Moderna, Inc. (NASDAQ:MRNA) Q3 2023 Earnings Call Transcript
Moderna, Inc. (NASDAQ:MRNA) Q3 2023 Earnings Call Transcript November 2, 2023
Moderna, Inc. misses on earnings expectations. Reported EPS is $-9.53 EPS, expectations were $-1.81.
Operator: Good morning. My name is Kevin. And welcome to Moderna's Third Quarter 2023 Earnings Call. At this time, all participants are in a listen-only mode. Following the formal remarks, we'll open the call up for your questions. [Operator Instructions] Please be advised, today's call is being recorded. At this time, I'd like to turn the call over to Lavina Talukdar, Head of Investor Relations at Moderna. Please proceed.
Lavina Talukdar: Thank you, Kevin. Good morning, everyone, and thank you for joining us on today's call to discuss Moderna's third quarter 2023 financial results and business updates. You can access the press release issued this morning as well as the slides that we'll be reviewing by going to the Investors section of our website. On today's call are Stéphane Bancel, our Chief Executive Officer; Stephen Hoge, our President; Arpa Garay, our Chief Commercial Officer; and Jamey Mock, our Chief Financial Officer. Before we begin, please note that this conference call will include forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Please see Slide 2 of the accompanying presentation and our SEC filings for important risk factors that could cause our actual performance and results to differ materially from those expressed or implied in these forward-looking statements.
With that, I'll turn it over to Stéphane.
Stéphane Bancel: Thank you, Lavina. Good morning or good afternoon, everyone. Thank you for joining us today. I will start with a quick review of our business for third quarter. Arpa will then give you an update of our commercial progress and plans. Jamey will present our financial results and will explain in detail the one-time charges we announced this morning in our press release. Stephen will then review our clinical programs. And I will share our key priorities for 2024 and 2025 to return Moderna to sales growth and profitability. We delivered $1.8 billion in Spikevax sales of COVID vaccine in the third quarter. Based on trend we are seeing in the U.S. COVID market in recent weeks, we expect our sales for 2023 to be at least $6 billion.
We have been preparing for the 2023 fall COVID launch throughout the year, because the U.S. market was pivoting from a pandemic government purchase market to a commercial market. I am very pleased to report that according to IQVIA market data, we have a market share in the U.S. of 45% season to date, compared to 36% for 2022. [And Arpa] (ph) will show you, we even achieved 51% market share last week in the U.S. This commercial performance in the U.S. market shows that Moderna can compete commercially with large established players, [that will prove] (ph) important as we launch RSV 2024 and combo of flu-COVID in 2025. On the cost side of the company, we informed you at R&D Day that it was important for us to resize our manufacturing footprint as the world has moved from a pandemic to an endemic setting.
I am pleased that our manufacturing and finance team were able to move fast and resize our manufacturing, so that we can go back to 75% to 80% gross margin levels. This resizing resulted in a charge of $1.6 billion, which Jamey will explain in detail in his section. Now let me turn over to Arpa to walk you through our progress in the U.S. market.
Arpa Garay: Thank you, Stéphane, and good morning or good afternoon to everyone. Today, I will provide an update on our third quarter performance, our U.S. commercial launch progress and our preparation for our RSV launch next year. Our total sales in the third quarter came in at $1.8 billion, which includes approximately $800 million in international sales and $900 million in U.S. sales. Total sales for the first three quarters of the year were $3.9 billion. Turning now to our expectations for the fourth quarter and full year 2023 outlook. In our international business, we expect an additional $1.1 billion in sales. These sales are based on government contracts and once vaccine doses are shipped and accepted by the customer, they are not returnable.
More than half of these sales have already shipped in the fourth quarter. In the U.S., we expect at least $1 billion in sales in the fourth quarter, which would bring U.S. sales to approximately $2 billion for the second half of 2023. This assumes approximately 50 million doses administered in the U.S., which would be similar to the fall season of 2022. With $3.9 billion in sales recorded as of the end of the third quarter, expected fourth quarter sales of $1.1 billion internationally and at least $1 billion in the U.S., our updated sales outlook for 2023 is at least $6 billion. Now turning to the U.S. launch. The data shown here are from IQVIA. As a reminder, IQVIA data only captures the retail channel in the U.S., which includes retail pharmacies and long-term care.
