Arezzo Industria e Comercio SA

BOVESPA:ARZZ3

Earnings Call Transcript 2018-Q4

[Operator]

Good morning, ladies and gentlemen. Thank you for waiting, and welcome to the Arezzo&Co conference call, where the results for the fourth quarter of 2018 will be presented. [Operator Instructions]

This call will be translated into English, and overseas participants will be able to ask questions. [Operator Instructions]

We would like to remind all journalists and others from the press that this conference call is exclusively for professionals from the financial market and current and potential shareholders. Any questions must be submitted to our press relations, Caroline Muzzi, whose contact information is available on the company website, at www.arezzoco.com.br.

This conference call and the slides are being streamed on the web and can also be seen on the company website. In case any of you do not have a copy of the Arezzo&Co press release published yesterday, Wednesday, February 20, you can get a copy from the company website.

This conference call is being recorded, and the recording is available on the website after the call is over.

Before we proceed, we would like to clarify that any statements made during this call regarding the company's business prospects as well as projections, operational and financial goals concerning its potential for growth are forecasts based on the expectations of management for the future of Arezzo&Co. These expectations are highly dependent on domestic market conditions and the general economic performance in Brazil as well as international markets and are, therefore, subject to change.

Now I'll hand over to Mr. Alexandre Birman. Mr. Birman, please proceed.

[Alexandre Birman, executive]

Good morning, everyone. Thank you for participating in our conference call regarding the results of 4Q 2018. I have with me our CFO, Rafael Sachete; and our IR Director, Aline Penna.

It's a pleasure that we begin the conference call now, which is our eighth year as a publicly traded company, with a learning experience that we've had with all of you that have an opportunity to have an outside view on our business.

The fourth quarter of the year is mainly marked by the high summer collection, which is the beginning of November, and especially for the Christmas sales that has a heavy weight to our business. For your information, in December our Arezzo&Co chain for monobrand stores and ecommerce stores had approximately 1 million tickets issued. That really shows the strength that our brands have, which is mainly directed to Classes A and B.

It's a quarter where we were very proud to see a growth in all our brands and channels. We also had strong store openings, which creates the foundation and the pipeline for future growth. If we analyze the growth of our sell-out chain in the fourth quarter, it was greater than 9%. So that shows the space that in store expansion in 2018 has to contribute towards our business.

It's also worth noting the continuous growth of ecommerce, getting close to 10% of the company's revenue, which was our objective for 2020. Therefore, we have a very consolidated and mature owned structure.

I'd like to take this opportunity to talk about the foundation of our business, which is our brands. We always like to say that the pillar of foundation that we've been -- since the foundation of the business and the roadshow, which is the foundation of our brands and the path that we're achieving with that. So Arezzo is an icon, especially during Christmas. It's amazing to see how many gifts are given from the Arezzo brands. So we developed a collection that really stimulated the gifts, with smart products and bags and shoe combos. Therefore, we had 36 Arezzo stores that in December alone sold over BRL 1 million and 6 stores that sold over BRL 2 million. I'd like to remind you that it has average sale floor of 65 square meter. So very high per square meter.

Arezzo is moving towards a concept of [Foreign Language], or “Together We Are,”; in terms of branding. So today, February 21, we're launching our winter collection. After 3 years of excellent work with Gisele Bundchen, we believe it's time to bring in more plurality and diversity to be the star of our campaign. So we're very happy with the results, and that was already true on Christmas. Now we have a famous hashtag for Arezzo that says a lot about Arezzo on Christmas, which is, “always present” [Foreign Language].

We also have the light format, as we call it internally, and we trust that the 100 stores that we included in the guidance will be achieved in a short period of time.

We also did some tests of the omnichannels, the pickup store, that lead to higher [indiscernible] from consumers. There's also a thermometer that tells us about the Arezzo health, which is strongly used in the franchise channels, and that means the default rate, which consequently has also dropped. Therefore, it's an implicit monitor that shows the engagement of our franchisees.

Now about the Schutz brand. We're very happy to see that Schutz resumed growth. I'd like to highlight that the figures that we're presenting for brand growth, even though it's still modest, we have to consider the effect of transferring from owned stores. We're focusing now on our owned stores in the cities of Sao Paulo and Rio de Janeiro. So the franchises that we had in [indiscernible], in Belo Horizonte and Brasilia -– owned stores in Belo Horizonte and Brasilia were not transferred to franchisees.

