Beyond Meat, Inc. (NASDAQ:BYND) Q3 2023 Earnings Call Transcript

Beyond Meat, Inc. (NASDAQ:BYND) Q3 2023 Earnings Call Transcript November 8, 2023

Beyond Meat, Inc. misses on earnings expectations. Reported EPS is $-1.09 EPS, expectations were $-0.83.

Operator: Good day and welcome to Beyond Meat, Inc. 2023 Third Quarter Conference Call. [Operator Instructions] Please note that this event is being recorded. I’d now like to turn the conference over to Paul Shepherd, Vice President, FP&A and Investor Relations. Please go ahead.

Paul Shepherd: Thank you. Good afternoon and welcome. Joining me on today’s call are Ethan Brown, Founder, President and Chief Executive Officer; and Lubi Kutua, Chief Financial Officer and Treasurer. By now, everyone should have access to the company’s third quarter 2023 earnings press release filed today after market close. This document is available in the Investor Relations section of Beyond Meat’s website at www.beyondmeat.com. Before we begin, please note that all the information presented on today’s call is unaudited and that during the course of this call, management may make forward-looking statements within the meaning of the federal securities laws. These statements are based on management’s current expectations and beliefs and involve risks and uncertainties that could cause actual results to differ materially from those described in these forward-looking statements.

Forward-looking statements in today’s earnings release, along with the comments on this call, are made only as of today and will not be updated as actual events unfold. We refer you to today’s press release, the company’s annual report on Form 10-K for the fiscal year ended December 31, 2022, the company’s quarterly report on Form 10-Q for the quarter ended September 30, 2023, to be filed with the SEC and other filings with the SEC for a detailed discussion of the risks that could cause actual results to differ materially from those expressed or implied in any forward-looking statements made today. Please also note that on today’s call, management may reference adjusted EBITDA, which is a non-GAAP financial measure. While we believe this non-GAAP financial measure provides useful information for investors, any reference to this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP.

Please refer to today’s press release for a reconciliation of adjusted EBITDA to its most comparable GAAP measure. And with that, I would now like to turn the call over to Ethan Brown.

Ethan Brown: Thank you, Paul, and good afternoon, everyone. Having pre-announced select’s financial results for the third quarter last week, I will briefly review these metrics and provide more color on our performance and then turn attention to what we are doing to adjust our global operations to fit the current macroeconomic reality and business environment. We expected a modest return to growth in the third quarter of 2023, which did not materialize as category-specific and broader consumer headwinds continued and drove weaker-than-expected sales volumes, reduced promotional effectiveness and adverse changes in our product sales mix. Net revenues for the third quarter were $75.3 million, down approximately 9% year-over-year.

In turn, lower volumes, coupled with higher levels of discounting and other factors, exerted significant downward pressure on our gross margin relative to our previous expectations, with gross profit swinging to a loss of approximately $7 million. This result obscured continuing progress we’re making on COGS reductions, where year-over-year, we reduced cost of goods sold by 18%. Despite these challenging circumstances, we were able to achieve free cash flow positive operations for the quarter. As we indicated when setting this goal 1 year ago, this outcome reflects a meaningful benefit from working capital as a source of cash. And while encouraging should not be interpreted to new that we have turned the corner to sustained free cash flow positive operations.

We do however believe that is indicative of the early progress we are making in our objective to reduce cash consumption even as the company takes additional measures to substantially reduce OpEx, make changes to pricing architecture and further prioritize current growth opportunities. I will now dive into our strategy and plan to accelerate our transition to sustainable and ultimately profitable operations. We are pursuing five main actions to improve our cost structure and overall operating performance. One, as previously announced, we are executing a 19% reduction in our global non-production employee base, immediate step in a broader program to improve our cost structure; two, we are reviewing our pricing strategy with certain channels to support margin expansion; three, we are continuing to utilize inventory management to reduce working capital; four, we are intensifying our focus on channels and geographies that are exhibiting revenue growth; and five, in U.S. retail, we are using our portfolio and marketing to directly counter misinformation about our products and category.

