Philip Morris International Inc. (PM) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us today. It's a pleasure to introduce the next speaker of our virtual conference this year, Jacek Olczak, who is the new CEO of Philip Morris International. We're especially pleased to have Jacek with us today since this is his first public event, I believe, as CEO, so congratulations, Jacek. Well, it's been a very exciting time for Philip Morris as the company has made tremendous progress on its smoke-free transformation with roughly 30% of its revenues now coming from reduced risk products. Now over the past year, we've seen IQOS increase its traction globally, fueled by the enormous compounding effect of new user acquisitions, strong innovation and a powerful digital marketing model that really, in my view, continues to set Philip Morris apart from the pack. Now with that, there's a lot to discuss this morning. So I'm going to first turn it over to Jacek for some opening remarks, and then we're going to go right into our fireside chat. But just as a quick reminder, please submit any questions you may have to me via e-mail, and I'll try to work them in. Jacek, I want to turn it over to you, and thanks again for joining us.

Thank you very much, Bonnie. It's a pleasure to be here. Although, I have to admit that after 18 months of practicing this virtual life, I simply have enough of the virtual life and I'm looking for the moment when I can see people in person, shake hands, maybe hug them and observe all these nonverbal forms of the communication. I think most of the audience shares my view. With that, we can go very quickly with 1 slide of the remarks, which I prepared for today. So I guess somebody say clicking, which should will lead to the couple of slides, obviously, of the forward-looking and cautionary statements. As always, invite everyone to read them carefully. With regards to my remarks, I've been around 5, 6 years ago when we started with IQOS, and we had absolute 0 of the revenue or volume coming from the noncombustible products. And fast forward, and it was actually very fast forward for us, 5, 6 years later, last year, almost 25%, first quarter, 28% of revenues coming from noncombustible form products. So I'm really, really pleased and excited of what we have proven to ourselves and to the consumer and to the investors how far we can go. You have heard during also Investors Day, we set a very ambitious target, 50% of the revenue coming from our noncombustible products in -- by 2025. And initially, we would set the target at half of the revenues could presumably discourage a lot of people and reduce the enthusiasm because it's difficult to climb such a high mountain. But I think where we are today, halfway through, I mean, I really feel confident that the aspirational target is within our reach. I need to admit also 1 thing when -- for the period of the very significant investments behind the IQOS development, assessment, clinical assessments, you name it, commercialization. And we have somehow done it in the way that I believe we continue focusing on our shareholders with regards to the returns. And I have in mind very much the dividend, which we've not only maintained, but we've been able to increase also over this whole period of investment which we went through. As I said, Q1, we opened the year in a very strong foot. We expect the full year volume of the heated tobacco units to be somewhere in the range 95 billion to 100 billion. And so far, we are on a good path to get there. One thing I mentioned, 50% of our revenue is coming from noncombustible products by 2025 is aspirational target. It's the first time we also set the target for the product for the revenue coming from a nontobacco, non-nicotine-related product, $1 billion. And this is here, I guess, we'll have some questions about this whole thing. But essentially, the dream which I always had in the past that all these investments in R&D, in the science, in assessment, knowledge of the consumers, et cetera, the behavioral aspect of consumers, switching, changing the behaviors, we also can leverage the completely new businesses for Philip Morris. And I believe we are now at the doorstep of opening another chapter of Philip Morris, which, as I said, is completely not related to the tobacco, to the nicotine. There was a major organizational shift, which we continue actually having. Some people may miss the fact that half of our senior management team today are people, great people who joined Philip Morris International from outside the industry, from outside tobacco industry. And I believe that inclusion of these set of skills, competencies and a different way of thinking from outside of Philip Morris is a very important component of our path to even further accelerating the transformation of the company . And the last point, sustainability of ESG issues, if you like, are very important to us. And we integrate them into our strategy in order to make progress towards this -- towards achieving sustainability. I'm very pleased that on the June 2, we will have a separate focused webcast on the sustainability. I invite everyone to join us. And when we very thoroughly and in a high level of granularity is going to share with you what we have achieved, because I believe PMI has achieved a lot on the sustainability to date, and where we want to go by 2025, '30 and so on. So that's essentially -- we will not update guidance today. So I believe we can remember this when we'll go to Q&A. And I'm very much looking to the Q&A session now.