That changes the base, because we have the full price of sell-out revenues, and now it's sell-in. If we exclude that effect, the Schutz growth would be 3%; still modest, but it does show the growth curve resuming. So I believe that throughout 2019 we're going to have good results with our Schutz brand, highly driven by product innovation. So the brand is a dictator in trends, and it was very –- it did very good in high summer with the neon colors, especially in green and pink, for the brand, and Schutz was a star in that trend.

In addition, all the work for store revamping, and we've seen a lot of adherence from consumers.

It's also worth noting a change in the Schutz chain, where we have new energy, bringing together the experience of companies that have been with us for a long time. The people pipeline shows that, that when we see an opportunity to change people can save that as a focus in the culture Schutz and the Schutz way of being in Schutz level. The product and merchandising and marketing team is working in the office for the 5 Schutz stores, the brand, at Oscar Freire. So people are experiencing the brand and breathing the brand. So we see good prospectives to resume growth.

Now about the Anacapri brand. Without a doubt, it was consolidated as one of the main brands in Brazil, and it's the fourth or fifth brand in terms of market share in some regions. Our focus to expand, which has been, we executed by our team. And as to Sao Paulo, it sprawls out. So we have a good purchase share in the city of Sao Paulo and the southeast. And the good news is that we still have a lot of room to go into more extreme regions, such as the northeast, north and the south.

So we currently have a brand that even though we have a lot of growth, it still has a long path ahead of it and allow to continue to grow. A lot of maturity in the product area, distribution and especially value proposition. So today, customers know what Anacapri is. I'm very happy that anywhere you go, be it at a shopping mall, airport, out on the street, you rarely see someone for more than half an hour without an Anacapri [ shell ]. A number of stores opened in this quarter and 36 in the past 12 months. So we're very confident. Anacapri is creating products that are icon.

The turnaround that we did two years ago bringing in the sneaker category into the brand has a lot of wind, as well. So the product volume that is replenished at continuous levels on a weekly basis, that reached 40% of brand sales. So that really makes us feel confident. So in 2019, God enabling, will be no different.

Now moving on to more affordable brands and higher priced brands. I'd like to talk about a brand that we don't say much about during our interactions, but I think it really deserves the highlight now, which is for the foreign market, high-priced Alexandre Birman brand. So a consolidation in the international market. In addition to the figures that speak for themselves, I have some qualitative examples that really shows how you become an international brand. Celebrities, personalities such as Julia Roberts, Meryl Streep and Kim Kardashian with over 25 million followers. That's a lot of people following her, people that are using Alexandre Birman and promoting that in social media.

So that shows a strong [ success ] in same-store sales in Brazil, and the growth of the brand in that quarter was [ 60% ]. So we have a plan for Brazil to open up some pop-up stores in the main capital of the country, promoting more awareness for the brand. Currently the brand only has stores in Sao Paulo and 1 in Rio de Janeiro. We have major cities and some international brands, as well, entering. So Curitiba, Belo Horizonte, among others, where we can create this concept for the brand. So we believe that in 2019 will be a year of continuous growth for the Alexandre Birman brand.

Now, about our emerging brands, the emerging brands. Internally we have a concept that will be reinforced, called [ star and coverts ]. And startup brands that we have at Arezzo&Co, currently we have Fiever and OWME. Internally what this philosophy has enabled us to have a lot of synergies. So bringing in more seasoned people with more experience to manage the brand, sharing roles obviously, really connected to products and branding and to bring more emphasis on these areas, sharing this with more seasoned professionals.

Fiever is stressing its positioning with casuals and goods. I will say going into the male casual sneakers segment, which accounts for now over 10% of sales in the brand and the monobrand channel. Additionally, it's good to see the consolidation of the brand supply chain by combining its own -- by having its own factory. Therefore, we have better [indiscernible] of products, faster replenishment, faster testing. So we're very confident that Fiever is now on an assertive path.

