Constellation Brands, Inc.
Q3 2023 Earnings Call Transcript

Published: 5 Jan 2023

[Operator:]

Greetings, and welcome to Constellation Brands' Third Quarter Full Year 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Joseph Suarez. Thank you. You may begin.

[Joseph Suarez:]

Thank you, Rob. Good morning, all, and Happy New Year. Welcome to Constellation Brands third quarter fiscal 2023 conference call. I'm here this morning with our CEO, Bill Newlands; and our CFO, Garth Hankinson. As a reminder, reconciliations between the most directly comparable GAAP measures and any non-GAAP financial measures discussed on this call are included in our news release or otherwise available on the company's website at www.cbrands.com. Please refer to the news release and Constellation's SEC filings for risk factors, which may impact forward-looking statements made on this call. Before turning the call over to Bill, in line with prior quarters or like last, let me limit everyone to one question per person, which will help us to end our call on time. Thanks in advance, and now here's Bill..

[Bill Newlands:]

Thank you, Joe, and good morning, everyone. Happy New Year to everyone, and welcome to our fiscal third quarter call. I hope you all had a great holiday season and that our products were able to play a role in some of your special moments with your family and friends. Since our last call in October, Constellation Brands reached a notable milestone in its history as a public company. As most of you know, in November, our shareholders approved the elimination of our Class B common stock. With that came the transition of our company to a single class of publicly listed stock, our Class A common stock, which provides our shareholders with equal one share, one vote rights. I want to thank everyone who supported this important enhancement to our company's corporate governance profile and capital structure. We believe that our leadership team now has an even stronger foundation to continue to build shareholder value through the strategic initiatives we adopted and have steadily advanced over the past nearly four years since I assumed the role of CEO. Since fiscal 2020, we agreed to focus on and put in place plans to

[Garth Hankinson:]

Thank you, Bill, and good morning, everyone. As Bill mentioned, we delivered another set of solid results in the third quarter and continue to make progress against our operating plans and strategic initiatives. Our beer business achieved high single-digit net sales growth and continue to deliver best-in-class operating margins. Our Wine & Spirits business made additional progress against its strategy with an even more premiumized portfolio further aligned with consumer trends following our recently completed divestiture. Additionally, we generated strong cash flow results and with yesterday's declared dividend to be paid in February, we are on track to exceed our stated $5 billion goal of returning cash to shareholders in the form of dividends and share repurchases between fiscal '20 and fiscal '23. I will now review our Q3 performance and full year outlook in more detail, where I will generally focus on comparable basis financial results. Starting with our beer business. Net sales increased 8%, primarily driven by higher average price increases and solid demand across our portfolio. Q3 shipment volumes were up 3% reflecting a difficult volume lap given the focus of replenishing product inventories in the same period last year. From a depletions perspective, we achieved growth in the quarter of approximately 6%, driven by the demand of our Modelo family of products, including the Modelo Especial and Modelo Chelada brand as well as double-digit growth from Pacifico. As Bill noted, depletions decelerated sequentially from Q2 to Q3. This was primarily due to

[Operator:]

Thank you. At this time, we will be conducting a question-and-answer session [Operator Instructions] Our first question comes from the line of Lauren Lieberman with Barclays. Please proceed with your question.

[Lauren Lieberman:]

Thanks. Good morning. When you walk through the drivers of the change in trend for depletions that you saw towards the end of the quarter, one sort of mention was a comparison on macroeconomic trend versus the prior year and then also your comments on taking sort of more muted pricing as you look into '24. So I'd love if you could just spend a little bit more time talking about what you're seeing from your various kind of core consumer groups, it feels like I know you pointed out some share gain continues. But when we look at some of your brands relative to other high-end brands, core beer brands, not Seltzer, it does look like there's underperformance, it's specific to your brands. So just any further diagnostic you may have done would be really helpful to hear about? And then also, I wasn't entirely clear on why the slower CapEx spend, I know you just went through it across at the very end of your comments, but I was hoping you could just reframe that because I admittedly missed why is it $200 million lower this year?

