Good morning, and welcome to the Herman Miller's First Quarter Earnings Conference Call. As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Kevin Veltman, Vice President of Investor Relations and Treasurer.

Good morning, everyone. Joining me today on our first quarter earnings call are Andi Owen, our President and Chief Executive Officer; Jeff Stutz, our Chief Financial Officer; and John McPhee, President of our Retail business. We have posted yesterday's press release on our Investor Relations website at hermanmiller.com. Some of the figures that we'll cover today are presented on a non-GAAP basis. We've reconciled the GAAP to non-GAAP amounts in a supplemental file that can also be accessed on the website. Before we begin our prepared remarks, I will remind everyone that this call will include forward-looking statements. For information on factors that could cause actual results to differ materially from these forward-looking statements, please refer to the earnings press release we issued last night as well as our annual and quarterly SEC filings. At the conclusion of our prepared remarks, we will have a Q&A session. Today's call is scheduled for 60 minutes and we ask that callers limit their questions to no more than three to allow time for all to participate. With that, I'll now turn the call over to Andi.

Good morning, and thanks for joining us today. I'll begin the call with highlights of our quarterly results, followed by sharing progress that we've made in our strategic priorities. In the first quarter, we built on our momentum from last quarter by starting the fiscal year with strong growth in sales and orders, led by our North America and Retail businesses. Consolidated sales grew 8% organically over last year, while orders were up 7%. We were especially pleased to continue generating positive results in the face of the ongoing global trade tension and tackling a broader geopolitical environment. Looking ahead, we're also seeing healthy levels of project opportunities in the pipeline. We've been encouraged to have more and more discussions with their customers about how we can assist in their efforts around attracting and retaining talent and help them design flexible, high performing workplaces. These discussions often highlight the power of the entire Herman Miller Group of brands to meet those needs. Complementing the growth in sales and orders, we posted improved gross margins this quarter, which were up 70 basis points over the same quarter last year. At the same time, our team continued to manage operating expenses very well. The combination of these factors helped drive another quarter of operating margin expansion with reported operating margins of 160 basis points above the same quarter last year, and adjusted operating margins that were higher by 90 basis points. We reported earnings per share on a GAAP basis of $0.81 during the quarter. On an adjusted basis, earnings per share of $0.84 reflected an increase of 22% over the same quarter last year. On the strategy front, we remain focused on the four strategic priorities that we shared at our May Investor Event. Let me summarize them briefly for you.…

Thank you, Andi. With sales growth of over 10% last year and 12% this quarter, the Retail business has been and continues to be a growth engine for Herman Miller. Importantly, there are a number of initiatives that we believe will help continue that momentum. First, our new state-of-the-art distribution center in Batavia, Ohio, was fully operational at the end of the first quarter. While this transition has required short-term investments the past couple of quarters, it better positions our business to provide enhanced service and reliability to our customers over the long-term. At the same time, the license that we acquired last year for the rights to bring the HAY design brand to North America is gaining traction. After establishing a HAY e-commerce site last year and opening the first two HAY studios in North America, we will be opening our third HAY studio early this quarter, which will be located in the Lincoln Park area of Chicago. HAY's product line has been an important contributor to our growing Design Within Reach contract business, as its furniture designs are great fit for the residential styles but more offices are including in their floor plans. In addition to our early efforts for the HAY brand, we opened three new Design Within Reach studios in the fourth quarter last year. While still in the early days, these studios represent promising locations for our brand and are off to a good start. One area where we've experienced pressure on our gross margins is related to net shipping costs. A major source of this pressure comes from growing consumer expectations that the products they purchase should come with free delivery. Compounding this issue is the fact that over the past several months we've experienced increasing costs from freight providers. To help address this,…

