ZimVie - Earnings Call - Q1 2025

Executive Summary

• Q1 2025 net sales were $112.0M, down 5.2% YoY (4.1% CC), while adjusted EBITDA rose to $17.6M with a 15.7% margin, surpassing the post-spine-sale margin target; GAAP diluted EPS from continuing ops was $(0.09) and adjusted diluted EPS was $0.27.
• Against Wall Street consensus, ZimVie delivered an EPS beat and a slight revenue miss; EBITDA came in below SPGI’s EBITDA consensus definition, reflecting differing GAAP vs non-GAAP treatments; estimates detail below.*
• Management reiterated FY 2025 guidance (Net sales $445–$460M, adj. EBITDA $65–$70M, adj. EPS $0.80–$0.95) and guided Q2 net sales to $112–$114M with ~15% adj. EBITDA margin, noting tariff mitigation plans around ~$3M annualized impact.
• Narrative catalysts: margin execution ahead of plan, initial success of the immediate molar implant launch, improving digital adoption, and signs of implant unit upticks in April; management emphasized data-driven U.S. commercial execution and supply-chain flexibility.

What Went Well and What Went Wrong

What Went Well

• Adjusted EBITDA margin expanded 520 bps YoY to 15.7%, exceeding the 15%+ target one year post spine divestiture, driven by manufacturing efficiencies and favorable mix toward implants/digital over low-margin scanners.
• Immediate molar implant system launch (mid-March) exceeded internal growth expectations; RealGUIDE software sales grew mid-teens and Implant Concierge grew 11% YoY, underpinning digital traction and workflow benefits.
• International operational actions and supply-chain flexibility (Florida/Valencia manufacturing nodes, OUS distribution node shifts) bolster tariff mitigation within guidance and support confidence in logistical resilience.

Quotes:

• “We achieved adjusted EBITDA margin of 15.7%, over 500 basis points of improvement over the first quarter of 2024.”
• “Immediate molar implant…has exceeded internal expectations for growth.”
• “We have supply chain and manufacturing flexibility…which will allow us to absorb these possible [tariff] costs.”

What Went Wrong

• Revenue declined 5.2% YoY (4.1% CC) with reported U.S. net sales down 2.8% and International down 8.5%; headwinds included FX, fewer selling days, expiration of a transition manufacturing agreement, and lower China sales.
• Mix pressure from deemphasized scanner sales (low margin) reduced top-line, though improved profitability; implant sales declined low single digits amid macro softness, particularly in higher-cost specialist cases.
• Cash from operations was negative in Q1 as working capital movements overshadowed profitability improvements, with operating cash outflow of $(13.9)M.

Transcript

Operator (participant)

Good afternoon and welcome to ZimVie's first quarter 2025 earnings conference call. Currently, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Webb Campbell from Gilmartin Group for today's introductory disclosures.

Webb Campbell (VP)

Thank you all for joining today's call. Earlier today, ZimVie released financial results for the first quarter ended March 31, 2025. A copy of the press release is available on the company's website, ZimVie.com, as well as on SEC.gov. Before we begin, I'd like to remind you that management will make comments during this call that include forward-looking statements. Actual results may differ materially from those indicated by the forward-looking statements due to a variety of risks and uncertainties. Please refer to the company's most recent periodic report filed with the SEC and subsequent SEC filings for a detailed description of these risks and uncertainties. In addition, the discussion on this call will include certain non-GAAP financial measures.

Reconciliations to these measures to the most directly comparable GAAP financial measures are included within the earnings release and/or investor deck issued today, found on the investor relations section of the company's website. This conference call contains time-sensitive information and is accurate only as of the live broadcast today, May 8th, 2025. ZimVie disclaims any intention or obligation except as required by law to update or revise financial projections or forward-looking statements, whether because of new information, future events, or otherwise. With that, I will turn the call over to Vafa Jamali, President and Chief Executive Officer.

Vafa Jamali (President and CEO)

Good afternoon and thank you all for joining us. In the first quarter of 2025, we delivered $112 million in total revenue. A highlight of our first quarter was continued progress on improving the margin profile of the business and generating over $17 million of adjusted EBITDA. Our team delivered over 350 basis points reduction in adjusted total cost of product sold. As a result, we achieved adjusted EBITDA margin of 15.7%, over 500 basis points of improvement over the first quarter of 2024. This was ahead of our previously announced goal of 15% plus EBITDA margin first year post our sale of the spine business and represents an over 40% year-over-year increase in EBITDA, despite our top line being challenged by an overall soft market. Our performance in terms of profitability is coming in better than expected.