Perfect. Thanks so much, Jacek, that was a good overview. I wanted to kick things off today with you. Just with your new role as CEO, I couldn't think of anyone that's better suited. I've known you for a number of years, so excited to kind of work with you in this new role. And I'm assuming that your immediate focus is, as you mentioned, to continue to accelerate the RRP conversion globally. And beyond that, I guess I'm curious to hear from you if there's anything you might expect to do differently or consider differently in terms of longer-term priorities. I guess I'm thinking of it in terms of the scope of your focus. And then touch on what you just highlighted for us because I do think an exciting opportunity is this $1 billion of revenues in Beyond Nicotine. Maybe share with us a little bit more details on what that could look like?

Yes. I do appreciate that even if we set aspirational target of $1 billion 5 years down the road, in the magnitude of our revenues, it's not really maybe that important number for many investors at this stage. But as I said, 6 years ago, we had nothing on IQOS, and we also have to earn the first billion. With IQOS, we demonstrated that we have a capability to transform the company, not only from a product perspective to noncombustible, nonsmokable products, that we have a capability to scientifically substantiate these products. And I think still where we went with IQOS with regards to the scientific substantiation at this stage is unmatched by anybody in the industry. But we also demonstrated that we can just move forward the company from a classical business-to-business to business-to-consumer model. And I believe that, that aspect of our transformation when we start owning relations with the consumers, not only transactional, but really this relation piece, which I believe is a very important building block to the successful conversion rate of IQOS, which obviously drives the economics much better, for example, that today, at least we observe in some other categories -- product categories in the noncombustible domain. So my focus is to make sure that now we have the resources and the capability to bring us to this $1 billion, and we have very carefully designed that -- the territories or avenues which we want to pursue. It is not that we try to build in PMI, a holding of loose association of companies, which don't really have any -- the common denominator is very low. We actually try to leverage all the knowledge which we have accumulated, which we have level of all the things which we have learned was working on IQOS, which is all about the inhalable products, which is a better choice for those who had continue smoking and how we can apply that knowledge and a couple of ideas, which we develop on the way into the new spectrum. So those of the audience -- those from the audience who have followed us on the Investors Day, Andre Calantzopoulos have said that this respiratory drug delivery is one of the territory which we would like to pursue. And I believe you will hear from Philip Morris in the next near period more how are we doing this. So we don't have the entire capability, I have to be very precise and very transparent here with investors. But we have the components and the capability, and I believe we can find something. And I think we will find something outside Philip Morris that capabilities outside Philip Morris connected with the capability of PMI, can give us an access to the products, which we can tap into completely different markets as an opportunity for PMI. So that's really the focus. And obviously, maybe it is not exciting for many, but I do believe that the staying razor -- maintaining this razor sharp focus on IQOS and IQOS P1, which is the heat-not-burn platform, entering the vape, which we started. Then the nicotine pouches and many other alternatives, I mean, it is -- we have to do it because this is really the core of a transformation. And frankly speaking, this is the core of our financials as we speak and look into near term.

Right. Okay. Just a follow-up then on that. In terms of the Beyond Nicotine, to be clear, is it things like, Jacek, botanicals, maybe respiratory drug delivery? And then curious would it also consider cannabis? And then will you do this organically? And then as you just sort of suggested you'd look outside Philip Morris and potentially look to make maybe acquisitions or take stakes in companies that have some of these capabilities beyond nicotine. Is that how we should think about it?

Yes. Just to clarify, the way we're looking into these whole thing is we're looking at the botanicals. I mean we're looking -- which obviously the botanicals may include or do include the cannabis and the products of this nature. What is very important to us, and this is what we want to bring into the table is the safety and efficacy aspect. I mean safety, meaning we know how to assess the safety of the products, especially with regards to the inhalable part of that market, but not only. And second, I do believe that we have a capacity to validate the claims around the products, right? So if you have any sort of claims in a consumer language, promises, can we validate, substantiate them, and then we can decide which of these products have to go for the full pharma type of a route to the consumer, which can be in a little bit different market. But for us, it's very important that work behind the product in this territory when we will give the guarantee of the consumers about the safety and the substantiated promise either the claims around. This can also -- we will not spend our efforts on developing the new molecules, so I am not thinking about the upstream pharma type of the development of the products. But I do believe that there are some very interesting active substances of molecules, if you like, which by changing the way they're administered, the human body, we can shorten the time to the bioavailability and therefore, have a positive impact in certain conditions for the certain group of people.

