Diversey Holdings, Ltd. (DSEY) on Q1 2022 Results - Earnings Call Transcript
Operator: Greetings, and welcome to the Diversey's First Quarter of 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. . As a reminder, this conference is being recorded.
Grant Graver: Thank you. Hello, everyone, and welcome to Diversey's first quarter 2022 earnings call. With me today are Phil Wieland, our Chief Executive Officer; and Todd Herndon, our Chief Financial Officer. As a reminder, during this call, we will make forward-looking statements. Some risk factors that may impact these statements and could cause actual future results to differ materially from our projected results are described in this morning's press release and in the reports we file with the SEC. The company does not undertake any duty to update such forward-looking statements. On today's call, the company will discuss certain non-GAAP measures and make references to certain supplemental data, which we believe can be useful in evaluating our performance. The presentation of this additional information should not be considered in isolation or as a substitute for results prepared in accordance with GAAP. A reconciliation of these non-GAAP measures and reference to supplemental data can be found on our Web site at ir.diversey.com and in our most recent annual report. And now, over to Phil.
Phil Wieland: Thanks, Grant, and good morning to all of you dialing in. There are two areas I'd like to highlight this morning. First, I'll provide some initial thoughts on our strong first quarter results and then read across to our confidence in hitting our full year revenue, adjusted EBITDA and margin goals. I'll then discuss how our business model is uniquely built to tackle the challenging global dynamics. Then I'm going to turn it over to Todd for some meat on the bones of the quarter and cover the 2022 outlook. So starting with the quarter, I remain confident about the resiliency of our business and our long-term growth prospects. As I'm sure you know by now, Diversey is one of only two large global companies that offer a full suite of hygiene, infection prevention and cleaning solutions in a highly fragmented industry. And it's that fragmentation coupled with the foundation that we have built for organic revenue growth, margin improvement and consolidation that gives us a competitive advantage in penetrating the over $46 billion total addressable market. Our first quarter results highlight the strength of our business model, despite the current macro environment. Specifically, revenue improved by 4.5% as compared to the prior year or 6.8% higher than pre-pandemic levels with significant recovery still to capture. Our constant currency organic sales growth accelerated to 7%. That revenue growth was driven by our base Institutional, that's our Institutional business excluding infection prevention, of 26% and Food and Beverage grew by 15%. Adjusted EBITDA margin of 9.1% were in line with our expectations for the quarter, and our forecast has significantly improved sequentially throughout the year as our pricing and cost containment initiatives are implemented and continue to mature. Moving to the macro and how our business model is standing up to the challenges, we are clearly operating in an unprecedented environment, with multiple COVID variants impacting global economies, with rising inflation, with supply chain bottlenecks, and other operating factors that can be difficult to predict, and really challenging to manage. I've been extremely pleased with the resiliency of our business model and our management team's agility in the short term, while maintaining focus on our long-term growth goals. Some highlights of our current initiatives. Firstly, we've been focusing hard on pricing to cover inflation. While input costs continue to rise steadily, we're implementing price increases across our various geographies and products. In the first quarter, we realized more than 6% revenue growth from pricing. And I expect this level of pricing to increase further as we move through the year. Today, our price increases have been well accepted. We expect these increases to remain intact, reflecting the essential nature of our products and services and their appeal to customers. Secondly, we have maintained a focus on controlling our fixed costs and leveraging our variable costs. Our first quarter margin of 9.1% is reflective of the near-term inflationary environment. As our pricing actions continue to be implemented, including additional pricing as required, we would expect our margins to meaningfully improve between now and the fourth quarter of the year. We also continue to invest in opportunities to expand margins into next year and beyond. A good example being our plant investment in Kentucky, which remains on track to be completed by the end of this year. In that example by co-locating our main warehouse with manufacturing and adding more capacity to bring currently contracted manufacturing volumes in-house, in combination with optimizing freight lanes. We expect to improve the total company margin by roughly 100 basis points from next year, as we work to deliver our targeted long-term EBITDA margin of 20%. So whilst it's still early in the year, we're pleased with our early pricing and cost containment results as we continue to navigate this unprecedented environment. Whilst of course we cannot predict the pace at which variable cost and overall inflation begins to normalize, we will maintain pricing discipline so we can drive revenue growth and capture margin expansion opportunities as the year progresses. But just as important, I'm very pleased with our continued progress on strategic growth drivers. We continue to evolve our value proposition with digital innovation and a focus on service, which is leading to higher retention levels and acceleration of net new customer wins and a robust pipeline of additional growth opportunities. This is especially strong in our strategic focus areas, including U.S. food service, global accounts, and water treatment. All of this is expected to drive double digit top line growth in Q2 through to Q4 this year. With that, let me now pass it over to Todd to give you some more detail on our strong first quarter and our outlook for the remainder of the year.
