Good afternoon. My name is Camilla and I will be your conference operator today. At this time, I would like to welcome everyone to the Fortune Brands Third Quarter 2023 Earnings Conference Call. [Operator Instructions] I would like to turn the call over to Leigh Avsec, Vice President of Investor Relations and Corporate Affairs. You may begin the conference call.

Good afternoon, everyone, and welcome to the Fortune Brands Innovations Third Quarter 2023 Earnings Call. Hopefully, everyone has had a chance to review our earnings release and supplemental financials. The earnings release and the audio replay of this call can be found in the Investors Section of our website. I want to remind everyone that the forward-looking statements we make on the call today, either in our prepared remarks or in the associated question-and-answer session, are based on current expectations and market outlook and are subject to certain risks and uncertainties that may cause actual results to differ materially from those currently anticipated. These risks are detailed in our various filings with the SEC. The company does not undertake any obligation to update or revise any forward-looking statements, except as required by law. Any references to operating profit or margin, earnings per share or free cash flow in today's call will focus on our results on a before charges and gains basis, unless otherwise specified. Please visit our website for a reconciliation. With me today on the call are Nick Fink, our Chief Executive Officer; and Dave Barry, our Chief Financial Officer. Following our prepared remarks, we have allowed time to address some questions. I will now turn the call over to Nick. Nick?

Thank you, Leigh, and thank you to everyone for joining us today. On this call, I will walk through the highlights of our third quarter performance and offer some thoughts on the macro environment. I will also give an update on our ongoing evolution into a tightly aligned company, focused on brands, innovation and channel. I will then turn the call over to Dave for a discussion of our financial results, our updates to our guidance for the remainder of 2023 as well as some thoughts on our emerging expectations for 2024. Turning to our third quarter performance. Our teams executed well and delivered solid top and bottom line results in a macro environment that remains challenging. Our net sales growth outperformed the market for our products and our margin results sequentially improved over the second quarter of 2023. We delivered above-market POS results across most of our businesses. Our recently acquired assets are performing better than we expected, and our balance sheet remains very healthy as we continue to generate strong operating and free cash flow. Our results this quarter demonstrate the potential and power of our aligned organizational structure and our Fortune Brands Advantage capabilities as well as our unwavering focus on outgrowing the market, preserving margins and generating cash, all while continuing to prioritize key investments, including brand building, thoughtful capacity additions and our digital transformation. The actions we took over the past year to better leverage the strength of our organization and sharpen our focus on our leading brands, meaningful innovation and our advantaged channel relationships, helped drive our results and give me confidence in our strong future. Our Fortune Brands Advantage capabilities will continue to advance our growth and margin journey by reducing cost, informing our strategic pricing strategies, and enabling our high-growth focus areas…

Thanks, Nick. As a reminder, my comments will focus on income before charges and gains to best reflect ongoing business performance. Additionally, comparisons will be made against the same period last year, unless otherwise noted. Let me start with our third quarter results. As Nick highlighted, our teams executed well and delivered solid sales, margin and free cash flow performance. Sales were $1.3 billion, up 5% and consolidated operating income was $220 million, up 2%. Total company operating margin improved sequentially to 17.4% and earnings per share were $1.19, up 3%. Free cash flow in the quarter was $269 million, which brings our year-to-date free cash flow generation to $660 million. Turning to sales. On an organic basis, net sales were down 4%, driven by volume declines. Overall, volume was down mid-single digits driven by high single-digit POS volume declines, partially offset by low single-digit favorable channel inventory comparables. Price contributed a low single-digit benefit in the quarter. Through the quarter, our POS volume softened sequentially in line with normal seasonal trends and DIY channels continue to remain softer than Pro channels. Our operating margin of 17.4% reflects our team's continued ability to drive continuous improvement savings and fund key strategic priorities, while remaining agile in the face of challenging end markets. Our teams remain focused on driving above-market growth, preserving and enhancing margins and generating cash. As I will detail later, our balance sheet remains strong and we have the flexibility to manage through various economic outcomes, while deploying additional capital to drive shareholder value. Now let me provide more color on our segment results. Beginning with Water Innovations, sales were $688 million, up 8%. Organic sales were down 4% or down 3% excluding the impact of FX. The organic net sales results reflect the impact of lower volumes,…

Thanks, Dave. That concludes our prepared remarks. We will now begin taking a limited number of questions. Since there may be a number of you who would like to ask a question, I will ask that you limit your initial questions to 2 and then reenter the queue to ask additional questions. I will now turn the call back to the operator to begin the question-and-answer session. Operator?

