Group 1 Automotive Inc (GPI) 2021 Q3 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to Group 1 Automotive's 2021 Third Quarter Financial Results Conference Call. (Operator Instructions) Please also be advised that today's conference call is being recorded. At this time, I'd like to turn the conference call over to Mr. Pete DeLongchamps, Group 1's Senior Vice President of Manufacturer Relations, Financial Services and Public Affairs. Please go ahead, Mr. DeLongchamps.

Good morning, everyone, and welcome to today's call. The earnings release we issued this morning and a related slide presentation that include reconciliations related to the adjusted results we will refer to on this call for comparison purposes have been posted to Group 1's website.

Before we begin, I'd like to make some brief remarks about forward-looking statements and the use of non-GAAP financial measures. Except for historical information mentioned during the conference call, statements made by management of Group 1 Automotive are forward-looking statements that are pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

Forward-looking statements involve both known and unknown risks and uncertainties, which may cause the company's actual results in future periods to differ materially from forecasted results. Those risks include, but are not limited to, risks associated with pricing, volume, inventory supply due to increased customer demand and reduced manufacturer production levels due to component shortages, conditions of markets and adverse developments in the global economy, as well as the public health crisis related to the COVID-19 virus and resulting impacts on the demand for new and used vehicles and related services. Those and other risks are described in the company's filings with the Securities and Exchange Commission over the past 12 months. Copies of these filings are available from both the SEC and the company.

In addition, certain non-GAAP financial measures as defined under SEC rules may be discussed on this call. As required by applicable SEC rules, the company provides reconciliations of any such non-GAAP financial measures to the most directly comparable GAAP measures on its website. Participating with me today on the call, Earl Hesterberg, our President and Chief Executive Officer; Daryl Kenningham, our President of U.S. and Brazilian Operations; and Daniel McHenry, our Senior Vice President and Chief Financial Officer.

I'll now hand the call over to Earl.

Thank you, Pete, and good morning, everyone. I'm pleased to report that for the quarter, Group 1 generated adjusted net income of $178 million. This equates to adjusted earnings per share of $9.62 per diluted share, an increase of 38% over the prior year and an increase of 219% over the pre-pandemic third quarter of 2019.

Our adjusted result excludes non-core items totaling approximately $5 million of net after-tax losses. This net amount consists primarily of a loss on debt extinguishment and acquisition costs related to the Prime transaction, partially offset by favorable legal settlements recognized during the quarter. These profit results were largely a result of strong vehicle margins that were able to more than offset unit sales declines, as well as continued growth in aftersales and impressive cost control.

Consumer demand for vehicles remains extremely strong heading into the fourth quarter, and we continue to sale most units almost immediately after OEM delivery. This dynamic should continue throughout the fourth quarter and potentially much further out assuming no material change in consumer demand. As of September 30th, we had 2,700 U.S. new vehicle inventory units in stock, representing an 11-day supply. Our used inventory situation is much stronger at 10,000 units and a 25-day supply. Daryl will speak more about inventory shortly.

A very encouraging element of our third quarter results is the very strong continued recovery in our aftersales business. Our U.S. market saw a 15.5% increase in aftersales revenues versus the prior year. Again, Daryl will provide more detail on our U.S. results in a moment. As with the U.S., consumer demand for vehicles in the U.K. is extremely strong, but new vehicle availability is severely constrained. We have an order bank with most of our major U.K. brands extending into the second quarter of next year.

Strong margins were able to more than offset sales declines due to inventory shortages, and we're proud to report that we generated an all-time record quarterly profit in the third quarter of 2021. We believe pent-up demand build over the past several years due to both Brexit and the pandemic will help drive strong U.K. vehicle demand into the foreseeable future.

Finally, I want to acknowledge the impressive work all of our regions have continued to do on cost control. Our U.S. adjusted SG&A as a percentage of gross profit was 57.6%, the U.K. was 64.6%, and Brazil came in at a record 60.9%. While there is certainly a level of transitory impact due to vehicle margins, we continue to witness very high levels of productivity that will remain after vehicle inventories normalize.

To provide some color on our U.S. and Brazil second quarter performances, I'll now turn the call over to Daryl Kenningham.

