Good morning, and welcome to the Flexsteel Industries 4th Quarter and Fiscal Year 2021 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask Please note, today's event is being recorded. I would now like to turn the conference over to Derek Schmidt, Chief Financial Officer and Chief Operating Officer for Flexsteel Industries. Please go ahead, sir.
Thank you, and welcome to today's call to discuss Flexsteel Industries' 4th quarter fiscal year 2021 financial results. Our earnings release, Which we issued after market close yesterday, Monday, August 23, is available on the Investor Relations section of our website, www.flexsteel.com under News and Events. I am here today with Jerry Dittmer, President and Chief Executive Officer. On today's call, we will provide prepared remarks and then we will open the call to your questions. Before we begin, I would like to remind you that the comments on today's call will include forward looking statements, which can be identified by the use of words such as estimate, anticipate, expect and similar phrases.
Forward looking statements by their nature involve estimates, projections, goals, forecasts and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in forward looking statements. Such risks and uncertainties include, but are not limited to, those that are described in our most recent annual report On Form 10 ks, as updated by our subsequent quarterly reports on Form 10 Q and other SEC filings as applicable. These forward looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. Additionally, we may refer to non GAAP measures, which are intended to supplement, but not substitute for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today, as well as the reconciliation of the GAAP to non GAAP measures.
And with that, I will turn the call over to Jerry Dittmer. Jerry?
Good morning and thank you for joining us today. Despite ongoing industry challenges related to supply chain, We executed well and delivered on continued strong demand for home furnishing products during our Q4. We reported net sales growth of 110 percent to $136,200,000 in the current quarter, Compared to $64,800,000 in the prior year quarter and organic sales growth of 123% compared to the prior year quarter with growth in virtually all product categories. Comparisons versus prior year are heavily skewed because of the impact of COVID-nineteen in the prior year quarter when retail stores shut down and e commerce transactions Year over year comparisons aside, I'm very encouraged by the double digit sequential growth Delivered in the quarter versus the 3rd quarter in both our retail and e commerce channel. Retail orders in the 4th quarter Remained robust, growing 118% above prior year and 76% above the 4th quarter In fiscal 2019, which was unaffected by COVID-nineteen, we feel that we are competing well and gaining market share.
We've been building growth momentum throughout fiscal 2021 and finished the year strong. Looking back, fiscal 2021 was a year of significant challenges for all of us, both personally and professionally. I'm especially proud and grateful of our team of dedicated employees who fought through these challenges. Their resilience in the face of numerous obstacles presented by COVID-nineteen and unprecedented global supply chain disruptions was Sandy. Even with these hurdles, our team delivered record sales of home furnishings products and a record adjusted earnings per share of $2.99 At the same time, we made notable strides in advancing our strategic agenda building a resilient foundation for long term profitable growth.
We strengthened talent and culture, including the addition of 3 new executive team members to accelerate our success in e commerce, new business development and global supply chain operations. We continue to modernize our systems and processes and successfully upgraded our SAP system and converted our financial systems to SAP without any disruption to the business. We took meaningful steps to expand our supply chain capacity by developing new partnerships to support both our domestic and global transportation, Adding an additional manufacturing plant in Juarez, Mexico and broadening our global supply chain base. We strengthened our digital capabilities and launched our first direct to consumer website, www. Homestyle furniture.com and relaunched our Flexsteel website www.flexsteel.com With an improved user experience and significant digital assets, we also reinforced our commitment to meaningfully improve our customers' experience by creating a dedicated executive role and team to accelerate this initiative.
Our near term outlook for the market remains bullish. The economy is strong, although the recent global surge in COVID-nineteen cases could be a disruptor to the positive economic momentum. Employment conditions are improving and consumer spending appears healthy. Based on these macroeconomic conditions and what we are hearing from customers, We expect overall consumer demand for home furnishing to likely remain strong through the bulk of the calendar year 2021. While our growth outlook is promising, there are a multitude of significant global supply chain headwinds, which we are navigating in the short term that may create choppiness in our first half profit results for fiscal 2022.
