Avis Budget Group, Inc. (NASDAQ:CAR) Q3 2023 Earnings Call Transcript

Avis Budget Group, Inc. (NASDAQ:CAR) Q3 2023 Earnings Call Transcript November 2, 2023

Operator: Good day, everyone and welcome to the Avis Budget Group’s Third Quarter 2023 Conference Call. [Operator Instructions] It is now my pleasure to turn today’s call over to David Calabria, Treasurer and Senior Vice President of Corporate Finance.

David Calabria: Good morning, everyone and thank you for joining us. On the call with me are Joe Ferraro, our Chief Executive Officer; and Brian Choi, our Chief Financial Officer. Before we begin, I would like to remind everyone that we will be discussing forward-looking information including potential future financial performance which is subject to risks, uncertainties and assumptions that could cause actual results to differ materially from such forward-looking statements and information. Such risks and assumptions, uncertainties and other factors are identified in our earnings release and other periodic filings with the SEC, as well as the Investor Relations section of our website. Accordingly, forward-looking statements should not be relied upon as a prediction of actual results in any or all of our forward-looking statements may prove to be inaccurate and we make no guarantees about our future performance.

We undertake no obligation to update or revise our forward-looking statements. On this call, we will discuss certain non-GAAP financial measures. Please refer to our earnings press release which is available on our website for how we define these measures and reconciliations to the closest comparable GAAP measures. With that, I’d like to turn the call over to Joe.

Joe Ferraro: Thank you, David. Good morning, everyone. And thank you for joining us today. Yesterday, we reported our third quarter results which delivered a record quarterly revenue of $3.6 billion [ph] and adjusted EBITDA of over $900 million. We all went into this quarter understanding that certain market dynamics of the third quarter of 2022 would not be tailwinds this year. However, our team was able to remain focused on cost discipline while delivering on record customer demand which produced earning results that I am incredibly proud. I’d like to thank all our employees across the world contributing to this achievement and demonstrating operational excellence throughout the year. For the past few quarters, we pointed out normal demand seasonality has returned to our industry.

As I stated on our last call, the second quarter is traditionally a transitional period into the summer peak, and that showed this quarter in the Americans with the summer being the busiest on record, with strong leisure activity, and July having the most cars on rent in company history, while representing the largest demand in the quarter; that’s sequentially declining into September as it normally does as summer travel diminishes and schools reopen. Our ability to accurately forecast summer demand allowed us to yield appropriately to sequentially increase RPD and diminish the year-over-year declines versus the previous quarter. However, on the international side, we were forced to navigate a more unpredictable market environment this quarter that saw higher than expected inbound demand but rate pressures on the intra-Europe business; we’ll get more into the details on that later in the call.

Before I do, let me review the key takeaways of the quarter for Americas segment. On our last call, I said the summer of 2023 would be one for the record books and the America segment did not disappoint. We saw record rental days, record transactions and record revenue in the quarter highlighting robust travel demand. Rental days this quarter were 7% higher year-over-year, and more impressively, that was on top of the rental day record being up 60% last third quarter. As long as I’m talking about year-over-year stats, I want to include we were up 14% over 2019 which was our last full year of pre-pandemic activity. If you look quarter-to-quarter, our volume increase year-over-year was more than twice as large as the first two quarters which were 3% and 3% respectively.

This does not reflect the shift in strategy in our part, but as rather an outcome for the long corporate and partnership business we’ve signed over the past years bearing fruit. We saw a sizeable change in demand as we started the summer season, as customers were put closer rent with a velocity never before seen as travel was peaked and extremely robust. We saw demand in both, traditional outdoor environments like beaches and mountains with tremendous growth of inbound customers and better than prior year more travel to the traditional cities, which was similar to what we saw pre-COVID just at a much higher level. And demand has not stopped through October, which looks to be the busiest October on record with solid mid-week commercial demand, coupled with leisure activity that supports the weekend.

October traditionally has the best mix of commercial as companies start traveling after summer, and leisure implements as full getaways become prominent. The weather conditions are great for rentals related to foliage [ph], football, and outdoor activities all support increased leisure activity. Moving on to RPD; there are several ways to analyze the results of this quarter. Price in the Americas was down 5% in the third quarter of 2023 versus the third quarter of 2022, and up 3% sequentially which was in line with our expectations. If you recall last year, pricing from the second and third quarter was largely relatively flat due to coming out of Omicron [ph] and supply chain challenges surrounding semiconductor and vehicle product choices [ph].

