Earnings Call: Q1 2018

May 10, 2018

Good day, and welcome to the Nomad Foods First Quarter 2018 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Taposh Barry, Head of Investor Relations. Please go ahead, sir. Great. Thank you, Darmen, and thank you all for joining us to review our Q1 2018 earnings results. With me on the call today are Chief Executive Officer, Stephane Deschmaker and our Chief Financial Officer, Sami Zekoutz. Before we begin, I would like to draw your attention to the disclaimer here on Slide 2 of our presentation. This conference call may make forward looking statements that are based on our view of the company's prospects at this time. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and this slide in our investor presentation, which does include cautionary language. We will also discuss non IFRS financial measures during the call today. These non IFRS financial measures should not be considered a replacement for and should be read together with IFRS results. You just can find the IFRS to non IFRS reconciliations within our earnings release as well as any tendencies at the end of the slide presentation that is available on our website. Finally, please note that certain financial information within this presentation represents adjusted figures for both 2017 2018 and that all adjusted figures have been adjusted for exceptional items, restructuring, share based payment and acquisition related items and that all comments from here on will refer to those adjusted numbers. And with that, I will hand the call over to Stephan. Thank you, Taposh, and thank you everyone for joining us on the call today. 2018 is off to a strong start with the momentum that we experienced throughout 2017 continuing into the new year. We reported 1st quarter organic revenue growth of 2.9%, gross margin expansion of 2 40 basis points, adjusted EBITDA of €103,000,000 and adjusted EPS of €0.35 per share, which is up 40% versus the prior year. Based on our strong year to date performance and visibility to the remainder of the year, we're raising guidance to the high end of our prior expectations and now expect full year 2018 adjusted Ladies and gentlemen, Martin Luther King of Barclays Conference Call. I'll turn the conference over to Mr. Stephane Desmacher. Please go ahead, sir. Okay. So as I said, 2018 is off to a strong start with the momentum that we experienced throughout 2017 continuing into the New Year. We reported 1st quarter organic revenue growth of 2.9%, gross margin expansion of 2 40 basis points, adjusted EBITDA of €103,000,000 and adjusted EPS of €0.35 per share, which is up 40% versus the prior year. Based on our strong year to date performance and visibility into the remainder of the year, we are raising guidance to the high end of our prior expectations and now expect full year 2018 adjusted EPS in the range of €1.10 €1.13 per share. This represents growth in the range of 11% to 14% versus the prior year. While the calendar year has changed, the underlying drivers of our performance remain largely consistent. Our formula for success continues to be driven by focus around our core as well as a strong sense of purpose behind our goal of increasing market share within the frozen food category. As Sami will outline, our Q1 top line performance came with very strong gross margins. While partly helped by phasing, these results underscore our focus on profitability and represent a meaningful step towards achieving our long term target of 20% EBITDA margin. Finally, during the Q1, we launched the position of Goodfella's, a market leading frozen pizza business in the UK and Ireland. We are excited to enter pizza, which as you know is a large and growing frozen category where we historically have limited presence. In addition to expertise in the new category, Good Stella also brings us size and scale in the UK, which as you know is our largest market by revenues in a country where we believe we have a meaningful opportunity to grow further. With the need of the deal now closed, our focus shifts to the successful integrating Goodsellas into NoMad Foods while leveraging our scale and commercial capabilities. Turning to Slide 5, we'd like to highlight some of the growth initiatives that contributed to our performance in Q1, while also providing you with visibility on how we plan to sustain momentum throughout the rest of 2018 and beyond. Since 2016, our strategy has been primarily focused on our core portfolio with examples including fish fingers, coated fish and peas. Most of you have come to know these are the must win battles. We have significantly improved our commercial execution. This has been a lower encompassing effort with our own product enhancements, packaging improvements, investments in working media, improved media content and better in store execution. This strategy to date has been largely applied to existing part of our portfolio where we have seen the greatest growth potential and the highest return on investment. The sustainability of our playbook continues to be validated with every passing quarter. Q1 represented our 5th consecutive quarter of organic revenue growth, category growth and market share expansion. We know that improved execution is a never ending journey. As such, while we are satisfied with the progress that we have made, we believe that we have a we still have a long way to go before reaching a level of best in class performance. As we look back at Q1, we raised the bar even further by executing all elements of our growth model and accelerating momentum within our core business. On Media, we launched a new Captain campaign, which we first rolled out to U. K. During the month of January. As you know, the Captain is one of our most iconic brand