Herbalife Nutrition Ltd.
Q4 2021 Earnings Call Transcript

Published: 23 Feb 2022

[Operator:]

Good afternoon and thank you for joining the Fourth Quarter and Full Year 2021 Earnings Conference Call for Herbalife Nutrition Ltd. On the call today is Dr. John Agwunobi, the company’s Chairman and CEO; John DeSimone, the company’s President; Alex Amezquita, the company’s Chief Financial Officer; and Eric Monroe, the company’s Senior Director, Investor Relations. I would now like to turn the call over to Eric Monroe to read the company’s Safe Harbor language.

[Eric Monroe:]

Before we begin, as a reminder, during this conference call, we may make forward-looking statements within the meaning of the federal securities laws. These statements involve assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those discussed or anticipated. For a complete discussion of risks associated with these forward-looking statements in our business, we encourage you to refer to today’s earnings release and our SEC filings, including our most recent annual report on Form 10-K. Our forward-looking statements are based upon information currently available to us. We do not undertake any obligation to update or release any revisions to any forward-looking statement or to report any future events or circumstances or to reflect the occurrence of unanticipated events. In addition, during this call, certain financial performance measures maybe discussed that differ from comparable measures contained in our financial statements prepared in accordance with U.S. generally accepted accounting principles referred to by the Securities and Exchange Commission as non-GAAP financial measures. We believe that these non-GAAP financial measures assist management and investors in evaluating our performance and preparing period-to-period results of operations in a more meaningful and consistent manner as discussed in greater detail in the supplemental schedules to our earnings release. A reconciliation of these non-GAAP measures to the most comparable GAAP financial measures is included in our earnings press release submitted to the SEC. These reconciliations, together with additional supplemental information, are available at the Investor Relations section of our website, herbalife.com. Additionally, when management makes reference to volumes during this conference call, they are referring to volume points. I will now turn the call over to our Chairman and CEO, John Agwunobi.

[John Agwunobi:]

Good afternoon. Thank you for joining us on the call today. 2021 was another record year for Herbalife Nutrition. Even during this period of continued global uncertainty due to the pandemic, our entrepreneurial direct sales channel help consumers around the world pursue their nutrition and wellness goals by giving them access to our high-quality nutrition products. For the full year, demand for our nutrition products resulted in net sales of $5.8 billion, an increase of 5% compared to the prior year and an annual record for the company. Our three largest regions

[Alex Amezquita:]

Thank you, John. As John mentioned, 2021 was a record year for Herbalife Nutrition across a number of metrics

[Operator:]

Thank you. Our first question comes from the line of Wendy Nicholson with Citi. Your line is open.

[Wendy Nicholson:]

Hi, good afternoon. I had a couple of questions. First, Alex, with regard to including the buyback in the earnings guidance, I think that’s new and different for you, and I think it’s actually great. But just with regard to the $50 million worth of repurchases each quarter are you kind of committing to doing $50 million each quarter or there is a chance you would do all $200 million in the first quarter and then none for the rest of the year? So is it an annual number or is it literally a per quarter guide?

[Alex Amezquita:]

Hi, Wendy, thanks for the question. The consistency is really the key here. So $50 million a quarter is sort of how we see it profiling out. Now obviously, to the extent that we don’t have a use of cash for any other initiatives and we have that cash on the balance sheet, that can opportunistically be greater than $50 million. It could be $100 million like we’ve been doing at least every quarter two, three and four of 2021. So we’re just trying to create some level of baseline in our guidance projection given that we know that we’re committed to the share repurchase program. And this really, we hope, gives investors and folks a sign of commitment to our share repurchase program beyond the words that we have historically provided.

[Wendy Nicholson:]

Okay. That’s fair. Well understood. And then I have two other questions, if that’s okay. The first one is just with regard to pricing. I mean, obviously, every company we cover talks about how unprecedented and really unusual this cost environment is. And I’m just wondering, number one, does that lead you to think about doing anything differently with regard to your pricing mechanisms? I know you’ve historically had these annual price increases scattered throughout the year tied to CPI. But is there anything in the current environment where you say, well, we maybe needed the second one of pricing or we need to do it more aggressively? Or anything on that front or still no strategy with regard to pricing is unchanged?