Thank you, John. Good morning, everyone. Consolidated net sales in the first quarter of $671 million were 7% above the same quarter last year on a GAAP basis, and up 8% organically after adjusting for the impact of year-over-year changes in foreign currency rates. New orders in the period of $677 million were 7% above last year. Within our North America Contract segment, sales were $458 million in the first quarter, representing an increase of 9% from last year. New orders were $468 million and a quarter, up 10% over last year. Order growth in North America was broad-based across all project size categories, and from a sector standpoint, was led by business services, information technology, and the U.S. Federal Government, partially offset by lower demand in healthcare and financial sectors. Our International Contract segment reported sales of $114 million in the quarter, a decrease of 1% compared to last year on a reported basis and slightly above last year organically. New orders of $117 million were 7% below the same quarter last year on a reporting basis and 5% lower organically. I think it's important to note that the International business faced challenging growth comparisons for the quarter. To put this in perspective, in the first quarter of last year the International business posted organic sales and order growth of 22% and 14% respectively. We believe this is important context for you to consider as you evaluate the performance of our International business this quarter. To be clear, this business has been a key contributor to our growth in recent years, both on a top and bottom-line perspective. And tough comparisons aside, it factors heavily into our strategy for driving continued growth in the future. With that background, lower year-over-year demand levels were experienced in the EMEA region, as…

Thanks, Jeff. Before I review our cash flow and balance sheet highlights, let me start with a brief overview of a recent refinancing transaction. Effective on August 28th, we refinanced our existing revolving credit facility. As part of this transaction, we upsized our revolver by $100 million from $400 million to $500 million, and extended the maturity of the facility by 5 years to August of 2024. After this transaction, the available capacity on our facility stood at $265 million at the end of the quarter. With that background, let me move to commentary on the first quarter. We ended the quarter with total cash and cash equivalents of $160 million, which was slightly higher than the cash on hand last quarter. Cash flows from operations in the first quarter were $53 million, reflecting an increase of 60% over the same quarter of last year. Increased earnings were the primary driver of higher operating cash flows in the quarter. Capital expenditures were $90 million in the quarter. Cash dividends paid in the quarter were $12 million. As a reminder, last quarter, we announced an increase of 6% in our quarterly dividend rate that will be paid beginning in October. This increase brings our expected annual payout level to approximately $49 million. We also continued our share repurchase program with repurchases of $8 million during the quarter. We remain in compliance with all debt covenants. And as of quarter end, our gross debt to EBITDA ratio was approximately 0.9 to 1. Given our current cash balance, ongoing cash flow from operations and total borrowing capacity, we remain well positioned to meet the financing needs of our business moving forward. With that, I'll turn the call back over to Jeff to cover our sales and earnings guidance for the second quarter of fiscal 2020.

Okay. Thank you, Kevin. We expect sales in the second quarter fiscal 2020 to range between $685 million and $705 million. The midpoint of this range implies an organic revenue increase of 7% compared to the same quarter last fiscal year. We expect consolidated gross margin in the second quarter to range between 36.6% and 37.6%. This midpoint gross margin forecast is 100 basis points higher than the second quarter of fiscal 2019 reflecting improved production leverage, lower steel prices and net benefits from our ongoing profit improvement initiatives. Operating expenses in the second quarter are expected to range between $189 million and $193 million. We anticipate earnings per share to be between $0.85 and $0.89 per share in the period and our assumed effective tax rate is expected to be between 21% and 23%. With that, I'll turn the call over to the operator, and we'll take your questions.

Thank you. [Operator Instructions] And our first question comes from Budd Bugatch with Raymond James. Your line is open.

Good morning, Andi. Good morning, Jeff. Good morning, Kevin. A couple of questions if I could. Let's talk a little bit about gross margin, it's most notable in terms of segments. In the Retail segment, you addressed it qualitatively and perhaps directionally. But can we get a little more clarity on maybe some data on the impact of commodities, tariffs and what's the new distribution center transition costs would be called out for? And what that looks like going forward for the next quarter and the next couple of quarters?

Hey, Budd, this is Jeff. I'll start. John is here, so chime in John with any color you have. So -- and just to clarify Budd, you want to -- just Retail or you want to get a sense for cost price pressures and benefits for the consolidated group?

Both if I could. I mean we -- with this segment model within the company and we obviously like to carry that forward with -- for consolidated results.

Yes. So let me start with the consolidated numbers, Budd, then we can talk -- we can kind of dig into a few comments on the Retail segment. So for the quarter -- I'll talk year-over-year, I'll just give you kind of a walkthrough of some of the major drivers on the gross margins. All-in-all, we were up about 70 basis points. Tariffs, tariffs pressures on a gross basis, of course, this is before any of the actions that we've taken, which we will be -- I'll cover in some of the other categories here, 90 basis points of pressure year-on-year. In the Retail business specifically, the impact of the net freight pressures that we referenced on the prepared remarks, about 50 basis points of pressure at the consolidated level. The distribution center move by itself, and John can provide further color on this of course, that's probably another 40 basis points year-on-year on the gross margin, negative. And then offsetting that we had a -- this combination of profit improvement initiatives that we talked a lot about, along with specific pricing actions that have been taken in the business accounted for about 210 basis points of benefit year-on-year. And then steel and commodity prices, also now a help to our gross margins, about 40 basis points of benefit. So I did my math right, that should get you close.

