Serko Limited (SKO) Earnings Call Transcript & Summary

Good day, and welcome to the Serko Interim Results Announcement Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Darrin Grafton, CEO of Serko. Please go ahead, sir.

Good morning. I'm Darrin Grafton, the CEO of Serko. Thank you for joining. I'm with Shane Sampson, our Chief Financial Officer. Today we'll take you through our results for the 6 months to 30 September 2022, provide an update on our strategic priorities and update you on our outlook. There will be an opportunity for questions. So turning to the highlights on Slide 5. Today we are proud to present our half year results, which represents an important step in Serko's commitment to deliver on our FY '23 and longer-term goals. It is easy to forget or want to forget the significant pressures that COVID generated with borders closed and lockdowns around the world. With your support, during this time, Serko committed to further advancing our technology ready to maximize the return to travel through an investment into people and technology and a relentless focus on our goals. Our first half demonstrates delivery against that focus and investment, our laser sharp focused on execution as well as the support and trust you as shareholders have placed in team Serko. I'd like to thank the massive effort of the team, executive and Board of Serko for their commitment and tireless effort. Travel is most definitely back and returning to close to pre-pandemic levels. Investments in our technology are starting to unlock new and existing customer opportunities and the numbers we are sharing today demonstrate this. This strong first half revenue growth was underpinned by the business travel recovery in Australia and New Zealand and a significant uplift in Booking.com completed room nights. Online travel bookings rose 75% and growth in total Booking.com completed room nights were up 432%, reflecting ongoing progress within our unmanaged travel segment. Our second half focus was on continued disciplined delivery to achieve our goals for FY '23 and beyond. This will include planned and focused product and development expenditure to keep us positioned as the market leader in the short and longer term. We're affirming our FY '23 guidance that revenue for the year will approximately double from FY '22. I'm now on Slide 6 and our financial highlights. Total income and segment revenue were $19.4 million and $20.3 million, respectively, both increasing 106% on the previous comparable period. We continue to report income less government grants, which is labeled as revenue and our financial statements. Revenue for the first half exceeded the full year revenue in FY '22 for all metrics. The financial results for the first half demonstrates the benefits from the ongoing business travel recovery and investment decisions we made during the pandemic. Revenue growth was driven by higher volumes discussed on the previous slide and by higher average revenue per booking. EBITDAF and net losses after tax were in line with our expectation and reflects the planned operating expenditure as we invest through the recovery for future revenue growth. I know operating expenses included a number of noncash items, which we will discuss in the financial section. Our cash position at the end of the half was $102.9 million, and this puts us in a strong position to continue our drive towards cash flow breakeven with an appropriate cash buffer. Our net cash burn averaged $3.6 million per month for the half year, and this is in line with our expectations. We continue to manage cash prudently. Moving through to Slide 7. We are committed and focused on all our strategic priorities. And today, I want to focus on 2 of our goals and objectives, unmanaged revenue and managed revenue. Moving through to Slide 8. The primary measurement of our Booking.com progress under unmanaged revenue will be completed room night, a metric we have been providing as part of reporting and which is more directly correlated to revenue than booked room night. This is consistent with how Serko reports other parts of the business. In the presentation, we have provided trend data by half of completed rooms night and from April 21 to September 2022. Booked room nights are provided until 30 September '22 as a transitionary measure. We've seen an encouraging increase in completed bookings during the first half in Booking.com for Business platform, assisted by the changes implemented during the period. We remain focused on working with Booking.com to achieve continued growth in conversions and revenue. Completed room nights on Booking.com increased 432% to 454,000, up from 85,000. The number of businesses registered on Booking.com for business continued to increase during the period to 484,000, up from 420,000 in May. Both Serko and Booking.com teams continue to make strong progress towards our joint objectives. We've continued to work closely together to develop the technology and insights for success of the partnership. We are on track with the delivery of our new hotel shop experience for Booking.com for business customers as discussed at the Annual Shareholders' Meeting. We're excited about the opportunity, the new experience we'll provide to drive faster innovation and growth in the future years. Moving to Slide 9, managed revenue. We've seen continued strong demand and recovery for business travel in Australia and New Zealand. We've also continued to win new business, which will provide further revenue growth as those contracts are onboarded and fully operational. In these core markets, we are focused on continuing to understand the changing needs of our travel management partners and customers to ensure we deliver exceptional product and technology. Our ANZ market recovery has maintained an average of over 90% of 2019 volumes with the New Zealand market peaking at over 160% of 2019 numbers during the high trading month of June. In New Zealand, volumes at the end of September were 145% of pre-pandemic levels, averaging 142% for the half year. This was an increase from 47% of pre-pandemic levels at the end of September 2021, a period following the imposition of strict lockdowns in August 2021. In Australia, volumes at the end of September were 89% of pre-pandemic levels and 84% for the half. This was an increase of 38 percentage points from the prior comparative period of 46%. The green line in the graph shows the average bookings per weekday as a percentage of 2019. Much of the monthly movement seen in May has been driven by the number of working days in the current year relative to the same month in 2019. In the Australian market, Qantas will launch new preferential pricing for new distribution capabilities or NDC airfares at the end of November. Serko is ready to support these market changes with multiple connections available. We're yet to see if this will result in any new uplift in ARPB as we are waiting to gauge the overall market reaction once these new offers go live. North America remains a strategic focus for Serko as outlined in our annual meeting. The North American market is a long-term opportunity, and we are working closely with our travel management partners to grow the market. We've recently trained 35 client executive team members at CWT as we work through a pipeline of customer opportunities together. Thank you, and I'll now hand over to Shane for some additional details on the financials.

