Zoetis Inc.
Q1 2019 Earnings Call Transcript

Published: 2 May 2019

[Operator:]

Welcome to the First Quarter 2019 Financial Results Conference Call and Webcast for Zoetis. Hosting the call today is Steve Frank, Vice President of Investor Relations for Zoetis. The presentation materials and additional financial tables are currently posted on the Investor Relations section of zoetis.com. The presentation slides can be managed by you, the viewer, it will not be forwarded automatically. In addition, a replay of this call will be available approximately two hours after the conclusion of this call via dial-in or on the Investor Relations section of zoetis.com. At this time, all participants have been placed in a listen-only mode and the floor will be opened for your questions following the presentation.

[Steve Frank:]

Thank you. Good morning, everyone, and welcome to the Zoetis first quarter 2019 earnings call. I’m joined today by Juan Ramon Alaix, our Chief Executive Officer; and Glenn David, our Chief Financial Officer. Before we begin, I'll remind you that the slides presented on this call are available on the Investor Relations section of our website and that our remarks today will include forward-looking statements, that actual results could differ materially from those projections. For a list and description of certain factors that could cause results to differ, I refer you to the forward-looking statements in today's press release and our SEC filings, including, but not limited to our Annual Report on Form 10-K and our reports on Form 10-Q. Our remarks today will also include references to certain financial measures, which were not prepared in accordance with Generally Accepted Accounting Principles or U.S. GAAP. A reconciliation of these non-GAAP financial measures to the most directly comparable U.S. GAAP measures is included in the financial tables that accompany our earnings press release and in the company's 8-K filing dated today, May 2, 2019. We also cite operational results, which exclude the impact of foreign exchange. With that, I will turn the call over to Juan Ramon.

[Juan Ramon Alaix:]

Thank you, Steve, and good morning, everyone. I will start today by describing some of the dynamics in the animal health industry that are on Investors minds. First, is a positive strength for spending an innovation in companion animal medicines and treatments. Pet owners spending in the U.S. continued to rise in terms of our revenue per visit and number of patient medicines. And we also see positive trends for our pet care in the rest of the world. Pet owners are willing to spend their income on medicines, vaccines, and other treatment to ensure a longer and better quality of life for their pets. We believe Zoetis is well-positioned to continue success in the companion animal space as our portfolio of dermatology products, parasiticides, and vaccines continue to drive our growth. Second, we see economic pressure, and other challenges continue to impact dairy and cattle producers in the U.S. We still, however, expect to see the U.S. cattle and dairy market growing for a full-year, driven by stronger domestic demand for beef and increasingly optimistic outlook for beef and dairy export and a modest improvement in milk prices.

[Glenn David:]

Thank you, Juan Ramon and good morning. As Juan Ramon noted, 2019 is off to a solid start. Operational revenue growth was 11% and operational adjusted net income growth was 18%. Reported revenue growth for the first quarter was 7% with a 4% unfavorable impact in foreign exchange, driven primarily by currency depreciation of the Euro and Brazilian Real. Excluding the impact of the Abaxis acquisition, operational growth for the quarter was 6%. Included in the 6% growth is, 4% price, and 2% volume. Volume growth includes contributions from key dermatology of 2% and new products of 1%, which were partially offset by declines in other in-line products of 1%. Companion animal demonstrated continued strength this quarter with legacy Abaxis products, parasiticides and key dermatology products leading the growth with positive contributions from all key markets.

[Operator:]

We'll take our first question from Erin Wright with Credit Suisse. Please go ahead. Your line is open.

[Erin Wright:]

Hi, thank you. Can you discuss a little bit how the Abaxis integration is progressing here relative to your internal expectations? It was a little lighter than what we thought in our Abaxis model and is that just the distributor dynamic, and I noticed that the GAAP acquisition related cost takes a little bit higher, is that all attributable to Abaxis and where we stand with it as the key implementation? And then the second question is on international livestock, just given some of the dynamics around African swine fever and what you called out in Brazil, can you speak to how we should think about that quarterly progression over the course of the year? Thanks.