About the OWME brand, it will be 12 months old in May. So we've been changing things, but we like to think that -- historically we like to say that a brand is like a human being. So its age is equal to a human being’s. So one-year-old, learning how to walk. Anacapri and now Fiever show us that now we have a formula to speed up that growth. But we have to say that it's a learning experience. It's still the beginning. We're very happy with the results. It's very much aligned with the operations that we had through [indiscernible] in 2018. And it makes us feel very -- what makes us feel very confident is customer loyalty. So our brand is presenting the highest number of [indiscernible] per ticket. So consumers that have this profile, they find what they were looking for at OWME. They become loyal and buy a lot with the brand.

It's interesting that we have high acceptance and the growth that we have in engagement in social media with a highlight with Instagram, because it's for mature customers. And we thought that that wouldn't be so strong. But after 9 months of life, the brand has a number of followers and also brings in great sales in commerce. So 2019 will still be a year of learning and maturing assets of the brand OWME.

So now I'd like to take this opportunity to talk about, in addition to the management of our business as it will continue its evolution, that it's still obligation, I'd like to highlight new growth opportunities that we're [indiscernible], strategic opportunities that were executed in 2018 and that throughout 2019 will definitely continue to gain traction.

So a highlight to our speeding up the growth curve in the U.S. market, leading to growth opportunities of revenues, investing in stores, growing in department stores and having a more robust team. So we're very confident with our learning and continuous growth. So it's something that's still marginal to our business in terms of percentage of revenue, but we believe that, as we like to say, it's a good option long-term growth. Our focus is that the company is solid and will be executed in the domestic market. And we believe that growth in the U.S. market is a good option.

Additionally, I'd like to highlight how our company has the culture of innovation. So in 2018 we started to evolve a lot in digital, investing in consulting, being a part of forums, creating our websites. We know that there's a famous thing they say in English that culture eats strategy for breakfast. So we know that changing the culture is the basis for becoming digital. That's why we invested a lot in 2018. And in the digital side, I'd like to highlight that since our company is already very strong in ecommerce, which leads to funding for these investments, which we will give you some flavor at the end of this call about 2019.

So it was a lot of -- a lot of investments are in the year to capture the product differential in Schutz and actually bring Schutz into the highlight. So, Schutz in the domestic market can still grow a lot. We believe that the brand will have strong growth throughout 2019.

We launched our [ sixth ] store, and that shows us our capacity to grow organically. The expansion of the light model. So we like to say that the 100 stores for Arezzo Light is -- and the [ savings ] in which the stores will be open is a matter of timing. The Anacapri growth, which gives us a big platform for growing our company and in general accounting for over 3% of our total revenues. And the essence for our company, which is a company that's made by people. It's a company about creation and innovation. So strengthening our culture of people. We have this special culture project in 2018.

So those are my initial remarks. I'd like to thank you all for trusting our company and the confidence in our company. I'd like to ask Rafael Sachete, our CFO, to give you more flavor and data about our performance. Thank you very much.

[Rafael Sachete, executive]

Thank you, Alexandre. Good morning, everyone. Continuing with our presentation, we would like to go now to Page 4. We can see on the left side of the chart that the gross revenue was BRL 506 million in 4Q '18, an 11.2% growth in the domestic market and 28.5% in the foreign market. We'd highlight for our operation in the U.S., which grew 65.5% in the quarter.

On the next page we show the [indiscernible] of the gross revenues in the domestic market, with highlights to Arezzo, which achieved BRL 206 million (sic) [ BRL 260 million ] of revenue, an increase of 9.7% year-over-year, accounting for 57.3% of the company's revenue. The web channel of that brand had strong growth of 27%, and the franchise channel grew 12%, and included 11 openings in the light model this quarter.

Anacapri brand grew 30.5% and started contributing with 14.4% of the revenues in the domestic market, compared to 12.3% year-over-year. The brand's franchise channel claimed strong growth of 40%, and most of that presented to due to opening 36 stores in the last 12 months, in addition to its strong growth in the same-store space.

Schutz accounted for 23.8% of the domestic revenue of the company, adding BRL 107.7 million of gross revenue in the fourth Q. And as Alexandre said, that brand had an impact of the transfer of sell-out to sell-in, which would lead us to a growth of about 3%. In 2019, we have been having encouraging results with the brand in the foreign market, and the U.S. operation grew 67.2% in Brazilian reals and 42% in American dollars.

Alexandre Birman brand grew 57.5% quarter. Highlights to the strong increase of same-store sales in Brazil, where we had 4 owned stores and especially the web commerce channel, in addition to a highlight for the foreign market sales.