[Operator Instructions] Our first question comes from the line of Matthew Bouley with Barclays.

Maybe to start off on the guide and kind of how you're looking at the fourth quarter here. Clearly, a lot of cross-currents in the market. I think you just mentioned some deceleration on the DIY side, sort of looking at the guide, it looks like you're implying some sequential deceleration in the top line. So just -- I know we can kind of back into what you gave, given with the full year guide, but just sort of any puts and takes, upside, downside to how you're thinking about the fourth quarter.

Matt, why don't I give you some kind of high-level thoughts on that, and then Dave can take you through some of the puts and takes. But a couple of things. I mean certainly, just from -- as we said in the prepared remarks, the market has been more or less as we've expected. I think with some of the point-of-sale DIY, maybe some of the retail stuffing a bit softer, single-family new construction being a bit stronger. And as we see how it plays through the year, the top line performance of every quarter has been improving. And so as we look to the fourth quarter, on an organic basis, now that 53rd week, we'd expect that to be flat, which is a sequential improvement. And so good to see the business kind of coming back to flat in particular with the market outperformance. And then as I look at some of the actual dollar point of sale that we get, which is more retail-based that's actually held remarkably steady for the last, call it, 10 to 12 weeks on a dollar basis. So obviously, comparables move around in terms of percentages versus last year. But just what are consumers doing when they go into stores, what are the dollars they're spending. That's been very steady. So while we'd like it to be higher, the predictability of seeing a kind of steady line sort of feeds into our degree of confidence during the fourth quarter. Dave, do you want to add more color to it?

I'm happy to provide a bit more color. I think starting with sales, if you look at our organic performance throughout the year each quarter, as Nick mentioned, we've gotten better versus prior year. So it started down 10% in the first quarter, then down 8%, now down 5%, and we'd expect the fourth quarter to be flat, excluding that extra fiscal week comp or likely down 3% to 4% reported organically when you factor in that comp. So nice sequential improvement versus the prior year on the sales line. And then on margin, we still see the second half operating margin around 16.5% or better, which would imply a fourth quarter of 15.5% or better, which is expected in the fourth quarter to see a bit of a sequential pullback from the third quarter just given volumes are down, but still well ahead of where we were in the first quarter, which is our other low volume quarter. So we feel good about how the business is managing, I think both the top line and the margin opportunity. And then if you think about just EPS, I'd remind people that our prior year had 2 favorable impacts that won't repeat, one being the flow-through from that extra fiscal week and the other being some favorable tax outcomes as we spun cabinets that were onetime in nature. So as we look at EPS in the quarter, we see something normalized that's down low single digits or better versus the prior year. So I know our teams are still working hard to capitalize on opportunities in the quarter, but still feel like we're managing the business well given the environment.

Got it. Okay. Second one, a little higher level. Now that you've had the assets on your team for another quarter and been able to dig in and get the integration underway. I'm curious, you had some comments at the top alluding to this, but sort of what have you learned incrementally as you've been able to dig into the assets. And specifically, the comments you made around the help with how Yale and August could benefit your connected products portfolio. Curious number one, do your synergy targets include benefits to the Connected Products portfolio? And then just number two, more broadly, as you looked into this further, what areas of upside could you see in those synergy targets?

Yes. I'd be happy to take that question. We were -- as you heard in the prepared remarks, we're just delighted with the acquisition. Even putting aside the fantastic value that came across that just the quality of the assets themselves are really phenomenal. The quality of the teams that support those assets, are fantastic and the performance since we've owned them has even exceeded our expectations on the top line. And on the bottom, you'll see that we've actually been able to accelerate some of our investments in the integration just because the integration is going really well. And so that's kind of the big-picture message. Now it's a great question, what have we learned? I take each of it separately. But certainly, it's sort of the Emtek business. I mean they're just really remarkable, continue to gain share, really, really outperformed the market. We were just recently on a market visit and speaking to one of our customers pointed to displays in a relatively small footprint of the store and said, this is 50% of the sales in the category just from this little area. And I think it just speaks to how powerful the brand is. What we've really learned is what is the formula that supports that and the business model and how does that work as profitably as it does. And so a lot of learnings coming from that, that are starting to be integrated into the whole House of ROHL strategy. And so just last week, we were going over annual operating plans and those teams are coming together, not just thinking about how do we offer these as an entire suite of product, which was part of our initial thesis, but really thinking how do we elevate the best of the best in…

Our next question comes from the line of John Lovallo with UBS.