We got 250 of -- this is I’ve taken consolidated, 250 of good guys, and I heard 130 of bad guys. That’s 120. What did I miss? Tariffs remind me the other one of the negative 40 of …

Let me just walk you through it one more time here quick, just so that we're all on the same page. Tariffs of 90, pressure; freight related expenses in the Retail business, pressure year-on-year of about 50 basis points; the DC moves within the Retail business about 40 basis points; pricing and profit improvement initiatives collectively, benefit year-on-year of about 210; and steel and commodities account for another about 40 basis points of benefit.

Got you. Okay, that's right. I missed the 50 as separate item. Okay. That's very helpful. And going forward, Jeff, how do you think they play out? What happens as you look forward?

Yes, sure. So our guide for the second quarter implies kind of the following headline assumptions. Tariffs, we think are -- continue to be a pressure year-on-year, about 60 basis points we would estimate. The freight pressures within the Retail business we think are on the same order of magnitude year-on-year, probably somewhere 50 to 60 basis points of pressure. Pricing and profit initiatives similar as well year-on-year, I’d call it maybe 190 to 200 basis points of benefit, are assumed. Steel and commodities, we can start to see a little bit more benefit from steel and commodity prices, mainly steel-driven. Just if you look at the directional -- the direction of the steel index, it's actually been drifting down. And so we should see about 70 basis points of benefit next quarter. And then, other puts and takes, we -- including mix by the way, probably it’s another 30 basis points of pressure. So all-in, I think our guide implies about 110 basis points of year-over-year improvement.

And then DC move, the quarterly, that goes away.

Correct, the DC move is largely done at this point. And then John, I don't know if you’d add anything to that at all? Any additional color on that?

It was a huge undertaking in the quarter. But we moved about 700 containers worth of merchandise, besides the regular ongoing receipts of new goods coming in from the old facility into the new state-of-the-art facility in Batavia, Ohio. I was down there last week. It's up running and really will be a positive going forward, while it was a drain during the quarter.

And so the delta for the transition costs were primarily the freight of moving goods, one from the other that don't repeat, right? That's the -- that was the -- that’s the nature of the costs?

That would be one of the elements. We also of course, on a GAAP basis, were paying double rent. So we're paying rent on the old facility and the new facility. And just with the cost of getting everything put away and into the new locations. So all the subs mold with that move. But we are completely out of the old facility at this point and fully operational. We'd love to have you see at some point out of the new facility.

And is there a delta in depreciation now that the new facility is up and operational? How does that work?

Yes, Budd. There is going to be some additional depreciation drag. It's included in the guide. I don't have that number off the top of my head. It's going to be incremental, a bit higher than the old as you would imagine.

Okay. Just a couple of other questions. I know, I'm going to limit myself to three I think. The digital efforts which is obviously of interest to many investors. How is that working in the Retail side? Can you give us some color of the mix of e-commerce business, what are you seeing on that mix? And since DWR is both a retail business and ultimately, maybe some contracts, can you give us some flavor as to how those revenues and profitability are working? Because obviously, the profitability is a major issue.

Yes. And hey, Budd, let me start off with a little bit on the digital transformation efforts. And then I'll turn it over to John. We don't break out this business in segments. So I'll say that we've kicked off a really large scale effort to upgrade our e-commerce experience. So starting with customer journeys, improved functionalities whether that’s new visualization, configuration capabilities, and also expanding our e-commerce presence across the brands and geographies. So this is pretty major undertaking and that is underway. We're also on the contract side looking at continued adoption of [MRL] and we'll continue, as I said, in our prepared remarks, expand internationally. We're also looking at launching two separate data analytics senior positions and data analyst capabilities. So along with the improved e-commerce presentation and stage, we'll also have a larger and much more capable data analytics team to back that up. And then we are looking at A/B testing right now for help with our retail shipping models, but we evaluate shipping freight and shipping revenue. We're testing a variety of things to determine what our next steps are going to be there. And then also looking at new pricing platform and products platform. So loading all of our products into one database, so that we can easily access them across all of our brands and then looking at ways that we can price more quickly. So there is additional effort around e-commerce that is far-reaching, improving our customer experience, improving our speed, improving our presence to the customer, understanding our customer better. And then there's also the IT backbone investment that we're making around products, that we're making around how we interact with our dealers on the contract side of the business. As far as the e-commerce side of the business in retail versus the bricks-and-mortar side, obviously e-commerce is growing as in every other retailer at a large rate and we continue to think that HAY will be a very, very, very important e-commerce presence. So we continue to expect to see growth in both of those areas. And John, I don't know if you’d add to that.

