ZimVie - Q4 2022

Transcript

Operator (participant)

Good afternoon and welcome to ZimVie's fourth quarter and full year 2022 earnings conference call. Currently all participants are on a listen only mode. We will be facilitating 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 Marissa Bych from Gilmartin Group for introductory disclosures.

Marissa Bych (Managing Director)

Hi, thank you all for joining today's call. Earlier today, ZimVie released financial results for the quarter and year ended December 31, 2022. 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 discussion of these risks and uncertainties. The discussion on this call will include certain non-GAAP financial measures.

Reconciliations of these measures to the most directly comparable GAAP financial measures are included within the earnings release and/or the 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, March 1st, 2023. ZimVie disclaims any intention or obligation, except as required by law, to update or revise any 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 of ZimVie.

Vafa Jamali (President and CEO)

Thank you, Marissa. Good afternoon and thank you all for joining us. I'd like to kick off the call by providing an update on the significant progress we've made in our first year as an independent company before turning the call to Rich Heppenstall, our Chief Financial Officer, to review our financial performance for the quarter and year ended December 31, 2022. Understanding that we still have substantial work ahead of us, I'd like to take a moment to commend our internal teams who have demonstrated tremendous capacity, adaptability and efficiency as we complete the steps to stand up our business post-spin and lay the foundation for future growth. We knew that turning this business around would take immense operational effort, fiscal discipline and a commitment to product innovation and execution over the course of several years, not quarters, and that remains true today.

I'm pleased that we've addressed and crossed hurdles in each of these areas already while implementing the right structure initiatives to create value over the three to five-year post-spin timeline that we outlined a year ago. 2023 is the year we focus energy on the commercial side of the portfolio to be able to grow into 2024 and beyond. Our most critical imperative as we build for long-term success is the health of our innovation platform. Over the past year, we've made considerable progress actively reshaping our innovation portfolio to ensure that our growth plans into the future are supported by differentiated products that drive better clinical outcomes and workload benefits. In Dental, we're thrilled with the launch of several new and next-generational products.

2022 was the first time in 10 years we launched a new dental implant line to the market, led by the introduction of our T3 PRO implant in June alongside our Encode Emergence abutment, then by our next generation TSX implant in November. We're seeing strong demand in the market for these implants with excellent feedback from adopters around stability, predictability, and ease of use. We're also excited to share that we just last week launched our RealGUIDE computer-aided design or CAD and full suite modules within our digital dentistry software platform. This offering allows physicians to complete detailed and sophisticated implant and tooth restoration procedures and creates seamless workflow throughout the procedure.

Our software platform is now the only offering in the market with implant planning and guide design within the same module as restorative care, including crown and denture design, allowing substantially greater efficiency for customers. These launches mark the beginning of the next wave of innovation in our Dental portfolio. We are really excited about our role in increasing the adoption of dental implants with these solutions. Our Dental business is positioned very well to grow and generate cash flow for our business as a whole. Moving to Spine, we're equally focused on refreshing our Spine portfolio. For example, in 2022 we announced the launch of the Virage Navigation System, which allows for the navigation of bone preparation instruments and polyaxial screws in the spine and is compatible with commercially available navigation systems.

This compatibility with third-party navigation systems supports our desire to be more active in the minimally invasive surgery or MIS procedures in an effort to improve overall patient outcomes. Building on this launch, today we are very excited to announce a partnership and global development agreement with Brainlab for spine enabling technologies to provide our customers and patients the deepest level of integration between ZimVie products and Brainlab's industry-leading portfolio of spine imaging, planning, navigation and robotic assisted solutions. Work is already underway to integrate our minimally invasive Vital and Virage systems into Brainlab's innovative solutions, allowing us to bring differentiated technology into the operating room to enhance workflow and accuracy while reducing intraoperative X-rays and radiation exposure. At the time of the spin, I announced that we would partner rather than build an enabling technology offering with an established leader in the space.

