Earnings Call: Q3 2021

Oct 20, 2021

Ladies and gentlemen, welcome to Nelig Group Webcast with Teleconference Q3 2021. For the first part of this call, all participants will be in listen only mode. And afterwards, there will be a question and answer session. Today, I am pleased to present Kristina Lukes, CEO and John Aftelius, CFO. Please start your meeting. Good morning and welcome to this call where we are to present the NLE Group results from the Q3 in 2021. I'm Kristina Lueckes, CEO for Nelly. And as usual, I'm hosting this call together with Yonhap Sijelius, CFO for the group. Good morning. Let me start with an update on Nelie, followed by the key highlights from the quarter. Jan will take us through the key financials for the quarter. And after that, as usual, we will open up for a Q and A session. This call puts focus on the past quarter, but let me start with shedding light on our long term ambition. We are on a journey, starting from the very core of our company with the strong, the well known and loved consumer brand, Nelly, And the more than a 1000000 active customers and engaged community forming the starting point towards social commerce. Social commerce defined as combining the selling of goods, I could say possibly even services through the engagement opportunities of Social media on our own and partner platforms, commercializing fully on the community powered brand. Nelly. Move to Slide 3. Nelio is an integral part of our target group's everyday life, of the young woman's everyday life. This is not new. We've built it since 2004 through influencer marketing and through our community of consumers, 1,200,000 customers in the Nordics. Our reason to be is to deliver on her needs And desire to always look and feel, fab, we promise our target group to always be on point with a head to toe look that isn't breaking our bank account. We promise to always celebrate the Fab U. Moving to Slide 4, sharing some key community facts and figures. We have 1,300,000 followers on social media and 1,200,000 active customers, placing close to 3,000,000 orders per year. Almost half of our sales comes from sales of our own brands. We are also now rolling out a more structured customer panel to gain qualitative insights combined with all the valuable data we have. And we are also proud of the presence in growing channels such as TikTok, where we've doubled our following in Q3. Slide 5 then, highlighting Q3 in total, we've had a design and collab with Bianca and Grosso in September, generating not only attention, traffic, but sales growth versus the Colab we had last year. Our warehouse project is closed on time and below budget. And we continue with a strong inventory turnover and thus have a relevant and fresh current stock together with a sound balance sheet. Slide 6 then. Looking a little closer into key trading KPIs. One way of breaking down our Sales is the product of traffic, conversion rate and basket size. In the past quarter, conversion and basket Development is healthy, and we closed the quarter with a growing active Nording customer base. Meanwhile, traffic generation is a challenge and therefore a strong current focus for us. Our organic traffic down partly due to less park and nightlight relevance, which is our strongest core and acquired traffic has become more expensive. Slide 7. Our share Expensive paid traffic has grown. And when we positioning our brand, the building of existing, but more importantly, Efficient presence in the many new channels is key. We are, as of now and as we speak of now, Trying out how to interact and build relevance in our dialogue to build organic traffic in channels like TikTok and through live shopping. Social media and trying out new ways of interacting with our customers is our core, And we have not kept up to our standards in exploring small but growing channels in the past year. Moving on to Slide 8. We continue our focus on the repositioning of the Nelly brand. We have defined our core target group and started to build our offering outside of the core of the brand Party into more occasions such as everyday. And we see very strong growth in everyday segments such as denim. The 3rd part of the repositioning of the brand is all about adding and strengthening brand attributes, So growing our emotional relationship to our customers and followers and expanding the offering into or 9, sorry. We have completed the first part of the relaunch of NELI, so the warehouse move and reorganization, concentrating our entire operations to Broas and have lots of new roles in place. Now we put All our focus on the continued repositioning of the Neli brand and we copy the focus and structure From how we achieved results in our warehouse move into that work, we can conclude that the The warehouse project is closed on time and below budget and the annual cost saving targeted of SEK 35,000,000 is confirmed. We are now trimming our standardized automation system with 80,000 and focusing on how to deliver on an Excellent customer brand experience also in the latter part of the customer journey. Turning over to you, Jan. Thank you, Kristina. On Slide 10, please let me go into a bit more depth From a financial perspective, and in this quarter in particular, of course, the effects of the warehouse project must be mentioned. On the revenue side, after having seen negative net revenue development during 2020, Net revenue grew for the 3rd consecutive quarter. And the main driver behind the growth in the quarter was, as we have seen during the past So a few quarters. Primarily healthy growth in several everyday fashion categories. Ocassionwear decreased