I'm first going to share what our weekly market share trends look like and then discuss our cumulative share since launch and how it compares to last year. On the fifth week post launch, for the week ending October 20th, what you can see on the slide here is that Moderna's market share is 51%. As we look over the season to date, Moderna's cumulative market share for this season is now 45%, which is higher than the 36% market share we had in 2022. As Stéphane mentioned, this progress demonstrates our ability to compete effectively in the commercial endemic market. Turning now to Slide 8, which shows cumulative vaccinations in the U.S. retail pharmacy channel. This year, COVID vaccines were launched two weeks later than in 2022. As a result, we analyze the data on a launch-adjusted basis as shown in the graph on the slide.
To do this, we look at the data based on the number of weeks post launch rather than simply on a calendar basis. This helps us compare vaccines uptake in 2023 versus 2022. On the graph, the blue line represents cumulative vaccinations post launch in '22 and the red line represents cumulative vaccination post launch this year. And on a launch-adjusted basis, the total market is tracking ahead of last year's vaccination levels, both on a weekly basis but also on a cumulative basis. As a reminder, the retail channel is typically the largest segment, so these trends in the first five weeks are encouraging given the later launch and slightly shorter season in 2023. Let's now turn to look at the channel mix in the market on Slide 9. In 2023, we expect retail and non-retail mix to evolve as the season progresses.
The non-retail segment includes independent networks, health systems, U.S. government entities, clinics, and other providers. Last year, this non-retail segment made up approximately 16 million doses in the season, or 33% of the total market. The gray line on the graph charts CDC-reported vaccinations, which capture both retail and non-retail channels in 2022. The blue line is vaccinations at retail pharmacies, as reported by IQVIA, in 2022. The difference between these two lines represents the non-retail segment. Looking at the data on the graph, you can see that the retail channel captures the majority of vaccinations early in the season. This can be seen in the narrow spread between the CDC and IQVIA data represented by the gray and blue lines, respectively.
Now, if you look in the seventh week of launch in 2022, the current week that we are in, in '23, you can see that the slope of the non-retail channel is increasing. We know that distributors this year have recently increased shipments to the non-retail channel and, as such, we expect non-retail as a percentage of market to grow between now and year-end. Importantly, we expect our market share to be consistent across channels and higher in 2023 than in 2022. We are committed to focus on public health efforts to increase vaccination rates. In the United States, we are taking a multi-pronged approach to educate all stakeholders and increase the urgency to get vaccinated. Across the medical community, pharmacies and clinics, and advocacy groups, we are providing patient education resources to help our partners encourage their patients to get their COVID vaccine this fall.
Earlier this week, we also launched our branded direct-to-consumer campaign, both on TV as well as across digital channels. For the remainder of the year, we will be amplifying education on the need for vaccination prior to gatherings, particularly with at-risk populations such as families, and traveling during the holiday season. We are also launching a focused education effort for consumers who are infected with COVID this summer on the importance of getting vaccinated in November and December. To summarize our COVID outlook, we expect at least $6 billion of sales this year based on the U.S. vaccination trends that signal a market of at least 50 million doses. Moderna's share, both in retail and non-retail, is expected to be consistent across channels and higher than in 2022.
Vaccine administrations in the retail channel are tracking ahead of last year on a launch-adjusted basis, signaling strong early consumer demand. Last year, only about 55% of COVID vaccinations were given by the end of October, with an additional 23 million vaccinations given in November and December. We expect the non-retail channel to increase as a percentage of the market, which will provide additional sites of vaccination for consumers to allow for a strong November and December. This year, given the later launch of vaccines, the non-retail channels are just now beginning their vaccination campaigns. To continue the momentum from our launch and supplement our customers' efforts, we will be amplifying our marketing campaigns in November and December.
Let me now turn to the upcoming RSV launch in 2024. We believe we have a best-in-class product profile that can make a difference both to patients but also to our customers. Our clinical profile shows strong vaccine efficacy. We have a well-established safety and tolerability profile that leverages the same mRNA technology that has been delivered in over 1 billion COVID vaccines. Additionally, we have not seen any cases of GBS in our Phase 3 trials. An important differentiator for our customers is that we will be the only company with ready-to-use pre-filled syringes, which are preferred by pharmacists and by clinicians. We continue to expect a 2024 launch of our RSV vaccine in the U.S., and are also preparing for launches in several international markets.
