Earnings Call: Q1 2022

Jun 11, 2021

Earnings release

Good morning. My name is Christelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ruth's Fiscal 2021 First Quarter Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. On the call today, we have Megan Roche, Chief Executive Officer Mona Kennedy, Chief Financial Officer and Kristin Davies, Head of Investor Relations for RUET. Before the call begins, the company would like to remind listeners that the call, including the Q and A portion, may Food Forward Looking Statements about current and future plans, expectations and inventions, results, levels of activities, performance, goals or achievements or any other future for Events or Development. This information is based on management's reasonable assumptions and beliefs in light of information currently available to Roots, and listeners are cautioned not to place undue reliance on such information. Each forward looking statement is subject to risks and uncertainties that could cause actual results to differ materially from those projected. The company refers listeners to its School 2021 First Quarter Management's Discussion and Analysis and or its annual information form dated April 7, 2021, for a summary of the significant assumptions underlying forward looking statements and certain risks and factors that could affect the company's future performance and ability to deliver on these statements. Roots undertakes no obligation to update or revise any forward looking statements made on this call. The fiscal 2021 Q1 earnings release. The related financial statements and the management's discussion and analysis are available on SEDAR as well as on the RUET's Investor Relations website at www.investors. Roots.com. Finally, Please also note that all figures discussed on this conference call are in Canadian dollars unless otherwise stated. Thank you. Ms. Davies, you may begin your conference. Thank you, operator. Good morning, everyone, and thank you for joining us. Megan Roche, our Chief Executive Officer, will discuss our fiscal 2021 Q1 operational comments as well as our strategic outlook for the fiscal year. Then she will turn the call over to Mona Kennedy, our Chief Financial Officer, will discuss our financials in greater detail. After that, we will open up the call to questions. Megan? Thank you, Kristen. Good morning, everyone, and thank you for joining us. Over the past 5 quarters, we have navigated unprecedented disruption in our industry as a result of COVID-nineteen. However, by remaining focused on what we can control, we have significant strength in the fundamentals of the business, Establishing a solid base on which to build long term profitable growth. Our first quarter results highlights the continued excitement of our customers for the brand and enthusiastic responses new product initiatives and positive sales through the blood plastics. We also highlight the continued strength in our omnichannel capabilities as customers take advantage of our multi channel shopping experience and our success in driving operational and cost efficiencies. In terms of gross margin SG specifically, we generated improvements year over year as well as significant progress 12 digit Q1 2019. During the quarter, we continued to leverage our digital capabilities, our single pool inventory at our distribution center and our store fleet to successfully serve our customers through an omnichannel lens. E commerce increased approximately 50% year over year, helping to offset declines caused by closures. As we have seen in previous periods where our stores were open, our customers are also shopping with high intent to purchase, which resulted in store conversions continue to outperform prior years. From a product perspective, we generate excitement with new and existing customers through a series of partnerships and collaborations, including Revolutionaire, Emma Knight and Adventure Station. We also partnered with L. S. Steeljay in the weekend to design women edition wore jackets during the quarter that created significant brand hype. In many cases, new products sold out within days of launching. Collaborations and partnerships will continue to play an important role in the business going forward. As highlighted in previous quarters, these relationships enable us to speak to new customers, to test new categories, innovate within our core products and create excitement amongst our loyal customer base. Our customers love our collaborations. Our heritage pieces also played a significant role in driving our business in the quarter. We continue to see many of our core products in our top sellers and we released The Roots Retro Collection, 90 Starbucks Style's incredibly positive customer response. The collection of the relaunch of our Blood Proof logo in the company's archive and also updated colors in the West. We also saw an opportunity to track new customers and give existing customers a reason to buy new other items by playing with color this season. Example, we offered 7 new callers in our event bank, the product first launched in 1988 to great success. It's a good reminder that as a brand that we've been around for almost 50 years. We have deep archives of incredible products. We see significant opportunity to continue to innovate with synergistic products. And as we saw in the quarter, even small things seem to be very In line with our key to scale strategy, we also continue to test new products, particularly those that can be made or finished our leather factory. In 2020, we demonstrated our ability to best extend beyond our Made in Canada leather products