Q3 2023 Oatly Group AB (publ) Earnings Call

Participants

Brian Kearney

Daniel Ordonez; COO; Oatly Group AB

Jean-Christophe Flatin; CEO; Oatly Group AB

Marie-Jose David; CFO; Oatly Group AB

John Joseph Baumgartner; MD & Senior Consumer Equity Research Analyst; Mizuho Securities USA LLC, Research Division

Kenneth B. Goldman; Senior Analyst; JPMorgan Chase & Co, Research Division

Max Andrew Stephen Gumport; Analyst; BNP Paribas Exane, Research Division

Presentation

Operator

Good day, and welcome to the Oatly Third Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions). After today's presentation, there will be an opportunity to ask questions as -- please note, this event is being recorded.
I would now like to turn the conference over to Brian Kearney, Vice President of Investor Relations. Please go ahead.

Brian Kearney

Thanks for joining us today on Oatly's Third Quarter 2023 Earnings Conference Call. On today's call are our Chief Executive Officer, Jean Christophe Flatin, our Chief Operating Officer, Daniel Ordonez, and our new Chief Financial Officer, Marie Jose David.
Before we begin, please review the disclaimer on Slide 3. During this call, management may make forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding our future results of operations and financial position, industry and business trends, business strategy, market growth and anticipated cost savings.
These statements are based on management's current expectations and beliefs and involve risks and uncertainties that could differ materially from actual events or those described in these forward-looking statements. Please refer to the documents we have filed with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today.
Also, please note on today's call, management will refer to certain non-IFRS financial measures, including EBITDA, adjusted EBITDA, constant currency revenue and free cash flow. While the company believes these non-IFRS financial measures will provide useful information, the presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with IFRS.
Please refer to today's release for a reconciliation of non-IFRS financial measures to the most comparable measures prepared in accordance with IFRS. In addition, Oatly has posted a supplemental presentation on its website for reference. I'd now like to turn the call over to John Christoph. Thank you, Brian, and good morning, everyone. Page 5 has the key messages I want you to take away from today's presentation.
First, we had solid third quarter results, where adjusted EBITDA exceeded our expectations and remain solid progress. The results of our bold strategic actions are clearly starting to materialize. Our EMEA segment continued to show its strength and durability. Our Americas segment gained good momentum in its retail business and the Foodservice business helped improve the bottom line by sacrificing sub-top line.
And the Asia segment is executing its reset plan, which is on track and delivering good results. Today, we are also announcing another bold action where we are doubling down on our asset-light production model, which we expect to increase our focus while improving our cash flow outlook and improving our confidence in our longer-term margin target.
Also, we are modifying our 2023 guidance to reflect an acceleration of our strategic actions, in particular, the diversification of our Americas foodservice business and the strategic reset in Asia. We now expect our constant currency revenue growth to be near the low end of our prior range of 7% to 12%, and our fourth quarter gross margin to be in the mid-20s compared to our prior expectation of high. Finally, we believe we remain on track to achieve profitable growth in 2024.
On Slide 6, you can see that the profitability of the business continued to improve in the third quarter. Our reported gross profit included approximately $6 million of one-off costs related to our Asia strategy resets. It is primarily inventory write-offs and co-packer penalties. This created a 320 basis point headwind in the quarter that we believe marks the underlying improvement in the business.
Our adjusted EBITDA also improved sequentially in the quarter as each segment showed improvement. The $85 million cost-saving program that we announced last quarter is already starting to flow through the P&L and we remain on track to achieve our targets. So, whilst we still have plenty of work to do, we are clearly making good progress.
Slide 7 outlines how we are doubling down on our asset-light production model. As you know, we have been evaluating how to optimize our supply chain. We have been taking a holistic look at the network with the overarching goals of ensuring we have the right amount of capacity when we need it while also being very efficient with our capital. We believe that we have enough capacity available to support our growth over the next few years.
We currently have production capacity of approximately 900 million meters compared to approximately 55 million liters sold over the past 4 quarters. Additionally, for the past 12 months, we have been making material improvements in our manufacturing network utilization, efficiency and reliability, both our own ad-based processing production and with our strategic co-packer network. This has resulted in significantly higher and more consistent output across our established sites.
We have also found new solutions that already enable us to better utilize our existing plants and expand them gradually over time to support the growth in EMEA and the Americas. Therefore, we are discontinuing the construction of new manufacturing plants in EMEA and the Americas. As part of this, we have also started to relocate some equipment that we previously purchased to ensure that we have adequate capacity to service our growing demand.
We believe this will help achieve our goals of appropriated time expansion and capital efficiency. It should also enable us to better focus by simplifying and streamlining the supply chain and reducing the complexity. This increased simplicity and focus also increases our confidence in our longer-term margin targets as we expect to be able to allocate more of our team's time and resources into improving the business.
On capital efficiency, we now forecast significantly lower CapEx than we previously expected. We now expect our 2023 CapEx to be below $75 million compared to our prior guidance of $110 million to $130 million. We also expect to invest below $75 million in 2024 CapEx. This increased efficiency is a meaningful step on our way forward towards financial self-sufficiency.
We are continuing to evaluate our total supply chain, including our assets in Asia, where we currently have 2 active facilities and the third one that is currently being built. Since we are continuing to evaluate the network in Asia, our updated CapEx guidance continues to assume that the third facility will be built and be an end-to-end facility.
With that, I would now like to turn it over to our Chief Operating Officer, Daniel Ordonez, to give you an update on the statements.