Brainlab fits exactly with our strategy to leverage broadly compatible solutions with an established footprint to drive greater pull-through across our Spine portfolio. Shifting to another focus within our Spine portfolio, The Tether, our differentiated non-fusion spinal device for the treatment of idiopathic scoliosis. As we have detailed in the past, we remain critically focused on driving therapy access for children who can benefit from this device. We received a major positive policy decision from Anthem in mid 2022, expanding coverage to 30+ million lives. Today, I'm pleased to announce that we have also received a positive policy decision from Highmark, expanding coverage by another 4+ million lives. The Tether is a great example of an innovative piece of our portfolio that is making a significant difference in the lives of our patients. We are excited by this growth opportunity this technology offers us.

Looking forward, we will continue to innovate on and around our existing solutions while we rationalize opportunities that are not value-creating and optimize our position in markets where we are positioned to win. We look forward to announcing our progress on the innovation front throughout the year. In addition to our focus on innovation, a significant portion of our energy in 2022 was directed towards many operational accomplishments since spin-off. We are pleased to have successfully separated operations from our former parent, Zimmer Biomet. As part of separation, we have established a world-class leadership team with the focus and experience to position the business for long-term growth and value creation. In our first year as a standalone company, the team has completed several major operational enhancements to accelerate our independence.

On the IT side, we successfully completed three major ERP conversions, one for each commercial region that we operate in. As part of our exiting our TSA agreements, these are the transition agreements with the parent, we refreshed our core IT systems, moving over 950 servers to new data centers and transitioning over 200 applications to modern and largely cloud-based platforms. We've also focused on inventory and physical footprint. We've materially reduced inventory and plan to seize additional opportunity for inventory reduction in 2023. We also identified a significant amount of fixed cost waste in the organization. Over the past year, we have closed, reduced the footprint, or transformed five facilities worldwide. As a derivative benefit of these efforts, we have improved our spine manufacturing fill rates from 65% to 95%.

In summary, we've made measurable progress against our most vital operational goals to create a strong foundation from which ZimVie can grow. This brings me to a relevant note on our position in global markets, specifically an update on our operations in China. As part of rationalizing our brands and focusing on improving growth and profitability, we are now in the process of fully exiting the China market in spine and evaluating our position in dental following recent VBP decisions. We are confident that this is the best decision to optimize our focus in markets that can be both growth and margin accretive to ZimVie over time. Before turning the call over to Rich to outline our financial performance, I want to once again underscore our immense progress and strong execution on the operational and organizational goals over the year.

While our financial performance has been impacted by separation dynamics and multiple challenging macroeconomic factors, we are establishing the pillars to support a growing, efficient, and profitable business over the next several years. We acknowledge that our top-line and bottom-line expectations for the year ahead do not reflect the progress we have made within the business in our first year, nor the long-term trajectory that we expect ZimVie to achieve. We are committed to transforming and driving a better company than we stepped into last March, and we are confident that our plan is on track to revitalize ZimVie for future growth and create shareholder value while addressing real patient needs in the dental and spine markets. I'll now hand over the line to Rich.

Rich Heppenstall (EVP and CFO)

Thanks, Vafa. Good afternoon, everyone. I'll begin by reviewing our fourth quarter 2022 results, and will then close by providing commentary on our outlook for the full year 2023. Total third-party net sales for the fourth quarter of 2022 were $228.2 million, a decrease of 12.4% on a reported basis and a decrease of 9.1% in constant currency. We implemented three major ERP conversions in the back half of the year. Unfortunately, the implementations negatively impacted the quarter by approximately $7 million due to disruptions meeting customer demand in our Spine segment. The quarter was also impacted by one less selling day in 2022 versus 2021, which impacted growth by approximately 1.5 percentage points.

After adjusting for the revenue disruptions and one less selling day, fourth quarter third-party net sales declined 8.3% and 4.9% in reported and constant currency, respectively. Additionally, fourth quarter sales were impacted by disruption in China due to macroeconomic challenges, including COVID and China volume-based procurement. We estimate that China distributor order slowdown ahead of VBP specifically accounted for a $3 million headwind or 1.3 percentage points to fourth quarter sales. Given the situation in China, we are also making proactive changes to our footprint, which will impact our 2023 guidance, something I will talk about shortly. Shifting to our two segments.