Okay. And then maybe switching gears a little bit and going back to your key RRP and IQOS. The consistent outperformance that you've had behind IQOS over the last several quarters has honestly been very impressive. So you've got strong new user acquisition, exciting innovation in the pipeline, a powerful positive price/mix impact from the higher net revenues per IQOS unit and then decreasing variable cost per user, essentially as you're scaling the business. So as I think of all that, a clear competitive advantage. So could you talk a little bit about how sustainable that is and why? And then in terms of the user acquisition model, You've done really well with this, but are you exploring other ways to convert users? And I guess I'm thinking about could you move into, say, a subscription-based model as you continue to you push this forward?

Yes. So look, I mean, obviously, everyone follows the developments of this category. I mean, 5 or so years ago, there was essentially no -- well, there was nobody from a competition in that territory. And I've heard the different opinions, category will not be -- or the seriousness of the Philip Morris commitments to go into this category. Second was acceptance at the consumer level. I mean, today, I guess everyone is convinced that the heat-not-burn part of the noncombustible products is a very, very important category or subsegment there. Obviously, you have a competition. You have all the major companies which are now -- first articulating that the heat-not-burn is a critical part of their strategy. They're coming with the products. They're trying to continuously innovate and improve the products. But I believe that IQOS is on the best path to establish something which we have managed historically to establish with Marlboro. Now we need to remember what the one thing is. At the end of the day, people like the product. They like the taste, they like the flavor, okay? And I believe IQOS already, today, in many of the -- well, most of the markets, frankly speaking, is unmatched standard of the taste when it comes to the so-called potentially reduced-risk products. And that's very important because at the end of the day, consumers will be willing to pay and come back to your product if we deliver on the main purpose why people are using the product, which is people smoke because they like the taste. And the objective is, my dream is that IQOS is going to be the new Marlboro. We will remember IQOS as how the real flavor is, as we remember Marlboro, and I think we are on the best path on this. That's obviously the aspect of our technology, continuous improvement on the consumables, what else we can do to deliver that -- this unparalleled taste satisfaction, but not just working on all the electronics and the way we serve the product to the market. I mean we're comparing IQOS today, measuring the NPS, the Net Promoter Score of IQOS across essentially all the 60-plus geographies where we are present. And we're benchmarking ourselves with the most important in the consumer, the mindset, the other FMCG or electronics type of a brand. And I have to tell you, when I see off the chart when IQOS flies at the level of Apple, when IQOS is better than anything else in the given market. And I think we're doing a lot of right things. We're building a brand while delivering the satisfaction and making sure that the whole experience is really as seamless as possible, so that's really very exciting and we're going to continue with this.

That is exciting. And I mean, to your point, you're essentially building this tremendous platform that you can innovate behind. And I'd love for you to talk a little bit more on your latest innovation, which is ILUMA. When I first listened to you describe it at I think it was your Investor Day, I honestly, I couldn't help but notice how excited you were in your voice. So it really does sound very revolutionary. I'm not sure if the broader market fully appreciates this. So maybe share with us really this induction technology, how it really is simplifying the whole experience and why the conversion, quite frankly, could accelerate.