Thank you, Darrin, and good morning, everyone. Comparisons are to the prior comparable period being the 6 months to 30 September 2021, unless explicitly stated otherwise. Certain comparatives have been reclassified to be consistent with the classifications adopted in the audited financial statements for the year ended March 31, 2022. The most notable of these is the netting against revenue of consideration payable to customers, which comprises Serko's share of jointly agreed marketing expenses. Segment revenue is revenue before netting consideration payable to customers. Looking at the profit and loss as a whole on Slide 11, total income grew by 106% to $19.4 million. Our total income in the first half was higher than our full year income for the year to March 31, 2022, of $18.9 million. I'll talk about revenue in more detail on the next slide. Operating expenses increased by 70%. I note that this seems a very high headline growth rate, but I note that it includes a number of noncash items, which I will talk to in more detail on a later slide. And I note that our operating cash expenditure was in line with expectations and that's reflected in our monthly cash burn of $3.6 million for the half, being in line with the expectations we've set. We reported a foreign exchange gain of $2.3 million. This partly represents an accounting anomaly where intercompany balances didn't give rise to exchange gains and losses, although the weaker New Zealand dollar did result in economic gains on foreign currency cash and receivable balances. The weaker New Zealand dollar over the half was a positive for Serko as most of our revenue is received in Australian dollars and euros. Net finance income grew to $1 million from $0.1 million, reflecting both additional cash on hand as a result of the capital raise in late 2021 and an increased term deposit rate. Our net loss after tax grew by $4.6 million or 30% to $19.7 million, reflecting the continued increased investment in the business and higher amortization, partially offset by the strong revenue growth. The EBITDAF loss grew by a similar amount to $16.9 million, an increase of $5.9 million or 44%. As a percentage of revenue, the EBITDAF loss fell by 45 percentage points to 90%, reflecting operating leverage as revenue grows. Looking at revenue in more detail on Slide 12. The key highlights are that Travel platform revenue grew by $3.6 million or 73% to $8.4 million, primarily reflecting increased travel volumes in Australia and New Zealand. And growth of consideration payable to customers, supplier commissions revenue grew by $6.7 million or 497%. Net of consideration payable to customers, supply commissions revenue grew by $6.3 million or 675% to $7.2 million, driven by increased Booking.com of business completed room nights and a higher average revenue per completed room night for ARPCRN. That's a mouthful. As Darrin noted earlier, online bookings increased by 75% to $2 million with the bulk of that growth in the Australian and New Zealand market. Looking at revenue by geography, Australian revenue growth of 62% reflects the higher booking volumes due to the travel rebound from the prior comparable period where lockdowns and travel restrictions, particularly in Melbourne and Sydney, significantly decreased travel volumes. The prior comparable period in New Zealand had seen strong volumes until the lockdown in August, and the New Zealand rebound was therefore smaller. The strong growth in the Europe and other geography was driven by increased supply commissions. Average revenue per booking or ARPB for travel-related revenue that -- travel platform and supply commissions revenues increased by 54% to $7.85. The growth in ARPB is driven by the increased average revenue per completed room night and the increase in the number of Booking.com for business bookings as a proportion of total bookings. The ARPCRN in euro terms increased by 53%, reflecting higher hotel prices relative to the prior comparable period as travel rebounded strongly. Operating expenses grew by $17.5 million or 70% to $42.3 million. As I noted, this seems a big jump. However, this was inflated by movements in