Todd Herndon: Thanks, Phil, and good morning, everyone. Before diving into the numbers, let me tell you why I feel so great about our results. First, we did what we said we'd do. Our top line growth and pricing were at the high end of expectations. EBITDA margins will improve throughout the year. I'm happy with our cash flow. And finally, I'm confident in our full year outlook. Now, starting with the results. Net sales for the quarter were 660 million, an increase of 28.5 million or 4.5% as compared to the first quarter of the prior year and 7% organic constant currency growth. I'm especially pleased with our revenue growth in the quarter, which is inclusive of the headwind associated with the normalization of our infection prevention business. This resulted in a decline of 76 million in infection prevention revenue compared to the first quarter of 2021, in line with our expectation. Now, moving on to our segments. Let's start with Institutional. As Phil mentioned, our Institutional base business represents more than 60% of our first quarter revenue and continues to perform well. First quarter revenue was 395.8 million, a 26% increase over the prior year quarter, driven by a combination of new customer wins and continued expansion with existing customers, as we continue progressing towards a return to pre-pandemic levels. Speaking of new customers, we're on track to exceed 3% annualized net new customer wins, improving from 2% in 2020 and 3% in 2021. As it relates to our existing customers, we highlighted in our fourth quarter call that we have an opportunity to organically recapture at least 220 million of revenue in the coming years as countries and businesses begin to ease COVID restrictions. Our Institutional recovery remains on track, with the euro above 90% of 2019 volume and emerging markets at above 80% in the first quarter, showing good progress to start the year. Despite the additional remaining recovery opportunity, first quarter revenue exceeded pre-COVID levels by 6.8% in total. I believe this is a testament to the resiliency of our business model and the effectiveness of our growth initiatives. Our infection prevention business, which represents approximately 10% of our revenue, began to return to more normalized levels beginning in the second quarter of 2021 and continued throughout the year. First quarter infection prevention revenue of 76 million represents a 50% decline versus prior year, and what we believe to be a sustainable run rate reflective of this business as we move forward. Our infection prevention business continues to reflect new wins with revenue more than 25% higher than pre-COVID levels, and we expect to continue to make gains in this strategic growth area. Finally, our Food and Beverage business, which is roughly 30% of our revenue, has also generated positive momentum supporting our long-term growth goals. We continue to experience high customer win rates for new business and recently introduced water treatment to further expand our organic growth initiatives. Our revenue of 187.8 million in the quarter is a 15% increase over the comparable prior year quarter. Now, let's move onto adjusted EBITDA. Consolidated adjusted EBITDA for the first quarter was 60.3 million, a 35% decrease as compared to the prior year quarter. This was above the high end of our guidance range and represents a 15.7% increase over the pre-COVID baseline in 2019. As Phil mentioned, we're especially pleased with this outcome in light of the numerous inflationary pressures we've had to overcome throughout the first quarter. Our Institutional and F&B segments delivered adjusted EBITDA of 53 million and 22 million, respectively, representing declines of 26% and 31%. Both segments were impacted by high input cost inflation, particularly in Europe due to the war in Ukraine, and we're taking aggressive pricing actions to address the price cost gap. Now let me touch specifically on cost for a moment. The current reality is that inflation is both difficult to predict and has progressed at an unprecedented pace, which makes life really tough. Cost volatility can put pressure on margins in the short term, but over time, it will eventually turn positive as inflation recedes and we continue to price for the value we provide to our customers. To offset and get ahead of costs, our full year pricing expectation for 2022 is an increase of greater than 8%. Combined with our steady productivity gains, we anticipate offsetting inflation first in dollars and as inflationary pressures moderate, I believe we can capture margin improvement as well. In these tough times, cash becomes even more important. As a result of that, I've invested a disproportionate of my time to focus on cash generation and I'm very pleased with the first quarter results. Free cash flow was 19 million in the first quarter of 2022 as compared to a minus 73 million in the prior year quarter. This is the first time we have posted positive free cash flow in the first quarter, and we see this as a good indicator for the remainder