The winning propositions which we have today in the market, and we ruled essentially the market until today's IQOS internal heating technology, which is essentially the blade and the heat is delivered and the warms the -- or aerosolize the tobacco matrix. And obviously, it creates some sort of a problem, not something that the consumer cannot live with, but I think it's the right time that we start addressing this, and this is around the cleaning of the device. You have a better taste experience if, from time to time, you clean the device. Now once you clean the device, accidentally you can break the blade and nothing worse can happen to the smoker or user. The moment when you want to have that experience, when you have that IQOS HeatSticks, and your device doesn't work, right, because you just broke this whole thing. Obviously, our post purchase customer care service is really, I think, one of the best -- well, definitely in the industry, maybe the benchmark is low. But if something happens to your device today, you essentially within a couple of hours, depends on the geographies, you will get the new device, et cetera. Now going to the induction, essentially, we're eliminating the blade from the whole equation. So the device is much more even -- more intuitive, doesn't require any sort of a maintenance with regards to the cleaning, et cetera, is then bloody difficult to break the device unless you really start jumping on it. And that's it, you put the HeatSticks, and that's the only thing which you're required to do in order to be in this beautiful territory of the unparalleled taste delivered by IQOS. So I'm very excited and more excited because if somebody would have told me that approaching 30 years of my career in this company, in this industry, we will have a product which will excite me so much. I thought that I've seen everything in my life. Boy, I haven't. So ILUMA is -- and we did the testing with the consumers in some geographies, and we have a very extensive beta panels with the consumers, plus all the researches of this work. I have to tell you, you should see the faces of the consumers when -- especially IQOS users today, when they really the most can appreciate that thing. I mean, you should see the eyes are smiling, okay? That's something which haven't crossed their mind how much we can push the borders here. I also believe in the moment when you start approaching a more traditional type of smokers, the people which are maybe -- have a less inclination to innovations, et cetera, et cetera. Actually, IQOS ILUMA can facilitate even faster acceleration of the consumer acquisitions in that sort of the segment. So obviously, if you go to the places like Japan, but not only, I mean, that's the right moment now to deploy that thing. There is another feature which is also interesting about an IQOS is that essentially, we have a stick recognition. So we also try to now, at this stage, start protecting the business from any sort of nonauthentic versions, illicit type of versions of the consumables, which unfortunately, I guess, will start appearing. They're already here and they're appearing. So there is another feature which gives us that sort of the guarantee, also to the consumer that we stand behind the statements about the IQOS in a closed version of the system because this is the only way when you can give the guarantee what do people inhale, what do people inhale. Time for [ next question ]. I can talk about the ILUMA for hours and...

No, I understand. And it will be interesting to see as we get into the second half of the year as you really continue to ramp this and the rollout, especially as it could potentially accelerate conversion. Even if there's some cannibalization, the idea is that it can be that much more incremental and take you probably deeper in certain markets is my assumption.

Yes. I mean [indiscernible] which we applied from the very beginning, is don't be afraid about the cannibalization. Actually, you can turn the cannibalization into your advantage. And at the end of the day, is to win the minds and the hearts of the consumers, go for the best of the revenue growth, get your share of the segment, create the segment, be a leader of the segment and don't worry that you have to cannibalize something on the way. This is a very -- this puts you on a defense rather than offense. You have to continuously be offensive even to yourself.

Okay. Switching gears a little bit, Jacek, I wanted to touch on some of the key trends that you're monitoring in emerging maybe versus the developed markets, especially through the pandemic. And how are you seeing underlying industry trends in both over the next several months? And then definitely, if you could touch on us -- or touch on for us the opportunity for IQOS, specifically in emerging markets? Because as I'm thinking about it, I know you talked about this at your Investor Day, but I think there is a great opportunity for you to do more in some of these key emerging markets like the Philippines, Indonesia and potentially Vietnam.