Fiever strengthened its position as casual sneaker sales showing a growth of 63.7%, with strong performance in all channels.

Now on Page 6 we have a view of the gross revenue per sales channel. Highlight the performance of web commerce channel, which grew 55.4% (sic) [ 25.4% ] in the period, as well as franchise and multibrand channel, which grew 16.2% and 12.3%, respectively.

In terms of sell-out, our monobrand store chain, which group franchise, owned stores and web commerce, showed a 9.3% growth in sales, strongly due to the growth of online channel and net opening of 62 stores, monobrand stores, in the past 12 months, in addition to sales at the same store, which grew 3.6% in 4Q '18. The company's revenue coming from monobrand stores represented by sell-in of franchise and sell-out of owned stores and web commerce showed an 11.7% growth in 4Q '18 year-over-year. As always, the analysis of indicators of sell-out and sell-in should be done always including a longer period of time, which eliminates seasonal effects of the dynamics of our collection launching.

And similar with the past 12 months, Arezzo&Co showed same-store sell-in at 4.7%, and the same-store sales sell-out at 4.2%, meaning a 0.5 percentage point difference. The multibrand channel grew 12.3% because of new clients and as greater cross-sell among brands at the same point of sale.

On Page 7, we see the growth of the number of same-stores and franchise and our sales floor area. We closed the quarter with 685 stores, up, 673 in Brazil and 12 overseas, with an increase of [ 5.5% ] in sales floor area, and 67 net openings in the past 12 months and 36 in this quarter.

Now on Page 8, we show on the left side the gross profit of the quarter, which actually BRL 194.7 million, a 14.8% growth, and gross margin of 47.2%. The expansion of 60 basis points on the gross margin in the quarter is explained by improved gross margin on the sell-in channels due to the [ recursion ] of ICMS tax from the PIS and [ customs ] calculation base; further, share of the web commerce channel and operations in the U.S. in the midst of [indiscernible], impacted by less contribution of their owned stores in the mix with the transfer of 6 owned stores to franchise in the quarter.

On this page we see the EBITDA performance, which achieved BRL 64.1 million in the quarter, 17.7% growth, and 16.5% (sic) [ 15.6% ] margin; 60 basis points year-over-year.

The increase of the expenses seen in the period is because of our strategic planning decisions that include developing the North American operations and other fronts, like developing a new brand rollout of the light format of Arezzo, investments in brand in Schutz brand, and expansion of Alexandre Birman brand in the European continent.

On Page 9 you can see the net income of the quarter, that achieved BRL 42.2 million, 23.7% lower year-over-year because of the effects on the comparison base. That's because in the fourth quarter 2017 the company obtained an injunction to not pay income tax and fee CSLL tax on the ICMS fiscal benefit. The gain totaled BRL 21.9 million in 4Q '17, and refers both to the current period and as well as after to the first 3 quarters. So we excluded that effect for comparison purposes, the net income in the 4Q '18 is 8.6% above year-over-year.

On Page 10, this is the cash generation of the company's operation, which achieved BRL 33.2 million. It's worth pointing out that the company paid dividends on October 22, 2018, on the amount of BRL 25 million.

Page 11. CapEx was BRL 12.6 million, with highlights in investment in technology at the Alexandre Birman plant and upgrade of our data center. And in the North American market we opened 2 stores in Miami: 1 Schutz at Aventura Mall and 1 Alexandre Birman at Bal Harbour Shops. In addition to the web commerce platform and investments in software and IT.

On the right side part of the page we see the indebtedness of the company. We closed third (sic) [ fourth ] quarter with net cash (sic) [ debt ] of BRL 124 million and net cash (sic) [ debt ] over EBITDA ratio still conservative, at 0.5x (sic) [ 17.5x ].

And on Page 12, our ROIC was 29.2%, 180 basis points above 4Q '17, mostly due to the 12.9% growth of our operation results, NOPAT. However, the increase of working capital is due to higher inventory volumes, the effects of consolidated sales growth and also the increase of management of drop-ship and ready-to-ship products.

This is what we had to say about the fourth quarter. I would like to thank you all and open now space for Q&A.

[Operator]

[Operator Instructions] Our first question comes from Marco Calvi, Itau BBA.

