Zoetis Inc. (ZTS) Earnings Call Transcript & Summary

Great. Thanks. Good afternoon. Next up, I'm happy to introduce Kristin Peck, Chief Executive Officer of Zoetis, the world's #1 animal health company, and one of our topics in animal health for most of the past several years. I've got a long of list of questions in front of me that I'd love to run by Kristen. I'm going to get right into it and just kick off with companion animal.

The data we're looking at, Kristin, sort of suggests the market is bouncing back relatively well. We had our checks out last night. IDEXX put out some industry data as well. And so maybe we can just start there, high level, just your thoughts on where the companion market -- companion animal market, pardon me, is today, versus maybe a month ago?

Sure. First of all, thanks for having me today, Jon, and for organizing this conference you've got. Great to connect with some of our investors, even if it's virtually today. So we are seeing very consistent data to the report that you put out, Jon. We are seeing significant improvements across the U.S. in vet visits. Some geographies, honestly, back to normal levels, and some others may be down 5% or 10% but largely getting back to where it was, which is a significant improvement over where we were a month ago. It's about versus our expectations, maybe a week or 2 faster. We were expecting this probably early to mid-June. So we are -- it is about a week or 2 faster than we expected in the U.S. Outside of the U.S., it's a little more uneven. We've got some really strong, one, I'd say, a few weeks ahead of where we expected in, say, Germany, but probably a little slower than we expected in some geographies, such as the U.K. So we continue to see just a return to the clinic. Really, has been a focus on the wellness visits that have backed up. So a lot of wellness visits that people have deferred for a month or 2. So we're excited to see that market really coming back, and we're seeing consistent data with what you had mentioned.

Okay. That's great color. I think maybe just to push you a little bit. The 2020 guidance, you guys gave a wide band with everything that's going on understandably so. Glenn talked about the high end of the 2020 guidance reflecting companion animal visits returning to more normalized levels and livestock producers returning to full operation. I don't think the latter is going on, and we'll touch on that. But for companion animals, is it fair to say that as we sit here today, you have more conviction that current companion animal trends are sort of more emblematic, if you would, at the higher end of your guidance?

Yes. I mean the only thing I would caution is there's -- if we hit a second wave, we're back into quarantines in the fall. And so I would say if things continued and didn't change, then yes, that would be the case, as Glenn had mentioned on the last call, that's what we're looking for to be at the high end of the range. So -- if we don't see a second wave in the fall, we think on the pet care companion animal side, certainly in the U.S. and mostly in Europe, they're getting little slower than the U.S., but still week-over-week improvement. So that is what we were looking for, and we are overall pleased with that.

Okay. Great. Second topic, Trio, you lowered the 2020 revenue expectations from $150 million to $100 million to $125 million. Just sort of a little unfortunate in terms of the timing. The product was approved right around the time that companies were pulling reps from the field. So maybe let's start there, Kristin, just please talk to how your reps are educating the veterinarians on the product, about the product from a remote setting?

Yes, sure. We remain really excited about that launch. As you know, better than most anyone, this is one of the largest markets in animal health based pet care, parasiticides market. So it's a big opportunity. There was a lot of anticipation for the product. So that we're very excited to get it. So as we saw, we -- unfortunately, the timing of this launch with the pandemic was not so opportune, as you rightly noted. The good news was, that's where we're excited and may stock the product. The challenge we saw was, obviously, with pet owners not coming in and reductions of 20% to 30% in a key launch season for parasiticides, as you know, that was sort of hard. And the other thing we've been working to overcome and we've got some answers to is where the vet visits were coming in, they were curbside drop off, so there's less engagement between the pet owner and a vet to actually switch somebody. So whereas I think we've seen strong sort of new puppy, new dog, new dog to the clinic sales, it's been a little harder to switch customers because there's just less of that one-on-one conversation. But what we're excited about is we launched our direct-to-consumer advertising, both digitally and through television, I'm sure you've all been seeing them, with all the time everyone's spending at home now. We're hoping that we'll get more pet owners coming and asking for the product. So that was the reason why we moved from the guidance of $150 million originally to the $100 million to $125 million. It was obviously, some lost doses and visits in the middle of the quarantine and then just getting that better interaction between the vet and the pet owner to do the pull through. So we continue to see excitement from the veterinary side and new pet owners -- get a good experience of pet owners who are getting it, but we're trying to really focus on the pull through.