We're encouraged by the recent RSV launches in the market this year, beating expectations due to robust consumer awareness and demand. And we believe that we are well positioned for our launch in 2024. Our strong clinical profile and ready-to-use pre-filled syringes are key competitive differentiators. My team and I are particularly excited about our ready-to-use pre-filled syringes given the robust demand for our COVID pre-filled syringes this fall. The majority of RSV vaccines in the U.S. will be given in the pharmacy setting. And given the ongoing pharmacy labor shortages, our ready-to-use presentation will save time and also reduce administration errors. We will be the only company with a one-step administration compared to competitive products, which require multiple preparation steps by pharmacists and clinicians.
We are very excited for the launch of our RSV vaccine given the strong product profile. And the commercial team is well positioned to bring our RSV vaccine, our second respiratory vaccine, to market. I will now turn it over to Jamey to provide an update on our financials.
Jamey Mock: Thanks, Arpa, and hello, everyone. Today, I will review our financial performance for the third quarter and provide an updated framework for our full year 2023 financial outlook. Additionally, given we know it's top of mind for investors, we wanted to provide our early thoughts on 2024 and how we're approaching the next couple years. Starting on Slide 15. Total net product sales for the quarter were $1.8 billion, down 44% year-over-year, driven by lower sales volume, and partially offset by a higher average selling price. Product sales were almost evenly distributed between the U.S. market and the rest of the world. We initiated product shipments to customers in mid-September for the fall booster season, following the authorization of our updated COVID-19 vaccine.
Cost of sales for the third quarter of 2023 was $2.2 billion compared to $1.1 billion in the prior year. I will provide detailed commentary on the following slides. Research and development expenses were $1.2 billion, which increased by 41% versus the prior year. This increase was driven by our expanded and maturing development pipeline with six products now in Phase 3 studies or pending approval. Selling, general and administrative expenses were $442 million, reflecting an increase of 59% year-over-year. The growth in spending was primarily driven by the buildout of our commercial activities and, in particular, our launch in the U.S. commercial market. The income tax provision in Q3 was $1.7 billion, as we reported evaluation allowance against deferred tax assets of $1.7 billion.
Under GAAP accounting rules, we are required to take a reserve, also referred to as evaluation allowance, for deferred tax assets when the current year and cumulative income projection for the next three years is in a loss position. These losses indicate our deferred tax assets may not be fully realized. It's important to note, future income from products not yet approved by regulators are excluded from these income projections, which restricts us to adjust our COVID vaccine, and it does not include expected future launches. In combination with our updated endemic COVID forecast, we determined it was appropriate to record a valuation allowance for our deferred tax assets. This valuation allowance did not impact cash flows, nor future returns, nor the company's ability to utilize deferred tax assets in future periods.
Net loss for the period was $3.6 billion compared to net income of $1 billion last year. Diluted loss per share was $9.53 compared to diluted earnings per share of $2.53 in 2022. Finally, we ended the third quarter with $12.8 billion in cash and investments. The decline versus prior quarter was driven by our operating loss and sales to be collected in Q4. Now, let me come back to cost of sales on Slide 16. We now expect full year cost of sales of $5 billion, driven by $1.5 billion of unit-driven expenses, which also includes royalties, and $3.5 billion of inventory write-downs and charges related to CMO purchase commitments, cancellation fees, and wind-down costs. As Stéphane previously highlighted, in our pursuit to optimize the cost structure of our COVID-19 franchise, we undertook a strategic initiative in the third quarter to restructure our manufacturing footprint, which was built for the pandemic.
As part of this initiative, we reduced our capacity and commitments with several third-party vendors, we reevaluated our raw material inventory levels, and cut back on our purchase commitments for raw materials not anticipated to be consumed before expiration. As a result, we are recording charges of $1.6 billion, $1.4 billion of which are in Q3 and an expected $0.2 billion in Q4. The $1.4 billion charge in Q3 consists of inventory write-downs of $0.9 billion and CMO wind-down costs and cancellation fees of $0.5 billion. The Q4 charge is related to CMO wind-down costs. Despite the immediate financial impact, we are confident that this strategic move will improve the efficiency of our manufacturing operations and establish a strong foundation for improved margins going forward.
