Dentsu Group Inc
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Dentsu Group Inc
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Welcome to the Dentsu 2023 First Half Earnings Call.
This is a reminder that today's call is being recorded. This call will be held in Japanese and English with simultaneous translation for those joining online. [Operator Instructions]
[Foreign Language] Today's presentation materials are available on the Dentsu Group website.
Joining me today are CEO, Dentsu Group Inc., Hiroshi Igarashi.
[Foreign Language]
CFO, Dentsu Group Inc., Nick Priday.
Hi, everybody. This is Nick Priday.
CEO, Dentsu Americas, and CEO, CXM International Markets Dentsu, Michael Komasinski.
Hi, everyone. Good morning, good evening.
CEO, Dentsu Japan, Norihiro Kuretani.
[Foreign Language]
The agenda for today will start with business update from CEO, Hiroshi Igarashi. CFO, Nick Priday will then present the financial update followed by CEO strategic update from Hiroshi Igarashi. We will invite you to ask questions after the presentations.
Mr. Igarashi, please go ahead.
Good evening, and thank you for joining our first half earnings call. First of all, I would like to say a couple of words. Group companies within Japan, namely Dentsu Hokkaido Inc. and Dentsu Promotion Exe Inc. have recently reported on overcharges in relation to a project commissioned by the Hokkaido government.
We have disclosed details of this matter on each of the group company's website. But I would like to reiterate that we will take preventive measures to ensure that this does not happen again through Dentsu Japan's mindset and behavior reforms being promoted within the group. I will now start the presentation with a summary of our first half results. The second quarter saw organic revenue decline of 4.7% with continued conservatism from our technology and finance clients, particularly in the U.S. market.
In the first half, customer transformation and technology reached 33% of group net revenues, growing 0.5% on a constant currency basis year-on-year. Growth was double digit in Japan, but the impact of the longer sales cycle in the U.S. market continued, although we have seen revenues stabilize. Looking forward, we expect Q2 to be the trough of organic growth as comparables ease significantly into the second half. Given the top line performance, we have already implemented some cost management measures and combined with our lower financing costs, we today reiterate our underlying EPS of ¥461.
Moving to some of the highlights from our second quarter. In Japan, we have more opportunities to work with our clients on strategy development, which is the foundation of management, such as formulating a client's purpose statement. For example, we assisted Japan Airlines in formulating a value-creation story to promote its ESG strategy. In media, we are proud to announce, we are the new global media partner of Carlsberg. We have become a new partner to Netflix in the U.K.
We won creative work from General Mills and Burger King in the U.S., and KLM and Hilton in EMEA. In June, we announced we are the first holdings agency and founding partner of the new Roblox partner program. Roblox is one of the world's leading platforms, promoting the full-scale introduction of immersive advertising, and the acquisition of Tag was completed as of June 30. Next, we have published the Dentsu integrated report 2023 as well as our ESG data book and the TCFD report. Finally, in terms of industry awards, we enjoyed success at Cannes Lions 2023, the world's largest festival of creativity winning 2 Grand Prix awards, 29 awards in total for gold, silver and bronze, as well as Regional Network of the Year for the second year in a row.
And Dentsu Inc. was awarded Agency of the Year for Craft. I would now like to hand over to Nick for financials. Nick, please go ahead.
Thank you, Igarashi-san. Hello, everybody. This is Nick Priday, and I'm now going to provide an update on our financial performance for the first half. I'll give you an update specifically on the second quarter performance and then provide the outlook for the full year at the end of this segment. So I'll start with our 4 key metrics.
For the second quarter, the organic revenue decline was 4.7%. This is due to strong prior year comparables, conservatism from clients in the technology and financial sectors, plus a one-off financial impact in the DACH cluster within EMEA. Recent weakness in net new business momentum also impacted organic growth this quarter. The comparables ease significantly as the year progresses into the second half, meaning that Q2 is expected to be the trough for organic revenue growth. The group operating margin was down significantly year-on-year.
This is also due to the one-off financial impact within the DACH cluster. We have implemented swift cost mitigation from the second quarter reflecting the new revenue outlook. Underlying basic earnings per share is ¥44 for this quarter, with the impact of cost reductions and the lowered financing costs being H2 weighted. Given that we have reiterated our full year earnings per share guidance of ¥461, our interim dividend payment is ¥78.5 per share, almost 12% up year-on-year and representing the highest interim dividend in Dentsu's history, reflecting our confidence on reaching the full year earnings per share guidance number, and also the 34% payout ratio we committed to for 2023. This next slide shows the main items included within our first half profit and loss statement.