This is a result of executing our strategy to improve and streamline our manufacturing and supply chain, reducing corporate infrastructure, and refocusing sales and R&D on our proprietary premium line of implants. In relation to tariffs, we're keeping our guidance unchanged for the year and have incorporated the impact of any potential tariff-related costs. We have plans in place to mitigate tariff costs, which we estimate today to be roughly $3 million per year, largely attributed to the EU/USA tariff rates. We have supply chain and manufacturing flexibility, which will allow us to absorb these possible costs through our commercial and operational efforts. Rich will provide greater clarity shortly. We will remain focused on driving continued margin improvement and cash flow as we are committed to delivering shareholder value. I'd like to provide a brief update on our commercial strategy.

On our fourth quarter call, we announced that we appointed a new Vice President of America Sales. I'm pleased to report that he is quickly making an impact in his expanded role as we're making a number of changes to our sales process and strategy to ensure we are expanding our customer base and increasing customer share. Our overall commercial strategy is beginning to play out. We have focused our sales and R&D teams on proprietary implant sales and development versus low-margin distributed products. Although less contribution from third-party scanner sales in North America will be reflected in top line, an overall improvement in mix is favorable to ZimVie and will allow us to focus on our core area of strength and differentiation. We are very confident that our strategy plays out. We will continue to see outsized returns.

I look forward to providing additional updates and sharing the results of these changes as the year progresses. I'll now give additional details on each piece of our portfolio, starting with dental implants. Implant sales declined low single digits in Q1 at a roughly stable pace to the fourth quarter of 2024 as a result of continued macro pressure. We believe our implant growth is consistent with the market's overall performance and maintain that an improvement in the macro environment will result in the adoption of our implants. At the same time, as mentioned earlier, our U.S. sales execution is showing tangible signs of success. March implant volume showed improvement, and April showed growth in implant units sold year over year. Our innovation pipeline also paints a positive picture for growth. We just launched our Immediate Molar Implant System in the middle of March, and it is progressing very well.

In fact, we've exceeded internal expectations for growth. This line will remain a growth driver for the remainder of the year. The Immediate Molar Implant System expands our clinically proven TSX and T3 Pro Implant Systems with an immediate molar solution for new and existing customers, simplifying challenging clinical scenarios for providers and shortening treatment times for patients. Commercially speaking, advancing innovation across our implant portfolio fills profitable portfolio gaps. It allows our sales team to sell something new to existing customers and gives us a stronger competitive position when negotiating larger deals. Next, shifting to biomaterials, our biomaterials portfolio continues to gain recognition for its quality and breadth, showing just over 1% growth during the quarter. This performance reflects our ongoing investments in innovation and our ability to deliver high-quality and industry-leading solutions.

Looking ahead, we're excited about the continued potential in this space, and we're confident that our momentum will sustain our leadership and deliver long-term value. Lastly, I'll provide an update on the continued success of our digital portfolio. Excluding oral scanner sales, which are distributed products, we saw continued uptake and growth in our digital dentistry business. Our ZimVie digital solutions, excluding scanner sales, grew high single digits in the first quarter. Our implant concierge service performed especially well, growing 11% year over year, helping clinicians save hours of time and reducing costs by improving workflows. Looking ahead, we're excited to expand the reach of implant concierge service in 2025, with an exciting launch in Japan in the second quarter. Additionally, we've driven continued strength in sales of surgical guides, with our Real Guide Software sales growing in mid-teens for the first quarter. We're optimistic about continuing this positive momentum.

We continue to believe that workflow improvements are critical to adoption of implant dentistry, and we're extremely pleased with the strength of our portfolio. Finally, during the quarter, we also made a strategic decision to acquire a distributor partner located in Costa Rica. Costa Rica is a premium dental implant market that caters to dental tourism. The transaction closed on April 7, which will provide more color on the benefit to our financial portfolio. By bringing this distributor in-house, we can leverage the infrastructure, customer relationships, and the number one market position to expand our local footprint and reduce or eliminate third-party selling costs. The acquisition provides an immediate benefit to our margin profile. I'll now turn the line over to Rich to review our financial performance and forward outlook in greater detail.