[Bill Newlands:]

Sure. So relative, Lauren, to the depletion trend scenario, we're still seeing in our -- all of our assessment and research suggests that we continue to have very strong support for our brands among our core Hispanic base as well as growing trends amongst the non-Hispanic community. I think a great example of that shows itself in that we actually had an increase in our share gain quarter-on-quarter from last year which reflects very well. Certainly, some of what we saw at the latter part of this quarter was driven by a couple of things. One is many businesses, including ours, took additional pricing over what we had planned. And that caused an overall softness in the market, particularly in the state of California. It wasn't limited to us. And frankly, that's not an unusual reaction. We've seen that many times before. Frankly, what we were very pleased about as we then look into December and to see if this thing is beginning to go back to some normalcy, we see that it has been, we saw a 7.5% swing to the upside in dollars versus where it was in November and that compares to a category swing of 4.5%. So again, we saw a significant improvement in the market that was primarily the cause of a bit of deceleration in our depletion performance as we got into December, and we continue to gain share in that overall mix of swing. So we're not -- we -- this is not an unusual event. It happens virtually every time you see significant pricing action taken and the fact that we continue to gain share at the clip that we are gives us great confidence going forward and the strength of the brands overall. Garth, anything you want to say.

[Garth Hankinson:]

Yes, Lauren, just on the CapEx, it's important to note that we continue to progress with our expansion as planned. As we stated in the remarks, we've added 11 million hectoliters of capacity over the last several years, $9 million in growth, sort of $2 million through productivity initiatives. We are on track with our expansions at both Nava and Obregon. And as we mentioned, we've recently broken ground in Veracruz. So the reduction in CapEx for this year is not necessarily abnormal as we move through the year. It really has more to reflect the timing of when payments will be made and less to do with progress.

[Operator:]

Our next question comes from the line of Nik Modi with RBC Capital Markets.

[Nik Modi:]

Yes, good morning, everyone. Bill, I was hoping maybe you could talk about what's actually happening with some of the pricing as it goes through the supply chain? Certainly, we've picked up some commentary within the trade that pricing was taken on top of what you actually took in the market. And I'm just curious what the state of that is, if it's starting to get unwound? And have you seen any implication of that in some of the more recent weeks?

[Bill Newlands:]

Yes. You bet, Nik. You're absolutely right. One of the things that we saw that occurred after our pricing increase is that other players within the chain took more price on top of what our pricing increase was. And frankly, this often happens as well. The Board tends to happen, and we've already started to see it in certain some markets is that, that moderates over time as well because an attempt is made to see what the consumer is ready to accept. And if we find a spot that's a bit more than they are ready to accept you see some moderation in that increase. You've already started to see that with some critical change in the state of California, which probably relates to my answer to Lauren a moment ago, which is why you saw the trends in December change quite a bit. So you're correct there was a lot more and it piled on, if you will, once it was out of us and into further down the chain, more was taken and as we often see that goes higher early and then moderates over time.

[Operator:]

Our next question is from Nadine Sarwat with Bernstein.

[Nadine Sarwat:]

I just want to stick with depletions here. I know you gave those explanations in your prepared remarks, but I have two follow-ups. So the first is that the reported depletion still meaningfully lag the trends in the Nielsen track channels, which I would have assumed would reflect a number of the factors that you called out, so could you help us understand this gap? And then the second question is, I know you've mentioned that you have confidence that your depletions would return to those normal levels. But we are still seeing weakness in the December Nielsen trends. So could you provide some color as to what gives you that confidence? And what are your quarter-to-date depletions at the moment?

[Bill Newlands:]

Sure. So let's start with the question of track channels. One of the things that we have historically found is that you're in the roughly -- there's roughly 3-point delta, we use IRI, I realize you just said Nielsen, we use IRI. There's roughly a 3-point delta historically between the growth that you see in the tracked channels and the depletion rates. Interestingly, that got massively bigger when you're in the middle of the pandemic because the percentage of business that went through the off-premise trade increased substantially. That has now come back to somewhat of a more normalized level as you get to a little bit better positioned in the on-premise, not quite back to where it was, but it's directionally. So that is some of what you are seeing is you're back to a more traditional split between those individual things. Relative to -- and I quoted to the California, some other states are seeing a bit different. Texas on the other was also a market that was somewhat softer post price increase, and that one has not rebounded just yet. But that, again, is not unusual either. It's a little bit of a different channel mix than what you see in the state of California where you often see a more faster response to whatever impact pricing increases take. So this, in our judgment is all part of a normal process of when pricing actions are taken. It takes a few months for it to all work its way through the system. Relative to the depletes, we don't have the final numbers in. As you would expect, we're only in day five of the New Year and obviously, it included the New Year, which makes the reporting a little bit behind. What I would say is that we're comfortable with where we think the summer is going to land. Otherwise, we wouldn't have raised our guidance.

