Q4 2023 MariMed Inc Earnings Call

Participants

Steve West; VP, IR; MariMed Inc

Jon Levine; CEO, Interim CFO & President; MariMed Inc.

Timothy Shaw; Chief Operating Officer; MariMed Inc

Pablo Zuanic; Analyst; Zuanic & Associates

Jesse Redmond; Analyst; Water Tower Research LLC

Andrew Semple; Analyst; Echelon Wealth Partners Inc

Presentation

Operator

Good morning, my name is Lara, and I'll be your conference operator today. At this time, I would like to welcome everyone to the MariMed Inc. fourth-quarter 2023 financial results conference call. (Operator Instructions) Thank you. I will now turn the line over to Mr. Steve West, Vice President of Investor Relations, to begin the conference.

Steve West

Good morning, everyone, and welcome to MariMed's fourth quarter and full year 2023 earnings call. Joining me today are Jon Levine, our Chief Executive Officer, and Tim Shaw, our Chief Operating Officer. This call will be archived on our Investor Relations website and contains forward-looking statements. Actual events or results may differ materially from these forward-looking statements and are subject to various risks and uncertainties. A discussion of some of these risks are contained in the Risk Factors section of our 10-K and our earnings release, which are available on our website. Any forward-looking statements reflect management's expectations as of today and we assume no obligation to update them unless required by law.
Additionally, we will refer to certain non-GAAP financial measures, which are reconciled in our earnings release and our supplemental slides located in the Investors section of our website. Finally, our first quarter 2024 earnings release is tentatively scheduled to be issued after the markets closed on May 8, 2024, and our analyst call is tentatively scheduled to be held on the morning of May 9, 2024 at 8:00 AM. I will now turn the call over to Jon.

Jon Levine

Thank you, Steve, and good morning, everyone. I'm pleased to report the environment and another strong year, which was the result of revenue growth in our core wholesale business in Maryland and Massachusetts, as well as our new dispensary ramping towards maturity. Even though we face significant regulatory and construction delay beyond our control, Merrimack continue to perform better than the overall industry in terms of top line growth and financial strength, we reported double digit revenue growth for the sixth consecutive year. We reported positive adjusted EBITDA for the 16th consecutive quarter in fourth consecutive full year, and we generated positive operating cash flow for the fourth consecutive year. I am not aware of any other cannabis company that has a proven track record and positive result equal to ours.
Let me quick quickly highlight a few of our key achievements during the year. In Massachusetts, we acquired Irma, the vertical operator in Quincy and opened a new dispensary in Beverly, we commenced operation in our fifth state with the opening of a dispensary in Tiffin, Ohio. In July, we began adults in Maryland, leading to our Annapolis dispensary more than doubling its revenue and significant increase in our wholesale operations and Illinois, we opened our fifth dispensary and KC. More importantly, we became vertical with the opening of our new processing facility in Mount Vernon. And finally, we reintroduced bedding and launched our other brands into the market. We are looking for the full year contribution from all of our new assets in 2024 and beyond.
Perhaps our most notable achievements in 2023 was securing what is arguably the most favorable financing package in the cannabis industry. We refinanced $59 million in debt at approximately 8% interest with a 10-year maturity. This deal save us millions of dollars a year in interest expense, which will significantly increase our cash flow and the transaction resulted in zero share dilution to shareholders. So new equity was issued. Other cannabis companies made headlines recently with financing deals that look as attractive as ours. However, when you consider the dilution baked into those transactions. The all-in cost of debt significantly exceeded what we achieved while our biggest year with respect to opening new assets, the momentum has continued into 2024. We command post-sale operations at scale in Illinois this past January. Our bet is that a mistake in how states are now widely accessible throughout the state validations, just launched last week and the remainder of our brands, including in-house government, will be launched soon. And today, we announced the pending acquisition of our second dispensary in Merrill Lynch located in Prince George's County. We also announced receipt of the Certificate of Occupancy for our permanent dispensary location in KZN, Illinois and hope to have it open and running in the next few weeks. That concludes our 2023 recap. With that, I will turn the call over to Tim for our operational update and outlook for 2024.

