Good day, and thank you for standing by. Welcome to the AMC Networks, Inc. Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. And I would now like to hand the conference over to your speaker today, Mr.

Nicholas Seibert, Vice President of Corporate Development and Investor Relations. Sir, please go ahead..

Thank you. Good morning, and welcome to the AMC Networks third quarter 2023 earnings conference call. Joining us this morning are Kristin Dolan, Chief Executive Officer; Patrick O’Connell, Chief Financial Officer; Kim Kelleher, Chief Commercial Officer; and Dan McDermott, President of Entertainment and AMC Studios.

Today's press release is available on our website at amcnetworks.com. We will begin with prepared remarks, and then, we'll open the call for questions. Today's call may include certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Any such forward-looking statements are not guarantees of future performance or results and involve risks and uncertainties that could cause actual results to differ. Please refer to AMC Network's SEC filings for a discussion of risks and uncertainties. The company disclaims any obligation to update any forward-looking statements made on this call.

Today, we will discuss certain non-GAAP financial measures. The required definitions and reconciliations can be found in today's press release. With that, I'd like to turn the call over to Kristin..

The Ones Who Live, featuring Andy Lincoln and Danai Gurira as Rick and Michonne set in Philadelphia. We just completed our annual FearFest programming event, which this year became a 2-month celebration of horror that ran across all of our linear networks and streaming services.

This year's event was curated by our horror brand, Shudder, one of the strongest horror brands in the world, and Halloween was one of the biggest acquisition days in Shudder's history.

The combination of FearFest and Shudder is a great example of the clear synergy between our targeted services and our linear networks, and demonstrates our ability to utilize our content across multiple platforms to serve our passionate fans the programming they love wherever and whenever they want it while maintaining the thoughtful curation that has become one of our core strengths in a crowded and confusing content environment.

WE tv launched a great new series for the latter part called Toya & Reginae, which saw linear viewership almost double over the course of the first season in its key demo and continues to perform remarkably well on our All Black streaming service.

In terms of advertising, we continue to make great strides in expanding our revenue growth opportunities. During the quarter and ahead of schedule, we launched an ad-supported version of AMC+, which allows us to offer additional flexibility to subscribers and also offer advanced advertising across our entire distribution ecosystem.

This is incredibly important as we continue to forge relationships with advertisers that span both linear and digital platforms with the same high level of relevance and targeting in both distribution channels.

Having an ad-supported version of AMC+ will also make it much easier for us to participate in innovative bundles that we believe will increasingly form the future of content distribution in the streaming space.

Last month, we started offering our advertising clients the ability to buy programmatically on our linear networks, a major technological lead for the entire industry, and we already have several national brands across a wide range of categories taking advantage of this new capability.

Programmatic buying offers enhanced targeting, greater efficiency, and has been the preferred way to transact on digital platforms for years, but until now has never been possible for national linear television commercials.

Our rollout of programmatic on linear follows our introduction of addressable advertising across our networks a couple of years ago, another first for the industry that significantly increases the value and relevance of our linear ad inventory.

We remain laser-focused on managing our business responsibly with a focus on costs, efficiency, profitability, and moving quickly into areas where we see competitive advantages.

At the same time, we continue to be nimble, opportunistic, and flexible in leveraging our core strengths and seizing every opportunity to put our content and brands everywhere viewers are. Now, I'd like to turn the call over to Patrick for a review of our financial results..

Thank you, Kristin. I'd like to start by building on what Kristin discussed regarding partnerships, then I'll review our financial results and outlook before we open it up for Q&A. Our relationships with our affiliates are important, long-standing and mutually beneficial.

We feel strongly that our tight portfolio of five well-defined networks continues to offer a strong value proposition to distributors and is well-suited to maintain broad distribution in basic or expanded basic tiers going forward.

Our network supported by strong programming and highly regarded brands are accretive to the overall value of the video bundle. Our best and highest-value programming has remained on linear. And as Kristin mentioned, we are one of the only remaining sources of high-quality scripted drama in the bundle.

That's reflective of our deliberate strategy to keep these affiliate relationships strong and hold our ground as the provider of a limited number of broadly appealing general entertainment brands that continue to bring value to our affiliates' video products.

Our MVPD partners appreciate and are well aware of the value and performance our networks deliver. They understand that our content is compelling, our networks are high-performing, and that our wholesale rate is low. Our networks account for a small slice of total industry affiliate fees and deliver almost 2x that in audience share.