[Marco Calvi, analyst]

My question is about ecommerce. We had a very strong quarter in the ecommerce channel during these results. If you could break down daily traffic and conversion. So you detailed many initiatives at Arezzo. If you could break down the results of that strong growth of 25% in traffic and conversion, that's my question.

[Alexandre Birman, executive]

This is Alexandre. Thank you for your question. It is a very encouraging question. It's something we worked strong since 2011 when we created our first ecommerce from Schutz brand. And the structure has more than 150 people in the chain. We do all the management internally. So there's a reason to be very proud of. We also have a lot to learn and evolve.

To answer your question, Marco, our ecommerce still has to grow in traffic. We have a strong customer base, but are still looking to buy through ecommerce. It's a very solid brand, and one of the reasons for our bottom line results to be strong, unlike other peer players, is because we have a natural flow in our website, due to people buying there. If we just look at Anacapri and Schutz, we participated in a campaign on Facebook recently, and our brands are the largest in the world, much ahead of other brands, which has the followers. Globally, very few brands have 4 million followers and we're talking about just Brazil and the other brands that operate around the world.

So our traffic is very strong. It's increasing continuously, and the good news is that we have a lot to evolve and to increase conversion. So our conversion is still modest. I can't give you specific figures because it's part of our guidelines of not disclose conversion data. But what I can say is that we have an increase of traffic. It's still a little bit of a low conversion, but we still have a lot to grow, improving the tools and making it easier to purchase. And that will be our goal working forward, because we want to improve conversion from the traffic we get.

[Operator]

Our next question is from Alana Imaizumi from Citibank.

[Alana Imaizumi, analyst]

My question is regards the operations in the U.S. I'd like to know if you have any updates about store openings or if you'd like to comment on any other highlights about your operations there in the fourth quarter.

[Alexandre Birman, executive]

This is Alexandre speaking. Thank you for your question. I'm very happy to see that you are monitoring our business now. As we like to say, our operations in the U.S. have good future prospective. Our major focus is to be a very diversified company in the foreign market. And we know we have a lot to grow in the domestic market. So it was -- our guidance was 55 stores. We're going to exceed 700 stores and we know we have more to grow.

Now about the operations in the U.S., currently we have 3 stores in the project phase in California. We're going to have 1, the first one, in the north of California, which is in San Francisco; another one in Dallas; and another one in Florida. So we really believe in our expansion process. We just give guidance on the U.S. operations, but I'd like to say that the range was going to be from 6 to 8 stores.

I'm going to take this opportunity based on your question to say that our growth there is in omnichannel growth, where the online platform is very important, showing good results and growth, and distribution in select department stores and pure ecommerce players. In the [ third ] quarter we're going to launch our marketplace on Amazon. We still don't have that. But based on the results that we have in the ecommerce that belongs to Amazon that is focused on shoes, which is [indiscernible], we have a good perspective to capture that traffic through a store on Amazon.

So that's just to give you some more flavor. Even though you see 670 stores in Brazil, plus 55, it seems like 6 is an expensive figure. But our focus is multichannel growth in the U.S. market.

I hope I answered your question. Otherwise, please feel free to ask again.

[Operator]

[Operator Instructions] We have no further questions. I'd like to hand over to Mr. Birman for his final remarks.

One moment, please. We are collecting more questions.

Mr. Rodrigo Cuestas, from Goldman Sachs.

[Rodrigo Cuestas Azpuru, analyst]

I'd just like to understand a little bit more about Schutz. Can you give me the timing and percentage of your base that you've been resuming? And together with that, do you have CapEx for franchisees? And how about for your owned stores?

[Alexandre Birman, executive]

This is Alexandre speaking. Thank you for your question. We have approximately 25% of this base is being store-based renovated during 2018. 2019, we should achieve 45% of the chain renovated. We're very confident about that. And that has shown that the brand is renewing itself through our concept of digital store concept.

About CapEx, no, we do not support franchisees directly with CapEx. We may have some support in marketing or local investments so that the brand can become more relevant in reopening.

[Rodrigo Cuestas Azpuru, analyst]

Perfect. Thank you. One more quick question. How about other expenses or the other income that we have here, BRL 4 million? Is there anything specific to this quarter?

[Rafael Sachete, executive]

This is Rafael Sachete speaking. Rodrigo, thank you for your question.

