Good day, and thank you for standing by. Welcome to the Brown-Forman Corporation Fourth Quarter and Fiscal Year 2024 Earnings Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please note that today’s conference is being recorded. I will now hand the conference over to your speaker host for today, Sue Perram, Vice President, Director of Investor Relations. Sue, please go ahead.

Thank you, and good morning, everyone. I would like to thank each of you for joining us today for Brown-Forman’s fourth quarter and fiscal year 2024 earnings call. Joining me today are Lawson Whiting, President and Chief Executive Officer; and Leanne Cunningham, Executive Vice President and Chief Financial Officer. This morning’s conference call contains forward-looking statements based on our current expectations. Numerous risks and uncertainties may cause actual results to differ materially from those anticipated or projected in these statements. Many of the factors that will determine future results are beyond the company’s ability to control or predict. You should not place undue reliance on any forward-looking statements, and except as required by law, the company undertakes no obligation to update any of these statements whether due to new information, future events or otherwise. This morning, we issued a press release containing our results for the fourth quarter and fiscal year 2024, in addition to posting presentation materials that Lawson and Leanne will walk through momentarily. Both the release and the presentation can be found on our website under the section titled Investors, Events and Presentations. In the press release, we have listed a number of the risk factors you should consider in conjunction with our forward-looking statements. Other significant risk factors are described in our Form 10-K and Form 10-Q reports filed with the Securities and Exchange Commission. During this call, we will be discussing certain non-GAAP financial measures. These measures, a reconciliation to the most directly comparable GAAP financial measures and the reasons management believes they provide useful information to investors regarding the company’s financial condition and results of operations are contained in the press release and investor presentation. With that, I would like to turn the call over to, Lawson.

Thank you, Sue, and good morning, everyone. Thank you for joining us today as we share Brown-Forman’s fiscal 2024 results. Before diving into the details, I wanted to provide a few high-level comments on our performance and my perspectives on the year. Brown-Forman is a 154 year old company, so we have been through periods of complexity and uncertainty in the past. We understand what it means to be resilient. We know how to navigate short-term challenges while remaining focused on our long-term strategy. Fiscal 2024 has certainly been a challenging year as we’re still operating in a highly dynamic environment. While our business is not immune to the impacts of industry and macroeconomic headwinds, Brown-Forman and its people have remained agile, focused and committed to the long-term growth of our brands and of our business. There is certainly a lot of complexity to our results, which we will walk you through momentarily. However, when you consider our depletion based results, which we believe represents the true health of our business, we’re pleased with our fiscal 2024 performance as it is in-line with our long-term growth expectations. While that statement may surprise some of you, this past fiscal year was greatly impacted by changes in consumer, retail and distributor inventories. We believe our brands remain healthy, we’re in the right categories and price points, and we’re confident in the outlook for our business. So, let’s discuss all of this in greater detail. Throughout the year, we’ve been using the word normalization as we lapped the impact of the supply-chain challenges and the rebuilding of inventory in the prior year, as well as consumers getting back to historical consumption patterns. We expected our organic results to moderate in fiscal 2024 after two plus years of double-digit growth. However, as we move…

Thank you, Lawson, and good morning, everyone. As Lawson has thoroughly reviewed our topline growth and the performance of our brands for the fiscal year, I will share details on our geographic performance, other business results and our outlook for fiscal 2025. First, from a geographic perspective. Emerging international markets and the travel retail channel delivered mid-to-high single-digit organic net sales growth, respectively, which was more than offset by organic net sales declines in the United States and the developed international markets. In the United States, organic net sales declined 4% largely reflecting lower volumes due to a negative 4% impact from an estimated net change in distributor inventory. First, I’ll speak to the significant amount of noise, if you will, created by changes in distributor inventories in the U.S. market for our business this fiscal year. We have been sharing with you throughout this fiscal year. In our first half, we cycled against the significant inventory rebuild during the same period last year. As we entered our second half, takeaway trends for total distilled spirits and also for our business moved below the historical mid-single-digit range as consumer demand slowed. As consumer takeaway remains below its historical range, retailers have adjusted their inventory levels in response to the slower demand and the higher interest rate environment. Distributor inventory levels were largely at normal levels throughout fiscal 2024 with movement to the low-end or just below the normal range in our fourth quarter. While we are on this topic, I will add here that in our outlook, the expectation is that distributor inventory levels will remain consistent with their current levels. Now, to turn to what we believe are the more important indicators of the health of our business in this market. While total distilled spirits trends continue to be…

Thank you. [Operator Instructions] And, our first question coming from the line of Bryan Spillane with Bank of America. Your line is open.

