for the full year, so again, slightly higher organic growth for the quarter than the full-year.

And some of the key drivers behind those good sales numbers is really, as I said before, on these premium and imported, or the premium and superpremium vodka market where our Bols product is number one, we had a 24% growth in the quarter. This is our highest margin product and a 19% growth in the year. So we are very pleased to see the positive dynamics coming out of Bols. And we look at Zubrowka also. We did the revamping of our Zubrowka, as you remember, earlier this year. And we will see a 31% growth in the quarter of Zubrowka and a 15% growth during the year, so again, acceleration in the quarter of some of our key vodka brands.

Not only the top line was enhanced by our production brands, but also from distribution share gains much like we had in the third quarter. Our import growth of 46% clearly dominated by top brands, we have Campari, Cinzano, Gallo, their brand, Carlo Rosi were able to achieve the number one productive value for 2007 of any wine brand in Poland and number two by volume.

I think the current strength, I think over the next two years it is very possible we will attain also the number one volume position of their product Carlo Rosi. Grants, which is rapidly trying to break into the top two whisky brands in Poland. We had a 74% growth, already from a pretty decent base of 40,000 cases. So, we are very pleased with the overall growth of the import portfolio.

We aslo have the new acquisition from July, and we had export growth of 30% as well, so, overall a very robust quarter and year for revenue. If we now look at gross margins; we are up 32% on the quarter over a year ago and we are 25% for the full year. So, again as the consumer is moving into more higher end products we are able to leverage a higher gross margin growth from a year ago then the full year.

And some of the key drivers behind that gross margin improvement is not only the Bols, I talked about before, but also certainly the import margins, the currency, the strong currency is helping better margins on the imports and also the rectification that we completed in the fourth quarter, also helped with the margins, as we were able to get it up half the quarter of our rectification, so that certainly did helped our overall growth margins.

If we move to operating expense, we did a tremendous job at operating expense for the quarter. We were able to reduce it from a year ago from 11.2% of sales to 10.1% for the quarter, and for the year, 11.3% we were able to reduce to 11.0%. And this is a tremendous achievement for the quarter, moving 1.1% down as a percentage of sales, really this shows our infrastructure, that we've been able to leverage our infrastructure to get more products moving through our fixed overheads. That just shows you how far we can moved our further, we believe with overheads by leveraging the existing infrastructure. And the Management has done a great job of focusing really on cost and I am very pleased we had really strong quarter on the ability to leverage our overall infrastructure.

Let me move to the operating profits, the result of these positive trends, we had the increase in operating profit for the quarter of 10.4% as a percentage of sales to 11.6%, that's up 47% from fourth quarter a year ago. And for the full year 9.7% to 9.9%, which is up 29%. So, again the underlying trends in the fourth quarter to leverage these drivers of getting more profitable mix to our infrastructure. All these positive attributes were able to drive the quarter much higher than the full year results.

I will not turn it over Chris Biedermann, who will take you through the balance sheet and financial ratios

Chris Biedermann

Okay, thanks, Bill. I'll start first looking at our P&L below operating profit. Again, our net interest expenses of $35.8 million, (inaudible) on our bonds plus our working capital and the additional $122 million debt we took on early in the year due to finance of Polmos minority buyout.

Other financial expenses of $13.6 million, is primarily the FX gains we had of $24 million and this is partially offset with the early debt retirement cost Q1of $11 million. Again, as talked in our other calls, the FX reflects movement in exchange rate between the zloty and the euro which relates back to our euro notes we have outstanding.

So looking down the bottom-line on a GAAP basis, our net income was $77 million, compared to $55 million last year, which represents the 40% gain. If we take out some of these non-cash FX and the early debt retirement cost on a comparable basis, net income was $69.8 million for the year or $1.73 per fully diluted share compared to $46.1 million in 2006 or $1.28 per fully diluted share. This is at the top end of our 2007 guidance and also reflects a 35% increase for fully diluted EPS on a comparable basis and this represents a strong growth, as Bill mentioned, in our underlying business.

Looking at our balance sheet, our inventory numbers are slightly higher this year. Mid-year we took a decision to increase inventory days by about three to five days in our warehouses. We did this to reduce the out of stocks we had and to more effectively serve our customers. This improves our overall sales. So for Q3 our inventory levels increased which is consistent with the trend in Q4. We expect now our inventory levels to stabilize with the current level going into 2008. Other than that, AR and AT basically grew in line with our overall business growth.

