Natural Grocers by Vitamin Cottage Inc (NGVC) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the Natural Grocers Second Quarter Fiscal Year 2017 Earnings Conference Call. (Operator Instructions) As a reminder, today's call is being recorded. I would like to turn the conference over to Mr. Todd Dissinger, Vice President and Treasurer for Natural Grocers. Mr. Dissinger, you may begin.

Good afternoon, everyone, and thank you for joining us for the Natural Grocers by Vitamin Cottage Second Quarter Fiscal 2017 Earnings Conference Call. On the call with me today are Kemper Isely, our Co-President, and Sandra Buffa, our Chief Financial Officer. As a reminder, all statements made on this conference call, other than statements of historical fact, are forward-looking statements. All forward-looking statements are based on current expectations and assumptions that are subject to risk and uncertainties. Actual results could differ materially from those described in the forward-looking statements due to a variety of factors, including the risks detailed in the company's most recently filed Forms 10-Q and 10-K. The company undertakes no obligation to update forward-looking statements. Our press release is available on our website, and a recording of this call will be available on our website at investors.naturalgrocers.com.

Now I will turn the call over to our Co-President, Kemper Isely.

Thank you, Todd. Good afternoon, everyone. During the second quarter, we continued to face pressure on our sales, which is evident in the 1.7% decrease in daily average comparable store sales during the quarter. Our most challenging month was January, when we believe results were impacted by customer concerns regarding the political environment. It is also clear that the food retailing environment remains challenging broadly and competition within the natural and organic segment remains high. However, we have had time to adapt to the new environment and are beginning to see the benefits of the operational and marketing initiatives that we have implemented.

While the second quarter results did not meet our expectations, I am pleased with the sequential cost improvements we achieved during the quarter, the results of our recent marketing initiatives and that we have been able to fully self-fund store growth thus far in 2017.

Let me discuss the results of these 3 adjustments to our operating model. First, we saw a 70 basis point sequential reduction in store expenses during the second quarter compared to the first quarter of 2017. Despite the softer comp during the second quarter, we have been implementing store labor controls over the past few quarters and the benefits of these initiatives became evident in the second quarter. We continue to address additional store expense improvements and still see an opportunity to achieve store labor rates consistent with 2015 levels by the end of fiscal 2017.

In addition to store expenses, we achieved a sequential improvement in shrink and delivered a 10 basis point sequential improvement in administrative expenses as we continue to hold administrative expenses relatively flat in dollars.

Second, we are seeing the positive results from our marketing initiatives. We recently began a new television advertising campaign in the Denver market. The ads began March 15 and we have seen a measurable lift within the 26 stores in the market relative to the control group. The television advertising will run through June and advertising efforts will broaden beyond the Denver market. We are also utilizing radio and outdoor advertising across many of our markets.

The reformatting of the Health Hotline has also been well received. For example, we saw a very strong redemption rate for our coupon program we ran in February in the Health Hotline.

We have also been encouraged by the results seen at our recent store openings, which we believe reflect the impact of our new store marketing plan. The new store marketing plan delivered an excellent media coverage for our most recent store opening in Davenport, Iowa a couple of weeks ago. The opening received coverage on local TV and radio, including NPR. The relocation of our Boulder store which is one of the highest volume units in the system, also enjoyed a robust grand opening, even by our Boulder store standards. Additionally, we have significant marketing plans for the third quarter, including a very successful Earth Day event a couple of weeks ago.

Finally, it's significant to note that our year-to-date new unit development has been entirely self-funded by operating cash flow, which has exceeded capital expenditures after considering the sale/leaseback proceeds. As such, we have been able to reduce the borrowings on our revolver, while funding the opening of 4 new stores and the relocation of our Boulder store during the quarter.

We will continue to be flexible with our unit growth plans to ensure we self-fund unit growth. Although we continue to see opportunities from measured new unit growth, while comparable store sales were again, at the low end of the full year guidance range, we are encouraged by the improvements to our monthly comps as the quarter progressed. The improvements occurred across both total daily average comps and mature stores. These improvements have continued thus far into the third quarter.

During the second quarter, we also encountered fewer operating months with new competition, although new competition impacted several of our larger volume stores. While we remain cautious and prudent with our expectations, we are encouraged by recent trends and continue to anticipate improved second half results, as our guidance reflects.