Hey, thanks, operator. Good morning, guys.

Good morning.

I guess just a couple of quick questions, like probably more clarifications. But, I guess the first one, can you give me you mentioned ingredient costs as inflationary for next year. Is that like corn? I know we have obsessed so much about agave and barrels, but I just wanted to kind of clarify just what it is that’s moving against you?

Yes. So, Bryan, it’s Leanne, and the things that we have going, again as a tailwind for us will be the agave, which we’ve talked about many times. It’s kind of going from that 28 to 30 Mexican pesos per kilo at the high. We’ve now seen down to as low as nine pesos per kilo in June depending on the quality of it. And also grain, we’re continuing to expect lower prices in the shorter-term, but still above the pre-pandemic averages. Where we’re seeing some increases are related to our glass, even though we have lower natural gas and diesel prices that are slowing the rate of inflation, we’re still expecting that in the U.S. where the vast majority of our glass comes from, it’ll be 2% to 3% increase. And then, again with transportation, that’s going to be in the low-single-digits. So, what we’ll also be, what we talked about in our prepared remarks, higher inflation on our costs, but then also the cost associated to lower production volumes. That’s all about us working to return to our more normal levels of working capital on our balance sheet. We’ve talked about a lot over time, the commodity costs continues to be high. We’ve talked about adjustments in our infrastructure that we believe will help to offset some of that commodity costs, but we still expect it to be high as well.

All right. Thanks, Leanne. And then Lawson, maybe can you just give us a perspective as you’re looking forward, I guess, this year? The category has been soft. Is your expectation in terms, and I’m really more focused on America whiskey. Is the expectation that the current trends kind of hold for next year? Do you expect that the category to accelerate? And, just to tie to that Lawson, can you talk a little bit about the amount of inventory, the industry inventory of sitting, I guess, aging at this point and whether we’re at risk of like an oversupply situation? We’ve had that question a couple of times, so it would be great to sort of get your perspective on it. Thank you.

Yes. All right. Thanks, Bryan. I mean, a few things. One, U.S. whiskey and tequila which are our two biggest categories continue to be the healthiest part of TDS. So, that I mean, that is a good thing but TDS has been bouncing along in that sort of 1% range now for, what nine months, something like that. So, it hasn’t really changed a whole lot. So, it’s obviously been a tough year for the consumer and a tough year for us. One thing I think that’s important to hit, Leanne said it a bit in her opening remarks. And, I think it’s the sort of question of the day. Is the changes, is the slowdown structural in some way or another where spirits demand, which COVID aside, was been in that 4% to 5% range for decades and decades. Or is it largely based on timing, really difficult comps and the inventory issues. And, I do believe, the big three that everyone talks about GLP-1s, cannabis and Gen Z, they are headwinds that are looming in the long-term. But, I don’t think that really has much, if anything to do with the current state of the consumer or the current state of the spirits business in the U.S. And, the reason I say that is, when you look at TDS and say in Nielsen, I mean it was going along actually pretty well and then late summer early fall it fell sharply and it caught everyone in our industry, including you all. I think everyone got caught up in it, and was surprised a bit by it. But, I really do believe that it’s really driven by inflation for the most part. And then, if there was a level of demand that got pulled forward during COVID and where…

That’s very helpful. Thanks, Lawson. Thanks, Leanne.

Thank you. And, our next question coming from the line of Nadine Sarwat with Bernstein. Your line is open.

Thank you for taking my question. One short-term and one long-term for me. On the short-term, coming back to inventories, obviously, large headwind in this quarter. Could you talk about how this compares versus your expectations on the last conference call and what would have been the cause for any difference there? And, a little bit more color on where your inventories are today? I understand there are sort of moving parts, but do you feel they’re fully at the right-level, right-size to that right-level going forward? And, then my long-term question coming back to the U.S, what’s your best assessment of where underlying spirits net sales growth for the U.S. today is for the industry? Obviously, Nielsen, NASDAQ covering some very different channels. And, what would you need to see in your opinion for the industry to get back to mid-single digits? Is it a more favorable macro environment for the consumer? Is it something else? Thank you.

