Soho House & Co - Q4 2022

Transcript

Operator (participant)

Thank you for standing by. At this time, I would like to welcome everyone to the Membership Collective Group Inc. Q4 2022 results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Thomas Allen, Chief Financial Officer, you may begin your conference.

Thomas Allen (CFO)

Thank you for joining us today to discuss the Membership Collective Group's Q4 and full year 2022 financial results. My name is Thomas Allen, and I'm the Chief Financial Officer. I'm here this morning with Andrew Carnie, our CEO. Today's discussion contains forward-looking statements that represent our beliefs or expectations about future events.

All forward-looking statements involve risks and uncertainties that could cause the actual results to differ materially from the forward-looking statements. Some of the factors that may cause such differences are described in our SEC filings. Any forward-looking statements represent our views only as of today, and we assume no obligation to update any forward-looking statements if our views change. By now, you should have access to our Q4 and full year 2022 earnings release, which can be found at membershipcollectivegroup.com in the News and Events section.

We have posted our Q4 and full year 2022 earnings presentation, which can also be found in the News and Events section on our site. During the call, we also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or an isolation from our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release. Let me hand it over to Andrew.

Andrew Carnie (CEO)

Thanks, Thomas. Good morning, everyone. I'm going to start by talking through Q4 and the full year 22 highlights, then give you an update on progress we've made against our two strategic priorities. I'll hand over to Thomas to talk through the financial performance and to outline our guidance for 2023, and we'll end with Q&A.

Let's start with the Q4. We delivered a strong performance due to executing against our strategic priorities, leading to continued revenue and membership growth and improved profitability. Soho House membership hit a new high of 162,000 members, a year-on-year increase of 32% and a 6% rise quarter-on-quarter. We came in within our original guidance range despite the decision we made in the Q3 to reduce our annual target for 2022 new Houses openings from 9 to 7.

We delivered strong profit growth over the period with Adjusted EBITDA reaching $23 million, up $21 million year-on-year and above our implied guidance range of $17 million-$22 million. This was driven by revenue growth, which was up 47% year-over-year, and the implementation of the operational excellent initiatives we outlined last quarter.

More on that shortly. While our Q4 results show the progress we've made on profitability alongside continued strong membership demand, it's important to look at our full year 2022 picture to appreciate how much the business has grown year-over-year. The number of Soho House members rose 39,000 or nearly a third. We added around 10,000 members or more in each of North America, the UK, and Europe.

While our Cities Without Houses program grew the fastest at around 45%, highlighting the excitement people have for our membership, even in the cities where we don't have houses. Our total MCG membership was up 46% to 227,000, as we also saw strong membership growth in Soho Friends and Soho Works. It was a record year for new applications that are growing in all regions, the MCG waitlist rose to 86,000, up 22% compared to 71,000 at the end of 2021. That's despite our record intakes throughout the year. The number of frozen members continued to fall, down approximately 4,500 at the end of 2021 to approximately 2,250 by the close of 2022.

We delivered seven new houses over the year, growing our house footprint by 21% with exciting new USA locations in Nashville, L.A., and Miami. Continued expansion in the U.K. with Balham and Brighton and our first Scandinavian houses in Copenhagen and Stockholm.

We also expanded outside of our core Soho House business with The Ned openings in New York and Doha and the opening of The Line, San Francisco. The growth we've seen in membership and new openings as well as strong pricing power drove total revenues up 73% to $972 million. On Adjusted EBITDA, we've moved from a $24 million loss in 2021 to a $61 million of EBITDA in 2022.

While we are proud of the turnaround, it is still early days in our focus of driving improved profitability in 2022 Adjusted EBITDA does not reflect the true potential of the business. Finally, it's worth highlighting that in the Q4 we completed our $50 million share buyback program, spending $15 million to purchase 3.5 million shares at an average of $4.31.

In total over the year, we bought back 8.5 million shares or 4% of our shares outstanding at an average price of $5.91. Now let me give you an update on the progress we're making against our strategic priorities. To recap, you'll remember last quarter that we said we're refining our strategy to focus obsessively on two things.