Okay. It's an interesting comment that you made, I didn't think about that, but in terms of the curbside pickup and not having the full engagement, if you would, between pet owner and veterinarian. How about the decision to price Trio, running some screens that we do on Chewy, et cetera. We see Trio at a slight discount to call it the industry-leading combo of NexGard and HEARTGARD. So, one, is that accurate? And two, just is that pricing in place in order to call it maximize share gains over the next 6 to 12 months?

Yes. That pricing is accurate, and that was the intent. It was to just remove any, well, I don't want a more expensive product barrier through the gain of market share into switching people. So our point is we think we have the better product overall. We have the easier-to-use products, one simple dose. We just wanted to remove that, well it's more expensive or it's the same price why do I switch to take it away. But we think it's a premium product. So we're very comfortable with where the pricing is right now and your analysis of it is accurate.

Okay. And a couple more in Trio. Feedback I got from investors, quite honestly, when you lowered the 2020, people didn't care. I mean, we all understand in the COVID environment. So the feedback was, hey, it's not a big deal. As long as there's not a triple competitor around the quarter because COVID unfortunately threw you a curveball for 2020. Just at a high level, Kristin, what are you hearing in terms of timings of other players? Do you believe anyone's closed? Or do you think it's possible that we get into 2021 fully in tick season and you're still the only player out there with a triple combo product?

It's a great question, Jon. And I so wish I had a better answer to it than I do. I mean, in our industry, it's not -- these aren't public things, and we compete against a few private companies and companies that are divisions of large ones. So there's not a lot of like robust external data or insight into this. What we're hearing through our channels, strategic accounts, pressure, whatever, our sense is we don't have a competitor in 2020. Do we have one in 2021? I like to be a little paranoid as a strategy. I assume we'll have one. I don't know. I mean the longer we don't, the better off we are. And that's why our focus has been -- and I know there were some questions, and I'm sure you'll get there, why didn't we have -- could we cut more costs and get better earnings with a reduction in revenue. And the answer is we're putting full-court press to gain share on this product. Their people using and happy with it, get customers loyal because I don't know when a competitor is coming. Is it Q1 '20, '21, Q2, I honestly don't know whereafter. But I think we need to assume that someone is coming, even though I don't have any data that says when or who or if, but we operate as if that will happen, and we're aggressively going to try to take share as best we can.

Okay. And to piggy back off that when you say aggressively take share, sort of flee and tick in parasiticides is one of the only areas, very few areas of animal health where Zoetis is sort of under indexed, right, as the market leader. And maybe you're, I don't know, mid- to high teens of what arguably is the biggest market in animal health. So when we look out, where do you think Trio can take you from a parasiticide market share perspective over a prolonged period of time?

I mean, look, we think we should have a similar market share that we -- due to the overall market, in our view, if not higher, given our strength in the channel. We were just behind, honestly in having the right portfolio to do that. But I also think we're talking about, I think, ProHeart 6 and ProHeart 12, which we launched, is also an excellent component to that that can be combined with regular Simparica. So we really are looking at this overall play and getting overall to our fair share of a similar share that we have in other spaces in animal health. And I think we are underrepresented here. And given the strength of the rest of that portfolio, I don't see any reason why we couldn't at least get back to our fair share of this.

Okay. And I'll throw sort of a live one coming off our vet panel earlier this morning, sort of real time. One of the doctors was looking forward to Trio and wanted to adopt in 2021. But he alluded to the fact that he still got a decent amount of inventory or, call it, duo, or at least I'll call it duo. And talked about -- that was an interesting point. If Zoetis had a buyback program, then he would move more aggressively the Trio in the near term. And when I think about that, if you guys were to put that in place, you might still get the incremental revenue from the heartworm component. So is any of that in place? Is it still too early to go down that road? I'm just sort of wondering how you guys as an organization is dealing with some of the inventory that might be out in the marketplace from Simparica.

It's an interesting question. And honestly, we haven't thought about that. We interestingly have not heard that from vet to date. And part of that is because switching has been hard. So sometimes we're just keeping them on ProHeart and Simparica. And certainly, that's to be very honest with you, for specific reasons, they are really concerned with compliance. And so they're going to give ProHeart 12 and Simparica anyway because they're sure they've got covered on heartworm under ProHeart 12. So we haven't heard it. If it becomes an opportunity, we can certainly assess it. I think the larger issue we're facing right now as you saw from some of the earnings report of some of our competitors was the [ loyalty ] of the channel of competitive products as well. So I haven't heard as much of the Simparica, too much inventory. But certainly, we look at any opportunity that comes our way.