Net revenues increased by 2.2% to ¥528 billion despite the organic decline. Acquisitions and foreign exchange had a positive impact on revenue growth. Underlying operating profit was ¥60.7 billion, down 33% year-on-year. Operating margin was down by 620 basis points year-on-year, but this includes the impact of a change in the accounting method of incentives in Japan, as mentioned in quarter 1 as well as the one-off financial impact from the DACH cluster. Our focus, as always, remains on annual margins and annual profitability.
Underlying net profit was ¥34.6 billion, and the statutory operating profit is lower year-on-year, largely due to the impact from nonrecurring asset sales in the first half of 2022 and the impact from a goodwill impairment recognition of ¥14.6 billion in the Asia Pacific region, excluding Japan, in this second quarter. The interim dividend of ¥78.5 is based on the full year EPS forecast and a payout ratio of 34%. That payout ratio being up 2 percentage points from the prior year. Next, I would like to talk about customer transformation and technology, our strategic focus for the group. We have successfully expanded our revenue mix and capabilities through acquisitions, leveraging our strong financial position.
Tag was the third largest acquisition in Dentsu's history. We completed the acquisition at the end of June, and revenues will be newly consolidated from July onwards. Tag will bring scale in dynamic digital content production capabilities, as well as an AI-powered technology platform, Digital Interact. Tag will positively impact our CT&T ratio by approximately 1 percentage point from Q3 onwards. Our M&A pipeline remains healthy, and we will continue to consider further acquisition opportunities in line with our disciplined valuation approach.
Turning to our regional view for the first half. While Japan showed a return to growth in the second quarter, the Americas, EMEA and Asia Pacific ex Japan, all reported organic revenue declines with strong comparables impacting our results. Amongst our largest markets, Japan and the U.K. reported growth with Denmark, the Netherlands, Norway and Poland, all reporting more than 5% organic revenue growth in the first half, while the U.S., China and India reported organic declines. Japan, our largest region at 42% of group revenues, returned to organic growth despite very strong comparables in the prior year.
CT&T continued to report double-digit organic revenue growth led by ISID and strength in our digital transformation services. We did see some conservatism in advertising investment in both online and offline media. The Americas faced strong prior year comparables with H1 2022 reporting double-digit organic revenue growth. In the second quarter, we've seen continued organic revenue decline in media due to lower client investment from technology sector clients, partly mitigated by some new client wins. CT&T recorded an organic revenue decline due to a lengthening of the sales cycle that we've seen since the third quarter of 2022, triggered by interest rate hikes and client conservatism on investing in longer-term projects.
We also saw some slowing spend from our financial sector clients where we have strong exposure in our U.S. CT&T business. Creative grew due to expanding remits from existing clients. EMEA reported first half organic decline of over 5% due to the one-off financial impact of a complex business transformation and systems integration issue in the DACH cluster. The financial impact is one-off and accounted for within the second quarter results.
Excluding this one-off impact, EMEA would have reported positive organic revenue growth for the first half of 2023. Media was positive in the first half, while CT&T and Creative both reported organic revenue declines. Finally, on our regions, Asia Pacific, excluding Japan, reported organic revenue decline of 7% in the second quarter. Performance in Taiwan and Hong Kong remained consistent, delivering growth in Southeast Asia. Vietnam delivered standout performance of high single digit.
Media, CT&T and Creative reported organic revenue declines, although client wins during the first half are a more encouraging sign. Moving to the next slide. This shows our leverage position and capital allocation policy. Our leverage is 0.2x based on net debt to underlying EBITDA. This is the level at the end of June after the Tag acquisition was completed.
Our leverage position has improved from 0.5x at the end of Q1 to 0.2x at the end of Q2, despite closing the group's third largest acquisition in history, demonstrating strong cash management and the health of the group balance sheet overall. We are now halfway through the 3-year acquisition period we announced at the start of 2022, and our run rate of M&A spend is in line. At the start of 2022, our CT&T ratio of net revenues was 29%. In the 18 months that followed, we have improved this ratio to 33% through both acquisition and organic growth, bringing us closer to our long-term target of 50%. We will continue to use our strong balance sheet to transform our business, shifting into the structural growth areas of our industry, maintaining our long-term perspective and our rigorous discipline.