somewhat year on year. And as you probably are aware of and can imagine, it has almost halved since 2019. The return rate increased somewhat from 35.5 percent in Q3 2020 to 37% in Q3 2021. And the high return rate is primarily driven by category mix, as certain everyday fashion categories Grow well, and they some of them have a higher than average return rate. But it's also As the pandemic's effect on customer behavior, which we saw so clearly in 2020, especially in certain quarters, Seems to be normalizing. It should be pointed out though that Q3 2021 is still some 2 percentage points below both Q3 2018 and Q3 2019 as regards return rate. Gross profit decreased by SEK 1,000,000, primarily as a SEK 4,000,000 warehouse project related inventory write down was recorded in the quarter. And the main driver for the underlying improvement in gross profit is primarily lower inventory write downs and less loss generating outlet sales volume than same quarter last year. The Reason for this is that we do have more fresh inventory in the quarter. We have less old stock than we've had for Quite some time actually, yes. It should also be mentioned that the direct impact on gross profit Of inbound freight cost inflation, which is on everybody's lips right now, it's noticeable, but had no significant gross margin impact in the quarter. However, indirectly, the delays and the uncertainty caused by this is causing operational When looking at the cost side of the P and L for the quarter, it's clear that the Werra project has an impact on all lines except for marketing cost. Fulfillment and distribution costs were €10,000,000 higher than last year, but they were burdened by €12,000,000 worth of warehouse project costs. And the underlying cost was lower than last year, despite having handled higher volumes in 2021. And while efficiency is still below the targeted levels for the it is a comforting first signal to see in the quarter. Marketing costs, however, increased by CHF 10,000,000 compared to the same period last year. And as Christina mentioned, lower organic traffic volumes combined performance marketing inflation has implied higher cost of sales in the last few quarters and Q3 is not an exception. In Short, we both have a mix effect and a price effect that go they both go against us in the quarter. Admin and other operating costs increased by DKK 5,000,000 in the quarter compared to same quarter last year. The increase was explained by DKK 5,000,000 worth of warehouse project costs. Underlying, In the quarter and as in previous quarter, costs are down due to the dismantling of the Stockholm based central functions, which were integrated in Nellie's Boros based administration team in H1 of 2020. So that's now done. And all in all, EBIT in the quarter was down NOK 27,000,000, impacted mainly by, of course, by warehouse project costs that summed up to CHF22,000,000 during the quarter. If we continue to Slide 11, I'd like to Your attention to a few other topics from the Q3 reports. As Cristina mentioned, the warehouse project was closed on time and below budget. And we look back a quarter in July when we presented our Q2 report, we were operating 2 warehouses. We were shipping to our customers while in parallel moving the stock to our new warehouse in bottles. Today, we operate 1 new automated warehouse in bottles And Falkenbari is closed. The investment objectives of this project were to reduce fulfillment and distribution costs, Shortening delivery times, improving the environmental footprint and providing room for growth. We expect all of them to be met. We are targeting an annual cost improvement of DKK 35,000,000 based on 2020 volumes, and we still believe that it will be met. And as I mentioned, while efficiency is still below the targeted levels, we believe that a portion of the cost improvement should be visible already by Q4. The CapEx ticket for the automation solution in isolation is SEK 84,000,000. It's financed through a rent supplement over 10 years. In addition to the €84,000,000 we recorded CapEx of NOK 19,000,000 related to, for instance, storage shelves, ventilation, network installations, IT equipment, etcetera. And this is well below the budget at €26,000,000 And as I mentioned, during the month of July, Nelly was operating and delivering customer orders from 2 warehouses. And the cost effect of this, together with all other project costs, totaled CHF 26,000,000 for the entire project, of which CHF 22,000,000 were recorded in Q3. The €26,000,000 is some 25% below the estimated €35,000,000 to €45,000,000 range, mainly since the project went well and as planned and that contingency reserves were left largely untapped. And to be completely clear, the project is now closed and we expect no further project costs. Continuing then to inventory turnover, which we always refer to and revert to. Inventory turnover remained solid also in Q3. The inventory share of sales amounted to a Sound 15.7 percent, which is slightly higher than 15.1% last year, but still significantly lower than the pre Q2 2020 levels that were about 20%. And we have since early 2020 focused on reducing stock levels. We do this by lowering targets for outgoing season stock levels. And we've also, in the past, liquidated old stock, Less of that in Q3 or a little of that in Q3 actually. We continue to focus on maximizing in season sales and thereby minimizing our outgoing season stock levels, as we firmly believe that this is supportive of margins over the product cycle and is more capital efficient. Finally, a note on cash, cash flows and financing. Cash flow in Q3 was also highly impacted by the