Good afternoon. Thank you for joining a.k.a. Brands to discuss our third quarter 2026 results released this afternoon, which can be found on our website at ir.aka-brands.com. With me on the call today is Ciaran Long, Chief Executive Officer, and Kevin Grant, Chief Financial Officer. Before we get started, I would like to remind you of the company's safe harbor language. Management may make forward-looking statements, which refer to expectations, projections, and other characterizations of future events, including guidance and underlying assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to update any such forward-looking statements. This call will also contain non-GAAP financial measures, such as Adjusted EBITDA, Adjusted EBITDA margin, and constant currency net sales.
Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the release furnished to the SEC and available on our website. With that, I will turn the call over to Ciaran.
Good afternoon, and thank you for joining us to discuss the third quarter of 2026. Our results reflect strong execution against our strategic plan. Net sales grew 9.7% to $161.3 million, and Adjusted EBITDA increased nearly 17% to $8.2 million, both in line with expectations. We delivered top-line growth this quarter while achieving our third consecutive quarter of double-digit Adjusted EBITDA growth. That combination demonstrates that the structural improvements we have made across the business are now driving both growth and profitability. Our performance this quarter was led by three key drivers: our expanding omnichannel model in the U.S., international growth, and significant gross margin improvement. The U.S., our largest market and greatest growth opportunity, led our performance, with net sales growing 14%. This marks a return to double-digit growth in the U.S. for the first time since we transformed our sourcing network last year.
That transition was a significant undertaking, and we are now growing from a more resilient foundation. Rest of world continued to accelerate, with net sales up 79% compared to approximately 49% in the second quarter, led by the ongoing success of Princess Polly in the U.K. Performance in Australia and New Zealand improved sequentially in Q3, with net sales declining approximately 7% compared to 12% in Q2, as we lap our strategic shift to a more profitable full-price selling model. While the macro environment continues to pressure consumers, we remain focused on executing a disciplined operating model. Importantly, gross margin expanded approximately 100 basis points year-over-year to 60.1%. This expansion was driven primarily by Culture Kings, where our multi-year transition to a full-price test-and-repeat model is now firmly embedded in how the business operates.
Notably, we achieved this gross margin improvement while absorbing significantly elevated freight costs, which speaks to our underlying margin profile. The quarter also demonstrated the momentum of our expanding omnichannel model. Online remains the foundation of our business, while stores and wholesale also delivered growth, broadened our reach, and introduced our brands to new customers. Our store fleet was a meaningful growth driver while delivering strong profitability, and our wholesale partners continued to respond positively to our product with significant runway ahead. We also continued to improve our operational foundation. During the quarter, we completed our planned distribution center relocation to a new facility in Ohio. This transition will enhance the customer experience and improve margins going forward, while also supporting the next stage of growth for our brands across online, stores, and wholesale.
At the same time, we're expanding our investment in AI, strengthening our team's ability to make faster and more informed decisions. Our smaller brands are now testing a proprietary AI tool we developed in-house, which helps the merchandising and planning teams determine what we buy, how much we buy, where to allocate it, and how we price it. The result is a sharper, more disciplined merchandising engine that helps us chase what's working, reduce markdowns, and expand margins. AI is also accelerating our content engine. Our creative teams can now take new content from production to live in a matter of days, and we are expanding our use of AI across video and imagery to create more content faster. We're also building AI into how customers shop.
As more consumers start their search with AI assistance, we're making sure our brands show up in those results, and traffic from those channels is growing. We're still early, but we see AI as a meaningful driver of conversion, inventory productivity, and margin expansion in the years ahead. Turning now to our brand highlights, starting with Princess Polly, our largest brand. Princess Polly delivered a strong third quarter as the brand continues to show the power of its omnichannel model. Our test-and-repeat engine is driving full-price sell-through, our stores and partners are introducing the brand to new customers, and our international expansion is opening meaningfully new growth opportunities.