Q4 Global Dental third-party net sales were $115.8 million, representing a 7.6% decrease on a reported basis, and a 2.9% decrease in constant currency when compared to the prior year period. Our performance was impacted by macro-related headwinds in our end markets, softness in China ahead of volume-based procurement and one less selling day. Normalizing for one less selling day and the impact of China, the Global Dental business was approximately flat year-over-year in the fourth quarter on a constant currency basis. In the U.S., Dental third-party net sales of $67.5 million decreased by 2.8%, hampered by the loss of one less selling day versus 2021.

Outside of the U.S., Dental third-party net sales of $48.3 million decreased by 13.6% on a reported basis and 2.9% in constant currency, including an approximate 3.2 percentage point impact related to China. Q4 global Spine third-party net sales were $112.3 million, a 16.9% decrease on a reported basis and a 14.8% decrease in constant currency when compared to the prior year period. The decrease was driven by the exit of certain unprofitable markets in late 2021, product discontinuation from our brand rationalization program, one less selling day, China, and revenue disruptions resulting from ERP implementations outside the U.S.

When adjusting for these five items, Spine sales decreased by 3.1% and 1% on a reported and constant currency basis, respectively, when compared to an Omicron variant impacted Q4 2021. In the U.S., Spine third-party net sales of $90.9 million decreased by 10.2%, hampered by the loss of one less selling day versus 2021. Outside the U.S., Spine third-party net sales of $21.5 million decreased by 36.8% on a reported basis and 28.5% in constant currency. Net sales outside of the U.S. include a 6.3% impact related to China VBP and a 24.6% impact from ERP implementation disruptions, as previously noted.

Q4 adjusted gross profit was $156.7 million compared to $167.2 million in the prior year period. Adjusted gross margin was 68.7%, an increase of 450 basis points when compared to 64.2% in Q4 2021. The increase in gross margin versus prior year is driven by a substantial reduction of inventory charges in the quarter and greater gross profit dollars from higher dental implant sales. Full year 2022 adjusted gross margin of 67.5% increased 160 basis points over the prior year towards the top end of our expected range of mid-60s gross margin. We are pleased with the progress we have made to manage inventory since then, we'll continue to drive our operational excellence initiatives to remove further inefficiencies out of the company.

Q4 2022 adjusted research and development expenses of $11.6 million were 5.1% as a percentage of third-party sales, a decrease of 40 basis points compared to the prior year period. Q4 2022 adjusted selling, general and administrative expenses of $133.6 million or 58.5% of third-party net sales was 560 basis points higher than the prior year period. Lower variable selling expenses from lower net sales and the favorable impact of the organizational realignment we completed in Q2 2022 were offset by higher fixed and semi-fixed costs as a percentage of revenue. Adjusted EBITDA in the fourth quarter 2022 of $28.1 million or 12.3% of third-party net sales reflects an increase of 70 basis points from 11.6% in the prior year period.

Full year 2022 adjusted EBITDA margin of 13.5% of third-party net sales is 50 basis points higher than the prior year adjusted EBITDA margin of 13.0%. This is toward the top end of our guidance range as expected. The increase in adjusted EBITDA margin is primarily due to higher gross margin, partially offset by higher selling general administrative expenses as a percentage of revenue, as previously discussed. Adjusted earnings per share in Q4 2022 was $0.16 on a fully diluted weighted average share count of 26.1 million shares. Full year 2022 adjusted earnings per share of $1.84 was driven largely by income tax benefits realized in the period, partially offset by higher interest expense. Touching on working capital, liquidity and debt.

We are pleased with our progress on capitalizing on the strength of assets on our balance sheet and the application of our disciplined financial framework to optimize our allocation of capital and to monetize certain assets to drive cash and increase financial flexibility. Our efforts have resulted in a reduction in net inventory of $13 million since December 2021 and a significant reduction of approximately $25 million in the planned amount of capital spent on spine instruments as we focus on driving increased set utilization in the field. We ended the fourth quarter with approximately $90 million of cash and equivalents, inclusive of approximately $10 million of cash earmarked to settle certain post-spin related transactions and to fund ERP implementations to decouple from our prior parent company.