Rich Heppenstall (EVP and CFO)

Thanks, Vafa, and good afternoon, everyone. I'll begin by reviewing our first quarter 2025 results and will close by providing commentary on our outlook for the full year 2025, in addition to providing our expectations for the second quarter. As a reminder, we finalized the sale of our spine business on April 1, 2024. Thus, our legacy spine segment is reflected in discontinued operations in our financial statements. Please refer to our 10-Q for financial results from discontinued operations. Beginning with our results for the first quarter 2025, net sales for the first quarter were $112 million, a decrease of 5.2% in reported rates and a decline of 4.1% in cost of currency. When normalizing for the expiration of the transition manufacturing agreement with our prior parent, one less selling day, and the shift in focus away from oral scanners and China sales, cost of currency net sales declined 1.4%.

In the U.S., net sales for the first quarter of $65.8 million declined 2.8% compared to the prior year, driven by lower implant sales, oral scanners, and the impact of one less selling day. When normalizing for scanner sales and one less selling day, sales declined 0.5%. Outside of the U.S., net sales of $46.2 million decreased 8.5% on a reported basis and 5.9% in cost of currency, driven by lower implant sales and headwinds totaling 430 basis points from the expiration of a transition manufacturing agreement with our prior parent, one less selling day, and lower China sales. When normalizing for these headwinds, sales decreased outside of the U.S. 1.6% in cost of currency. First quarter 2025 adjusted cost of product sold was 33.6% as a percentage of sales, decreasing 360 basis points versus 37.2% in the prior year period.

The reduction is driven primarily by manufacturing efficiencies and cost reductions, but also includes a mixed benefit as we prioritize higher margin implant and digital sales versus a lower margin scanner business and the elimination of the low margin transition manufacturing agreement with our prior parent. First quarter adjusted research and development expenses of $5.4 million, or 4.8% of sales, compares to $6.3 million, or 5.3% of sales in the prior year. The decrease is primarily due to lower clinical expenses in the period. First quarter adjusted selling, general and administrative expense of $58.7 million decreased 2.7% from $60.3 million in the prior year, driven by reductions in headcount and related expenses. Other income of $1.7 million primarily reflects income from transition service agreements resulting from the sale of our spine business and offsets stranded costs that remain in SG&A expense.

As of the end of Q1, our transitionary service obligations to support our prior spine organization are effectively complete. First quarter adjusted EBITDA attributable to continuing operations was $17.6 million, translating to a 15.7% adjusted EBITDA margin. This reflects a 41% increase, or $5.1 million, and 520 basis points of margin expansion versus $12.5 million, or 10.5% margin in the same period last year. Not only are we pleased with our Q1 EBITDA margin of 15.7%, we exceeded our previously communicated commitments to deliver 15% plus EBITDA margins one year post spine sale. Furthermore, we achieved GAAP operating income and pre-tax income positive in the first quarter, also exceeding our expectations and external commitments. Our strong profitability underscores our ability to drive optimization in our cost structure during a time of transformational change and a challenging market environment.

We believe this hard work positions us well for continued value creation as our end markets continue to show signs of stability in what is widely viewed as a cyclical trough in our industry. First quarter adjusted earnings per share attributable to continued operations of $0.27 per share on a fully diluted share count of 27.7 million shares reflects a 238% increase from $0.08 per share in the prior year period. Turning to the balance sheet, as of the end of the first quarter 2025, consolidated ZimVie continuing operations cash was $67 million. Gross debt at the end of the quarter was approximately $220 million, yielding net debt of approximately $153 million. As a reminder, our cash balance does not include our $60 million seller note from the sale of spine, which continues to compound interest.

This note matures in October of 2029, but could be received earlier under certain circumstances. Additionally, we maintain our $175 million revolving credit facility, which remains undrawn. Quickly touching on our disclosure regarding the acquisition of our Costa Rica distributor. During the first quarter, we made the strategic decision to acquire a local dental distributor located in Costa Rica. We expect the transaction to be beneficial to ZimVie as it converts our sales presence in Costa Rica to a direct sales force and also leverages our existing footprint in the country. We funded the transaction with $3.3 million in cash, inclusive of $1.3 million in book value of inventory and accounts receivable. The transaction closed in April of 2025. With respect to capital allocation, we will continue to prioritize debt reduction as our number one objective.