First, growing enhancing the value of membership to drive long-term recurring revenue, recognizing that membership remains the core driver of our business. Second, delivering operational excellence to drive profitability and free cash flow, an area where we know we can do more and where we've identified and already implemented a number of initiatives. In line with our first priority, today we've announced a decision to change the group's name from Membership Collective Group to Soho House & Co.

As we've spent time as a listed company, we've recognized the benefits of being associated with a powerful and unique brand. The Soho House name is a huge asset for us, and we want to leverage that fully. This change is also in line with our move to strengthen our focus on the Soho House business while continuing to support our other strong businesses.

We would expect the name change to take effect later this month, the stock will trade on the New York Stock Exchange under the ticker SHCO. Members are at the heart and soul of Soho House, we know that bringing people together in our houses with great atmospheres is what matters most to them and us.

Starting in the Q4 and continuing over the recent months, we've focused on how we can drive even greater value for our members. We've significantly increased the amount of data that we look at by house, which has enabled us to provide the right service at the right time and tailor our programs such as menus and events to the local market and members. Here are a couple of examples.

At 180 House in London, we've introduced a more elevated 1970s-inspired menu, which leans into the design and feel of that house. We've also launched new events, programming such as weekly jazz nights and daily wellness talks to align with the atmosphere and approach. At two of our houses in Soho, the original Soho House at Forty Greek Street and Center Sixteen Street, we've designed new menus to reflect the differing member demographic behaviors and needs of each house.

Across all three houses, a third of the menu now is bespoke to that club. More broadly, we focused on two main improvements across our houses, driven by member feedback. Firstly, we've changed our menus to be more seasonal with more healthy options. Secondly, to improve service across all our houses, we've rolled out new staff training and realigned manager incentives with member satisfaction as the primary focus.

Both of these quality improvement processes will continue throughout this year. The changes have been well-received by the teams, and the initiatives are driving positive results where we've seen improved performance and member satisfaction across our houses over the past few months. New house openings in Miami and Stockholm in Q4 and last month in Bangkok further create value for members, and we're looking forward to announcing exciting openings throughout the course of 2023 in line with our target of five-seven new houses a year.

We've also seen good progress in delivering operational excellence to drive profitability and free cash flow. Our strategy here is clear and focused on three key areas. Leveraging data and member insight to operate and scale efficiently without compromising what matters most to our members, and a focused approach to expanding in-house margins and enhancing the membership value proposition.

We hit the ground running in the Q4 and have already made good inroads into a number of areas. We talked to you previously about the need to reduce our in-house operating expenses and in particular, our wage bill. Through more efficient rostering and ensuring that we have the right number of staff in our Houses at the right time for our members, wages as a percentage of revenues dropped approximately 1,000 basis points in December versus August last year. There's certainly a seasonal benefit here of how busy our Houses are in December, and I wouldn't expect the delta to repeat month-on-month, but it demonstrates the benefits that we can drive by implementing the initiatives we outline.

At the same time, we've also reduced support office expenses with targeted reductions on content and digital, as we discussed last quarter, and other corporate expenses across all parts of our business. The changes we've made in our F&B program continues to drive growth margin expansion with Like-for-like F&B margins 230 basis points above the final quarter of 2019. In addition, greater focus on driving higher occupancy in ADR led to RevPAR increasing 22% year-over-year at Like-for-like properties.

It's still early days in terms of driving the benefits of these profit initiatives, and we have much more to go, but we're on track, and we feel confident that this will help us generate stronger, more consistent earnings going forward, which is a great segue to pass over to Thomas to give more detail on the Q4 results and updated guidance.

Thomas Allen (CFO)

Thanks, Andrew. Total revenue for the Q4 grew 47% to $270 million or 66% on a constant currency basis. Membership, in-house, and other revenues rose 46%, 36%, and 70% year-over-year, respectively, or 66%, 54%, and 93%, respectively on a constant currency basis.

House level contribution increased 42% year-over-year. House level margins were up 30 basis points year-on-year, which was a decent result given Q4 2021 benefited from still ramping cost structures post-COVID, but our Q4 2022 margins were still impacted by the cost increases we saw earlier in the year that we are unwinding. Other contribution grew 190%, with margins increasing approximately 800 basis points, supported by strong Soho Home revenue growth, good results for our standalone townhouse and restaurants, and design fees.