Thank you, Earl. As Earl mentioned, U.S. new vehicle inventory levels finished the quarter at 2,700 and 11 days' supply. Our September inventory receipts were the lowest of the year at approximately 6,800 units. We expect to receive roughly the same level in October and November, which we believe will be the trough. We do not have much visibility yet into 2022, but based on OEM communications, we expect production to increase over current levels at some point in the first quarter.

Our team did a great job increasing vehicle margins throughout the quarter as inventory supply continues to decline, and we will continue to adjust our operations as required. Our same-store used vehicle retail unit sales improved by 15% versus the third quarter of 2020. Our team also did a great job increasing gross profit PRUs, which is a result of increased purchases directly from vehicle owners. We continue to be very aggressive yet judicious with our used vehicle inventory sourcing strategy, which has allowed us to hold day supply relatively constant while largely avoiding public auctions.

As a franchise dealer, we have a distinct advantage over used only operators due to the numerous channels afforded us a sourcing inventory, including our service drives, lease returns and OEM closed auctions. The most encouraging profit driver was once again our aftersales performance. Our customer pay continues to ramp up following a very strong first half of the year, with 19% same-store dealership gross profit growth compared to the third quarter of 2019. This allowed us to grow same-store dealership aftersales gross profits by 9%, despite continued headwinds in warranty and collision, both of which we believe will reverse in time. We foresee aftersales continuing to ramp up over the near term.

The final major factor driving our outstanding profit performance was continued cost discipline. Our third quarter adjusted SG&A as a percentage of gross profit was 67.6%, down from 59% in the third quarter of 2020 and down from 70.5% in the pre-pandemic third quarter of 2019. A material part of the improvement was due to productivity gains, which we believe will be permanent.

I would like to provide another quarterly update of AcceleRide, our digital retailing platform. AcceleRide is proving again to be a difference maker for our customers. In the third quarter, we sold 5,200 vehicles through AcceleRide, a 68% increase over last year. And since we have very little inventory, preselling incoming new vehicles is critical to our business and AcceleRide allows customers to finalize transactions on in-transit units and take deposits digitally. In addition to expanding our reach into in-transit inventory, AcceleRide is proving to be an exceptional way to grow our footprint. In the third quarter, 75% of AcceleRide buyers were new to Group 1. Customers clearly value the superior omnichannel experience that AcceleRide provides, which gives Group 1 another avenue to grow incrementally. Of the customers who placed orders online last quarter, nearly 50% uploaded the driver's license and 25% uploaded proof of insurance and additional 36% of the orders had a completed credit application as well.

We believe that giving customers control of completing any or all of the car buying process online is critical to their overall satisfaction and our ability to continue to generate incremental volumes through the platform. AcceleRide is also giving us great advantages in sourcing used vehicles. During the quarter, we purchased nearly 5,000 used vehicles from customers through AcceleRide, either through trades or through individual acquisitions, that's up 30% sequentially from the second quarter. A differentiator for us is our ability to digitally pay customers through Zelle. Nearly 1,000 customers out of our 5,000 total took advantage of the digital payment feature in AcceleRide.

In addition to remote selling, we have increased the adoption of AcceleRide for customers in our showroom. About half of U.S. vehicles sold in the third quarter utilized AcceleRide in the everyday traditional sales process. In our view, digitizing the in-dealership experience saves everyone time, creates complete transparency and increases professionalism. In September, we activated integrated delivery fees at 38 dealerships. Preliminary results are encouraging. About 13% of customers chose delivery upfront and so far, 5% are confirming in the final steps. The average delivery distance is 164 miles, further demonstrating our ability to extend our reach with AcceleRide.

We look forward to launching integrated delivery fees in more dealerships soon. AcceleRide will launch in our newly acquired dealerships in Texas and California very soon, and our AcceleRide footprint will expand significantly in the Northeast, with the upcoming Prime dealership acquisitions. We expect to start rolling out AcceleRide in those dealerships in January of 2022.

Turning quickly to Brazil. Despite a nearly 30% decline in industry units sold versus the third quarter of 2019, our team once again did a fantastic job growing margins across all lines of business and aggressively thinning the cost structure, resulting in the lowest SG&A quarter in the region's history. For the second quarter in a row, our Brazilian teams set an all-time quarterly profit record. We continue to be well positioned to benefit from a sales rebound coming out of the pandemic.

I will now turn the call over to our CFO, Daniel McHenry, to provide a balance sheet and liquidity review. Daniel?