At the same time, we are continuing our efforts to maximize the benefits of One Dentsu. And one example is the optimization of financing costs shown on this page. As One Dentsu, we have been able to optimize our intercompany funding, leveraging the strength of our balance sheet in Japan to reduce our financing costs by circa ¥4 billion to ¥5 billion in 2023. This program was implemented in May, meaning this is the 7th month impact. And as we look to 2024, this impact will be annualized.
And this program will support our underlying EPS delivery for this current year. Moving to our full year 2023 guidance. We have lowered our organic growth outlook to between 0% to minus 2%, and lowered our operating margin target for the current year to 17% -- circa 17%. However, the net revenue downgrade is less than 1% versus the forecast in February supported by acquisition and foreign exchange upside. We do remain confident in our ability to deliver the EPS guidance of ¥461 issued in February and financing cost reductions, as I've just mentioned.
We'll ensure we deliver the full year EPS guidance. Moving to the next slide. We demonstrate our confidence in our full year EPS number by reiterating our full year dividend guidance of ¥157 based upon a 34% payout ratio. The interim dividend of ¥78.5 per share, as I mentioned earlier, is a record interim dividend payment. So in conclusion, Q2 is expected to be the trough for organic revenue growth as comparables ease going into the second half of this year.
In light of our reduced organic revenue growth guidance, we have implemented some tactical cost management programs for 2023. And on a longer-term basis, we expect to be able to deliver cost savings through One Dentsu, which will further simplify our business. Our lowered full year '23 guidance of 0% to minus 2% does make it increasingly difficult to achieve the midterm management plan revenue growth of 4% to 5% CAGR growth by 2024. Similarly, the revised margin guidance for this year of circa 17% makes the 2024 target of 18% margin delivery difficult to achieve. We do remain confident in our long-term positioning of the convergence of marketing, technology and consulting with our ability to deliver integrated solutions, creating real competitive differentiation for our clients and driving shareholder value over time.
Thank you. I will now hand back to Igarashi-san.
Thank you, Nick. So I'll now explain about the strategic update. In February this year, we announced the acquisition of Tag, the third largest acquisition in Dentsu history. The deal enables us to deliver the integrated growth solutions our clients are looking at an even higher level. Tag will provide high-quality content at speed and scale for Creative, a scaled personalization engine for customer experience management, as well as adding power to media with dynamic content optimization.
We consider Tag's capabilities as the last mile, ensuring Dentsu can provide an integrated full-service offering to our global clients. The deal will unite the group's service offerings like never before and I believe, will improve our ability to win global integrated accounts, scaling our client relationships further. I'd like to share with you an overview of their capabilities.
[Presentation]
We have been clear on our view that the future of our industry is greater convergence of marketing, technology and consulting. We began positioning ourselves for this since 2020 with the comprehensive review, the simplification agenda and more recently, with the One Dentsu philosophy. Looking ahead, we must continue to move fast, accelerating the One Dentsu mindset throughout the firm to remove internal barriers and strengthen collaboration across the group. This collaboration, through a single account management model across geographies, will drive client centricity, allowing us to leverage the diverse capabilities across the group into every client. The results will be to grow revenues with our global clients where we see the greatest opportunity.
In June, I announced that Michael Komasinski would be leading the Americas region, our second largest region representing 29% of our global revenues. Michael joined Merkle in 2015, that is a proven leader with 20-plus years experience in digital transformations, delivering solutions to clients in a wide area of data and technology. Our clients want partners that can drive growth, innovation and qualified business value -- quantified business value. And with Michael's capabilities meeting this client needs, he will deliver industry-leading growth in Americas. In recent weeks, we have also announced new leadership of 2 more of our largest markets, China and India.
Both of the newly appointed market CEOs with strong market knowledge and expertise will drive growth and regain competitiveness to each of the market. At Dentsu, we have developed deep strategic partnerships with the world's leading technology innovators over many years. It is these alliances and partners that have ensured we can deliver transformational solutions to our clients. Dentsu is leading sales force agency partner. The #1 Google Analytics 360 and reseller.