assets. After years off air, we decided to bring the Captain back to TV in 2016, which turns also to be a very good decision. We further invested in the capital in Q1 by launching a new pan European campaign, which reinforced the simplicity of our fish finger ingredients under our slogan of real food, simply made. On product, we continue to make enhancements to our core including the introduction of our quickest ever fish finger in early March. And finally, on in store execution, we've built on our distribution momentum by expanding into offer, which is Adi's banner in Austria. In summary, we continue to make significant progress in improving the execution of our core portfolio and believe we still have a way to go before realizing our full potential. As we advance through 2018, we will begin to apply this playbook to a series of new innovations that we have been developing within our pipeline. Slide 5 highlights some of the new products that you will see as launched throughout the year, mainly in the second half, beginning with the back to school period. Through a series of concentrated big bets, these innovations will leverage our leadership really meat. These innovations include veggie power, a vegetable mix boosted with the inclusion of grains and pulses, good for you, a new range of vegetables based meals with a modern Swiss and Peas, a new plant protein innovation offering consumers a healthy substitute to meat. Indeed, we are very excited to take our portfolio to the next level and aligner even further with powerful consumer strengths such as health and wellness, plant protein and convenience. Ultimately, we expect the combination of improved execution, growth in our core and increased contribution from innovation to drive sustained market share gains and an organic growth rate in the low single digits range. In summary, 2018 is off to a strong start with Q1 results further validating the sustainability of our strategy and importantly, the team's ability to execute against it. I would now like to turn the call over to Sami Zekout. As most of you know, Sami joined as a CFO last month following a 30 year career with Buck and Gamble. He was most recently the CFO of the Global Grooming Business. Sami brings extensive experience to our organization and we look forward to his contribution in the years to come. With that, I will hand the call over to Sammy to provide a more detailed overview of our Q1's financial results. Thank you, Stefan, and thank you all for your participation today. It's a real pleasure to be joining Nomad Foods at such an exciting time and I look forward to meeting you in the months to come. Turning to Slide 6, I will provide more detail on our key operating metrics beginning with revenues, which increased 1.5 percent to €539,000,000 driven by 2.9 percent organic revenue growth and offset by 140 basis points from unfavorable foreign exchange translation. Organic revenue growth of 2.9% exceeded our guidance of 2%, mainly due to a strong end to Q1. Organic growth closely resembles consumer takeaway as we once again gained market share in a category that grew low single digits. Growth was particularly balanced by geography. We experienced growth in the UK, Germany and Italy, which grew organic sales by 6%, 8% and 4% respectively. These are our 3 largest countries accounting for nearly 50% of sales and an even greater percentage of our EBITDA. They are also the markets where we are prioritized strategically as we have high margins, high market share and high growth potential. All three countries posted organic revenue growth and increases in market share during Q1. As you may be aware, there were a number of shifts during the Q1. First, we benefited from an earlier Easter, which helped Q1 sales growth by about 1%. 2nd, this benefit was partly offset by the phasing of promotion out of Q1, part of which we shifted into the year to go period. In net, we are pleased with organic revenue growth of 2.9 percent in Q1 and remain comfortable with our ability to realize low single digit organic revenue growth for the year. Moving on to gross margin, which expanded 240 basis points to 31.8%. Gross margin were held by 180 basis points from mix, 100 basis points from price and promotion and we offset by 40 basis points from higher cost of sales. 1st quarter gross margin illustrates the progress that we continue to make along our net revenue management program and put us on pace for another year of gross margin expansion in our base business. While we are pleased by our gross margin performance during the Q1, there were a few contributing factors to the overall magnitude of the increase, which will not repeat in future quarters. They include the anniversary of U. K. Trade promotion in the year ago period, the shift of certain promotion out of Q1 and favorable year on year purchasing of fish. In net, we are pleased by gross margin performance during the Q1, but do expect to realize a more modest growth rate of our gross margin expansion in our base business throughout the remaining 9 months of the year as a whole. Further, beginning in Q2, our P and L will also begin to reflect the Goodfella's acquisition, which as you know has lower gross margin our legacy business. Taking both of these factors into consideration, we expect consolidated gross margin to be in the range of 30% to 31% throughout the remainder of 2018. Moving down to the rest of the P and L, adjusted operating expense declined 2% year over year with a 4% reduction in direct expense, offset by 1% growth in A and P. Adjusted EBITDA was €103,000,000 representing a 16% increase versus the prior year. Adjusted EBITDA margin expanded 230 basis points to 19.1% for the quarter. Adjusted EPS was €0.35 for the quarter, an