Thank you, Nadine. And, I’ll take the inventory question. Again, kind of pointing to what we have talked about that our depletion-based results came in, in-line with our expectations. First, I’ll point you to Schedule B for fiscal 2024 depletions are ahead of shipments on our full strength portfolio and even to a greater extent than when we reported in our third quarter call. In the U.S. we know retailers have adjusted their inventory levels in response to the consumer takeaway trends being below their historic mid-single-digit range and with a higher inflation rate environment. We’ve been talking about for the entire fiscal year that at the distributor level, our distributor inventories have been within that normal targeted range as we have gone through the majority of this fiscal year. However, in the fourth quarter in the U.S, the distributor levels did unexpectedly for us dropped to the low-end or just below their normal targeted range. We’re continuing to partner really closely with them as we have been all year, probably even more so now. But, I will say we do believe we’ve now experienced the majority of the movement in the inventories across the distributor retailer and consumer supply-chain and our kind of thoughts on that were in our prepared remarks, we have that built into the guidance that we’ve provided. And then, I’ll turn it over to Lawson, for the second part of your question.

So, the question just being a little bit over the longer-term when and what’s it going to take essentially to get the U.S. market back on track again. It’s very difficult to predict when what is going to happen with consumer spending. I mean, the one thing we know for sure is the comps are going to get easier. So, even not only ours, but even in the Nielsen number world that, as I mentioned earlier, that sort of August, September fall-off, we’re coming up upon that. And so, I hate talking about easier comps, but the reality is that they will ease up. I do believe given partially the way you call it underlying or depletion-based results are better than shipments. This largely is an inventory correction issue that includes the consumer. As we said just a minute ago, the consumer has got to work through it’s the bottles that are sitting at home. And, we talked about this on the last call and I know a few of you all did some analysis on this and sort of agreed I think with our statements that it was going to take about a year to work through that consumer inventory. And so, we’re coming up on that year lapping period in a few months. So, it’s difficult to predict and consumer spending is going to need to improve across all CPGs, not even just spirits. I mean the consumer has been heard everywhere. So, but if you pin me down and said, what do you really think? I think we would say that sometime in the fall or into the winter that trends will improve.

And then, the only thing I’ll add is, and we’ve said it in our prepared remarks again, but just to emphasize it, in the U.S. and some of our other key markets, we have been able to maintain market share in this volatile environment. So, we feel good about with all the noise that’s in the system that our brands are maintaining the share in the marketplace.

Understood. Thank you very much.

Thank you. And, our next question coming from the line of Robert Moskow with TD Cowen. Your line is open.

Hi, this is Seamus Cassidy on for Rob Moskow. And, thanks for taking the question. So, given the target that you reiterated at your March Investor Day to double fiscal ‘22 operating income by fiscal ‘32. With fiscal ‘25 expected to be another below algo year, I’m curious how you see this trending beyond fiscal ‘25 and maybe where you expect to get operating leverage in the out years given that you’ll need to invest more this year in terms of advertising and promotion? Thank you.

Yes. Well, look, we always knew that ambition was not easy, call it lofty a little bit, particularly the last couple of years or really last year for the most part has been difficult. But look, 2032 is still a fair ways away. We still believe in the portfolio and everything that we are doing has the growth characteristics to deliver on those goals. And so, we are not changing our long-term growth algorithm at all. And, you asked about leverage. I know we are working very hard to get some gross margin leverage around here. And so, I think that’s going to take continued work, but continued, you’ve heard me say it before low and slow. I want to continue that and everyone is we’re all on-board and focused on that right now. And thankfully, even in the current environment that we’re in today, we still think that pricing is a lever in all this to continue to generate growth and it’s actually coming true in the numbers. And so, a little bit of gross margin improvement with expense controls that make sure that our operating expenses don’t grow at a rate greater than our sales. I mean, that’s the model that we believe in and we’ll continue to do. And then, I know we’re only two years into this 10-year plan and so there’s plenty of time to accelerate.

That’s helpful. Thanks. And then, maybe just one quick follow-up. You sort of talked about your excitement about a return-to-annual pricing in the spirits industry, but you also sort of called out inflation as something that’s been a headwind for consumers. So, I’m curious how you’re thinking about that in fiscal 2025? Thanks.