Daniel Ordonez

Thank you, Brian. I'll begin my discussion on Slide 9 with EMEA, which is our largest operating segment at 54% of our third quarter revenue. The old drink category in EMEA grew at a very healthy 15% in the quarter, which was more than double the growth of the broader plant-based milk category. I'm pleased to say though that our constant currency revenue growth was 16% in the quarter, outpacing the old ring category.
Slide 10 shows that EMEA segment has consistently reported volume growth in the mid- to high single digits, driven by our established markets, growing volume in the mid-single digits and the new markets contributing the balance. We believe that this consistency in our established markets is a testament to the strength and durability of our business model in EMEA.
And we expect this momentum going forward, helped by many of our new customer wins, including Coffee Fellows, which we recently announced. We are pleased with the performance in the established markets, and we're actively working to maintain the momentum. Slide 11 gives an update on our Gold Blue strategy, which is our approach to increasing consumer usage by launching margin-accretive innovations that is best used outside of coffee.
Recall that our U.K. business is the furthest along the way with this portfolio expansion. In the U.K., our new items are some of the fastest-turning plant-based products. The whole and semi products are the biggest launches in the category in the last 52 weeks, according to NPD, and we have strong repeat rates with already 50% of whole and semi shoppers repeating purchase since launch.
In Germany, which is our second largest market in EMEA segment, the rollout of Gold Blue is progressing well. The Gold Blue introduction has driven a 24% in volume, net of cannibalization. Overall, we are seeing very good progress here. Now turning to Slide 12. We continue to make terrific progress in bringing Outlet new geographies.
Here, you can see some of our activity in this market. You can see on this slide that we are making good progress establishing an open culture in these new markets. For example, in Belgium, we already have an established presence in. In France, we are already the highest velocity plant-based milk in supermarkets, and we are continuing to engage with customers and consumers on a personal level in the street.
And in Spain, we already have the leading market share in the Barista category, and we're growing rapidly by integrating it into the culinary culture. Slide 13 shows some of the highlights of our recent unique experience-based brand activities were summer coffee and soft serve tour. We showed up at the most important new successive with food tracks all over Europe, spreading the open magic with its consumer target audience. In fact, we had to extend the softer pop-up shop in Amsterdam way after the summer.
I encourage you to go to our YouTube channel to see more on how we engage consumers this summer. I closed the EMEA discussion on Slide 14. You see while engaging the consumers and driving top line is important, EMEA is a solid and profitable business throughout the P&L. As you can see on this slide, our EMEA business is generating margins that are already approaching our total company long-term margin targets. We believe that EMEA margins still have room to expand as we execute on our growth plans and increase our capacity utilization from the low 70s.
As many of you know, we believe we can replicate our EMEA business model in our other segments. Turning to Americas segment on Slide 15. I am pleased to report that we are back to gaining retail market share in the Americas. While the category growth rates have not been as strong as we would like, we firmly believe that consumers will continue to shift to OSG over time.
So, we are focused on controlling the controllables and ensuring that we are building our business to achieve long-term profitable growth. On Slide 16, you can see that we continue to post strong distribution gains. In the last 12 weeks period, we have increased our total distribution points by 18%, and our ACV is now at 39%, which is 250 basis points versus this time last year.