[Juan Ramon Alaix:]

Thank you, Erin. Let me answer the question on Abaxis, and let me first say that we are pleased with the progress that we're making with the integration of Abaxis. The team in the U.S. is already working well, maybe not fully integrating the two portfolios because we mentioned that these have full integration, we need also to work with the integration of SAP. And related to the implementation of SAP for Abaxis, we have decided to move the implementation from August-September to February, because we want our IT team to focus on working on the connectivity of all equipment of Abaxis. We think that this connectivity that we expect to penalize by the end of the year will help us really to have that much more support to diagnostics and offer full integration or full connectivity of the diagnostic equipment to the practice management system. We’re also pleased with the progress that we are making in International markets. We have now almost completed all the hiring process for reps and also for technical support. We have also said the customer service that would help in really to provide the support to diagnostic customers. So, in general, we are progressing very well. We continue – very excited about the quality of the portfolio of Abaxis, and we are very confident that Abaxis will represent a significant growth opportunity, especially from 2020. Now we see 2020 – 2019 as a year where we are integrating, we are fixing some of the things that we have to identify from the previews Abaxis model, and we are very confident that the projections that we have for this portfolio will be very positive. In terms of the international livestock, let me provide a comment on Brazil and then I will ask Glenn to go into more details on what we expect for the rest of the year in the total livestock performance. In Brazil, we see that the market that continue growing very fast. It's a very strong growth for Zoetis. So, the growth in companion animal is above market growth, so we are growing very fast. In cattle, we decided to change some of our commercial policies, including prices, and we saw as expected some negative reaction from distribution. This had an impact in the first quarter for Brazil, especially in cattle, but we are convinced that these changes will help us in generating better future growth and improve the profitability of our cattle operations in Brazil. So, we remain very convinced that Brazil will be a growth driver for Zoetis, and we are investing to support this growth on that. Glenn, do you mind to provide more details on the International livestock?

[Glenn David:]

Absolutely. Erin, just also to your question on Abaxis and the Q1 performance you referenced, distributor stocking. So far, we talked about the performance in Q1 2019 to Q1 2018. In Q1 2018, there was stocking with the introduction of the new products in terms your settlement analyzer and Apoquel rapid test, that did pose a challenging comp between Q1 2019 and Q1 2018. In terms of the international livestock performance, as Juan Ramon said, for livestock internationally we declined about 1% this quarter, driven by the factors that we discussed in terms of African swine fever, as well as the impact in Brazil. We would expect to return to growth in Q2, and that growth to accelerate in Q3 and Q4.

[Juan Ramon Alaix:]

Thank you, Glenn. Next question, please.

[Operator:]

We'll go next to Louise Chen with Cantor Fitzgerald. Please go ahead.

[Louise Chen:]

Hi. Thanks for taking my question here. So, I wanted to ask you about your temporary weakness in livestock and when do you expect that to subside this year and then return to growth, and how much of that is macro versus company specific? And then maybe just if you could talk a little bit more about this MSA buyer pattern? Thank you.

[Juan Ramon Alaix:]

Well, as we said that in the first quarter, we faced two impacts in terms of the temporary weakness in livestock. One was the cattle business in the U.S. was affected by different factors. And talking about the market, the market declined. We saw that the movement of animals was below expectations. In many cases, driven by weather conditions, but we are optimistic about the cattle business in the U.S. moving forward, the demand for beef is positive, and also the exports are increasing. Additionally, we expect also in the second half of the year a small increase on the price of the milk also that will help the total cattle business in the U.S. As many times we mentioned, I think it is difficult to analyze our business in a quarterly basis. There are fluctuations based on buying patterns and promotional activities weather conditions that maybe it's important to understand the business on a yearly basis. We remain confident that the livestock market will be growing at the end of the year. What we are expecting is that the poultry will be growing in line or slightly ahead of the market. In terms of swine, we expect going lower than the market, and mainly because of the African swine fever. But we expect having a temporary impact, but maybe from a third or fourth quarter and definitely in 2020, we expect a significant recovery because many markets outside of China will expand the production that will generate a significant growth. And finally, with the cattle, we also expect that for the year overall growing – we expect growing in the U.S., we expect also growing international markets, but growing below expected market growth.

[Glenn David:]

And in terms of the timing of the MSA purchases in the U.S., that's really related to the timing of our annual price increases. So, in 2019, we align the timing of our MSA price increases to be in sync with the rest of our portfolio, which is in January, that led to some additional sales in Q4 of 2018 that then destocked in Q1 of 2019. So that is not an impact that we would expect to see as we move forward through the rest of the year.

[Juan Ramon Alaix:]

Next question, please.