When it comes to pricing, it’s worth noting three things. One; we all know that the supply and demand imbalance industry for the last two summers would not be repeated in 2023. Two; the RVF decline [ph] in RPD went from 8% in the second quarter to 5%. Three; we were able to achieve a greater level of sequential RPD growth in the second quarter to the third quarter than 2022. All three of these notes to pick up a pricing environment that is more favorable than the absolute year-over-year growth will suggest. However, perhaps the most encouraging thing we’re seeing in our pricing environment is best reflected in another metric we follow which is quarterly RPD versus comparable RPD in 2019. For example, the RPD in the fourth quarter of 2022 was 31% higher than the RPD in the fourth quarter of 2019.

In the first quarter of 2023, it was 33% higher than the first quarter of 2019. The second quarter of 2023 was again 33% higher than the second quarter of 2019. And lastly, in this quarter RPD was 29% higher than the third quarter of 2019 which we believe would have been more than 30% if not for the travel disruption in our highest RPD region [ph] due to the tragic effects of [indiscernible] fires. We interpret this as a sign that the industry supply and demand dynamics will match and resulting an RPD that’s roughly 30% higher than pre-pandemic levels. Is this in the moment [ph]? Maybe so, but it was apparent that we’re back to more normalized seasonal trends just at a much higher level. With regard to operating costs, we were met with significant challenges across several market dynamics, vehicle depreciation, which was [indiscernible] in the third quarter of 2022 started to normalize.

We were faced with $350 million headwind this quarter. The interest rate environment continue to decline this quarter on a larger fleet base with higher cap cost resulting in another $80 million vehicle interest costs versus the third quarter of 2022. Utilization whilst strong was also negatively impacted due to higher than expected recalls because of those wildfires [ph]. However, despite these challenges our teams continued to demonstrate stringent discipline while servicing a record number of customers and investing in our brand, although rental base grew by 7%, and we continued on nationwide plan on our marketing campaign. Direct OpEx [ph] and SG&A in the Americas grew by only 4%. This operating leverage we created by reducing the cost and our control helped us overcome those costs out of our control.

We’re able to deliver our fourth consecutive quarter with America’s adjusted EBITDA margins over 25%. On that note, let me provide a few additional income statement results in the quarter. In the Americas revenue increased over $30 million year-over-year, comprised of record rental growth of 7% offset by RPD declines of 5%. America’s adjusted EBITDA during the same period decreased by roughly $445 million to the aforementioned headwinds from vehicle depreciation equal interest rate. These factors will continue to be a headwind throughout the balance of the year but as we did this quarter, we’ve continued to mitigate those costs within our control and demonstrate operating leverage that translates into adjusted EBITDA and margin attainment. From what we currently see, as I mentioned earlier, travel demand remains healthy as we experienced the busiest October on record.

Bookings for the outer-months [ph] are robust as we look at reservation bills for the Thanksgiving and Christmas leisure periods. In summary, demand continues to be strong and price will adjust seasonally as it normally does from the third to the fourth quarter. And as always, we will continue to manage with operational excellence and I’m confident that our teams will show what it means in the fourth quarter and beyond. Now, let’s shift gears to international which is more of a complicated story to unpack this quarter. On our last call, I detailed the different business segments we addressed in the international which is made up of domestic, cross border and international inbound. Typically, demand patterns of all three of these segments are currently adjusting for predictable mix shifts due to normal seasonality.

This quarter however, we saw a significant strain in the international inbound segment, primarily from U.S. customers traveling to Europe, but less apparent with domestic and cross border business. The combination of these two factors resulted in a blended rental rate growth of 1% for the region, significantly lower than the guidance of high single digit rental rate growth we gave on our last earnings call. I’d like to provide a bit of color on what we saw in our latest thoughts going forward. Prior to the third quarter of 2023, our international segments were nine consecutive quarters of year-over-year revenue growth. Despite that growth in the second quarter of 2023, our international rental base was still down 23% versus the second quarter of 2019.