Well look, I mean we kind of already hit that. I mean the consumer demand is normalizing. Now, we all, but I mean keep in mind, there is 2.5 years worth of double-digit growth, where every, it was difficult to drop all that to the bottom line because of all the things you all know about. But, it was outstanding for a period of time, and I think it’s just a return to that normalization a little bit. I think, if we’re honest with ourselves, a year ago, we thought that meant it was just the market was going to hit, go back to that 4% to 5% range and stay there. And, it’s taken a year of being below that to sort of correct this consumer inventory thing. So, the timing we’ll see, but I still feel pretty confident that the long-term outlook for spirits in this country is excellent and nothing really has structurally changed. So, did that answer your question?

Yes. Thank you.

Thank you. And, our next question coming from the line of Lauren Lieberman with Barclays. Your line is open.

Well, it’s great, thanks so much. I guess completely hounding on what you guys have already been talking about, but the notion that the inventory cleanup, both at distributors, consumers, retailers and so on is complete, it’s just very different than what we’re hearing from others in the industry. So, not taking issue at all with your view Lawson on the long-term health of the industry that nothing structural has changed, really just getting at the question of the longevity of the correction and the visibility that there is. So, I’m just curious, what is it that you guys are seeing or your reasons to believe that inventory correction throughout the being distributor, retailer, consumer landscape is complete? Thanks.

And, this goes back Lauren, to what we’ve been saying for quite some time now with all the disruption that has been in our system that started with the pandemic and the glass supply challenges, logistics challenges. We continue to be in a significantly different position than most of our comp set because of the glass supply challenges that we have gotten into. We’ve talked about this over time, how we prioritize brands, we prioritize markets to rebuild and refill our supply-chain and even in ‘24, there was lumpiness that we had to compare against especially in the fourth quarter in the prior year, where we were reloading our emerging international markets. And, we have had to comp against that. We’ve come up to normal inventory levels where others were in a different place and maybe coming down. And so, we’ve really felt like we have been there and been closely aligned with our partners in the U.S. distribution system. For us, it really was about that unexpected drop in their inventory levels in the fourth quarter as they got kind of down to absolutely the lowest end and below, just below their targeted inventory range. So, that was kind of for us the miss and what was unexpected. As we continue to do our work, we continue to believe the vast majority of that movement is now behind us. But, we’re definitely not saying that all of it is behind us as it relates to the U.S. So again, all of that would be included in our guidance.

And, understanding the distributor side of it and the retailer is fairly clean and we have data against it. The biggest question is the health of the consumer itself and when that comes back. And look, everybody is going to have a different opinion on that and I don’t have a great crystal ball any better than you do. We’re just, I won’t walk through the consumer example again, but we do think that the pantries are not as full as they were a year ago. And, it just depends a little bit when the consumer comes back and starts spending in a big way, particularly also we haven’t talked at all about the on-premise. But, on-premise has weakened over the last year and that doesn’t help overall trends either, but we think that’ll start to come back too over the next year.

And again, it was just one small line in our prepared remarks, but the importance of what we talked about that in our outlook, it just assumes that where our inventories are today, it’s going to continue going into the future.

Okay. And Leanne, actually I wanted to clarify on that point. Should we think about that as the absolute level of inventories, distributor inventories are where they should be? So, from a growth standpoint, like the next quarter or two, that’s still a headwind to growth. But again, like an absolute level, we’re at the right point, if you’re following what I’m asking?

Yes. So, what we’re talking about is kind of there in the U.S. they’re kind of at the low-end or just below their levels. In our guidance that assumes they’re going to stay consistent with where they are right now and that as we move forward, we’ve talked about in our outlook, we’re going to go against in our first half strong shipments. Again, part of its related to the lumpiness of the shipments in F‘24 for the emerging international markets, but then also in the U.S. again, as we executed our pricing strategy last year that would have seen stronger shipments in the first half. And again, all that’s build in, so the stronger first half as we look at F‘25 and, then we expect a stronger second half in ‘25.

Okay. Got it. That’s right. Absolute levels, but then the growth rates are something different, but the absolute levels have kind of reached the point where they need to be. Okay.

Generally.

I’ll pass it along. I have more, but I’ll pass it on. Thank you.