by producing scrubs and then fabulous masks in our factory. In Q1 2021, we tested the premium fleet selection with our first ever limited edition drop of Made in Canada Fleece, embroidered at the leather Tree Toronto. Each restaurant represented 3.5 hours of artistry, running 154,000 pitches with 9 sets of hands in 22 colors of bread. What was a small product line we saw promise to resell in a single weekend and a price more than double that rather electric on the site. Turning briefly to our international business. Taiwan is showing signs of recovery, although we continue to expect volatility as they work through the impacts of multiple ways of COVID-nineteen. China is also progressing in the right direction for us and we continue to believe in the long term growth potential in the United States. In both United States and China, we also continue to believe Addition to our strategy is the most appropriate for us in the near term. At this stage, the majority of our directly operated stores are in Canada, a market that remains significantly challenged by the impact COVID-nineteen. As such, our continued success in navigating these unprecedented times is a lot of the strength of the brand, our products and our business. Over the longer term, we believe we can extend the strength internationally to drive further growth. Celebrating diversity, equality, equity, inclusion and and delivering a positive impact within our communities remain important areas of focus for us to integral to The Roots brand. During the quarter, we donated a portion of our sales from remaining Canada Fabrics Masks to select collaboration items to 2 amazing organizations. The first is the Black Academy, which is dedicated to breaking down barriers of discrimination and combating systematic racism in Canada by elevating inspiring Anglophone and Francophone Black talent across the country. And the 2nd is Gen, a growing mentorship program designed to help the next generation of women leaders develop special skills, pursue higher education and build successful career path. I'm also personally excited to speak with his family as a mentor in the program in 2021. We also played a role in supporting vaccine roles here in Ontario. We arranged the vaccination clinic for our team in the surrounding communities of the distribution center and We also give employees paid time off to encourage them to get vaccinated. The team will tirelessly support the role of these vaccinations and we are continuing to do our part in the global fight against the pandemic. It was encouraging to be moving into a more hopeful phase. However, the battle continues for many and our thoughts are with those who have been affected by COVID-nineteen and the communities and countries that are in early stages in their recovery than we are here in Canada. We also continue to progress our diversity, equality, equity and inclusion initiatives in our organization. We are pleased with our progress and we're retaining our momentum behind these efforts. However, this is about long term meaningful change. We'll take time and as we all know, the work around diversity, equality, equity and inclusion is never done. As we look to the Q2, the uncertainty of the pandemic remains in Canada, including government mandated store closures that are currently expected to persist since July. Over the last 5 quarters, we've been focused on what we can control and thoughtfully responding to that which we cannot. For example, while we cannot control the provincial store opening plans or the changes in government subsidy programs, we are maintaining this growth in our operations to help offset these impacts if possible. And overall, we strengthened the fundamentals of the business over the last 5 quarters in a way that has positioned us well for future growth. We are optimistic that with the vaccine role We will start to see increasing macro recovery in the course. We are confident that as we slowly emerge from this pandemic, customers will continue to seek to express this child sacrificing the comfort, quality and versatility to which they've become accustomed. We also continue to believe that digital convenience will be important to customers going forward. These are all areas of strength The Root and in many cases have been for almost 50 years. With the focus in the long term, We plan to amplify our iconic brand with great creative, strong product execution and targeted investments focused on driving profitable growth, all while continuing to support our community. Before I turn the call over to Mona, I want to take Mona to acknowledge The Root's team and their continued hard work and perseverance. The actions we took in 2020, which have carried forward into 2021, have an unusual impact in the business and position us well for a bright future post COVID-nineteen. Thanks, Megan, and good morning, everyone. During the Q1 and now into our Q2, we continue to face headwinds and uncertainty as a result of government mandated store closures and operating limitation. Nonetheless, in Q1 2021, we delivered sales growth, gross margin expansion and bottom line improvement. Our Q1 results continue to demonstrate a few key factors. Customer excitement for and loyalty to the brand, our robust omni channel capabilities and our success in driving operational and cost efficiencies. Now looking at our financial results in greater Show. Total sales in the Q1 were $37,300,000 up 24.7 percent from total sales of $29,900,000 share. CTC sales were $31,400,000 a 27.6% improvement over $24,600,000 last year. Our year over year sales increase was driven by stores, e