Now I would like to turn the call over to Sandra to discuss our financial results.

Thank you very much, Kemper, and good afternoon, everyone. During the second quarter of fiscal 2017, net sales increased 8.3% to $192.2 million and comparable store sales decreased 1.7%. The comparable store sales decline during the second quarter was driven by a 1.4% decrease in daily average transaction count, and a 0.4% decrease in average transaction size during the quarter. Daily average mature store sales decreased 3.1%, primarily reflecting the challenging food retailing environment and the ongoing effect of regional economic pressures in markets with sensitivity to oil and gas prices.

While our month-to-month comparable store sales have been choppy, we did see improvement in February and March compared to January with a roughly flat transaction count. That improvement has continued to date into April, as Kemper mentioned.

Gross profit margin declined approximately 90 basis points to 28.2%, primarily due to an increase in occupancy costs as a percent of sales. The increase in occupancy costs as a percent of sales was primarily due to higher average lease expenses at newer and relocated stores and also reflecting the decrease in mature store sales and the fixed nature of rent obligations and related occupancy expenses.

Store expenses as a percentage of sales rose approximately 20 basis points to 22.1% during the second quarter compared to the prior-year period. The increase largely reflects deleveraging of store level expenses that are less variable, including depreciation, utilities and operations allocations, given the negative comparable store sales performance during the quarter and a modest increase in labor costs as a percentage of revenue.

As Kemper mentioned, when compared to the first quarter, store expenses declined sequentially by 70 basis points with the decrease in labor costs as a percentage of revenue comprising the largest component of the improvement. Administrative expense as a percentage of sales decreased approximately 20 basis points as a result of our cost focus reflecting recent sales trends.

Pre-opening and relocation expenses decreased $0.2 million to $1.3 million during the second quarter compared to the prior comparable period in fiscal 2016 due to the number and timing of new store openings.

During the second quarter of fiscal 2017, we opened 4 new stores and relocated 1 store compared to opening 5 new stores in the second quarter of fiscal 2016.

Net income was $3 million with diluted earnings per share of $0.13 in the second quarter of fiscal 2017.

EBITDA was $12.8 million in the second quarter of fiscal 2017 compared to $12.6 million in the second quarter of fiscal 2016. We ended the second quarter with $4.2 million in cash and cash equivalents and $17.5 million available on our revolving credit facility.

During the first half of 2017, we generated cash from operations of $22.4 million and invested $21 million net in capital expenditures, after reflecting the $2.6 million of sale/leaseback proceeds. The strong cash flow year-to-date is consistent with our expectation to largely self-fund our unit growth during fiscal 2017.

Before I turn the call back to Kemper to discuss unit development and fiscal 2017 guidance, please note that our current unit development plans should lead to about 5 new stores in the third quarter and 2 new stores during the fourth quarter. As such, we will expect the fourth quarter earnings to benefit from lower preopening costs than the prior year.

Thank you, Sandra. So far during quarter 3 of fiscal 2017, we have opened 1 additional store in Iowa. We have signed leases for 13 additional new stores to open in 2017 and beyond. At this point, we anticipate 6 of these stores will open in the remainder of fiscal 2017. We continue to monitor new store performance and will remain flexible with new unit development plans going forward to adapt to the operating environment.

Moving to our 2017 outlook. We have narrowed the outlook we issued on November 17. During fiscal 2017, we expect to open 15 to 17 new stores, down from 15 to 20 previously, resulting in 12% to 14% unit growth; achieve daily average comparable store sales growth of negative 1% to 1%; achieve net income margin of 1.4% to 1.5% versus 1.4% to 1.6% previously; achieve diluted earnings per share between $0.50 and $0.54 versus $0.50 to $0.58 previously; and deliver EBITDA margin of 6.4% to 6.7% versus 6.4% to 6.8%, previously.

Additionally, we now expect capital expenditures for fiscal 2017 in the range of $40 million to $44 million versus our prior outlook for $40 million to $48 million. Our accounting principles along with our core strategies remain our prime focus as we continue to differentiate us from the competition. We have and are accelerating our efforts to communicate these differences.

Now, I would like to open the lines up for questions. Thank you.

(Operator Instructions) Our first question is from David Magee with SunTrust.