Our view was that one of the post recovery in Europe started later than the Americas would eventually follow a similar trajectory with continued recovery in days buildings throughout 2023 and into 2024. While we still believe this is the overall macro cost the industry will pay, this slide shows that don’t be a straight line. Europe is a more fragmented rental car industry. We saw small domestic operators built fleet inventory and what we all assume will be a record summer. However, what we saw in the third quarter was unprecedented travel disruptions with labor strikes and flight cancellations, civil disruptions and protests in key markets, and perhaps more importantly, a dollar [ph] economic environment with high energy prices, surging borrowing costs and waiting export demand all negatively impacting European consumer confidence and spending.

Given that Avis Budget is a globally recognized brand with a whole market being the U.S., we’ve benefited from the boost in international inbound travelers. However, the domestic and cross border segments saw a significantly weaker demand. Instead of chasing volume to meet previously communicated rental rates targets, we’ve quickly pivoted and made a conscious business decision to forego low RPD business this season and concentrate on those transactions that met our return on invested capital hurdles in an environment where monthly per unit costs are up 27% and monthly interest costs are a multiple of that; we felt the only prudent decision was to remain disciplined in voluntary pass on little margin business, and this is reflected in our results.

Yes, rental days were only up 1% year-over-year but we protected RPD which was up 4% sequentially, focused on cost mitigation and delivered nearly $200 million of adjusted EBITDA at 24% margin; the second highest quarterly adjusted EBITDA in our international segments history. Our goal is to continue to optimize margin through strategic pricing, stringent cost mitigation and fleets in line with demand. We continue to believe that substantial opportunity for recovery in this region exists and will focus on capturing our share of it going forward. Moving on to fleet where as usual we’ll focus more on the America segment. On our last call, I said that while we saw a stronger than expected used car market in the beginning of the year, we did not expect gains at those levels to continue for the balance of the year.

Residual values for used cars moderated from the second quarter and throughout the third quarter. They’re still elevated over pre-pandemic levels, and there continues to be strong demand for used cars of our type. Used car inventory is still down but the price point of these cars to be more than $20,000 lower than a new car which presents significant value for our consumers. We have said that we expected our gains to continue to normalize and our monthly depreciation costs to continue as our gross depreciation of roughly $300 per vehicle. This will happen by next quarter and we’re seeing it reflected in the October results. The lower gains on sale this quarter versus the second quarter of 2023 combined with the additional new vehicles we inflated increased depreciation costs in the Americas from $168 per vehicle per month from the second quarter of 2023; $219 per vehicle per month in the third quarter of 2023.

We expect this trend to continue throughout the fourth quarter where a monthly net depreciation for vehicle continues to converge with a monthly straight line depreciation of roughly $300 per vehicle. Let’s shift gears now to monthly vehicle interest. In the Americas monthly per unit interest costs grew from $62 per vehicle in the third quarter of 2022 to $105 per vehicle in the third quarter of 2023; an increase of 70%. On the fleet base of over roughly 550,000 vehicles that equates to over $70 million of cash outflow from interest expense. I’ve said it before and I’ll say it again, in an environment where our foreign input costs are rising, both the cost of vehicles and the cost of finance, we must be hypervigilant in matching our vehicle supply just on the demand.

We’d rather run out of the incremental vehicle than have an unutilized vehicle on our line. To see us put this render practices as we see fleet in the fourth quarter, the sequential decline is consistent with what we’ve historically done in pre-pandemic years from the third to the fourth quarter. Lastly, with regards to vehicle availability and previous labor disruptions, deliveries are still on-track or to still available and we’re progressing with our talks about future buys. Currently, our model year of 2024 buys are largely complete, we have a great relationship with our OEM partners and I want to thank them for their continued support. Before I leave fleet, let me comment on EVs. As you know, my strategy is centered around ensuring that our infrastructure was developed to service vehicles of this type in a manner that’s consistent with our operational logistics.

We’ve been investing in those capabilities and while we currently have all necessary resources to appropriately service our electric fleet today, we will continue to build our EV infrastructure resources across our footprint commensurate with our anticipated growth. This provides us the ability to react given changes in demand curve. We have ensured we have EVs of different makes and models from our majority of our manufacturers which helps us with customer demand and further insulates us from cost pressures associated with recalls and other maintenance related activities. We manage our EVs similar to how we manage our regular gas cars focusing on our airport activity which gives us our best margin outcome while we continue to have supply slightly under our demand; this ensures our per unit economic stay in line.