Giving more details on revenue, we saw quarter-over-quarter revenue growth to the eighth consecutive quarter with three key drivers. Continued strong membership growth and higher fees drove a twenty-four and a half million dollar increase in membership revenues year-over-year. Strong footfall in both new and legacy houses led to stronger sales, which drove a $31.7 million increase in in-house revenues.

Other revenues were up $29.8 million, with Soho Home seeing a 104% increase in sales year-over-year. Our Q4 Adjusted EBITDA was $23 million, up $3 million quarter-on-quarter and $20 million year-on-year as we benefit from continued strong membership and revenue growth and the start of our additional profit initiatives. Our EBITDA also beat consensus of $19 million.

Moving to guidance for 2023, we expect to see continued momentum through the course of the year with strong growth across membership, revenues, and Adjusted EBITDA. In line with the guidance we gave with 3rd quarter results, we're guiding to at least 190,000 Soho House members by the end of 2023. A reflection of the strong demand we continue to see, as well as our record wait list, strong retention, and our plan to open five-seven new Soho Houses this year.

We expect to deliver total membership revenue of $355 million-$365 million, driven by our membership and pricing growth. We are forecasting total revenues of $1.1 billion-$1.2 billion, representing 13%-24% growth year-over-year, reflecting continued strong membership in-house and other revenue growth.

On our revenue guidance, we are assuming FX is an approximately $40 million headwind. We base our FX expectations on what banks were forecasting in December when we were finalizing our budget. Expectations and spot rates have both improved, but we would prefer to take the more cautious path given the headwinds we experienced in 2022. We're also assuming that like-for-like food and beverage revenue trends remain relatively stable to where we were in the H2 of 2022.

We see this as a prudent approach in case the economy weakens, which should be more than offset by our increase in members. Finally, we're guiding to Adjusted EBITDA of $120 million-$130 million, an increase of 97%-113% year-over-year, with implied margins of approximately 11%, up from 6% in 2022.

We are confident the continued strong demand for our business and initiatives we have put in place to drive greater profitability will deliver on this plan. Just one point of note is to remember that hotel, food, and beverage businesses like ours are seasonal, with Q1 typically the seasonally slowest quarter. We expect 1Q revenue and EBITDA to be less than 4Q 2022 before a more significant ramp-up in Q2 through the end of the year, as we benefit from more business when the weather is better and holiday events in the Q4.

Andrew Carnie (CEO)

Thank you, Thomas. In conclusion, here are the key points. 2022 was a strong year of revenue and membership growth, underpinned by robust retention, record applications, and a record wait list. We have clear strategic priorities in place to generate more profits and free cash flow and in turn drive shareholder returns. The initiatives we put in place against these priorities, including greater use of data analytics, are already driving results.

We are laser focused on delivering for our members and growing membership value. Finally, we're more confident than ever in the future of a unique global membership business, Soho House & Co, as we enter 2023 with momentum. With that, we'll now open to questions. Operator, can we take the first question, please? As a reminder, you can either ask your questions over the phone or submit them over the webcast.

Operator (participant)

To ask a question, please press star one. Your first question is from Steven Zaccone of Citi. Please go ahead. Your line is open.

Steven Zaccone (Director of Equity Research)

Great. Good morning. Thank you for taking my questions. Congrats on the nice results. First question on pricing. Can you talk about the ability to take price increases this year across membership fees, food and beverage, and room rates? Maybe specifically the membership fees. Can you talk about how much? Thank you.

Andrew Carnie (CEO)

Hi, Steven. Yes, membership pricing and pricing in general. If we take membership first, you know everyone around the world is suffering at a higher cost of living right now. What we've done is we've shifted our approach. For existing members, we've passed on mid-single digit, which is actually below current inflation levels. For new members, given our continued strong demand, we'd raise prices double digit this year.

What we wanted to do is create more of a distinction between new and existing member rates and to give increased value to our existing loyal members. Since we've increased our new member pricing, we continue to see super high applications, which shows the strength of our business. I'll touch a little bit on F&B pricing now, and then I'll hand over to Thomas to do bedroom pricing.

The way we're thinking about F&B is, yes, sure, we've got pricing opportunities, but actually we're focused more on increasing average spend per member than raising prices. You know, we're starting to know our members much more, their behaviors, their preferences by house, which allows us to tailor the experience to them. If you remember, like I mentioned on my prerecorded remarks, you know, I gave the One Eighty House example.