Yes. So there are different roads. I mean, 2 of these markets you mentioned, we have a presence, very significant presence, infrastructure, et cetera. We're doing some experimentations in Jakarta already. We started pre COVID. Obviously, in this part of the world, the COVID is still not over, unfortunately. And I guess it's still going to take some time, which obviously also has the impact of underlying total industry trends on the global basis. Philippines, I think, we had a very successful test. We call it the test, but we have more than [ above ] the share points in Manila, which really -- we gained that thing during a COVID time when Philippines as many other markets in the regions were really very heavily impacted. So we're also having in mind that, look, ultimately IQOS, all our products portfolio have to be attainable, affordable to every smoker in the world, right? So we need to go and find out the solutions, which is around the device, which is about the phase direction, if you take Indonesia into consideration. And also the way you're serving that the product to the consumers. I mean, it may require some creative solutions, at least creative our industry with regards to form of payments, you mentioned, subscriptions or installments, et cetera. So we're running tons of experiments. So we're calibrating what is the last best way to enter this market. It's not that much of an issue if you go to the key cities, capital city, et cetera, that I believe the model which we have developed in the more developed markets will serve there well. But very quickly, we'll have to go outside, and we're going to the -- a relatively lower income cohorts, consumer segment, so we need to be prepared. And I think -- and we will be ready for this one. With regards to the total industry trends or consumer trends during COVID, look, there are 2 aspects of the COVID. This is the way I look at this thing. One is obviously the health aspect and think this shouldn't happen to happen. We all have to go through this and we're going through this whole thing. But the reality, how we've been impacted, is that somebody completely ruined our daily mobility calendar. You were not allowed to go to the office. You were not allowed to go for a vacation. You were not allowed to go to the concert. It was a complete seizure of the mobility. You were not allowed to do the things you were allowed before. Now we haven't realized how much of our consumption was actually connected to what we've been doing during a day, right? So you go to the bus stop, you have 1 or 2 cigarettes, you wait for the bus. You go to the office, you have a break, you have 2 cigarettes. You come back, you come back home, that sort of the ritual. You meet with the friends in the bar, you also have -- can enjoy the product. Because this whole thing has been completely erased for quite a while, I mean people didn't have this -- didn't have to follow this journey. And here is the situation -- and another aspect of this thing that many people have been actually making the daily, very often, income based on the fact that you were on the go all the time, right? And especially in the developing countries, but you take Philippines again, Indonesia, Mexico, just to mention the larger market. You could see there was a sudden -- of operations of this daily income. And obviously, we immediately feel this whole thing because it has an impact on the daily consumption because of affordability or lack of the income or much lower income. And second is, because now I am not on the street, I am on the go and now I am grounded at home. Now somebody smart has start calling this whole thing that we are working from home. Many of us has experienced actually, we didn't work from homes, but we work from the school. Because in the meantime, our kids were grounded at home as well. If you have a family, et cetera, and you are a smoker, it's absolutely bad idea to smoke in front of them. So obviously, you have an impact on the consumption. IQOS, okay, went through this whole period completely, frankly speaking, unimpacted, right? And we continue our acquisition, maybe a little bit on a lower pace. But IQOS, because of the functional benefits, which it does, it's less disturbing to the people around, et cetera, et cetera, you have a more freedom to use the product, the consumption hasn't been impacted, but on cigarettes we had. Now the question is, that almost all markets entered into a discovery phase, plus/minus, at the same time. Now unwinding of the COVID, as we can see this already today is at different speeds. So you have the U.S., you have a Western Europe, which is ahead. And if I again go to some Asian markets, some which are important for us, Philippines, Indonesia, I mean we don't see the recovery at this stage. So now we'll have this asymmetry of recovery, I guess, through this year. Hopefully, we go to the 2022, and we will say, okay, all markets tick boxes in the truly post COVID situation.

Okay. That was helpful. And another topic that I definitely wanted to touch on with you is really the outlook for excise taxes to do with RRPs. You've been really active and vocal in supporting the differentiated regulatory framework as it relates to the excise tax treatment of IQOS and certainly broader RRPs based on really the harm reduction objectives relative -- and the relative risk. So could you maybe talk about some of the positive changes you're starting to see in many of these key geographies? And then where do you see the tax regime really, in general, heading over the next few years, especially as RRPs broadly gain momentum?

Yes, essentially in all geographies, IQOS today is classified, that is recognized, as a product different than a cigarette. It's a product which is different than a combustible cigarette and enjoys the lower taxation. The logic behind this whole thing being that more and more markets do recognize that the product is not equal, okay? And the product is not equal, you shouldn't pay the same taxation. Now in some countries, it is very solidly based on the harm reduction recognition that the product is under different place on the risk continuum. And therefore, there is a role of indirect taxation like excise tax to stimulate some sort of behavior at the consumer level. In some markets, it's just classified as the other tobacco products and pays -- but pays the lower tax. Usually, the tax structure around IQOS is heavily skewed towards a specific component. So this is the way it's based, et cetera. And as you know, remember from our combustible business, these are the tax structure, which we always favor a lot. Now going forward, obviously, there will be -- especially in the post COVID time, there will be a pressure from the government somehow to go and make more money on the tobacco products. I mean very often, I have to remind that tobacco taxes constitute 60%, 70%, 80%, depends on the country, of the total price paid by the consumer. So it's a government in individual country which is very high in the value chain. We will have some pressure on this taxation. But as I said, at the same time, you have a growing evidence that these products are better and they do solve the problem of smoking. So I believe one should expect that there will be the trade-off in a sense that the governments will be accepting the fact that the tax is lower, but the benefits are being crept to -- or captured [ somewhere there ]. We have a conversation currently, we are in the conversation in Germany. So the parliament is debating the proposal about the equalization of the tax, as I understand it, and there it has been met with a lot of critics. We'll see how the politicians in Germany will take that, how we're going to land there. Ukraine, as you might have known or heard is also -- on the one hand, they went for the tax equalizations completely from the different perspective. And there is a law pending in parliament now to unwind that or to open the gap between IQOS and then the combustible products. So I do believe, at the end of the day, there will be a tax differential. But obviously, somehow the governmental budgetary needs will have to be taken into consideration. So the question is how big the gap should be. But I think that's the process, right, on which we will be getting there. You know that we also sell IQOS today at the prices which are -- okay, in different places, we tested the different markets. I believe there is also some room when we can accommodate the taxation movements for the pricing, which we can take on IQOS. So it's -- I'm much more focused actually on the markets, which are taking completely 180-degree change in the view on the alternatives, right. You take New Zealand, which was on the forefront of antismoking, anti tobacco and anti movement recognize the role of the alternatives, revisiting the laws. We had Uruguay, you remember, one of the countries which went for the plain packaging and many other things around the combustible products, completely against the alternative. Now all of a sudden, recognize that, that policy will not solve the problem of smoking, and they need to adopt something which you have in the U.S. with FDA, which is do something about the cigarettes but open the corridor for innovation. Okay, substantiate and verify them, and that's the way of accelerating the end of smoking. So there was a lot of regulatory developments. If -- the more you will see regulatory developments around the harm reduction base of legislation, a [ bullet ] that's going to be another building block into the excise differentiation. We know that consumers, not only about the tobacco, but if you want to change behavior results for -- of the consumers, there has to be some economic incentive as well. Just the fact that something is better, whatever that better is it's not enough. You need to have that economic type of incentive. Later on, you can maybe remove these incentives, but not at the very beginning.