Timothy Shaw

Thank you, Joe. Good morning, everyone. Let me start with a quick recap of our 2023 results and then jump into our 2024 operations plan. First, we reported retail sales of $95.5 million, which grew 3% versus 2022. Massachusetts and Maryland both experienced strong growth, which was offset by a decline in Illinois sales due to increased competition and lower average check. Illinois dispensary costs increased more than 55% in the past year, which has led to an overall decline in average sales per store of about 30%.
Overall, we are pleased with the growth of our retail business despite challenges in Illinois, our big story of the year was wholesale. We reported revenue of $49 million, which increased 48% versus 2022. This growth was driven primarily by adult use in Maryland, inorganic growth in Massachusetts, which we expect to continue through 2024.
On the brand and marketing front, we had several big wins, including the amazing growth of our new in-house suite of value products, which is now our second largest brand behind nature's heritage. The significant demand for quality products at affordable prices led to an almost cult-like following for our in-house brand in Massachusetts and Maryland. Illinois is off to a strong start as well. During the year, our brand won three national awards in High Times cannabis cup competition by for first place in the edibles beverage category. While Bobby's baked brownie bites took second place in the edibles Trust, a non-government category and the Nature's heritage Chirp cake live resin took second place in the concentrate Salton's category in Maryland, specifically Bad Daddy's one favorite edible in the Nature's heritage was named savor ourselves at the end of 2024. We cannot be more pleased with the continued success of our amazing brands at both the local and national level for 2020 for our operations, focus will be on ramping up our new assets in Ohio, Massachusetts and Illinois, who will also focus on completing construction of our new cultivation facility in Illinois, our processing kitchen in Missouri and the cultivation expansion in Maryland. Our 2024 sales, marketing and product development plans focused on delivering a full slate of new products that consumers want. Brands are the future of cannabis, and I am confident that we have the best brands with the best brand builders in the industry. We will continue driving visibility of our existing brands with increased media reach through targeted digital advertising, strong promotional partnerships and other proven strategies in the first half of 2020 for our branded marketing campaigns include the following for Betty's. We recently launched our BD bubbly fruit chew as part of the 10th anniversary celebration of video. That is just this week. We followed that up with our biggest product launch of the year. That is a takeaway PM. This will combine the best of our top-selling SKUs, bedtime bodies. And equally, it is for pain and sleep management and they will bring back our these time bodies limited-time offering for Bobby's baked goods. We plan to launch a new banana bread, which is easily the best Asian banana bread I've ever had provide nations. We just launched several new flavors formulated with new technology to provide a quicker onset. If you haven't tried by basins when you're trying to Pinnacle out of flavored drink mix, if I may. And we have huge plans for my baby nature's heritage, which includes a robust lineup of new product launches and marketing campaigns. We just launched double fresh tools that couples and eighth of two different flower strains into a single quarter offshore without sacrificing any of the aromas or quality. We will also enter the fast-growing mini pre-roll category with tiny timbers travel pack that contains six eight gram pre-rolls, each of which are meant to be smoked in a single setting.
Finally, I'm thrilled to announce our mega exclusive sponsorship with contract giant Live Nation. Starting this month, Nature's heritage will be the exclusive cannabis brand for the MGM Grand music club located next to Fenway Park in Boston. Mgm Grand is Live Nation's top music club in the world. We have a comprehensive marketing plan that will include on-site brand visibility as our Live Nation's ticketing site and tickets for promotional purposes. It's a landmark sponsorship for Live Nation Merrimac in the cannabis industry as a whole, I could not be more excited about the opportunity to partner with our leading flower brands such a culture forward platform. We have many more product brands and marketing campaigns planned for the rest of the year, which I will update you on the coming months.
The buzz and excitement within our sales and marketing team is truly lighting up the office. We're taken off this year on a big high. That concludes my operational review. I will now turn the call over to Steve for our financial review.