Thank you, Daryl, and good morning, everyone. As of September 30th, we had $297 million of cash on hand and another $335 million invested in our floorplan offset accounts, bringing total cash liquidity to $632 million. There was also $282 million of additional borrowing capacity on our U.S. syndicated acquisition line, bringing total immediate liquidity to $914 million.

Subsequent to quarter end, we issued $200 million of bonds as an add-on to our existing 4% notes due 2028. This debt was raised to help fund our previously announced acquisition of the Prime Automotive Group, which we expect to close in November. We also plan on raising approximately $180 million in mortgage debt to help fund the deal and provide future liquidity flexibility. We generated $234 million of adjusted operating cash flow in the third quarter and $210 million of free cash flow after backing a $24 million of capital expenditure. This brings our September year-to-date free cash flow to $522 million, which has allowed us to fund the majority of our Prime acquisition with excess cash on hand.

Our rent adjusted leverage ratio, as defined by our U.S. syndicated credit facility, was reduced to 1.5x at the end of September. On a net debt basis, which considers all U.S. cash on hand, our leverage was 0.9x at September 30th. As previously announced, when considering the pending Prime acquisition, we do not expect our rent adjusted leverage ratio to exceed 2x, leaving plenty of flexibility for further capital deployment.

Finally, related to interest expense. Our quarterly floorplan interest of $4.8 million was a decrease of $3.3 million or 41% from prior year due to lower vehicle inventory holdings. Non-floorplan interest expense decreased $1.5 million or 10% from prior year, primarily due to last year's bond debt refinancing. For additional detail regarding our financial condition, please refer to the schedules of additional information attached to the news release as well as the investor presentation posted on our website.

I will now turn the call back over to Earl.

Thank you, Daniel. Related to our corporate development efforts, we previously announced the October acquisitions of two dealerships in the Dallas-Fort Worth Metroplex and one dealership in California. And as Daniel mentioned, we expect our purchase of the Prime Group in New England to close in November. Once closed, our 2021 total acquired revenues will equal $2.5 billion. Our balance sheet, cash flow generation and leverage position will continue to allow for further capital deployment and we will continue to seek ways to maximize value for our shareholders as we head into 2022.

This concludes our prepared remarks. I will now turn the call over to the operator to begin the question-and-answer session. Operator?

(Operator Instructions) And our first question comes from Mike Ward from Benchmark.

I wonder, if you could provide a bit more color on the U.S. parts and service, in particular, up 15.5% same-store. If I'm not mistaken, that's about double the rest of the group. Where are you seeing the strength? Is that something that can continue? Where is that coming from?

Mike, this is Daryl Kenningham. We're seeing the strength across the board. We try to -- it starts with our availability in our shops and our 4-day work week that we've had in place for several years, our philosophy around customer scheduling that we want our customers to be able to schedule an appointment when it's convenient for them. Nearly 40% of our customers are scheduling appointments online these days. So we believe many more of them are reaching us than ever before. And we continue to staff up and aftersales, so that's where we see it and we see it continuing.

So 40% online scheduling, that's up from about 30%. Is that where it was kind of running?

Yes.

And now, I'm guessing it's still being way down because of the lack of tradings and supplies, so it's holding back some of the used vehicle sales, is that correct? So we could see these double-digit type increases on a same-store base continuing into '22 and possibly through the year, is that right?

I can't tell you it would be double-digit, but we feel really good about the aftersales business.

Okay. The second thing, the U.K., you mentioned the order bank. I think earlier, you said it was like going out into the second quarter of 2022. In order of magnitude, I assume there was a lot of deferment of some of the deliveries of the registrations in September in particular. Is that where it's coming from or is -- have you seen this?

Absolutely, Mike. Yes. Most of our brands, when we sell a new car are going into an order bank that are in the second quarter next year. So yes, sales now are almost entirely dictated by deliveries of what the factory can produce, because as you know, U.K. dealers don't stock new vehicles on-site and the vehicle holding centers are basically empty. So it's whatever the flow is from the factory and so the order bank is great. Demand is great, and it's just how quick can they build them.

I think on Ford's call yesterday, they talked about having orders from dealers from direct from customers for over 100,000 units in the U.S., is that what you're seeing, particularly with pickup trucks in Texas?