While this progress is good, there is many more to come during the shelf reset this fall and this winter. You have likely seen our recent press release announcing the new Myer distribution, and we're also launching new distribution of Costco and expanding our distribution at Walmart.
I'm also very pleased to announce that we have regained distribution at Stop & Shop, which is a customer that we lost during our historical supply chain hiccups. Turning to Slide 17. As part of these shelf resets, we are also getting good acceptance of our new innovation. Here, you can see our new products, similar to the EMEA global strategy in the Americas, we are expanding our portfolio to increase consumer choice and usage of our products.
We are launching two new old mills, a super basic version that has just four easy ingredients and an unsweetened version that has zero sugar and has a category count that will directly compete with almond milk. We are also launching a line of delicious coffee creamers with a variety of popular flavors beyond the lookout for these terrific new products.
Turning to foodservice side of the business on Slide 18. 45% of the American segment third quarter revenue was in Foodservice. This part of the business revenue declined by 6% in the quarter. While we do not like to see sales declines, we are focused on profitable growth. Excluding our largest customer, Foodservice revenue grew by 10%. By winning new customers, expanding into new doors and launching new items.
We are diversifying our Foodservice business, improving our margins and giving us access to faster-growing areas of the channel. Slide 19 shows that our co-packer consolidation in Americas is driving solid results that are flowing through the P&L.
This initiative has driven the second cost of good per liter down by a healthy 10% from quarter to quarter 3, which is enabled by the Yara Foods transaction that we completed earlier this year and is as well as our strong ongoing partnership with innovation Foods at our Niobe facility.
Both Ya YA foods and innovation foods have been terrific partners. As we continue to work with them to become more and more efficient, we believe we can continue to reduce our costs moving forward. Turning to Asia on Slide 20. The Asia team has moved quickly to implement the strategy reset plan that we discussed on the last quarter's call.
On this slide, you can see the impact of those actions. -- by refocusing the business and reducing costs, there was a top line impact and a significant bottom line benefit. By implementing the reset plan, the Asia business improved adjusted EBITDA by $4 million quarter-over-quarter and $10 million year-on-year.
Slide 21 shows how significant the change the team has executed just in the last quarter. The team has cut over 70% of the rescues and focus on the ones that are most profitable and can be produced more efficiently. You can see in the middle chart that we are also executing a significant shift in our channel mix by intentionally pulling back on certain SKUs, customers and geographies.
We have increased the percentage of revenue sold through the core full service channel by a full 11 percentage points. and the result of this refocusing is a reduction in cost of goods per liter by 16% year-on-year and 8% quarter-over-quarter. The team has done a good job executing the first phase of the research plan.
Now turning to Slide 22. While we are pleased with the progress to date, we know that we will still have to work to do to get this segment to where it needs to be. And the team is clearly focused on achieving profitable growth. As Desi mentioned, our SG&A cost-saving program remains on track, and Asia remains on track to deliver their portion, which is $40 million.
The team is continuing to drive efficiencies in the supply chain by focusing on things such as optimizing which facilities we produce, which products in and maximizing production runs for our larger selling SKUs. We expect that they will continue to find ways to drive additional efficiencies.
Finally, the sales team remains active and energized. We have been given the direction to continue to build the business with our core channels, geographies and SKUs so that we can build a strong, profitable and sustainable business.
I would now like to turn the call over to our new CFO, Marie-Jose David.

