Funko, Inc. (NASDAQ:FNKO) Q1 2021 Earnings Conference Call May 6, 2021 4:30 PM ET
Ben Avenia-Tapper - IR
Brian Mariotti - CEO
Andrew Perlmutter - President
Jennifer Jung - CFO
Conference Call Participants
Stephanie Wissink - Jefferies
Tami Zacharia - JPMorgan
Linda Weiser - D.A. Davidson
Garrett Johnson - BMO Capital Markets
Good afternoon. And welcome to Funko's Conference Call to discuss Financial Results for the First Quarter of 2021. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from the company. As a reminder, this call is being recorded.
I will now turn the call over to Mr. Ben Avenia-Tapper, Director of Investor Relations to get started. Please proceed.
Thank you, and good afternoon. With us on the call today are Brian Mariotti, Chief Executive Officer; Andrew Perlmutter, President; and Jennifer Fall Jung, Chief Financial Officer.
Before we begin, I'd like to remind everyone that during the course of this conference call management will discuss forecast targets and other forward-looking statements regarding the company and its financial results. Well, these statements represent our best current judgment about future results and performance as of today, our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect.
In addition to any risks that we highlighted during the call, important factors that may affect our future results are described in our most recent SEC reports and today's earnings press release.
In addition, we will refer to non-GAAP financial measures during the discussion. Reconciliations to their most directly comparable us gap financial measures, and supplemental financial information can be found in the earnings press release and 8-K that we released earlier today. All of these items plus a visual presentation that investors can consult to follow along with this discussion are available on our Investor Relations website, investor.funko.com.
I will now turn the call over to Brian.
Good afternoon, everyone. And thank you for joining us today. We are pleased to deliver a strong start to the year which marks the largest Q1 in Funko's history. A year ago at this time, I was talking about the steps we were taking to navigate an unprecedented period of uncertainty due to the pandemic.
Today, I'm happy to provide a very different update. After returning to top-line growth in Q4. We have continued to see strong consumer demand, which is driving broad-based strength across our brands, products, channels, and geographies.
First quarter net sales came in ahead of expectations increasing 38% versus prior year. The outperformance primarily reflects an earlier than expected recovery in Europe, as well as higher than anticipated sales within our own direct to consumer channel. Importantly, we continue to improve profitability, and careful cost controls drove adjusted EBITDA margins well ahead of plan and a 790 basis points over last year.
Q1 was highlighted by a number of positive indicators across the business that reinforced the strength of Funko's pop culture platform and the ability to connect with our fan base across the world. Our brands have never been stronger. Pop and Loungefly continue to resonate with fans around the globe and drive growth across our channels.
In Q1 pop 33% versus a year ago, highlighting not just the strength of the quarter, but also reinforcing the power of our pop culture platform as we continue to extend our reach across products, channels, and geographies. Loungefly branded products grew more than 80% year-over-year, as we saw a solid recovery in our domestic specialty channel and increased traffic across Europe, as well as the continued success of Loungefly.com.
In the quarter, we continue to see our product diversity strategy take hold as our non-figure business grew 52% over 2020, led by bag, wallet, accessory, plush and games. These diversification efforts have allowed us to connect with a broader fan base, while also expanding our relationship with many of our largest retail partners.
Our direct-to-consumer business grew over 160% year-over-year, and now represents 10% of the overall business. That's up from 4% just two years ago. In fact, our e-commerce sites alone generated net sales equivalent to our largest single customer in the quarter. We've continued to see solid momentum on both our U.S. and European sites, as fans increasingly turn to Funko to connect with pop culture, reflecting our successful efforts to broaden our fan base, expand our product offerings and elevate our customer experience.
From a regional perspective, consumer demand in the U.S. remains robust as sales increased 39% over 2020. We saw strength across our third-party e-commerce, mass market and direct-to-consumer channels. While the U.S. specialty channels beginning to show signs of recovery
In Europe, we're seeing a consumer demand recovery that's both sooner and stronger than we initially anticipated. As a result, sales in Europe came in well ahead of expectations, growing 55% over 2020. From a channel perspective, third-party e-commerce our recently launched Funko Europe website, and especially retail channel drove strains in the quarter. We were encouraged to see improving demand in the region, but the environment remains dynamic. With many countries and markets still under restrictions.