Okay. Great. I want to pivot over to livestock. There's so many different data points that [indiscernible] out there. And it's hard, I believe from my seat to know what really matters for your livestock business for the livestock market in general. And last time we published some of those metrics that we track from the USDA. We also published dairy pricing. And from those 2 metrics, it looks like the livestock business, at least cattle continues to be pretty difficult. Maybe if you can talk, Kristin, just at a high level, what are the 1 or 2 or 3 metrics that investors should really be on the lookout for when they think about your livestock business to try to identify when the pressure points might be easing a bit.

Sure. So taking a step back on our livestock portfolio, 40% is U.S. and 60% is ex-U.S. And I know there's understandably always a lot of attention for all of us in the U.S. is what's happening in the U.S. But I'd start with -- it's 60% ex-U.S. and then it's diversified across species. The larger segment is clearly cattle, which is both split out between beef and dairy, as you know. And then you've got pork, poultry and aquaculture. And putting aquaculture aside, which is less impacted by some of what we're talking about right now, I think the trends are really different across those. And this is one of the advantages that Zoetis has is that we're very diversified, both geographically as well as by species and then by species by geography. And so look, if you start with poultry, I think poultry had a short-term hit both as we expected it to rebound by the end of Q2. The hit was, as you move from the large trend of 50-50 dine-in dine-out to an 80% to 90% dine-in scenario, supply chain just had to realign from sending 50 pounds of chicken in a box to packaging for supermarket consumption. And so you saw shortages sometimes in livestocks just on this figuring how to realign the supply chain of package for grocery stores, as you know. So that was sort of one. But they've figured that out largely now. The one that would came as sort of a surprise at the end of March, April was some of these emerging issues in packing plants. But again, back to diversification, that's a U.S. and Canada issue. And I do think it will sort itself out by the end of Q2 in North America. So that will probably [indiscernible]. So you're left with, in my view, 2 underlying trends as you look at sort of chicken, pork, beef and dairy, which is, first, the recession, what generally happens in a recession, which means people will trade down a little bit in proteins as they're either unemployed or they're unsure of their economic situation. And we have good models for that from previous recessions. And in that, it goes down but still grows, call it, 1% to 2%, historically, that's what happened. But I think what makes this different is the combination with just the disappearance of the majority of dine out. So people consume more beef and more dairy when they're at stadiums having cheese burgers or hotdogs or eating out at stake restaurants, you just see it differently. And so when does that return? And what does that look like? So we're expecting globally that poultry largely bounces back pretty quick, and I think you'll see that once we get past the U.S. packing plant issue, people will be eating and they might move some of their consumption to culture. Pork hasn't -- I would say, similarly, there hasn't it -- once you fix the packing capacity, which is causing huge hurt to our customers right now is the price of pork has just plummeted since they didn't have capacity for the animals. Once you solve that, which again, that's a short-term issue, will be solved. You've got the tailwind of African swine fever in China. So as long as China export stay strong, again, they have a huge need for pork, and it's been very strong, even throughout the pandemic. The export market to China from the U.S. and many other geographies, Brazil, et cetera, has been strong. I think pork does fine. So I think what you want to watch on pork, which is the savior of pork is the export market there and specifically China, really driving that. And we're watching the global. So if someone else sells that then we're shipping to somebody else. But I think that's what really is the savior in this one for pork overall. Again, people might also trade down there. So I think pork will be okay. The sort of more medium-term concern is how fast can you ramp back up a dine-out world that build some of that gap in beef and dairy. Dairy is getting a little better, if you look at milk futures right now, producers made smart decisions and cut production to at least manage price a little bit. So you may see what we're seeing a temporary calling of animals. So maybe there's a reduction of 1% in animals. Again, these aren't huge percentages, but you're going to need some short-term reduction to get that market back. And because it takes a while to breed cattle and to change that dynamic, you're probably 1 to 2 years from a full recovery, assuming we get sort of a more normal understanding of what demand will look like for dine-in, dine-out before I would say beef and dairy fully recover. But dairy can manage more in the short-term supply of milk. Beef is going to be a little more challenged. So I think what you're watching is, where does the dine-out market overall go and just watch some of the numbers of animals, which isn't perfect, but it's definitely a proxy. We're seeing for some of these producers, they'll just keep animals on pasture longer, which is less use of our products, overall, as you know. Or they trade down from a premium product like DRAXXIN to a less efficacious one because they just can't afford it. So we've got all of that baked into the guidance we gave for the year. And our assumption is that sort of how it plays out. If it's significantly worse, we can certainly talk about it, but it can obviously bounce back better as well.