However, we've always maintained an opportunistic stance toward potential tuck-in activity, and with a revitalized balance sheet and in the current environment, we recognize that some compelling opportunities may arise that tactically and strategically make sense. Now shifting toward our 2025 guidance. Beginning with our expectations for full year 2025, we are reiterating our full year 2025 revenue guidance range of $445 million-$460 million, reflecting a 1% decline to 2% reported growth for the full year. The low end of our guidance range assumes the dental market remains the same, while the high end implies a moderate market recovery, commercial strategy execution, and success of new product introductions in the back half of 2025. We also are reiterating our adjusted EBITDA guidance of between $65 million and $70 million, reflecting an 8%-17% improvement over 2024.

As Vafa mentioned, we anticipate that we can absorb the approximately $3 million annualized impact of tariffs within our existing guidance. By leveraging the flexibility of our manufacturing and distribution global footprint, we've already taken actions to optimize our supply chain and replenishment nodes. We acknowledge that the situation is dynamic and will continue to assess opportunities to further reduce the impact. We are also reiterating our earnings per share guidance of $0.80 per share to $0.95 per share on a fully diluted share count of 29 million shares. Moving on to our expectations for the second quarter 2025, we expect net sales in the second quarter of 2025 to be in the range of $112 million-$114 million, inclusive of two headwinds. First, a $3 million, or 260 basis point impact from order timing differences for an outside of the U.S.

distributor order that occurred in Q2 of 2024. Second, the expiration of the transition manufacturing agreement with our prior parent is a $640,000 impact, or 60 basis points in the second quarter. When normalizing for these two items, we expect Q2 sales to be a 1% decline to 1% growth. We expect adjusted EBITDA margin in the second quarter of approximately 15% of sales. With that, I'll now turn the call back over to Vafa.

Vafa Jamali (President and CEO)

Thank you, Rich. As we wrap up the first quarter, I'm excited about the continued progress towards improving our portfolio with new product introductions like the immediate molar, our commercial focus on what matters most for ZimVie, and our focus on improving profitability. We're building a strong foundation for success. We've maintained our position in the global dental implant market, and our biomaterials and digital dentistry markets are growing. Continuous improvements in practice and workflow are a critically important element to driving dental implant adoption. Our focus on continuously innovating our portfolio and driving progress in digitizing dentistry will continue to yield benefit. I'm optimistic about the year ahead and look forward to sharing our progress as we execute on these plans. With that, I would like to open it up to questions.

Operator (participant)

Thank you. At this time, we will conduct the question and answer session. Our first question comes from the line of Kevin Kalendo of UBS. Your line is now open.

Dylan Finley (Equity Research Associate)

Thank you very much. Good afternoon. This is Dylan Finley on for Kevin. I'd love to start by double-clicking on your comments about the uptick in implant units sold in April. Any expanded color there in whether this might be attributed to higher utilization, same-store sales, or new accounts?

Vafa Jamali (President and CEO)

I don't. Vafa here. Yes. We started to see we felt like Q1 looked a lot like Q4, and then March was steadily getting better. Nothing yet to really write home about. April started to just show a little more resilience. Our number one piece that we've been looking for is essentially same-store sales and that improving. That's what we're seeing as improving right now. We have a number of commercial strategies in place that could help the other side of it as well with respect to new customers. Right now, both the immediate molar, which is a new launch that we had, is growing really much better than expected. Overall, our implant units were up.

Dylan Finley (Equity Research Associate)

Very helpful. Thank you. Just as a follow-up on kind of pricing dynamics. Overall, in dentistry, there was a bit of an uptick in pricing coming out of the pandemic. It seems like pricing has sort of kind of moderated and cooled, and now things are pretty stable. I guess as it pertains to your portfolio and implants specifically, how is pricing trending today? Follow-up to that, do you have any capacity to offset any tariff impact via price increases?