We believe our solid Q1 performance reflects the substantial runway ahead for Funko. We are strongly positioned from a strategic, financial and operational perspective to drive sustained long-term growth. As such, we remain focused on executing against our initiatives to increase our broad consumer appeal and expand our total addressable market, which brings me to our most recent TAM expansion opportunity.
We're thrilled to be entering in the NFT market, which provides us another compelling platform to connect with our fans. As we announced last month, with the strategic acquisition of a majority stake and TokenWave, we've accelerated our entry into NFT's and will extend our product platform to include digital collectibles. The synergies between a digital collectible space and our physical product portfolio are significant.
Equally powerful is the crossover appeal between NFT collectors and our Funko fanbase. By merging the physical with the digital, we can provide fans with a very accessible way become an NFT collector. Digital versions of some of our most popular physical pop figures will bring an entirely new experience to our existing fanbase, and provide us with the opportunity to bring NFT collectors onto the Funko platform.
For our licensing partners, we represent a turnkey solution to enter an exciting new market with a trusted partner. We are planning an initial launch in June, featuring a new property each week at a starting price point of only $999. Collected to score the rarest NFTs will also receive exclusive rights to a physical Funko figure free of charge. Once sold out, and NFT will only be available to purchase again on the secondary markets, with Funko and our licensing partners receiving a royalty payment on each additional transaction.
Importantly, we chose best-in-class partners to launch our efforts. TokenHead, which runs on the WAX Network provides us with a leading mobile platform for displaying and valuing NFT collections. WAX is a blockchain built specifically for NFTs and provides a secure and convenient network for buying, selling and trading NFTs. Importantly, WAX provides the vIRL or Virtual and Real Life Technology, which will enable us to link exclusive physical products to our ultra-rare NFTs.
We recognize the new cycle around NFTs have been significant and the enthusiasm is high. We view this like any other new venture. We are starting small, keeping our entry costs low and taking a measured approach with a goal of building a business that is sustainable, and profitable.
As we look ahead to the remainder of 2021, we are particularly pleased with our strong start to the year and feel confident that the business is positioned for long-term success. Our team continues to drive innovation, and remains focused on our strategic initiatives around Funko's core pop culture platform, product diversification, community expansion, and international growth.
While the macroenvironment remains somewhat uncertain, we are encouraged to see easing restrictions in the U.S. and strengthening consumer demand signals globally. Given the earlier than anticipated recovery, we are seeing across some of our key channels and regions, we are raising our outlook for the full year. We expect to achieve net sales of $865 million to $900 million, approximately $15 million at the midpoint of our previous guidance range and adjusted EBITDA margins of 14% to 14.5%. Jen will share more details on our outlook when she reviews our financial results.
We greatly appreciate the support of our partners, fans and shareholders and look forward to keeping you updated on our progress throughout the year. Now I'll turn the call over to Andrew to discuss our strategic initiatives.
Thanks, Brian. Our record first quarter results are testament to the ongoing progress our teams are making against our key strategic initiatives. We're excited to build upon our strong start to the year by continuing to deliver innovation and delight our fans around the world.
Let me update you on our four major growth pillars. First, maximizing our core business. We're driving growth in our core by extending our reach across fan groups using evergreen content in new and creative ways. We're targeting specific underpenetrated genres as well as creating new and unique products that resonate with our fans.
Our ability to leverage nostalgic properties and uniquely Funko manner continues to drive growth in evergreen content, which made up 66% of our sales in Q1. As the new content slate strengthens over the remainder of this year, and then the next with increased the African television and video game releases, we will continue to emphasize evergreen favorites, while also introducing new and exciting properties.
An important ingredient to our success with evergreen properties is the ability to target under-penetrated genres that have significant fan bases with sizable market opportunities. For example, we've identified sports music and anime, as compelling opportunities and momentum has been building since we put our stake in the ground last year. We view this as a particularly compelling opportunity because it provides us with the ability to reach new and unique fan bases and ultimately grow Funko's ecosystem.
As you know, innovation has always been the lifeblood of Funko. And it's truly what makes this business thrive. During the pandemic, they've not taken our foot off the gas. By way of example, we are rolling out new pop formats such as pop albums and pop comic books. We also recently announced the launch of Gold, the distinct Vinyl Figure platform. Gold figures are designed to appeal to a sports and music fanbase where we currently are under penetrated. Importantly, these product introductions provide us with an opportunity to expand our footprint with our key retail partners.