Kemper, you mentioned that the tone of sales seemed to be improving here in the recent period and in your forecast, the guidance assumes an improvement in the second half of the year. How much of this is because of easier comparisons versus just a better tone on an absolute basis?

I'm sorry, David, could you repeat the last part of your question?

I think the comparisons get easier in the second half of the year and may have gotten easier throughout the recent quarter when business seemed to be improving. I'm just curious. Is that the sole factor involved here or is that you really thought the marketing is having traction above and beyond that. In other words, 2 year comps, is that a number that should be improving?

Well, during the quarter, we saw improvement each month, January being a particularly trying month for every aspect of sales. We had significant customer -- transaction count declines and average ticket declines in January, where we think consumers were holding back a little bit because of political uncertainty. And then in February, we saw actually saw our average ticket went down, but our customer count -- our transaction count was positive for the month. And so that was good.

And then in March, we had an extra day, which was helpful as far as the overall for the month. So we had a positive for the month. And on an average per day, we were a little bit negative on the customer count and positive on the transaction -- the transaction side.

And so -- and then, going into April, we've seen sequential -- even more improvement year-to-date, we're within our guidance range of 1% to negative 1% on sales, whereas we ended the quarter at negative 1.2% -- on year-to-date sales.

Go ahead.

And then I was just going to say, our marketing seems to be driving the customer counts into our store. Our reformatted Health Hotline, in particular in February, we believe is the reason for the positive customer transaction counts in February and then the improved transaction counts in March were also proven by the Health Hotline and then the addition of our television advertising at the end of the month.

And then, this month, we've rolled out the television advertising -- I mean in April, we rolled it out to more markets and also radio advertising that we think is pretty -- is having a good impact on our transaction counts.

And secondly, the -- you referenced the market as being challenging out there and certainly everybody is saying that. At the same time, it does appear that at least conventional pricing is improving a bit sequentially and it might be better in the second half of this year. But various retailers have slowed square footage growth. Do you have a view as to, are those reasons for optimism in your business too over the next 12 months?

No, I think that a rationalization of square footage growth is good for us as well as everybody else, because there is so much -- so much market out there for groceries. I think that our differentiated messaging that we're going to get out via our marketing will really improve our position in the marketplace over the next 6 months. And then over the next couple years.

Our next question is from Rupesh Parikh with Oppenheimer.

This is actually Erica Eiler on for Rupesh. Thanks for taking our questions. So we've heard from a couple of players now that front page ads have been more competitively lately. I'm just curious, what you're seeing on the competitive and promotional front?

Well, I would definitely say that the pricing of conventional products have gotten to be incredibly competitive. I mean the fortunate thing is is that we don't sell commercial conventional produce -- more commercially raised, conventional meats. And, so we're not experiencing that same competitive pressure.

On the other hand, we've found that being very aggressive on our higher standard products really draws customers into stores and then the experiments we've done with really aggressive pricing on say, eggs and bacon, it has had a significant impact on driving customer counts into our stores and increasing the overall customer count and average basket size at those stores that we've experimented with that pricing on. And we're going to roll that out a little bit more aggressively during this quarter to see whether it has further benefits.

That's really helpful. And then just switching gears to gross margins. So you called out a decrease in product margins and this definitely marked a change from the improvement in product margins that you guys have called out the past couple quarters. So maybe you can provide some color on what's going on here and maybe any additional color on how we should think about gross margins for the balance of the year.

Well, essentially we had -- what affected our gross margin most significantly this quarter was that we had a decline in our bulk packaged products and when we did that it dropped more expenses out on to our income statement that were rolled into the price of those bulk products. And we should have that decline in our packaged goods corrected by the end of this quarter and that minor blip should go away.

Our next question comes from Bill Kirk with RBC Capital Markets.

Next week, I think you have a store opening in Arkansas that's going to be a bit different from some of your other stores, I think less of an education center. Can you talk about the changes in that store? Is that something we can expect going forward? And maybe why the changes?

Yes, that's our new prototype store. And all of our stores or most of our stores in the future will be in that format. The reason for the change are several-fold, first off we wanted to standardize how many shelves of grocery, vitamins et cetera that we have in the stores so that there's less -- before we went to this change, we had like 130-some different stores with 130 different layouts. And so that was we were really kind of reinventing and spending a lot of energy from our home office standpoint of laying out stores. So with one format, we can rationalize and get efficiencies from just having a single layout.