[Operator:]

Our next question is from Kaumil Gajrawala with Credit Suisse. Please proceed with your question.

[Kaumil Gajrawala:]

Hi, guys. Not to belabor the pricing conversation, but when you mentioned 2024 pricing to be more muted, could you maybe just talk a little bit more about what that means? And then Garth, when we think about the share price, not just the movement today but perhaps more recently and perhaps even the fact that it's been -- the share has been flat for a period of time. Does that change how you're thinking about share recalls?

[Bill Newlands:]

Sure, I'll go for it. So relative to 2024 pricing, as we stated in the last quarterly call, we were going to go above what our expectations had been. And that reflects, obviously, in the October increase that has taken us above our traditional 1% to 2% guidelines. What we're suggesting relative to 2024 is that it's going to be much more in line with what our historical trend has been, which is 1% to 2%. We would not expect it to go beyond the top end of the range as we did in this particular year and late in this fiscal year.

[Garth Hankinson:]

Yes, Kaumil on the share repurchase, I just want to make sure it's clear that we haven't necessarily deprioritized share repurchase activity. As we mentioned, we have $1.2 billion worth of capacity under our current board authorization. In the near term, we think that it's more important to focus on getting our leverage ratio back down close to 3%. That being said, we do have the flexibility to be able to take advantage of weakness in the marketplace, as we said in our prepared remarks and be opportunistic. So it's absolutely something that we have the flexibility and optionality to execute against.

[Operator:]

Our next question is from Bonnie Herzog with Goldman Sachs. Please proceed with your question.

[Bonnie Herzog:]

All right, thank you. Hi, everyone. Just maybe first, a quick clarification on your pricing. I'm wondering if you're still expecting to be in your 2% to 3% pricing guidance range for the full year since I guess that would imply only around 1% pricing in Q4? And then, I guess, a question on your guidance, just in terms of your beer guidance, you raised your full year sales and op income growth, but it does imply shipments will be down maybe as much as high single digits in Q4. So I'm aware you're lapping the distributor inventory build from last year, but just trying to reconcile this with some of the key initiatives you have out such as the rollout of Modelo Oro that's shipping now. So maybe if you could touch on that? And then just finally, I wanted to clarify if you expect your full year shipments and depletions to be broadly in line with each other? Thanks.

[Bill Newlands:]

Sure. We do expect to be slightly above our 2% to 3% that we quoted in the last quarter, when all is said and done for the year. We also -- you should also recognize that mix is going to be higher and in large part because of the significant increase in the Chelada business, which is mix accretive in the overall portfolio. Garth, do you want to touch on the other piece?

[Garth Hankinson:]

Yes. Just in Q4, right? I mean as a reminder Bonnie, as we said throughout the year, you need to focus on sort of full year performance as that we're going to -- it was going to be sort of uneven or choppy results throughout the year, given the fact that we had the difficult overlaps as we were in the first half of last year dealing with some production-related issues in the second half of the year, we were building back inventories. So Q4 will certainly be muted this year versus what it was last year as last year was sort of artificially high due to that, those rebuilding efforts.

[Operator:]

Our next question is from Dara Mohsenian with Morgan Stanley.

[Dara Mohsenian:]