First, ocean container availability has improved in recent months, But ocean container rates have continued their relentless climb. Containers from Vietnam and China to our largest U. S. Distribution center, Which previously cost $3,000 to $4,000 before COVID-nineteen rose to $10,000 in May and subsequently surged to $20,000 levels in August. Containers coming from Thailand and Indonesia are now surpassing $22,000 While we take appropriate actions to pass along these increased costs to the market if we can, There is an inherent time lag in price realization, which we expect to put material pressure on gross margins near term.
2nd, ancillary charges associated with ocean containers such as demurrage and detention are escalating to unreasonable levels. The significant reduction in 3 days allowed by shipping lines has been further exasperated by the unavailability of labor. The lack of truck drivers and warehouse workers available to pick up, unload and return containers, combined with minimal free days, have intensified ancillary charges. Railways are clogged and rail yards are full, which only further strains our ability to return containers. 3rd, material availability, specifically for polyfoam remains constrained and it's not clear if we'll see significant improvement for calendar year 2022.
4th, the recent resurgence of COVID-nineteen led by the spread of the Delta variant has unknown and potentially substantial consequences. Extended shutdowns related to COVID-nineteen in Asia could bring a halt to the flow of sourced products for the industry. Similar events in the U. S. Could be highly disruptive to our manufacturing and distribution operations.
5th and lastly, cost inflation remained a prominent risk. We realized major cost increases last fiscal year in virtually all of our materials and finished goods, as well as labor and domestic transportation. Continued imbalances between supply and demand for these resources may continue to exert upward pressure on costs. In response to all these factors, We continue to prudently manage discretionary SG and A expenditures to partially offset the gross margin pressures Until price realization catches up to the cost increases and supply chain disruptions are alleviated. In summary, these supply chain challenges are frustrating, but our team isn't deterred by these variables impacting our industry, which we view as transitory.
The agility of our company to rapidly respond to changing external conditions is a strength And one we will continue to leverage to gain share even in times of industry disruption. I remain confident in our ability to deliver strong sales growth and financial results longer term. Now, I'll turn the call over to Derek to discuss our financial and operational results, and I'll be back with some closing comments on what we see ahead.
Thank you, Jerry, and good morning, everyone. 4th quarter net sales were 136 $200,000 up $71,400,000 or 110 percent compared to $64,800,000 in the prior year period. Our sales results were slightly above our $120,000,000 to $135,000,000 guidance range despite the ongoing supply chain Based in the quarter, which Jerry highlighted earlier. We were highly encouraged by our 4th quarter sales results, which represented our highest Sales quarter for the fiscal year and grew 15% sequentially from 3rd quarter sales results of $118,400,000 We saw an increase in our home furnishing products sold through retail stores of $78,500,000 or 196%. Retail sales were especially favorable compared to prior year results, which were adversely impacted by COVID-nineteen In related retail store shutdowns, compared with the pre pandemic fiscal 2019 Q4, Retail sales for the Q4 of fiscal 2021 increased 60% for a compounded annual growth rate of 27%.
Additionally, 4th quarter retail sales also represented a sequential growth versus the 3rd quarter of 15%. We've gained significant retail placements this year and are competing well with a healthy inventory position of in stock products and competitive lead times on custom manufactured products. Products sold through e commerce declined $3,300,000 or minus 16.3%. E commerce sales were softer in comparison to the prior year quarter when online sales increased by 86% due to COVID-nineteen and related retail store shutdowns. Compared with the pre pandemic fiscal 2019 Q4, E commerce sales for the Q4 of fiscal 2021 increased 56% for a compounded annual growth rate of 25%.
Another useful measure of our e commerce growth momentum is sequential growth versus the Q3, which was plus 14%. Lastly, we realized the sales decline of $3,800,000 due to the exit of our vehicle and product lines during the Q4 of fiscal 2021. Excluding these exited product lines, our total company organic growth was 123% in the quarter. From a profit perspective, we reported a fiscal 4th quarter net income of $5,800,000 or $0.81 per diluted share. That compared to a net loss of $25,700,000 or minus $3.23 per diluted share in the prior year quarter.