noncash items. As a percentage of revenue, operating expenses fell to 225% from 285%, a decrease of 60 percentage points, reflecting operating leverage as revenue grows. Approximately 54% of the $17.5 million increase in operating expenses relates to product design and development expenses, which represents the cost of developing and maintaining our software. I will talk to product design and development expenses in more detail on the next slide. Selling and marketing and hosting expenses increased by $1.3 million and $1 million, respectively, primarily reflecting increased costs as a result of increased transaction volumes, but also some increased marketing spend as markets reopened. Hosting expenses grew by 43%, significantly lower than the online booking volume growth of 75%, reflecting operating leverage as volumes grew, the ARPB increased and also initiatives to improve the efficiency of our hosting arrangement. Remuneration and other benefits grew by $11.4 million or 77%, reflecting the planned increase in average headcount, higher average cost per staff member due to wage growth, particularly -- the staff, over the last couple of years and also the impact of noncash items, which increased relative to the prior year and comprised over 1/3 of the increase. The 2 most significant noncash items were: Firstly, capitalization, which declined by $1.7 million to $5.5 million, reflecting the mix of software development work undertaken in the period. As a proportion of product design and development expenditure, capitalization fell by 22 percentage points to 27%. We expect the proportion of product design and development expenditure capitalized to increase in the second half, driven primarily by the development of the new hotel search experience Darrin talked to earlier. Secondly, the employee incentive share scheme cost, which are noncash, and grew by $1.9 million. Administration expenses increased by $1.5 million or 56% relative to the prior comparable period, but was slightly lower than the 6 months to March 31, 2022. Amortization and depreciation increased by $2.3 million or 63% to $6 million. The increase related to higher amortization is the value of capitalized software has grown and also as most new assets capitalized in the current calendar year, have been depreciated over 3 years rather than 5 years. In the half, the level of capitalization and amortization was similar. Serko has continued to invest to support growth with employee numbers growing by 39% or 13% to 334, providing a strong base to support a high rate of revenue growth going forward. Serko has also added contractors over the period and is moving to use external providers for some development in the second half. After an extended period of focusing on growing the organization, we are now focusing on efficient delivery and execution within the existing resource space. Looking at Slide 14, product design and development. As discussed on the previous slide, product design and development has been the primary area of cost growth with expense up to capitalization and amortization, up $9.5 million or 91%. The growth reflects increased investment in staffing, higher amortization and lower levels of capitalization. Looking at the balance sheet on Slide 15. Cash and short-term investments increased by $40.5 million to $102.9 million, reflecting the capital raise in late 2021 and cash burn. Average monthly cash burn in the half was $3.6 million, similar to the underlying cash burn for the 6 months of March 31, 2022, as revenue growth has offset increased expenditure. Current assets grew by $6.7 million or 104% to $13.2 million primarily reflecting higher receivables as a result of revenue growth in August and September 2022 relative to the same month in 2021, together with accrued interest. The growth from March 31, 2022, was similar. Current liabilities also grew, although the increase from March 31, 2022, was more modest. Current liabilities of growth of $3.7 million since March 31, 2022, primarily reflects customer contributions not yet paid and increased lease liabilities as a result of a new lease. I will now hand back to Darrin to talk to outlook.