[Alex Amezquita:]

Yes, that’s a great question. At present, we are sticking to our historical pricing strategies, which is very consistent with taking price consistent with each market’s local CPI. With that said, like you said, we are at unprecedented times. There are unprecedented input costs on freight, on raw materials, just up and down labor. So we are evaluating, is there more we can do? But obviously, we have to take the impact of that and how that might affect demand on those respective markets. And so balancing those two objectives, preserving margin without hurting demand, that is something that we are going to have to take another strategic look at, but at present, we are just sticking to our historical practices.

[Wendy Nicholson:]

Got it. Got it. And then I don’t mean to hog the Q&A, but just one more question because I thought it was an interesting comment, John, that you made with regard to the Mexico – I think it was Mexico where you said you’re testing a potential change in the frequency of the payments of the commission. I thought that was very interesting. But I just wondered, are there any incremental costs to that? Does it change the cadence of the business? Are there any risks or things I’m not thinking of yet because that’s something new and different that I hadn’t heard of before. And do you know if any of the other direct sellers are doing something similar?

[John DeSimone:]

Yes. So this is John DeSimone. I’ll take that question. So let me see if I can get it, I’ll answer each of them. So there are no material risk that we believe. The cost is negligible to do it weekly. It doesn’t impact the cadence of the business. What it really does is allow new distributors to get money in their pocket sooner, right? So if – basically, if I was getting commissioned before, I’d have to wait till the end of the month, and even then it would be 2 weeks before I get the check by the time I get being processed. And now we have visibility in the transaction much earlier, we can get people’s money in their pocket sooner. And yes, there is a competitive reason to do it, too, because competitors do offer quicker commission payments than we have historically. So it’s being tested in Mexico. If it’s successful, which we believe it will be, then there is possibilities we take it elsewhere.

[John Agwunobi:]

Well, I’ll just add – this is John A. I’ll just add that there are many of our distributors in Mexico are very excited by this. I mean, they recognize that it just makes it easier in markets like Mexico, and it’s going to be true, I think, around the world, to be able to have more money in your pocket quicker for cash flow purposes, to kind of engage those new distributors early on and get them seeing cash coming in, it commits them at an early point in their journey.

[Wendy Nicholson:]

Got it. Sounds great. Terrific, thanks so much.

[Operator:]

Thank you. Our next question comes from the line of Steph Wissink with Jefferies. Your line is open.

[Steph Wissink:]

Thank you. Good afternoon, everyone. I wanted to ask a follow-up question on guidance, if you could just talk a little bit about the flat assumption versus the 6%? And what are the key attributes and by market, if you are willing to give us some sense of that variance, particularly at that upper end? Does that assume that China influx or that you see persistence in the west as you’ve seen over the last couple of years?

[Alex Amezquita:]

Yes. I mean, we don’t really guide market by market. I think generally speaking, the guidance, the 0% to 6% of what that reflects is the normal range that we provide at this time of the year. I don’t think there is a different set of circumstances on the 6 that earning than the midpoint of the guidance where we expect an exceptional inflection point in China, etcetera. That profiling out of the year is really probably the more, I would say, unique thing about ‘22 versus prior years and how we’re starting this year still comping that surge in demand that was present in the first quarter and the first half of ‘21. And then as that surge in demand sort of normalize to some degree, in 2021, we expect to grow off of that more normalized base in the back half of the year. So the guidance really is just more reflective of how we see the business progressing past the surge of demand that we saw on the onset of the pandemic.

[Steph Wissink:]

Okay. That’s helpful. And then my follow-up question to Wendy’s earlier one on pricing. I’m just curious if you can give us maybe a slightly different lens into the supply chain. And how much of the cost basket you hedge or control versus how much of the costs you’re buying kind of on a spot basis where you’re seeing the volatility in some of the costing?

[Alex Amezquita:]

Yes. So there is a number of buckets in that question. So some of our biggest ingredients like soy, protein, isolate, I guess you could use the word hedging, but we lock in that price ahead of time. So our 2022 price on that major raw ingredient, that’s locked in for the full year ‘22 at relatively attractive prices versus CPI and versus a lot of the input prices that you might see. It’s in the low single digits of cost increase, ‘22 over ‘21. That’s probably one of the brighter spots of our input cost. However, many of the others or commodity-type prices, whether it’s off dairy or resins or those types of things, and those are typically spot market buys for us. Further, a big piece of our input cost is freight. And whether it’s freight in or freight out those costs have significantly escalated as well from all the demand issues that we’re all familiar with, so again, not something that you can really hedge or really lock in material prices. You’re really subject to spot prices on all of that. So we’re doing the best to sort of manage some of how to manage those input costs, particularly around the home delivery aspect, but that’s going to be a little bit of a longer term solution that we’re going to look to see if we can have some productivity improvements on that in ‘22.