You know, Steven, we increased our. We changed our dining menu, increasing the quality of ingredients. It's all 1970s inspired. We changed our events tailored to the local member. We improved our service standards. Our average spend since making those changes is up by about 20%. This approach is being implemented throughout our regions and houses.

You know, our members have always told us they don't mind paying more if we deliver better value, more choice across service and food and beverage. That's what we're really gonna focus on, and that we're excited about the improvements we've made in Q one, and that actually we're gonna be rolling out to throughout the year. Thomas, do you wanna cover ADRs?

Thomas Allen (CFO)

Yeah. Steven, just echoing what Andrew said. Look, we have two strategic priorities. First is to grow and enhance our membership, second is to drive higher profitability. We wanna make sure that we continue to deliver value to our members, and so we continue to offer good rates on rooms. When we look at the index, there has been opportunities, especially on select sites. As we've seen market rates go up and as we've analyzed our RevPAR indexes and our ADR indexes, we have found some good opportunities.

Steven Zaccone (Director of Equity Research)

Great. That's all helpful detail. Appreciate that. The follow-up question I had is to focus on the EBITDA margin approaching 11%. Thomas, could you walk through the building blocks in a bit more detail? What I'm curious on is, do you see this as a ceiling for EBITDA margin? I assume no. Then, like, how do we think about the building blocks to go above this 11% level?

Thomas Allen (CFO)

Thanks, Steven. Good question. As we think about the kind of five-point delta between the 6% that we just delivered on EBITDA margins and our guide of about 11%, we see four main buckets of upside. The first will be wages, right? We talked about last quarter about how wages as a percentage of sales had gotten higher than where we thought that they should be. We started to deliver that in the Q4, but that was gradual in the Q4. We still see a very big opportunity to continue to drive that higher. Second is on G&A. We talked last quarter about streamlining our support offices, especially things like content and digital, but really across the board.

We're gonna continue to see cost leverage on the G&A line. Third is just other fixed costs. If you think about for our houses, we have rent, we have insurance, there are other stickier costs. While we are dealing with inflation, if you think about just for membership revenues, we're guiding for membership revenues growing 30%-34% this year. You know, that should generate good operating leverage. Finally is on food and beverage costs. You know, we're continuing to find new ways to improve that. You know, we highlighted in the prepared remarks that in the Q4, our food and beverage margins were 230 basis points better than Q4 2019, and we're still finding ways to drive that forward.

Steven Grambling (Managing Director)

Okay, great. Thanks for all the detail. Best of luck this year.

Operator (participant)

Your next question is from Stephen Grambling of Morgan Stanley. Please go ahead. Your line is open.

Steven Grambling (Managing Director)

Thank you. I was hoping that you could just remind us of when we think about the five to seven new properties that are gonna be open this year, I guess, what do the locations look like for these, and how do they compare to the base? Are there any reasons why these houses will drive either a different number of new members and/or spend and ROIC kind of maturation? Thanks.

Thomas Allen (CFO)

Thanks, Steven. compared to last year, where we gave the specific houses, we chose not to do that this year because we really want the investment community to focus on our membership growth versus our house growth. That said, you know, we've talked a lot about opening Mexico City. Also, if you go on our website, you'll see that we have Manchester and Bangkok just opened too. you know three of our houses that are opening.

You know, when we look at our pipeline, for this year and for next year, what we're seeing is a lot of entries into some new markets, some new kind of major city markets, which we're excited about because we see really strong potential for membership growth in those markets. When we look on average, the size of the houses this year will be a little bit smaller than last year. In terms of the performance, we feel like they should be comparable given the locations, you know, in places like Mexico City, you know, Manchester, Bangkok, you know, compared to 2022.

Steven Grambling (Managing Director)

As we think about those properties and the development and rent that might be associated with those, have you found any changes in terms of, you know, the cost in terms of rent per House or how we should be thinking about that? I think you have some disclosures in your, in your K about the undiscounted rent payments. I don't know if there's anything to call out in terms of either better implied interest rates or anything like that, given what's happening in the broader rate environment. Thanks.