As part of the $1.6 billion in total restructuring charges I just mentioned, only the CMO-related costs and cancellation fees are cash restructuring costs. We project this approximately $0.7 billion charge will have a payback in less than two years and a net cash benefit of approximately $1 billion through 2029. As I mentioned, our full year forecast for cost of sales in 2023 is now $5 billion. Before resizing charges of $1.6 billion, our cost of sales for the full year is expected to be at the low end of our previous guidance of $3.5 billion to $4 billion. So, now coming back to my commentary on Q3. In addition to unit-driven manufacturing costs and the cost from this initiative, we also incurred approximately $0.4 billion of inventory charges for excess and obsolete material, demand-related write-downs of our latest Spikevax product, and unutilized manufacturing capacity charges.
Moving to Slide 17. In summary, we made substantial progress to resize our COVID cost structure and accelerated our path towards our longer-term target of 20% to 25% of sales. We expect our cost of sales to not only be at a lower level, but also be more predictable in the future. In recent quarters, our cost of sales were highly impacted by write-offs and charges as we just addressed today and in previous calls. Year-to-date write-offs and charges for inventory CMO and supplier-related commitments are 74% of sales. Starting in 2024, we expect those to be less than 10% of sales on an annualized basis. Our capacity is now better positioned to scale with volume. At a $4 billion sales level, we expect cost of sales of approximately 35%, reducing to approximately 30% at $6 billion of sales, and 20% to 25% at even higher sales levels.
In other words, with our resized manufacturing footprint, we now expect to achieve significant volume leverage moving forward. Let's now move to Slide 18. While we intend to continue to focus on GAAP results, we wanted to give you a view of our financial results in Q3 with and without the resizing and tax valuation allowance charges. While our total GAAP net loss in the third quarter was $3.6 billion, our loss excluding these charges would have been $0.5 billion. Now, let's turn to our updated 2023 financial framework on Slide 19. As Arpa mentioned earlier, we now expect product sales for 2023 of at least $6 billion for the full year, which is comprised of $3.9 billion of sales through the third quarter, an additional $1.1 billion of international sales in Q4, and at least $1 billion of Q4 sales from the U.S. As explained earlier, we now expect cost of sales for the full year of approximately $5 billion, which includes resizing charges of $1.6 billion.
For R&D and SG&A, we now expect full year expenses to be approximately $6.3 billion, with approximately $4.8 billion in research and development. Our R&D spend is slightly higher than the $4.5 billion previously forecasted, which is mainly driven by business development activities as well as additional investments in our late-stage clinical trials. Our forecast for SG&A expenses remain consistent at approximately $1.5 billion. We now expect a full year tax expense of approximately $0.8 billion to $1 billion, driven by the $1.7 billion increase in the deferred tax allowance I referenced earlier. And finally, we now expect capital expenditures of approximately $0.9 billion, down from our previous guidance of $1 billion. Before I get into the specifics on 2024 and 2025, I wanted to share with you our principles on how we are operating the company today and our plans over the next three years.
We are laser-focused on making our COVID franchise profitable in 2024 and beyond. We look at our Spikevax product profitability, excluding research and development costs, for our future pipeline, and we believe our recent resizing efforts will ensure that our COVID franchise is a continuous and increasing source of income and cash generation. At the same time, we also recognize the significant and unique opportunity for organic sales growth ahead of us with our late-stage pipeline. We will be disciplined in our investment approach and adjust R&D and SG&A based upon the sales performance of our product lines, which in 2024 is still mostly COVID, but we expect it to also include RSV. We expect this investment in our late-stage pipeline will result in a loss over the next two years, but help us to breakeven starting in 2026.
We believe our current balance sheet is more than sufficient to fund our plans without the need to raise equity. We are also not planning to repurchase shares in the intermediate term. Stepping back, we believe this is an unparalleled opportunity to impact the lives of patients while creating shareholder value at the same time. Moving to Slide 21, let's start with our view on sales over the next couple of years. We're expecting sales to hit a low point in 2024 at approximately $4 billion. The biggest change year-over-year is related to our signed APAs. We currently have $1 billion of COVID-related APAs for delivery in 2024. Recall that our first half sales in 2023 of $2.1 billion were mostly deferrals from our 2022 existing contracts. So, we expect minimal sales in the first half of 2024.