warehouse project. Cash flow from operation was mainly impacted by lower earnings, which in turn is mainly due to the warehouse project costs. While most of the warehouse CapEx was recorded in Q2, the remainder impacted cash flow from investments in Q3. And since there was no change in financing in Q3, the only effect in cash We account for this lease, of course, under IFRS 16, which caused the balance sheet to inflate in the quarter. Cash at the end of the quarter amounted to CHF 141,000,000 and we did not tap into our credit facilities at no point during the quarter. We closed Q3 with a solid cash position, on utilized credit facilities and apart from tax If we then conclude on the financial update, I'd like to move on to Slide number 12. And I'd also want to share some of the progress made within the sustainability area during the quarter. We look at sustainability from 3 different perspectives, empowering femininity, respect the planet and fair and equal. And just to highlight on some of the progress made in Q3, we joined forces with other Swedish textile industry colleagues through Stika, a Swedish organization aimed at climate action with the aim to increase the use of renewable energy use in Turkey. Turkey, of course, a major Producing country for the textile industry in Sweden. We also discontinued sending paper invoices to our customers. And while this may seem like something insignificant, it actually implies that we're avoiding printing, handling and Sending some 3,000,000 paper invoices annually, all due to the new setup in the new warehouse. And finally, we're happy to note that more than half of the warehouse staff in the new warehouse are female. Having been through these highlights, Christina, I'd like to hand back over to you for any concluding remarks. Well, thank you, Jan. Well, I'm very proud over the fact that we as a company are halfway through our Relaunch. We've mobilized energy and executional power to conduct a successful warehouse move. Normally say a heart operation during a marathon race. In the middle of a complete restructuring of the company, now everyone in place In both of us, more than 16 new employees mailing commercial roles are now in place and we now want to use the same focus and structure into the latter part of the relaunch when we continue to reposition our brand, Build efficiency in our traffic generation with focus on organic traffic and continue to build and strengthen our community. Thank you for listening in. And I trust that we now move into a Q and A session. And we already have a question from Nicholas Frome from Aristide Equities. Please go ahead. Thanks, operator, and good morning, everybody. So my first question would be, could you just confirm that The non recurring items relating to the new inventory of CHF26 1,000,000 is indeed sort of your final estimate for the cost of this transition and full year 2021, please? Yes. The short answer is yes. And the total amount It was €26,000,000 of which €22,000,000 were recorded in Q3. So the project is closing, we expect no Further project costs. Yes. Thanks for clearing that. May I just ask then what's the reason for sort of Costs being compared to mid guidance range about €10,000,000 lower than you actually initially expected, please? Yes. When designing such a project, both on the CapEx side and On the project cost side, there it's standard practice to have some contingency for unplanned and non identified either investments, equipment acquisitions, etcetera, but also for operational hiccups, of course. We did expect, for instance, let me take one example. We did expect to send double orders to a significant degree. We did, I mean, sending one Where we picked the T shirt from Brors and the dress from Falkenberg, we did that and we sent a significant amount of Double orders, incurring double freight costs, but the share of such orders was lower than initially Estimated, that's one very concrete example. And also on the CapEx side, we had Similar entries where we have used some of the continued reserves, but we did not tap into all of them. I could add to that. The fact that the project was well closed on time or even partly before deadline, of course, Also imply that there was a time where double orders were not happening and Staffing was not either needed during a shorter period of time that we originally estimated. Right. So important to conclude, there's no sort of change in the actual project as such, but you have actually Been investing and getting out what you expected in terms of your new distribution structure. I think and we closed Earlier, so, Yes. To be specific, we I mean, the entire project was closed As planned, the actual move went quicker than we anticipated. And We had few unanticipated, I mean, issues and cost lines that And the ones that we did anticipate were, to some degree, also lower than we estimated. Yes. That's Perfect. Thanks for clearing that. The natural follow-up question then is, of course, now you reiterate your to take out about EUR 35,000,000 in savings from your new automated DC. And I was just wondering if you could give us some quarterly guidance So for example, do you expect the full effect or at least the share of the full year savings already as of now as in Q4 In current trading, please. As I we're a bit cautious. Firstly, we typically don't provide guidance. In this particular case, we've gone as far as saying We do expect a share of the cost saving to end up in Q4. I think it would be aggressive to believe that the entire 35,000,000 Annual saving, I mean, allocated to the Q4 volumes would all be recorded in You should