Hi guys, good morning. So I know we spent a lot of time on depletions already, but just a couple more specific follow-ups to drive a finer point on it. A, just as we think about the deceleration we've seen in nontrack channels, the untracked channels the last couple of quarters here. I wanted to get a little more detail on your perspective on what's occurring there. Is it more just look, there's less momentum from an on-premise recovery post-COVID as you cycle the more normalized post-COVID comps, might there be more of a macro slowdown on the untracked off-premise channels as theoretically volume shift to track channels in areas like Bodegas, et cetera, just sort of break down that nontracked channel mix a bit in terms of talking about on-premise versus the untracked off-premise. So sort of extended a bit beyond the answer to Nadine's question? And then Modelo does look like it's disproportionately slowed. Just to check on that, it seems like your mindset is more that it's related to some of the weakness in California, some of the pricing impact, less sort of more temporary factors. Is any of that sort of related to more longer-term factors? Maybe it's at a much larger base and you're having -- you're not going to see as much growth? How do you sort of think about the Modelo brand and its performance recently? And then last, sorry for the multipart question, but price/mix was obviously very strong in the quarter. Some of that is higher year-over-year pricing. But presumably, some of that is mix also. So are you seeing a big shift to smaller packages, might that also be part of the reason for some of the depletion weakness. So I just wanted to get a little more clarity on those points as it related to depletions? Thanks.

[Bill Newlands:]

Sure. Let's try to tackle those one at a time. Relative to Modelo, well, importantly, we are still seeing share gains in our five biggest markets. I think that's really important. But we're seeing several times those gains in the other markets with track channels, which we see as we've said many times before, a tremendous upside opportunity, this brand is still under shared, if you will, in terms of its household penetration compared to Corona Extra as an example. So there's just a lot of runway for growth for Modelo, and we remain very, very comfortable and confident in that brand's ability to continue to accelerate. Relative to the nontracked channels, we have continued to see on-premise get closer to where it had been, but it's still not quite to where it was before the pandemic, one. Two, it always takes a bit more time in some of the smaller Bodega style nontrack channels for pricing actions to work their way through. We've seen that happen before. And obviously, when you include and talk about the state of California, which is our single biggest share market, I'll remind you that Modelo Especial is bigger than Coors Light, Miller Light, Bud Light combined. When you see some of that happen it has a disproportionate impact in the short term until the pricing scenario plays itself through. So we don't believe this is any long-term trend issues. And our confidence in that is bolstered by the fact that as I stated earlier to one of the earlier questions, that we saw a very strong rebound in the State of California during December. Relative to price mix, a piece of that -- by the way, I should also mention, the number one share gainer in the State of California in the last four weeks happen to be Pacifico. I think that also speaks to the strength of our portfolio. Our portfolio is not a one-trick pony. We have a very strong place in the Corona brand, and the Modelo brand as well as Pacifico, all of which I think is very positive. Relative to the price mix question, right? We are seeing mix benefits. Some of that, as I stated just a moment ago is related to Chelada, given how big and important Chelada has gotten to be, that is mix accretive to our overall business. And therefore, the 40-plus percent growth profile that you see from that particular subsegment of Modelo does add significantly to the mix benefit that you observed.

[Operator:]

Our next question is from Kevin Grundy with Jefferies.

[Kevin Grundy:]

Great, thanks. Good morning, everyone. So my question relates to trade down in the category over the next 12 months, given the sort of obvious element in the room with the macro factors. And I wanted to tie that in your level of confidence on -- in your beer segment. So we are seeing trade down like we see it in the Nielsen data for economy beers, which, of course, have been donating share for a long period of time. So Bill, how concerning is that when we look at trade down behavior and we've seen it in past recessions as well. I just want to see how that's sort of informing the view. And I think relatedly, just given some of the concern that's out there in the market today, I think folks would be very keen on hearing your level of confidence, I guess, in your intermediate term, high single-digit growth outlook for the beer business. The color you guys gave on margins was certainly helpful. And it looks like you're taking a conservative tack there. Is it reasonable to take a sort of similarly conservative tack in your outlook for top line growth in the beer segment looking out to next year as well? So thank you for all that.

[Bill Newlands:]

Sure. I'll go backwards there on that. Hopefully, I won't miss anything. We maintain our continuing expectation of our medium-term guidance that we've said before, we don't think there's any radical change to where that has been. And as you know, we've often beaten that in the past. Relative to trade down, we'd obviously watch this carefully. We are very fortunate in the alcohol beverage business that we tend to be recession-resistant, doesn't mean that there's no impact that we are -- it is certainly resistant. The interesting thing that's occurred at this particular time is we've seen variable trade down at our price points. It doesn't mean -- you're correct, there has been trade down, but it has tended to be from price points below us going even lower rather than trade down from our brands which I think speaks very strongly to this year's strength of those brands. We have seen some trading around within our brands. I know -- as I said a moment ago, the Pacifico scenario in the state of California is spectacular. And I think is reflective of the growth potential for that business but it also reflected some trading around within our portfolio that occurred. So we are less concerned. We also keep our eye on it. We are less concerned about trade down from our price points. And remember, we are continuing to market these brands in the same way that we have historically. Our share of voice at the consumer level has never been higher. And I think that's important as well. We continue to invest behind our brands to support those in the eye and the mind of the consumer. And I think that's going to be critically important during a time when there could be some trade down lower in the category.