Nick, I actually did want to follow up on what Matt just asked to some extent on the connected product portfolio. Very interesting opportunity goes beyond Smart Locks, obviously, with Smart Water, you guys -- I think you mentioned you've tripled the sales over the past few years. So the question is, I mean, where do you go from here? What's sort of the expected growth trajectory? And what are the potential product expansion opportunities?

Yes. Well, John, thanks for that question. I mean we've really taken a big step forward, I think, through the STRAT plan cycle and really ask ourselves that question you just laid out, so just thinking about it incrementally. We're really like what is the addressable market here? And what do we expect that we could gain in terms of ownership of that market? And you touched on Smart Water. I mean when you look at the Smart Water opportunity from a number of different lenses, it is pretty staggering, right? Just to start with just the pure -- how much preventable water damage is there today. We think that's $15 billion of claims a year. It's greater than Fire and Burglary combined, right, so $15 billion of preventable water damage. I actually believe we're going to grow that addressable market because we're going to come up with more products that can address more types of preventable water damage. We can take that pretty much to zero. I mean we did a study with LexisNexis in 10,000 homes. We reduced 96% of the claims to zero, and the other 4% of claims, I believe, we reduced by over 70%. So pretty much going to zero. There's an ESG lens to it, right? In addition to saving, we think potentially trillions of gallons of water, there's a huge energy component to processing and cleaning water. And so you take Mission Moen, which is really based on what we have in the market today, our commitment to save 1 trillion gallons by 2030, that according to the math available on the EPA website, so equivalent of us taking one million cars off the road for a year, right? And so you can start to see [indiscernible] municipalities, right? It has a huge…

That's helpful color. And then the next question is on water specifically. The sales outlook was raised from, I think, flat to down 2% to now flat to down 1%. U.S. new construction a little better, China, a little worse. So I guess how are you thinking about House of ROHL and Moen in this equation, which I think were both down organically in the quarter. Then also what's driving the decrease in margin outlook from, I think, 23.5% to 23% on an improved sales outlook?

John, this is Dave. I'll handle the margin one first. I think it's more around some of the accelerated investments that we're making, as Nick mentioned, some with the Emtek acquisition and then some [indiscernible]. And so as we've talked about in the past, our margin quarter-to-quarter stays in that low to mid-20s, and you may see some fluctuations. It was 24.2% in the third quarter, and we'll step back a little bit in the fourth, but more around investment timing than anything else. And then on the sales line, the team really continues to perform well and drive outperformance. And so House of ROHL, as we've mentioned, down low single digit organically in the third quarter, probably at similar levels in the fourth quarter. And then for Moen America, it's a similar performance we see, down low single digits in the fourth quarter, which really implies that our POS run rate stays at mid-single digits or better, and we have some favorable inventory tailwinds from last year that we've discussed. And so I think it's more -- as we have line of sight to the end of the year, just tightening that range around the performance that we're seeing out of the business.

Our next question comes from the line of Stephen Kim with Evercore ISI.

Appreciate all the color. I wanted to ask a little bit on the U.S. residential side. You -- I think, increased the U.S. -- the single-family new construction component of your guide. But multifamily has been looking weaker and the -- what was the increase in rates and so forth. I think the concerns exist about how things might look over the next few months. So I know that you have a fairly constructive view of that given the undersupplied state of the industry. Obviously, I share that view as well. But I was curious if you could talk specifically about the multifamily side, to the degree to which that may be weighing and on the overall outlook because I didn't hear you call that out. And then similar to this, in your Outdoors division, your Doors business has a lot of starts exposure, I guess. Your sales -- you said it was kind of as expected, the starts effect, but the sales guide came down a bunch. And so just curious if you could sort of maybe tie that in there as well.