increase of 40%, reflecting higher EBITDA, lower interest expense and share repurchase. Turning to cash flow on Slide 7, we generated €83,000,000 of adjusted free cash flow throughout the Q1, which equates to operating cash flow conversion of 86%. Factors contributing to free cash flow for the 1st quarter are as follows: adjusted EBITDA of €103,000,000 which grew 16% year on year, working capital was an €11,000,000 offset in Q1, mainly due to phasing. CapEx was €4,000,000 during the quarter, below last year as we anniversaried increased spend on machinery and equipment related to the Finisys acquisition integration. Cash taxes were 3,000,000 dollars and finally cash interest and other were $3,000,000 below last year's amount due to a combination of refinancing benefit gain on derivative and phasing. Turning to Slide 8 on 2018 guidance, which is based on foreign exchange rates as of May 9, 2018, based on our year to date performance and visibility into the rest of the year, we are raising our full year 2018 guidance to the high end of our prior range. As a result, we now expect 2018 adjusted EBITDA in the range of €355,000,000 to €360,000,000 and adjusted EPS in the range of €110,000,000 to €113,000,000 per share. When translated into U. S. Dollar, the currency in which our shares trade, adjusted EPS guidance equates to a range of $1.30 to $1.33 per share. Full year guidance continues to be based on an underlying assumption of low single digit organic revenue growth. Based on current exchange rates, we expect FX translation to represent approximately 100 basis points of drag on reported revenue in both the Q2 and the full year. While the British pound has been somewhat stable versus the euro, currency translation has been negatively impacted by the recent depreciation of the Swedish krona and Norwegian krona versus the year resulted in a translation headwind greater than our prior expectation for the full year. As a reminder, our full year guidance includes Goodfella's, which will be the home for approximately 2 months of Q2 and the entire quarter beginning in Q3 and beyond. We continue to expect Goodfella's to contribute approximately €90,000,000 revenues and €10,000,000 EBITDA for the partial year of ownership in 2018. While we expect GoodPalace to be immediately accretive on EBITDA and EPS, this business does come with lower gross margin from the outset and is expected to offset gross margin in our base business by approximately 100 basis points per quarter until fully incorporated in our base. Including Goodfella's mix and the aforementioned gross margin driver, we expect to report consolidated gross margin in the range of 30% to 31% throughout the remaining of 2018. On operating expense, we continue to fund investments in A and P through discipline around indirect expense. For the year, this should result in operating expense growing roughly in line with revenue growth. On a quarterly basis, we now expect A and P spend to be more evenly balanced throughout the course of the year, which will result in a meaningful year over year increase in Q3. Taking the aforementioned factors into consideration, along with the steady build of Luxferla's EBITDA contribution throughout the year, we expect Q1 and Q4 to represent the majority of this year's absolute EBITDA growth versus the prior year. That concludes our remarks and I will turn the session over to Q and A. Thank you. Darby, back to you. Thank you. We'll take our first question from Steven Strycula with UBS. Please go ahead, sir. Hi, good morning. Quick question for you, Stephane. I wanted to make sure that it sounded like the last time we heard from you up in New York at the CAGNY launch that the quarter was trending for Q1 roughly around 2% organic sales and you guys did a little bit better than that with 2.9%. Was there anything that happened kind of at the end of the quarter from maybe a sell in benefit? Or was it just that you really just finished the month pretty strong in your base business? Thanks, Steve. Actually, there is no phasing, so no selling. In fact, it's just we performed a bit better than expected. Probably a bit helped by the weather by the way, because the weather was a bit colder. And at the same time, great market share expansion. So, a combination of all these things. You remember what we said is the category is growing, market share is growing and then on top of that we were a bit helped by the weather. So that's the algorithm, I would put it that way. Okay. And as we think about the cadence of the year, should we think about the Q3 being the toughest year over year organic sales compared due to the strength of the category and the weather from a year over year comparison basis? And then if you could spend a moment, Stephan, talking about the innovation plans in the back half in a little larger detail just because you guys haven't been that big on innovation, you've been more focused on renovation. So just giving us a little bit of feel as to what we should expect changing the revenue trajectory as we get to the back half? Thank you and I'll pass it along. I would thoroughly go I would focus instead of Q3, I would say I would take the 2 to 3 quarters just to highlight that we're just confirming the low single digit organic revenue growth. We feel confident we're going to get there. So that's and again, back to the same combination of category growing and retaking market share bit by bit, quarter by quarter. So, that's that. And so, I would not pinpoint any specific quarter. Then back to innovation, which is a good point. Maybe a bit of retrospective, Steve, you remember, I think what the difference is indeed that we're very much focused on renovation for the first 2 years and a half. And I really believe