Well, I'll let Daryl answer that, but I believe that's directionally correct.

Yes, that's what we're seeing, Mike. Exactly.

Our next question comes from John Murphy from Bank of America.

I just had a sort of a similar question to Mike on what's kind of really controllable here on the used side. I mean, given that you are looking at tight inventory on the new vehicle side, probably well into next year, maybe even through the year. You're going to have access to these used trade-ins that will flow to you more directly than they will to other participants in the market. How do you think about the used vehicle business go forward? And I think, there's kind of the view that the GPUs are way too high and they're going to come down, but they certainly might not into 2022 or through 2022. And just how do you think about balancing that volume versus the gross to maximize total profit there?

Well, we feel like in our own footprint, there is still quite a bit of volume opportunity for us to do. We also put a great deal of emphasis, even though there are fewer trade-ins being sourced from new car sales these days, which is obvious. The big advantage we have, John, is our aftersales business is growing like crazy, which means more opportunities to buy cars from customers coming through our service drives. When you look at last quarter, 14% of our sourcing was from individuals and some of that included service drive. So that's doubled from a year ago, and we continue to see opportunity there. So we don't see the lid on used cars that we see on new cars, because there's other avenues to source, and we feel like we're doing a pretty good job with that.

And Daryl, when you think about the gross though, I mean, if you -- I mean, I would assume that you're balancing this as you dropped the gross 5% and get a 10% improvement in volume, you might do it all day long. Are you thinking about it that way or do you want the gross to travel around this $2,100 to $2,200 range, I think it was in the quarter. I mean, how do you think about that volume versus gross trade-off?

John, this is Earl. The way we look at it is a market dictates the grosses. We have always moved our used vehicle inventory every month, whether we have 28 days, 32 days, whatever it is. The key to our volume is sourcing, which is what Daryl just covered, the market dictates the grosses. And so we're still moving them like we always move them. Obviously, a little bit quicker, but we never had much more than 32 or 33 days and so if you want to sell more vehicles now, you have to acquire them properly. And for every additional one you acquire, you'll get an additional retail sale.

Okay. That's incredibly helpful. And then just lastly on the F&I, Pete always kind of promises that you're kind of reaching these after product limits and there's not more opportunity, but there's seems to be sort of this continuous upside in F&I. So I mean, how much room do you think there is in F&I? What are penetration rates currently? And could there be risk as rates back up and volumes ultimately come in and you might start selling at lower price points for this to maybe fade, and I don't think it would be next year, but maybe fade in '23 and beyond. I mean, how do you think about that level, the opportunity and the risk going forward?

John, I think the biggest risk we have clearly is interest rates but when you take a look at our current business, we couldn't be more pleased with the penetration rates. You had to take a look at vehicle service contracts, maintenance. Those penetration rates have all increased. We're very pleased with the spread that we have in F&I from a compliance standpoint. So we continue to, I think, do a terrific job with our teams, and there may be a little bit more upside, but we're very comfortable where we are today.

Yes, John, this is Earl. The other point I'd make is we have learned over the last year or 2 that we're very comfortable now when the online retailing does not materially change our F&I either in terms of penetrations and such. So the online retailing is basically holds the same business model for us that the traditional model have.

Okay. And I'm sorry, I'll sneak in one last one. Earl, as you mentioned that online retailing. I mean, what you're hearing from the automakers is an increased focus on creating their own sort of digital overlays, interaction with the consumer that then funnels into your dealerships, right? So it doesn't necessarily disrupt your economics or disintermediate you at all, but kind of dovetails the consumer through a branded website into your dealerships. How do you think AcceleRide will work in tandem or maybe compete with that? And is that great complexity or does that actually make things easier for you? I mean, how is that going to develop over time with your online efforts?

John, Daryl again. We've had discussions with every OEM on this issue and we are determined not to compete with the OEMs on a digital solution. We work with them on their solutions almost to a OEM, they realized that AcceleRide is outstanding solution for customers of that brand. And because it incorporates all steps in the buying process and it's generally much further ahead than the OEMs are in their own development of these tools. And what I see are the OEMs letting the dealers take more of this as long as there are certain steps that meet their compliance rules. And I think, you'll see that evolve over the next year or 2 with different OEMs as well, but that's what we see. It's a very close partnership for us.