That makes us a very efficient partner.

Our partners also appreciate our ability to work together on new initiatives that drive real economic benefits for us and for them, such as selling our streaming services, distributing our FAST channels, collaborating on technical enhancements that improve the viewing experience, and increasing developments and value of television advertising.

We expect our relationships with our affiliates, both old and new, to remain fruitful and mutually beneficial for many years to come. On to our third quarter consolidated financial performance. Consolidated revenue decreased 7% from the prior year to $637 million.

Consolidated adjusted operating income decreased 9% to $177 million, representing a margin of 28%, which reflects our continued focus on operating efficiency, and is consistent with the margin we delivered in the third quarter of last year. Adjusted earnings per share was $1.85.

We delivered $99 million of free cash flow in the quarter, which sets us up nicely to achieve our previously stated free cash flow objectives for 2023. Notwithstanding that, we continue to operate in a difficult environment as we navigate industry-wide challenges, impacting both the ad market and traditional pay TV ecosystem.

During this period of market evolution, driven by shifting consumer preferences, we have been pleased with our ability to continue to manage expenses while remaining flexible and collaborative as the industry works through this period of transition. I'll quickly touch on our segment financials.

Domestic operations revenues decreased 8% to $541 million for the third quarter. This was driven by an 18% decrease in advertising revenues and a 13% decrease in affiliate revenues, partly offset by streaming and licensing revenue growth of 9% and 7%, respectively.

Advertising revenues in the third quarter continues to be impacted by lower linear ratings, a difficult ad environment, and fewer episodes of original programming, which is the anticipated result of the rightsizing we have done to date in terms of programming investment. Digital growth remains a partial offset to these headwinds.

That said, we continue to experience a similar advertising environment as our peers as scatter and direct response remain challenging given the economic climate as our advertising partners remain conservative with their spending.

Affiliate revenue performance in the quarter was driven by continued declines in the basic subscriber universe, and the 3% impact from the strategic nonrenewal of Fubo. We ended the quarter with 11.1 million streaming subscribers, up from 10.7 million in the prior year period and 11 million in the second quarter.

We are pleased that our focus on higher-quality subscribers is working despite significantly reduced promotional activity. In the third quarter, we grew subscribers 4% year-over-year and 1% sequentially. Domestic operations adjusted operating income decreased 10% to $185 million, with a margin of 34%.

The decrease in AOI was largely attributable to lower revenues and was partially offset by lower SG&A expense, the result of continued cost controls across the company. Looking at our International and Other segment, for the third quarter, revenue and adjusted operating income each decreased 2% to $98 million and $13 million, respectively.

Moving to the balance sheet. We ended the third quarter with net debt and finance leases of approximately $1.9 billion, and a consolidated net leverage ratio of 2.7x.

We have substantial financial flexibility and total liquidity in excess of $1.35 billion, including $955 million of cash in the balance sheet, and our undrawn $400 million revolving credit facility. As noted in our earnings release this morning, we are redeeming our 2024 Senior Notes at par with formal notice to holders going out today.

Regarding capital allocation, our philosophy remains disciplined and opportunistic. First, we look to support the business with a particular focus, creating compelling content that resonates with our audience, while balancing overall profitability and cash flow generation.

Second, we remain focused on the balance sheet and addressing upcoming maturities. Lastly, strategic M&A and returning capital to shareholders remain further down our priority list. On to our outlook for the year.

In terms of our revenue outlook, given the industry pressures I discussed earlier in my remarks, we are now expecting consolidated net revenue to be closer to $2.7 billion for the full year 2023, down from our prior expectation of approximately $2.8 billion.

Our decision to reduce our full year revenue outlook reflects softness we are seeing in content licensing revenues as well as the continuation of a difficult advertising environment.

Despite these headwinds, we are reiterating our 2023 adjusted operating income outlook and expect AOI to be in the range of $650 million to $675 million, reflecting continued and better than previously anticipated cost discipline. We are also reiterating our expectation of 2023 free cash flow in the range of $120 million to $140 million.

Note that our free cash flow guidance contemplates $115 million of one-time cash restructuring payments. Excluding these restructuring payments, our free cash flow would be in the range of $235 million to $255 million. We also continue to expect to grow free cash flow going forward.