[Operator:]

We'll go next to Kevin Ellich with Craig-Hallum. Please go ahead.

[Kevin Ellich:]

Good morning. Hi, Juan Ramon. Just have a couple of questions here. Companion animal continues to be really strong. You're seeing really good growth out of obviously the dermatology portfolio, but also Revolution Plus for cats compared to the dogs, could you talk about what areas you're focused with the product development, maybe more on the feline side in the areas that are being medicalized. Also timing for the monoclonal antibody products. And then Glenn, on the SG&A and operating expenses, clearly there were some favorability this quarter. And you talked about increased spending, DTC campaign in Q2. Could you give us a little bit more color on that? Thank you.

[Juan Ramon Alaix:]

Kevin, we see the current portfolio still showing opportunities for growth. We see opportunities for growing the parasiticides now with Revolution Plus. We still see that Simparica continues gaining momentum in the U.S. and also international markets. Apoquel and CYTOPOINT are growing and we expect to continue growing. We expect to continue growing in the U.S. and also expect to continue growing in international markets. And now, we have the addition of Apoquel in China, that also will support this growth. We are also very confident that this growth is steady for the long-term, because as we said, the current portfolio continue growing, but we expect also to introduce Simparica or a combination of products – three-way products in 2020, that also we expect that to continue generating growth. In the future, we are not at this point providing any details of when we expect that monoclonal antibodies to be in the market. But definitely we see opportunities in reline with pain. We see opportunities also in feline with dermatology, again with monoclonal antibodies, and always with monoclonal antibodies in dogs for pain. And we are very confident that the R&D machine will continue bringing innovation to the market in companion animals, but also in livestock. We have products for both companion animal and livestock that will support growth in 2020, 2021, also 2022. So, we are very confident that we have a pipeline that will maintain growth that will be in line or faster than the market. And Glenn will respond the question on G&A.

[Glenn David:]

Kevin, in terms of the operating expenses. So, just for the quarter, our operating expenses grew about 8%. If you back out Abaxis, operating expenses grew around 3%, compared to our revenue growth of 6%. So, pretty much in line with our overall expectations over an extended period of time. That being said, we did have some favorability in R&D expenses in terms of the timing as well. So, as we move through into Q2 and Q3, we'd expect elevated expenses in Q2 and Q3 as that is the time frame in which our DTC promotions, particularly in the U.S. around our dermatology portfolio and Simparica to kick in at a higher level. And we'd also expect some elevated expenses in terms of our R&D as well.

[Juan Ramon Alaix:]

Next question, please.

[Operator:]

We'll go next to Michael Ryskin with Bank of America. Please go ahead.

[Michael Ryskin:]

Hi, guys. Thanks for taking the question. A couple – I want to dig deeper on some of the moving pieces in the quarter both on the livestock markets in the U.S. and internationally. If I sort of go through some of the items you called out African swine fever, the spend, divestment, looking at your revenues by geography, I think I can estimate that ASF may have had a $5 million to $10 million hit in the quarter. The Japan divestment is somewhere in the same ballpark as well. So, I want to get a sense of if that's the right way to think about it? And then is that the similar run rate you would expect for ASF going forward? And then the other one would on the U.S. livestock business. You talked a little bit about the distributor relationship in the stocking in 4Q, but just trying to get a sense of the magnitude of that impact in the first quarter versus the rest of the feedlot pressures as well, so we could plan the phase through the course of the year? Thanks.

[Juan Ramon Alaix:]

Thank you, Mike. I will make a general comment on the African swine fever. Then Glenn will go to the details of your questions. So, first, the African swine fever definitely is having a significant impact in China, and we also have an impact in our results. We mentioned that probably up to 30% of pigs would be lost on 150 million to 200 million. And as a reference, in the U.S., production is 120 million per year. But it's also true that in China, the market share of multinational company is only 10%, 90% is products sold by local companies. We definitely see a significant issue in China, mainly for the business in China cattle, so we see that the other countries, the U.S., Brazil, European markets will increase significantly the production of pork to meet all the demands of the Chinese consumers that are definitely for a significant period of time. There will be seen a shortfall for producing in China. And it seems outside of China, we have a significant market share in swine. In the medium and long-term, we see that as an opportunity to generate growth in swine and also maybe an impact in poultry and to a minor extent also to beef. Because in the end, the consumption of animal products in China will remain and export markets will supply products to meet that demand in the markets. And then Glenn will go through the details of the impact on African swine fever in the quarter and also the Japan agro business and also the U.S. impact of the value.