While demand for EVs have improved considerably, we’ll continue to monitor our supply and ensure that it keeps up with this ever changing environment. Let’s turn towards technology and how it’s an integral part of everything we do. Our proprietary demand fleet pricing system continues to allow us to optimize price and volume by forecasting volume down to the store level, both, close in and months out, and pricing our vehicles at an individual vehicle level while optimizing utilization, contribution margin. This technology along with our revenue management team, and operational field experience continues to generate a significant advantage of maintaining our supply, demand and pricing process. We have made technological enhancements in our maintenance and repair processes generating efficiencies and operating expenses.

These enhancements relied on technicians with faster visibility of data analytics to determine body damage or salvage decisions, as well as ensuring we optimize our spend with outside service providers. We continue to see improvements in our field of productivity due to strengthening our workforce planning tool. We’ve been able to realize this improvement in our field direct operating expenses. The continuation of technology enhancements allow us to keep our costs inside of increasing demand and help margin profitability. As you know, we have implemented vehicle telematics at our fleet which provides actual fuel readings and helps insulate us from rising gas prices, as well as supply to provide improved asset control. On the customer experience side, we continue to promote a seamless experience for our customers.

Our Avis Quick-pass [ph] offering now at a majority of our airports enables our customers select from a choice of vehicles on their phone, proceed directly to their car, or even exchange their car if they like and drive to the exit gate utilizing a QR code for an automated exit. On return, customers who close out their rental on their own utilizing our connected car technologies. Similarly a budget best rate choice is an expedited pickup process that allows you to select your vehicle right from your mobile device by taking a picture of the vehicles license plate and proceed through an automated exit gate thus expediting your rental checkout. On return, our connected car technology allows you to check in automatically and receivers see within minutes.

These technologies have improved our customer experience and enhanced our overall NPS. Before I conclude, I’d like to make [indiscernible] press release last night announcing changes to our management structure and board dynamics. Brian Choi, our CFO, will be transitioning to a newly developed role in our company; EVP-Chief Transformation Officer. I asked Brian to step out of his current CFO role and take on this new challenge designed to help create sustainable adjusted EBITDA in the years to come. Brian has experience looking at our company, both from the outside during his days as investor, and over the past three years helping us managing from the inside in his current role of CFO. He has a unique ability to analyze and digest data and turn it into a practical format like no other, and this will benefit our business as we work to grow our profitable revenue while creating efficiency in our cost lines by working with stakeholders, both in our headquarters and our field operations, all designed to improve our overall performance.

And now, Izzy [ph] moves from her current role of EVP and Head of the Americas to fill Brian’s role as CFO. Izzy’s [ph] prior experience as the VP of Tax, Chief Accounting Officer and CFO of the Americas, now combined with the operational experience she gained over the past four years positions her extremely well in a new role as Global CFO. Izzy has been instrumental in delivering the record setting performance in the Americas over the last three years. We will get to know Izzy more formally in the coming months. Adding in, David Calabria, with his experience in Accounting, Investor Relations and the terrific work he’s done in Treasury makes this formidable team. In addition, we announced some changes on the board level as well. Bernardo Hayes [ph], the Executive Chairman since 2020 will transition from his current role and remain a Member of our Board starting in May of next year.

Bernardo has been instrumental in the company’s performance, helping us navigate through the pandemic and transform into the company we are today. His insights and partnerships were very much needed and helped guide our future, and I look forward to continuing to work with him as a Member of our Board. Jagdeep Pawha [ph] will move from the Vice Chairman role to the Chairman role starting in May as well. Jagdeep, the President of SRS, has been with our Board since 2018; and like Bernardo, has been a large part of our success, and I look forward to working with him in a greater capacity in the months to come. We are extremely fortunate to have terrific talent on our team and a gifted board to help align our strategies. So, let me conclude. We had another great quarter with record setting revenue in the Americas, and the strongest summer ever recorded, with price improving from the second quarter to the third quarter, as we noted on our last call.

International continues to drive towards margin attainment with profitable revenue and cost efficiencies. The fourth quarter started off strong with good commercial in leisure demand and record setting volume in the U.S. and advanced reservations surrounding Thanksgiving and the holiday seasons are strong. Price will moderate and adjust seasonally as it’s done historically, as we come off our peak, we will continue to [indiscernible] our vehicles to keep them in line with demand. Our team is focused and driven to once again deliver another strong quarter to finish out the year. With that, let me turn over to Brian to go through our liquidity and outlook.