Our second strategic initiative is product diversification. As Brian mentioned, our non-figure products grew over 50% year-over-year driven by our broad-based strength across our categories, as we continue to diversify the business by broadening our Loungefly brand offerings, expanding our games portfolio, and introducing new and exciting youth collectibles.
Loungefly continues to grow as a brand both domestically and in Europe. We see substantial runway to drive growth and expansion through continued innovation across multiple product categories and expanding our distribution within mass market, third-party e-commerce and direct-to-consumer channels.
In the youth collectible category, we've been able to extend our reach by appealing to a younger demographic broadening both our customer base and our footprint within retail partners. Over the course of the year, we will be focused on supporting our recent launch of Snapsies and building excitement around some of our traditional properties like Five Nights at Freddy's.
Turning to games, we continue to gain strong traction in the category. Q1 growth of more than 40% was driven by our expanded portfolio and distribution through new retail partners. With more than 40 titles slated for the remainder of the year, including a second edition of our popular Marvel Battleworld, we are well positioned to continue gaining share in this market.
Our third initiative is the expansion of our DTC business. Over the past year, we have significantly enhanced our global digital capabilities, enabling us to drive more direct and meaningful engagement with our fans. We are pleased to see our investments and hard work bear fruit as we gain meaningful traction in the U.S. as well as Europe, where we recently launched funds from Europe calm.
Importantly, we've been able to strengthen our customer experience from initial engagement through purchase. While we make great progress to date, our DTC initiative is still in its early stages. We are expanding the breadth and depth of our product offerings on the website, building additional tools for fan engagement, including tiered loyalty and rewards programs, enhancing the capabilities on our app and making important back-end improvements.
As Brian mentioned, we've grown our DTC business from just 4% two years ago, to over 10% of sales today. And we believe there's still tremendous runway ahead.
Our final area of strategic focus is our international expansion effort. While the global landscape continues to see wide variances in recovery, we are making excellent progress against our objectives. Within Europe, we're strategically expanding to new regions where we see strong affinity for pop culture. Outside of Europe, we're streamlining our operations through strategic channel partnerships in Canada and Latin America.
In Australia, New Zealand, where Q1 saw less disruption from the pandemic, we focused on broadening our product distribution, with particular emphasis on establishing the Loungefly brand and broadening our games presence. In the Asia-Pacific region, we will continue to invest thoughtfully where we believe our brands have profitable growth opportunity. We are excited to execute on the opportunities in front of us and look forward to keeping you updated as we progress through the year.
I will now turn the call over to Jen take you through the financials and 2021 expectations.
Thanks, Andrew. And good afternoon, everyone. We're pleased to report strong first quarter results highlighted by net sales growth of 38%, which reflects improving consumer demand and broad base strength across our brands, products, geographies and channels. The overall performance relative to our expectations was primarily driven by better than anticipated results in Europe admits accelerating consumer demand, as well as over performance within our B2C channels. All comparisons are year-over-year unless otherwise stated.
Net sales in the U.S. increased 39% to $137 million, while Europe grew 55% to $40 million and other international regions increased 2% reflecting the ongoing pandemic headwinds in several key markets. The number of active properties in Q1 was 762, an increase of 12% from prior year. Net sales per active property were $248,000 and a quarter, an increase of 24%. For list of our top performing properties in the quarter, please see the accompanying earnings presentation.
On a product category basis, Q1 net sales of figures to 35% to $151 million. Other sales increased 52% to $39 million primarily reflecting the strength in our Loungefly-branded products, which grew 82% in the quarter. Additionally, we saw strength within our game, plush and accessory category. Sales of our pop-branded products grew 33%, with strong double-digit growth both domestically and in Europe.
First quarter gross margin was 41.4%, an increase of 100 basis points versus Q1 2020. The year-over-year improvement primarily reflect favorable sales mix and improve product margins partially offset by an increase in shipping and freight costs.
As a percentage of sale SG&A leveraged by 750 basis points coming in at 27.1% versus 34.6% in 2020. SG&A a dollars increased 8% to $51 million slightly higher than we anticipated due to the over performance in the quarter.