[Glenn David:]

So, Mike, specific to your questions, for ASF and Japan, you mentioned the range of $5 million to $10 million. So, what I'd say, ASF is probably at the high end of the range for the quarter and Japan is probably at the low end of that range for the quarter. In terms of U.S. livestock, obviously we did have the impact in Q1. It's a little above that $5 million to $10 million range that you referenced with the bigger portion of that being cattle.

[Juan Ramon Alaix:]

Thank you, Glenn. Next question, please.

[Operator:]

The next question is from Jon Block with Stifel. Please go ahead.

[Jon Block:]

Pardon me. Thanks guys, good morning. I've got two long ones. Maybe I'll try to break it up if it's okay with you. The first one is triple or Simparica Trio, any updates on how the filing or interaction with the agency is proceeding? and I'm just curious in your ability to fulfill demand in the early days, obviously with Apoquel there were challenges post launch although, I know some of that was sort of the reliance on a third-party manufacturer. So, any color would be helpful. And then I'll ask a quicker follow up. Thanks.

[Juan Ramon Alaix:]

Thank you, Jon. And we have provision with the discussions with the FDA. We have completed out all the sections of the filing and it's just now the normal process of question and answers. We are confident that this year it's strong and it will be approved by the FDA, but always something that is not depending on us but on the regulators. But one of the challenges that we discussed in the past is that we needed to demonstrate 100% efficacy on how we have to provide these data. And we are confident that – probably that will be approved and ready to be launched in 2020. And definitely we try to learn from previous challenge or issues or mistakes, and definitely in the case of the three-way products, we secured enough active ingredients to be ready for launch the product, as soon as the product is approved. So, we are not expecting any challenge in terms of supplying the market or the demand. Next question.

[Operator:]

We'll go next to David Risinger with Morgan Stanley. Please go ahead.

[David Risinger:]

Thank you very much. So, I have three questions, please. First, with respect to U.S. companion growth this quarter, could you just give us the figure, the percentage ex-Abaxis? Second, how should we model livestock sequentially in the second quarter? I just don't have a good feel for how we should think – thinking about the livestock business sequentially in 2Q in the U.S. and ex-U.S. And then, one little tidbit, with respect to the revenue guidance reduction of 1%, was that solely related to FX or was there also some modest impact elsewhere? Thank you.

[Juan Ramon Alaix:]

Thank you, Dave. And Glenn will cover these three questions.

[Glenn David:]

Sure. So, just in those questions. In terms of our revenue growth excluding Abaxis focused on companion animal, so globally our companion animal business grew 27%. Without Abaxis we still grew extremely strong at 19% globally. In the U.S., the number was – with Abaxis we grew 30%, excluding Abaxis we grew 20%, and internationally companion animal grew 23%. Without Abaxis, we grew 18%. So, really strong organic growth within our U.S. companion business. As we mentioned earlier, in terms of the livestock growth sequentially, when you look at it globally, we did decline 3% this quarter in terms of livestock business on an operational basis. We do expect to return to growth in Q2, and we expect that growth to accelerate throughout the year. In terms of the guidance, we reduced the guidance for both the low and high end of the range by $75 million, that was purely due to FX. There were significant movements at the time from when we set guidance. When we set guidance back in February, we were using rates as of late January, and when we set guidance now, we're using rates as of the end of – towards the end of April, and that had a significant movement, so the movement was purely due to FX.

[Juan Ramon Alaix:]

Thank you. Next question please.

[Operator:]

And we'll take the next question from John Kreger with William Blair. Please go ahead.

[Unidentified Analyst:]

Hi. This is on for John Kreger. So, just a quick question surrounding the dermatology portfolio. When you just think about like the penetration rates specifically in the U.S. right now, where do you guys kind of think that is? And then when you think about the international growth in the dermatology portfolio for the rest in 2019 and beyond, where do you guys foresee that going? And then just when you think about them individually, so Apoquel and CYTOPOINT, have they trended – have they trended well, compared to your expectations and are you seeing that's having like a strong preference for one or the other products? Thanks.