Brian Choi: Thank you, Joe for the kind words and opportunity to take on this new role. I am beyond excited to start but first let me do what CFOs do and discuss our liquidity and near term outlook. My comments today will focus on our adjusted results which are reconciled from our GAAP numbers in our press release. I’d like to start off by addressing my favorite topic, capital allocation. We again took a balanced approach to the cash flow deployment in the quarter by addressing both, fleet debt and return to shareholders. We voluntarily contributed over $100 million to our vehicle programs like forgoing the refinancings of higher cost tranches of our AESOP [ph] term debt as they came due, and funded those tranches with cash on hand instead.

With interest costs in the high single digits now for our CMD tranches [ph] of our ADS [ph]; you’ll continue to see a deleveraging here going forward. We also deployed nearly $500 million into repurchasing 2.2 million of our shares outstanding this quarter. Given that we strongly believe that our current share price does not reflect the fair value of our transformed company, we will continue to aggressively buy back shares until that gap closes and this will be reflected in the cash flow usage of our fourth quarter. The summer has built our war chest and we have built full confidence that substantial free cash flow will continue to be generated in 2024 and beyond. However, as we’ve said on previous calls, we will be nimble and opportunistic with regards to capital allocation and will consider all avenues of returning capital to shareholders.

We continue to find ourselves in the privileged position of being in the strongest financial standing in the history of our company. Our last 12 months adjusted EBITDA is $2.8 billion. During the last nine months, we’ve contributed nearly $1 billion back into our vehicle programs, deployed over $200 million into investments in our systems, operations, customer experience and EV capabilities, all along having a net leverage ratio of about 1.5 times. As of September 30, we had available liquidity of approximately $1 billion with additional borrowing capacity of $1.1 billion in our ABS facilities. Our corporate debt as well ladder with over 90% of our corporate debt having maturities in 2026 or beyond. And we are in compliance with all of our secured financing facilities around the world with significant headroom on our maintenance covenants sets as of the end of September.

Let’s move on to Outlook. As you know, we’ve made the decision as a management team to forgo giving formal annual guidance to allow ourselves the flexibility to make adult decisions as the business environment changes. Here’s some color around what we’re currently seeing for the fourth quarter. Rental demand in the Americas appears to be robust and we are again expecting to fleet slightly inside of the strong demand we’re currently seeing. We’re encouraged by the strong corporate demand we saw in October and believe that will continue into late November but major holiday season kicks in. And as Joe stated, advanced reservations around the holidays are strong. We believe this will translate to mid-single digit rental growth combined with the normal sequential seasonal decline we saw last year from 3Q to 4Q.

In international as we stated previously, we expect to return to revenue growth with mental day growth in the low single digits and flat RPD. Consolidated monthly per unit vehicle interest which was $92 in 3Q ’23 will move up slightly above $100 as we indicated on previous calls. Monthly net vehicle depreciation will convert with our straight line depreciation by the fourth quarter as we expect gains on sales to be insignificant. And while those gains will be missed, the silver lining is that we’re returning to a more normal environment, both in terms of fleet and seasonal demand. Which better enables us to do what we feel is our competitive advantage, analyzing the field, setting ambitious targets and executing operationally. All of this to translate into a full year adjusted EBITDA over $2.5 billion, the second highest annual adjusted EBITDA in our company’s history.

With that, let’s opened it up for questions.

See also 30 Most Polluted States in the US and 25 Best Countries for Human Rights and Rule of Law.

Q&A Session

Operator: Thank you. [Operator Instructions]. And we have our first question from Stephanie Moore with Jefferies.

Hans Hoffman: Good morning. This is Hans Hoffman for Stephanie. Congrats for the strong quarter and appreciate all the color. So listing up my first question just you know, thinking about 2024 understanding not a whole lot of visibility on demand environment and you know right now it’s like kind of vehicle funding costs are going up, you know, vehicle depreciation kind of getting to a more normalized level. So, kind of putting that aside. We talked about, you know, in terms of what if it wasn’t your control and your sort of ability to preserve margin or mitigate some of those margin pressures and next year.