Thomas Allen (CFO)

We continue to see really strong demand from developers. In fact, we're seeing an uptake in interest in new territories. As we've grown in more beta cities, places like Copenhagen and Stockholm and Austin and Nashville, we're finding developers in comparable cities, places like Oslo and Helsinki, come to us with interest. We know that the developers have higher financing and input costs.

In some instances, that is affecting the economics of the deal. Look, that was partially why we chose to cut our new unit growth guidance last quarter, was not to be forced into taking deals that we didn't feel comfortable with. We've also been offered some really attractive deals and at good terms, and some even better than what we've had before. You know, but it's just about choosing the right opportunities.

Steven Grambling (Managing Director)

That's helpful color. I'll jump back in the queue. Thanks so much.

Operator (participant)

Your next question is from George Kelly of ROTH MKM. Please go ahead. Your line is open.

George Kelly (Managing Director and Senior Research Analyst)

Hi, everybody. Thanks for taking my questions. First one for you is on the other revenue category. I was curious if you could help us sort of think about growth this year. I know the Soho Home business, I think you said in the quarter it grew over 100%. Just trying to frame sort of expectations for 2023 that you bake into your guidance.

Thomas Allen (CFO)

Thanks, George. When we think about the hierarchy of the revenue growth next year, I'd put it as we expect membership revenue to grow the fastest, followed by in-house revenue, followed by other revenue. There are parts of that other revenue that we expect to grow really quickly.

For example, you know, we still expect Soho Home to have really strong growth. However, we're taking a more tempered expectation there, given the overall backdrop in home products, and we're really focusing on profitability there, while we'll still deliver really strong growth. The other components of that is Scorpios should continue to have strong growth. Our Works business should continue to have strong growth, but more measured growth in this past year.

The Line in The Ned, we've opened up a few over the past year. Those should continue to have growth. One of the things that have also been in there have been legacy restaurants and townhouses, we're not growing that business really as quickly. We've also streamlined some of that business, that'll weigh on some of the growth. You know, other businesses that, you know, we've been investing behind in that segment will continue to grow really quickly and strong, while others are not gonna have as much growth.

George Kelly (Managing Director and Senior Research Analyst)

Okay.

Thomas Allen (CFO)

We've also actually. Let me add one thing. Back to our point earlier in the prepared remarks about how we're trying to take a prudent approach to thinking about like-for-like sales in 2023 versus 2022. We've taken that same view on those restaurants and townhouses for 2023.

George Kelly (Managing Director and Senior Research Analyst)

Okay, great. 2 other quick ones. I know you don't guide to free cash flow, do you expect to be free cash flow positive in 23 or can you talk at all? I don't know if you wanna talk to CapEx or however you could answer that. Second question is, you commented in the prepared remarks about changing the incentive structure on... I believe you were talking about kind of House level management. Can you detail just what those changes were and maybe, you know, what it was before these adjustments? That's all I had. Thank you.

Thomas Allen (CFO)

Right. I'll take the first question, Andrew will take the second one. Just on free cash flow, we do expect to be free cash flow positive in 2023. When you think about our kinda second strategic pillar, driving higher profitability, internally, we also really think about free cash flow too. In the presentation, we talked about how we expect our CapEx to be lower in 2023 versus 2022.

That's benefiting both from us, moving more and more asset light, as well as us just being, you know, being more mindful about CapEx and getting to free cash flow, which I know a lot of investors and obviously we want. The only thing I would say about seasonality is do remember the seasonality of our business. First quarter is the lowest, so I don't know if we'll be free cash flow positive in the first quarter, but we should turn quickly thereafter.

Andrew Carnie (CEO)

Hey, on the house incentives. What we wanted to do as part of our improving our value for members is we are super focused on improving the service we provide in our houses and also improving our food. Food is more diversification across our houses, quality, seasonality.

Service is quicker service, higher quality service, more personal service. What we've done to really drive that forward is with our leadership teams in our houses, we're now incentivizing them on a quarterly basis based on their performance, both financially, but more importantly, their performance on improving member experience, which we can now measure really, really well. It's another key area that we've evolved and developed as part of our obsession on improving our members' experiencing across all our 41 houses globally.

George Kelly (Managing Director and Senior Research Analyst)

Thank you.

Operator (participant)

Your next question is from Shaun Kelley of Bank of America. Please go ahead. Your line is open.