Thanks, Shane. Serko's first half total income exceeded the full year to March 31, 2022, with a strong exit rate from the half. Serko notes that historically the second half revenue is lower than the first half. Serko is affirming its FY '23 guidance of approximately doubling FY '22 revenue. Guidance, of course, remains subject to ongoing risks, including geopolitical and macroeconomic uncertainty and the potential resurgence of COVID. Serko has significant cash reserves and is tightly managing investment levels with a focus on moving towards profitability and cash flow breakeven. It is Serko's intention, based on current market conditions, to return to cash flow positive position during the FY '25 financial year with the appropriate cash reserves on hand at that point of breakeven. Thank you. And I'll now invite questions.

[Operator Instructions]. We will take our first question from Joshua Dale with Craigs Investment Partners.

Just first one on Slide 8, Booking.com booking volumes. If we divide your 208,000 bookings by 6 months, you get about 35,000 per month. You did 39,000 in the month of March. Just want to discuss the differences there. Have things slowed a little? Or was there a natural slowdown over the Northern Hemisphere summer period? Or was March just an overly good month? Is there any detail you can provide there?

Yes. I mean, I think the key focus that we have is on the completed room nights number. I would certainly note August is seasonally a very low month. So certainly the August month is weaker. I think my recall is that we were kind of relatively similarly was across the best part and then as we talked about at the Annual Shareholders Meeting, we achieved some increase in condition by -- the exit rate was pretty strong in terms of bookings.

And on average revenue per completed room night, that was EUR 10.10. Is that your 50% share?

Yes, that's correct.

And just to clarify, the 2 million online bookings on Slide 12 includes the 208,000 from Booking.com for business. Is that correct?

Yes. That's correct, Josh.

And I guess last one for me. I appreciate the booking for business product is still in development. But if you had to list the top 3 things you'd like to take off that would drive user engagement most materially, what would they be?

Definitely, as the hotel shop experience and -- but that's really where we are kind of primarily focused at the moment. But if you're just specifying for booking for business that's around making sure that we can bring those aspects of the little bit leisure and consumer style through into that platform and maximize how people interact with the technology at that point. And then the second part is just really more people coming into the funnel through activation.

Just a follow-up. I'm surprised you didn't talk about rentalcars.com integration, which I've noticed has -- is live now, although in a limited number of geographies. Can you just touch on that a little bit too?

Yes. So we did push that live in the first half, and we've got that live in the market. We follow where we can due to any regulations around payments or other sort of things. So it's live in the markets that we can activate that and we follow the requirements that are set down by Booking.com in that case. So yes, that is actually live. And apologies for not listing that out as an achievement of what's actually going on as well.

That's quite all right. I really appreciate it.

I think one other point, Josh, I think [indiscernible] for New Zealand market also went live in the half as well just recently. So you'll hear that market update. So we've kind of been focused on the metrics more than probably some of the functional sort of stuff that's delivered. So apologies for that, but yes, there has been still significant product enhancements going out around those areas.

We will take our next question from Guy Hooper with Jarden.

First one for me just on the guidance. I think at the full year, you mentioned you're expecting cost growth to sort of be in step with revenue. Is that still the case? And what are your expectations for cash burn in the second half?

Guy, I'll take that one. In terms of cost growth, I think that is still essentially correct on a cash cost basis. And so our expectation for the second half, I think we talked back in May, we indicated that we underline cash burn for the 6 months to 31 March was about $3.5 million. And we're effectively expecting that, that will be somewhere over the second half, we probably going a little bit higher and a little bit lower over this year on the cash burn, we're probably a little bit of a flatter profile just with the timing of a couple of projects.

And I guess, just on North America and some of the managed travel can you just provide a little bit of an update in terms of some of the progress? I mean you obviously announced Visa in May and presumably that takes a little while to implement. But maybe any update on how that's going and from [indiscernible] RFPs as well?

Yes. So we're fully live across the markets with Visa. That's completed its rollout process now. And Kim Hamer is -- she's also won travel manager of the year based on her travel program implementation with us, which is really good endorsement of what our technology is able to do. And a lot of that was related to what we call the NDC if it is within the North American market and how our technology can actually handle the mix of that and legacy sort of systems as well. So that's a really good outcome. As we mentioned, Visa trades with CWT and we've been training up the CWT sales and business development team to move their pipeline through with us. And so that's kind of been the key focuses for the team in that. We have implemented an additional reseller in that market and activated customers through those sort of pipeline. So we're building through from that recovery that we saw around that 7th of April sort of timeframe where the market started to come back, highly focused on trying to just build that steady build through into that market recovery, recognizing that a lot of the travel management companies are also scrambling to employ new team members as travel switched back on. And so it's a combination of focused effort around that.

Yes. Great. And then, I guess, just one last one for me. The Booking.com customer growth, is that still predominantly organic? And I guess at what point -- what point can you start promoting that more and build that funnel out?