I will now provide further commentary in each of these five areas: operating expense reduction, a reduction in force combined with the elimination of certain open positions is expected to result in approximately $10.5 million to $12.5 million in operating expense savings in 2024 and is an immediate step in a broader cost-cutting initiative to better align our operating expenses with current revenue. While necessary, this is a difficult decision for the business given the tremendous talent, expertise and passion of our workforce. Our people are what make us special and letting these team members go is done with a very heavy heart. Though we reduced year-to-date operating expenses by 29% or $73.9 million year-over-year to further cut costs as we look to establish our operating expense base for 2024 at a level that better reflects current revenues, we are initiating a review of our global operations focused on narrowing our commercial focus to certain growth opportunities, and accelerating activities that prioritize gross margin expansion and cash generation.

As part of these efforts, we are evaluating intend to reduce activities related to certain underperforming geographies, markets and channels, including a review and potential restructuring of our operations in China. We are further focusing our research and development to near-term product renovations and innovations and a more limited set of breakthrough projects and programs. As I will elaborate on momentarily, we are more narrowly deploying our marketing spend in the U.S. around the primary message of taste and health. More generally, we continue to invest focus and resources around lean management in support of overall expense reduction and margin expansion, including the potential exit of certain product lines and further optimization of our manufacturing capacity and real estate footprint to reduce overall complexity and drive additional cost savings relating to logistics, overhead, tolling and general production pricing architecture.

As you know, over the last year, we have used pricing in an effort to bring new consumers into the category and to support our inventory reduction and cash generation objectives. While these pricing programs are effective in generating cash and inventory that did not help us move from early adopters to mainstream consumers. We believe there are likely several reasons for this outcome, among them, increased consumer confusion over our value proposition and the remaining price delta between Beyond Meat products and their animal protein equivalent. As we look to 2024, we expect to implement a more nuanced pricing strategy, keeping certain programs and pricing in place, while adjusting others in support of gross margin expansion. Inventory management, we intend to continue to manage inventory levels down to generate cash.

We’ve made some progress in this regard as inventory levels have fallen by 21% year-over-year, yet we have many miles left to travel as we seek to bring inventory in line with lean management principles. Commercial focus on current growth markets and channels, we are encouraged by and are investing in markets and partnerships that are currently exhibiting growth. This includes select markets in Europe and in particular, certain strategic partners where we are experiencing year-over-year double-digit growth. Bidding back in U.S. retail, we are pursuing the portfolio and marketing approach intended to restore growth in U.S. retail. We are contending with two main headwinds. First, there are broader challenges facing the U.S. consumer, namely higher prices and reduced buying power.

We believe that the corresponding consumer action of trading down among proteins that is foregoing more expensive cuts of animal meat for cheaper cuts of meat, similarly impacting our category and brand. We are, despite aforementioned pricing programs at certain exceptions, a higher-priced protein relative to animal protein. Second, as I previously mentioned, we continue to face serious category perception challenge. As I’ve long maintained as a brand and category, we will cross the chasm to mainstream on the strength of progress across taste, health and price and to a lesser extent here in the U.S., awareness of the planetary benefits of our products. We continue to make organoleptic progress across our portfolio, which the team is wrapping up recognition and awards as we close the century gap between our products and their animal protein equivalent.

And it is, in our view, the health perception of the category that is the most immediate and important variable to address in order to restore growth. We must squarely and forcefully counter the broad misinformation that swirls around our category before we can more effectively use pricing as a tool to bring new users in the mainstream consumer into our category. There is a loud and steady drumbeat of advertisements, peds and social media post and activities that seek to negatively influence the consumer regarding our products and category. Generally, this always-on attack platform uses 1 or more of 3 million rhetorical anchors, sake meat, processed and full of chemicals. The financial backers of the successful campaign appear to range from more obvious, such as various members of the meat industry, the less obvious, which may include members of the pharmaceutical industry, the latter seeking to preserve one of the largest global markets for antibiotics, livestock.

As you may know, it’s estimated that over 70% of medically important antibiotics are given not to humans, but to livestock. As I shared, this effort to sow doubt to confusion regarding our products has worked, while 50% of U.S. consumers believe that plant-based meats were healthy in 2020. By 2022, this number had declined at 38%, and my guess is that this percentage would be lower today. This well-orchestrated campaign borrows heavily from similar efforts to frustrate tobacco legislation and the tighter regulation of under-aged consumption of alcohol and, in fact, share some of the same players. We are confident that the strong health benefits available to consumers the use of our products will ultimately overcome these tactics. This said, we are not passively waiting and instead are taking the following actions.