[Juan Ramon Alaix:]

In terms of penetration for dermatology portfolio, I think it's – it's about – in terms of patient, about 59% and it's something that probably – 63%, sorry, it's the total patient share, which is based on and we still see opportunities first to continue expanding the market and we will be starting now in the second quarter campaign – detectable tumor campaign. We set two objectives, one it's expanded market. And also, second is set to continue building brand equity for Apoquel. We see also that these investments are also having a positive impact on CYTOPOINT. We expect dermatology portfolio to continue growing. We expect also to grow faster in international markets than in the U.S., but in the U.S., we still see a positive momentum, and how much is the preferential CYTOPOINT or Apoquel? In that respect, I think we leave veterinarians to decide what is the best for their patients, the pets. And we are not trying that to promote Apoquel in favor of CYTOPOINT, and CYTOPOINT in favor of Apoquel. We are covering all the spectrum of needs in terms of treating dermatology issues, itching in dogs, and that we see that there is cannibalization, but also CYTOPOINT has been growing the market and helping us increase this franchise. Next question please.

[Operator:]

We'll go next to with Kathy Miner with Cowen & Company. Please go ahead.

[Kathy Miner:]

Thank you. Good morning. I've two questions. First, could you just provide a little more clarification on your comments about the impacts of the African swine fever on Zoetis, and I appreciate that over time there is going to be a greater demand for the proteins or will see other regions pick-up some of the supply? Can you just help us understand why that's medium to long-term and why shouldn't we see some of those dynamics sooner, particularly as supply needs to pick-up in some other countries? And my second question is on Apoquel. First, could you give us the breakdown between CYTOPOINT and Apoquel sales of 155 million you gave us before? And also, in Apoquel in China, could you give us a sense of the market size, is it similar to the EU5 or U.S. and is CYTOPOINT also under review in China? Thank you.

[Juan Ramon Alaix:]

Thank you for all the questions, Kathy. So, let's go back to the African swine fever and the potential impact. We mentioned that we expect that up to 30% of pigs can be blocked because of the African swine fever in China. So, if we translate this 30% to our revenues in – so we can also estimate that it will be about 30% of our revenues. Although we expect a little bit lower impact because of maybe sophisticated farms are less affected by the African swine fever, then the production of small farms. We expect that that it will be an immediate impact in terms of the value of the pigs. As a reference, in the last quarter, in the fourth quarter of 2018, producers in the U.S., they were losing $20 per pig, now they making $30 profit per pig. So, the value of the pigs has increasing significantly, and then their willingness to spend and to keep these pigs healthy and productive also will increase. So, we expect that that will be a positive impact, an immediate positive impact. Then, we expect also that the farmers or producers in U.S., Brazil, European Union will increase production. The cycle of the production is six months. But probably we will need to wait six months to see some impact because it will increase the production. And even that if it takes six months from birth to slaughter, I think we can start using products at earlier stage of the animal. So, we expect in the third and the fourth quarters of this year having a positive impact in the swine business in Brazil, U.S., and U.S. market. And moving into the details of Apoquel breakout, Glenn, do you mind answering that? And also, probably those projections in China and providing some context.

[Glenn David:]

Sure. So, in terms of the total derm revenue, we had $155 million in total sales for the quarter with growth of 30%. To the earlier question, in terms of penetration, U.S. had $104 million in sales and international had around $52 million. So, as the similar amount of medicalized dogs in the U.S. is international, we would expect more rapid growth from international greater penetration over time internationally. The breakout of $155 million between Apoquel and CYTOPOINT. We had $119 million of sales of Apoquel with 22% operational growth, and we had $36 million of sales in CYTOPOINT with 65% operational growth. In terms of Apoquel in China, we’re very excited about the launch of Apoquel in China, China is one of our largest and fastest growing companion animal markets. Just to put in context though, the overall potential market size. So, in 2018, Apoquel globally in all of our international markets, including the U.S., have less than $160 million in sales with our top market internationally generating sales of just below $30 million. So that should give some overall context in terms of the potential of Apoquel in any given international large companion animal market.

[Juan Ramon Alaix:]

Thank you. Next question please.

[Operator:]

And we'll go next to Chris Schott with JPMorgan. Please go ahead.