commerce and the P and Approximately 30% of the quarter in comparison to 50% last year. So we naturally saw higher sales just by the nature of being open for more of the quarter. However, we're also encouraged by having seen sales close to pre pandemic 2019 2020 levels when our stores were all open in the order. In terms of e commerce, as you have seen in previous quarters, e commerce growth moderates as stores reopen. However, online sales were still up approximately 50% year over year and that is on top of the growth we achieved in Q1 2020. On the partners and other front, sales were 5 $900,000 up from $5,300,000 last year. This was primarily a result of an increase in our Asia partner business in Taiwan, which was significantly impacted by temporary store closures and reduced traffic last year as a result of COVID-nineteen. It was also the result of a shift in timing of wholesale orders that contributed to higher sales in the quarter. We had another quarter strong gross margin improvement as a result of our continued promotional discipline. At 61.2%, our DTC gross margin for the Q1 improved 320 basis points over the 58% we recorded last year. We continue to manage our expenses tightly, while closely monitoring our top line performance. We recorded $25,900,000 in selling, general and administrative expenses for Q1 2021, down from $27,800,000 last year. The year over year decrease predominantly reflects as a result of the year over year increase in DTC sales, as well as higher costs related to investments in talent and marketing. Our Q1 SG and A also reflects $2,500,000 in government wage and rent subsidies, which compares to $1,300,000 last year. In addition, we realized $1,700,000 in SG and A savings related to the U. S. Predominantly as of the permanent closure of 7 of our U. S. Stores a year ago. Reflecting our sales growth, gross margin expansion, cost savings and the benefit of government subsidies that helped offset the impact of store closures in the quarter, we recorded an adjusted EBITDA of negative 2,500,000 $5,000,000 improvement over a negative $7,500,000 we recorded in Q1 2020. Now turning to inventory. Our inventory balance at the end of the quarter was $42,500,000 while up slightly over $40,300,000 a year ago, it It is primarily a result of our pack and hold strategy. As I'm sure you're aware, there are industry wide concerns about delivery delays, largely as a result of the evolving pressures on our supply chain from COVID outbreaks in India, Southeast Asia, as well as congestion at the ports. We aren't seeing any material impact at the moment as we took precautions early and moved delivery dates up in our calendar. So while in some cases product is arriving later than initially planned, it continues to be seasonally relevant. It is the buffers that we have built in that are being squeezed or Nonetheless, this is something we continue to monitor very closely and we can turn to our pack and hold inventory, layering it in to bridge delays as needed. At quarter end, we had an outstanding revolver balance of $10,500,000 and had net cash of $4,100,000 with net debt of $76,400,000 down from $97,300,000 in Q1 2020. Subsequent to the quarter, on the back of our strong profitability in 2020, We amended our credit agreement. We extended the original maturity date of September 2022 to September 2024, demonstrating the ongoing support of our lenders. In addition, the amendment reduced our 75,000,000 revolving credit facility to 60,000,000 Reflecting improvements in the borrowing needs of our business. We're pleased with our Q1 results, including the significant gross margin, SG and A and adjusted EBITDA relative to Q1 2019 pre pandemic. As we're now progressing through Q2 2021 and government restrictions are slowly lifting, we have been able to reopen our stores in Quebec and Nova Scotia. And today, we're reopening 26 of our 62 Ontario locations at 15% capacity. Nonetheless, we anticipate having a higher number of temporary corporate retail store closures in Ontario, which is our largest market and typically includes our highest revenue stores in comparison to the Q2 of last year. In addition, we're operating under tighter government mandated capacity stations of last year. To partially offset the short term pressures, we will continue to manage costs and leverage government programs. However, due to the changes in the program, the government wage subsidy is available at a declining rate compared to Q2 2020. To put it into context, In Q2 2020, the subsidy rate was 75%. Under the new formula, our effective rate would have been less than half of that for the same period. We remain confident in our ability to deliver on the areas of the business within our control. Through all of our efforts over the last 5 quarters, we have reduced our cost base, capture deficiencies, strengthen the overall fundamentals of the business, all while continuing to build on nearly half a century of brand strength. As such, as government operating restrictions ease and short term pressures alleviate, we expect to return to recovery. In closing, I wanted to echo Megan's gratitude for the entire Roots team for another quarter of hard work and commitment despite the ongoing challenges as a result of the pandemic. With that, operator, please open the line to questions. Thank Your first question comes from the line of Brian Morrison with TD Securities. Hi, good morning. Very, Megan and Aumu. First question, you've done a very good job optimizing your gross margin and SG and A. I'm curious if you feel maybe outside of scale, if there's any additional identifiable buckets