of the year. However, given the current environment, we will likely be more selective in the short term when considering opportunities in our strong pipeline of accretive M&A. At quarter end, we had cash and cash equivalents of 216 million and available liquidity of 658 million, which I view as a position of strength. We have roughly 50/50 split between fixed and floating rate debt with interest rate caps in place for our protection. I'm confident in our liquidity. Our net debt leverage ended the quarter at 4.7x. We are focused on generating increased positive cash flow for the full year of 2022 and expect to see net debt leverage improvement by year end. Finally, let me provide our view on the 2022 outlook. We remain confident in our ability to grow our top line while improving our margins. As we look forward to our long-term opportunity, we are extremely energized. We're encouraged by the recovery of our base business as markets reopen from COVID with a continued opportunity to capture additional revenue that was lost during COVID. We also expect to continue to win market share while maintaining focus on our pricing to cover rising input costs. The infection normalization should now be substantially behind us. For the balance of 2022, we anticipate a return to growth in infection prevention based on our innovation and differentiated technology. While we're encouraged with our first quarter results and our positive momentum, we continue to operate in an unprecedented environment. I reaffirm high single digit percent revenue growth and adjusted EBITDA of 380 million to 420 million for 2022. If the positive trends we saw in the first quarter continue and the inflation environment begins to evade, we would expect to update our outlook as the year progresses. One last item before I turn it back over to Phil. While we do not plan to provide quarterly earnings guidance, our current forecast is that approximately 37% of our full year adjusted EBITDA will be earned in the first half of 2022, with the remaining 63% in the back half of the year. This first half, second half outlook reflects the pre-COVID historical seasonality of our business and the continued progression of our various cost initiatives, coupled with our price increases and surcharges that are expected to continue to build throughout the year. With that said, I'll hand it back over to Phil for a quick wrap up.
Phil Wieland: Thanks, Todd. Let me share a few closing thoughts. Firstly, on growth. We have strong customer retention, long tenured customer relationships and a robust pipeline of new customer growth opportunities. The 2% annualized growth for net new wins in 2020 that became 3% in 2021 is showing further growth in 2022. And secondly, on pricing. We have demonstrated pricing power to offset inflationary pressures. The 6% we saw in Q1 will grow to more than 8% for the full year. This, along with cost containment, will deliver sequential margin growth through 2022. Finally, we are pleased with the progress we're making in transforming Diversey and with the resiliency of the business model that delivers during both good times and challenging times. Let me close by thanking our team around the world for their continued hard work in delivering our mission to protect and care for people. And with that, operator, please open the line for questions.
Operator: Thank you. At this time, we will be conducting a question-and-answer session. . The first question comes from Josh Spector from UBS. Please go ahead with your question, Josh.
Josh Spector: Yes. Hi guys, and thanks for taking my question. Just first of all, on the guidance, you held your guidance for the year. Your pricing appears a bit better. Growth, I assume appears perhaps a little bit worse, at least from a macro perspective. Just curious if there's any change in bias from the midpoint to perhaps a top or bottom end versus what you're seeing today?
Phil Wieland: So, Josh, I think, firstly, I wouldn't say that we were seeing our growth lower than we were previously indicating. Actually, quite the contrary where we're really pleased with the way that our growth is tracking this year. We just mentioned before how we're seeing that increase. We've seen that increase steadily over the last few months. Having said that, it's still very early in the year and therefore it's not appropriate at this time to increase the guidance. And therefore, I think we stick with the range that we've got and we wouldn't be pushing you up that range at all. We're pretty comfortable with our consensus at the moment.
Josh Spector: Okay. Thanks for that. And just on Food and Beverage, just a question around the growth there overall. You have a lot of things going on in between pricing; base new wins, talking about the water treatment business ramping. Curious just on the volume side, if you could provide any context about how things are trending between the new win side of the heritage Diversey products versus how much of the volume growth is the water treatment selling taking place? Thanks.