[Steph Wissink:]

Okay. Great. My last question for you is just on the cash on hand and inventory levels. Are you feeling like you need to run your business with a bit higher inventory as a bit of an adjusting case protection or are you seeing some improvement in the fluidity of your supply where you think you can start to see working capital efficiency come back into the balance sheet?

[Alex Amezquita:]

Generally speaking, the inventory level has run a little bit above where we would have liked it. In some markets, it’s strategic and it makes sense, but generally, as a company, what we experienced in ‘21, as you might recall, we took guidance up, all of our forecasts came up, our manufacturing plants ran hot and produced a lot of inventory that what turned out to be into the back half of ‘21, then created excess inventory. So we’re still working off of that inventory if you look on our balance sheet. The levels of inventory are significantly higher than where they were a year ago. And we will continue to work those off as we get into 2022. Obviously, that has a sort of a duplicate affect too on our manufacturing variances, which is a little bit of the – if you look at our gross profit margin implied for ‘22, there is a little bit of a hit there as we’re working off that inventory, we’re going to have negative manufacturing variances at least through the first half of 2022.

[Steph Wissink:]

Alright. Very helpful. Thank you.

[Operator:]

Thank you. Our next question comes from the line of Jeff Van Sinderen with B. Riley. Your line is open.

[Jeff Van Sinderen:]

Hi, everyone. I just wanted to touch on, I guess, I would call it sort of the performance product umbrella. Under that umbrella, that line has really helped to attract a younger demographic and has been a relatively fast-growing segment. Can you give us a sense of how you’re enhancing that product line going forward? I know you said, I think, you had 400 new SKUs last year. Maybe touch on growth expectations around that performance line for ‘22. And ultimately, what level of concentration as part of your whole business seems feasible for the performance line over the longer term?

[John Agwunobi:]

Yes. I might get you to – this is John A. I might get you to repeat that second part of your question. Let me answer the first part first. It wasn’t actually 400 new SKUs in that category. It was 100 new SKUs in that category, 400 overall around the world. Yes, we’re really excited about our Sports Nutrition business. It’s energy, it’s protein, it’s hydration. And it’s actually it’s done very well on a number of fronts. One, new SKUs, as we’ve indicated, we’re expanding into – we have a few flavors that we – that are very core to the business, the flavors you would expect. But we are not only adding flavors, we are also going deeper in terms of the science and the types of products, things like BCAAs and different kinds of more specialized products in addition to our core product. We have also expanded our energy line within that space, quite dramatically, actually in a number of countries as well, new flavors, new formulations, new packet sizes as well, gone from tablets to powders and so forth. So, there is a lot of excitement. And yes, it does drive a younger demographic into the business. When we launch our vegan line, I have no doubt we will start to then go even further by taking vegan and organic into the sports line as well. For the full year, just to remind you, our sports business is up 26%. And I think we had similar growth in prior years. There was a time we would have added the caveat coming off a small base, but it’s actually been growing quite well now for a number of years and becoming increasingly – and I think this goes to the second part of your question, it’s increasingly becoming an important part of our overall mix. Now, I will just add one last thing. It’s a central part of our 5-year long-term strategy going forward. Our goal is candidly to become one of the top brands in sports nutrition around the world. And we have internal targets that we are gearing towards in a number of big markets. And indeed, we have a global target that we are trying to push for as well. I will stop there and ask my colleague, John, he wants to add anything, he is shaking his head. So, I will leave it there unless I left one of your questions unanswered.

[Jeff Van Sinderen:]

Okay. No. That was great. And then just as a follow-up to that, you mentioned the vegan line, and that, I guess being integrated at least partially having some vegan products in the sports performance line. The vegan line, I am guessing, also would be you would have products in other perhaps in the weight control line or what have you that are also vegan. I think you have some vegan products now, if I am not mistaken?