Sure. Why don't I -- I'll start and just give you some perspectives and Dave will add some more color around it. I'll just start more on your question about the starts and multifamily. And multifamily is actually a pretty small part of our business. And so I don't disagree with you. I do think it's challenged. I think it's going to be challenged. But it's a pretty small part of our business. And then within that, the part of multifamily that we serve tends to be the higher end of multifamily. And so I think where a lot of [indiscernible] is probably in places where we don't have a ton of exposure because we're more -- if you think about in multifamily for sale large concept buildings. Those are the type of things that we tend to be calling on versus -- I think we're seeing a lot of pressure in the rental market, which tends to gear more towards the price competitive stuff. So why not we pause there. Dave may have some color and then we can talk about that Doors piece.

Yes. Steve, so multifamily in total is about 6%, 7% of the portfolio, so pretty small. And recall, our products go in towards the end. So our multifamily estimate for this year is actually up high single digits. And so we're not feeling much headwind in the macro this year based on when our products are consumed on multifamily. I'd say what's a little bit softer is probably the overall U.S. R&R, right? If we're still down 4% to 6%, they are at the midpoint of that, maybe a bit below the midpoint, and that's offsetting the single-family new construction benefit in the overall macro.

At Door's question, you're right, more single-family new construction exposure there. What's been interesting is we kind of haven't yet seen the benefit of the [indiscernible] pull-through our products. So we think that's probably just got to do with when our products are installed. And that varies. I mean not the point of inflation doesn't vary, but the lag between starts and complete tends to vary. And so it's kind of an inexact science. And so we've not seen it pull-through very strongly in doors or valves, which for us is a great indicator given our exposure to large production builders. We get a great sense given the valve install is fairly early on when that's pulling through. And so we think that's probably most likely to be an end of '23 and into '24 tailwind.

Yes. And Steve, just some color on that. Our Moen valve POS in the third quarter. So the component of the product that goes behind the wall into construction was still down mid-single digits. And then our doors wholesale POS, which predominantly serves new construction was down low double digits. So we're not seeing that new construction pull-through yet on this point, probably late fourth quarter, early 2024. I say the other piece on the outdoor guide is driving it down a little bit, channel inventories are still lean across that segment. And we expected really a bit more inventory to come in, in the quarter than we saw as we exited the quarter, still pretty lean, both on the decking and door side.

Okay. That's helpful. Yes, I appreciate that. That info in the valve is interesting because we have seen that pull-through happen in some other segments, so another product. So that's interesting that it should come soon.

Given that we're pretty much locked into -- I mean not for [indiscernible] locked into that portion of the builders is very high. It's pretty good for us.

Yes, clearly. Okay. Second question relates to just kind of generally, if you could talk about the dynamic between price cost, if there was anything sort of to call out there that we should be thinking about across your -- the various segments?

Yes, there's nothing material to update really from where we've been in the past few quarters. So still see price as a low single-digit contributor to sales, started to see some deflation -- metals deflation in the P&L in the third quarter as we expected. But I'd say overall deflation still less than 1% of COGS given offsets to labor, some of the freight lanes have increased and then around indirect spending. And so tracking to where we thought we'd be at the beginning of the year and no material update or change.

And I'd just add for some color. You talked about this previously, but one of our key Fortune Brands Advantage capabilities is category management. And so what are the -- these are the things that we decided to invest in to get really, really good at things like our next-generation sourcing capabilities, global supply chain, category management, complexity reduction and digital. And we're finding that having that capability, which is really data analytics driven and understanding of the shelf, the consumer and shopper behaviors, the elasticities, having that tool now has been very powerful because it's allowed us to have very constructive conversations with our trade partners and allows us to be very precise and targeted in how we manage price and therefore, continues to be a contributor while keeping us competitive in the marketplace.

Our next question comes from the line of Michael Rehaut with JPMorgan.

Great. Thanks very much. Good afternoon, everyone. Just wanted to -- for my first question, make sure I'm getting some of the nuances of the change in guidance here. And I guess just on a basic level, it seems like the slight reduction in operating margin is predominantly driven by the slight change in sales. So I just want to make sure I'm thinking about that right. It just appears like it's more just a function of the sales leverage. And when you think about from a top-down perspective, you have a couple of the segments, a slight tick-down in the sales guidance, what's really driving that from an end market perspective? And it also appears, if I'm looking at it right, that you were a little better than your outlook on 3Q and a little worse than what we were thinking about for 4Q. So if there's any type of shift between timing here or if things are a little better, things are a little worse in the last 3 months of the year. Just wanted to appreciate any of those differences as well.