Yes, I would just say that we're looking for both quick wins and long-term wins. And so, we're implementing at the end of this month a series of changes to the dwr.com site first. And then based upon success there, we'll be rolling that out across our other platforms hermanmiller.com and hay.com. And then there's other projects that will take a little bit longer. And as Andi mentioned, going to one Herman Miller and being able to share a product information seamlessly across our businesses will be a huge advantage going forward.

Okay. I'm sure others will get into more -- trying to get more specifics on the e-com side. Just last from me, Kevin, you did talk about the new revolver. Any changes to interest structure -- interest rate structure on any of that debt commitment fee differential, the rate differential?

Yes, the new deal -- so we upsized it by $100 million to provide more liquidity. Our interest grid improved a bit in a couple of spots. We're at the spot, we're at on the grid. It'll be roughly the same going forward from an interest expense perspective.

And anything on the commitment fee since you've upsized it? Do you have more interest expense from that?

The amounts were somewhat similar to what we paid last time on a larger deal. So the basis points came down a bit. So that will flow through at a pretty similar run rate.

Thank you. And our next question comes from Steven Ramsay with Thompson Research. Your line is open.

I wanted to start with the specialty, the old specialty segment inclusion in North America, how the turnaround in those units is going. I mean, clearly, good to see a strong result from the whole segment when you include the old segment in. So just trying to get color on the headwind of those segments and the benefit if there was improvement?

Hey, Steven. This is Jeff. I'll start with a few comments and then certainly Andi will join in. So I want to be real careful. Hopefully you understand, we're reporting the business on the basis of the combined segment now. So I'm not going to give a ton of detail on the individual businesses. What I will say is, on the contract side, all of these businesses are largely contract focused. And those businesses are continuing to see collectively the kinds of growth rates that we are generally speaking, talking about in total. So good uplift in the majority of those businesses. As you know, what we -- prior to making the change, we've talked a bit about this on past calls, we have one of our subsidiaries that's healthcare focused that is actually seen pretty good top-line growth in the last -- as we closed last fiscal year, but we were struggling a little bit with kind of getting that translated to bottom-line profitability. Those -- that work is ongoing and we are taking that whole process very seriously, and we've actually made some improvements there. So I'm not going to give you a detailed color on each of those businesses. But I can tell you generally speaking, the businesses reflect the kind of contract growth that we're reporting in total.

Yes, I would say, we see nice growth across all the segments. But to add to that, Steven, what we've also seen as we think about one Herman Miller and we bring all of these contract partners under one leader and one sales force, it’s how we're showing up to the customer, how we're showing up to the A&B community. We've really simplified our approach and we've made it easier for them to access many of these brands, and in some cases I think built awareness that we are all part of one group. So, I think that piece of ease of operation and efficiency is definitely showing up across the board.

Excellent. And then -- I know this is a sensitive topic, but maybe high level, you can talk to any resistance to pricing and getting pricing in recent months? It seems from -- not necessarily peers but various companies and different channels, some resistance to pricing as further tariffs are being implemented?

None that we've seen it this time.

Great. And then in International, just thinking about -- on the top-line, was it purely a comps issue or is there any fundamental slowing of demand there? And then on the gross margin improvement, with the slight pullback in sales, is that just a function of mix or is that a function of pricing that you've put through in the past flowing through?