Marie-Jose David

Thank you, Daniel. Slide 24 gives you an overview of the P&L for the quarter. We reported 3% year-over-year revenue growth and flat constant currency revenue growth. Gross margin for the quarter was 17.4%, which is a 14.7 percentage points improvement versus the prior year quarter and 180 basis point sequential decline from Q2.
As Jean-Christophe mentioned, our reported gross margin includes approximately $6 million of one-off costs associated with the ongoing Asia reset, which is a 320 basis point headwind that we believe mask the underlying improvement in our gross margin. Adjusted EBITDA was a loss of EUR 36 million, which was ahead of our expectations.
This was a EUR 47 million improvement versus the prior year and EUR 17 million improvement versus the second quarter. Slide 25 shows the bridging items for our quarterly revenue growth. You can see volume declined 1%, price/mix improved 1% for a flat constant currency remit. Foreign exchange was a tailwind of 3%, resulting in 3% total revenue growth for the quarter.
Slide 26 shows the revenue bridge by segment. EMEA continued to report strong growth with 16% constant currency revenue growth, led by 10% price/mix improvement, which was driven by the price increase with to last quarter and will start to anniversary this coming fourth quarter. Americas 4% decline was driven by a 6% volume decline, which was driven entirely by the food service channel as the rest of the business grew volume. Asia, 28% constant currency decline was driven by the actions we have taken as part of the segment's strategic reset plan.
Volume declined 15% as we refocused the business on our core channels and neurography, and price/mix declined 2%, largely driven by unfavorable sales mix as we rationalize SKUs that were higher priced but lower margin. CD-27 shows you the sequential quarter-over-quarter gross margin bridge.
A year-over-year bridge is provided in the appendix of this presentation. over, gross margin declined 180 basis points. The sequential decline in gross margin was driven primarily by a 190-basis point headwind from the Asia business, which includes the EUR 6 million or approximately 420 basis points of one-off costs related to the strategic reset.
Pricing and mix in EMEA and Americas improved gross margin by 110 basis points. used per meter in EMEA and Americas was a headwind of 90 basis points as the Copacker consolidation in Americas is improving our cost per liter, while EMEA experienced increase for packing costs. Finally, foreign exchange was a 20-basis point headwind.
Slide 28 shows our adjusted EBITDA by segment. As you can see, each segment showed good sequential improvement as our strategic actions are showing results. The cost savings program that we announced last quarter is on track, and it is most clearly helping drive the improvement in Asia and corporate. Similar to last year, we do expect corporate to increase several million dollars sequentially in Q4 as we seasonally stand more in our fourth quarter.
Turning to our balance sheet and cash flow on Slide 29. Overall, our let position is strong, and we are improving our free cash flow. The left-hand chart shows how liquidity position at the end of the quarter. We ended the quarter with $487 million of total liquidity, comprised of EUR 283 million of cash and equivalents and $44 million of undrawn bank facilities.
The Santa chart shows that we have made good progress in improving our free cash flow. Improving our free cash flow is a priority for me and our organization is very focused on it. As such, we expect our cash flow to continue to improve, driven by the items shown on the right side of the slide.
We expect to continue improving our adjusted EBITDA and reach profitability in 2024. As Jean-Christophe discussed, we are continuing to optimize our manufacturing footprint, and we are continuing to evaluate actions elsewhere in the network. We believe that we have the opportunity to improve our working capital metrics.
Slide 3 shows you an update guidance. For 2023, we now expect constant currency revenue growth to be near the low end of our guidance range of 7% to 12%. This is primarily driven by a revised outlook in the Americas segment as we diversify its food service business. We now expect our fourth quarter gross margin to be in the mid-20s.
This estimate now includes our expected costs related to the Asia reset as well as the absorption impact of reduced volume expectations in the Americas segment.
As Jean Flatin said earlier, we also now expect CapEx to be below EUR 75 million this year as well as 2 -- as mentioned in our earnings press release, in our fourth quarter, we expect to incur a noncash improvement in the range of EUR 110 million to EUR 150 million related to the production facility in EMEA and Americas segment, where we are discontinuing construction.
We also expect to ensure restructuring and over exit cost of approximately EUR 40 million, EUR 50 million. We currently estimate this to result in no more than EUR 20 million of net cash out over the next 2 fiscal years. After taking into consideration anticipated proceeds from selling certain equipment.
Finally, we remain on track to achieve positive adjusted EBITDA in 2024, while enabling our future to temp growth. We are confident that the actions we are taking will strengthen the business and position us for success. This concludes our prepared remarks. Operator, we are now prepared to take questions.

Question and Answer Session

Operator

We will now begin the question-and-answer session (Operator Instructions) Our first question comes from Ken Goldman with JPMorgan.

Kenneth B. Goldman

I wanted to ask if it's not too early, if we could get a little bit of a read on what you think some of the key tailwinds and headwinds we should look for as we head into next year, not looking for numbers necessarily, but just an idea of kind of how you think about progression.
Obviously, it looks like you're feeling pretty good about Americas recovering and some of the new doors going in there. Just want to get a general sense of your thoughts early on the direction there and kind of the mileposts we should look for?