[Operator:]

Our next question is from Andrew Strelzik with BMO. Please proceed with your question.

[Andrew Strelzik:]

Hi, good morning. Thanks for taking the questions. First, I'll follow up quickly and then another question. The follow-up is on pricing again. I'm just curious, obviously recognizing that you're making some of the commentary about '24 being a bit more muted, while you're seeing some volatility in the depletion trends. So can you just talk about how you'll be approaching that or what you'll be watching as you move through the year potential flexibility there, things maybe holding a little bit better? And then the other question is just on product innovation, which you mentioned all the growth that's been driven by product innovation in the last several years. How does the innovation pipeline look now versus the last several years? Are you -- where are you seeing kind of the biggest opportunities or where is the focus? And is that more or less relevant in this consumer environment? Thanks.

[Bill Newlands:]

Yes, you bet. So relative to pricing, Andrew, we believe we're going to be more -- we took more price now in October which will inherently have some rollover benefit within the P&L. But relative to new pricing taken in next fiscal year, we expect them to be back in that 1% to 2% range that we have consistently delivered. We think that's important, especially in an environment where the consumer is overly sensitive to pricing actions. We're in an inflationary environment across all areas in the consumer space. And our view is we need to be careful in balancing our growth profile with our pricing profile. And we're going to continue that thought and approach going forward because we think it's in the best long-term interest of our brands. Innovation is going to continue to be an important part of what we do. As you know, we're very excited about the launch here in March of Modelo Oro. Certainly, the Chelada business continues to be one of our great growth drivers. And many of those things, as I noted in my prepared remarks, are products that are relatively new. As you probably know, this fiscal year, we added a 12 pack, we added 12 ounce. We're putting a variety pack in. That's been very successful also. So we're reaching more consumers and more consumer occasions than what we have done. And therefore, we continue to expect innovation to be an ongoing part of our success, same through the wine business. You saw that with things like Unshackled with things like our Red Blend in Meiomi. You saw that with Illuminate, with Kim Crawford. We're -- and innovation has been a strength of our companies and that we can put outstanding liquids in the bottle or can as the case may be and continue to do so, and we think that's going to be an important part together with our core organic growth of our growth profile going forward.

[Operator:]

Our next question is from Chris Carey with Wells Fargo. Please proceed with your question.

[Chris Carey:]

Hi, everyone. So I'm just trying to get a little bit more comfort with the outlook on beer operating margins for next year. If I just take this concept of muted pricing and high single-digit inflation, I'm coming up with a little bit of operating margin compression, right, and maybe modest operating income growth in beer next year. And so I'm just wondering if that logic is sound or whether there are other things going on here like incremental savings programs for less spending elsewhere, which gets you to, I think, what you're implying is operating margins are flat, and if not, I just wonder if there's a more important revision of estimates that's required here, so thanks for any clarification on that? And any help you can provide on the bridge math.

[Garth Hankinson:]