rightly so, we have to make the foundation of business sound again. And in the meantime, I think we have taken a more mature approach towards innovation. So we are back to innovation, but instead of diversifying us away from our core business, it's really focused on a limited number of big bets. So it's more focused. It's focused behind the core business, number 2. And then we have obviously taken into consideration the big trends that we see, the macro consumer trends like convenience and health and wellness. And so that's going to really hit us in a positive way in the second part of the year, especially quarter 4, I will put it that way. So that's more to come. You've seen some examples in our presentation. But so again, keywords, it's core, it's a key consumer trends and it's more focused behind a more limited number of big bets. And it's too more specific for the 4. Did it answer the question? Yes, it did. Thank you. We'll take our next question from Brian Holland with Consumer Edge Research. Please go ahead. Hey, thanks. Hello, everyone. So I guess just to confirm on the margins, I know you talked about some benefit there or things that happened in Q1 that won't repeat in Q2. Just to confirm, is there anything did you like when you talk about phasing, etcetera, is there anything where you benefited in Q1 where that benefit actually reverses or maybe you stole a little bit from Q2 on the margin side or maybe just because of the shift sequentially that anything changes there? And then carrying the margin question forward as we go over the balance of the year, anything we should be sensitive to in our models with respect to launch cost, etcetera, around the innovation that you've described? Yes, let me come back. Just make sure we recap the point there. We've gross margin have been expanded by 2 40 basis points as I had mentioned. There's roughly about 1 and 80 basis points from mix, 100 basis points from price and promotion and it was offset by the cost of sale effectively that has been up effectively by about 40 basis points which has impacted there. We have seen some shift of promotion effectively from Q1 and which effectively will have a marginal effect if you want moving forward. But the reality is that there is nothing that effectively of large nature that is going to change the pattern if you want moving forward. The key point there is what's very important is frankly that we look at the portfolio where effectively we are going to roughly improve if you want our gross margin versus year ago. That is very clear. And I mean, based on effectively the calculation we have made, I mean, good sellers will be impacting our gross margin by roughly about 100 basis points per quarter moving forward. So, that's going to be effectively one thing that we look forward. So, on the base of our let's say base business, our base business gross margin will be improving and the one element effective to answer your question specifically that is effectively going to have an impact on the ship is going to be promotion. Thanks. That's helpful. Just quickly shifting to the top line, maybe at a category level, obviously, you talked about January being soft, I guess, dating back to the Q4 call. January was surprisingly soft and then you saw some rebound over subsequent months, February, March, I think you talked about at the CAGNY lunch. But only one more month to add on to that, but are we continuing to see that trend? And anything just that you're seeing at a category level that would change your view near to intermediate term about the backdrop there? The honest answer is no. But back to let me start again with what we have seen. Indeed, you are right, Brian. I mean, it's January was soft. And there was really a buildup between January, February March. So March, it's maybe back to, by the way, to Steve's question. March was really very solid. And then it's really premature to come with any expectations for the year. So, we are back to the model we have put together, which is we believe that this category is growing. It grows, it's growing and will grow. And on the back of that, we're going to get market share. So that's been working like this and we don't see any reason to change one way or another the model. Okay. And then last one for me. A few weeks ago, you had a transaction announced on the retail side in the U. K. Just curious if you could give us a sense your exposure to same store in NASDAQ and also just maybe just some high level commentary about how you think that might or could impact the market and sort of just reiterate your stance on how you're positioned on the retail side such that maybe this is or isn't an issue going forward or risk to pricing, etcetera? Thank you. I'll be very factual. Number 1, it's midstream UK represents around 25% of gross sales. So it's not 100%. So that's one thing. 2nd, we have already obviously what they put together and indeed they have been identified procurement synergies which is part of the game. And as I said, it's part of the game. So we've been through these kind of games in the past with the merger of how the lens for example or the buying groups in France. So, that's our job and we have to get there. I think it offers also some opportunities especially for us as a brand leader and especially in the middle of this recovery where we're moving from strength to strength. So that's part of the game and we're going to have some conversation. It's going to take some time and as you know, it's not going to close. Apparently, again, not going to speculate on anybody else's merger, but apparently it's not going to close before next year. So, we're going to have conversations and that's it. So, I would say business as usual, but it's part of the