Our next question comes from Rick Nelson from Stephens.

I don't look to ask about the acquisition environment. There's been a flu of big deals, Prime being one of those. I'm curious, how much more is out there, your appetite? And maybe if you could speak to multiples that you're seeing?

Yes, sure, Rick. Yes, there's still many deals out there. It seems that the higher the prices go, the more it motivates other sellers to try to get the same price. So I think there'll continue to be a lot of activity. In our case, we're focused on closing the one in hand. We'll continue to look opportunistically, because we have the financial wherewithal to continue to take action. But there's only so many of these good deals, I think that will work out from a valuation point of view and OEM. So I think it will continue for a while. I don't know, if the tax -- potential tax changes next year will slow it down, but at the moment, I still see a lot of people trying to sell their business to take advantage of some of the more recent pricing. Yes, we can only do them when they're accretive and valuation works for us, and we're very excited about Prime. So we'll -- when the dust settles and we close it, we can probably provide more clarity on what we think it will do for us.

Great. Curious about the pro forma leverage now for Prime and the deals that have come in, how that looks relative to your goals?

So in terms of the pro forma, Rick, as we've said, we don't expect our leverage to increase above 2x. So we see the Prime acquisition has been accretive from day one.

Great, great. And just a follow-up on AcceleRide. I think, you mentioned the F&I attachment is really good, overall profitability, how that compares to an in-store sale and how exactly do you define AcceleRide transaction? Is that somebody that places an order online or somebody that enters AcceleRide and buys the car down the road, not necessarily online?

Rick, this is Daryl. We define an AcceleRide sales, somebody starts AcceleRide and purchases a car and there's many customers that interact with elements of AcceleRide that we don't count them as a quote AcceleRide sales. Attachment rides on F&I. I think, we covered fairly comparable as well as front-end PRUs are comparable as well between AcceleRide and terrestrial sales.

And there is an AcceleRide customer pay more credit or well yield buyers and are they seeking delivery or in-store pickup?

So Rick, this is Pete. There's really no differentiation and one of the reasons that we've talked about before is we're using AcceleRide as a tool within the dealership. So as we mentioned earlier, credit applications are a big piece of the AcceleRide model, so because it's a modular type application, customers are going in and doing their own credit applications. So it's really helping dealership efficiency, so when you look at who's using AcceleRide, there's not a big difference between credit tiers. And the way we have it set up now is that regardless of the credit here, every customer has an opportunity to get financing, whether they're a high FICO score or a low FICO score and we think that's one of the things that really differentiates our application.

And our next question comes from David Whiston from Morningstar.

I guess first, are you guys at all concerned about inflation continuing to be a problem in the 2022 to the point that consumers may not either want to buy a vehicle or will stop opting -- preferring the high-end trims, they are in such a high demand now?

This is Earl, David. I don't think there's any doubt that inflation is a business factor, and we've been chatting with the banks about that. I don't think we can call it transitory or anything like that. But there's so much money to be lent that no one thinks it will be a massive interest rate hit in the near term, but costs are going to go up on everything. But the affordability of vehicles is much more dictated by retail financing and leasing and with high used car values and low interest rates, I don't see this inflation raining on the vehicle sales parade in the foreseeable future. But I do believe that inflation is not a joke. We were certainly seeing it and prices of new cars could go up, which again will support used car prices.

And I mean, conversely though, if chip supply improves, higher supply should help ease the increase in used vehicle pricings and lower residual value is a little relative to '21, right?

Well, at some day, when the supply normalizes, clearly, that will occur. We continue to be surprised by the duration of the supply shortage and I'm told by the top executives of our suppliers that they don't see it getting better till at least third quarter of next year.

Yes. I've heard that too. In the U.K., I know consumers there are battling petrol shortages and whatnot. Is that causing people to say, I'm not going to bother buying a car right now or buying electric instead?

Well, there is a more rapid shift to electric in the U.K. that's a fact, David. But it seems to be driven more by taxation, particularly company car taxation that is starting to push people from diesel into hybrid or full electric, that's a fact. And so EV adoption is probably 3 to 4x higher in the U.K. at the moment, but that still doesn't put it much into double digits of the market. The petrol problem in the U.K. was primarily delivery. They don't have enough, what they call lorry drivers, we call truck drivers. But yes, I think, we're going to see a quicker EV shift, but there is absolutely no difference in the customer demand dynamic for automobiles in the U.K. compared to the U.S. New and used vehicle demand is very robust and bear in mind that there was a Brexit uncertainty issue prior to the COVID retail demand depression. So there's a lot of pent-up vehicle demand in the U.K.