From a merchandising perspective, this year's back-to-school was Princess Polly's strongest season to date, and the quarter highlighted a key strength of the brand's test-and-repeat model, the ability to capitalize quickly on emerging trends while building a growing base of durable, repeatable programs. An example is that we can quickly build on viral cultural moments, such as the Cielo Mesh Halter Top in zebra print that was featured in the film "Obsession." It became the brand's biggest-selling style of the quarter, and Princess Polly is carrying that momentum into holiday with new going-out styles inspired by its success. At the same time, the deeper buys and proven core evergreen categories discussed last quarter delivered exceptional results. Sweats sold four times last year's level, and knit tops nearly doubled.
This balance of being both on-trend and repeatability keeps the assortment fresh for customers while supporting more predictable demand, healthier inventory productivity, and better margins. Princess Polly's marketing engine remains a key competitive advantage, building cultural relevance at scale while driving efficient customer acquisition. The scale of the creator engine is a meaningful differentiator. Princess Polly ran thousands of creator collaborations in the quarter, with more than 10,000 creator videos live each month and over 13 million weekly TikTok Shop video views. This reach converts into sales, and TikTok Shop remains one of the brand's fastest-growing channels, with U.S. sales nearly tripling year over year and growing more than 40% from the second quarter. The brand also launched TikTok Shop in the U.K. in July, opening a second market to the scale on the platform.
Store expansion continued in the third quarter with new openings in Orlando and Houston, bringing the U.S. fleet to 15 stores. We look forward to opening Southdale Center in Edina, Minnesota, and Stonebriar Center in Frisco, Texas, in the fourth quarter. Looking ahead, Princess Polly has signed leases for at least six new locations in the U.S. in 2027. In wholesale, demand was solid across partners in the third quarter, including Nordstrom and ASOS. Internationally, the U.K. remains a standout growth story. Since the launch of the local site, app, and distribution center in March, faster delivery has resonated strongly with customers. Third-quarter U.K. sales were roughly four times last year's level, U.K. customers nearly quadrupled, and sales grew 27% from the second quarter.
Looking ahead, the U.K. serves as Princess Polly's springboard into Europe, beginning with a dedicated German site launching this quarter, and we see significant growth potential across the region. Turning now to Petal & Pup. Petal & Pup continued to build its reach as a multi-channel lifestyle brand in the quarter. Event dressing remains the brand's signature strength. Its August event collection was the most successful third-quarter launch to date, with customers trading up to more elevated styles, a signal of the brand's pricing power. Heading into holiday, the brand launched its seasonal assortment earlier than last year, including a curated sweater shop, giving customers and wholesale partners a longer selling window. Wholesale remains a key growth driver, led to double-digit growth at Nordstrom and Macy's. At the Nordstrom Anniversary Sale, Petal & Pup ranked as the number six most demanded brand across all women's apparel.
The brand has also opened 100 boutique accounts, representing more than 140 stores in just two quarters of focused specialty wholesale effort. Looking ahead, Petal & Pup's distribution pipeline is the strongest in the brand's history. In the U.S., the brand recently launched on bloomingdales.com. Internationally, it will expand into new markets in the fourth quarter through launches with Myer in Australia and Nykaa Fashion in India. That momentum continues into 2027. Following a successful initial launch with Dillard's, Petal & Pup will expand across the retailer's full store fleet, and Urban Outfitters and Scheels will both begin carrying the brand next year. Each new partner broadens the brand's reach and reinforces our confidence in Petal & Pup's long-term growth trajectory. Turning now to our streetwear brands.
Culture Kings continues to make progress on its product and margin transformation, with its full-price test-and-repeat model driving a meaningful contribution to our consolidated gross margin expansion. With a stronger margin structure now in place, Culture Kings is well-positioned to drive profit flow-through as it grows. Culture Kings' in-house brands continue to resonate with customers, fueled by a robust slate of collaborations. The highlight of the quarter was Carré's collaboration with Mickey and Friends, which was revealed at Disney's D23 Showcase and launched globally in September. 73 Studio built on its success with Marvel through Spider-Man and expanded into gaming with Halo, while Loiter carried that momentum into October with global launches alongside Sonic and Alpha Industries. Beyond product, Culture Kings continues to stand out for its ability to bring sport, culture, and retail together.