And for AWS, we have advanced partner status, and we are an Adobe Platinum Solution. These credentials ensure our solutions are centered in technology with data and analytics to drive the best marketing outcomes for our clients. In July, we announced the latest milestone in Dentsu's long-standing partnership with Microsoft, launching enterprise-wide access to advanced Azure open AI technologies. This has already resulted in the development of our latest AI product, Merkle's GenCX, a unique offering that uses large knowledge and large language models to deliver more impactful customer experiences. The positive potential of AI for our business is enormous as we use these capabilities to improve the efficiencies and effectiveness of our clients' budgets.
Since the launch of the comprehensive review of our business in August 2020, it is clear that much progress has been made. As we reflect on the progress, we also recognize the need to continue to accelerate this transformation to position our group for future success. On Dentsu, we'll not only further simplify our organization, delivering an integrated full-service client offer, but deliver continued savings as we streamline our operations. Our balance sheet is strong at 0.2x leverage post the Tag acquisition, meaning we can continue to invest for growth to grow our exposure to the structural growth area of our industry. And we continue to improve the efficiency of the balance sheet through continued nontrading asset sales.
Finally, our focus on maximizing shareholder value has resulted in a record interim dividend, up almost 12% year-on-year. And we continue to make great strides with our governance with a majority independent Board. As we look forward, client pitches require ever closer integration of our services. And by accelerating our One Dentsu philosophy and mindset, we will encourage the collaboration required amongst our group and our people to deliver against and exceed our clients' expectations. As I have repeated in these past few earnings calls, we are confident in our positioning at the convergence of marketing, technology and consulting, delivering bigger solutions and growth for our clients, transcending our traditional marketing capabilities.
It has been a tougher start to 2023 than we had anticipated at the start of the year. But we look forward to improving growth rates going forward with our focus on converting the growing pipeline of opportunities we see in the second half of the year as the pitch environment remains highly active. I appreciate your continued support. Thank you for listening.
And I will now hand back to the operator.
We will now begin the Q&A session. [Operator Instructions] Ms. Fiona Orford-Williams from Edison Group.
Two questions for me, if I may, please. First, I can appreciate that you're being a little bit sensitive about what you're saying from commercial reasons, presumably around the DACH segment issue. Perhaps we could phrase it differently, and I could ask what lessons have been learned from that experience? And my second question is, Nick, you were talking about the CAGR of 4% to 5% and the 18% margin target in the -- in this medium-term plan being probably beyond reach.
What thoughts do you have about that medium plan?
You asked two questions. First was on the DACH issue and what lessons were learned. And your second question was with regards to the midterm management plan. Comments were made, but can we offer more detailed comments on the midterm management plan? CFO, Nick Priday, will respond to those two questions.
Fiona, thank you for the questions. So in terms of the DACH impact and as you phrased at the learnings, obviously, just to repeat what I said in the presentation, our Q2 performance in DACH was affected by a one-off financial impact in the DACH cluster. That was the result. The results were adversely affected by what was a complex business transformation and systems integration issue. We did have a number of parallel transformation work streams happening at the same time.
And this resulted in the misalignment of certain business processes and systems. In terms of the impact, which I referred to during the presentation, our European performance in the first half was down by more than 5% organically. We would have been in -- we would have reported positive growth in the first half, except for this issue. And in terms of our margin guidance on a full year basis, which had previously been 17.5% downgraded today to circa 17%. Again, we would have been broadly in line with the previous guidance if it wasn't for this DACH issue, so I want to provide some quantification.
We continue to interrogate the root causes of the system issues within DACH and take all appropriate measures to prevent recurrence. That work is ongoing. And ultimately, with any transformation, technology is just one element of it. It's the process change and adoption of that technology that really brings about the transformation and the benefits and ensuring we are providing adequate support is critical as well as sharing cross-border knowledge from other regions or markets. But as I say, the financial impact is one-off and has been accounted for in the Q2 numbers.
And we will continue to learn lessons from this episode. In terms of the second question about the medium-term plan, essentially, we're not withdrawing the plan or the target. We're just recognizing that at this stage, given the downgrade to our full year revenue outlook for 2023 and the margin, we're starting in a more difficult place in terms of delivering on the 4% to 5% compound annual growth rates, which we've guided to in the midterm management plan. So it would take quite a significant level of growth in 2024 to deliver on that CAGR growth rate. So that's -- we're just calling that out, recognizing that upfront that, that represents a challenge.