And moving in to cash flow statement, our net cash flow provided by operating activities for the 12 months ending December 31, 2007 was $23 million compared to $71 million last year. The primary driver impacting the movements in working capital is related primarily of payments for our excise tax. This year, due to the timings of holidays, we had a shorter window to get product out at year-end, therefore we shipped more product into the market at the end of November and beginning of December. We need to pay excise taxes within 25 days of shipping goods therefore we had higher excise payments in 2007. This is the main driver of the $31 million swing into other accrued liabilities and payables. If you look at CapEx, the net CapEx for the year was $23.1 million of which about $16 million relates to our two rectification lines that we've mentioned earlier.

So overall, we're continue to see strong liquidity ratios with a net debt to EBITDA ratio of about 3.3 times, EBITDA interest coverage of about 3.06, both of those on a trailing 12-month basis. These measures are well in line with our previously stated internal targets of 3 to 3.5 of net debt EDITDA, which we expect to continue to be inline even after the planned acquisitions which Bill will discuss more about now.

Now I'll turn it back over to Bill to provide further overview of our upcoming plans.

William Carey

Thanks, Chris. So, if we talk a little bit first about Parliament. As mentioned in the press release, we have achieved anti-trust approval for the acquisition. We also received all the necessary permits to move ahead. We are targeting mid March for closure. The business continues to perform inline with what we put out in our guidance in December, from 2.6 million nine-liter cases to 3.2 million nine-liter cases projected for 2008. Also very good new to announce is that we do have some solid commitments from some international suppliers to participate in our expansion with Parliament and join us from an imported base, because as you the sales force there are, over 400 salesman are essentially selling one brand and they can certainly leverage that and sell may more brands, especially from a import side. So, we are very pleased to see that some of the international suppliers are recognizing the opportunity there as well, and to get some commitments there. So, as I said, closing by mid March with our 85% stake in the company.

I'll be happy to address any of the questions on Parliament or questions about after the call.

If we move onto Whitehall which was announced yesterday. This is an importer and distributor of fine wine and spirits. The company is led by Mark Hoffman who has done a fantastic job of really building a top class wine and spirit import and distribution company. There portfolio is extremely well positioned to take advantage of the premiumization trends taking place in Russia today. The premiumization trends are even at a higher rate than certainly in Poland and the market they operate in is cognac, champagne, top premium wine market, are accelerating 15%, 20% a year, if not more in certain product categories. Also what we like very much about the business model is, it is very complimentary to our part of that business. The Whitehall business is very focused on top [foreign] accounts, driving distribution through the distribution centers and driving top premium products. And Parliament being a sub-premium vodka category, which is also fast-growing, certainly concentrating more on the off-premise, certainly very complementary in terms of the two portfolios.

The company, Whitehall, it has leading positions that it imports and distributes from many international leading companies and it has leading positions in the Russian market in cognac, champagne, premium imported wine market, they have extensive (inaudible) distribution if not the most extensive distribution, certainly a close second. And they really penetrate throughout the market to their four distribution centers and with a very extensive distribution reach.

If we look a bit on the transaction, the transaction we signed ahead of terms where we would acquire a 49.9% voting interest with 75% economic interest with a call after 2013 in terms of to buy out the remainder of the shares. Mark Kaoffman will continue to lead and run the company and the proposed timing of closure of the investment would be two to four months depending on antitrust approval if we need it or not, and to be financed through a combination of cash, debt and equity.

But as we look at the Russian market as a whole, we continue to see very positive dynamics, not only on the premium vodka side as we commented on previous quarters about Parliament, but also on the imported side. And us coming -- and CEDC coming from an import background, certainly within Poland and moving into production a few years ago, we certainly feel very comfortable with two really great quality companies of our investment strategy with Parliament and Whitehall.

And as 2008 -- as we move into 2008 we're really setting up a new era in my opinion of expansion for CEDC and it's really an exciting time. Not only in Poland where we believe we have continued to see solid growth opportunities, as mentioned before, but also really our first year of operating in Russia with two quality companies and investments in Parliament and Whitehall, our management team is committed to continue to deliver superior shareholder returns in 2008 and beyond. I'll now open up the call for questions. Thank you.

Question-and-Answer Session

Operator

(Operator Instructions)

We will take our first question from Gary Giblen with Goldsmith & Harris. Go ahead please.

Gary Giblen - Goldsmith & Harris

Good morning, Bill and everybody. There's been speculation that wheat costs would be -- turn to be a negative, but from your remarks it sounds like the zloty offsets that. But is wheat potentially a cost escalation problem?

William Carey

No, we don't view wheat as a serious problem for us. One, that we believe we'll continue to see a strong currency. The Poland grain harvest is quite different than the U.S. and world markets. And third is that with the solid growth of the economy, Gary, any real increase in wheat or grain prices, spirit prices, generally us and our competitors are able to pass off most of this to the consumer; the same thing happening in Russia where you have a premiumization going on. It's more difficult in Western markets sometimes in slow growth. But in Poland, and even Russia where we have solid growth, I think we are in a good situation.