I would say primarily comps, Steven. If you look at the performance in International in Q1 of last year, the two-year comps are still on the 20s, which we're pretty happy with. We had some very large projects in our EMEA region last year. But one place where we have seen slowdown, which is no surprise, is the UK and that's been happening a while with the Brexit uncertainty. But we still see strong growth in APAC and LatAm and we have overall a lot of confidence in our international businesses. From a gross margin perspective and Jeff please add color to that, we've had a lot of efficiency that we've seen from our combination of our manufacturing facilities in Dongguan in Asia. And that's really helped us to capture some increased profitability across the international region as well. And I would just say to shout out to the international team and our teams in general, we've done an excellent job of managing operating expense and profitability this quarter in the face of some really interesting challenges. So I think the team deserves some credit for their ability to turn that profit performance with declining sales.

Yes. Steven, this is Jeff. I thinks that's spot on. One little bit I'd add to that on the gross margin side is, that's a business now where we're seeing -- for a long time that business just didn't have the volume running through the various operations to tell a similar leverage story as we would historically get in our North American manufacturing operations. We're seeing more volume run through the factory now. Their ops teams have done amazing job and I think we're benefiting leverage basis in a way that we have historically as well.

Thank you. And our next question comes from Matt McCall with Seaport Global. Your line is open.

I actually want to follow up on Steven's questions. So, Jeff, you gave -- when you broke down to Budd about the different buckets of puts and takes, you said 210 basis points from price and profit improvement. What about just price? Did you have price enough to offset your cost if there wasn't any inflation or the tariffs impact, where you price cost positive without the profit improvement effort?

Yes. Yes.

Okay, I should have followed that up with, if so how much?

That’s no.

That's why I asked it. Sorry, yes but -- so what was the price cost benefit? And then when you think about the price cost outlook, just given what you said about steel, what does that turn into, just the pricing side?

Yes. Probably 100 basis points of the number I gave you, also net of the tariff impact.

And is that -- so that the -- that was the Q1. What about in the guide?

Of the same order magnitude, Matt.

So maybe, Andi, you mentioned a comment on the business roundtable. I think the actual metric yesterday wasn't as encouraging and we've actually written some of things about some of the macro factors we're watching. But clearly, you guys are not seeing the impact of that. Can you talk of -- and it sounds like the pipeline is good. So can you talk about -- why is the -- why is that not more concerning? It doesn't sound like you're calling out any indications of concern from your dealers, anything like that. Why is the -- what do you think is driving the strength, despite what appears to be a little bit of a moderation in the macro?

I think what we're still hearing in there, now the customers and the A/B community all the time. We're still hearing that the work for talent is really contributing to people looking at their workplaces, people understanding how they can provide places that people want to work. We aren't seeing a slowdown there. Some of it looks good in a short-term basis and a long-term basis, there are A&B partners, even architectural billings have been down slightly. If you look at the long-term in the last six months to 12 months, we aren't seeing indicators out there that are concerning to us right now. Now, obviously, as everyone else is doing, we're watching carefully. But right now, we really feel to work for talent. We really feel American companies and consumers are strong. Jeff, you have something to add?

No, I think that's right. It's exactly right.

And then I guess the -- two more quick ones. The SG&A outlook, it looks like there's a little deleveraging on a year-over-year basis implied, if we did our math right? Is anything you want to call out or explain there, or did we do our math wrong?

No, I think you're right, Matt. I think there's a couple of things. Number one, we're off to a good start on the fiscal year. So expect -- and again, this is year-over-year, I assume your math is based on. There's going to be some drag from instead of bonus accruals, assuming we can keep the pace, right? That won't be earned if we don't earn it. It won't be paid if we don't earn it. But right now, that's what the guide implies. That's part of the answer. I think in fairness to -- some of this is, as Andi alluded to some of the investment we're making on various digital fronts, all actions that we think are mission critical to the strategic direction of the company, some of that is going to require some incremental investment and I think that's what would represent the balance of what you're seeing largely.

Yes, for sure.

Okay. And then last one. The take -- you took your targeted savings or your savings target up. What drove that change? What changed with your outlook?

Yes, Matt. This is Jeff again. It kind of alludes to pricing. I think our pricing realization has lot -- has been a bit better than we had earlier anticipated. And as a result of that, that really accounts for the majority of the difference.

Okay. So pricing is lumped down with the profit improvement efforts?