Moving down the P&L, our strong top-line performance flow through to the bottom line. In Q1 adjusted EBITDA increased substantially to $30 million, adjusted EBITDA margin expanded 790 basis points to 15.7% and adjusted diluted earnings per share increased to $0.24.
Turning to the balance sheet and cash flow, we ended the quarter with $75 million of cash and cash equivalents and $75 million of availability under our revolver, representing total liquidity of $150 million. That represents an improvement of nearly 50% versus a year ago. We ended the quarter with total debt of $183 million, down 25% compared to Q1 of last year.
Inventory at quarter-end totaled $52 million up 16% on sales growth of 38%. The business generated strong operating cash flow of $37.5 million during the quarter.
As we look at the remainder of 2021, we expect the macro environment to remain dynamic. In the first half, consumer demand has begun strengthening sooner than we anticipated driving over performance relative to the first half sales outlook, we provided on our year-end earnings call. Because our full year guidance had already contemplated a more normalized demand environment in the second half our expectation for second half sales growth in the low to mid double digits remains unchanged.
For that contract for full year 2021, we are raising our top line outlook at the midpoint by about $50 million and we now expect sales of $865 million to $900 million. We continue to expect gross margin to strengthen in 2021 driven by an increase in our direct-to-consumer business as well as regional and distribution mix. For the balance of the year we expect SG&A on a dollar basis to increase sequentially each quarter in the mid to high-single digit.
Full year adjusted EBITDA margin is expected to be in the range of 14% to 14.5% representing an increase of 170 to 220 basis points compared to 2020. We expect adjusted net income of $52 million to $60 million based on a blended tax rate of 25% and adjusted earnings per diluted share of $0.98 to $1.12 based on weighted average diluted share count of $53.3 million.
We appreciate your time this afternoon. Now Brian, Andrew and I will be glad to take your questions.
[Operator Instructions] Your first question comes from the line of Erinn Murphy from Piper Sandler.
Great, thanks. Good afternoon. This is Curt on for Erinn, great to speak with you Jennifer and gentlemen. Congrats on the great quarters. A couple of questions here. First off, where do you see the long-term penetration rate of DTC overtime, and how does that reshape the P&L profitability?
Hey, Curt, this is Jen, how are you?
Good. We feel really great about what we've been able to achieve with DTC, over the past year growing it to 10% penetration in the quarter. We're going to continue to focus on that and continue to build that. As Andrew mentioned, it's one of our long-term strategies. And we expect that to continue to grow as we look beyond. But we feel really good about the progress we made, but we're continuing to focus on it and have it be a priority.
Awesome, great. And then just on the NFT acquisition, what's the margin profile of that business? And how do you guys use that affecting top-line long-term?
Yeah, I'll let Jen chime in. I mean, obviously, we view the businesses, it's going to have a higher profit margin than what our traditional physical products go. But it is obviously a very new business. We're going to be very conservative and take a measured approach.
Now we get into the business as a whole. And I think, obviously, because we're being very cautious with the revenues, it probably won't have a much of a material effect on margins, year one maybe, you're two. But if this continues to grow, and we are very excited about our philosophy and our strategy in this space. I mean it could end up ultimately having an effect on our profitability.
Got it. Great. And then just one more for me. Just can you speak to what you're seeing in terms of original content today, and where that could be overtime as a revenue guide building?
It's been a focus of ours, right. And I think we've had some real good successes in the last three or four quarters. Our own IP has been either in the top ten [ph] or just outside the top ten each and every quarter. That's significant progress from just a couple of years ago, when we basically zero revenue from our own IP.
So we will continue to strategize on how to grow that business. So one of our outlets which is Paka, which is a Japanese inspired original IP lining, continue to exchange [ph] on a on a quarter-over-quarter basis. We continue to brand more Funko-styled products, like our Pop Protectors and our Pop Cases.
And we think there's obviously significant room there. We have obviously our Snapsies initiative as well. So we're certainly putting resources to that. And we definitely see this growing, and we'll continue to put a focus on it quarter-after-quarter.
Awesome, thank you so much. That's it for me.
Yep. Good. Thanks for talking.