In fact, we had an effect from the fourth quarter, but the effect that shows in other income revenues is not affecting our results, our bottom line, because it's just recognizing the revenues of transferring these operations to franchisees. So there are a number of expenses that are high that do not show in that figure. So they are, first of all, terminations because franchisees they don't take in the [ pain ] with the cost. The company terminates them. And it's high, almost BRL 2 million in that sense.

We also have write-offs of amortizations and write-offs of amortized assets. So equipment, everything about the stores. That has to be written off and some amortization. Also that the net effects of the BRL 4 million that you see positive is approximately BRL 1.5 million of a positive effect for the company to the EBITDA and not [indiscernible].

[Operator]

We have no further questions. I'd like to hand over to Mr. Birman for his final remarks.

[Alexandre Birman, executive]

Once again, thank you again for everybody's participation. We are now ending the cycle of 2018 in a very successful manner through a lot of work, dedication and passion. So I'd like to take this opportunity to thank our entire team for another year. We're now opening our 47th year of existence. I'd like to thank the support that we get from the board of the company and the mentoring that I receive from my master, who is my father.

First, our plans for 2019, without a doubt, is continuing to evolve our U.S. operations. The digital platform we'll implement to the agile concept in our company by creating some squads, where we have examples of that would be to evolve our BI. We're implementing a new tool that will give us more agility in data. We have a dedicated squad to create or to strengthen how we merchandise, how we promote our brands, which is the area that's the hub between file, commercial and sourcing. We have another squad that will focus on investing in our omnichannel. That's something we're investing a lot in and we highly believe in that. And as we mentioned, there will be a link sales where a salesperson from the brick and mortar in-store can sell through WhatsApp, and the payment can be made in a very safe manner by consumers.

We also have digital growing through -- assisted through the squads. We're going to inaugurate a new area of our company outside to carry out different work. In this new area, Hub 2154 will be inaugurated on March 14.

The growth of the Schutz brand, the investments that we've made that we believe, and the continuous expansion of Anacapri and strong internal work so that we have room and a culture that's more adherent and has actions that will lead us to be the employer of choice.

I'd also like to say that a change in collection, it's like a new cycle that's beginning. So on last Sunday, February 17, we had our national sales convention, with over 1,300 people together in Sao Paulo and over 6,000 people connected remotely all over Brazil. It was a special moment. In addition to having a show for each brand, the trends and marketing, new product merchandising. And the renewal -- one of the innovations that we do in all stores, we also had a special convention with the presentation of Luciano Huck, the Brazilian TV host.

And a partnership with an NGO which is called [Foreign Language] the slums in Brazil. So that's part of our social work, as well. We believe that we can work stronger and stronger in that sense.

To conclude, I'd like to highlight a big change. I briefly mentioned that during the call that today, hours ago, we launched the new Arezzo brand campaign. “Together We Inspire” that's our hashtag, and I can't believe how much adherence we've had from this campaign in just a few hours on social media. And that's going to bring in traffic to our stores.

So I'd like to invite everyone, as we always do. I think it's a coincidence. Most of our calls are the day before the launches of important sell-out dates. So I'd like to invite everyone to visit our stores, stop by our flagship store at the Iguatemi Mall. It's going to have an event for Brazilian leaders and consumers. So it's strong to awaken interest from our customers.

In Schutz, we have the hashtag, “Unlock Your City,” which was launched on Tuesday and with strong movement at the flagship store on Oscar Freire Street that changed the environment fully. The store has strong growth in the past days.

We also have the launch of the campaign at [ Terraco Italia ] restaurant. So I'd like to invite everyone to see that on social media, the investments that we're making here in Sao Paulo, media out of home, media mall, and we're going to buy yellow bikes, where Schutz will have a center on Oscar Freire. The yellow bikes, I'm sorry. And we're going to be a star in that. So we're going to have our ads on yellow bikes all over Sao Paulo. The campaign is going to have an idea that will continue throughout summer. It will be worth it. It's a different vision. And pictures sent for the first time through drone technology photos.

So we're very confident about our winter collection now.

Thank you, everyone. I hope you have a great 2019. Thank you once again to the board of directors for every positioning and direction that they give us, as well as the guidelines so that we can have a more solid company on the path to 2154. Thank you very much.

[Operator]

The Arezzo&Co conference call is now over. Thank you for your participation, and have a great day. Thank you.