Yes, Chris, thanks for the question. Look I think it's important to note that we will continue to deliver best-in-class operating margins, both this year and next year. As we said during the call, we're in the process right now of going through our annual planning review. And so we'll have a lot more detail to share on this with our Q4 earnings release and outlook for FY 2024. That being said, we did want to use today to acknowledge that next year's margin profile is going to be more in line with this year's margin profile for all the reasons that we discussed. Certainly, inflation continues to be enduring, and it's lasted longer than anyone had expected. And as we noted, many of our costs are contractual in nature, and those contracts when they get renegotiated, they get renegotiated at sort of the then inflation rate, not necessarily what the outlook for the year is. And we're going through that process again right now. So we'll have more clarity around where we land on those as we go through the next several weeks and months. We've talked about hedges in commodities, and commodities coming off their highs, but certainly, they certainly haven't reverted yet to where they were pre-pandemic, so they will continue to be a bit of a headwind for us next year. Depreciation will also be a bit of a headwind next year for us as we lay around the incremental CapEx that I referenced to Lauren's question, we will -- we do expect to go live with our ABA capacity expansion at Nava as well as that incremental capacity at Obregon. What's the impact to that depreciation on, again, we'll know better about that in the next few months because that's all dependent upon when assets are put into service. And then as you know, pricing will be a bit more muted. Again, we're still going to be within our 1% to 2% algorithm. We just won't be above 2%, like we have been not just this fiscal year but last fiscal year as well. And so those will be some of the headwinds. And again, we always have tailwinds for as well. The continued momentum of the brands, right? We'll continue to -- the brands will continue to grow and drive efficiencies, and we always have a robust set of cost savings initiatives that we will avail ourselves up. And again, we'll have more detail around what -- how each of those impact margins for FY '24 as we release our FY '23 annual results, but we wanted to acknowledge that on this call.

[Operator:]

Our next question is from Bryan Spillane with Bank of America.

[Bryan Spillane:]

Thanks, operator. Good morning, everyone. Just one quick one for me. Garth, I guess while we're talking about '24 there's a $26 million, I guess, gross contribution after marketing hit from the Wine & Spirits divestitures that affected fiscal '23. So does any of that spill into fiscal '24? Or are there still I guess drags from divestitures that we should be thinking about as we're just polishing up our '24 model today?

[Garth Hankinson:]

There won't be any more necessarily more drags per se from that, as the cost will come out. I won't say that the impact that you'll have is that there will just be a comparability issued for the first sort of three quarters of the year, but no further drag as we move into the year.

[Operator:]

And our final question comes from Vivien Azer with Cowen and Company. Please proceed with your question.

[Vivien Azer:]

Hi, thank you very much. I was hoping we could pivot to the wine segment, given the conversations around down trading in beer Bill, I was hoping to get some perspective on what you guys think you're seeing in wine, the Nielsen data would suggest that there is down trading there? And if you could just remind us, given all of the divestitures that you guys have done, what percentage of your wine revenues are coming from $20 and above?

[Bill Newlands:]

Sure, you bet Vivien. We have seen some more trading down in the wine business in the fact that private label has been tending to outpace branded sales by roughly 2.1 points in the last 12 weeks. So that has had some impact. What's interesting is you get a bit of a, I would say, a buying model scenario, meaning you're seeing some trade down at sort of mid- to lower price points. And then you're doing fine if you get into higher price points and a little bit in the middle has been a little shaky is some of what we're seeing. So -- which is a little different than what you have seen historically in these particular environments. As I said in my prepared remarks, there's been a pretty radical change in the amount of our business in the premium sector. I would -- I didn't categorize it as $20. But we're well over 60% of our total business now occurring in the premium and fine wine sector, which was 34% just a few years ago. So we're seeing a pretty radical move within our business as we thought what if we reshape the portfolio because over the long term that's where the consumer is going. And we believe that's not only where there's better profitability but there's better growth as well. So we believe the work that we've done is bearing fruit, and I think it plays itself out in terms of the growth profile of some of our higher end and critical brands.

[Operator:]

We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Bill Newlands for closing remarks.

[Bill Newlands:]

Thank you, Rob. Despite the ongoing inflationary headwinds affecting the concern in our business over the last three quarters, we're on track to deliver another strong year of growth and remain well placed to further build on the solid track record we have established against advancing our long-term strategic initiatives for nearly four years now. Our Beer business continues to lead in share gains, growth and margins and we're confident in our ability to capture the significant opportunities we still see for our core and our next wave brands. Our Wine & Spirits premiumization strategy continues to gain momentum as well advancing our higher-end brands, DTC channels and international footprint, all yielding noticeable results. Lastly, the performance of our businesses, coupled with our disciplined and balanced capital allocation priorities has allowed us to maintain our investment-grade rating, surpass our cash returns goal, grow our beer production capacity and execute small growth accretive M&A. With all that said, let me reiterate, looking ahead, we remain committed and believe we now have an even stronger foundation to deliver sustainable growth and value creation for our shareholders. Thanks for everyone for joining the call, and I wish you a happy, safe and healthy New Year.

[Operator:]

This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.