Recall that this year, our free cash flow will reflect the $50 million tailwind from the Hulu transaction we discussed last quarter. So to be clear, our expectation of free cash flow growth going forward is growth off of the base range of $185 million to $205 million.

We continue to expect cash content investment to be approximately $1.1 billion for 2023, and expect cash content investment to be in the area of $1 billion thereafter. Before I close, I would like to again note that our financial approach is rooted in three foundational principles to ensure maximum flexibility going forward.

The first is ensuring that we maximize the monetization of our content across all available avenues and platforms while preserving brand affinity. Kristin highlighted some of the ways we have recently done this, including our pop-up with Max and the launch of an ad-supported version of AMC+. The second is operating as efficiently as possible.

This is a must for all content companies, and we remain focused on managing a lean and adaptable business on this front. We are pleased with our performance since we began implementing changes around this time last year.

The third is being highly disciplined when it comes to capital allocation, including remaining opportunistic and flexible as we continue to maintain our healthy balance sheet.

This includes being responsible with our content investments and reducing our quantum of gross debt, which we are doing today through the notice of redemption on our 2024 Senior Notes.

We live and breathe these financial principles throughout the organization, which allows us to manage this business profitably and sustainably while retaining flexibility to move quickly as we leverage our core strengths and seize new opportunities. Operator, please open the line for questions..

[Operator Instructions] Our first question will come from Michael Morris of Guggenheim Securities. Your line is open..

Thank you, guys. Good morning. Two, if I could. First, maybe for Kristin. I'd love to hear some more detail on how the programming -- the programmatic linear advertising works specifically.

How does it sort of fit with your direct sales organization? And what kind of mechanics does it take to deliver targeted advertising to a linear audience? How -- what other partners do you have to work with? And I guess, how does that work exactly? That's my first question. And then second, maybe for Patrick.

You talked about softness in licensing revenue impacting the full-year guide. There seems to be a very strong appetite for licensed content, especially during the strike right now. So maybe you can help us understand how much of that has to do with like timing availability? And how much of that has to do with end-market demand? Thanks..

Great. Thanks Michael. You're making my day by asking about this particular topic because it's very near and dear to my heart, maximizing the capacity that we have on all of our advertising. And my history recently in data and analytics like this is a super enthusiastic area for me.

I'm going to let Kim Kelleher speak to programmatic linear, just on the technicalities of it, but also coupling that with addressable, and national addressable is really kind of a 1-2 punch.

So Kim, do you want to get into the specifics a little bit?.

Sure. Thanks Michael. We're really excited about this, as Kristin just said. So in simplest terms, what we've done is we've enabled biddable programmatic buying capabilities within our linear inventory, which was mentioned as an industry first. This is something we've been working on for a long time.

This means digital advertisers can now purchase our national linear inventory programmatically using the traditional buying platforms that they use today to buy all of their digital. So what this opens up is a lot of incremental audience and reach, and it maximizes the value of our yield on our linear inventory.

So it brings accessibility to a longer tail of advertisers than we have traditionally worked with. So this is also the first time our advertisers can manage reach and frequency within the same campaign in linear using an automated buying platform, like The Trade Desk or whoever their preferred partner is.

So this is really exciting when you couple it with the advanced advertising efforts we've taken to make all of our inventory highly targetable. So this really kind of rounds out the offering, and just making it much more seamless and efficient to buy from us..

Yes.

And just in summary, like you can -- an advertiser can come to us either with a segment that they define or when we help them define, and then, they can buy across all of our opportunities in a consolidated way and also through our Audience Plus platform get attribution that really helps them understand what worked, what didn't, and they're buying across every single scenario of advertising offering that we have, whether it's linear or digital.

So it's super exciting, and I think there's a lot of upside here..

Mike, it's Patrick on the content licensing question. The short answer to the question is more of an end-market issue for us and a pricing issue for us. So I'll unpack that a little bit here. So first off, I'd separate the international and domestic markets.

I think the international market remains kind of more robust than the domestic side, at least for us. And as we go to market and look to sort of pull forward the monetization of our content, we're at the same time, disciplined from a price perspective.

So obviously, we were able to get a bunch of additional programming, kind of on the Covered via the unwind of the Disney-Hulu deal. We opted to use that on the pop-up on Max, opportunistic, really put our content out there, hopefully driving people back into our own ecosystem.