[John Agwunobi:]

Yes. So, we have a few individual vegan SKUs within broader lines, especially in our European market. But this is different. This is about us trying to develop a branded full end-to-end line of products that are used for weight management, sports performance and a number of other kind of end usages inside that category. So, we are trying to develop a full line under its own brand within the Herbalife Nutrition family of brands. Our goal being initially to launch here in the U.S. early 2023 is our target and then to take it further afield around the world from there.

[Jeff Van Sinderen:]

Okay. And then if I could just squeeze in one more. Just generally speaking, what do you think are the most important digital initiatives that you are hoping to, I guess complete or make considerable headway on this year that could impact your business towards driving more sales.

[John Agwunobi:]

Yes. I think, first of all, the whole digital kind of space in our strategy involves better supporting the way our distributors interact with their customers. And so there is a number of different kind of, for lack of a better word, buckets of activity there. It will include things like efficiency plays for our distributors, productivity plays for our distributors. I think the one that the distributors have pushed us to move the fastest on, and it’s underway, is an overall enhancement of their ability to e-retail to their customers. And starting in Europe, but then quickly, I think spreading around the world. We are going to do just that. I think the goal is not just to kind of launch something, but also to have a partnership with specialist – specialty vendors in the space that allows us to keep up with the times and so to speak. In other words, the vendor will be responsible for enhancing the functions of the e-retail side over time. But it’s principally focused on the work that our distributors do.

[Jeff Van Sinderen:]

Okay, great. Thanks for taking my questions and best of luck.

[Operator:]

Thank you. Our next question comes from the line of William Reuter with Bank of America. Your line is open

[Mary Ann:]

Hi. This is Mary Ann for Bill. Thanks for taking our question. Can you touch on where you are seeing the most significant inflation between raw materials, freight and labor? And if availability of any raw materials have been a challenge or if it’s more just that the costs are higher?

[Alex Amezquita:]

Yes, it’s more on just the pricing and the pricing variances from prior year. The basket of goods, I wouldn’t say that are disproportionate in one or the other. I mentioned earlier in the call on some of our raws we are doing quite well on. But the overall basket has significantly increased.

[Mary Ann:]

Got it. Thanks very much.

[Operator:]

Thank you. Our next question comes from the line of Doug Lane with Lane Research. Your line is open.

[Doug Lane:]

Yes. Hi everybody. Can you – you mentioned COVID several times in your comments, which is understandable given where we are. But can you drill down a little bit more on what in particular or how in particular COVID is impacting your ability to go-to-market? Is it the supply chain? Is it big events? Is it Nutrition Club attendance? I mean just where exactly is COVID impacting your business these days?

[John Agwunobi:]

Yes. So Doug, obviously, because we are in 94 countries, we are in all of the big regions around the world, the answer is it depends on which region you are talking about, right. But I will try to give you a little more color. So clearly, I think in many of our markets that are Nutrition Club-based markets like Mexico, and to a lesser degree, the U.S. We found that during the peak of COVID, customers didn’t want to go to the Nutrition Club. And in some cases, governments actually prevented us from opening Nutrition Clubs. I remember Nutrition Clubs in India, for a while they were shutdown. However, for most of those markets today, that surge in COVID has passed by. And the Nutrition Clubs are rapidly reopening, customers are showing back up at their favorite mini community, the Nutrition Club on the corner and things are beginning to get back to normal. So, that’s one area. The second – I am talking about – there were some positives, obviously, but let’s speak to the negatives here a little bit, because I think that’s what your question was about. The second area, obviously, was I think, as you point out, supply chain. And the supply chain impacts of COVID, I think it’s safe to say because the entire industry is facing them. On the front end, in other words, inbound, but also on the outbound side has been impacted, I think in ways that are going to take a little longer to bounce back. Things like shipping, containers, freight in and out, the cost of freight, those kinds of things, I think are going to take a little longer to heal, to get back to normal. Even though for the most part, I think the impact of COVID in the West has diminished significantly. There is still a lot of COVID on the east side of those supply chains. If you look at what’s happening in Hong Kong, to a lesser degree now, but who knows what will happen in the future in China, there is – and beyond in Asia. There is some pretty – I don’t think Omicron has peaked yet in many of those markets. The good thing about Omicron is if the East was anything – sorry, the West was anything to go by, it should pass fairly quickly, right, two months, three months, four months for the peak to pass. So, that would be the second area. The last thing I would just say is on meetings and in-person meetings. They are the lifeblood of our business. We are a relationship business. We rely heavily on people teaching others, inspiring others and nurturing others, whether it would be the customer who is trying to lose weight. She needs her coach. And she needs her coach right there with her as she is working out or as she is walking – setting up her plan, or on the business opportunity side, where you have young entrepreneurs trying to build the business. And the need to learn from the more experienced distributors that have gone before them, they do all of that in these events. And we are so excited. One of the biggest positives that we sense as a company is the fact that, as a company, in general, we are reopening. In-person events are happening again. We have a schedule of events through the rest of the year that show dramatic acceleration. I am going to attend many of them, as will many of our executives all around the world. So, we are feeling quite good about that. The one kind of, I think question mark would be how long does it take for APAC to get through its Omicron wave, because they too are an important part of that process.