Marie-Jose David

Marie Jose David speaking. Nice meeting you today? Thank you. Look, as we speak, we are working on our 2024 budget. So, for sure, we will share more next earnings call. But what I can tell you today is that our first priority is to bring this business to profitability.
What also we see is that the second half is going to be better than the first half, both from absolute EBITDA dollars as well as organic sales growth. Asia is at plan and the actions we are taking in America will be behind us, and we will continue to deliver on our SG&A things as well as the supply chain productivity as we discussed. So, this is what we can tell you today. I really want to reinforce the fact that we're working on it, and this is where we stand today.

Kenneth B. Goldman

And then just a quick question about the status of your relationship, I guess, with your largest customer in Americas, how you see that progressing from here? Any color you can provide on that would be helpful, I think.

Daniel Ordonez

Thanks again, Daniel here. Good to see -- to hear from you today. Well, listen, we're looking to drive profitable growth. You heard us in the prepared remarks and you heard Sanjay talking about it now. And that means that we are prioritizing the quality of our growth according to our strategy, and we believe we're here for the long run.
So, this doesn't mean we're walking away from any contract and any customer. We're just rebalancing our out-of-home and foodservice channel sales, which have a variety, as we discussed in previous earnings, a variety of subchannels that are more margin accretive to us and more profitable, and we're rebalancing that. So that's what we can share with you today.
There is ample opportunity to grow in both channels, as you see our recent distribution gains in the U.S. with some early signs of market data improvement. And the same thing goes for out-of-home and foodservice ample growth opportunities is just the rebalancing of the equation between bonds to make sure that we're true to our quality of growth and that Oatly becomes a much better and stronger business before it becomes a bigger business.

Operator

Our next question comes from Max Gumport with BNP.

Max Andrew Stephen Gumport

Thanks for the question. Sticking with the Americas. So, you acknowledge that category growth rates in the retail channel have slowed. That sounds like you believe that the shift to milk continue. I was just hoping for more color on what's driving the conviction behind that.

Daniel Ordonez

Yes. Thank you, Max. Thanks for the question, Daniel, again, taking it. Yes, as you have seen, we've seen units and dollar growth recently in our scanner data -- and we have also seen market share progress within both land-based milks and hot mill. So, this is consistent with the early signs of distribution gains we see.
And as we consistently said, we are head down on execution. It may sound a bit sales centers, but hopefully, it's the proven brand that ignites category growth. And therefore, as opposed to spend time worrying about the category.
What we're doing is stimulating that growth. sustained field rates, as you would have heard us speaking a few earnings calls ago and now strong innovation coming and ongoing this optic brand activation at the back of solid distribution gains.
This is what we're doing in EMEA Max and with visible results. And this is what we're starting now to consistently deploy in the U.S. Mind you that only has a strong runway for distribution gains in the Americas, too. And that will help with the strong velocities we have to stimulate further demand.

Max Andrew Stephen Gumport

Got it. And then just on the supply chain changes, I realize they're being positioned as a doubling down on the asset-light production model and they should increase your focus and improve your cash flow and the confidence in your longer-term margin target.
I guess to play devil's advocate, skeptic could say you've stepped back from Asia, you're seeing declining sales in the America is partly due to a step away from your largest customer in foodservice.
It sounds that you've got the capacity to produce more than your selling. You've lowered your sales targets throughout the year and your volumes did decline in 3Q on a year-over-year basis?
And maybe you could conclude that growth just has come down a lot for this business over the last several months. What would your pushback be to that type of narrative?

Jean-Christophe Flatin

At Jean speaking. I have a very strong pushback for you, which is there is no demand issue for us. What drives even is our ability to fully deploy our playbook. The underlying demand for the auto mall category remains strong.
And as Daniel said, Oatly is the key driver of category growth, especially when we combine sustained capacity, distribution gains and bond building investments. EMEA is a very good example for that.
We have consistently stimulated growth in our core markets, and we are still gaining significant share. Just take the example of Germany or the Netherlands, at mill continues to grow in a consistent high single digit in volume despite pricing. And that's why in the U.S., we are confident that with the recent and upcoming distribution gains as well as increased brand activity, we will be able to replicate the same playbook on results.
And of course, in China, we just started recently to adapt to the new context. So really, when you look at the reduction in CapEx, it is therefore, simply a consistent ongoing calibration, acknowledging the fact that we have found asset-light ways to service our goals and expansion within our established network.
And by doing so, strengthening further our confidence in our long-term margin. So that would be my pushback Max.