Your next question comes from the line of Steph Wissink from Jefferies
Thank you. Good afternoon, everyone. I have a follow up to Curt's question on the NFT opportunity. Brian, you're talking about it kind of out over the next couple of years. But what in addition to the revenue opportunity, are you thinking about in terms of expanding your engagement with your fan? Your DTC opportunity platform has been significant, yeah. Talk a little bit about engagement.
Yeah, I mean, that's a great question. I mean, Andrew and I had conversations with licensors. We've had conversations with retailers, they have retailers request out. This is what's so exciting about linking the physical and the digital together.
There are so many different ways to engage. There's so many different ways to get people excited about what NFT's are. Just one example, we could drop a free NFT for Freddy Funko, wearing a San Diego Comic Con T-shirt just days before the event give the NFF away. It's numbered, it's free, it gets them into the ecosystem. They have to sign up for an account.
And it has value and there's retailers that want to participate whether it's through NFT cards, dropping a Pog and NFT pot [ph] into an actual physical product and having a link that is well events. And that cross collaboration of people that are embedded as collectors in the NFT space that never bought a physical product from Funko and vice versa.
People have been in the Funko physical space who've never bought an NFT product. We think there's a cross-pollination that's going to happen between that. And they're just - we're really excited, I think. But it all starts with sound fundamentals and for us it's diversity of licenses, content, content, content, keeping that fresh, keeping it low price point to get in keeping the content varied on a week-to-week basis, finding ways to make the content interactive, finding ways to link it to rare physical products to get people in who might not ever consider buying an NFT before. Because we all know the secondary market with pops is very robust.
There's so many ways to interact. There's so many different ways to engage the fan base. It's super exciting. And I think that we're just going to take a real measured approach to our strategy, our licenses, our connections to the fans and really make this look like it is a long-term proposition. It is not a money grab. Because you see some of the programs out there, if it or NFT they just feel like quick cash grab. And we're not about that. This is a long-term strategy that we think goes hand-in-hand with what we already do, which is engaging pop culture enthusiasts and fans in a very fun, unique way.
Just as a follow up to that. Brian, could you talk a little bit about your DTC exposure by market? I think you're just opening Europe now, but how is that developing? And are you seeing any common patterns among consumers engaging with you on DTC?
Yeah. Obviously, it's still heavy, North America. But Europe again, we brought that along two years earlier than expected. And one of the few ways we took advantage of the pandemic was obviously, rushing that investment in that work done ahead, while Europe was almost completely shut down.
What we're seeing - I think things we're most proud of, is the average basket size. And people now buying the regular items more than they are buying the exclusive. We used to be a flash shell driven business on direct to consumer. We dropped something limited, people would come in and get that limited item and get out oftentimes crashing our website, oftentimes selling out in mere minutes.
And now what we're seeing is they're coming for the - sometimes to be exclusive, and then they're adding to the basket, the rest of the everyday line. And I think that's a real testament to what we've accomplished there. And Johanna Gepford is leading that charge, she's been with me and Funko for about nearly 15 years. She understands our customer journey and our customer better than just about anybody. She's doing a wonderful job of just trying to create a special environment in Funko that feels a little bit different than our other retail partners.
And I think you'll continue to see new formats and new ways to engage that fan base. It's definitely different than our other trusted partners.
Thank you very helpful.
Your next question comes from Tami Zacharia from JPMorgan.
Hi, thank you so much for taking my questions. So my first question is, can you share a little bit about the TokenWave acquisition? How much cash was spent for what percentage of ownership? And what kind of revenue and earnings accretion, if at all, do you expect from the acquisition this year?
Generally I answer that part. I can answer any strategic partners. But yeah.
The acquisition was for 51% stake in the company. It's a relatively new company. At this point, we aren't really disclosing much about the purchase price, as well as any revenue that we are. As Brian was talking - speaking to earlier. We're taking things very cautiously and conservatively. So at this point, it's our platform that we're working on for a June launch and we're really excited about it. That it fits perfectly within our strategy, and it makes great sense for us at Funko.
Got it? That's super helpful. So basically, that would mean the guidance you have for this year doesn't include any significant sort of contribution from NFT revenues.
Okay, got it. And so my second question is any thoughts on the rising cost of resin, and freight? And how you think about the impact of those on margins this year?
There was the first question that was - that you said resin?
Yeah, but we don't use resin in our product. I'll let Jen answer the second part of it. Just to make sure you understand. We don't we don't use resin in any of our products so that wouldn't be necessarily applicable here.