[Chris Schott:]

Great. Thanks very much. Just two questions, maybe first on Simparica Trio. Just a little bit more color about how were thinking about the launch of these new triples, how quickly they'll be adopted. Should we be thinking about these as products that could have significant year one uptake or is this a more gradual kind of three to five-year process as these roll out? The second question, I know it's been touched on a little bit, but your companion business, particularly in the U.S. companion business were particularly strong in the quarter and above recent trend, just elaborate a little bit more on what you're seeing here, and if there's anything with either one-time related or either kind of year-over-year timing related in terms of the strength we saw this quarter. Just trying to get a sense of how much of this is just really healthy organic kind of underlying growth versus timing issues? Thanks so much.

[JUAN RAMON ALAIX:]

First, starting with the combination of product for parasiticides. Well, their options, I think we expect their options would be fast and also will depend. If we are number three, number two or number one in the market, but definitely we see a need for the market to combine internal and parasiticides mainly in dogs. And we are confident that we have significant opportunity to generate growth in 2020, 2021 and also 2022, because we think that that is – this probably will have a long run, and definitely the opportunity is really to generate our growth in companion animal. And Glenn will talk about the U.S. companion animal growth in the quarter and the trends for the future.

[Glenn David:]

Yes. So, what I would say Chris is, the overall global compatible growth was very strong. When you take out the impact of Abaxis, we grew 19%, 20% in the U.S., 18% internationally. So, both segments growing very rapidly in companion animal, and those are driven just by strong underlying dynamics and trends, particularly around the derm portfolio around Simparica and also really strong performance of Revolution Plus. Q1 of 2019 was the launch of Revolution Plus in the U.S., it's off to a very successful start. There is some stocking in Q1 of 2019, particularly in the U.S., but still the start that we're seeing in Revolution Plus is very, very encouraging.

[Juan Ramon Alaix:]

Thank you, Glenn. Net question please.

[Operator:]

And we'll go next to Greg Fraser with SunTrust. Please go ahead.

[Greg Fraser:]

Great. Thanks for taking the questions. This is Greg Fraser on for Gregg Gilbert. As that as livestock business was impacted by destocking related consolidation in the distributor space, that's something that you've observed, I wasn't sure of your comment on distributor purchasing patterns, which related to what they described, and just a quick follow-up on the livestock commentary, are you anticipating growth for international for the full year? Thank you.

[Juan Ramon Alaix:]

Probably we still have some challenge with distribution in Brazil, but not in the U.S. In Brazil, I mentioned that we have these changes in the commercial policies that reviews sales to distribution during the quarter. But as I mentioned, we expect that this will support more quality growth in the future, but no changes in the distribution in the U.S. So, Glenn, do you want to add comments here?

[Glenn David:]

No, just to your question on livestock growth for the full year. We still are expecting livestock to grow globally in the U.S. and internationally.

[Juan Ramon Alaix:]

Thank you. Next question please.

[Operator:]

We will take today's final question from Navin Jacob with UBS. Please go ahead.

[Prakhar Agrawal:]

Hi. This is Prakhar Agrawal on behalf of many Navin Jacob. Two questions, please. First, on poultry, your growth in poultry products was quite strong. So, could you give more color on what is driving that in terms of the near-term trends and anything specific from your product portfolio? And secondly, one of your competitors recently made an acquisition that included some oncology products, so is Zoetis making an R&D investment in oncology and do you think this market is commercially attractive? Thank you.

[Juan Ramon Alaix:]

I will ask Glenn to answer the question on poultry and then I will cover the oncology part of the question.

[Glenn David:]

So, from a poultry perspective, we continue to perform very well in poultry. Overall, very solid growth, higher than the rest of our portfolio livestock, and really that's driven by our portfolio of alternative to antibiotics in poultry that we continue to perform very well within the MSA sector. So that's something that's been consistent for us over the last number of quarters and trend that we expect to continue.

[Juan Ramon Alaix:]

And on oncology, we have already a product in oncology. She is working well, which is a . We launched this product some years ago. We continue assessing the oncology market, then definitely we have some programs – internal programs related to monoclonal antibody and some of the products such that still oncology is very limited by market although maybe in the future it will be a potential attractive market. But today, it's a quietly with that opportunity. And I think, that concludes the questions, and thank you very much for joining us today. And as we said, we remain very confident about the outlook for 2019 and we are maintaining our operational growth, and we are also maintaining our target in terms of adjusted net income. Thank you very much for your attendance.

[Operator:]

And this will conclude today's program. Thank for your participation. You may now disconnect.