For the U.S., we expect 2024 to be at least $2 billion and believe it will grow over time. Lastly, we expect approximately $1 billion from RSV and other international COVID sales. And finally, in 2025, we expect a return to growth. Let me finish by giving you a more fulsome view on 2024 and our thinking on 2025. Starting with 2024, as I just explained, we expect sales to be approximately $4 billion. Cost of sales are expected to be approximately 35% of sales. R&D expenses of approximately $4.5 billion in 2024, would be down 6%. In 2024, the majority of our R&D expenses are for registration trials, which are now mostly committed. I will speak to our view on 2025 R&D expenses in a moment. SG&A expenses of approximately $1.3 billion in 2024 would be down 13%.
We expect taxes to be negligible in 2024 and capital expenditures to be similar to 2023 at $0.9 billion. In summary for 2024, Spikevax will generate nearly $1 billion of income. When we combine that with our estimated investments in R&D and capital expenditures, our cash balance is projected to be approximately $9 billion at the end of 2024. Now for our preliminary thoughts on 2025. As mentioned earlier, sales will return to growth. Cost of sales will improve with the increased sales growth. R&D will be flat to down, and we have much greater flexibility for reduction, given that only approximately half of our current R&D spending levels for registrational trials are committed for 2025. SG&A will be flat to down. Taxes will continue to be negligible.
And capital expenditures will be materially lower after the completion of our facilities in the UK, Canada and Australia in the first half of 2025. In summary, our COVID operating income will grow and our investments will remain flat or lower, leading us to an estimated ending cash balance of approximately $6 billion to $7 billion in 2025. Finally, during this period, we expect to launch five new products to help us breakeven in 2026. So with that, I'll now turn the call over to Stephen.
Stephen Hoge: Good morning or good afternoon. Today I'll do a quick review of our clinical programs. Many of the details from these programs were shared at our R&D Day in September. I will also review the Phase 3 trial designs for our combination flu and COVID vaccine, mRNA-1083 and the Phase 3 trial design for our INT in non-small cell lung cancer. During R&D Day, we shared the significant progress we've made through the year in advancing our late-stage pipeline, creating the opportunity to have up to 15 product launches in the next five years. Through 2025, and subject to regulatory review and approvals, we anticipate launches for our RSV vaccine, our flu vaccine, a next-generation COVID vaccine, and our combination flu and COVID vaccine.
Looking beyond 2025, we have a diverse pipeline of other vaccines, cancer therapies, and rare metabolic disease medicines. We're very excited by the potential benefits these medicines offer across a diverse range of therapeutic areas. Slide 25 is an overview of our respiratory vaccines pipeline. Our leading pipeline includes commercial and Phase 3 programs against COVID, RSV, and flu, as well as earlier-stage next-generation programs in COVID and flu and multiple [combinations] (ph). We recently shared positive topline Phase 1/2 data from our combination flu and COVID vaccine, mRNA-1083. And on the heels of this success, we've started and are rapidly enrolling a Phase 3 study for mRNA-1083 in adults 50 and older. Slide 26 shows the Phase 3 design for mRNA-1083.
The Phase 3 study is a randomized, stratified, observer-blind, active-control study evaluating the immunogenicity and safety of 1083 compared to co-administered flu and COVID vaccines. The study will enroll 8,000 participants overall, with two cohorts of 4,000 participants stratified by age 65 years and older and 50 to 64 years of age. Both cohorts will receive mRNA-1083, or in the control arm, an age-recommended licensed quadrivalent flu vaccine plus our approved COVID vaccine. Study participants will be followed for six months. The next, on Slide 27, is an overview of our latent and other vaccines pipeline. As previously announced, our Phase 3 study evaluating vaccine efficacy and safety of our CMV vaccine in women of childbearing age is now fully enrolled, including the adolescent cohort.
The study is accruing cases and we look forward to vaccine efficacy data when it becomes available. Earlier-stage clinical programs against EBV, HIV, VZV, HSV, and against the Norovirus and Lyme disease continue to progress. Slide 28 is an overview of our therapeutics pipeline. We're proud of the progress across cancer, rare diseases, and other areas. Many of the details of these programs were highlighted at our recent R&D Day, and I refer you to that presentation on our website. Notable since R&D Day is the continued rapid enrollment of the INT Phase 3 adjuvant melanoma study, which has seen a great deal of interest from investigators and patients since presentation of the Phase 2 data at ASCO earlier this year. As previously announced, before the end of the year, we will conduct another analysis of the Phase 2 study with longer follow-up time at approximately three years, and we are looking forward to sharing that data INT is also moving forward in other types of cancer with the initiation of a second Phase 3 study in adjuvant non-small cell lung cancer.