Steve West

Thank you, Tim. I would like to start with a brief overview of our full year 2023 financial results. Then conclude with our 2024 financial targets. Our full year 2023 revenue was approximately $149 million, which was the midpoint of our full year guidance range of 148 to $150 million and was up 11% year over year. Our revenue growth was driven by strength in both our wholesale and retail channel. Our full year 2023 non-GAAP adjusted gross margin was 45.4%, also above our full year guidance of 45%. Our gross margin declined approximately 300 basis points versus 2022 due to losing 100% margin fees with the consolidation of Pain Therapeutics, higher input costs and pricing pressures our full year 2023 adjusted EBITDA was $25 million, which was slightly below our full year guidance range of 27 to $32 million and a decline versus our 2022 adjusted EBITDA of $32 million this year over year decline in adjusted EBITDA was due primarily to our gross margin decline, investments and operating capabilities increased labor associated with the new asset openings and losses incurred ramping up the new facility.
Turning to the balance sheet and cash flow, we ended 2023 with $14.6 million of cash and equivalents, which increased 50% versus our 2022 year-end cash balance of $9.7 million. Our working capital remained strong at $20.6 million and increased 17% versus our working capital at the end of 2022. Cash flow from operations 2023 was $7.9 million, and we spent $20.1 million in CapEx.
That concludes our 2023 financial review. Before discussing our 24 financial targets, I want to note that they are based solely on organic growth within our existing core business. With this in mind, our 2024 financial targets are as follows revenue growth of 5% to 7%, driven by our wholesale business partially offset by a decline in retail. We expect retail growth in Massachusetts, Maryland and Ohio. We offset by declines in Illinois, which are being impacted by increased competition and continued declines in average check. According to public data, Illinois average sales per store in December declined by 32% as the number of dispensaries grew 57%. This increase in retail dispensaries will continue to negatively impact average unit economics as we have seen in other states.
Secondly, increased store counts. We are targeting non-GAAP adjusted EBITDA growth of 0% to 2% as we continue to experience higher costs associated with building and ramping up new assets. For example, in 2023, we spent $1.1 million in start-up expenses, bringing new assets online. Additionally, our EBITDA loss to operate these new assets was $2.6 million. More recently, our three newest assets to come online had a loss of nearly $1 million in the fourth quarter of 2023. We view this as a short-term drag, and we are confident both revenue and EBITDA will increase as these assets mature.
Finally, we are targeting CapEx of approximately $10 million for the current construction projects, which is the remaining CapEx we originally projected for 2023 that was not spent due to the regulatory and construction delays. That concludes our financial review and outlook. I will now turn the call back over to John for his concluding remarks.

Jon Levine

Thank you, Steve. I'm very pleased with MariMed's perform, and we continue to significantly outpace our peers with respect to top line revenue growth. And I sit here today confident we will continue this trend in 2024 despite the continued industry challenges we all face. We remain focused on executing our strategic plan. That said, we never sit idle waiting for good things to happen. We continually review our plan and focus on initiatives that have potential to generate increased shareholder value. We are extremely confident that course we have charted on-point. Merrimack still has one of the most conservative balance sheets in the industry. We have access to arguably the lowest cost capital in the industry. Our new assets are ramping and generating more revenue every quarter continue to report significantly stronger growth in our core states of Maryland and Massachusetts. And that just speaks to our gear to growth, which brings me to our financial outlook. We have long prided ourselves on giving conservative financial targets. 2023 was no different. We built in conservatism with our asset opening time line. However, we could not anticipate the magnitude of delays we experienced in securing basic construction materials such as electrical boxes and stainless steel fasteners, one of the length of time for regulators in certain states to complete their approval process. We have discussed providing financial targets with our largest institutional investors and industry analysts. We have received amazing support from both groups, and I'd like to thank everyone who provided us valuable insight and advice after significant consideration we decided to provide forward-looking targets based on organic growth within our existing businesses with essentially no incremental growth projects such as adult use sales in our kitchen, Ohio or Quincy, Massachusetts dispensary Make no mistake, these incremental growth opportunities are crucial to our strategic growth plan, but we are not presently including them in our 2024 targets. If these are any revenue-generating projects are completed, we will update our targets accordingly. We believe this will allow us to better focus our discussions on important business development. We have significant levers that could generate an additional 5% to 7% growth on top of our revenue targets, an additional eight to 10 in EVA. These include the opening of a new project in the kitchen to preserve the approval of adult use vices, Quincy dispensary, the commencement of adult use sales in Ohio, our second dispensary in metro and new brands or product lines in other mergers and acquisitions for new licenses that we could win. We have set the table for continued revenue growth and profitability jet. As we said, we would I am extremely bullish on the future of Merrimack to maintain our growth profile for the foreseeable future. We have the capability to grow and we have access to low-cost capital for the right merger acquisition opportunities. With that I'd like to start growing family of employees for their hard work and dedication to helping Merrimack achieve our mission to improve the lives of people every day. Operator, you may open the line for questions.