ZimVie spun in March 2022 with approximately $80 million of cash, inclusive of $22 million to settle post-spin related transactions. After adjusting for the earmarked cash, we generated approximately $22 million of cash since we spun out as our own independent company on March 1st, 2022. Consistent with our capital allocation priority of increasing financial flexibility and paying down debt to reduce our leverage profile over time, I'm pleased to announce that prior to the end of 2022, we prepaid all of our required 2023 principal payments on our term loan debt. We took this action to provide further financial flexibility in 2023 as we continue to execute on our operational and commercial initiatives. Our $175 million revolver remains undrawn. I'll now turn to our full year 2023 outlook.

Before I begin, I wanna highlight that guidance details are reflected in our investor deck posted on the Investor Relations section of zimvie.com to give some additional transparency. Starting with revenue, we expect 2023 net sales to be in the range of $825 million-$850 million, reflecting a 7.9% year-over-year reported net sales decline at the midpoint. Our guidance includes an anticipated 1.4% year-over-year negative impact from foreign currency headwinds, which we expect to be more pronounced in the first half of the year, leveling out in the second half. Our guidance also includes a 1.2% year-over-year negative impact from exits and scale back of operations in China.

Therefore, excluding the foreign exchange impact and excluding China scale back, our guidance reflects a net sales decline of 5.3% at the midpoint. Looking at our segments, we expect Dental to grow in the flat to low single digits in line with our end markets in 2023, inclusive of a 1.5 percentage point headwind due to foreign exchange and an expected approximate 0.5 point impact from China. We expect Spine to decline in the teens, inclusive of an approximate 3 percentage point impact to our Spine business from our decision to exit the China market and a 1.0 percentage point negative impact of foreign exchange. Moving to adjusted EBITDA, we expect full year adjusted EBITDA margin to be in the range of 13.5%-14.0% of net sales.

As we have previously discussed, we are implementing steps to continue to expand margins despite our anticipated top line decline. Adjusted earnings per share is expected to be between $0.30 a share and $0.50 a share on a fully diluted share count of 28.6 million shares. Our earnings per share guidance reflects an approximate $0.70 year-over-year headwind due to higher interest expense and a $0.50 year-over-year headwind from tax expense as the choppiness of activity post-spin starts to normalize. Rising interest rates and change in our tax rate are the primary contributors of lower year-over-year adjusted earnings per share.

Although we do not provide quarterly guidance, we expect quarterly revenue to follow traditional historical seasonality with Q4 and Q2 being our strongest quarters and accounting for approximately 52% of total revenue, and Q3 being our lowest performing quarter due to summer vacation schedules, which we expect to account for less than 24% of total revenue. 2022 did not follow traditional seasonality trends due to the Omicron impact in late 2021 and early 2022. As a reminder, supplemental guidance is available in our Investor Presentation located on zimvie.com. With that, I'll now turn the call back over to Vafa.

Vafa Jamali (President and CEO)

Thank you, Rich. Companies in spin-off situations generally face significant disruption in their first year as a standalone entity. This is especially the case when the business is heavily entangled with the parent company. We made the choice against a choppy macro environment to focus on what we could control within the business and accelerate our separation in the first year to ultimately accelerate our independence. I feel good about our accomplishments in this area as a whole, and I'm confident that this is the best approach to getting ZimVie through the separation period quickly, allowing us to dedicate more time now and going forward to commercial success within Dental and Spine. This remains our priority as we continue our mission to transform patient lives. I'm pleased to share that we'll be showcasing our new dental implant line in two weeks at the International Dental Show in Cologne, Germany.

We'll be hosting a virtual interactive dialogue with two KOLs, an oral surgeon, and a periodontist the following week to discuss the use and the benefits of ZimVie's digital dentistry platform and implant solutions.

We will share greater detail shortly and hope that many of you can join us at one or both of these events. With that, we will open it up to questions.

Operator (participant)

Thank you. As a reminder to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question coming from the line of Robbie Marcus with JPMorgan. Your line is open.

Robbie Marcus (Medtech Senior Analyst)

Great. Thanks for taking the questions. Maybe we could start with fourth quarter, and it came a bit below consensus in both Spine and Dental, even excluding China and currency. Maybe you could spend a minute on the trends you're seeing in each of those businesses and the shortfall in fourth quarter, and what you're seeing so far in first quarter in each of them. Thanks.