And with the margin guidance now for 2023 at circa 17%, again, getting to 18% is a stretch. Again, we're not withdrawing that guidance formally, but just recognizing it's a stretch at this stage.
So for the next question, Mr. Maeda from SMBC Nikko Securities.
My name is Maeda from SMBC Nikko Securities. I have two questions as well. First question. As you have explained, in regards to the DACH cluster issue, I'm not quite sure about the background. So I was wondering if you could provide a further explanation.
Is it based on system integration? Now is it kind of a system trouble that you have experienced that has caused this issue? Based on your explanation that you have given, I could not quite understand why it had impacted revenues. So if you could give more color and then give the detailed explanation, please. The second is regards to the APAC's goodwill impairment.
Could you explain the background to this as well? The advertising market was weaker in certain areas more than expected? Or was it that there was a structural issue? What is the reason that you have to take the impairment of the goodwill?
You have asked two questions. The first question was related to the DACH issue. Is it system integration troubles? There were some element that you were unable to understand. So you wanted a more detailed explanation, inclusive of the background.
And also, the impairment of APAC was recorded on this location. Now, is that something that was unique to a certain area? Or is that more structural issue? And please share the thoughts in these regards. In regards to 2 questions, I would like to ask Nick to respond.
Thank you, Igarashi-san. Thank you, Maeda-san, for the two questions. So building on the comments I just made around DACH and your question around whether it's connected to system integration issues. I would say that it's a combination of a complex business transformation and systems integration issues. It's the extent of the transformation within the DACH cluster that added to the complexity with a number of systems being transitioned at the same time.
And as you will appreciate, DACH is a combination of markets and a multicurrency cluster. But essentially, we have seen some delays to business processes as we work through the complexity of the transformation initiatives. And those delays include delays to client invoicing as we need to ensure we fully reconcile the work that we've done, and that we've completed for clients before we invoice. So hopefully, that provides a bit more color in terms of the issue. It's worth noting that across other regions and markets, they -- those other regions and markets are typically more progressed with the transformation.
And so for example, one of the systems being introduced within DACH has been successfully rolled out across approximately 70% of the international markets already in terms of revenue composition. So I just wanted to provide that additional color too. If I move on to the second question around the Asia Pacific goodwill situation and the impairment recorded in the second quarter. We do have to review goodwill annually for impairment. We have, however, taken this charge at Q2 because if there are indicators of impairment, we need to assess those indicators at the time under a number of factors, including the performance of the business across Asia Pacific.
And you've seen the Q2 organic revenue decline that we've reported. We also need to take into account the higher interest rate environment and the longer-term prospects of growth across the economies, which we operate in. And we need to assess then the discounted value of the long-term projected cash flows against the carrying value of goodwill. And as a result of that analysis, we have recorded a further impairment charge in Asia Pacific of some ¥14.6 billion. So that's the background and the further color in terms of the Asia Pacific question.
So for the next question, Mr. Kishimoto from Mizuho Securities.
Kishimoto from Mizuho Securities. I also have two questions. First of all, at the end of the presentation, you said that there is great pitch pipeline. Can you quantify that? How much potential pitch is there in the pipeline?
That's my first question. Secondly, by region, organic growth rate. How do you deem the organic growth rate by region for the second half? It may be difficult to give specific numbers, but against the Q2 results. How do you feel about the second quarter for Japan business?
Q2 saw signs of recovery. So there could be brighter news in the second half. So can you give us a regional update on how you proceed the second half? Those are my 2 questions.
Thank you, Mr. Kishimoto, for those questions. We received two questions. And first, there is a sound pitch pipeline that was mentioned in the presentation. So I, Igarashi, will explain the overview of the pipeline situation.
And should there be any follow-up comments, representing the Americas, Michael, could you add some comments later on. And on the regional situation, I, Igarashi, will take that question. And then on Japan business, I will ask Kuretani to respond. First of all, on the pitch pipeline, media pipeline, there is soundness and there are many potential projects for each region. There are several items in the pipeline in all of the regions.
I cannot give you any clear numerics, but we are participating in large-scale pitches as well. So we will further strengthen our efforts to win these pitches in the pipeline. It won't be easy, but we are making a group-wide effort to capture those opportunities. And we will follow the trend of the first half. And we believe that we will do well in the second half for media pitch.