Question and Answer Session

Operator

(Operator Instructions) Pablo Zuanic, Zuanic & Associates.

Pablo Zuanic

Good morning, everyone, and congratulations on the on the growth in 2023, I mean 48% growth in wholesale. That's quite impressive in this space. I'm looking for if you can.
The question would be if you're going to unpack the guidance for sales growth in wholesale, right you said 5% to 7% in total retail down, say calculated wholesale. That means roughly mid 10s, high 10s, which again, it's a very robust number. But if you can unpack that in terms of what I would call the supply side of things, right? Like remind us, percentage-wise, what would be the capacity increasingly now in Illinois account processing and cultivation once you had nothing there, right. So that's a big lift up the Maryland expansion. If you can remind us or quantify that in terms of how much more processing we have on average '24 versus '23. Same thing with cultivation. And also there's an expansion in Massachusetts, if you can just unpack a bit more the wholesale and confirm that I'm right in my estimate that the guidance would imply wholesale up mid-teens, high-teens and now have a follow-up.
Thanks, Pablo.
Good morning.
Great.

Great to hear from you again, and thank you for joining the call this morning. Those were very good questions. The increased projections of the additional 5% to 7% growth is really about bringing on our additional cultivation in Illinois and the retail store in Illinois plus the expansion of the Merrill Lynch facility, which will be coming open. So I mean in Illinois, we're hopeful last year to have that opened in November, and it was delayed to the last week of December. So we're looking at a whole year of the processing center running plus we'll be bringing on the full flower sometime in midyear of this year. So that growth from those two parts of operation and wholesale will be the biggest of the gains in that additional. But then in addition, we have the Merrell and Tulsa. But again, that won't open until the midyear point in first harvest sometime late in 2024. Our company is very, yes, 2024, and that will more than double our growing capacity there, which will help us be able to generate more flower in that state, which we'd be very excited if we could speed that up again with construction delays of materials that delayed us already into 2024 when we were supposed to be done Phase three in those construction delays.
And then on top of getting the final approvals from state and getting those licenses up and running, those type of delays are very important to growing the business. So that 5% to 7% growth for this year, just on existing transactions are going to be have a lot of those pieces coming onboard. But more the fact is that we have the existing business in Merrell and that's still growing before we additional grow. And you said Massachusetts, we've extended our grow so that we can meet the increased demand. And we are still pushing out of our kitchen as much product as possible. And we're continuing to see upward mobility will also have increased growth still in our retail stores that came on in 2023. So those growth opportunities will be part of that five to seven, but then we have the over the data and all the things that are still to come.
Yes.

Pablo Zuanic

And that's a follow on then in terms of what's to come, I don't know if you can rank in terms of approvability what happens first, and I don't know if that's possible, but, you know, I'm thinking that Missouri kitchen, the numeric store you reapply or so that I suppose closes soon on any line of sight on the Quincy store going rec? Is that, you know, I know, it's hard to really with Massachusetts and then, of course, a different store benefiting from Brexit. I'm just trying to I know it's around the guidance, but if you tried to quantify what do you think would happen first and then talk about probabilities if it's possible, but again, thank you.

Yes, Pavel, that's part of the reason that in our guidance, we didn't put in the other project is trying to figure which ones are going to come. First, as you said, Massachusetts regulatory is always the biggest question, Mark, but the good news is that I do feel that we have these great opportunities to see the new Merrell in license Quincy coming on hopefully in the first half of the year. I could see Missouri at some time, I really can't give a date. That's the reason that we I'd put it out of the projections because the military licenses have taken years to just get a change of address. It took us over 12 months to get our request for a change of address from reserved location, which is why the delay caused us to have to pull that from these projections in still watching what's going on in Ohio have one that's going to go to adult use.

Jon Levine

Those are all great questions. And I said of putting them in until we have better ideas, we can increase our forecast as we go versus having to come back and decrease it as we had to do this past year because of construction delays in processing and grow retail is usually more of a delay of the local governments getting us the final those are systems. So we're hopeful to be able to announce something as we're going. Just I can't put a timeline on it and understood.

Pablo Zuanic

And that makes a lot of sense, of course. Again, congratulations.

Absolutely.