bear in mind that the to a very large extent, every single operator, manager and Where our staff, they weren't employed, in nearly less than a year ago. So it's a completely new organization. It's a new setup where we've got new routines and we're trimming it. We've got a competent team in place and we feel confident that they will realize The cost saving, and we do believe that to see a share of that, a significant portion in ready by Q4. I think it would be aggressive to assume that we reach the entire target by Q4. Yes, yes. But importantly, everything is It's up and running and you think you will have some positive impact from your decisions and investments already done in the books in the quarter? Yes. Yes. And as I mentioned, actually by even though we're not I mean, we're not at Efficiency targets yet in Q3. We do see underlying lower costs. If we if you put back If you reduce or add back the warehouse costs on the fulfillment line, also considering a volume increase From last year, we're actually lower in absolute terms and costs, which is, of course, a reassuring first sign that we seem to be on the right track. Excellent, excellent. I'll stop for now and see if there's any other questions. But I would like to come back with some more questions otherwise. Thank you. You're welcome. You're a gentleman, Atlas. We indeed have another question from Ita Griglu, DMDA. Please go ahead. Yes. Hi, good morning. Thank you for the presentation. It's Ebo Bjorkild from Gillem Biren. I have a few questions. With the marketing expenses, it would be interesting to hear your view going forward. Should we expect to see a higher base level at least for the near term in terms of marketing expenses? I can start off and you can add Jan. Again, we're not guiding in the future, but Looking into the quarter, we see an inflation on traffic acquisition. And that has been a clear trend in the past quarter. And I can add to that that we've had a decline in organic traffic, which is now an important focus area for us To strengthen, part of that is, of course, due to effect from the pandemic, where Our core strength around party and nightlife, so not searching for the party dress, of course, affects the organic search for us. So the focus is to, of course, turn that trend around. I don't know if you want to add, Jan. No. I think, as you indicate, there are, I mean, At least a couple of reasons for the inflation. The firstly, one should be careful comparing 2020 because pricing fell rather dramatically, especially in Q2 2020. But I mean, we must admit that pricing wise, we're now north of the 2019 level. And then we have the mix effect that you referred to, the organic traffic declining, which all else equal, if we want to maintain traffic, We need to acquire more traffic than when the organic component decreases. The effect of, I mean, position and the party, I mean, part of less party occasions in 2020 and 2021 is, of course, one explanation. But I will also mention that we did move our Entire sales and marketing team from Stockholm and to Bross, which in practice implies that few of them, very few are in place. I mean, it's a completely new team, which is great because we have Loads new competence, energy and in place. But we have also, of course, lost Some of the best practice that we did have in the existing team. The focus on these areas couldn't be higher going forward. So without guiding, I mean, you can at least rest assured that our team has its full focus On these core questions. I can add that part of relaunching the organization. I mean, one Part of centralizing the team to Burrows where I think we had 2 or 3 individuals joining the team 1st of So we're close to a full team now, but, we have also made changes In the process and how we acquire traffic with new partners and new ways, and of course, that also demands a trimming in period. So without quantifying the effect From all the different things, these are explanations to the inflation we see in Q3, all of them being addressed as for now. Great. Thank you so much for that answer. And I have another question. So now when we almost have more or less A complete easing of restrictions in Sweden. It would be interesting to see or to hear from your side What the effect has been in terms of traffic to the website and especially in across Segments that obviously was negatively affected by the pandemic, if you're already started to see kind of Pent up demand starting to come through. I can mention just on the last bit of the question, if we start there. The in Q3, we did not see that clear uptick, if you see from occasion where in fact, The most pure play, I mean, party product groups declined somewhat year on year And we're still down significantly almost half from 2019. However, I was in the new warehouse, So I mean packing orders myself a few weeks ago and it's clear that the product mix contains More party items than half a year ago, definitely. That being said, And not, I mean, providing any guidance now. It hasn't been The floodgates on the parties side are not open, to put it that way. So it's definitely a move, But it hasn't been a complete digital effect of reopening. But we do, of course, see a pickup, But not massive effect on it. Is that a clear enough answer to your question, Evan? Absolutely. Great. Thank you so much. And just one more question, if that's fine. So in terms of the underlying improvement in the gross profit, you gave good indications of the dynamics there. But it would be interesting to hear in terms of the kind of balance between Operational efficiencies coming through given the move to the automated