Operator

The next question comes from John Baumgartner with Mizuho Securities.

John Joseph Baumgartner

Thanks for the question. I guess, first off, looking at Asia, there's a lot going on there, I think, just sort of restaging the portfolio, pulling back on profitable items.
Is there a way to think about where this business sort of bases out in terms of just seeing big year-on-year decreases in revenue. What's the right run rate for this business at this point do you think?
I mean, is this sort of a bottom? And is there more to go in terms of absence sales declines this year? Like how do you think about resetting the base in Asia?

Daniel Ordonez

Thanks, John, and it's great to hear from you. Thank you for joining us today, as always. I'll try to unpack that for you. And you're right, there are multiple dimensions to our reset in nature. The first one has to do with the context, right, accepting and acknowledging that there is a much tougher consumer and customer environment with very clear repercussions when it comes to demand sensitivity, but also especially price sensitivity more than demand. That's number one.
So, we're reacting to that first, right? And as explained in prepared remarks, not just on these earnings, but in previous one, the team has moved in record time to implement that reset plan that we announced.
So that is focusing the portfolio with a strong reduction of 70% in SKUs, channel in our proven perimeter, which is foodservice and of course, a subsequent headcount recalibration.
So this is almost behind us in terms of operational execution. So now it's all hands-on deck towards generating further growth. So, we are pleased to see that the reset is moving in the right direction.
Now I know your question is about the outlook and what we expect moving forward. And of course, we cannot predict the future, right? So, we are controlling the controllables there and we are in the early steps of our reset plan.
We do expect, and I think MJ was referring to that to report better results in 2024. But it's too early to give you exact details on the shape of the growth curve at this point in time. The 3 of us, I can tell you will be in Shanghai and in the factoring mention again in 2 weeks' time with our team in the field.
We will obviously keep you updated, and we'll give you a full 2024 guidance in our quarter 4 call and the perspective on how the business is expected to look. Our go-forward plan has been proven to work in EMEA and is starting to show early results in the U.S. So, we see no reason why we cannot follow suit in Asia.
However, I would like to repeat one of the previous mantras with which we are driving the business since the last 2 quarters. We really see John a stronger business before we seek a bigger business. And I cannot think on a better region to apply that mantra than in Asia at the moment.

John Joseph Baumgartner

Okay. And to follow up in the Americas, I think you've quietly built up some pretty nice TDP growth year-on-year despite the absence of any kind of big bang one of increases in sizable retailers.
But looking at -- looking at the Americas results today, seeing the volume being softer coming from food service, I guess how should we think about that sort of volatility from foodservice in the Americas numbers going forward?
I imagine to the extent that you've got volume declines in foodservice, you're shifting leaders to more profitable outlets. How do we think about preparing for further volume declines in the Americas going forward?
If we see that, is there a trade-off of more profitability going forward? Just help us walk through the non-measured channel component of the other geography.

Daniel Ordonez

Thank you, John. Well, I'll spare you the same words of how we're seeking profitable growth here. But imagine the 2 buckets, as you call them out, foodservice and retail. In the retail environment, you've seen the baby steps and with a very promising outlook when it comes to distribution gains and with our continued solid velocities and very promising ACV gains when it comes to the new items, the new innovations.
So, expect a promising solid outlook when it comes to retail, which is approaching 50% of our sales. In Foodservices, balancing act, expect some headwinds in the next because we have made some proactive decisions to manage growth profitably. Now if you look at one slide in which we made specific remarks on this, we are growing solidly outside some of the -- some of our largest customer in foodservice.
So, we believe now that we have put focus teams and resources to multiply growth in these channels, which are more margin accretive to give us that balance that MJ was referring to march towards the second half of 2024 to expect more growth and more profitable growth.

Operator

This concludes our question-and-answer session.
I would like to turn the conference back over to Brian Kearney for any closing remarks.

Brian Kearney

Great. Thank you, operator. Thanks, everybody, for joining us. Feel free to reach out to me if you have any follow-up questions. Have a great day.

Operator

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.