Gary Giblen - Goldsmith & Harris

Okay, fantastic. And then what are your current thoughts on financing Whitehall -- cash, debt, stocks or what?

William Carey

As we mentioned, a combination of cash, equity and debt and once we are fully prepared to come out with our financing plans we'll certainly let the market know, Gary, our full disclosure of this.

Gary Giblen - Goldsmith & Harris

Okay. And then last one for me is could you give us --?

William Carey

But as Chris said, we will keep in line, even post closing, these investments. We will keep our balance sheet in a very good working shape.

Gary Giblen - Goldsmith & Harris

Sure, good. And then can you give us an update on Zubrowka in the U.S. which by now should have some early results in?

William Carey

Yes, we launched Zubrowka in November, certainly launched in November in Chicago with our first launch party in Chicago. It's now moving out to -- I think it's targeting 10 more states moving out right now. It's in line, Gary, with our projections of 25,000 cases on a 12-month base.

Gary Giblen - Goldsmith & Harris

Okay. And how about UK where you stepped up the marketing because you have the new packaging and so forth?

William Carey

UK is showing very good trends. Our percentage growth in UK -- I just got a report the other day showing that it's certainly accelerating a bit, again operating still at 25-30% growth rates.

Gary Giblen - Goldsmith & Harris

Okay, great quarter. And congratulations on the latest acquisition. Thank you.

Operator

I'll take our next question from Amy Greene with Avondale Partners.

Amy Greene - Avondale Partners

Just wanted to see, Bill, if you could give us a little bit of color as it relates to the Whitehall Group; how big is this distributor relative to its peers in the marketplace?

William Carey

Yes, I think it is difficult to get accurate data showing exactly where they rank in terms of their peers, and in our opinion it's certainly in the top two leading importer distributors of spirits and wine in Russia. I think it is at the top or, like I said earlier, a very close second to the top of the leading importer distributor of wines and spirits in Russia.

Amy Greene - Avondale Partners

Great. Is the Ukraine still an attractive market for you all? And if you had your choice kind of looking forward and knowing what you see on the landscape in Russia, do you see more distributor opportunities out there, or are you still seeing brand opportunities?

William Carey

No, we still see a lot of brand opportunities. Ukraine is certainly on our radar screen, but certainly we believe with the quality companies that we are talking with and putting out announcements with that we would continue down the same road of quality companies, quality brands.

No, we would not look for another importer in Russia. But certainly from an import side, we have a lot of brands that are not well represented in Russia that would like to join us probably on the Parliament side, possibly on the Whitehall side. But in general, there is a lot of -- not only from the import side but just local brands as well in Russia that are available or can be available in the near future for purchasing.

And still the market is quite open in terms of if you do have good leverage in the marketplace to even development new brands. And we believe by leveraging our position there with a sizable salesforce, we will be able to also create new opportunities there through our infrastructure in, for example, Parliament.

Amy Greene - Avondale Partners

One last question as it relates to Parliament. I think in your comments that you said that there were 400 -- you had a 400-member salesforce. and I thought in previous comments, you had said 200. Has it grown or are we counting it differently or something like that?

William Carey

No, I think absolute salesforce, we have about 200 to 250. I think the remainder are merchandisers that merchandise the market for them. So, in essence, they are salesmen as well of a certain aspect. So I group those together with the salesforce and merchandisers, calling it 400.

Amy Greene - Avondale Partners

Thanks, guys. Congratulations on a great sales quarter.

Operator

(Operator Instructions)

We will take our next question Katie Ruci with JPMorgan. Go ahead please.

Katie Ruci - JPMorgan

Good morning or good afternoon, I guess, depending on where you're sitting. I have a quick question actually on the leverage. We have Parliament acquisition, then we have Whitehall announced, and then potentially V&S spread stake. I am curious to know, given your past conservative record and your comments earlier about the strength of balance sheet, do you have a leverage target that you want to keep yourself to in the coming year, and what is that? Because obviously, year-end leverage is higher given last year because of Parliament. And I appreciate that the EBITDA is not fully contributed, etc., but given the conditions in the credit market what is your leverage target if you have one, or actually then give me a number, I guess?

Chris Biedermann

Yes, we are currently at this 3.3, which is pretty consistent where we have been. And our target range, as I stated earlier is about -- we try to maintain 3.0 to 3.5, and that is the area we feel comfortable in. Obviously, as you mentioned, after acquisitions we jump up a bit. But on a 12-month pro forma type basis, we are very comfortable in that 3.0 to 3.5 range.