Yes. So it's a combination of organic and what we call existing customers. So we still see a portion of customers that were previous Booking.com customers reactivate their accounts as they come back to travel. So they regularly -- that sets a regularly daily experience during journey any given month. We see both new and customers reactivate that had come through in that first migration wave that we did previously. And so that gives a steady set of customers coming in there. And yes, we would imagine in future years starting to increase marketing a little bit more to increase the activation as we go through and launch some of the new technology changes into next year's calendar year.

And just a follow-up. At what point does Booking.com -- like what would Booking.com want to see from the product before they start promoting it from their leisure account, so when customers click their traveling to business button?

Yes. So it's -- I can't really talk about probably the direct stuff that Booking want to see inside there. That's probably more appropriate for them to probably comment on. But the more that we have active and the more people are buying through the platform and the more share of the wallet we produce will definitely impact those decisions.

[Operator Instructions] We will go next to Siraj Ahmed with Citigroup.

I have a few questions. First thing, just I'm a bit confused with the guidance, right? You're saying there's a strong exit rate from first half, but you're implying that second half revenue will be lower than first half. So I just want to confirm that. Would you still think second half revenue will be lower this year?

Siraj, I'll talk to that. So I guess, probably we are not intending to imply that it will be lower. We're simply highlighting that while the exit rate is strong at this point, we're not willing to increase our guidance. There's still uncertainty in terms of where the market will go over the second half.

Okay. So you're not -- I mean, what you're seeing today, you don't think -- it shouldn't be the second half is lower. Is that right, from what you are seeing?

Yes. The key thing we're just reiterating was that while the exit rate is high, we don't want to see people getting carried away to what that might mean. So we're just highlighting that historically, the second half year has been a little bit lower. And therefore, we expect a strong exit rate, we're still focused on doubling as opposed to changing guidance.

Yes. Look, we enter into December, January, which is kind of like the Christmas seasonality low period. And we've got some unpredictability around the Europe conditions around some of the gas and other sort of inflationary measures in that market. So though we've had a strong exit out of the half, we can't -- we're not -- we're cautiously saying, hey, look, we don't know at this point. And so we're not -- our guidance aspects on doubling. We can see that but we're not prepared to comment any further on this. So we're sort of saying it's just reaffirming that.

Yes. Okay. No, that makes sense. The second thing, in terms of exit rates, so Shane, you sort of -- I might have missed this, but am I right in assuming that bookings in September from Booking.com of business, the actual booking metric, monthly booking metric was better than March, and the average for the half was lower?

Yes. And so I think if you recall at the Annual Shareholders meeting, we indicated we've made some changes in conjunction with bookings that had achieved a meaningful uplift. So that was partly why we're emphasizing that there was a strong exit run rate, but we just do not want to be carried away in terms of what that translates into the second half.

And I understand the metric that you're looking at is room nights completed, but bookings is still a lead indicator, isn't it, for room nights completed?

And so the booking is kind of yes and no. So the reason -- and that was one of the first questions that was raised is that it's a different way of the booking -- the reason we go completed room nights as that picks up cancellations and everything in there. But the first part is bookings now one booking can have multiple rooms and multiple stays inside. So it's actually a totally different metrics to what we were previously reporting from bookings, and that's why we've gone on completed rooms stay. So as we're going through this, the makeup of one booking can potentially do 3 to 5 different lines inside there. It's a little bit more complex. So you don't have to cycle through 2 bookings. You can do that all in one. So it distorts the numbers. And so that's why we've sort of worked on more the completed room stays because you can't -- they're not like-for-like comparisons anymore with the technology. And so unfortunately, that was one of the first biggest thing, our bookings flat was -- it's actually a different makeup inside those bookings completely now.

I think the other key point would be, it is a leading metric. It gives you a view of what might be happening a few weeks out as opposed to a few months out. Most of the bookings are effectively completed within the month that they made. So it's a bit more than half of completed nights, so different -- some element of leading metrics, but not a hugely meaningful in terms of what does it mean for the second half.

Correct.

That's helpful. And just looking at -- so you're backing out based on your -- what you've disclosed, it seems like the ANZ ARPB has declined compared to last year. Any reason why that's the case?