Thank you. And, our next question coming from the line of Nik Modi with RBC. Your line is open.

Thank you. Good morning, everyone. Lawson, I had two questions. First was just on Jack Daniel’s, given all the kind of line extensions over the years and different flavor expressions, have you as an organization figured out how to spend behind the Jack Daniel’s equity and really kind of provide a halo for all the expressions because there’s a lot of innovation coming out from other players in some of these areas that seems like there’s some cannibalization of your business. So, just wanted to get your perspective on how you think about brand building long-term? And then, just kind of sticking on the Jack Daniel’s mainline brand, we’re hearing a lot of promotional activity from your competitor base, some of that’s not tracked in the Nielsen or Circana data, instant redeemable coupons etcetera. So, I just wanted to get your perspective on that and kind of how you’re thinking about that embedded in your guidance?

All right. So first, I’ll hit the Jack one first. Well, for one, the short-term and then I’ll take it a little bit longer-term and a little bit higher up, but organic net sales for Jack Daniel’s Tennessee Whiskey, so Black Label was down 5%, but there was an 8% impact from the net change in distributor inventories. And so, let’s not think that all of a sudden the brand is in this big decline from a consumer perspective. We still feel very good about that. There’s just been there’s been, so much noise and we’re also comparing against in the prior period, some very high numbers. And so, when you step back and you look at it, say on a five year basis or even longer than that, the brand has maintained the growth rate. I think we just said, the same growth rate on a five year basis, 10 year basis, on a 30 year basis is all plus five. So, we’re not seeing a long-term slowdown even in Tennessee Whiskey as we have introduced, we’ve had the flavors. It’s been a few years since we’ve introduced a new one, but we’ve got all these higher in-line extensions that we’ve doing on the brand, that I do think act I mean, they drive profit in and of themselves, but they’re also a halo over top of the brand or the franchise altogether. But the health metrics remain stable, and we do believe that Tennessee Whiskey is going to normalize over the next year. And so, it’s and then back to the marketing and the brand expense and the levels that we have and all those kind of things. Look, we’ve changed up the marketing mix quite a bit over the last few years. We do, I’m very happy…

And, then one thing I’ll add to that is for el Jimador specifically, when you look at Brown-Forman’s pricing in tequila versus TDS, you will see ours is definitely higher and that’s all about the repositioning of our el Jimador brand getting it firmly into that $20 to [$29, $99] (ph) price tier where we see the fastest growth right now. So, and we have a new package that will be coming out that supports that in this year. So, we’re excited about what we’ll see from el Jimador as we move forward with that price repositioning work we’re doing.

Thanks so much. I’ll pass it on.

Thank you. And, our next question coming from the line of Filippo Falorni with Citi. Your line is open.

Hey, good morning, everyone. I had a question on the developed international and emerging market business. In the past calls, you talked about some weakness in some European markets. So, maybe can you give an update there and also in emerging on Mexico? And then, for the second half of the year, Leanne, you mentioned the improvement in the second half. What gives you the confidence in the improvement in the second half on topline? Is it mainly the kind of the comps on the inventory side or are you assuming also an acceleration in category growth in the U.S. and international markets? Thank you.

I’ll start with your last one first, because it’s the most of thing which is about what we will be comping in the second half of this year. And then, to go to some of the international markets in the U.K., we’re continuing to hold our value share in both the on and off trade. The consumer does continue to reduce their spending and trade downs present in that market. For us, Germany continues and you can see that in the numbers continues to be really strong and the consumer climate there we see as improving. Poland, we’re still growing nicely in that market while consumers are remaining cautious with their spending. And then, France is just a market. I think it’s a consistency theme we’ve talked about for the entire year, which is they just continue to down trade and having the promotional activities. So, maybe having the Olympics this summer will change that a bit. And then, as it relates to Mexico, the similar trend is what we have been reporting, which is the consumer continues to be slowing down in spending and we’ve been talking about that in our business and you can see that through el Jimador and Herradura performance. Brazil, we continue to deliver low-single-digit growth there because our Jack Daniel’s Tennessee Apple, is just being really well received with the consumers and its driving market share gains. And, the consumer takeaways there is slowing a bit as well. And, it’s the competitive environments intensified, but we’re actually delivering double-digit our strong growth in Brazil.