Around Australia's first regular season NFL game, the brand partnered with the San Francisco 49ers and the NFL on a citywide activation in Melbourne, delivering the Melbourne store's biggest sales day outside of Boxing Day in more than five years. That success provides a blueprint for future sporting partnerships in both Australia, and the U.S. Culture Kings' U.S. expansion is also underway in Puerto Rico. In late December, the brand will open a 5,000 sq ft store at Plaza Las Américas in San Juan, the largest shopping center in the Caribbean. Built around the immersive format that defines Culture Kings, the store features a basketball hoop, a wall of headwear, a live DJ booth, alongside a curated mix of global brands such as Adidas, ASICS, and New Era, and our in-house brands, Loiter, 73 Studio, and mnml.
Rounding out the portfolio, mnml continued its momentum and remained the top five men's brand on TikTok Shop. This quarter, the brand relaunched its Standard Form basic collection with a refreshed logo, mnml branding on the outside of the garment for the first time, and fully redesigned packaging. mnml also celebrated its 10-year anniversary with a pop-up in Los Angeles, bringing the brand's community together in person. Overall, I'm very pleased with our performance this quarter. We returned the U.S. to double-digit growth, expanded gross margin, and continued to scale our omnichannel model while strengthening our balance sheet. We have a clear set of catalysts ahead: a growing Princess Polly store fleet and a pipeline of 2027 openings, expansion into Europe beginning with Germany, the broadest wholesale pipeline in Petal & Pup's history, and a new Culture Kings store in the U.S.
I'm confident in our strategy and in the long-term growth opportunity across our portfolio. I want to thank our teams for their hard work and commitment. These results are a direct reflection of their dedication to our brands and our customers. With that, I'll turn it over to Kevin.
Thanks, Ciaran. Net sales were $161.3 million for the third quarter, an increase of 9.7% compared to $147.1 million a year ago. On a constant currency basis, net sales increased 7.6%. By region, sales in the U.S. increased 14% to $112.6 million, which, as Ciaran noted, marks our first quarter of double-digit U.S. growth since our sourcing transition last year. Sales in the rest of world increased 78.9% to $7.6 million, driven by the continued success of Princess Polly in the U.K. In the Australia and New Zealand region, sales declined 6.7% to $ 41.2 million, an improvement from the 12% decline in the second quarter. Consumers in the region remain under pressure from the macro environment, and we were lapping sales from unproductive units as we completed the Culture Kings merchandising transition. Total orders were 2.12 million, up 12.8% year-over-year.
Trailing 12-month active customers, excluding wholesale, increased 8.8% to 4.43 million compared to 4.07 million a year ago. Average order value was $76 compared to $78 last year. As mentioned, we are particularly proud of the approximate 100 basis point gross margin expansion to 60.1%, driven by our continued discipline and focus on full-price selling, led by our streetwear brands. These gross margin improvements were partially offset by approximately 140 basis points year-over-year headwind in inbound freight costs, or roughly a $2.3 million Adjusted EBITDA impact. Selling expenses were $52.3 million, or 32.4% of net sales, compared to $43.2 million, or 29.4% of net sales a year ago. As Ciaran discussed, we completed our distribution center relocation during the quarter. The associated one-time charges of $5.3 million were higher than we anticipated and are excluded from Adjusted EBITDA.
Starting in 2027, we expect faster delivery times and lower shipping costs as we continue to build the foundation for online, stores, and wholesale growth. Marketing expenses were $21.1 million, or 13.1% of net sales, compared to $18.5 million, or 12.6% of net sales a year ago, reflecting continued investment in customer acquisition and brand awareness. General and administrative expenses were $27.7 million, or 17.1% of net sales, compared to $26.7 million, or 18.1% of net sales a year ago. As mentioned, Adjusted EBITDA increased 16.6% to $8.2 million compared to $7 million a year ago. Our Adjusted EBITDA margin expanded 30 basis points to 5.1%, marking our third consecutive quarter of double-digit Adjusted EBITDA growth. Turning to the balance sheet, we ended the quarter with $15.6 million in cash and cash equivalents.
Total debt at the end of the quarter declined 8.5% to $101.9 million from $111.3 million a year ago, and net leverage improved to 3.5 x compared to 3.8 x a year ago. We ended the quarter with $95.4 million in inventory, down 1.3% from $96.7 million a year ago, while net sales grew nearly 10%. Importantly, we are pleased with both the composition and freshness of our inventory heading into the fourth quarter. Turning now to our outlook. We are tightening our full-year net sales guidance to $626 million-$632 million to be in line with our quarter-to-date net sales trend of mid-single-digit growth. For the fourth quarter, we expect net sales to be between $172 million-$178 million.