The reported net income included a $698,000 pre tax restructuring expense And a $2,000,000 reduction in tax expense due to the remeasurement of valuation allowances, primarily related to deferred tax assets. Excluding these items, the 4th quarter non GAAP adjusted net income was $4,400,000 or $0.61 per diluted share, As compared to a non GAAP adjusted net loss of $1,500,000 or minus $0.19 per diluted share in the Q4 last year. And as Jerry noted earlier, thanks to the efforts of our hard working team members, we achieved a record adjusted earnings per share of $2.99 for the fiscal year during a very tumultuous period. Please see the non GAAP disclosure included in the earnings release For a detailed reconciliation of GAAP to non GAAP adjusted net income and adjusted earnings per share. Gross margin As a percent of net sales in the 4th quarter was 19.4%, which was slightly better than the midpoint of our guidance range of 18.5% to 20%.
Margin expansion from higher sales volumes was partially offset by surging ocean container freight rates and ancillary charges in the quarter. Gross margin was significantly higher versus a reported 9.2% in the prior year quarter. The 10 point 2% point year over year improvement in gross margin was primarily due to structural cost reductions, operational efficiencies, Fixed cost leverage due to higher sales volume as compared to the prior year quarter and lower inventory reserve expense due to strong demand. Selling, general and administrative or SG and A expenses increased $1,800,000 to $18,600,000 compared to $16,800,000 in the prior year quarter when we aggressively reduced cost in response to COVID-nineteen and related sales declines. SG and A as a percentage of net sales in the quarter was 13.7% compared to 13.8% in the 3rd quarter and compared with 25.9 percent in the prior year quarter.
The 12 20 basis point decline compared to the prior year quarter was driven by 3.40 basis points in unusual items, including 40 basis points for lower bad debt expense, 210 basis points related to prior year lease impairments and 90 basis points for prior year COVID related costs, With the remaining 8 80 basis point decline, primarily due to effective cost management and cost leverage gained from higher sales. Turning to income taxes. During the quarter, we reported a tax expense of $1,260,000 or an effective rate of 17.7 percent compared to a tax benefit of $5,600,000 in the prior year quarter or an effective tax rate of 17.8%. The effective tax rate in the 4th quarter included A $2,000,000 tax reduction or an impact of $0.28 per diluted share related to the remeasurement of valuation allowances, primarily on deferred tax assets. The effective tax rate for the year is 26.8%.
Now moving on to the balance sheet. The company ended the quarter with a cash balance of $1,300,000 in working capital, defined as current assets less current liabilities, of $128,800,000 and a $3,500,000 balance on our secured line of credit. Compared to the end of fiscal 2020, working capital increased modestly by $400,000 The slight increase in working capital was due to a $23,800,000 increase in trade receivables from higher sales And a $90,600,000 increase in inventory, a majority of which was in transit to our distribution centers at year end, mostly offset by a decrease in cash of $46,900,000 a decline in other current assets of $9,100,000 primarily due to a tax refund, a decline of $11,700,000 in assets held for sale And a $46,300,000 increase in trade payables and accrued liabilities, mostly related to higher inventory purchases. Capital expenditures for the 12 months ended June 30, 2021 were approximately $2,600,000 Now on to our restructuring update. The company incurred approximately $700,000 of restructuring expense, primarily for ongoing facility and transition costs.
Total restructuring expenses for the fiscal year 2021 were $3,400,000 We currently have 2 facilities held for sale, 1 in Starkville, Mississippi and the other one in Harrison, Arkansas. We expect ongoing facility costs for these two locations to be in the range of $50,000 to $60,000 per month. For fiscal 2022, the company forecast restructuring expense of $500,000 to $800,000 primarily for ongoing facility costs related to these properties currently held for sale independent upon the timing of the asset sales. Now looking forward, guidance for the Q1 is a bit challenging due to the uncertain conditions, specifically related to the relentless climb of ocean container freight rates and ancillary charges. Availability of labor, Availability of materials like polyfoam and unpredictable cost inflation are additional risks, which are fluid and could have a material impact on both sales and gross margin dollars.
That said, our best estimate for 1st quarter sales is between $130,000,000 $140,000,000 with the availability of drivers to deliver orders to customers being the largest determinant between the high and low end of that range. The midpoint of this guidance range or $135,000,000 represents a growth rate of 28% versus the Q1 of fiscal 2021 and reflects confidence in our continued growth momentum. For the full fiscal year 2022, we are targeting sales growth between 15% to 20%, But achievement of that growth will be dependent on global supply chain conditions improving and stabilizing in the second half of the year. Gross margins are expected to be under significant pressure in the Q1 from both Surging Ocean container freight rates and related ancillary charges. Ancillary charges alone are estimated to be in the range of $5,000,000 to $6,000,000 in the quarter.