Mike, it's Dave. I'd say your first question, that's accurate. It's really -- sales slight reduction in our sales guidance flowing through to operating margin is based on the volume leverage. So that's really coming in Outdoors. I mean if you look at the segment changes, water segment guidance overall up slightly, so from minus 2% to flat to minus 1% to flat and then security same, up slightly 13% to 15% up to 14% to 15%. So it's really Outdoors as we mentioned earlier on the call. Slightly lower R&R, POS and then some channel inventories that are leaner. So I think that's the simple way to think about the change in guidance. Third quarter, fourth quarter, there are always some timing benefits across the quarter or challenges across the quarter. As I mentioned earlier, teams are working hard to get the best results out of the fourth quarter that we can given the market environment.

Right. And I appreciate that. I guess I was focusing a touch more on the organic change. I mean it brings me really to the second question, which is that you'd mentioned both acquisitions are doing better than you expected. And so I was hoping to get a sense, number one of, I know it's just one quarter, perhaps that's under your belt here. But any kind of updated thoughts about how to think about an annualized revenue run rate for these 2 businesses? I think a quarter ago, you're talking about, I believe, $240 million for Emtek, Schaub, and $170 million for Yale and August. If there's any changes to how we should think about those numbers on an annualized run rate? And from -- again, from an end market perspective, if you think about those 2 different businesses, where is that upside coming from? Is it again, a certain channel or end market or if there's even any initial benefits from some of the sales synergies, which I do expect would be more in '24. But -- just any thoughts in terms of the drivers there?

I'll start with the drivers and then I'll give it to Dave who can talk you through the rest of it. But I'd say the drivers are, a, on the -- and again, 2 different Emtek and Schaub. I think they -- we, I guess, now have just built a fantastic business model and a mousetrap that really, really works for the high-end designer consumer, and that continues to take share. And so it is outperforming some market in a very healthy way. And -- but I think the real opportunity will be to take what's really working in that model and leverage it across the rest of the luxury portfolio. And then on the Yale and August side, just a really fantastic product set that have been growing really nicely, but have been chip-constrained for a while. And as that is starting to flow now. And I think also, we're giving the team there, sort of the privilege of focus on really working on a number of things that they had on their plates that they wanted to do, but they were also working on other priorities for their predecessor organization, which they told us -- give us a privilege of focus for a while and let us get some things done next quarter or two, and we're seeing some of that come to fruition. I think it's early days to say, does that change our view on the run rate? I mean we sort this since like June, but what it's allowing us to do is lean into the synergies with a lot of confidence and also invest ahead of plan on bringing some of those synergies to life.

Yes. And I think Nick said it well, Mike. I mean we'll provide a more detailed view of 2024 on our next call for those businesses, but it's it is going well. It is early days, and the team is capitalizing on a lot of opportunities .

Thank you. Our next question comes from the line of Adam Baumgarten with Salmon.

Just curious on some of the benefits you've been seeing from the leadership reorganization and kind of how that's playing out. And I know there's been some savings you've called out in the past year, in the first year or so, but just kind of how to think about it going forward, and then I'll stop there.

Yes. That work -- and it was a lot of work, and it's still a lot of work because we're really in the first cycle of the new operating structure, right? So we just saw the first integrated annual plan [indiscernible] so we can go next month, we'll see the first integrated brand plans, product plans, innovation plans. But in short, it is actually going ahead of schedule and better than we expected, and I said that with a lot of credit to our teams because I think it's really their -- sort of trust and enthusiasm of leaning into it that's delivering. But it was designed to unlock growth and productivity. And Dave can talk a bit to the numbers, but the economic -- the immediate cost-out benefit is a really nice byproduct of not wasting energy on things that weren't creating value and allowing the organization to spend their time on things that will. And so we're seeing a lot more of that. We're seeing us be able to move through initiatives a lot quicker. And a simple example, Dave and I talked about sort of Fortune Brands advantage. You have these capabilities, and we were getting much better at deploying them across the organization. But now it's not a question of is it a good idea, not a good idea [Indiscernible]. Those leaders show you for leading our commercial organization [indiscernible] Ron Wilson is leading our supply chain organization, if they want to go execute on something across the entire portfolio, they get their teams and they go execute. And so we're seeing a much faster execution of our key initiatives. And I think that will be the real unlock over time, and we expect to show up more than anywhere else is growth. Now you all see where are we in that? I think we've taken out kind of like the [indiscernible]. Now again, I caution myself using the word easy because I think our team would say, nothing was easy about it, but it's the obvious lower-hanging fruit opportunities. The next 2/3 will really come from things like simplifying our systems, being able to work more easily across the business, taking out more duplication as we have more efficient systems in place. And we see that as a multiyear growth and productivity journey for the company.