game. Thanks. Appreciate the color. Best of luck. We'll now take our next question from Rob Dickerson with Deutsche Bank. Please go ahead. Thank you very much. So just I guess a couple of questions more mechanical both on margin just cadence for the year that you walk through fairly specifically. One is just on the gross margin, you're saying 30% to 31% for the remainder of the year, then essentially I think for the full year. So that implies basically flat gross margin kind of from Q2 to Q4. And then you said there I think you said there was approximately 100 basis points offset that would come from the Goodfellas tuck in. So I just want to be clear that when we see gross margin or if we expect to see gross margin flat for the rest of the year that obviously the base business would be up approximately 100 basis points for a quarter? Rob, it's Patrice. Just a quick correction on your comment. We didn't comment on gross margins for the year. What we said is Q2 through Q4, so the next three quarters cumulatively, and we expect gross margins in that range of 30% to 31% after Goodfellas including Goodfellas. Yes. Including Goodfellas. Okay, got it. And then just in terms of the Goodfellas drag, I think the commentary was kind of that would drag on margin until basically, I guess, kind of fully integrated or better revenue management, etcetera. So I'm just curious as kind of on thoughts as you bring that into the nomad structure in Q2. The plan is basically to better operate the business through revenue management to try to improve the margin. And therefore, in 'nineteen, like that wouldn't that hopefully would no longer be a margin drag that would be more in line with regular nomad base. Is that right? Let me first requalify the drag. For me, drag to some extent is an opportunity. So, it means that we can bring value to the organization and that's part of the acquisition game obviously. So, we believe that in terms of net revenue management, more specifically in terms of promo efficiency, for example, something like that we have done quite efficiently in the rest of the group, we can bring value. So that will obviously improve the gross margin for good sellers, that's one thing. At the same time, let's put it that way, You also have private label and private label comes in terms of gross margin at the very least, come with structurally lower gross margin and that will not change as such unless obviously the mix between gross margin and between the network between the private label and brands is changing over time. That's not going to happen anytime soon, taking some time. More importantly as well, let's say, if you're moving downwards from gross margin to EBITDA, it also comes with a much lower organization and fixed cost organization. So, what is a drag at the gross margin level is much less of a drag at the EBITDA level. And so, as you know, our main objective is to move within the next few years to €25,000,000 EBITDA and that's ultimately our goal within the perimeter of what's in finance is. Okay, perfect. And then quickly, Stefan, just given your pension and I guess explicit business strategy to continue to basically roll up frozen within Western Europe, I'm just curious as to how you view the current M and A environment within Western Europe, more specifically in frozen and if the expectation that potentially more assets could come to market from larger companies is still in the cards? Thanks. Yes. I think to your point, number 1, I can only agree with you, it's the right focus. So we focus behind the consolidation of the growth of the frozen food industry in Europe and you still have some interesting assets to be acquired at some stage. But by definition of M and A, you have to prepare yourselves and we are preparing ourselves and I think these 2, 3 years have been very good in terms of preparation. And obviously, what we can't predict is obviously when the sellers, the different owners will decide to sell. So, that's the definition of M and A. But the good news is you still have some interesting assets to be acquired. And we have seen it. Great job. Thank you. Thank you. We'll take our next question from Bill Chappell with SunTrust. Please go ahead. Thanks. Good morning. Hi, Dan. Good morning. Sean, can you maybe walk around the kind of a little bit just to and kind of how some of the specific countries are trending? In particular, I think you'd said that looking back, Germany is the only place that's really trending above where you were 2, 3 years ago and whereas U. K, Sweden, France still had some room to go. So maybe kind of an update there of what you see and whether they will kind of get back to where they were a couple of years ago by the end of this year? They will not be excited by when they are going to cross a Magic line. So that's more what can they offer, what can they what is the potential. But let's face it, as Sami explained, 60% of the business is in this UK, Italy and Germany. They are the must win countries. We have the core businesses, the core categories, but we also have must win countries. And together, they obviously they're very important to us. You remember that UK was a bit slower than the others and now it's catching up, which is very good news. And so, that's very good news in line with Gudsella. So, that means that the organization is ready. And then, we have indeed we have countries like Sweden which is still negative as expected by the way. We knew that we had to digest a series of things among others some non profitable food service businesses among others. Spain is a bit weak, but it's a smaller country. But all others like France, for example, is growing despite a negative industry. That's one of the few countries where frozen food is going