Rich Heppenstall (EVP and CFO)

Yeah. Hey, Robbie, it's Rich. Yeah. Q4, I'll start a little bit, I'll start with the headline around ERP challenges. When we talked at the end of Q3, we had guided $915 million-$930 million. We said we're gonna be towards the bottom end of that range. We were impacted by about $7 million relative to ERP implementations, as you mentioned on the call. That would have, you know, put us kind of squarely towards the bottom end of the range. What we saw some of the dynamics between Dental and Spine for the fourth quarter is on the Dental business, we were obviously impacted by Spine. It slowed down actually quite a bit for us, going into VBP.

On the Dental side also, what we did see is a little bit of kind of macroeconomic uncertainty in the kind of frankly in December that kind of further impacted sales on the Dental side. On the Spine side of things, you know, that was more related to China and the ERP implementations more than anything else. That's how we kind of finished the fourth quarter. To your question around on the first quarter, we're actually seeing some stability. We actually had a pretty decent January for us. We're starting to see some stability in Dental and starting to see some stability in Spine.

The quarter's off to kind of as we're expecting through the first, you know, almost two months.

Robbie Marcus (Medtech Senior Analyst)

Great. Maybe if we take it to 2023, you know, I think the Dental outlook looks pretty reasonable, but the Spine growth is it's a bit even below market growth still and probably lower than you were thinking a year ago. Maybe talk to some of the issues there that you're experience or plan to experience in 2023 and how you can overcome that and return that business to market growth.

Vafa Jamali (President and CEO)

Sure. Hey, Robbie, it's Vafa. Like you said, Dental is doing well. We think that the portfolio is positioned well to compete. We think our pricing is good, our profitability is good. Our commercial infrastructure is very healthy. We're really happy with Dental. With Spine, we're a little bit behind in terms of the portfolio, and we had some gaps. Frankly, we had some commercial activities that we uncovered through the year that, you know, were frankly suboptimal and we need to really performance manage some of our commercial operations. With all that volatility, inside spine, we focused on the portfolio. We added an opportunity to do a development, an R&D program with Brainlab. That's gonna fill a gap for us with respect to enabling technology.

It's a gap that we had coming out of Zimmer Biomet that I think we've effectively filled, and we'll start to work towards that. That'll be healthy. We've invested in Mobi-C and what that needs to do to regenerate and reinvigorate that one. In 2022, with respect to Tether, which is an outstanding product, we hit some reimbursement hurdles, which we resolved, and we continued to get some wins. We got Anthem. Following Anthem, we had Highmark and really that's giving our Tether surgeons a lot of confidence that if they that they can get reimbursement for their patients when they're getting them. I think a number of these things are pieces that we have to put together.

There still is disruption in spine that we're living through. I think the first half of the year is gonna be the toughest part, and I think you're gonna see a much, much healthier spine business in the back end of the year for Zimmer Biomet. That's kinda how I see it, but I really do think that there's enough disruption, enough volatility out there, that we just felt like we should give ourselves some room to make the changes we need to do to really get to a point where we have the portfolio and the commercial team that we need that can actually win in this market for us.

Robbie Marcus (Medtech Senior Analyst)

Great. maybe one more from me. As you think about the below the line items, it's taking a significant chunk of EPS out for next year. How are you thinking about your EPS growth over the long run, and when do you think you could get back to 2022 levels? Thanks.

Rich Heppenstall (EVP and CFO)

Yeah. Hey, Robbie. This is Rich. We spent a fair amount of time looking at EPS. I boil down the EPS change year-over-year into a couple of different, actually probably four different categories, right? You know, EPS actually goes higher year-over-year by about $0.23 or so, give or take, given higher profitability and then some lower depreciation and amortization expense, which obviously increases net income. That's offset by some higher share-based compensation and a little bit of a dilutive impact. The net of those two numbers is about 4% decline year-over-year on EPS between those two items.