We're benefiting this year, honestly, from a higher volume of content put in the Covered since we had held back in prior years and kept that for exclusive use on our own platforms. That's obviously no longer the case. But the reality is, is that when we're in market, we value our content highly.

And so while there's always an appetite for the content, it's not always at a price that we think it's worth. And so we're opting to sort of keep some powder dry. It doesn't mean that the timing isn't necessarily, but we are sort of guardians of our programming and the value thereof..

Thank you both for the details. Appreciate it..

Thank you. And one moment please for our next question. Our next question will come from David Joyce of Seaport Research Partners. Your line is open..

Thank you. I wanted to follow on the programmatic question there. I was just wondering how, I guess, ubiquitous is this ability.

How are we moving towards industry standards across the various networks and platforms in order to make this efficient for the ad buyers? And how does this work with you opening up some of your newer services like AMC+ to advertising? Are you -- is it pretty seamless to be selling across platforms, and if you could tie that in also to how things went in the upfront this year? Were these part of all of those negotiations, as I presume they probably were? Thanks..

David, it's Kim Kelleher. Great question. So let's say, I'm going to take it piece by piece very quickly. It's -- so this has been a work in progress for a long time. This started with addressable efforts that we announced two years ago with on addressability in partnership with Comcast, Charter, and Cox.

Fast forward to today, we are opening up inventory that we'll be able to add to this footprint, partner by partner. Initially, though, we are working through Canoe, and have started with Comcast inventory. Obviously, Canoe also works with Charter and Cox. So we anticipate expanding upon this.

What we do is we couple this inventory with our growing CTV inventory coming from our 17 FAST channels that are currently across nine platforms, soon to be across 12 platforms by the end of this year, which is giving us a huge expanse of inventory that can be transacted on digitally.

So once you put all of this together, you're able to do highly targeted. And with the progress the industry has made on managing reach and frequency and brand safety within those environments, you've got a very compelling opportunity that we're excited to be leading..

Thanks. And if I could add a second topic.

With some of the content comparisons causing some challenges, how can we -- and obviously, given some of the strike impacts, how should we think about some of your key content properties, timing-wise, across some of your main networks over the next few quarters to think about how advertising trends may be playing out? Thanks..

Hi David, this is Dan. Thanks for the question. We're in great shape. We have a robust slate of content that is already finished and/or being finished right now, as Kristin said, with Interview with the Vampire and the second season of Daryl Dixon that will take us well into 2024.

So we don't expect any impact from the lingering SAG after-strike, which we also hope is going to be resolved in the coming days anyway. So -- and there's no material impact to AOI or free cash flow from the strikes..

And David, it's Patrick, just one sort of final footnote there from a 2023 perspective, you'll recognize that we're cycling fairly difficult comps from a programming perspective. So I would expect that the advertising number in Q4 will reflect that..

Great. Thank you..

Thank you. And one moment please for our next question. Next question will come from the line of Michael Nathanson of MoffettNathanson. Your line is open..

Hi. This is Luke Landis on for Michael.

I wanted to ask, in your current bundled deals with linear distributors, is there any way to allocate the breakdown to streaming versus linear channels? And how you expect that to shift in the years ahead?.

It's Kristin. At this point, I think we look at our relationships holistically. And as we noted, we've included AMC+ with every single partner, traditional as well as a lot of the newer players into the space like Amazon, Apple, Roku, YouTube. So I think this will evolve over time how it gets sort of bifurcated and trifurcated.

But just to restate, our goal is always to offer the most flexibility that allows our partners to be successful and to get our content in front of as many people opportunistically in any way that they would like to consume it.

So utilizing our content across brands, across platforms, across technologies, and then both in ad-supported and non-ad-supported ways, but it's not specifically broken out yet in a way that we can articulate publicly..

Thank you..

Thank you. Again one moment please for our next question. Our next question will come from Brett Feldman of Goldman Sachs. Your line is open..

Great. Thanks. Two, if you don't mind. First, on free cash flow and the outlook for growing free cash flow.

I was hoping you could give us some insights into how you think the cash flow equation is going to evolve, meaning, right now, you guys are really doing a terrific job on the cost side of it, and that's clearly supporting a strong cash flow profile.

How much longer do you think that cost programs can support growth in free cash flow? And how are you thinking about the path to long-term revenue growth? I think, most people would agree it is sort of essential to sustaining cash flow growth over the long term.