And then secondly, we took some of the costs out of our buildout by removing the demo kitchen and turning it into a more just a learning center in the store. The demo kitchen was pretty expensive and we determined that the cost benefit wasn't there for that expense and we decided to take it out so that we would save a couple hundred thousand dollars per store in buildout costs.

That makes sense. And a question on the marketing campaign, the here versus here, what is it that you're trying to communicate and I guess, how aggressive are you willing to be in communicating that difference?

I have Kevin Miller, our Vice President of Marketing here and I would like him to chime in and answer that question for us. So I'm going to let him go on that question. He's actually, I'll ask him to play the rebel chicken radio ad so that you can actually hear how aggressive we're going to be.

Yes. So this is Kevin Miller. So we really are becoming a little bit more aggressive in our strategic focus through our advertising. And that's really leveraging our comparative approach to the competition than what we've done in the past.

So our new TV campaign is based on the following strategies: One, we want to leverage the equity of our legacy campaign. We're going to add a competitive element versus the competition. We're inviting the consumer to think and act, i.e. here versus here, and all this is going to be anchored by driving home our quality standards.

So we can't show you the TV now, but we will play some of the radio for you. The radio is based on a campaign called rebel chicken, which is about a chicken that is a free range chicken and suddenly finds out that most other chickens aren't free range like she is. And gets very upset about it and goes on a campaign to let America know that there is a lot of not-so-good things about conventional chicken practices and egg practices. All right, so right now, we'll play rebel chicken.

(presentation)

All right. So you can tell from that campaign and that creative that we are getting really a little bit more creative and a little bit more comparative in our approach and really comparing conventional farming practices and with our organic and free range farming practices.

Thank you. I appreciate you playing that for us.

Did you have any other questions?

That's all, I'll jump to the back.

Our next question is from Chris Mandeville with Jefferies.

Kemper, can you be a little bit more specific in terms of the quarter as it relates to any type of temporary or onetime impacts whether it be cannibalization or Easter or possibly some incremental weather you folks observed during the quarter?

The only onetime impact that influenced was the political uncertainty in January. Other than that, Easter moved out from March to April, and so in reality, having as strong a March as we did without Easter and it was pretty encouraging to us.

Okay. And then, so with deflation seemingly abating at least in the conventional world a little bit more steadily, this should conceivably improve your relative pricing. Of course, you guys are playing with a different quality, but nonetheless, it doesn't actually sound as though you guys are seeing any type of uplift.

I guess, I'm just kind of curious, do you anticipate that the end consumer ultimately realizing that the price differential as we continue to reflate or could this be somewhat of a new norm, where maybe you're of the mind that conventionals continue to remain aggressive in certain categories to keep pricing down?

I think conventionals are going to remain competitive. I mean, I see $0.99 dozens of factory raised eggs out there all the time right now. And I see $1.69 a pound conventionally raised antibiotic, drug laden chicken out there all the time too. So I don't see that going away and I see Sprouts advertising that type of chicken and stuff all the time. And, I think King Soopers is doing it also. So I don't see them stopping doing that because they think it drives customers.

As I said, we've decided to become really aggressive on our eggs and bacon that are of a higher standard and it's driving customer counts into our stores also in the test markets that we're doing.

And I really haven't seen the reinflation of food prices yet, the commodities are still pretty low. It is -- historically speaking. Produce prices have spiked up because of shortages, but other commodities such as nuts and beans and the basic commodities are still at pretty low prices compared to where they were a year ago.

Got it. And I guess, just on the digital front. Any update as it relates to N Power and a Natural mobile app?

N Power is doing very well for us. We're up to approximately 300,000 -- 325,000 users. We're getting a really -- we've gotten a really nice cadence on our 2 weekly offers that we give to our N power customers that aren't costing us as much as the offers were last year and they're getting tremendous response from those customers. we're essentially getting 3% to 4% response on our Thursday offers and I think that's pretty amazing actually for giving a dollar off on a particular category of products.

And then the last one from me here. Just trying to frame the back half of the year relative to the updated guidance. I'm still having a little bit of difficulty getting to your guidance range with the expectations that comps maybe improve modestly in the back half, but nonetheless, doesn't seem as though you'll be at the levels where you can actually leverage on your occupancy.