There are -- this is where -- that's why I lumped them together in my walk, Matt, because there are certain pricing actions that we've taken that I would classify kind of act outside of the specific profit initiatives that we've been talking about. But at the end of the day, some of our profit improvement initiatives have been very directly associated with price actions. And so it's a little hard to draw the bright line in between the two. We've somewhat considered them collectively in our internal and how we’ve operated the business internally. So that's why I lumped them together. But yes, there are some in both buckets.

Thank you. And our next question comes from Greg Burns with Sidoti & Company. Your line is open.

Just had a question about the retail demand trends. We've seen the -- it looks like the comp -- the comparable brand sales of -- the growth there has slowed down a little bit. So I just wanted to get your view on the outlook for growth in the Retail segment. And if you think you can kind of maintain the current pace, given that the comparable brand sales have been a bit lower than reported revenue growth? Thanks.

Greg, hi, this is John McPhee. So one of the things with the DC move was, it slowed our deliveries during the quarter, which impacts future sales going forward, right? We had to publish that due to the transition, our delivery times would be a little longer than historically they would have been. And so, we had some pressure there. But overall, I believe the trend is positive and certainly having the move behind us will allow our team to put 100% of their focus back on selling. So that should be positive going forward.

Okay. And then from a profitability perspective for that segment, I know that the DC move is behind you, so maybe some of the duplicate costs are rolling off. But what's your view on, what your profit outlook for that segment of the business for the remainder of the year? Do you foresee that getting back to positive operating earnings sometime this year? Thank you.

Hey, Greg, this is Jeff. Yeah. So we outlined a number of things that we -- in our prepared remarks that we feel are temporary pressures in the business. Among them is the kind of near-term items that are, I think, behind us related to the DC move. There's some additional costs that I would characterize as they will be ongoing and we will ramp into improved profitability as we begin to leverage them. We talked about investment in the launch of the HAY brand as an example. The effect of having six stores today that are -- that weren't in place a year ago at this time and the fairly well documented data across our store portfolio would suggest that, that takes a period of time for those stores to mature. And so, if you factor all of those out, we think going forward our guide for Q2 first of all would imply something closer to breakeven operating margin for the quarter. So let's just be clear on that. But as we get into the back half of the year, we believe we start to see the ramp up of profitability against some of those investments. We're like closer to 3% to 5% in the back half as we kind of get toward Q4 op margins for that business. And then our job is to continue to ramp it beyond that, and we do believe that that's possible. It will take a little bit of time.

And then, are your dealers currently selling HAY, do they have access to sell those products yet?

Yes. We localize several families of products throughout the first couple of quarters in a year and they have access to those products, as well as products that we can manufacture, outsource and we're ramping up sales and our dealer network in North America. And that as we work towards expanding, HAY will continue to have that same presence in other countries in the world. But so far, HAY has been very strong.

And then lastly, you talked about the digital efforts on the Retail side. But on the contract side, what percent of your dealers have adopted those new digital tools? And maybe if you can just give us a little bit of color on the effect it has had on your orders? Like have you been -- have you seen increase in your wallet share, your dealers, at the ones that have adopted the new digital tools? Thank you.

I can't speak to an increase in wallet share at this point. But what I can say is that dealers have adopted it and the majority of our dealers have and will continue to. It's -- again, it's a gradual rollout dealer to dealer. What we've heard from our dealers over time is that we're very complicated to work with and also that it takes a lot of time to visualize and specify our products. What we're hearing from them is that they're saving anywhere from 30% to 60% time. So, it's taking them that much less time to actually design and specify the products, so that's helping them. [Hire a] designers, use the designers they have more effectively, and spend more time with customers. So, we anticipate we will see an increase in wallet share. We also anticipate we'll just see better interactions with our dealers and at more time, the savings from them. And Kevin, would you want to add anything to that?

No, I think the point is, we've definitely hit in North America a pretty good cross-section of the dealer base of certified dealer network, that type of thing. I think that 3,500 products -- projects that had been visualized using this new tool starts to show the adoption. It was up nicely sequentially from last quarter, but we're still only a couple of quarters in. So to Andi's point, the key is freeing up time for our designers and sales people to focus on the customer and spend time with them.

Thank you. And I'm showing no further questions at this time. I'd like to turn the call back to Andi Owens for any closing remarks.

Great. Thanks, Catherine. Thank you all for joining today's call. We will, of course, be back to you in December with a progress update and I hope that you all have a great day. Talk to you soon.

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now all disconnect.