First, we continue to support third-party research regarding the health outcomes available to consumers through our products. This research includes our ongoing work with Stanford University School of Medicine, and a growing and formal consortium of universities, hospitals and institutions. We derive significant value from this research in at least 2 ways. First, we achieved and can share a more precise understanding of the impact of our products on key human health indices, for example, cholesterol levels. Second, we are surrounded by leading medical and nutritional experts who are instrumental in our efforts to, over time, deliver even greater health benefits in future iterations of our products. Second, we are teaming up with leading associations to validate and help familiarize the consumer with the health benefits of our products.

These partnerships and affiliations include, as we’ve highlighted, the American Heart Association, which has recently expanded the number of Beyond products, earning its rigorous certification as a hard healthy food as well as our multiyear program with American Cancer Society to further research on plant-based meat and cancer prevention. In 2024, we expect to announce additional certifications and partnerships that we believe provide important third-party endorsements and/or recognition of the health benefits of our products. Third, to make accessible and amplify the positive health outcomes associated with our products. We are teaming up with authentic voices, including ambassadors, medical professionals and registered dietitian and nutritionist to counter false narratives and educate the consumer on the ingredients and process we use for our plant-based meats.

There will be more to come on this front in the coming quarters, and we look forward to updating you on our progress accordingly. In closing, we are disappointed by our third quarter 2023 results and are taking immediate action to pull significant costs out of our operating base as we enter 2024. Simultaneously, we are heightening and narrowing our focus around specific geographies and channels where we are experiencing growth, including in the EU, where we’re seeing favorable near-term trends, such as certain segments of U.S. Foodservice. As we head into 2024, we believe we have a solid portfolio and marketing strategy to address category and brand headwinds in U.S. retail, one built around the fundamental benefits available to the consumer through our carefully designed plant-based meats.

Though we believe that our achievement of cash flow positive operations for the third quarter is an encouraging directional signal, we are committed to a far more comprehensive and aggressive rebalancing of operating expense to current revenues as we plan for the future. We understand the current results, category challenges and the intended media coverage can distract from what we believe is a far brighter future. We see this future in colleges and universities here in the U.S. and abroad, including those where use-driven movements are calling for fully plant-based campuses to fight climate change, drawing analogies to university pledges to divest from fossil fuels. We see this future in countries where per capita animal meat consumption is the lowest ever in recorded history, such as in the UK and Germany and the corresponding progress we are experiencing in McDonald’s McPlant platform in these and other EU economies.

We see this future in cities, such as Amsterdam, where officials are taking tangible steps to increase availability of plant-based meats and dairy in support of their target to have 50% of citizens consuming a plant-based diet by 2030. And in South Korea, where the Minister of Agriculture, Food and Rural Affairs recently announced strategic plan to support the growth and consumption of plant-based meats and alternative proteins. And we see this future in the use-driven petition to have the upcoming UN Climate Summit, top 28, the majority plant-based and a UN’s acknowledgment of the legitimacy and seaming [indiscernible] this demand. Finally, we see this future when together with the medical and nutrition community, we mobilized to push back against incumbent industry propaganda and put in place our strong response yet to this troubling misinformation campaign.

In summary, though we did not foresee the current trough in our journey of disruption, we are confident in our ability to successfully fight through it, and fulfill our vision of being tomorrow’s global protein company of size and significance, a company dedicated to empowering consumers through delicious and satiating products to take meaningful action to address the urgent human health, climate natural resource and animal welfare challenges facing our global society. With that, I will turn it over to Lubi, our Chief Financial Officer and Treasurer, to walk us through our third quarter financial results in greater detail as well as update our outlook for 2023.

Lubi Kutua: Thank you, Ethan, and good afternoon, everyone. As Ethan noted, this was a disappointing quarter for us in light of continued weakness in the plant-based meat category in our largest channel, namely U.S. retail, we are doubling down on our gross margin expansion and cash generation efforts, hence our decision to execute a further reduction in force and initiate our global operations review. As we shared in the press release, that review will consider the potential exit of select product lines, changes to our pricing architecture within certain channels, accelerated cash accretive inventory reduction initiatives, further optimization of our manufacturing capacity and real estate footprint and a review and potential restructuring of our operations in China.