And while you mentioned that you're going to make continued sequential progress on SG&A, it seems to be a bit difficult to get there at least from what I'm doing right now anyways. I could be going about it the wrong way. But nonetheless, is there anything that I should be observant of whether it be the tax rate, is that now lowered to more of a 35% type of number, given where things have shaken out in the first half of the year? Anything you would call out that I should be thinking about that gives you the confidence to get to that $0.27 in the back half of the year?

I think that our comp sales in April gives us confidence that we will have substantially better comps over the next 5 months. And that will help us gain a little bit of leverage on our fixed costs. When you are negative, you lose leverage on your fixed costs which we've been for the last 2 quarters. And so just getting a little bit of positive, if we can maintain that -- that momentum that we have had through April, and I think we can because of our aggressive marketing we're planning on doing over the next 5 months. I think will be able to maintain that momentum we had in April. Todd or Sandra, do you want to answer the question about the tax rate?

The tax rate that we have in the model going forward is 35.5%.

Our next question comes from Shane Higgins with Deutsche Bank.

I just want to get a little bit more color on the kind of the product mix during the quarter. Did you guys see decent growth in dietary supplements or the body care segments?

Dietary supplements outgrew -- gained market share during the quarter. Our overall sales were 8.3% and supplements were up 10% for the quarter.

Okay, great. And just -- I was checking your inventory levels, looks like those are still down on a per-store basis. Just curious as to how that's impacting your overall margins and shrink during the quarter? And kind of how should we think about inventory levels progressing as the year goes on?

I think we will be able to get more efficiencies and actually get some more reductions in inventory at the year goes on. As far as shrink, it's helping the shrink levels because the lower the inventories, the less product we have to shrink, of course. And then we're back, now we actually beat, in this last quarter, we beat last year's second quarter shrink numbers by 5 basis points. But that's still 5 basis points. We are happy with that. And we think we'll have continued improvement in our shrink numbers as the year progresses, and we're trying to push ourselves back to our 2013 levels of shrink. And hopefully, by next year at this time, we'll even have better news on that front.

Okay. Is that -- was that inventory that's kind of in the back of the store? Was that -- is there any particular categories you guys have been running a little bit leaner?

Well, we've cut back the -- we're on SAP and we do a replenishment inventory, and we've cut back the number of days on hand in the replenishment, in particular in supplements and body care, so that's very helpful. And that's where the majority of our inventory is carried. And so that, just cutting back a few days, really helps the amount of the inventory we have in the stores.

Has it affected your out of stocks at all? Or are those still kind of in line with historical levels?

They are staying very close to historical levels.

Great. Just last one for me, the TV advertising that you guys are doing in Denver. Have you guys run TV ads in the past? I'm just curious as to if you guys are seeing...

Yes, we have. We ran last year in Denver in April. And Kansas City in, I think it was February last year. This year, we're running it March, April, May, June in Denver and several other markets April, May, June.

You guys are seeing -- I guess you are seeing a similar return on that as you've seen historically given that you continue to roll it out?

Yes, we see a nice bump when we roll it out compared to our control group of stores that don't have the same type of marketing going on.

Our next question comes from Ryan Gilligan with Barclays.

Just a quick follow-up on the new media campaign. Are you still thinking marketing cost as a percent of sales will be about flat for the year or how should we think about that?

For the entire year, they will be about flat, yes. They will be higher during this quarter and next quarter compared to the first quarter and second quarter.

Got it. And then, I guess, can you share the year-over-year basis point improvement in labor and shrink? I know you said they improved sequentially, but just trying to get a feel for how they impacted the year-over-year change in operating margin?

I'm sorry, we don't have that number right here.

So we see the -- on a year-over-year basis, labor was up a couple of basis points. But sequentially, it was down in that 25 to 30 basis point range. And shrink sequentially is down 5 basis points and it's down about 12 basis points year-over-year.

Got it. And on labor, is sales per labor hour better on a year-over-year basis?

Yes, we've made some really good improvements in sales per labor hour. We haven't given that metric out, but clearly on a sequential basis, we've improved that dramatically.

Got it. That's helpful. And then I guess lastly, can you just give us an update on what comps are in the energy-sensitive markets versus the nonenergy-sensitive markets?

Well, Texas is our worst performing comp state. That gives you kind of how we looked at the energy markets.

Are they improving because it seems like the employment levels are starting to turn?