The Phase 3 design for adjuvant non-small cell lung cancer is shown on Slide 29. It is a randomized placebo-blind -- double-blind placebo and active comparator controlled study of a combination of INT plus KEYTRUDA versus placebo plus KEYTRUDA in patients with non-small cell lung cancer. The study will enroll approximately 900 patients with stage II to IIIB tumors who were resected and previously treated with adjuvant chemotherapy. Each patient will receive up to nine doses of INT administered intramuscularly every three weeks with KEYTRUDA administered every six weeks in the active arm, or nine doses of a placebo injection administered every three weeks and KEYTRUDA every six weeks in the comparator arm. The primary endpoint of the study is disease-free survival.
Key secondary endpoints include overall survival, distant metastasis-free survival, and patient-reported outcomes. This study marks an important milestone in our collaboration with our partner, Merck, and our shared commitment to rapidly bring INT to patients. With that, I'll turn it over to Stéphane.
Stéphane Bancel: Thank you, Stephen, Jamey and Arpa. Our focus is to return Moderna to sales growth and profitability. To achieve that, we have three priorities. Priority number one, commercial execution. Our market share in the U.S. demonstrates we can compete. We are focused on launching RSV in 2024. We believe we have best-in-class profile for RSV vaccine, high-efficiency, good safety profile, and the easiest to use in pharmacies or doctor's offices. As you all know, pharmacy chains are having challenges given the workload, especially in the fall season. The two other vaccines on the market today are very complicated to prepare before injection; one is nine steps, and one is four steps. Now we launched pre-filled syringe and, as Arpa said, we are very excited about that.
And from the discussions I had with the leadership of pharmacies, I believe that this will be an important differentiation. Our COVID plus flu combo vaccine should launch in 2025. And as you know, flu is a higher volume market than COVID. In the U.S., for example, flu is around 3 times the number of doses compared to the COVID market. With these new product launches in '24 and '25, and the combination of COVID sales in the endemic setting, we believe Moderna will be in sales growth again in 2025. Priority number two, discipline investments. We'll be disciplined in our investments and [cycle] (ph) them based on our sales performance. As you saw, we have taken bold actions to resize our manufacturing footprint in the third quarter. The team is not done and there are many continuous improvement projects to drive a reduction in cost of manufacturing.
We'll also look at our R&D costs and will consider partnering some programs, if needed, to allow us to be responsible and disciplined about our costs. For SG&A, as Jamey mentioned, we are currently going through our 2024 budget and our goal is to have a lower spend in SG&A in 2024 than we had in 2023. We still plan to keep SG&A flat in 2025 versus 2024. We're launching respiratory products in 2024 and 2025, and we anticipate the same teams [indiscernible] productivity gains as we improve our commercial operations. As Jamey mentioned, we expect to breakeven in 2026. Priority number three, executing on our late-stage pipeline to drive sales growth. As you all know, we have an exciting late-stage pipeline with six Phase 3 assets. For respiratory program, RSV, flu, next-gen COVID, mRNA-1283, and COVID plus flu combo that Stephen just talked about.
One latent program, CMV, which is fully enrolled in Phase 3 and accruing cases. One oncology program, INT in melanoma, and as Stephen mentioned, in lung cancer. We look forward to having and sharing three years of INT data from our melanoma study before the end of this year. If the data are strong, we believe it could be the basis for regulatory discussions for potential accelerated approval. We have been investing in building a factory in Marlborough, Massachusetts, which will enable the commercial launch for INT. Thanks to the mRNA platform we built, we have an exciting pipeline, with up to 15 launches in the next five years. We have the largest late-stage pipeline of any mRNA company in the world and will continue to focus to deliver the greatest possible impact to people for mRNA medicine.
I've never been more excited about the potential we have to deliver for patients. The actions we are taking help us to execute on that vision. With this, operator, we'll be happy to take questions now.
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