As you might expect, this global operations review needs to take its course, and so we will reserve providing further more detailed information for future periods as individual initiatives become more definitive. As such, my remarks today will primarily focus on our financial results for the third quarter of 2023 as well as our updated outlook for the full year. Net revenues for the quarter ended September 30, 2023, were $75.3 million, a decrease of $7.2 million or 8.7% compared to the prior year period. This was driven by an 11.6% decrease in net revenue per pound, partially offset by a 3.5% increase in volume of products sold. The decrease in net revenue per pound was primarily driven by increased trade discounts, especially in the U.S. retail channel and changes in product sales mix, partially offset by favorable changes in foreign currency exchange rates.

The increase in volumes of products sold was primarily driven by sales to international retail and Foodservice channels and was partially offset by decreased volume in the U.S. retail and Foodservice channels due to weak category demand and the cycling of certain sales in the Foodservice channel in the year ago period that did not repeat this year. Breaking down our net revenues by channel, net revenues from U.S. retail sales in the third quarter of 2023 were $30.5 million, a decrease of $15.7 million or 33.9% compared to the prior year period due to an 18.8% decrease in volume of products sold primarily reflecting continued soft category demand, particularly among our core refrigerated products, and an 18.6% decrease in net revenue per pound, resulting from higher trade discounts and to a lesser extent, changes in pricing and product sales mix.

In U.S. Foodservice, net revenues in the third quarter were $12.5 million, a decrease of $3.5 million or 21.6% compared to the year ago period. This decline was driven by a 37.7% decrease in volume of products sold, primarily reflecting the cycling of sales to a large QSR customer for a limited time offering in the year-ago period, which did not repeat in the current year, partially offset by a 26% increase in net revenue per pound, primarily driven by changes in product sales mix. Excluding the aforementioned sales to a large QSR customer for a limited time offering, U.S. Foodservice channel net revenues would have increased by approximately 39% year-over-year. Net revenues from international retail sales in the third quarter of 2023 were $14.2 million, an increase of $4 million or 38.8% compared to the year ago period due to a 42.8% increase in volume of products sold, primarily reflecting strong sales from new product introductions and the lapping of a weak year ago comparison partially offset by a 2.8% decrease in net revenue per pound.

The decrease in net revenue per pound was primarily due to higher trade discounts and changes in product sales mix, partially offset by favorable changes in foreign currency exchange rates. Finally, in International Foodservice, net revenues were $18.1 million in the third quarter of 2023, an increase of $8 million or 78.7% compared to the year ago period. This increase was driven by a 90.9% increase in volume of products sold primarily reflecting strong sales to a large QSR customer in the EU, partially offset by a 6.3% decrease in net revenue per pound. The decrease in net revenue per pound was primarily due to higher trade discounts, partially offset by favorable changes in foreign currency exchange rates. I’ll now move to gross margin.

Gross profit in the third quarter of 2023 was a loss of $7.3 million or gross margin of negative 9.6% compared to a loss of $14.8 million or negative 18% in the year ago period. Although this represents over 8 percentage points of margin improvement versus the year ago period, including the impact on depreciation expense from the change in our accounting estimates associated with the estimated useful lives of our large manufacturing equipment, it fell short of our previously stated expectation to drive sequential margin improvement throughout the year. Relative to our previous expectation, the variance in gross margin was primarily driven by lower net revenue per pound, reflecting higher-than-expected trade discounts and less favorable sales mix and, to a lesser extent, higher COGS per pound, mainly driven by warehousing costs and co-manufacturer underutilization fees.

Compared to the year ago period, gross profit and gross margin in the third quarter of 2023 were positively impacted by lower manufacturing costs, excluding depreciation, lower materials costs lower depreciation and lower inventory reserves per pound, partially offset by lower net revenues per pound. In the third quarter of 2023, gross profit and gross margin benefited by $4.4 million or 5.9 percentage points of gross margin, respectively, as a result of the change in the estimated useful lives of certain – of our large manufacturing equipment as compared to those same measures calculated using our previous estimated useful lives. Moving down the P&L. Operating expenses in the third quarter of 2023 were $62.4 million, a reduction of $12.5 million or 16.7% compared to the prior year period.