Vafa Jamali (President and CEO)

I'll start, and then Rich, if you could just get into some more of the detail, it'd be great. Obviously, we are in the premium market, and the premium implant market has been less price competitive than where there's a lot of battles for price happening at the value lines and even in the challenger lines. We have largely not been in very large competitive price situations. There are occasions where we would like to do that, where it might be a DSO or a larger deal or a larger specialist where we would want to be very competitive. I think the broader our portfolio is, the more capacity it gives us to actually package a deal that is very good for the customer and is also very good for us without having to significantly drop price.

That is kind of how I see the premium market. Rich, give you the specifics. In terms of your second question, which was capacity, I think in times like this, you need to be really selective on where you put price and where you do not. Segmentation of the market is going to be really critical. I believe there are segments of the market, segments of our portfolio, which we could raise price and probably will raise price. There are others that it probably would not be to our benefit. It might actually put us at a competitive disadvantage if we do. We will be really selective there and rely heavily on very, very accurate segmentation of our customer base.

Dylan Finley (Equity Research Associate)

Great. Thank you very much.

Operator (participant)

Thank you. Our next question comes from the line of Anderson Schock of B. Riley Securities. Your line is now open.

Anderson Schock (Equity Research Analyst)

Hi. Thank you for taking the questions and congrats on the progress. First, could you just provide more color on the regional performance differences? The international segment saw about an 8.5% decline versus 2.8% in the U.S. I guess what's driving the greater decline internationally?

Vafa Jamali (President and CEO)

Rich, you want to take that one?

Rich Heppenstall (EVP and CFO)

Yeah. Yeah. Hey, good afternoon, Anderson. Yeah. In the U.S., we've had a—outside of the U.S., sorry—we had a number of headwinds that we called out in the Q4 call that materialized, obviously, in the first quarter. For us, the specific impact from the U.S. was the FX impact of the euro to dollar primarily was about 260 basis points impact. The impact of the termination of our low-margin transition manufacturing agreement with our prior parent in the first quarter is 270 basis points. We had one less selling day, which is 100 basis points. We have de-emphasized our focus on China, given kind of the situation currently. That is about 60 basis points.

When you normalize for those items, the OUS sales modestly declined about 1.6% versus the headline 8.5% because we had those headwinds that were called out and year-over-year impacts to us in the first quarter.

Anderson Schock (Equity Research Analyst)

Okay. Got it. That's helpful. Could you talk about your current position in the Japanese market and then maybe the size of that opportunity for the launch of implant concierge here?

Vafa Jamali (President and CEO)

Right. Our presence in Japan is relatively similar to where it is in the U.S. in terms of our share position. The pricing in Japan is good. It is a good pricing market for premium implants. The premium implant market is still healthy there. The idea of implant concierges is that it essentially can double the size of your business because that is kind of the rate at which a full program would cost and be the cost of essentially a premium implant. We obviously do not extrapolate it that way, but we do think that it will be one of the top three growth drivers for Japan in terms of just really, really solid revenue growth. What you are also doing is you are improving the workflow, which is usually a big barrier for practices, no different in Japan than it is in the United States.

We think that can really accelerate the growth of the overall implant adoption. That is kind of how we see it. I have not really put a number on it yet. I will, and we will launch it over the next couple of weeks.

Rich Heppenstall (EVP and CFO)

Yeah. In addition to that, just Anderson, just on Japan, we had talked a little bit last year around our recovery and a little bit in Japan. We do have a strong market position in that country to the point where we actually grew in the first quarter, mid-single digits. When you take a good fundamental foundational business like we have in Japan, and then you add something as differentiated as implant concierges on top, we feel as though we have not quantified the numbers Vafa mentioned, but we should be able to continue to accelerate momentum in that geography.

Vafa Jamali (President and CEO)

It'll obviously be local for local too, Anderson. So it'll have a good customer intimacy aspect to it as well.

Anderson Schock (Equity Research Analyst)

Okay. Got it. Thank you for taking our questions.

Vafa Jamali (President and CEO)

Pleasure.

Operator (participant)

Thank you. Our next question comes from the line of Matt Miksic of Barclays. Your line is now open.

Matt Miksic (Equity Research Analyst)

Hi. Thanks so much for taking the questions. Vafa, I wanted to maybe follow up with you on your thoughts on the drill down on the question on geographic performance to maybe talk about end market trends and where you think things are in terms of picking up, if at all, or anything that you can do to sort of continue to improve the top-line performance. I have one follow-up.