Where the rubber really meets the road on EPS is in two items. The first one is interest expense, which is about $0.75. If you recall, our debt is SOFR plus 1.75%. When we spun, that debt was priced at about 2.3%. We're at about 6.7% today. Obviously the It's floating rate debt, obviously the Fed increasing the interest rates is impacting us because of our debt load. That's the biggest piece, which is about $0.76. The other piece is tax expense. What we've talked to you about and the investment community about is that our adjusted income tax expense is generally speaking about 25% of adjusted profit before tax.

In 2022, there were a number of items that were cleaned up post-spin that we actually realized a tax benefit of about a tax rate of about -3.8% of adjusted profit before tax. That's just not gonna recur, right? I mean, you can't obviously have a favorable negative tax rate in perpetuity. That normalizes into 2023, you know, as we cleaned up a lot of these kind of post-spin transactions in 2022. If you kind of think about kinda 2024 and beyond, you know, 2023 is actually probably more of a rebaseline based on current environment relative to interest expense and tax expense, then we'll be able to grow from there.

Robbie Marcus (Medtech Senior Analyst)

Okay. Fair to say it could be a while before you get back given the current interest and tax forecast.

Vafa Jamali (President and CEO)

Yeah. As interest expense is the highest part of it, I think that that would be the right approach.

Rich Heppenstall (EVP and CFO)

Yeah. I mean, if you look at the entirety of it, Robbie, right? I mean, about $1.20 is between interest and having a negative tax rate in 2022, right?

Robbie Marcus (Medtech Senior Analyst)

Got it. Okay.

Rich Heppenstall (EVP and CFO)

Right.

Robbie Marcus (Medtech Senior Analyst)

Great. Thanks a lot.

Vafa Jamali (President and CEO)

Thank you.

Operator (participant)

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

Sarah James (Director and Healthcare Services Equity Analyst)

Hi, this is Sarah on for Matt. Thanks for taking our question. Just one from us. I know we just talked about this. In Dental, if you can just go a little bit deeper into the trends, specifically OUS, U.S. I know you called out the VBP. Is there any additional color you can provide there and any visibility in terms of timing of when things can turn around?

Rich Heppenstall (EVP and CFO)

Yeah. Do you want?

Vafa Jamali (President and CEO)

Go ahead.

Rich Heppenstall (EVP and CFO)

I'll start, and I'll let Vafa add some color. The Dental business actually, you know, in Q4 year-over-year was basically flat, right? There were a couple of impacts we had in the fourth quarter, as we mentioned, just on the prepared remarks. You know, one being, you know, foreign currency exchange headwind, and then the other one was an impact of China. Of course Q4 had one less selling date. When you actually normalize for those items in Q4, our Dental business was flat. And I think it was relatively flat, you know, U.S. and OUS when you kinda normalize for those particular items.

We believe our Dental business is still performing at or perhaps even a little bit better than market. If you look at some of our peers as they've announced, you know, many of them are kind of performing at that same level. You know, we continue to feel as though our Dental business is really well positioned. You know, the market acceptance to our new products has been really strong. We've got a global footprint, direct sales force. As we look at 2023, we continue to think that Dental is gonna perform kind of at or a little bit better than market. I think, you know, there's a little bit of macro headwind that we're seeing, but that's consistent across the space.

Then we have a little bit of an FX headwind in China into 2023. Like I said, we should be performing at or a little bit better than market.

Vafa Jamali (President and CEO)

Yeah. Further to that, Sarah, I think, VBP is significant in China, and we've purposely given ourselves enough room to make the right decision on how to approach that market. Whether you stay as is or you reconfigure your team to address a market that isn't as impacted. The price cuts were significant, so we've given ourselves enough room to make the right choice on how to satisfy that market or not. That remains a question for us. I think it's implied within our guidance that we'll be looking at a different approach to China. But short of-

Sarah James (Director and Healthcare Services Equity Analyst)

Thank you.

Vafa Jamali (President and CEO)

Short of China, I'd say most of the OUS and U.S. is pretty similar.

Operator (participant)

Thank you. I'm showing no further questions at this time. I will now turn the call back over to Mr. Vafa Jamali for any closing remarks.

Vafa Jamali (President and CEO)

Just, thank you very much for your attention, and we look forward to sharing better news in future quarters. Thank you very much, and wish you a great rest of the day.

Operator (participant)

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