And for CXM, mostly in the North Americas, pitch pipeline is recovering and becoming more robust. Michael may add to that later on. But as I have already mentioned, the business cycle is prolonging. So from pitch line to billing, we need to view the situation with some conservatism. CXM, CT&T, Michael, would you like to add a few comments?
Please go ahead.
Yes. It's Michael Komasinski. Thanks for the question. As Igarashi-san mentioned, the media pipeline is very healthy at this point, with over ¥5.5 billion in that pipeline globally across the international markets, and 88% of that being offensive. So we like the shape of that pipeline.
In the CXM business, we saw our Q2 pipeline improve, both in terms of size. But more importantly, in terms of health, with more new opportunities coming into it, which improves the aging of that pipeline. So we like the improvement of the shape of it as well as an increase as certain sectors start to come back into that, that had slowed in the second half of last year and in the early part of this year.
Thank you, Michael. By the way, Tag. Let me make one comment regarding Tag, for which acquisition has been completed. Tag is seeing many opportunities. A total of 44 projects are currently underway.
And based upon these projects, we will be studying within our group, how we can expand upon those projects. And these projects will bear fruit in the second half as business opportunities. Your second question was second half for the various regions. I will leave it up to Kuretani-san to speak about the Japan region later on. So I will take non-Japan.
Americas, as I said, under the leadership of Michael Komasinski, our new CEO, 8 plans -- the 8-point plan is currently underway and various initiatives are being implemented. We've made an announcement regarding the new management team and this is a team that we have put into place in order to exercise strong leadership to turn around the Americas business. We talked about the media pipeline, and the CXM pipeline is very robust. So based upon those factors, we truly hope that the Americas will get back on the track of recovery. On EMEA, Nick talked about the DACH cluster.
If that issue had not been in place, we would have recorded positive growth. So many work streams and projects are bearing fruit, and we are also acquiring new businesses as well. Yes, the external environment is difficult. But in EMEA, I believe that the momentum can be sustained. On the other hand, regarding APAC.
For the second half, there has been some delay in recovery of the China market, which is one concern. But as we talked about in Taiwan and in Southeast Asia, the situation is quite healthy. Generally, there still are some signs of bearishness but with recovery in India and with the new CEO for China in place, we will make efforts to achieve recovery. So now, I hand over the microphone to Mr. Kuretani to speak about the Japan market.
This is Kuretani speaking. And I would like to make some comments regarding the outlook of our domestic business. First of all, as Igarashi-san and Nick explained, as far as the Japan business, CT&T, double-digit growth continues. And for advertisement, 1Q, first quarter was a slow start. But in Q2, we began to see size of recovery.
So minus 0.2% was Q1, and Q2 was plus 3.4% for organic growth. So 1.4% organic growth rate has been achieved in the first half. We announced the full year guidance. And for Japan business, last year, we renewed the net revenue -- we renewed the net revenue target, and we think we will be able to renew once again. Later, retail, finance, cosmetics, households, real estate, these are some of the sectors that were good communications.
Beverages, food, automotives, these are large sectors, which will see recovery in the second half. And we have -- we record the diffusion index for the group on a regular basis, and we are beginning to see -- we continue to see recovery. In major sport event, basketball, rugby, World Cup and World Athletics, sales is proceeding very smoothly for these major sport events. So with recovery in the advertisement market with CT&T going beyond 30%. For domestic market, that was the target for 2024, but we think that we will be achieving that target earlier.
On Americas, in addition to what I've already mentioned, Michael, anything to add to that? If you could briefly follow up on what I've already said.
Yes. Thank you, Igarashi-san. So in the Americas, we have quickly implemented a series of changes really to make our brands more complementary and a little more easily interoperable in the way that they come together around integrated client opportunities. We think that is the trend in the market towards integrated solutions and integrated servicing of clients. And so we continue to make changes within the business to realign capabilities and leadership in a way that makes the business come together more easily.
We think that, that will help improve our conversion rate and ultimately lead to better retention and growth of existing accounts. And so those are some of the changes that have been trying to get in place in the region here quickly. We'll continue that change agenda through the end of the year.
[Operator Instructions] With that, I would like to conclude today's earnings call. Thank you very much for participating today. You may now disconnect. Thank you.