The Combination of record levels of inbound inventory, significantly reduced allowed free days from shipping lines And the scarcity of drivers is upending normal logistics flow and sending ancillary charges soaring. We have cost mitigation plans in motion to reduce these charges substantially by the Q2, but these added costs will be a major margin drag to start the year. And while we continue to pass through cost increases to the market where we can, the timing lag between the recent exponential increase in ocean container Freight rates and the offsetting price realization will further add to short term margin pressure. All that said, we are estimating gross margins in the mid teens For the Q1, but with sequential improvement in the 2nd quarter and forecasting gross margins of 20% to 21% in the second half of the year, presuming supply chain conditions stabilize. SG and A guidance for the Q1 is expected to be approximately 13% to 13.5% of sales as we will continue to aggressively manage discretionary spending near term to partially offset the impact Gross margin pressures.
We expect that SG and A as a percent of sales will increase to 14% to 14.5% In the second half of the year to support strategic growth investments, but the SG and A increase will be dependent on a similar or better improvement in gross margins during that same time period. For the Q1, adjusted operating income margins are expected in the low single digits, Strained in the near term as we work through higher ocean container ancillary charges and the timing lag between higher ocean container costs and increased price realization. We expect adjusted operating margins to steadily improve throughout the year with margins returning to 7% or higher by the Q4 of fiscal 2022. The effective tax rate for fiscal 2022 is expected to be in the range of 26 27%. Restructuring expenses are forecasted in the range of $500,000 to $800,000 We will continue to expand inventory in fiscal 2022 to improve in stock service levels and provide exceptional support to our customers, Which has been a significant advantage for us in fiscal 2021.
We are also aggressively expanding our supply chain capacity to support long term growth. During fiscal 2022, the company anticipates spending 11 $500,000 to $13,500,000 for capital expenditures. Company plans to spend approximately $7,000,000 For manufacturing capacity expansion, approximately $2,500,000 for manufacturing productivity improvements and the remaining amount for software enhancements and general maintenance. The company is currently working with a major global bank Its borrowing capacity to $85,000,000 The expanded credit line is expected to fund increased working capital, Primarily inventory needed to support the company's goals for aggressive growth. The new credit agreement is expected to be by September 2021.
In summary, we are planning for another year of aggressive profitable growth With double digit sales improvement forecasted, while we are navigating significant gross margin headwinds to start the year, We are fully committed to delivering higher adjusted operating income dollars and higher adjusted earnings per share for the full fiscal year. We are prudently managing expenses and capital deployment, while making the right strategic investments to support our long term growth. I'll turn the call back over to Jerry
to share his perspective on our outlook. Thanks. Given my confidence in our team In our strong growth momentum, we enter fiscal 2022 well positioned to continue profitable growth. We began the new fiscal year with a record retail home furnishings backlog of $152,000,000 and are aggressively working on plans and investments to expand our capacity to both fulfill the current backlog and support future growth. Our 3rd and newest manufacturing plant in Juarez, Mexico recently started operations with limited production, But we'll ramp up quickly throughout the year as Polyfoam availability improves.
Additionally, we recently entered into an agreement to Located in Mexicali will begin shortly and we hope to take possession by June of 2022. By the end of the calendar year 2021, we expect to start up a new distribution center on the East Coast to better service our customers in that region and to handle increased inventory levels to support growth. Our inventory position relative to our competition was a clear advantage in fiscal 2021 and we intend to maintain that strength. We've remained aggressive with purchasing $52,000,000 was in transit to our distribution centers. As a result, we estimate our in stock position to improve significantly our Q1, which we expect will subsequently spur additional growth, with most of Southern Vietnam in COVID-nineteen lockdown currently, Furniture production there has plummeted in the short term and the strength of our inventory position will only be a larger advantage if COVID-nineteen shutdowns in Asia Expand or are extended.
In summary, we're enthusiastic about the long term growth opportunities for the company And we are making the right strategic investments now to realize our growth potential. Looking forward, we will continue to build on our strong growth momentum, Focus on long term opportunities for aggressive growth, invest strategically in our businesses to improve our customers' experience, Expand our digital and e commerce capabilities, build our brands and drive product innovation relevant to the market. The future of the company remains as promising as ever, and we are confident in our ability to create value for our customers, employees, partners and shareholders. With that, we will open up the call to your questions. Operator?