Phil Wieland: Yes, sure. Maybe it helps for me to unpack those F&B numbers a little bit. If you take our organic constant currency, F&B top line, it's about 14%. Within that, the pricing in F&B is about 8.5%. And the volume is the balance. It's still the case that the predominance of our volume growth in Food and Beverage is coming from our core cleaning and hygiene products. We've been on a very good winning spree there right through '20 and accelerated through '21. Water treatment is coming online most significantly. We said at the end of last year, we'd got to double digit millions. And we thought that that will continue to increase. I'm sure it has. But it's still not the most significant part of our growth.
Josh Spector: Very helpful. Thank you.
Operator: Thank you. The next question comes from Vincent Andrews from Morgan Stanley. Please go ahead, Vincent.
Vincent Andrews: Thank you and good morning, everyone. Todd, I just wanted to close the loop on one of the guidance items on COGS, because I kind of remember when you reported the fourth quarter, oil was $125. And I think if you add it in at $25 million to $35 million incremental cost sort of based on some analysis, you've done regressing sort of that oil price range around a basket of raw. So obviously, oil is not at 125 anymore. It can clearly be volatile. But I just wanted to see whether sort of the reiterated guidance assumes any change in the oil price assumption or the flow down into those intermediate chemicals?
Todd Herndon: Yes, Vincent, I appreciate the question. I would tell you that our view is still roughly the same as the outlook we gave at the end of our last earnings call. We're still in that range, albeit I would say estimated costs have slightly increased and we're implementing additional pricing and surcharges to offset that. I think the net range we gave this last period is roughly the same. I'd say we're also confident that we can continue to manage the business in a very challenging operating environment, and expect really headwinds to shift the tailwinds as changes abate. We're off and expecting a good jump off point as well as we enter 2023. But we're effectively kind of in the same place net where we discussed last quarter.
Vincent Andrews: Okay, understood. A lot of moving parts, which I'm sure will keep moving. Maybe just a follow up on the second quarter. Is that progressing different than you thought when you reported 4Q or did the Street -- did we all just kind of miss model it?
Todd Herndon: I think maybe it's -- staying on inflation just for one second, clearly inflation is having a significant impact on our cost base. I think as a reminder, our direct costs, material costs were up 10% in Q3 of last year, 16%, that accelerated to 26% in Q1 and we're expecting a full year outlook of 28%. Implied in this full year view is that we expect cost to remain at an elevated level at about where we are for the remainder of the year. And in terms of putting it into numbers, given direct material costs are roughly 33% of revenue, that 28% inflation is worth about 240 million in the year, which is what we're seeking to overcome in terms of dollar inflation first, and that takes some time to implement given the price cost time lag, that we've discussed, in the future. So our full year outlook really hasn't changed. I think maybe just the pacing of how the numbers will flow quarter-on-quarter may have changed a little bit, which is why we gave the outlook of 37, 63 in the script that you've heard us talk to, which I think is just a little more precise than when we first learned about the Ukraine situation and how it may phase.
Vincent Andrews: Okay. That's very helpful. I'll pass it on.
Phil Wieland: Vincent, maybe just another thought. When you look at the 37 that we're talking about now in the first half, if you go back to the pre-pandemic period, that was about 41%, right? So the business always had this fairly significant seasonality, H1 versus H2. It's obviously a little bit more extreme than that this year, just because it takes time to pass the inflation through to pricing. But I think that 41, 59 data point is quite interesting when thinking about what we've just been talking about.
Vincent Andrews: Yes, that's really helpful obviously. Not a lot of clean year comparisons given what's happened over the last couple of years. So I appreciate all the color.
Phil Wieland: All right. Thanks, Vincent.
Operator: Thank you. The next question comes from Chris Parkinson from Mizuho Securities. Please go ahead, Chris.
Chris Parkinson: Great. Thank you so much. So obviously the focus on margins has really been the cumulative impact of inflation over the last few years and ultimately since the IPO process. But when you take a step back on Slide 4 and you go over your sourcing, supply chain and operational excellence plans, can you just offer a little bit more color on ultimately where you -- once inflation is kind of fully dealt with, where you ultimately can go on the margin front for both segments and just how that filters into the EBITDA CAGR guidance over the long term? So just any additional color would be greatly appreciated. Thank you so much.