Pablo Zuanic

Last one, if I can in terms of acquisitions, of course, there's room to add more stores in Ohio for UVM. and A. and the same thing in Maryland, what's your priority? I mean, one could say Maryland is already rake, I'm probably going to become more competitive or high use of outdoor rec. So from eight point of view, all else equal, Ohio higher should be a bigger priority than Maryland in terms of M&A, but maybe I'm missing something. I'm not thinking about it the right way.

No, Pablo, you're absolutely right. I mean, Metro end date is not a date, but important piece because of the timeframe that you have to wait to get a license, Ohio and Missouri are two areas, but Ohio would I definitely would say, would be one of our first ones to become fully vertical within the state of Ohio as quick as possible or getting more dispensary. Besides the one we'll get with the license coming on. So yes, we'll be paying attention to Ohio and Missouri, then Maryland, and we're still looking to expand into other new states that are having applications. We did apply in the state of Texas in New York. We're going to probably put in some other applications as other states come online. But Ohio right now is my focus trying to get there?
Yes, both grow in a processing came from additional retail so that we can be fully vertical in the state of Ohio when they go adult use.

Timothy Shaw

Got it. Thank you very much.

Operator

Jesse Redmond, Water Tower Research.

Jesse Redmond

Fine, John, Tory And Steve, are you guys?

Steve West

Very good.

Jon Levine

Nice to hear from you from maybe talk a little bit more about the decision on the guidance.

Jesse Redmond

I sense that last year was a bit frustrating because there are some elements outside of your control that ultimately that led to things being delayed and and that being able to meet initial expectations and you can set. So it seems like you found a good way to be able to still offer some some guidance, maybe a more conservative approach, still offer some transparency, but maybe doesn't make you as much as dependent on the regulators to meet those deadlines.

Is that kind of where your head was?

Jesse Redmond

Or just curious to get some more perspective on these guidance numbers?

Yes.

Thank you very much again for joining the call and yes, I'd love to give you some more guidance guidance or explanation.
Yes. So it's the frustrations. I mean, I've been in the real estate construction business for well over 25 years. And I have never seen anything like that when you're trying to build out a cultivation and processing center, trying to get items such as an outlet and what I mean who would have thought of electrical panel would take you six months to get. But it's amazing that those type of construction delays have they started to exist, not just in the cannabis world. But I do know from my real estate ventures, I have seen that elsewhere. So what we had looked at is what caused the adjustments in 2023 and it was a lot of the delays from not just regulatory but from the construction materials building out the cultivation and processing centers have been delayed in Illinois for well over six months from what we originally projected and in Maryland being delayed that we thought we would have it's open and running. But those delays definitely caused us to take a look and say, hey, you know what we need to do it. Even though we're conservative, we need to be even more conservative and pull out things that we know could be still delayed so looking at right now, three and construction delays, both in the manufacturing and in the retail, we decided to only report which shows that the continued growth of our operation from the expansion that we've already completed in 2023. And what we're going to complete in early 2024, we'll project our growth increase every year that we've had. We may not be projecting double digit so far for this year. But I feel that with the other licenses that we will out as we get regulatory approval will help take us to that double digit increase year over year for continued years. So I hope that help better explain what we were trying to do.

Timothy Shaw

Yes, that's great. Thank you.

Jesse Redmond

Just a follow up question as to seeing the Massachusetts data, it looked like flour prices dropped again significantly last year to go. And what I saw was for was down about 40% that being offset by a strong increase in unit volumes. Just curious to get more perspective on what you're seeing in terms of wholesale pricing in Massachusetts and also on the retail competition side.

Timothy Shaw

Sure, Jesse, to add on that, I can take this and go at them as large as it yet.
And you've seen incorrect, yes, it feels like we've hit the floor in Massachusetts, and that's where natures heritage has continued to stay above the fray, keeping the high premium pricing. And we brought the in-house flower in house has become more of a popular brand that is catching up is our second most popular brand in the state and beyond. So because of in-house, we're able to get the volume out there and capture capture those revenues and continue to keep watches heritage as a our high premium brand and hold a higher value. And we hope to see that this is this is where the floor is it that looks it looks to be stable, getting more and more stable as sales continue to plan plateau you perspective, Tim, on the retail side, on the retail side, there's it doesn't seem to be as much of a rush of as many stores opening. So it's hard to tell what's going to happen. And I think our stores are doing well we're still seeing an increase as we have two additional stores in the state. So I think we're in a good position to continue to have great marketing programs, loyalty programs to continue to keep the traffic coming to our stores. So we're pretty bullish and excited that we'll be able to turn Quincy into adult use hopefully by the end of this year.
And we'll see in a retail increase on the Massachusetts program.