Thank you. We will now begin the question and answer session. Today's first question comes from Sandy Mehta with EvaluATE Research. Please go ahead.
Yes. Congratulations on the strong results. If you look at your expansion in Mexico, the Juarez Plans and the new CapEx that you talked about. And once all of the CapEx plans that you have for this current year, which you just mentioned, Once all of that is up and running 100% fully online, can you talk about what would be your sales potential Once all this CapEx is online? And also could you talk about the mix change in terms of how much of your product you source from Asia As well as how much from North America?
Thank you.
Yes. Good morning. Thanks. This is Jerry. Yes, probably in that $650,000,000 range, it could be a little higher, a little lower is kind of the expansion that we've got planned right now.
And as far as the movement back and forth, currently about 70% of our volume comes from Asia. Our plan is Over time, and that wouldn't be in the next year or 2, it would be to move closer to a fifty-fifty is really what our ultimate goal would be.
And with all of these CapEx plans, it sounds like you are you sound very bullish About the future and the longevity of this up cycle in housing and furniture. And can you talk a little bit about How much legs this cycle has? Do you see the strong housing and furniture market lasting for 2, 3 years? And what are the variables? And how do you guys Look at it and analyze it?
Thank you so much.
Yes, I think Sandy, it's Derek. So in the near term, I think The industry outlook has some legs. Again, if you put the recent surge in COVID Related to the delta variant aside, I mean a lot of the macroeconomic indicators are certainly bullish. Once we get into 2022, there's been so much uncertainty, it's hard to call a long, long term play. But Currently, we view the macroeconomic kind of conditions as favorable.
As we look at our growth though, I mean, we do not need the industry to grow substantially in order to reach our growth ambitions. We are planning on Expanding our addressable market, reaching different consumer segments, developing new brands, competing at different price points through different styles In different product categories. So when we think about our long term growth and how we're investing for that growth, it is not wildly Dependent on significant growth in the industry, we believe that we can penetrate Our existing markets and expand our addressable markets to continue to drive healthy, profitable double digit growth for Flexsteel.
Great. Thank you so much.
Thank you, Sandy.
And our next question comes from JP Gaggen with Global Value Investment Corp. Please go ahead.
Good morning, gentlemen, and congratulations on a nice report. You recently relaunched Flexsteel's website and launched a home sales website. Can you discuss your outlook for e commerce sales, including direct Consumer sales versus your traditional distribution channels over the long term?
Yes. Hey, JP, it's Derek. So in terms of e commerce, we've laid out a longer term Objective to double the size of the business over the next 5 years. We believe e commerce in that period could triple or quadruple. So e commerce today is about 15% of our sales.
If we're successful with our e commerce endeavors, There's no reason that that couldn't be 40% or higher in 5 years from now. Direct to consumer certainly will play a role in that. But also we're mindful that developing a Large direct to consumer business takes time and it takes significant investment. So we are continuing to evaluate All the outlets related to e commerce. So today, our business largely revolves around large e tail partners, Amazon, Wayfair, homedepot.com, we will continue to grow with those customers and expand with others kind of specialty e tailers, while in parallel investing and growing our D2C business.
When we think about e commerce, it's really multifaceted. It isn't overly dependent on D2C. But that's an area certainly that will
Your recent footprint expansion has been, I believe, exclusively in Mexico. Does this represent a shift in your preference for sourcing product, Namely away from Southeast Asia or has this capacity been added only to meet expected future demand? And then perhaps to expand on Sandy's question, can you add any additional color around the general development of your global supply chain?
Yes, this is Jerry, JP. It expanded out a little bit. Part of it is to move away from Asia a little bit because we're overly dependent. A lot of the Mexico is for our expansion, but we also have really balanced out. We've got in our some of our new product categories, The product is going to be coming from Eastern Europe.
We have some OEMs that supply us here in the United States. And we've also got, like I said, this expansion in Mexico. It's really just a balance out kind of our footprint with more of a global footprint and not be Have quite as much on the line in Asia as we do now. With that said, we will continue to have a large footprint over in Thailand, Indonesia, Vietnam, China like we do today, but we're just trying to balance it out more.