warehouse, how much did that contribute? And are you also better at aligning assortment and campaigns with the customer base you've seen Matching demand better booked if we drill down a little bit more into the dynamics there, that would be much appreciated. That sounds like a CFO question, Kristina. So I'll give you a CFO answer than using the P and L as a guiding stick. Starting with gross profit, as you started, the variations in gross profit that we have seen through the last three quarters have mainly been explained by, I mean, underlying margin and the volumes of outlet sales and inventory write downs. In a situation where you have a lot of old stock, You will have higher levels of inventory write down. Q1 and Q3 2021 saw lower levels Of inventory write downs and output sales than the corresponding periods in 2020. So those were the main drivers for Q1 and Q3. In Q2, we saw about equal levels of that compared to 2020, But we saw higher underlying margins, gross margins. In Q3, we had No. I mean, we were about on par with the gross margin for Q3 2020, partly because the initial part of the quarter was rather weak and we saw a high campaign pressure in the market in general. So that's the gross profit, gross margin side of it. And from you asked also the warehouse and the efficiency gains. The warehouse move and the efficiency gains there are primarily, of course, shown or recorded in the fulfillment and distribution cost P and L line. There is a and the second part, the admin cost Other operational costs are also affected primarily by the closing down of the Stockholm based operation. This was concluded in H1, and we expect we did see the full effect of that First down in Q3 and expect that to be a small, almost insignificant part of our Cost base going forward. So and then the marketing side is pretty that has more to do, as we discussed previously, with I mean, the entire handling and how you share and drive your commercial I mean, Our store and how we buy marketing. So that has less to do with the first part of the relaunch that we discussed. Did you follow that line of reasoning, Evan? Yes, absolutely. Great. Thank you very much. And if I may, just one very last question. So on ESG, you mentioned quite a few Initiatives that you've been working on and kind of improvements. So it would be interesting to hear now looking forward, Is there anything else that you can share that you're working on within this area? I think there are thanks for noticing it. We've talked about that before that we're doing lots of things, but have maybe not communicated so strongly about the different progresses we have. I think a key focus for us is The partnership with Stilke and several initiatives around respecting the planet. Of course, that demands a lot of effort from the entire organization because it's the it's our offering. So when we talk about figures of moving up to a higher share of sustainable materials, etcetera, of course, that's a big move, taking a lot of resources and effort internally to make sure that we move forward our positions. So that's a strong focus for us and working with our partners and throughout our supply chain, both from An environmental perspective, but also when it comes to being fair and equal throughout our supply chain. Lastly, I can comment on the continued repositioning of the brand where we're adding emotional attributes and Around celebrating femininity and celebrating the young woman in our target group, I hope Great. Thank you very much. That will say all of my questions. Thank you, So we have another question from Nicklas Frome again. Please go ahead. Thanks, operator. So I was just going to come back and ask a few more questions, if I may. Starting with Q3, we touched a little bit already upon the sort of gross profit developments. But when I read your results report, you state that the market has been particularly markdown driven. On the other hand, You report of much lower outlet sales, etcetera. So my question is, if you could walk us through the gross margin bridge In Q3, commenting on perhaps everything from markdowns to FX and other major gross margin drivers, please? Will do. If I start with you mentioned FX, we didn't have a major FX impact in this one. So small to negligible. Also, as I mentioned, 1, we did have an effect from freight inbound freight cost inflation, but in the big scheme of things, not a significant driver for gross margin In the quarter. And that leaves us back to 2 main components, the ones that you mentioned yourself. I mean, underlying gross margin and Effects from inventory write downs and outlet sales. The All in all, the gross margin, which is combined on the underlying gross margin, which is, of course, a combination of In going margin or and the markdowns were flat year on year. So we did see a especially towards the big or in the beginning of the quarter, we saw a rather hefty The markdown pressure in the market is rather competitive. But we did Improved gross margin towards the end of the quarter, such that all in all, considering the entire quarter, we were about on par With last year. That implies that, so that the underlying improvement comes From the less volumes of outlet sales and less inventory write downs. As you may know, we automatically mark down Our inventory after a particular time has I mean, when some products different product groups reached certain inventory age, they're automatically written down. So that means that large lower volumes of inventory That leads to lower image rewrite out. That since we have had such low volumes That was the main positive effect to the gross