And then the second is you've really been at the forefront of bundling your streaming services in with other streamers, and you've had some good early success there. There's been this constant conversation about when are we going to see more of that happening broadly across the category. I'm curious what your insights are there.

As you've done this, what have you found has worked? And do you see some emerging catalysts that are likely to create more of a bundling initiatives and natural facilitators? Sort of an open-ended question, but I think you guys have the unique advantage on this. Thank you..

Hi Brett, it's Patrick. I'll start on the free cash flow question. Listen, we've been taking steps over the course of the last three to four quarters, frankly, to set ourselves up in this way. And so we'll have essentially doubled run rate free cash flow from '22 into '23, and we feel quite good about continuing to grow that into '24.

Obviously, the biggest lever we've had to pull there is on the programming side. And so we've set up the '23, '24, and we're looking towards '25 slates in order to ensure that, that run rate continues. Obviously, there are revenue challenges in the business. We expect those to continue into 2024, particularly on the traditional side of the business.

One of the ways we've been able to grow free cash flow is not just on expense management, which, to your point, is finite. But I would also point at our efficiency on the marketing front. And so that's been one lever that we've pulled this year that's been particularly effective for us.

And obviously, we've moderated the growth in our streaming subscribers, and that's decelerated to a degree, but it's been offset by significant increases in the efficiency of that marketing spend. So we're being much more tactical in spending against CPAs where we see value. And so I think to the extent we continue to do that.

And frankly, as the ecosystem evolves towards bundles and we can have more sort of innovative and imaginative kind of revenue streams, as Kristin alluded to, I think from that, obviously, AOI and free cash flow growth will continue..

On the bundling side, Brett, I would just say there's real opportunity here around pricing and packaging. We are, as we've stated before, a pure-play programmer. So we have, I think, more flexibility to experiment.

We have long-standing relationships in the industry, so it's kind of fun to get together and brainstorm and think about opportunities and put them in the marketplace.

And then sort of -- as part of an answer to both of your questions, our goal here is really to get to be sort of a lean-mean distribution machine to create great content and get it out everywhere we possibly can.

And that's our ability to be innovative, our ability to move quickly, our ability to partner and engage with people on all different types of ideas and then culminate that with really intense utilization of data and technology to really understand the opportunities, articulate and attribute what the results were and then kind of roll those forward into expansion of the opportunities around bundling, around technological distribution, around ad-supported capabilities, are all, again, bright future spots that we see.

In addition to the efficiencies that we're finding in the organization in just getting smarter and more nimble and faster in everything that we do. So we've made a lot of progress there. I think we have more opportunities to do so in ways that benefit the company without cutting bone..

Thank you..

Thank you. And one moment please for our next question. Our next question will come from Thomas Yeh of Morgan Stanley. Your line is open..

Thanks so much. I wanted to ask more about the Max experiment, especially in the contrast to the comments about the lower industry appetite for licensing. It seems like it was more promotional than economic in nature. Wondering if there is any opportunity to monetize that more directly in the future.

And do you think the value lies more in driving attention to your own services as opposed to kind of a direct licensing?.

I'd say it's a combination of both. I mean, we did see, obviously, as we said, we're thrilled with the volume of viewership of our titles on Max, including things that were not current. So we've got a lot of exposure for our brands.

We then saw uptick again in utilization on AMC+ of the current seasons of shows like Dark Winds, and some of the other shows that we put on Max. And then we're -- the experiment just ended a couple of days ago. So we're now working with Warner Bros.

on results from them to see how we can again sort of parlay this forward and think about ways that we can opportunistically continue to expand the visibility of our content and partner with others to help kind of serve the customer best and bundles. Everything old is new again when you talk about bundles.

And whether it's a triple play of telecommunications offerings or a neatly packaged set of programming offering as it benefits the consumer, and we want to play in that space..

Great. Makes sense. And then recognizing it's still early days on the ad tier launch, the OTT subscriptions, I noticed, it stabilized in the quarter. I'm wondering if there was a contribution or a mix shift from that. And it sounds like you see this as a potential tool to find more ways to bundle.

Is the expectation that the mix of subscribers shifts more towards an emphasis on AVOD as an opportunity over time? Thank you..