Yes, seems to make sense to mitigate some geopolitical risk. Finally, we're glad to see that you implemented SAP without any disruption. Are there plans to add additional components of an ERP or is the work largely completed?
No. So There's going to be additional. So I mean we still are running our manufacturing on our old AF400. There are some other areas of SAP that we're working through with some of our partners in the logistics and distribution area. And there will be other modules that we will hang off of the current SAP as we go forward.
But We're excited that we finally got the financials up in some other areas, but this will be an ongoing thing that we'll continue to look at.
Okay. And finally, not to belabor the point, but on rising ocean freight charges, Have you considered any strategies to control costs there Other than what you're already doing?
Yes. So there's several things, JP, that we've done. Number 1, we've expanded The number of partners that we work with in terms of freight forwarders, we are leveraging our network of suppliers to tap into They're transportation partners. We are working with our suppliers Where they're open to it in order to help subsidize some of the increases. So we're taking a multitude, I think, of actions in order to Best manage the situation given the circumstance.
Great. I appreciate the color and congratulations again on a nice print.
Thank you.
Our next question comes from John Deysher with Pinnacle. Please go ahead.
Good morning and congrats on a nice way to wrap up the year. I was just curious, 70% of the volume came out of Asia this past year. What was the mix between China and Vietnam?
Yes. So of our, John, of our total sourced globally sourced product, 67% currently is sourced from Vietnam and 21% is from China. And then the remainder is largely Indonesia and Thailand.
Okay. So of the 70% that came from Asia, 67% was Vietnam and what was the percent from China?
'twenty one.
'twenty one, okay. The tariffs are still in effect from China at this point?
They are.
Okay. And do you see that mix changing for the next fiscal year?
Yes, I think assuming the tariffs stay in place, we'll be opportunistic in terms of moving production away from China where it makes sense. Given how robust the demand has been this past year, there simply wasn't enough capacity in Vietnam to support both our growth And support additional production shift from China into Vietnam. Certainly, if the demand horizon changes, there may be an opportunity to shift more Away from China.
And the large chunk that came out of from out of Vietnam, that's under pressure because of COVID. Where do you sense that inventory to come from going forward?
Yes. So again, we've been as you know, Jerry and I stated in our earlier comments, we've been very aggressive with our inventory buy. Again, we finished the year with $160,000,000 of inventory. On the balance sheet, we've got $62,000,000 in transit as of the year end. So we're actually in a very, very good competitive position If Vietnam stays shut down for an extended period.
So We don't know how long this Vietnam shutdown is going to last, but we feel confident that We've got enough inventory in our system or on the water to support us into the latter part of Calendar 2021.
Okay. All right. That's good to hear. Shifting to e commerce, you said it was about 15% of sales. Is that ballpark around $72,000,000 for the year for e commerce?
$66,000,000 $67,000,000 of net sales.
Okay, good. There was no discussion of the buy any kind of buyback. And I know you spent $29,000,000 I think $29,800,000 on buybacks last fiscal year. How many shares was that? And is there room for any additional buybacks going forward?
Yes. If I remember, John, we probably have repurchased $1,100,000 $1,200,000 shares altogether since we started the repurchase What I would tell you in terms of how we're thinking about capital allocation and prioritization, our number one focus right now is Reinvestment back in the business to support growth. And you're seeing that in terms of our inventory build as well as the capital expenditures expand our supply chain capacity, we will continue to keep the share repurchase program active And be opportunistic if our share price were to fall substantially below our intrinsic value. But right now, again, the priority is to invest back in the business for growth. So I do not anticipate share repurchases being anywhere near The level that they were in fiscal year 2020, just because again or I'm sorry, fiscal year 2021 because of the growth opportunities we have in front of us.
All right. Okay, good. That makes sense. Thanks and good luck going forward.
Great. Thanks, John.
And ladies and gentlemen, this concludes the question and answer session. I'd like to turn the conference back over to the management team for any final remarks.
Thank you. In closing, I would like to thank all our Flexsteel employees for their outstanding performance and service during the Q4. I would also like to thank you for participating in today's call. Thank you for your questions today and please reach out to any additional ones. We look forward to updating you on our next call.