Phil Wieland: Yes, let me start. The first thing to say is, we've been very clear and we've reiterated a lot that we're tracking to 20% EBITDA margins. Nothing's changed in that at all. If you look at what we've been able to do on strategic sourcing, I think we feel really good about what we're doing there. In fact, we've probably put even more resource in this area as we've thought about how we can work with R&D to reformulate, how we can look at trimming the range, making sure that it works better for customers and also optimizes efficiency. If you look at supply chain, we've talked a lot about some of the M&A we've done to get more strategic control of our supply chain in places like Australia, but also this new plant that we're building in North America, we're really excited about that. It's going to come online towards the back end of this year, maybe slightly ahead of when we were first expecting and that's going to deliver 100 basis points improvement. Our operational excellence also is going well. I think we were well into that at IPO. We're still tracking with that. And I think maybe pricing is the one that we've really had to put extra focus on for obvious reasons. When we said at IPO that you were going to see us taken our responsibility as a market leader extremely seriously and we've done that. If you look at the pricing that we've passed in Q1, I think you can see that bearing fruit. We've invested a lot of time, effort and resource, not only into the basics but also to some of the more systems based solutions just to make sure that we're really doing everything we can to optimize across the board. And so rolling all that together, I think we feel really good about the 20%. I think it drifts back a little bit because, of course, we are having to manage this cost inflation. We don't know exactly when it's going to abate. We're expecting it to sort of be somewhere near the peak at the moment. But as what happens from here, quarter-by-quarter, it's hard to tell. So hopefully that gives you a bit of a sense of where we're going.
Chris Parkinson: That's helpful. And just a quick follow up on the free cash flow. You made a conscientious effort to kind of bring some attention in your prepared remarks on this. But just to dig in a little bit more, there was a decent amount of noise for the first couple of quarters just from 2021, much of that associated with the IPO process which is perfectly understandable. Once again -- once we get through kind of this difficult time on the inflationary front, how should we think further about the working capital metrics, any other moving parts, cash taxes, just any data points that can give the investment community additional confidence to further drive your net debt down further over the long term less than 4.5x would be greatly appreciated? But what should we be ultimately monitoring? Thank you.
Todd Herndon: Yes, let me just give you a color, this is Todd again, on maybe the '22 view. If you take that midpoint of the EBITDA guidance, we're going to see about 50 million in cash taxes set north of 75 million, just a little bit of cash interest, 75 million or 80 million of one-time costs. And that's really broken down by 30 million of our kind of North America footprint project we're excited about that goes away, about $7 million, $8 million of one-time stocks implementation. And then I'd say maybe 10 million of ongoing M&A, which puts to our kind of growth algorithm of a couple of points with inorganic growth each year and about 25 million of restructuring, which helps us towards our progression to 20% EBITDA margin outlook. And then we're going to have this year about 130 of CapEx, of which about 25 million to 30 million links to our North American footprint project, which then after this year, allows us to reset around that 3% cash kind of target investment on an ongoing basis in CapEx. And then this year, we expect to have a bit of favorable working capital for progressing on a number of issues. As an example, implementing supply chain financing to help extend our payables, doing a lot of work on investment in advanced planning to help our inventory accuracy service levels, as well as reduce our inventory over time. So we have a lot of focus in that area. And so that's kind of this year. And it should get around $100 million of free cash flow in 2022. And then as our EBITDA outlook increases, we'll clearly have that going forward. And if you want to think about your cash tax modeling, you might take about 12.5% of the incremental EBITDA and apply that to cash taxes, because we have some significant positive attributes to allow for that, around 3% of CapEx going forward and our one-time should migrate towards this $40 million, $45 million going forward, which then will clearly generate significant increases in '23 free cash flow over '22 even. That's hopefully a complete answer for it.
Chris Parkinson: Very much so. Thank you so much.
Operator: Thank you. . The next question comes from Ashish Sabadra from RBC Capital Markets. Please go ahead, Ashish.
Unidentified Analyst: Hi. This is Ajay on for Ashish. Thanks for taking my question. I just -- given it's been a few weeks since you guys implemented the fuel surcharge, I'm just wondering if you guys had any comments on how the customer receptivity has been around that, if you're getting any pushback? And then maybe if you could just comment on how quickly the surcharge is sort of designed to roll off if and when oil prices ease off as well? Thank you.