Okay. Okay. Great. A lot of very good color there. Maybe just a few follow-ups specific to livestock and then we'll move on. But I think at the time of the call, Kristin, you talked about the packing plant capacity. Again, this is U.S.-centric, off by about 15%. Is that still where we are today, give or take? Or has that already started to improve here in the second quarter?

It's already improved. I think we were at about 15% we spoke. I think in its worst, it was 20%, 25%, some regions were 30%. But it's now pretty much for pork and poultry at around 10%, so it's improved since that point. Again, it's a little sporadic week-to-week if you watch in the news reports. I would say beef is probably a little lower, maybe it's 10% to 15%. But I think will be at 10% from what my sources say by probably maybe next week or the week after. So call the U.S. and Canada, which is in a similar situation, honestly, at about 10%. We think that will work its way out as we get through middle to end of June. So as we kind of said in the last call, we do think that this dynamic should work itself out by the end of our Q2.

Okay. And maybe just one last one on livestock. Earlier when we were talking about companion animal, we talked about a lot of the favorable trends that we've seen recently. You agreed, but I think you also called out, hey, look, that's a North American thing. It's not quite the same story in all international markets. It's a little bit more of the inverse here on the livestock side of things. In other words, everything front and center on the packing plant capacity and the USDA numbers that were difficult on cattle placed on feed, that's all specific to U.S. Are you seeing the opposite dynamic where livestock is getting together maybe a little bit quicker OUS versus U.S.?

Yes. We are seeing -- again, you got to break it down by species. We -- there's a few markets that are really big in beef, to be honest with you. So if you look at Europe, really there, you're going to see much more pork and poultry than you're going to see cattle, and those are bouncing back much better. So if you look at ex-U.S. livestock, to your point, it actually does do better. Australia is bouncing back much better here and the drought has been better, so their cattle market should be improving. So that's why I say like the diversity of our portfolio and the diversity of geographies, I don't even know what to say about Brazil and how they're approaching this thing, but they're keeping that market running and they're exporting big numbers. So Brazil is -- from a livestock perspective, doing well, like probably from a COVID perspective, not so much. But this is why I would say, to your point, I do think international, they're still challenged, but not at the same level as you've seen in the U.S., but it's much more a local dynamic. What are the species that each market is really focused on and then how are they doing on that and how are they managing. So we do see the diversification of our portfolio, remaining a strength by species, by geography and with 60% of livestock ex-U.S., it does help a little bit versus some of the more acute dynamics that you're seeing in the U.S.

Got it. Perfect. I'm going to try to work our way down the P&L and still get to a couple of other topics. So I want to jump over to operating expense. Between 2015 and '17, and I know we don't have gone with those, but I'll lay out some numbers. OpEx as a percent of sales came down notably from about 37% of sales to 32.4%, but then it was flat as a percent of sales between 2017 and 2019. And the company did a lot of things during that time. I mean you bought Abaxis, you had some very successful DTC campaigns along the way. I'm just curious at a high level how we should think about OpEx going forward. Is that still a line item that you think you can leverage in '21 and '22, assuming market growth returns to, call it, normalcy?