We are confident in the momentum across our growth initiatives, and our outlook implies an acceleration in net sales growth from the third quarter to the fourth quarter on a two-year stack. At the same time, we continue to face increasing air freight rates and surcharges, which we expect to weigh on fourth-quarter gross margin by an additional 80 basis points compared to our prior outlook. The midpoint of our fourth quarter guide contemplates a 57% gross margin. As a result, we now expect fourth quarter Adjusted EBITDA of $7 million-$8 million, bringing our full year Adjusted EBITDA outlook to $29 million-$30 million. These freight costs are a near-term headwind and do not change the structural gross margin improvements we have made across the business.
For modeling purposes, we anticipate fiscal 2026 stock-based compensation of approximately $4.5 million-$5.5 million, depreciation and amortization expense of roughly $20 million-$21 million, interest and other expense of approximately $23 million-$25 million, which includes the DC relocation costs, an effective tax rate of negative 10%, CapEx between $16 million-$17 million, and weighted average diluted share count of approximately 11 million. In closing, our third quarter results reflect continued progress against our strategic plan, with growth in our priority markets, structurally higher gross margins, a cleaner and more productive inventory position, and a stronger balance sheet. We believe we are well-positioned to execute through the holiday season and continue delivering long-term value for our shareholders. With that, we will open it up for questions.
Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. We also ask all those in the queue to please limit themselves to only one question and one follow-up to allow everyone else a chance to ask a question. Our first question comes from the line of Randy Konik with Jefferies. Please proceed with your question.
Hey, how are you? Thanks for taking my question. I guess just on the strong growth in the U.S., what is your feel for the holiday season and beyond in terms of just the environment out there and kind of how you think about the different companies you are witnessing in the environment? Kind of what are they doing with promotionally, pricing, architecture, and how are you guys thinking about kind of responding to that or navigating that as we get through holiday and beyond?
Yeah. Thanks, Randy. I think certainly good to see us back to that double-digit growth, and I think it took us a while. We had to make a huge effort last year to restructure and change our sourcing and supply chain, and I think we are really seeing the benefit of that now, being back to that double-digit growth in the U.S. and doing it at a time when we are continuing to expand gross margins. I think it was good for us. As we went through the quarter, we saw the performance across all the brands and all the channels, be it direct consumer, wholesale stores, TikTok, and so kind of really pleased to see that as well. As we think about the promotional environment, I think certainly we see that from a macro perspective, there is a lot going on for the consumer.
I think we are very fortunate, and we can see it with the growth we had in Q3. They are very interested in our brands. They like our product. They continue to come to the site. I think we do see that they are a little bit cautious in adding that last item to the basket or maybe that extra item to the basket. So we are very conscious of that. As we think about Q4, we certainly feel we are well set up for holiday, and we have got growth going into the holidays. We have kind of reflected in the guidance. We are expecting it to be as promotional as last year, and that is kind of how we are set up for the holiday.
But look, we are fortunate that with our short lead time and our test-and-repeat model, we can be very reactive to anything we see out there in the environment. So, feel like we are in a good place and looking forward to executing against holiday.
Super helpful. And then, it looks like you have made good progress on the balance sheet. I noticed on the outlook; you reduced your CapEx guide a few million. So, I just want to understand as we think about kind of next year and beyond, maybe without giving actual numbers, maybe just qualitatively, how are you thinking about kind of debt paydown versus store expansion, where it sounds like you have made some great progress and you are seeing a great response to when you are putting stores in, especially around Princess Polly? So, just give me some, and I guess also Culture Kings. Basically, just give us some thought on how you are weighing that store expansion. Obviously, you need CapEx for that, but also the debt paydown where you have done a nice job of starting to get that debt paid down relative to EBITDA.
Yeah, I think it is great to see the performance of the stores. They are introducing new customers to the brand. We are getting great engagement there from existing customers. There is the halo from online, good performance from a four-wall profitability, and paying back on track and even a little bit faster. I think, look, from what we are seeing, it does give us more and more confidence to lean into that opportunity for Princess Polly and also for Culture Kings, and we are really looking forward to finally having the second store in the U.S. open for Culture Kings in December. I think as it relates to the capital structure, I think, look, we want to continue to pay down debt, but also very much invest in the growth opportunity that we have. I think we have done a nice job of straddling both of those.