The primary drivers were lower legal and restructuring expenses, reduced non-production headcount expenses, lower product donation expenses and reduced scale-up expenses, partially offset by the write-off of an uncollectible note receivable in the amount of $3.8 million associated with a certain co-manufacturer as well as higher consulting expense accruals. Loss from operations was therefore $69.6 million in the third quarter of 2023, compared to $89.7 million in the prior year period. Total other expense net of $0.7 million in the third quarter of 2023 consisted primarily of $2.5 million in realized and unrealized foreign currency transaction losses, and $1 million in interest expense from the amortization of convertible debt issuance costs, offset by $2.8 million in interest income.

Overall, net loss in the third quarter of 2023 was $70.5 million compared to $101.7 million in the year ago period. Adjusted EBITDA was a loss of $57.5 million or negative 76.3% of net revenues in the third quarter of 2023, compared to an adjusted EBITDA loss of $73.8 million or negative 89.5% of net revenues in the year ago period. Turning now to our balance sheet. Our cash and cash equivalents balance, including current and non-current restricted cash was $232.8 million and total debt outstanding was approximately $1.1 billion. Inventory fell to $194.6 million in the third quarter of 2023, representing a sequential quarterly reduction of $12.6 million or 6.1% and our sixth consecutive quarter of inventory reductions. Turning to cash flows.

Net cash provided by operating activities in the third quarter of 2023 was $9.1 million, an increase of $43.7 million compared to the year ago period, and capital expenditures totaled $1.4 million compared to $18 million in the year ago period. As a result, free cash flow, defined as cash flows from operating activities less capital expenditures, was an increase of $7.6 million in the third quarter of 2023 and total net change in cash, including the effect of foreign currency exchange rate changes on cash was an increase of $6.9 million compared to a decrease of $64.5 million in the prior year period. Taken together, these year-over-year improvements in COGS, operating expenses, inventory drawdown and cash compensation demonstrate that we continue to make real strides in managing our business more efficiently.

Finally, I will provide revised guidance for our full year 2023 outlook. We now expect net revenues to be in the range of $330 million to $340 million representing a decrease of approximately 21% to 19% compared to the full year 2022. Gross profit for the full year is now expected to be approximately breakeven, and we continue to expect operating expenses to be approximately $245 million or less before onetime separation costs and non-cash savings associated with our recent reduction in force. We estimate we will incur onetime cash charges of approximately $2 million to $2.5 million in connection with the reduction in force, primarily consisting of notice period and severance payments, employee benefits and related costs, and we expect the majority of these charges will be incurred in the fourth quarter of 2023, subject to local law and consultation requirements, which may extend the process beyond the end of 2023 in certain countries.

In aggregate, the reduction in force, combined with the elimination of certain open positions is expected to result in approximately $9.5 million to $10.5 million in cash operating expense savings in 2024, and an additional approximately $1 million to $2 million in non-cash savings related to previously granted unvested stock compensation, which would have vested in 2024. Finally, we now expect capital expenditures to be in the range of $10 million to $15 million for the full year 2023. With that, I will conclude my remarks and turn the call back over to the operator to open it up for your questions. Thank you.

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Q&A Session

Operator: Thank you. [Operator Instructions] First question comes from Alexia Howard of Bernstein. Please go ahead.

Alexia Howard: Good evening, everyone.

Ethan Brown: Hi, Alexia. How are you?

Alexia Howard: Hi, there. So can we hone in on the U.S. sales generally, particularly the grocery channel. It looks as though the measured channel data was better than the numbers that you reported. So I’m wondering, first of all, what happened in non-measured channels? And then I have a follow-up.

Lubi Kutua: Yes, it’s Lubi. I can speak to that, Alexia. So as you know, there’s typically a lag between shipments and the consumption data. So sometimes, some of the trends that you see in the consumption data do not necessarily align. I wouldn’t say that there was anything particularly unusual that happened in non-measured channels. So I think primarily, like any differences that you’re noting there are primarily driven by just sort of timing differences.

Alexia Howard: Great. Thank you. And as a follow-up, can you talk about the differences between the dynamics in the international markets versus domestically? Obviously, things are still very challenged domestically with pricing down and so on. And yet you’re actually seeing much better performance in the overseas market. So I’m wondering what the difference is in terms of consumer behaviors, competitive trends, et cetera. And I’ll pass it on.