You know, I don't think they are improving as much as -- I don't think -- I think the oil companies have become much more efficient in their ability to drill wells and they are not hiring as many people as they used to.

Our next question comes from Alvin Concepcion with Citi.

So just want to talk a little bit about the earnings guidance. I know you called out the lower store growth expectations. Are there any other reasons for reducing the top end? I guess, what I'm getting at is it looks like EBITDA margins are expected to be a little bit lighter at the top end versus what you had previously. And that's with lower store growth, so I'm wondering why we wouldn't see that at least stay the same or improve a little bit.

I think we just -- as we look at the model that we're putting together, we had always had an anticipation of the range that included a number of stores and while we bring down the top and the top number of stores, that those show an improvement in EBITDA flow through.

We'll have lower pre-opening expenses in the back half of the year, and of course, we've talked about labor and shrink improvements and we expect to see that continue into the second half of the year.

Got it. And you talked about some improvements in April. Was that pretty much stemming from strong underlying results or did the Easter shift kind of boost that a little bit? I'm just wondering if you can give us a sense of what the underlying trends were ex Easter shift in April, that give you the confidence in maintaining your annual targets for comps?

The Easter shift helped some, but we saw generally better transaction counts and improved sales before Easter also. Easter was like almost exactly in the middle of the month. Before we would have had an impact from Easter, we were already seeing improved results. And we'd already, last year we'd had a significant bump in April because of our Earth Day promotion. And this year, we maintained that bump, so we're pretty happy with the way the month played out. We had 1 -- we had that snowstorm that rolled through Denver, through Colorado on the last Saturday of the month which was kind of a negative, but other than that, the month was pretty steady.

Our next question is from Scott Mushkin with Wolfe Research.

I just want to get back to, Kemper, you made a comment that you were doing some promotion I think in eggs and bacon, pulling pricing down and it was driving some volumes and you were going to expand that. I guess, my question is, we're getting in our research that the consumer is really sensitive to this price discounting activity and volumes move pretty quickly. How concerned are you about that, that the consumers is getting a little bit used to buying food at a discount even if it's better quality food like you guys provide?

Well, I think that when you provide a good price on a perishable item, it drives them into the store. As long as you are able to maintain the pricing on the rest of your basket, then I don't have a big problem with that issue. And we've so far been able to maintain -- we maintain a pretty tight margin as it is and so we've been able to maintain that tight margin on the rest of our basket without having to discount it significantly.

And we've seen a similar approach at a Whole Foods, obviously, a pretty big competitor in the Colorado area. Have you noticed a more aggressive stance out of them lately?

No, not really. Not on what we're selling.

So then my second question goes to expense control which you flagged obviously as a really good area that you guys have done some -- some work on. As we get to the back half of the year, you know, many markets, including your base Denver are seeing significant increases in labor costs. And I'm just wondering if you could talk about the push and pull of your expense controls, maybe give us a little bit more color on what you're doing to try to control those expenses. And remind us, I think you've said it before, but just remind us and then also how it works with these rising costs that you're likely to face that could even accelerate as the year goes on?

You're correct. There's definitely a tighter labor market particularly in Denver. But we've always maintained a higher-than-average starting wage to start with. So we haven't had to, as of now, increase that starting wage in the Denver market. There are a couple markets where we've had to increase our wages because of new minimum wage, labor laws. You know, up in the Portland area for instance, to maintain our gap between the minimum wage and our wage.

We also have some of the things that we do, is that we offer health insurance and we try to have mainly full time employees and then we also offer a dollar an hour in vitamin bucks. And so that adds to how much base compensation we're giving to our employees to start with. And, so and our health insurance is a high-quality health plan. So our good (inaudible) are appreciative of that.

And we increased our standard -- of how much productivity we expect out of each employee at our stores. And then at the administrative level, you have to limit how much hiring you do and that's how you control your general and administrative costs.

This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Isely for any closing remarks.

Thank you very much for joining us to discuss our second quarter results. We are pleased to deliver sequential cost improvements during the second quarter and to have generated positive cash flow year-to-date. We remain confident in Natural Grocers' 62-year history of successfully adapting to an ever-evolving natural products landscape. Thanks, everybody. Have a great day. Bye.

The conference has now concluded. We thank you for attending today's presentation. You may now disconnect.