We do think, look, we can certainly fuel and fund the growth we need with the operating cash that we have. Look, one of the other initiatives that we have is just improving our turns, and some of the early work that we have done with a proprietary tool that we have developed leveraging AI, we feel there is an opportunity to improve our turns, unlock some capital there that can also help in our efforts to pay down debt and go after the growth opportunity. So, feel like we have a good plan as it relates to that.
Super helpful. Thanks, guys.
Thank you. Our next question comes from the line of Dana Telsey with Telsey Group. Please proceed with your question. Dana Telsey from Telsey Group, your line is now live.
Oh, hi. Can you hear me now?
Yeah.
Great. Hi. As you think about the freight impact, which I think was around a $2.3 million impact or 140 basis points, how are you planning that going forward? With the improvement of significance that Culture Kings, both stronger margins driving profit flow through, how does that evolve going forward? Any history base to what it was, or is this just a new momentum, and what could that add to the overall architecture of the company overall? When you were talking about consumer caution, is that what you mean with the AOV, which was down, I think, nearly 3%? Is that more visible in any of the particular brands, and how does that impact wholesale orders? Are you seeing any change there? Thank you.
Yeah. Thanks, Dana, for the question. I'll take the first part of that on the impact of the freight, and I'll pass it to Ciaran. Yeah, no doubt the impact of the elevated freight costs has had a significant impact, like you mentioned, $2.3 million in Q3, and for the back half, it's a $6 million impact that drops straight to EBITDA. Despite that, we're really proud that we expanded the gross margin in Q3 up 100 basis points, and the guide for the Q4 gross margin is expanding another 150 basis points despite that headwind. So, we're very proud of what we put in place structurally, and obviously, there'd be upside too if the freight rates normalize to historical levels next year.
Dana, I'll touch on Culture Kings. Yeah, look, we are really glad to see the improvements the business has made in just getting onto that test-and-repeat model, much better product, customers are reacting really well to it, seeing now better gross margins, and with that will come improving EBITDA and comps as well. I think as we think about it, I think, look, there's just a lot of potential there. I think that the retailtainment aspect of that brand is extremely strong. Within there, the mix of the third-party product that they have, and they've got great brands with Adidas, ASICS, New Era, people like that, and our own brands, Loiter, 73 Studio, Carré, mnml, they're all having a really nice impact. We see big potential, I think, for each of those first-party brands.
As we think about it, I think there is certainly huge growth opportunities under the umbrella of Culture Kings, that will start when we open the next store for us in Puerto Rico in December. Also, I think taking some of those brands on the journey that Princess Polly, Petal & Pup, and mnml have gone on to open, really take them into new channels, whether it be TikTok, wholesale, or into other strategic partners. Look, I think there is a lot of opportunity there for them, and I think really the foundations are there now, great products, clean inventory, and the team is, I feel, a really good team that can really kind of go after that opportunity. Then I will just touch on AOV. I think it is down a little bit year-over-year, but just really more coming from channel mix than anything else.
As we see, I think we have talked a little bit, really, really strong growth on TikTok, up 3x for Princess Polly versus last year and nearly 40% from Q2. That is a little bit lower AOV in that channel, and it is more kind of less basket building than you would see in others. So, it is a little bit of that as it relates to that.
Thank you.
Thank you. Our next question comes from the line of Ryan Meyers with Lake Street Capital Markets. You may proceed with your question.
Hey, guys. Thanks for taking my questions. First one for me, Ciaran, I think you kind of mentioned this on the first question that you had, but the U.S. business sounds like that remains strong headed into the fourth quarter. Did you say that that is continuing at a double-digit growth rate? Just want to make sure I understand sort of the momentum that you guys are seeing in the U.S. business here in the fourth quarter.