for further improvement, Maybe specifically through your omni channel capabilities. Sorry, Brian, you cut out a little bit. The sound is not very good. Do you Roots. You've done a very good job of optimizing your gross margin and SG and A. I'm just curious if you feel maybe outside of scale, if there's any additional identifiable buckets for further cost improvement, specifically through your omnichannel capabilities? I think when I kind of like think about margin and cost, those are areas that we're going to continually focus and as it relates to the business, right. So as our omni channel business kind of expands, we will continue to focus on those areas to increase contribution Margins. So when I think about cost savings, we've had a number of areas where we've seen permanent cost savings as it relates to the U. S, as it relates to our Store labor being more efficient as it relates to our corporate costs being more efficient. So I think those are permanent cost savings that we're going to continue to see. And on the margin front, you've seen it kind of now 5 quarters in a row. We're working on it and we're seeing great expansion in margins, so we're going to continue to work on it. And as it relates to omni, it's going to become more of our business. We're going to see customers basically shopping where they want to shop. So that's where our focus is Ruth's. And we've got strategies to focus on that as well. Great. And then just add to that, I think Sorry, I think your overarching question, Brian, was also are we going to see any significant profit, especially in omni channel that we're going to see more potential cost savings. I think we've identified a few additional areas that we are looking at for cost savings, but I think we in 2020 took out a lot. And so I don't think you should expect to see significant incremental cost Okay. And then just on a temporary basis, are there any costs associated? I mean, you're doing A very admirable job of the shift between e commerce and bricks and mortar with the lockdowns. I'm just wondering if there's any costs associated with the shift during the lockdowns and has this hampered your inventory position at all? No, it hasn't really hampered our inventory position. Obviously, being able to fulfill orders from stores and doing curbside has given customers Roots. So we've been able to actually access the inventory at stores that have been closed. So no, I wouldn't say that it has hampered it, and I think we've kind of managed it fine. As you know, in e commerce, obviously, there's incremental shipping costs that the stores don't have, but also stores have rents that e Root. So there's obviously a give and take, but I wouldn't say it has answered it or added incremental costs. Okay. And last question, I guess. Your pack and cold strategy, I'm wondering if it's there's a specific This pertains to, I would have thought that it would have been springsummer merchandise and that we would start to see a lessening impact from us. So our pack and hold strategy, it was inventory both for spring and summer and also for fall and winter and we had a pretty Even split. We also didn't expect that our stores were going to be closed for a lot of Q1 and also a lot of Q2. So obviously the pack and hold strategy didn't move as we had strategized, but as stores will open in Ontario starting today, We're hoping to kind of see movements in the summer and spring inventory and then we still have some for the fall as well. The pack and hold inventory that we're sitting Rootes. The ForteFaul is actually helping us right now given the challenges of the ports and the delay in shipments. So we're actually quite happy about that strategy and it's benefiting us More than we had expected. And I can only presume that you feel this is all current as well? Yes. Yes. All right. Thank you very much. Your next question comes from the line of Patricia Baker with Scotiabank. Good morning, everyone. Congratulations on the hard work in this quarter and the narrowing of the loss. I've got a couple of questions. The first one is what more can you tell us about your experience in Q1 in the U. S. Now that you've got an For all intents and purposes, an online new strategy there. What did you see in the markets where you closed stores? And did your the revenue in the U. S. In the quarter, did it get aligned with what you expected would happen route along the line for this new strategy or approach to the U. S. Market. Okay. Thanks, Patricia. Yes, I mean, I think we're not going to give you I think overall, we continue to be happy with our strategy in the U. S. And we are We do believe that a digital strategy for us in the near term is the right way to go. We think we have a lot of potential to continue to grow our e commerce business there and so we're happy with the way it's currently performing, But it is a small part of our business and so there is a lot of opportunity still to drive growth and there's still a lot that we need to do to continue to develop our footprint there. Okay. Thank you for that. And then secondly, on you noted in the quarter that you had higher marketing expenses. And I just have two questions around that. What is the outlook for marketing for the remainder of the year? And then secondly, Presumably, given the strong sales that you have, but that marketing efforts really provided some fuel to drive the top line and what is a worthwhile investment for you. Yes, absolutely. I think last year, the pandemic had just started Q1, right? So we did everything we could to cut costs as we had so much uncertainty in front of us. And as we