Hey, let me add one point on the U.K., because if you look at Schedule C it looks kind of ugly on the U.K, down 14% sales, but very importantly that is largely driven by Jack & Coke and Jack & Cola. So, that was a very big Jack & Cola market, very healthy and a good business for us for a long time. That is the cleanest example, I guess, of a market where we used to sell directly ourselves and now it’s The Coca-Cola Company is doing it. So, we’ve had to pull Jack & Cola off the shelves, and now we’re selling like we do with all the other markets where Coca-Cola is selling. We’re effectively selling them concentrate really, which just obviously has a lot lower sales number. So, it makes the U.K. look worse than it really is.

Great. Thank you. That’s helpful. And then, maybe following up on the gross margin questions previously, is the Q4 decline and performance mainly driven by the lower inventory that you had expected? Have you already starting to see some of those costs inflation headwind that you mentioned for next year already playing out in Q4? And then, thinking about ‘25, I know you mentioned there’s puts and takes agave favorable, some other commodities inflationary. But overall, are you still expecting some margin expansion, gross margin expansion in ‘25? Thank you.

So, to your first one, the big change in the fourth quarter is really going to be driven by inventory related cost as we would call it LIFO and it’s our LIFO calculation on the year-over-year change of what we had in the fourth quarter of ‘23 compared to the fourth quarter of ‘24. So, that’s the extreme change there. And then, related to gross margin expansion for F ‘25, just as we talk about reported gross margin, the change in our portfolio as it relates to the addition of Gin Mare and Diplomatico and the divestiture of Finlandia and Sonoma‑Cutrer that will provide us with gross margin expansion from a reported perspective. And then, for the rest of our gross margin, we will have that low-single-digit favorable price mix largely driven by price in F ‘25. But again, that’s going to be a little bit more than offset by cost and the work that we will be doing to normalize the working capital on our balance sheet.

Got it. Very helpful. Thank you.

Thank you. And, our next question coming from the line of Peter Grom with UBS. Your line is open.

Thanks, operator. Good morning, everyone. So, Leanne, maybe building on that last question, you kind of touched on those a tale of two halves, first half more subdued. Can you maybe provide some parameters in terms of how you’re thinking about the first half versus second half in terms of gross rates? And then, maybe kind of following up to Filippo’s question, it seems like one of the primary reasons you’re expecting a more challenged first half was due to the tougher shipments. But can you maybe just share what’s embedded in the guidance from a category perspective? I think you mentioned that the improvement in the back half is more comp driven, but there just doesn’t seem to be a lot of visibility in terms of when this inflection to the historical growth rate occurs. So, just to be curious what’s kind of the assumption embedded into the outlook from a category standpoint? Thanks.

Well, I would say from what we are looking for in our growth rates is we shared that it was really going to be driven by developed and emerging international markets that those will be driving the greatest growth rates. To your point, the tail of two halves that we will have in F ‘25 which because of disruptions we’ve the tail of two halves story now for a couple of years. Again, for us in the first half of ‘25, it’s really going to be about comping against those strong shipments that we had in the first half. Conversely, when we just talked about the lower distributor inventory levels, we’ll be comping against that in the second half of this year. When we continue to look at our business, we continue to be on a path back to kind of our long-term growth algorithm in F ‘25. It’ll be another step in that path back to normalization. But again, with what we see right now from the consumer, the trade, we’re just assuming that we’re pretty consistent with where we are until we get some indicators of change as we go through this year.

Got it. Thanks so much. I’ll pass it on.

Thank you. And, ladies and gentlemen, that’s all the time we have for Q&A session. I’ll now turn the call back over to Sue, for any closing comments.

Thank you. And, thank you to Lawson and Leanne, and to everyone for joining us today for Brown-Forman’s fourth quarter and fiscal year 2024 earnings call. If you have any additional questions, please contact us. As we close, I want to acknowledge an anniversary that the company just celebrated yesterday on June 4, 1924, in the midst of prohibition, Brown-Forman relocated to its headquarters in the location that we’re sitting in today, marking a century as another milestone in our 150 year, four year history and a reminder of the agility and resilience of this company and its people as we work every day to ensure that there’s nothing better in the market. With that, this concludes today’s call.

Ladies and gentlemen, that does conclude conference call for today. Thank you for your participation. You may now disconnect.