Hi Thomas, it's Patrick. Yes, thanks for recognizing the kind of the sequential growth there. As I referenced before, it's really early days on the ad tier. So it's tough to draw any kind of lessons from that yet.

That being said, I think, I would point to the efficiency and kind of marketing spend and cadence of content, et cetera, on the subscriber growth -- on the subscriber side. Q4, we'll see what that looks like. It's still too early, I think, to attribute much on the ad-supported tier, but I'll let Kim comment as well..

Thomas, I would just add to the second part of your question. I think it's very important for us to have this ad-supported tier now because it allows us to participate in future bundling partnerships with parity across a non-ad-supported tier or an ad-free tier and an ad tier.

So making it seamless for the consumer and giving them that choice regardless of the tier they decide to come in..

Makes sense. Thank you so much..

[Operator Instructions] We have Steve Cahall of Wells Fargo. Your line is open..

Thank you. So, Kristin, you talked a lot on this call about the importance of partnerships. And I know the Max relationship has come up a lot. And this seems to be a bigger theme that we're seeing with more content heading on to bigger platforms to maximize its value and reach. So the question I wanted to ask you.

You seem to hold nothing sacrosanct within the business in terms of how to best position it going forward. How important is AMC+ to the long-term strategy of AMC? It seems like the linear network is still a great place to premiere content and engage with subscribers.

But AMC+ is competing against some of these bigger platforms that you're finding partnerships with. So how do you just think about the strategic nature of that asset going forward? And then Patrick, I might be doing the math wrong here, but I think your AOI guide implies a very small Q4 for AOI versus the last three quarters.

Can you just talk about if there's any content amortization timing shift in there? Is it a conservative guide or something else? Thank you..

Great. Thanks Steve. On the AMC+ front, it's a critical piece of what we do because it's -- again, we've always coupled it with the linear network. We haven't, particularly, in the last year, put things on AMC+ that we wouldn't put on the linear network.

So we see it more as an extension of our linear offering that is available to people who consume television in a different way. That's why we're so excited, a, about the Xumo launch and our partnerships with the virtual MVPDs and the traditional MVPDs that include AMC+.

But also this is -- it's interesting just to have products that appeal to different segments of the audience depending on their age and their habits. But each of them contain what we've been sort of working on for 40 years, which has curated amazing scripted dramas.

And the great thing for us, again, as Patrick mentioned, is we're reasonably priced across all of our products, and what we deliver is general entertainment.

So we believe, by being good partners and having great content, we can hold a good position in a sort of expanded basic traditional family cable type of package, whether it's something that is traditional linear or in the more advanced kind of future-looking bundles. It's still a bundle, it's just delivered over IP. So it's a critical piece.

But again, I think you have to think about it as a different transmission form of what we've always done really well..

Hi Steve, it's Patrick. On the Q4 question, I think you answered your own question. So your instincts are correct. There will be a substantial amount of amortization hits the P&L. And if I could sort of qualify the nature of the guide, I would say I expect us to be within the range. It's not necessarily conservative.

But, yes, as you look at -- kind of last year, we had a similar dynamic in terms of the Q4 margin being kind of materially lower than the balance of the year. So there's nothing more than that in there..

Great. Maybe just to follow on with that, Patrick. I think the domestic margin year-to-date is about four percentage points higher than last year with less revenue. I know you all have done a lot on cost. Do you think you can continue to expand margin at domestics over the longer term? Thanks..

I'm not sure expanding margin over time is going to be as easy, but we're going to give it our all. But expanding margins could be challenging, I think..

But I would add, we still see some significant opportunities to streamline our expenses, particularly around technology and distribution. And that's sort of -- that's not unique to us. The marketplace is evolving. The capabilities are evolving.

There's opportunities for different cloud vendors and different distribution capabilities that really can allow us to be more efficient in the actual mechanics of delivery on a go-forward basis, and we're looking at that really closely..

Yes. Steve, actually, one more point on the margin there that I'd point to would be, we're focused on free cash flow. And so, obviously, sort of amortization has a big impact on our P&L from an AOI perspective. As we go forward, we're more focused on free cash flow than AOI. So we're not managing the business for margin.

We're managing it for free cash flow right now..

Very clear. Thank you..

Thank you. I'm seeing no further questions in the queue. This will conclude today's conference call. Thank you all for participating. You may now disconnect. Have a pleasant day, and enjoy your weekend..