Got it. Super helpful. Yes.
And for the shipping, we definitely saw some headwinds, as we called out on our last earnings call. We expected to see headwinds, but we also noted that we thought we could actually offset those headwinds. So our Q1 margin does reflect the shipping headwinds. And we do expect those to continue throughout 2021. But we are taking other measures and we have some - we're seeing some great strides in our overall margin that's being able to offset those at this time.
Got it. Perfect. Thank you so much, and best of luck.
[Operator Instructions] Your next question comes from the line of Linda Weiser from D.A. Davidson.
Hi, how are you? I was wondering if you could comment on - I know you had talked about a lot of brick-and-mortar distribution expansions prior to the pandemic. And I was wondering if you could just kind of comment, what happened with some of those. I noticed like even in Walmart, your section is not that big sell. It seems like there's opportunity. And I think you talked about Best Buy and things like that. Could you kind of update us on distribution gain opportunities and what you've accomplished?
Yeah, I can take that one. Thanks for the question. This is Andrew. So we are really excited with where we are. When we talk about our product diversification strategy, I think that you're going to start to see that bear fruit at retail with our existing and new partners as well.
If you take a look at the mass channel, specifically, the product diversification and growing the core business, are both lending to additional space at retail. So, if you take a look at the sports and anime and music initiative that we have, you will see increases in both promotional and existing shelf space, in the mass channel, as well as other channels this year, that are fully supported by that initiative. So we couldn't be more excited about that.
In addition to that, we're also seeing growth in other categories that we have grown into. For example, games, we're seeing expansion of our shelf games in that category, youth collectibles, we're continuing to see expansion, even apparel and things, things like that, that where we're seeing some good expansion.
So we're excited about that. We're always building bridges to new retailers growing, floor space within those particular retailers. I think you mentioned Best Buy. We are working with Best Buy. We're continuing to refine those programs in store. And they've just got a new team in place. So we're getting to know the new team. But we're seeing expansions at many of our channels. We're seeing a lot of good success with the drug channel.
So we've got our foot down on the gas and we're continuing to build
Yeah, Linda, I talk with the big wins in Europe as well with like retailers like Carrefour. We continue to penetrate all of their different markets where we're just very France-focused. It's now all over Europe in their stores. So there is a lot of wins in the brick-and-mortar space.
Great. And then in terms of your international expansion. I mean, obviously Europe is starting to come around. Are you - and things strengthen up here are you going to be looking to expand into some new international markets? And what would be your next your next targets internationally?
Yeah, definitely. The team is focusing on obviously, Poland, in Russia specifically. But yeah, there is a focus there. We've got some great new leadership in terms of sales and different teams now that are breaking out by region in Europe to really focus on some of these other countries that are under penetrated. Germany is another country has come a long way in a very short period of time.
So what we're doing is strengthen all of the different countries. We're doing really well in the Nordics now. So there is absolutely growth in a high level of interest in continuing to build the brand throughout Europe, but definitely CE and Germany, and the Nordics are three that are really humming right now.
Great, thank you very much. Good luck.
Our next question comes from the line of Garrett Johnson from BMO Capital Markets
Hey, good afternoon. I wanted to follow up on the input cost question. And I guess if we need to be specific polyvinyl chloride and what those prices are looking like? How that's affecting your production? And if you need to increase price to cover those costs, or - and what kind of pricing power do you have?
Yeah, Garrett, we have not had a cost of goods increase in over five years in any of our manufacturing. And we don't use resin, PVC vinyl is definitely our product choice when it comes to raw materials. But we've always been able to overcome any kind of cross price increase due to just pure volume. The amazing amount of volume we pushed. And as we migrated out of China, and into Vietnam, aligning with stronger, larger, better-funded factories have enabled us to actually lower our cost of goods a little bit each and every year.
So we're in a really strong position right there. Obviously, there's some headwinds with container space and containers pricing. And some delays, but that's really the only thing that's really facing us in terms right now in terms of cost of goods.
Okay, all right. Thank you.
And I show no further questions at this time. Are there any closing remarks for management?
Thank you everybody for your time today. We really appreciate it.
Ladies and gentlemen, this does conclude today's conference. Thank you for your participation. You may now all disconnect.