Ethan Brown: Thank you for the question. That’s exactly what’s happening. I think the kind of main story that’s afoot right now with our business from a growth perspective is if you look at the EU, as an example, retail and foodservice are both up substantially. Some of that is driven by timing of shipments, but the numbers are pretty significant. It’s like 39% for retail and almost 80% for foodservice. But again, you have to factor in some timing issues with shipments, but overall, very directionally encouraging. And then you look at the strategics and what’s happening with McPlant platform, for example, in the EU, it continues to get good traction to a point where if you look at Austria, Germany, Ireland, Netherlands, UK, Malta, Portugal and Slovenia and Switzerland, all of those markets are operating and doing well for us.

So the main difference, right, is in the EU, the consumer is driven not only, of course, by taste, they wanting to enjoy the delicious products, but also climate plays a significant role in the consumer decision around the food system and food choices as well as health. And health does not have the same kind of counter attack that’s going on here in the U.S., the – both on a climate and health perspective, the products are viewed correctly and given credit for their positive impact. So we continue to see very strong international growth. And if you start to look at the mix of our revenues, it’s reflecting that, right? I think we’re 43% now. International versus 67% domestic. And then in the U.S., if you look at U.S. Foodservice, we are lapping an LTO we did a year ago this past quarter.

And if you separate that out for a minute, U.S. Foodservice is also up pretty substantially. So it really gets down to U.S. retail. That’s the main issue. And so that’s why we’re spending so much time focusing on how do we write the narrative, how do we correct the narrative rather in U.S. retail around our product to bring the consumer back into our value proposition. And as I noted, there is some confusion out there and some misinformation that we need to do a better job of cleaning up. So very encouraged by the growth we’ve seen internationally, encouraged by some of the segments in foodservice, continue to be concerned about retail, but have a strategy there to try to get that ship righted.

Alexia Howard: Great. Thank you very much. I will pass it on.

Operator: Thank you. Next question will be from Daniel Gold [ph], BMO. Please go ahead.

Unidentified Analyst: Hi, this is Daniel Gold. Thanks for taking my question. In the pre announcement, there is a comment about improving margins through pricing. How does that reconcile with targeting price parity with beef?

Ethan Brown: Sure. So I think almost – let me see, 4.5 years ago, I set a target to within 5 years to be able to price at parity with at least one product in one category. And we’ve actually achieved that with a particular product. We’ll give more news on that as we come up on the 5-year mark. But overall, we need to take a step back. The idea here last year when we went into a focus on driving our pricing structure, closer to animal protein, a couple of things are going on. One animal protein was seeing increases in price. So we thought with that narrowing of the gap, we could accelerate and close the delta even further. But the idea was to get across chasm from kind of the niche early adopter consumer that we do so well with to the mainstream consumer.

And it didn’t work. We think that the headwinds that the category is facing, whether it’s the misinformation or misunderstanding about the value proposition or whether it’s just the incredible pressure. the retail consumer is under and the very established pattern of trading down among high-cost proteins. Again, even though we did pricing program, we were still higher cost. So in that environment, whether it was the sector-specific headwinds of ambiguity around the health benefits and things of that nature or whether it was a broader consumer environment and reduced buying power and things of that nature. It just didn’t have an impact. And so we’re going to go back to pricing the products at a way that gives us a margin that can sustain our business.

And that’s not across the board, right? Some of the pricing programs will stay in place and others will lift, and it will be on a case-by-case basis.

Unidentified Analyst: Interesting. That’s really helpful. Also, there were some 3Q softness that was attributed to lower-than-anticipated promotional effectiveness. What can you learn from that? And why was that the case?

Ethan Brown: I think it’s the same feature that I was just highlighting. When there is so much noise, both macroeconomic with the consumer pressure, as well as questions about our value proposition. There are some programs that is less effective. And so in hindsight, right, we probably would have done less of it, given the just the overall conditions of the market in our particular category. In the long run, we think it’s a good thing to do. But we first have to clean up this messaging issue and the perception issue before. I think those type of programs can be effective. In some sense, you just train the consumer if you’re not increasing the population that’s consuming your product, you’re just training existing ones to wait for those discounts. So – but we’re going to look heavily at how we do that and when we do that in the future.

Unidentified Analyst: Got it. That makes sense. Thank you.

Operator: Thank you. Next question will be Ben Theurer of Barclays. Please go ahead.