Phil Wieland: Yes, let me try to give you some insight here. I think the first thing to say is, whereas in Q1, everything we did on pricing was straight price and no surcharge. As for Q2 onwards, it's going to be a mix of straight pricing and surcharge. So you shouldn't think of this as it's all going to be surcharge going forward. What really matters here is that we explain the underlying dynamics to the customer so they understand what's going on and what needs to happen to the pricing. Let me give you a couple of examples that might help. So if you think of emerging markets, right, where volatile inflation has always been part of the operating landscape, it's almost all price rises still. So most of those changes that we're going to see in Q2 will be straight price rises. But then if you come into Western Europe, where obviously it's traditionally been a much more benign environment, there we're going much more with the surcharge. And we've implemented a system based on energy index that we're going to update quarterly. So the first one has gone in. On a quarterly basis going forward, we'll be making adjustments and that will be up. And then at some point, we'd expect that to come down. Maybe to give you a sense of it, as we think about our total pricing for this year, I think about 20% will be surcharge and the balance of it is going to be straight price. Maybe just coming back I think to the other part of your question, look, customers do not love this. But I think overwhelmingly, they understand it. We're able to explain very clearly the underlying movements in the commodity prices. And as we do that, they relatively readily understand the next step that we need to do this. We're feeling really about as confident as we can at this stage of the process that we're going to be able to make the progress that we need to across the pricing and the surcharges.
Unidentified Analyst: That's very helpful. Thank you.
Operator: Thank you. The next question comes from John Roberts from Credit Suisse. Please go ahead, John.
John Roberts: Thank you. The market's obviously concerned about high debt level companies in this rising interest rate environment. Are there ways you can accelerate the debt reduction by divesting or partially divesting? I'm thinking about TASKI, a relatively standalone unit. And do you need to own 100% of TASKI in order to get full value for the rest of your portfolio?
Phil Wieland: Hi, John. It's Phil. Let me deal with the TASKI thing. And then, Todd maybe can give a fuller answer to your question. We don't have any plans or expectations to sell TASKI. And I'll tell you why? The TASKI business is performing incredibly well. We've invested a lot in innovation. The guys have done a terrific job. And it's really bearing fruit and the future growth prospects are fantastic. And as we've said before, the TASKI proposition integrates really well with the chemicals proposition. And we think they work really well together to allow us to take market share. So no, I don't think we've got any plans right now in that respect on TASKI. But, Todd, maybe you can give a broader answer about interest rates and how we're kind of trying to manage the impact of those?
Todd Herndon: Yes, sure, Phil. First of all, I'd say we're cognizant about our net debt leverage, which was 4.7x in the quarter. We believe that that number will be 4.4x or below by the time we get to year end here based on our outlook. I'd also say we're pleased with our liquidity position at the moment. We had over $650 million in liquidity at the end of the quarter. And the fact that we have no maturities coming due on our long-term debt until early as 2028 I think puts us in a pretty good place at our weighted average cost of debt less than 4%. The other thing I think I would mention is we are looking at ways to generate cash creatively. We refinanced the business at an optimal time in the fall of 2021. And as part of that refinancing, we executed $0.5 billion across currency swaps that were in the money. And in Q1, as an example, we converted that favorable cross currency swap valuation into $44 million of upfront cash here that also increases our liquidity. So I think that's not an example of a divestiture or non-core asset but is a great example of how I think we're doing a nice job managing liquidity and generation in cash.
John Roberts: I was just thinking since water treatment chemicals could be managed without you fully owning all of the assets in operation that maybe there might be other parts of your business that could be still a big part of the portfolio, but you don't have to own everything.
Phil Wieland: Yes. John, it's a good thought and it's one obviously we've been spending a bit of time thinking through. But there's nothing significant that I can tell you about at this time.
John Roberts: Thank you.
Operator: Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And now I'd like to turn the call back to Phil Wieland for closing remarks. Thank you, sir.
Phil Wieland: Thank you for that. These are clearly tough times. But against that backdrop, we feel like we're acquitting ourselves really well. The pricing, as you've seen, has been market leading. Our new business growth continues to accelerate and our cost containment is bearing fruit. So, we're really facing into the challenges and steering the business both for the short term, but also making sure that we've got at least half an eye on the medium term. And we're navigating to optimize against that timeline as well. With that, thank you all for your questions and for listening, and we'll talk to you all again soon. Thank you.
Operator: Thank you. This concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation.