Yes. I mean, when you -- your numbers look very accurate what you were talking about. From 2015 to 2017, we had completed the spin up and we were really focusing on operational efficiency initiatives. And that's where you saw the more significant reduction in our overall cost base. But over the last couple of years, we've been investing in the core portfolio. We've been really growing our derm franchise, launching Simparica. We've also invested in diagnostics and continuing to invest in profitable growth in our livestock business, investing in some of these digital and data businesses, such as Smartbow. And if you look at even this year, I think we're launching significant new product with Trio and investing strongly behind that with a very strong portfolio behind that in monoclonal antibodies for both chronic pain in cats and dogs. So we then also to really prepare ourselves for the launch of Trio and the mAbs and the expansion of diagnostics, expanded our U.S. companion animal sales force by 10%. But you've also seen much higher growth rates that have then been historical growth rates on the top line, really moving up 1% or 2% higher. So beyond 2020, we see R&D to grow in line with revenue overall. From a G&A perspective, we are really happy with our current footprint. We don't think that, that should grow any faster than inflation. But if you look at selling and marketing, we expect it to be somewhere between R&D and G&A as we invest behind significant product launches, such as Trio and our upcoming mAbs. So that's sort of how we're seeing the numbers overall. As -- we're excited of the innovative portfolio that we have right now and that we're seeing over the next 1 to 2 years. And our focus will be to invest behind that. So hopefully, that gives you a sense as you look at sort of OpEx, I mean, across the category.

Yes. No, it certainly does. That's great. I do want to go on gross margin as well because if you think about gross margin, arguably, it should have a natural tailwind to it, why the higher-margin companion animal business grows faster than livestock and then even within companion animal, you can sort of say, well, look, the novel therapeutics, such as the derm portfolio and like Trio, that's even growing the fastest within companion animal. So is that one, Kristin, the right way to think about it? And the other part of that question would just be, what are Trio gross margins roughly at scale? Glenn's talked about how it's going to be lower this year as you ramp-up the product, but is that a 80%, 75% gross margin product once you get closer to scale?

Sure. We have seen, to your point, some very nice gross margin expansion over the last few years. Few things I would say are driving that. First, price. As you've seen over the last few years, we've taken about 2% price per year. We've also been really focused. And I think our manufacturing and supply has done a great job around cost reductions in our supply chain and our products. Mix has been favorable for us, more coming out of companion animals and livestock has been positive and even which products. And then certainly, we've seen some favorable foreign exchange. If you look at gross margins going forward, our companion animal gross margins are higher than livestock, as we talked about. And as you see an evolution of getting, as we talked about earlier, more of our fair share in companion animal, you'll see those -- that will obviously be a nice tailwind for us in companion animals that outpace some of the growth. Trio's gross margin will improve over time, and it should be very consistent. Scale really does matter, and this is a launch year. But overall, we are expecting Trio to have a very strong gross margin as we move forward, similar to other products in our portfolio in companion animal. So a very strong gross margin.

75%, 80% area zip code be in for Trio at scale?

I don't think we're going that specific, but you can say it's very good.

Okay. I'll settle on very good. I want to move away from the P&L. I'm going to go on over to diagnostics. Maybe let's just start with where is it -- your entire diagnostic portfolio? Where does it stand today versus when you close the Abaxis acquisition 18 to 24 months ago, you've clearly invested around it, cobbled together some reference labs. You had to integrate software. I think that took you longer, but maybe just give us an update on, hey, Jon, here's diagnostics where it sits today May of 2020 versus what we had when we first dipped our toe in the water.

Sure. So when we first entered in a big way the diagnostics market with the acquisition of Abaxis, we said, look, if you look at Abaxis, we need to clean up the U.S. portfolio, fix connectivity, will probably go a little bit of market share, but that's a high competitive market. We think the big upside in that deal was international where it was much more of blue ocean, much more competitive with less dominant players over there. I would say that value story has largely held. We've done -- we're very pleased with the ramp-up in international, the placements we're getting and how we're starting to gain market share in international. So I think that story is holding in international. The U.S. story, it's going to be a battle for every point of market share has been true. As Juan Ramón talked about before, connectivity was a little more challenging than we expected. We are now making the progress we expected, and we're quite pleased with where we are in that -- overall in the U.S. and globally as we manage that. But the U.S. is -- has a dominant player, as we all know, it's a competitive marketplace. And really, only 10% to 15% opens up in a year. We were excited, and we saw great customer interest in our FREEDOM FLEX programs, which was combining our point-of-care diagnostics with our core portfolio. So sort of -- instead of financing it just with reference lab as some of our competitors do, really looking at it with us of committing to adding a product you might not use like a new vaccine to finance it. And that's been exciting. But as we were about a year into it, it became clear that breaking this sort of reference lab, point-of-care was getting challenging. And if we could be reference lab, we find a way to get some scale, that would be real value to our customers because diagnostics is really synergistic with our core portfolio, being able to better diagnose helps you better decide what treatments to use. That data can also help us overall in our research. So the diagnostics is really critical to us. It's critical to the vet for making the best health care decision. So given it was fundamental, we looked at models to gain scale and reference that. And could we do it? We are confident we can, and we are excited about the progress we're making overall in U.S. We plan to look at a similar strategy in international, which is a combination buy and build. But as we said when we did this, we went with a 3 to 5-year strategy, really getting to scale in a geography before expanding. So this remains really critical to our continuum of care strategy. We are very pleased with the value proposition we initially entered with has maintained. I think we would have liked to have gone a little faster on connectivity in the U.S. It's still frustrated customers for the first year or so, but we're quite pleased with where we are there. And we continue to see this as an exciting opportunity in a fast-growing market that's growing faster than overall animal health to invest and grow our business and really see it as synergistic with our core portfolio.