backwards. But despite that, we're growing. The business is growing, not only market share, but business is growing. And then very interestingly, in that we know we have countries like Austria where we have a very, very strong position like a 30% market share plus where we currently we're growing in a very spectacular way. We mentioned Sami mentioned that we're taking that we work now with Ruffer which is the brand for Aldi in Austria and that's a big plus for us. So in terms of additional SKUs, you just have to work differently with these guys. So you work with a more limited assortment. You have to make sure that your margin is comparable to the margin you have with your traditional players, otherwise you're shooting yourself in the foot and we don't want to do that. But once you have achieved this, thanks to the strength of our brands, we can obviously becomes an opportunity for us. So that's good news. Okay. That's helpful. And then looking back to GoodFellas now that you have owned it for a few months, I mean, I think the initial comments were promotions were high from kind of what you were comfortable with and advertising was low and you were going to at least change the advertising in the near term and hold promotions there. Is that still kind of the case for the next 6 months as you kind of learn the business and learn what how to do with the business or any other changes in kind of strategy? Actually, it's more a question of weeks by the way than months. But it doesn't change anything to what you said, Bill. It's exactly that. The plan, the business plan is exactly what you mentioned. So, we are going to optimize net revenue management. So, we are going to further invest behind the plan. And in terms of like the advertising, does that happen immediately this quarter or is that kind of ramp as we move forward? No, we don't. The answer is we don't need it at this stage. So, and the sales are pretty good. So we just need to prepare ourselves more for let's say end of Q3, Q4 just to have the real impact. So, we will get to do that in due time. In the meantime, we are working very hard in terms of integration. So, it's doing well. Great. Thanks so much. Thanks, Bill. We'll take our next question from Adam Misrahi with Berenberg. Please go ahead. Good morning, guys. Thank you. I have a quick question for Sami. I mean, I know it's early days for you in NoMad, but I'd be interested to hear if there are any areas of the business that you've identified as a priority for you to work on or any opportunities that immediately stand out for you? Thank you. Thank you very much, I mean, Adam. Actually, I mean, let me reiterate the fact that I am extremely excited, I mean, joining NoMad, I mean, and one of the big drivers, if you want, is effectively the huge opportunity that the category, I mean, represents. I think I'm coming at a very specific time where this category is now resuming growth, I would say, in many markets. And I think, NoMad can definitely, I mean, create that growth acceleration, I would say. So, if you think about the one other thing I am seeing is effectively continued, I mean, net sales acceleration. I think the company has done a fabulous job already at, let's say, taking the cost down, the cost of the DB and a lot of, let's say, cost management intervention in order to fuel A and P. So, the key point there is, I think, to find the further inflection point to frankly accelerate growth further to really create the scale that we need to frankly deliver the plan we have over the long run. So, for me, it's about growth acceleration in a very profitable way. That's the whole idea. But these are the opportunities I'm really focusing my attention on, I mean, those days. So, the good news is basically Sami is coming to the conclusion there are many things that we can improve, which is a great news. Great. Thank you. We'll take our next question from Jon Tanwanteng with CJS Securities. Please go ahead. Good morning, gentlemen. Congrats on the quarter and on the outlook as well. My first question, how should we think of the ramp of the Goodfella's EBITDA margin? Should we think of the improvements there as a straight line over 2 years? And kind of second, what will be the cash cost to realize those synergies and what kind of revenue growth assumptions are you using to get there? Okay. So actually your point about it's a straight line, it's never a straight line as such, but at least it's a regular buildup which is very close to your what you said. That's one thing. 2nd, you may remember the nature of the synergies will come from 2 things. One of some indirect cost, that's one thing. It's also predominantly network management, which doesn't require a lot of restructuring. So there will be restructuring, the magnitude of around $15,000,000 there or thereabouts. So, but the rest will definitely come in terms of synergy. Once we have this, obviously, the rest of the synergies will come from less revenue management, which is good, which is again back to the low organic revenue growth, single digit organic revenue growth, sorry. Great. Thank you very much. Did it answer your question? It did. Thank you. Appears that we do not have any further questions at this time. I will now turn the conference back to Mr. Stefan De Smicher to have any additional closing remarks. Thank you. And to conclude, we are off to a strong start to the year with Q1, our largest quarter of the year now complete. Our strategy continues to drive improved financial results. We are confident in the plans and guidance that we have outlined for the rest of the year and look forward to updating you on our progress when we report 2nd quarter results in August. This concludes today's conference call. Ladies and gentlemen,