Joe Ferraro : Hi. It’s just Joss, I’ll start off and Brian if you want to jump in. So you’re right. We are we’re currently working on our business planning process. So I don’t have all the details surrounding 2024. We’ll be doing that over the next couple of months. But when one probably says that, and I said this earlier in our prepared remarks, went back to normal seasonality. So I would anticipate that that would ring true going into next year as well. And what I mean by normal seasonality, the second quarter is bigger than the first and the third quarter is bigger than the second and the fourth quarter is somewhat in line with the second one there abouts. And the demand patterns and the pricing patterns will adjust seasonally.

I think that that would be a good starting point with how we would look at 2024. There were some guiding principles however that you know, I think about it. If we can take a look at this past summer, it was the busiest peak that we’ve seen and I you know, going into it as I said on the last call, but I thought the summer was going to be was going to be big like normally it’s just a log of peak because the second quarter was like a transitionary period into the summer, which was exactly what we saw in 2019. Right. So coming off a busy summer you would say well, you know, as demand slowed down a little bit. Are we going to see that going into the fourth quarter? And I have to tell you October is, like I said earlier, it’s going to be the biggest October, right?

We didn’t formalize the exact metrics quite yet, but it’s all indications that it will be and so the volume didn’t stop. Right. Demand is so strong. We see strong growth in commercial and we see strong growth coming from leisure. And I see that continuing going into the form. You know what surrounding holidays, you know, Thanksgiving and Christmas and a good deal of fourth quarter activity was all said and done surrounds Christmas and that looks pretty good. I don’t believe that that’s going to stop when you get to January or February or March I think will start picking up. Yeah, it’ll just seasonally but demand to be strong. I think pricing you’ve seen what I said earlier. Very strong demand elevated compared to 2019. And I see no reason why that why that doesn’t change.

However, we have all facing interest costs. Are you saying there are no depreciation costs assigned to normalise. One of the key reasons why I asked Brian to come out of his role is to help us monetize some of the activities that we have surrounding data and data analytics to make our team better operators. I believe we have a great operational team right now. But the way we’re looking at things today is uniquely different than maybe the way we looked at him in the past, but I believe that will give us an edge in keeping our direct operating costs and things of that nature. More in line that Brian turned to.

Brian Choi : Yes, I think you’ve covered everything Joe just the one thing to highlight is, you know, this interest cost pressures are going to continue into next year. When the cost of play to take on a new car is going to be over $100 per vehicle per month, but you have to re-evaluate the appropriate return on invested capital for that car. So I think that means that we’re going to be very focused on yield management next year, we’re going to be focused on utilization. And as Joe mentioned, we intend to fleet slightly below demand in order to remain disciplined around return on invested capital.

Hans Hoffman: Got it, that’s super helpful. And I just appreciate time, all the color rounds would have Europe but, you know, they just kind of wanted to unpack it a little bit more. So I guess maybe just thinking about Q4, have you seen sort of easing in terms of some of the pressures, you know, when domestic and sort of cross border travel, or the kind of, you know, the expectation that, you know, maybe just the European consumers, you know, what do we do that and kind of, you know, here domestically in that know, maybe some of those pressures can kind of continue to Q4 to Q1 at offset a little bit by, you know, continued strength and sort of, you know, the international events.

Joe Ferraro : You know, listen, I think there’s a lot of geopolitical pressures over there. And I think we have to be, we have to react. And so I’m comfortable with where we are today. I thought that the margin attainment in the third quarter was terrific. It was the second highest we had in company history, and you’re going to see us, you know, operate that way. And if things change, we’ll deal with and react accordingly. But our fleet is going to be in line with demand, our cost basis is going to be aligned that allows us to produce margin, we still have an extremely strong what I would call inbound demand coming out of the United States. We have terrific partners with all our airlines here in the U.S., and they continue to drop customers off and we will concentrate you know our ability to generate, you know, that highly profitable business in Europe.

Now, you know, when we looked at it, you know, compared to 2019 in the in the United States, we started to overcome the COVID or related challenges in 2021. We thought that that was going to happen this summer, but like I said, inbound business terrific for us with you know into European business and domestic not so good. So we will prepare as if we will prepare to operate on a more of a drop through basis. And if things change, we can react very quickly. And that’s what I like about our business compared to when we were pre-COVID. We took a lot of cost out we’re able to optimize as we go.

Hans Hoffman: Got it. Thanks.