Katie Ruci - JPMorgan

And is that consistent with the rating agencies' use? Have you talked to them -- obviously, they upgraded you guys last year, deservedly so, but just curious if they are okay, if you will, with that target because they are known to be a little temperamental at the time?

Chris Biedermann

We have always consistently communicated to all parties, including rating agencies, that the 3.0 to 3.5 times is our comfort zone, if you will. That has been communicated as well to them. That is what we expect to maintain. So yes, I think everybody is comfortable with that. And I have not received any information that we would have any changes in our credit rating right now.

Katie Ruci - JPMorgan

Okay, thank you. Then I have another question more general. On the acquisitions that you are doing, whether it is just producers or distributors, can you tell me or can you give me a little bit of color in terms of what is the multiples that you are comfortable with in acquiring? Because obviously, I guess I'm not asking back-of-the-envelope to get a number on current acquisitions. I am just more generally interested on strategy. What are you comparable with before integrating them into the business and then generating synergies, etc.?

William Carey

I think in general, we haven't put out full disclosure of purchasing terms of Parliament or certainly Whitehall. Of course, they will come out with Parliament upon closing as they will with Whitehall upon closing. We have made it clear for all acquisitions we make, we try to make it immediately accretive to our earnings.

I think from our two press releases that we have put out on Parliament and Whitehall, these are very accretive opportunities for us on a first-year annualized base, and I think -- I can't really comment today on multiples, but when you see the closing documentation, I think the multiples will be quite reasonable.

Katie Ruci - JPMorgan

Okay. good. Finally if I may, in terms of -- I'm sorry if I missed this earlier -- but do we have a more clear date, if you will, on when these closings will be done and when we will get this information?

William Carey

Yes, the Parliament we are expecting mid-March.

Katie Ruci - JPMorgan

Mid-March, okay.

William Carey

And Whitehall somewhere between three to four months.

Katie Ruci - JPMorgan

Okay. Thank you very much, and congratulations on results.

William Carey

Thank you.

Operator

(Operator Instructions)

We will take our next question from David Kadarauch with Wood. Go ahead please.

David Kadarauch - Wood

Congratulations on the results. My questions are twofold. Just going back to the debt question, can you give us some sort of idea as to your likely cost of funding on incremental debt right now, I guess maybe as it regards the funding of these two acquisitions? I guess there might be two offsetting factors. There is this alleged credit crunch, but also there is perhaps the tendency for you to be viewed as a better credit than 12 months ago. So I'm interested in what the net effect of that is.

Chris Biedermann

I think when we look back to credit agencies a few years ago, one of their knocks on us was that we were only Poland specific. So I think now with some more geographical reach, I think we will be certainly looked at positively for that. And these companies that we -- you know, the Bols and Bialystok of two years ago or two and a half years ago; certainly Whitehall and Parliament, these are very good cash flow generated companies, much like the Bols and Bialystok.

So we believe, as Chris said, that our ratios remain in line post closing. I can't give you details of certainly interest expense and so forth today, but certainly we believe that we are a very much more credible company if you want to even look at three years ago, David. So I think even with the credit environment today, we believe that the financing package that we have arranged will be well-received by the market.

David Kadarauch - Wood

Thank you. The second question is this question of the import business, I guess both in Poland and Russia. You referred to some people joining you already perhaps on importing into Russia; that sounds exciting. How much further might that trend go on this year with more brand owners coming to you?

Secondly, in Poland what about Poland? Is Poland already set in stone really, or is there also a chance in Poland to sort of leverage your size and strength and get a serious increase in the import marketshare, even from your currently very high base?

William Carey

I think the range of the import growth we have had this year of 46% for the full year is outstanding. We have got great suppliers, great brands here. The market is trending in the right way. The government is doing a lot of work on building out infrastructure or at least certainly taking a more realistic view than the old government of building out infrastructure which, obviously, is going to improve jobs, improve opportunities for further consumer income, has continued to fuel imports.

I think our guidance that we have given you of 213 for the year, up from 173, just Poland alone not including the accretiveness of Parliament and/or Whitehall just shows you we are going to be able to continue to grow our business model here, and imports are becoming a bigger and bigger piece of that. So we certainly don't look at the growth story certainly over by any means in Poland.

David Kadarauch - Wood

Okay, thank you.

Operator

Mr. Archbold, There appear to be no further questions at this time. I would like to turn the call back over to you for any of additional or closing comments.

James Archbold

Thank you. We would like to thank everyone for joining us today, and we look forward to speaking with you again next quarter. Thank you.

Operator

This does conclude today's conference. We thank you for your participation. You may now disconnect.

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