Okay. Thanks, Jacek. I think we might have time for 1 more question. One of the topics I did want to ask you about is you think about your aspiration to ultimately have about half of your revenue coming from RRPs. Trying to get a sense of how important the U.S. market is for you in this aspiration. IQOS has been rolled out. Are you satisfied so far with the rollout? And then if you could touch on, which just kind of came out recently is BAT's lawsuit, which is to prevent IQOS from being imported into the U.S., how big of a risk that is from your perspective?

Yes. Look, I will not hide that the U.S. market is very interesting to us, I mean, on the nicotine space and also on the beyond the nicotine space, right? So it's difficult, completely illogical to ignore the U.S. market. I actually have my own acronym on the market, which I believe we should have make there more significant inroads, but necessary we have the key how to do it. But we have to do it. It's the CIA, which is China, India and America. And 1 day, if we want to really aspire to be a more successful global company, we need to crack the code of how to enter this. Maybe Beyond Nicotine is also giving us another opportunity, but you cannot just ignore the markets, the countries of this size. With regards to the BAT and the recent developments, okay, so the only thing we know, to be very frank, is the notice that this preliminary -- this initial determination has been reached. So it's essentially 1 page without really knowing the details, okay? BAT was challenging IQOS in the U.S. on the 3 patents. I am aware that the 1 patent was found by the commission in this initial determination as not infringed, if you like, was 1 win on us. And the 2 at this stage was found that we infringed the patents, okay? This is the most important, 2 very important things. First is this is the first step on the whole process. So we'll need to see for our ability to go to the commission and see what the final verdict, if you like, is going to be. So that's -- there's still some time to go. Second thing is this only pertains or it only impacts the U.S., okay? And actually, BAT has been challenging us in a number of jurisdictions outside the U.S. And in all of these cases, we have won. So my worry says -- worry about the 9 different challenges in the different countries, including U.K. And the other is when we have absolutely won the cases. And that's another thing is that the same exact patent family has been assessed by the European Patent Office -- European Patent Office, and that patent office issued a preliminary opinion finding that these patents are not valid. So I think in the total battle, which we have now with BAT, I actually think that we have an upper hand. And I hope that everything will finish well. So again, this is the development in the U.S. first is just on the first step. And second is the -- is that all the battles, which we have on other international jurisdictions when we're really winning case after case. There was 1 more important thing on the U.S. if people are really -- investors are really interested is we also have a pending case against this BAT claimed patents and in validating these patents in the U.S. Patent Office. That's obviously process which last much longer. I mean adults who are familiar with the subject, U.S. Patent Office doesn't really take these cases very lightly. If you are being admitted into the proceedings, it actually means that we have something. So I feel comfortable about it.

All right. Very helpful, Jacek. And with that, we really have run out of time today, although I could spend several hours talking to you about all of this since it's so fascinating. I really appreciate your time today. And soon -- and nice to see you, I hope the next time is in person. Thank you again.

Thank you so much.