Okay. And finally, in the U.S., are you seeing any change relative to a few months ago where people -- maybe a few months ago, they were more willing to go ahead and take a used vehicle, even though they wanted new, whereas now, they're just like, forget and I am going to wait for them. Are you seeing the opposite of where people are more desperate?

David, this is Daryl. Luxury customers generally will wait for a car, where you see a little bit of switching is -- in some of the volume mix but that's generally what we see, but I can't tell you it's a huge trend. Generally somebody want a new car, they want a new car. We did see our CPO volumes bump up a little bit in the quarter and that's probably some of that happening.

And our next question comes from Rajat Gupta from JPMorgan.

Congrats on a pretty solid quarter and very good execution here in the U.S., particularly. I wanted to start off with the balance sheet question. You talked about 2x leverage lease adjusted. How much higher can you go from here? And will you be willing to add on more leverage here in the near term, maybe for more buyback or maybe more M&A. Just curious on the go-forward capital allocation after you close the Prime deal? And I have a follow up.

Yes, sure. And I think what we've always said is that we are happy to go up to 3, 3.5x leverage for the right deal or for the right acquisition to grow -- continue to grow the company. And as and when, we would see such an opportunity, of course, we would be happy to add on debt to our balance sheet and of course, get the supplementary earnings that we would from such an acquisition. And I'll turn it over to Earl for the capital allocation part of the question.

Yes. We're certainly continually interested in further external growth through M&A, but we strongly believe our shares are undervalued. We weren't in the repo market, the share repurchase market in the third quarter, because we had some material nonpublic information. But there's a very good possibility that we will be opportunistically in the share repurchase market absent any near-term major acquisition opportunities, and we have plenty of financial flexibility to execute both.

Understood. That's helpful color. And just wanted to follow up on the productivity comments earlier. We continue to be surprised by the strong productivity, not just for Group 1, but for the overall sector in general. Curious as to, has your long term or normalized assumption there changed, given how strong productivity has been so far post-COVID? You've given us like some targets earlier in the U.S., particularly 200 to 300 basis points lower than pre-COVID. Just curious if that's changed at all. And also in the context of just how AcceleRide adoption has gone up in-store and how your store person are using that more? Like has that also probably increased the productivity and maybe they make you hit your target sooner or even better once you're back to more normal GPUs?

Well, absolutely, our viewpoint has changed and our operating assumption has changed. We've increased the productivity of our salespeople by 30% pre-COVID versus today. There's absolutely no reason to go backwards on that. Selling 13 or more units a month instead of 10. Same with our technicians, they're at least 25% more efficient. So yes, we -- there are a variety of things that contribute to that, and Daryl will probably want to comment and certainly, online business is part of that. It certainly supports being more productive, but yes, we never intend to go back to those lower efficiency levels in the future. Daryl?

Earl, you covered it. AcceleRide is a great tool to drive efficiency and some of the numbers we talked about, we see that with half of our customers using AcceleRide for credit applications and uploading insurance and vehicle appraisals and purchases, that's all -- that all enables the transaction digitally. And we expect that to be ingrained in the future and adds to productivity in the -- in our shops, more online scheduling, more support from our parts departments and continuing to press the 4-day work week, all add to productivity improvements.

Got it. But the targets you've given before, the 200 to 300 bps improvement, is that still unchanged or are you willing to change that number at this point or you want to wait a little longer progress?

I think that we would rather get wherein GPUs normalize or we see it on a more standard flat basis, but the expectation is that for the U.S., it will be at least 300 basis points lower and for the U.K., probably slightly more on an ongoing basis versus 2019 levels.

And ladies and gentlemen, with that, we'll conclude today's question-and-answer session. I'd like to turn the floor back over to Earl Hesterberg for any closing remarks.

Well, thanks to everyone for joining us today. We look forward on updating you -- forward to updating you on our fourth quarter earnings call. Thank you.

And ladies and gentlemen, with that, we will conclude today's conference call. We do thank you for attending today's presentation. You may now disconnect your lines.