[Doug Lane:]

I know that you had to go virtual with some events in recent months. How long do you think before – I mean, I guess you can’t predict COVID, I get that. But just from your planning standpoint, are you looking to be pretty much fully up and running with your regional conventions and events by the second half of this year, for instance?

[John Agwunobi:]

In speaking to all of our leaders around the world, almost every market expects to try to have in-person events by the end of the year. There will be a mix of transition between now and then. And I have no doubt we are going to hold on to many of the positive aspects of the virtual world that we have all learned to live in. We are going to layer that on top of the in-person events as they begin to then kind of happen around the world. So, the answer to your question is we fully expect to have most of our countries hosting some kind of live events by the end of this year with the trajectory between here and there that kind of ramps up pretty dramatically as COVID exits.

[Doug Lane:]

Okay. Thank you. That’s very helpful. Just one last question, you are a big global company. Can you give us how you think about what you can possibly build or how you are thinking about it in your forecast with the geopolitics in Russia and Brazil going on?

[John Agwunobi:]

Yes. Let me throw this one to John DeSimone, our President, who worked so closely with the markets.

[John DeSimone:]

Yes. Hi, Doug. So look, just like every other company has got business in those markets, we are putting contingency plans together. We have distributors and customers who rely on this company and there are – we are in 95 countries. We have supply chains coming from different regions that I think can get products into those countries depending on what the circumstances are. They don’t have to come from the U.S., the relations with the U.S. isn’t good. Really, the biggest risk is more on the banking side, can we get money out and right now, we expect that we will be able to. You never know. But we have got continue to see plans in place that we are hopeful we will manage at least any kind of reasonable outcomes from the events. And look, with Ukraine itself, just to give you a perspective, it’s 10 million to 15 million volume points a quarter. It’s not big. That’s probably where the biggest risk lies. I mean there is risk in Russia, there is risk in Brazil, but the biggest risk is probably in the Ukraine, and it’s not a material country to us.

[Doug Lane:]

Okay. That’s helpful. Thanks John.

[Operator:]

Thank you. Our next question comes from the line of Matthew Berry with Miller Value Partners. Your line is open.

[Matthew Berry:]

Hello guys. Thank you for taking my call. Could I get – I know you don’t provide guidance, but could you maybe provide any thoughts on the big step down that you are expecting in the first quarter of this year? And obviously, at this point, you have almost two months of data that you are reading off. So, that’s a big step down, you are minus 10% to minus 4%, I think on the volume point. So, what’s really driving that? Is that the number of sales leaders that you have got out there? Is it the number of volume points that those sales leaders are producing? And any sort of additional data on what you are seeing in the business that’s driving that would be really helpful?

[Alex Amezquita:]

Yes. So, it’s a great question. And so this is a little bit the nuances of the profiling. So clearly, in Q4, we had sequential growth over Q3. In Q1, the health and strength of the business continues to actually be stronger. Now, with that said, like the numbers that you called out, if you look at the midpoint of the guidance, that is either slightly to the downside or flat with where we were in Q4. And that’s less about the current state of the business and more about what the business is comping off of. So, if you go back to the first quarter of ‘21, we reaccelerated with the surge that we experienced in the middle of 2020 from the pandemic. So, if you are looking at some of those top line numbers, and you are saying, “Hey, well, this isn’t getting better than Q4.” Actually, the health of the business is getting better, but it’s comping off of a more difficult comp. So, that’s – when you look at that, you have to kind of put some of that in perspective. So, if you go back, for example and you go back to the first quarter of ‘21, we reaccelerated with 19% net sales growth in the first quarter of last year. Right. So, we are comping off of a 19% net sales growth year – quarter versus 15.6% in the fourth quarter. Does that make sense?