Shaun Kelley (Analyst)

Hi, good morning or afternoon, everyone. Thanks for taking my question. First would maybe be Thomas or Andrew, could you give us a little bit more color on just the consumer environment? You know, obviously there's been a bit of consternation about, you know, how the European consumer in particular would react to some of the, just the broader macro. I think on the travel side, it sounds to us like things have actually held in really well. Could you just give us a little bit of color about maybe how that worked in the quarter and what some of your maybe forward expectations are just, you know, for the booking window or what you can see right now in the business?

Thomas Allen (CFO)

Thanks, Shaun. When we think about what we're seeing in terms of current trends and trends in the quarter, when we look at in-house revenue growth versus 2019 on Like-for-like houses, you actually saw an acceleration in the Q4. I think on the Q3 call, during the summer, we talked about how we were seeing kind of low double digits, low teens growth in that metric, in the Like-for-like growth versus 2019. That accelerated up to about 20% in the Q4. When we look at January and February and we look at, you know, the past few weeks, we've seen relatively similar growth to what we saw in that Q4, up close to 20%.

Shaun Kelley (Analyst)

Got it. Very, very helpful. Then, second question, and, you know, this one might be a little technical, but when we kinda think about, you know, your the operating expenses for the, you know, in-house operations, we kinda think about as a ratio, relative to in-house revenue. I'm kinda curious, I mean, that number did come down sequentially about 120%. You talked about a lot of progress in December and initiatives.

You know, is it possible to do, you know, meaningfully better than the 120% as we kinda start moving, you know, through the years? Is that embedded in the expectation and sort of maybe some of the pros and cons around, you know, leverage in that expense base?

Thomas Allen (CFO)

Yeah. Shaun, yeah, we're continuing to work. Do you remember there was some Q4 benefit and seasonal benefit to that? That is a key metric that we're looking at. You know, as we talked about or as we showed with our guide, we are expecting to get cost leverage to our business.

When we think about wages, you know, we really started to see strong improvements in our wages center revenue starting in October, but it really started to take hold in December, and we're still seeing improvements as we go through the months comparing it to, you know, prior comparable periods. You know, we're not gonna get into guiding to our in-house expense ratio, but you know, you can see where our EBITDA is and you can see that we are expecting to see good cost leverage.

Shaun Kelley (Analyst)

Great. Thank you very much.

Operator (participant)

Your last question is from Ali Naqvi of HSBC of London. Please go ahead. Your line is open.

Ali Naqvi (Senior Equity Analyst)

Hi. Thank you for taking the question. Just in terms of the staff costs, longer term, where do you expect that to reach, as you work through all these initiatives on short-term and everything else? Secondly, on your wait list, obviously it's at all-time highs now. You used to give some qualitative comments on how much of that wait list actually converts into members. I'm just wondering whether that's changed at all in sort of recent quarters. Finally, obviously with the consumer demand environment that we have, is there anything happening to the member mix that we should be aware of? For example, as travel has restarted, are people moving to more Every House members versus Local House memberships? Thank you.

Thomas Allen (CFO)

Ali, going through the three questions, just on wages, we haven't historically given a percentage there, we did in the prepared remarks, give the improvement we've seen from August to December of about 1,000 basis points. You know, I don't think we're prepared to give absolute numbers there. On the mix of our members, I think historically we've said, you know, our regular members are about 80%, under 27, 20%, and our Every House members around 80%, and Local House members are about 20%. That's been pretty consistent. No major things to call out there. In terms of the wait list, you know, what we did see was, you know, we continue to see really strong growth.

We saw growth across all regions, really. Yeah, when we look at it was really across all regions. The quality continues to be there, so we continue to see really strong, high quality members. Just remember when we think about the wait list, you know, the more houses we enter and the more countries we enter opens up new markets for us. That's continuing to help on the applications and driving that higher wait list.

Ali Naqvi (Senior Equity Analyst)

Thank you.

Thomas Allen (CFO)

No more questions. Thank you everyone for listening and, we look forward to continuing to talk to you through the quarter.

Ali Naqvi (Senior Equity Analyst)

Thank you.

Operator (participant)

This concludes today's conference call. Thank you for your participation. You may now disconnect.