I'd like to just add on that site in Massachusetts. A lot of the competition that's on the bordering states had been feeling the pressure more than the locations that we have, our three retail stores. And I think that's part of the reason that we're seeing increases still and there's still the bad news in Massachusetts about several dispensaries struggling because of where they're located. I'd just like to add that in.

Steve West

Thank you.

Jesse Redmond

That's helpful, guys.

Thank you.

Operator

Andrew Semple, Echelon Capital Markets.

Andrew Semple

Thank you, good morning. First question just on Q4 EBITDA that came in below the guidance issued in November despite margins and revenues printing in line. It does appear that operating costs were the main culprit for that growing much faster than anticipated. I calculate that recurring cash-based operating expenses are up close to 6 million per quarter or about $23 million annualized year-over-year, Q4 to Q4. Clearly, that's pretty material given the market cap of 100 million. We've seen many of the other U.S. cannabis peers implement cost cutting programs to 2023 is merited considering something similar for 2024? And if so, is that embedded in the 2024 outlook.

Jon Levine

Yes, morning, Andrew.

Thank you for joining the call and very good question. The Q4 costs had increases that were really associated with a lot of the startup delays in our facilities, you know, having to maintain our building our brands and sending people in to make sure that we have that high quality and consistency and training staff to be able to produce those delays of getting regulatory approval to open, whether it's construction or regulatory, those delays, it cost us almost a million and a half, as Steve said, in the in his section about the start-up costs in that, that point as to the expense, because there's no revenue there and they're not having any production or production of inventory. So those those really get caught up and we did bring on additional staffing and other expenses to prepare for that growth that was delayed. So those costs will be made up in 2024, having to make a lot of cutbacks, we were able to maintain the levels without having to add additional staff in that we had already added to get to the level, we will add some expenses into the Illinois as it starts to ramp up. But we are still have a good growth projection based upon revenue not based upon just wanting to hire people or give it higher increases.

Jesse Redmond

Got it. That's helpful. And would like to relate those comments flow to the guidance on if you think you could hold operating costs flat year on, we would tend to expect to have potential for some EBITDA margin increases.
When I look to the 2024 guidance, the revenues reported revenues up 5% to 7%, adjusted EBITDA 0% to 2% higher. That would imply EBITDA margins contracting year over year. So I'm just wondering whether maybe some of that margin expansion is back-half weighted in the year or how you're seeing or whether you're just being again, as you said, potentially conservative with the outlook?

We'll definitely be extra conservative with our outlook, but it's also the ramp-up costs and the start that it takes to get into new markets where we haven't been or that we're going back into those start-up costs and ramp-up costs has a cost of loss that you have to carry for promotion. And that does hurt the EBITDA on the on the long term for one year, but that we make up in that that grows. So in the later part of 2024, we'll see improvements in EBITDA versus how we probably start.

Jesse Redmond

Got it.

Steve West

Okay.

Jesse Redmond

That's helpful. And then just finally, if you could clarify some of the items that are in the 2024 guidance. I just want to confirm that the Illinois, Massachusetts and Maryland new cultivation space is within the guidance and as would be the adult-use store in Quincy, are those are all those items in your 2024 outlook?

No, as I said in my in my earlier comments, the Quincy adult use is not in the guidance. What is in the guidance is the silver invoice processing center, bringing on the flower in 2020 for the expansion of doubling the gross space in Maryland coming on in the second half of 2020. For all the things that are not included are the Quincy, it does use the additional license that we just announced in Maryland for the retail store on the Missouri kitchen, Ohio adult use in getting another dispensary in Ohio with the eValues. So all those things are not in any of our forecast for this year, but that they were in the upside of the additional monies that would take us over the double digit revenue and EBITDA increases.

Timothy Shaw

Got it.

Jesse Redmond

That's helpful. Thanks for taking my questions.

Jon Levine

Thank you, Paul.

Operator

Thank you. There are no further questions at this time.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.