And Adam, just to put some financials behind it. So as we've mentioned, that first 1/3 or so was $55 million of gross SG&A out, and we have invested some back into the business to drive some key priorities. And the teams have been busy working this year on the next phase of that organization in the future. And as we move to design it, it's going to come with process improvement, system simplification to really get more lean operating environment relative to where we've been.

And I guess the other switching gears question I would have is just on the decking business, it seems like that's a pretty meaningful positive standout, you guys, your peers and competitors in terms of -- versus the broader backdrop. I guess maybe if you have any color on what's driving that? How sustainable it is? Anything you're seeing there just because the broader -- I'd say, home improvement market is kind of soft at this point.

Yes. I would start a couple of things. I mean, firstly, again, as you know really well, just the underlying value prop of composite and PVC materials continues to really be healthy and particularly when you add in all the other costs of installing a deck. And so that will take share against wood and will continue to do so for a very, very long time. And in our own capacity modeling, we will play with that conversion ratio. We think it's somewhere between 1% and 2% of wood. So really hot here, it might be a 2% and a slower year, like this year, we think it might be closer to 1%, but it's still happening. And so I think that does continue to drive the top line. The next piece, I think, is really important that you mentioned was sustainability, right? And we've tried to be very thoughtful and very judicious about how we go to market to do it in a sustainable way for us and all of our route-to-market partners. And so be thoughtful about pricing, be thoughtful about our product offerings and therefore, be thoughtful about the where we press the portfolio. And I think what you see in these latest results is we've been willing to give up a little bit of lower-margin business where we think it's not going to be healthy or sustainable to go focus on areas that are and more up the price spectrum. And then that's where we ended up taking share. And I think that's what through these results. We'll continue to pursue that strategy because we think that's the most sustainable way to build this business out for the long term.

Our next question comes from the line of Phil Ng with Jefferies.

And Dave, I really appreciate you giving us an early look on 2024 in terms of the market. You're calling for a low single-digit decline in 2024, but you're expecting margin expansion and earnings growth. So can you help us unpack what are the key drivers in terms of growing earnings and -- any color on ranges because The Street is certainly modeling a pretty robust earnings growth next year, so maybe well off the lows set a little bit. But I really appreciate you giving us an early look on 2024.

Yes, happy to -- I think our confidence in margin expansion and earnings growth really stems from the work that we talked about on this call. So replatforming the business, getting after some synergy opportunities. We've mentioned some changes in the security business that we've made. And so there's a lot of, I'd say, internal activities that we see coming through the P&L next year. We have -- we will be comping that inventory reduction headwind in the first quarter. Given where production is likely going to be planned, I wouldn't expect to get all of that back because we'll still be producing at a level lower than we were in '21 and '22. And then we still see price cost as a benefit. And our teams are still working through their strategic recommendations to our customers around pricing, but looking to have price contribute again positively to net sales growth next year as we really think about taking price using our category management capabilities and based on the strength of our brands and innovations in a way that both maximizes our share but also profit for us and our customers. And we've demonstrated our ability to do that over the past couple of years. So I think it's really those 3 levers. The internal actions we've taken some favorable comps on our cost bar and then some price cost favorability.

Is there any way to size up those buckets for us so we have a better handle? And should we assume flattish market, if you're outpacing the market and you're taking price against so maybe flat sales or you could actually -- you get some top line growth?

Yes. I think, certainly, our teams are still working through all the details. We've seen enough to be able to give this confidence now, we'll provide more in January. And then yes, I think depending on where the market settles, you would expect us to beat the market and typically organically, we're targeting 150 to 200 basis points above the market. And so that would imply organic growth in that flat to down low single digits depending on how the market settles out.

Thank you. We have reached the end of our question-and-answer session. And with that, thank you for joining today's conference call. You may now disconnect.