Yeah. What we have seen, Ryan, is that momentum continue, and it was great to see it up that 14% in Q2 and kind of continue into Q4. I would say as we go through the quarter, the comps or the comparators get a little bit harder. We got into a better inventory position as we went through Q4 last year. Look, I think we feel really good about the catalysts that we have in place to continue growth, right? We have a couple of more stores opening for Princess Polly in the quarter. We will have Culture Kings next store. We have great pipeline of wholesale, and I think continuing that momentum that we are seeing in TikTok and other channels. So, we feel good about the guidance that is out there.
Okay. Got it. Obviously, freight remains a headwind, but if we think of the business outside of the freight headwind and the improvements that you guys have made across inventory, sourcing, merchandising, I mean, how should we think about how much more operating leverage there is in the business as this, whether revenue growth accelerates or kind of stays at this mid to high single-digit rate?
Yeah. We certainly, long term, certainly see double-digit EBITDA profitability in this business. I think, look, we have obviously done a lot of structural work to put the building blocks in place for that, but we think there is still a lot of opportunity. I would say, look, across each of the lines, gross margin, obviously we have seen a lot of improvement despite the headwinds of air freight. I think moving to our new DC, we feel great from a capacity and a service level, but there should also be savings there going forward. I think as we just scale, certainly from a marketing and a G&A potential, there are opportunities there as well.
So, look, I think some of it will come from scale, and I think some of it will come from the initiatives that we have going across all of the lines to continue to drive improvement and increase our profitability.
Great. Thanks for taking my questions.
Thank you. And our last question comes from the line of Eric Beder with SCC Research. Your line is now live.
Good afternoon. Let's talk a little bit about Princess Polly. So, you're up to 17 stores by year end. What are the learnings here, and what have you been changing in terms of the Princess Polly business? I know you mentioned sweats and some more basics, those have been a push. What do you think you need to do to continue to kind of maximize the Princess Polly store base?
Yeah. Thanks, Eric. We're really pleased with the performance of the brand, and I think the work the team there is doing and continues to do has been phenomenal as they go into these new channels and execute them, and channels that are new to the brand, right? I think we've seen the stores performing really well, as I mentioned, introducing new customers to the brand, we're getting a halo effect online, and great for sales and profitability. I think within that, they are evolving their model, and we talked a little bit last quarter about how they were going deeper in areas where they have more confidence. Sweats was a good example, and knits. Sweats in the quarter were up 4x versus last year. Knits category nearly doubled.
I think all of those things are giving them continued confidence that they can play into new categories, that they can evolve the models slightly as they move into stores. I think they are always going to be test-and-repeat, but I think there are places where they have more confidence to make sure that they're in stock at all times in some of these evergreen styles and evergreen winners. So, I see we continue to see a lot of potential for the brand. As I mentioned last quarter, could certainly see 100 stores for them in the U.S., but we're also getting a good view on the opportunity internationally with some of the growth we've seen in the U.K., up 40% year to date, and other areas as well.
Yeah. I'd like to talk a little bit about that. Yes, so you put in the 3PL, which enables you to now ship to the U.K. and I guess ship to Germany quicker. What are you seeing in the potential differences in the customer bases there? Does it make sense, I guess, in the longer term to eventually have retail stores potentially in Europe? How should we think about that opportunity as evolving going forward? Thank you.
Yeah. So, for the U.K. first, we have a U.K. customized website. The app is customized for the U.K., and then we put product in there and that proximity of product, and I would say just that better customer offering, right, being more attuned to them is driving the growth there. I think we see that same opportunity in Europe, and that's what we're doing now in Germany. The website and app first, and then we'll start putting product closer there as well. Certainly, delighted with the customer response we've seen. I think they've been I suppose the social channels that these consumers engage their content are global, so the brand awareness has somewhat been there for Princess Polly and is there in the U.K. and Europe.
They've been waiting for the brand nearly to come and kind of put that better service level out there so they can engage easier with the brand. We're delighted to have done that, and the response we see, I think it does give us confidence that there are absolutely a lot of growth opportunities for Princess Polly internationally, and we've confidence there. I think, look, our focus is very much U.S. at the moment. That continues to be a huge opportunity, and we're still very early days for the brand, but it's good to know that there are multiple growth levers out there.
Great. Good luck for the holiday season. Thank you.
Thanks, Eric.
Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. This also concludes today's conference. You may disconnect your lines at this time. We thank you for your participation.