face this year, we're making decisions based on returns. So as kind of We're being more strategic with our marketing spending. I would expect a little bit of elevated spending with marketing, just because we're going to be investing in areas where there is return. And also additionally, stores were open more in Q1 of this year, which then results in higher marketing spending and investment as it relates to stores. So there's going to be a little bit of linkage around store openings as well. And if I may, I'll ask a third question. So Q1 was a very it was a quarter where you You've accomplished a lot in terms of creating excitement and you pointed out all the number of things that you did with collaboration and partnership. Well, should we expect that that same level of innovation or new product and partnership, As we move through the remainder of the year or was this just a particularly concentrated effort? We have a lot of collaborations and partnerships coming later on in the year. We've got a few meaningful ones coming more towards the fall, which is our peak trading period. So I think Q1, I mean, typically is at lower sales period for us. So we tend to try to push things a little bit more In Q2, we see everything in our eyes on the brand. That being said, from a product innovation perspective, you should continue to expect to see product innovation from us throughout the year. I'm not sure if you saw in the Q2, but we did a lot of testing and learning. So as an example, our province crew that I mentioned at the beginning of call, which was made in Canada and then embroidered our leather factory. That was $198 crew and it sold out in days. And our typical crew on that line is more in the $78 to $84 range. So we're continuing to test the premium fleet. We're continuing to Root's. As it relates to leather categories, we have new food products that come in and then in the fall we have a number of new product categories and innovations that are coming in. One of our main focus areas as we go forward is to test innovation in our product categories and then the CV scale strategy plan for it to drive future growth. So you should definitely continue to see more collaborations and also more innovation and product range going forward. Okay. Tremendous. I look forward to that. Thank you. Steven, your line is open. Thank you. I must have didn't hear that. Thank you. Good morning. I just wanted to follow-up on a couple of things here. Specifically, gross margin performance was quite strong in the quarter. Roots. You sort of came out of Q4 expecting gross margin to be flat year over year. So I'm just curious sort of where you saw outperformance against your expectations through Q1. Yes, absolutely. So in terms of gross margins, We continue to reduce depth and breadth of promotions as we kind of communicated over the past few quarters and we saw some opportunities this year to reduce some promotions that we didn't think we're going to have as much of an impact. For example, we had 20% off in e commerce last year as the pandemic had just started. Also, we had a customer appreciation event in early March of last year route that we didn't do this year. So we saw some margin improvement there, and we're going to continue to focus on that. I think probably your follow on question will be, are you going to route to see similar margin improvements in Q2. And I think I would have to say that I don't think so. We're going to continue on these strategies, but as you know, Roots. We had already started on new strategies in Q2 of last year, so we're going to be comping some of that and we don't have a lot of additional promotions to eliminate. We're going to continue to focus on full price sales, but given that we had incremental store closures in Q1 of this year and now going into Q2, there are some inventory that we'll have to get through. So I we have to kind of see how the customers show up and what the demand for product. So I wouldn't expect similar margin improvements in Q2, but we're really happy with our results in Q1. Okay. That's great. Thanks, Mona. So maybe expanding beyond Q2, the way we're thinking about gross margins through the year was This reduced promotional activity continuing, but then maybe kicking in again a little bit in Q4, assuming more of a normalized environment. Is that still your expectation for the year? Yes. Yes. As you know, in Q4 of last year, we were closed during Black Friday and a few of the highly promotional areas. And I mean, there's some promotional sales. So, yes, I would expect that in Q4. And we missed some promotional sales. So yes, I would expect that in Q4, we would see some margin decline associated with having a more normalized environment. Right. Okay. That's helpful. Thank you. Can you give a little bit of color around Your channel profitability in store versus e commerce. Just trying to assess how much how mix through the pandemic and coming out of the pandemic Will impact margins as you see shifts between in store versus e commerce sales. From a margin perspective, our profitability in store and any comments are pretty equivalent. And I don't think it has really Root. Our results by that much. We continue to focus on as we look at it and if there is any shift, we correct for it. So I would have to say that there isn't really that much of an impact. In e commerce, we've got more variable costs. So costs will go up and down as units go up, including shipping costs. And in stores, obviously, we have more fixed costs. Roots. But in that kind of the past year, we've been able to turn some of those fixed costs into variable. As