Yes. That's really a combination of just a little bit of a change in the mix between the customers that the bookings are going through and the rates that those customers have. And also, obviously, the extent there are some more fixed charges within those as the volume goes up, those average down in terms of ARPB…

Have you had any pricing -- yes, sorry. Have you had any pricing pressure on that like has any of the customers asked for lower pricing?

Certainly, our orientation at the moment is when you look at the inflation spread across the general market, the conversation on price is one we'll be looking to drive probably more than our customer. Yes.

Okay. Last one, just on the ARPB as well. So Darrin, you sort of mentioned in [ DC ] right, which is coming at the end of the month. I'm still unclear as to how it will get monetized for you. But just how should we think about it because potentially it could be higher fee stream for you, right, per booking?

Potentially, yes. And that's -- so we're kind of saying, hey, look, we recognize it's coming, but we don't have a metric or any ability to provide any guidance on that on what materiality that could be at this point until we actually see how the market accepted what the prices actually look like and how the companies react to that. All we can say is that the part that we can control is to have the technology ready to do that. And we'll see probably through December, January, how that sort of impacts both the New Zealand and Australian market, where it's applicable to. So unfortunately, it is one of those sort of things. We can't provide a number with certainty in this sort of space. It's just too early. But if we see the stuff, we will look at how we actually bring that forward to the market.

And just confirming, Shane, that ARPB, the mix impact, should we just assume that's flat going forward? Does the mix remain same or can it decline unless it increase…

Yes. I think kind of flat is a reasonable assumption for the second half. As I noted, we're simply looking to pricing as a lever in the medium term, but in the second half it's unlikely [indiscernible].

We will go next to Vignesh Nair with UBS. We will go next to Mark Robertson with Forsyth Barr.

Just one question for me. Can you give a quick update on what you're seeing in terms of trading second half to date in your key markets of Australia, U.S. and Europe in terms of pressures on businesses, obviously, in this current macro environment and heading into, like you noted, a pretty uncertain winter over in Europe?

Yes. We're obviously limited in giving out information that's beyond what we've put in the deck. So we put the trading in for ANZ. And as you can see there on adjusted weekday basis, there was actually a little bit of an uptick in terms of volume relative to the same month in 2019. I won't talk to details. But certainly, in Europe, we haven't yet seen any impact on our volumes from the macroeconomic situation in Europe, but we see as we think about that guidance, we're about doubling, we're keeping in mind that that's a risk that could impact on the second half. But to date, nothing sort of concrete that we would be seeing there.

Awesome. I guess just one more from me. In terms of the marketing with Booking.com, where do you see that plateauing? Obviously you talked about you're doing more now as markets reopen, but where do you see that plateau?

So obviously, a lot -- it's a very large opportunity with booking for business. And therefore, I wouldn't want to sort of speculate where we might be 3 years from today because there's a lot of orders go into the bridge. In the near term, probably more kind of steady growth in that cost as opposed to significant growth. I think one of the call outs someone made earlier on the call was obviously one of the most obvious opportunities to get more volume and there would be marketing to the existing Booking.com based, that would be unlikely to have a lot of advertising costs because it would be more a marketing by bookings. So that's going to be one of the potential significant drivers in time if we can achieve that. But in the next 12 months, it's probably more like sort of doubling of the cost as opposed to dramatic scaling of it.

Awesome. And then just finally, on headcount. How do you see that growing in the second half?

Yes. So we -- I guess we see that we've grown the business to the point where it has the capability it needs to drive the growth that we're looking to achieve. And so we see headcount as being relatively flattish. We don't -- we're probably focused less on the headline headcount number and more on the cost base. So for example, we have grown contractors over this half year to give us some more flexibility. We'd be happy to have headcount growth go up a little bit if we replace some contractors with low-cost salary people or we increased some of the headcount in China. So it's another place where we can achieve a lower cost base. So [indiscernible] more on the kind of cost level, but as a general message, we definitely have transitioned from a period in which we've had to grow the resource base of the company significantly to one where we more see we have become the broad shape of what we need and it's small fine-tuning around the edges.

And that concludes today's question-and-answer session. Mr. Grafton, at this time, I'll turn the conference back to you for any additional or closing remarks.

I'd just like to thank you all for your attendance today, and thank you also for the support over the last few years since COVID as well. So thank you very much and look forward to meeting you one-on-one.

This concludes today's call. Thank you for your participation and you may now disconnect.