Okay. And maybe just one more there. When we think about the keys to winning, what's more important, Kristin and maybe it's both. But is it, "hey, we had point of care. We clearly needed a reference lab with the way this market functions", or is it, "you know what, bundling with therapeutics is something that we're ultimately going to have that, that #1 player does -- does not or may. So is it, "hey, Jon, we needed a more comprehensive diagnostics portfolio with a reference lab" or is it in addition to that, also the ability to ultimately bundle with therapeutics?

We will always continue with bundle therapeutics as well. And we believe that customers should have choice to do however they wish. And so to us, it's not an or, it's an and.

Okay. A couple of minutes left, so I want to make the most of it. Pipeline. Just talk to us about what else we should be really excited for. I think it's easy just for Trio to dwarf everything else. But I've been covering you guys for 5 years, I think your pipeline is by far the most robust. When we gave veterinarians a blank piece of paper where they wanted to see, the #1 writing was Trio and behind that was monoclonals for pain and then feline and canine and the veterinarian this morning on the panel, when I sort of said to opening the question, what do you want, she called out paying for feline. So just talk to us on what else is in the pipeline? What else are you and Zoetis most excited about? And I'll stop there and ask one more follow-up.

Sure. So we are really excited about the portfolio. I give huge credit to our R&D organization, who's just been phenomenal. And I think it's really doing what you said, which is connecting with the unmet medical need. So the first was really focusing in parasiticide. So we've talked a lot about Trio, so I won't go anymore there. But I do want to highlight the 12-month injectable ProHeart 12, which vets are also really excited about. Ensure you have full compliance, they can inject it at the vet, no worries there. So that remains a really strong and exciting opportunity, beyond just some of the parasiticide markets. And again, that will continue to grow as well as we launch in new and additional markets over the coming months. We're really excited on monoclonal antibodies for cats and dogs. You'll also see -- we're investing in infrastructure to grow our manufacturing capacity around monoclonal antibodies. We see this as a big opportunity overall to really provide an incredibly efficacious and safe product to customers and especially in categories where, honestly, there wasn't any. But as you move beyond just cats and dogs, I think new immunotherapies could pave the way for alternatives to antibiotics in food animals. We're really excited about that as some of our research in Colorado state. We're also really excited about some of the new innovations in diagnostics that we'll be launching and leveraging more of that with digital and data. And then at livestock looking at technology such as Smartbow, which really address what we're seeing today with a challenge on labor and a look for more productivity at lower cost. So we think there's a lot of exciting technologies on the program.

Great. And just in 30 seconds. When I think about Trio and then monoclonals and feline, where those sales are arguably incremental in canine, scalable as in maybe remodel, but you've been losing share there. Anyway, a lot of incremental revenue opportunities. If the market growth that you've highlighted in the past of 4% to 5% is not permanently impaired, and it should be for COVID, can we think of high single-digit durable growth, 7% plus for Zoetis over an extended period of time?

I think so much of our growth, as you look at it, focus is around innovation. And so I think our ability to outpace a market growth of, call it, 4% to 6% over the long-term is our ability to continue to out innovate. And I think what you've seen us continue to do is to out innovate. I think we're really excited about some near-term things in pet care and vector vaccines in poultry. And then I think over the medium horizon, really exciting things for livestock as well.

Okay. Kristin, thanks so much for your time. Thanks for joining us today. Best of luck for the balance of the year and look forward to catching up again soon.

Okay. Thanks so much. Great.

Take care.

Bye. Thanks.