you know, we've been able to reduce labor. We've been able to negotiate better rents. So I would say they're fairly equivalent and I wouldn't say our profitability has been impacted by too much. Okay. Thank you. And then maybe just finally, it sounds like you're opening only 26 of 62 stores in Ontario, as stores are allowed to reopen today. Maybe is there any reason why you're not opening 62? And then I guess As you think about ongoing openings, when would you expect to have your full store network opened in Ontario? Yes. I'll take the one, Steven. So unfortunately, the government mandated closures, the way they've done it is that you can only reopen in Ontario today if you have a street front location. So of our stores, the 62 stores that we have in Ontario, only 26 of them have street from locations. So we and other retailers will not be able to open our mall based stores. We anticipate the government has indicated that by July 2nd, they're hoping to go and open all based stores. So we, I think like everyone else, are hoping that happens earlier. But for the time being, our expectation is that it will be early July before we can open our full suite of stores in Ontario. Okay. Okay. That's helpful. Okay, thank you so much and congrats on your performance. Thank you. Thank you. Your next question comes from the line of Matthew Lee with Canaccord. Hi, good morning. Good morning. Good morning. So just given the puts and takes involved with Q2 regarding store openings and e commerce growth, Are you starting to see kind of similar double digit DTC growth year over year in Q2 versus maybe Q1? Yes, Matthew, we're not going to give specific guidance in the quarter. I think that when we look at Q2, we want to make sure that we give All the information in terms of what we're seeing in light of the government mandated changes. And so I think that was fair to say is that our stores are going closed longer more stores are going to be closed in Q2 and for a longer period of time than last year. In addition to other stores that are open are operating a lower operating capacity. So I think you have to take that into consideration. I don't think that the growth that we saw in Q1 is repeatable in Q2 as a result of that. But I think our stores are opening today and route Ontario, and we are hoping that we'll see some good returns from our customers and because we do the high desirability to get Roots. From that perspective, I think you need to take into consideration that year over year from a Q2 perspective, more stores are going to be closed and they're offering a lower capacity they were in 2021 sorry, in 2020. Right. Okay. But okay. So maybe put a different way, if Astrakhan Are you guys comfortable with your ability to get your stores back up to full speed right away or is there maybe a route I mean from the things that are under our control, we're ready to go. I think it's more about how comfortable the customer Roots. In terms of showing up in stores, I think there's going to be a ramp up period. I don't think traffic have been down. Customers aren't comfortable going into stores. So I think we're going to see declines in traffic, but conversion has been high. So whether that conversion is going Completely offset the traffic decline or how big that traffic decline is going to be, I think are still the question marks. We're going to look at it very closely and as stores open today in Ontario and see how customers are showing up. But I don't think it's going to be right up to the way it was and back to normal because customers have an adjustment period that they need to get through. That's fair. And then maybe just with regards to your premium fleets in the quarter, I mean, Longer term and higher level, should we be expecting Ruth to move towards that kind of more premium offering in that price range going forward? Not as for our full collection. I think the way we view our collection is just like many other brands is that it's important for us to have a premium offering with an inflection because we have the variability from our existing and new customers to buy into those types of products. We think Made in Canada is Horton. We think using the skills and the artistry that we have in our other factories to do different and unique things is something that people are desiring. And when we did those premium products, So far what we've seen is that it is a mix of existing and new customers. So definitely existing customers who are buying a lower priced item are seeing the craft and quality of the roots brand and our interest and excited to buy into something in a more premium level. So you should think about it as it's going to continue to be kind of a collaborations where Yes, there's cream on the cross, right? So we've got a core product offering that we will continue to offer and innovate in. We're going to have premium fleece and other items like Roots. The letter is etcetera to kind of draw the customer in that we think are interesting and improving price. But we're not proposing this is a good shift in strategy where all of our products are going to be premium. Roots. It's going to be a nice mix of premium items that are drawing in a unique and different customer base as well as giving our existing loyal customers something special to buy. All right. Thanks. That's it for me. And we have no further remarks. I will turn back to management for closing remarks. Thank you, operator. That ends our scheduled call today. We really appreciate all of your time. We look forward to seeing you next quarter. This concludes today's conference You may now disconnect.