Vafa Jamali (President and CEO)

Right. Hi, Matt. When we really look at probably an over-index on the U.S. market for ZimVie, that's good in the sense that that is the most profitable market with the highest prices. That has been the area that's been slower for all of us. Remember that we're premium. We don't play in the value or the challenger line. It really does rely largely on a specialist return to action. More and more specialists and more complicated cases are really what boosts us. That's what we started to see in March, and we started to see in April. Overall, I think that market is good and getting healthier. I think that Europe is a whole bunch of countries, and each of them a little bit different. We have very, very high performance in France. TV's doing exceptionally well.

We have some cost threats, competitive threats that we experienced in Iberia, which specifically was Portugal, which was with a very low-cost value implant and import. Those are areas that we are working on strategies right now to mitigate within our portfolio and within partnerships that we are forging right now. Those are some specific areas where price is more acutely required than others. In those cases, we have a little bit of a different strategy in the U.S. I believe that we have the right strategy. Like I said, the commercial team is really focused on the right things. Because of that, I do feel very optimistic that the U.S. business is going to return strong.

Matt Miksic (Equity Research Analyst)

That's helpful. Thanks. Maybe a follow-up on, as we speak to different companies and try to understand, obviously, things like the economic sensitivities to tariffs, which you've talked about, as well as the economic or logistical sensitivities of the supply chain. If you could maybe talk a little bit about any actions that you've taken to shore that up or any color or commentary you can express about the confidence in how the business is operating logistically in terms of supply chain and manufacturing to the ex tent that we can get a sense of how you may be able to react as things kind of potentially start moving around or fluctuating here, given the volatility we've seen in the last couple of months.

Vafa Jamali (President and CEO)

I'm extremely confident in our manufacturing capabilities. We've really demonstrated that. We've worked on it for quite a while since we kicked that project off. We have been able to demonstrate a tangible demonstration of results in terms of gross margin, etc., etc. We also have flexibility of manufacturing. We have a site in Florida, and we have a site in Valencia. That gives us a great amount of flexibility. Like Rich said, we've already moved a lot of the nodes, the distribution nodes for OUS out of Valencia. That way, we skip the U.S. tariff part of it. That has given us a lot of flex, and will continue to give us an opportunity. We'll constantly measure if there's labor arbitrage in one site versus the other outweighed by the—is it outweighed by the tariff cost or not?

We do have that flex. Because we've largely exited China, we don't have that risk, which I think right now poses the greatest threat probably to our segment and our industry. That one's the one that we don't have a lot of reliance on. We moved manufacturing. One of our strategies early was to insource a lot of third-party manufacturing. We insourced our largest third-party manufacturer from China into Valencia. Obviously, if we didn't have that, that would be a project we were working on right now. That's been a great part of the margin improvement. Also, if you frankly think about it retrospectively, a great tariff avoidance if we had the benefit of foresight. It nevertheless was a positive move. I think I'm confident that we're able to do that.

Again, no one can predict exactly what will happen and what the end tariffs will be. Based on what we know right now and what we see every day, we think we've got a plan that can mitigate it within our guidance.

Matt Miksic (Equity Research Analyst)

That's very helpful. Thanks, Vafa.

Vafa Jamali (President and CEO)

Thanks, Matt.

Operator (participant)

Thank you. I am showing no further questions at this time. So I would like to turn it back to Vafa Jamali for closing remarks.

Vafa Jamali (President and CEO)

Great. Thank you very much. We're really proud of our accomplishments towards driving overachievement and profitability, most notable in our gross margin. This is the result of a lot of hard work. Having a lot of hard work with no result is not fun. In this case, thanks to my fantastic colleagues who've shown great effort and generated great results. I really want to thank our employees. I also feel very optimistic that this same energy and the same focus is being directed right now towards our commercial strategies, and they'll yield similar results in this dynamic end market. I'm really, really proud of our team. We're focused on the very vital few priorities that will drive the most impact for our company. Our better-than-expected performance from the launch of this new implant, the Immediate Molar Implant System, is really a reflection of that focus.

We believe the dental market is the implant market's resilient, and we think that dental implants are still very much under-adopted. We do believe that this is still the greatest growth driver for our market. I really thank you for your attention today, and I wish you a great evening.

Operator (participant)

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.