[Matthew Berry:]

That makes sense. And I guess this is something we could probably get into a little more detail on offline because there is definitely a few moving parts. But okay, I appreciate the help on that, Alex. Thank you.

[Alex Amezquita:]

Sure. Thanks.

[Operator:]

Thank you. Our next question comes from the line of Hale Holden with Barclays. Your line is open.

[Hale Holden:]

Great. Thanks for squeezing me in. I just had a couple of quick housekeeping ones. Alex, would it be possible for you to also give us a CapEx estimate for this year?

[Alex Amezquita:]

Sure. Our CapEx guidance is $200 million in the midpoint. And again, that’s getting to some of these digital programs that John mentioned, too, some of the technology initiatives to help on the front end of the business to – that’s supporting that slightly elevated number from where we have been historically.

[Hale Holden:]

The second question is on the EBITDA guide that you gave, does that include or exclude the efficiency in cost saves charges that you are doing this year that you called out in SG&A?

[Alex Amezquita:]

Yes. So, the charges – the types of charges that we excluded in 2021 and that I mentioned to the tune of $25 million to $30 million, that total basket is not in the EBITDA number. We expect that will be carved out in that EBITDA guide for 2022.

[Hale Holden:]

Great. And then I got a big picture one, which is there has been a lot of discussion on, as you emerge from the pandemic and it becomes endemic, but weight loss and healthy behaviors are maybe less of a focus than they probably should be. And I was wondering if you were seeing that at all from your sales performance or if that was a concern for you guys?

[John Agwunobi:]

It’s not a concern, and we are not seeing it in our sales performance at all. In fact, we believe there is going to be increased demand beyond the pandemic. A couple of things. First of all, I think the pandemic has conditioned a lot of people to focus on their health and on their immunity and on their ability to fight external threats from viruses and bacteria and the harms of the world. The second reason is, unfortunately, many people on lockdown gained weight. And we think that once they all emerge and get active again, go back to work and so forth, there is going to be, we believe, an increased demand for weight management as people try to get healthy again, after 2 years of sitting on their couch. Lastly, I would just kind of point to the fact that there are long-term trends that have not been impacted by the pandemic. The obesity epidemic continues to be a major issue. It was for the 5 years prior to the pandemic, and we believe will be the 5 years that follow the pandemic. And then there has been a surge, more subtle, unless you are in the industry because it’s not a headline news thing, but people are – there has been a big trend towards sports, outdoor activities, healthy living and especially in the younger demographics. And that surge, as evidenced by the increase in our sports nutrition business, up 26% in the prior year. We believe that, that’s going to continue. There is no indication that it’s going to slowdown, at least from the data we see.

[Hale Holden:]

Great. Thank you so much. I appreciate it.

[Operator:]

Thank you. I would now like to turn the call back over to CEO, John Agwunobi, for closing remarks.

[John Agwunobi:]

Thank you. We have gone a little longer in our call today. Obviously, end of year, a lot of complicated issues with the pandemic and so forth. I am glad we did because we had an opportunity to kind of go a little deeper than we might typically have gone with all of you. Thank you for your questions and for attending. I will end quickly, therefore, by saying, listen, we have a long-term strategy that we are very confident in, we are very proud of. It’s working. It’s delivering. And it’s going to continue to deliver as we look out into the future. We have given you guidance for 2022. And if you take those midpoints, you will recognize that our share repurchase program is an important part of our tactical play for the rest of this year. As Alex pointed out, we are going to try to make it a lot more consistent, at least on its base, and then we will be opportunistic on top of that as we move forward. The market continues to look for – and when I say the market, I mean our customers and the distributors that support them, continue to look for the kinds of products that we sell all around the world. Demand continues to be something that we are very pleased to see. And as we profile out 2022 and beyond, we are feeling really good about our future as a company. I will leave it at that, and say thank you for attending. Look forward to speaking with all of you on the road at some point.

[Operator:]

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