margin improvement in the quarter. That was a verbal bridge. Is that fair enough or any follow-up questions? Yes. No, absolutely. Thank you so much. Following on to that question, I was meant to ask Your thoughts on the issues in upstream sourcing, transportation and supply chain management in current trading would be very Useful, I think, to have your most recent thoughts on how that could impact Q4 results, please. I can start off by saying that Jan also mentioned that it's on everybody's lips and I think And it's part of our daily operations to manage that. It created friction in Q3 and creates friction on our operations because it's difficult to plan campaigns and activities considering Delays as a fact and unsecurity of when we can Secure that the offering is sellable at our warehouse. So It's more on an operational level, how to work with the assortment available at the different times. So it's also trimming and Making the organization also become more efficient in selling what you have and creating an appealing offering with what you Have considering what the overall transportation market looks like. And looking back in the quarter, and I think we have an example of that with Bianca, where we managed to A massive campaign with one of our partners that we had to Move around and play around with 2 releases instead of 1. And on a very last minute note, try to optimize considering what was available to sell. I can add to that also. That's a good example. As in Q3, we don't expect We expect freight cost inflation to be noticeable going forward, but still not a significant direct cost impact. Secondly, then you can ask yourself the indirect impact that we I mean, like Christina is discussing. We do have inventory on stock to sell. We don't I mean, We don't expect to be under stocked going into the important Black Week Singles Day Christmas shopping period. So that's good in a way. So the so we're concerned. We're working with it on a daily basis, but the direct effect Are not expected to be overly significant from a cost perspective. All right. Thank you for that. My next question is, I'm just realizing this is the Q1 in pretty much 12 quarters or 3 years, I actually reported a positive development in the number of orders. And just for the sake of the argument, even if average order values was down, etcetera. I was just going to ask you Sorry, it was actually up. Yes, it was up. Yes. No, well, the average basket was up, but the average order was probably down, I think. Well, the KPI that I'm sorry, the KPI that we're reporting AOV, which is average order value and that was up year on year. Right, right, right. My question is, could you give us is this a change in trend here? Should we expect if you look on Your expectations for current trading and into next year, should we expect slightly continuing improvement in traffic and orders being the main value drivers? Or should we expect the average order value being the main driver behind sales growth, whatever it is at the end of the day. Without guiding into the future, I think we had One slide in the presentation when it comes to one way of looking at sales, which is traffic times conversion rate Times average order value or basket size. I think we've we have put a lot of focus on conversion rate And average order value, where we have a positive trend in the quarter. We're not happy with the traffic generation. So that's a focus for us to turn that trend around and also the cost of that around. Okay. Perhaps 2 more questions before I'm done, if I may. So I also noticed that for the first time in a very long time, you also report growth in your European business or non Nordic sales. And I was just wondering what we should expect of this going forward and if you can confirm that These sales are actually contributing with black numbers. Well, the Firstly, just noting that non Nordic sales, as a consequence of the decision made back in 2019, 2020 to discontinue active marketing towards these markets have, I mean, rather dramatically fallen and is now a, I wouldn't say insignificant, but still a very low share of our sales. Our focus is the Nordics. The it's true, though, that we did see growth, but I wouldn't extrapolate that. That's We're down on low levels when it comes to these markets. It's not a focus area for us. So that's the first answer to the first part of the question. The second is the A large proportion of those sales come from our warehouse sorry, from our B2B business, wholesale business. As you may know, we're available on Zalando, that is a profitable business for us. So yes, black numbers. Perfect. And final question, even though it is a bit detailed, but I just realized, you've added some CHF 200,000,000 in right of use assets in Q3 in your balance sheet, right? Yes. Obviously reflecting the yes, the DC. So My question is really, would it be fair to just divide that with 10 years and amortize that with €20,000,000 per year going forward or €5,000,000 per quarter? No, there are 2 parts of it. This the increase in Q3 actually stems from the lease agreements on the new warehouse, which is longer. It's actually a 15 year lease, 15.5 year lease. So that the large balance sheet, lease liability and lease asset recorded is a function of that lease agreement being a very long term lease agreement in effect. Okay, okay. Excellent. Thank you so much for taking all these questions. Thank you. Thank you, Niklas. It seems that we have no further questions for the moment. So dear speakers, the floor is yours. Well, thank you so much for listening in and for the many very good questions. And I wish you a great day.