Earnings Call: Q1 2014

Apr 8, 2014

Good day, ladies and gentlemen, and welcome to the Levi Strauss and Company's First Quarter 2014 Earnings Conference Call. All parties will be in a listen only mode until the question and answer session, at which time instructions will follow. This conference is being recorded and may not be reproduced in whole or in part without written permission from the company. A telephone replay will be available 2 hours after the completion of this call through April 14, 2014 by calling 800-585-8367 in the United States and Canada and 404-537-3406 for all other locations. Please use conference ID 1,000,000,000,790. This conference call also is being broadcast over the Internet and a replay of the webcast will be accessible for 1 month on the company's website, levistrauss.com. I would now like to turn the call over to Chris Ogle, Vice President, Investor Relations and Assistant Treasurer at Levi Strauss and Company. Good afternoon, everyone, and welcome to our conference call. I'm pleased to introduce members of the Levi Strauss and Company management team. With us here today are Chip Berg, our President and CEO and Harmit Singh, our Executive Vice President and Chief Financial Officer. Before we begin, let me briefly remind you of a few items. Our discussion today may include forward looking statements that are based on our current assumptions, expectations and projections about future events. Although these statements reflect the best judgment of our senior management, they involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the statements as more fully described in our annual report on Form 10 ks, our registration statements and other filings with the Securities and Exchange Commission. Other unknown or unpredictable factors also could have material adverse effects on our future results, performance or achievements. We provide information on our website about how we compile various measures used to describe our business performance. Participants on today's call may discuss non GAAP financial measures. You will find the appropriate reconciliations at the earnings webcast page in the Investors section of our website as well as in our earnings press release announcing the Q1 2014 financial results, which was furnished with the SEC today on Form 8 ks. Finally, we filed our quarterly financial report today on Form 10 Q with the SEC. You can link to our SEC filings from our website. And now I'd like to turn the call over to Chip Berg. Thanks, Chris. Good afternoon, and thanks for joining us today. We knew the Q1 would be challenging, but it turned out to be even more difficult than we expected. Our focus on our key strategies enabled us to maintain stable constant dollar net revenues despite unfavorable weather conditions, continuing retail traffic declines, a competitive promotional environment and ongoing softness in our U. S. Women's wholesale business. On the positive side, our retail business grew. We made progress in Northern Europe and China is moving in the right direction. As you also know, 2 weeks ago, we announced the first phase of a significant productivity initiative, which I'll discuss in a few more moments. While we expect the overall environment to remain choppy throughout the year, we will retain our focus on driving sustainable, profitable growth over the long term. Harmit will now walk you through the financial results. Harmit? Thank you, Chip. Welcome to everyone joining our call. My comments today will reference comparisons on a year over year basis in U. S. Dollars unless I indicate otherwise. Total consolidated net revenues for the Q1 of 2014 of $1,100,000,000 were down 1% on a reported basis, but flat without the effects of currency. Lower revenues in the Americas were offset by higher revenues in Europe and Asia. On a global basis, wholesale was down 4%. Company operated retail revenues grew more than 10%. Without the benefit of the timing shift of the Black Friday week, our retail business grew more than 6%, reflecting improved retail productivity, more stores and e commerce growth. The benefit of Black Friday week was approximately 1% of total company 1st quarter net revenue. Gross profit for the quarter was 576,000,000 dollars down 3% from $592,000,000 last year. Gross margin decreased 60 basis points to 51%, reflecting higher discounted sales and inventory markdowns to manage inventory, mainly in the Americas. This was partially offset by margin benefit from retail growth. SG and A expense increased 3% to 425,000,000 dollars the largest share of the increase relating to retail, reflecting the ongoing expansion of our company operated retail store network. The SG and A increase also included charges of 6,000,000 associated with the first phase of the global productivity initiative, which we announced 2 weeks ago. Excluding the charges and the increase in expenses for our retail expansion strategy, our SG and A expense was flat to prior year, reflecting our focus on cost management. We also recorded restructuring charges of $58,000,000 related to our global productivity initiative, bringing total charges for this first phase to $64,000,000 The charges are of a non recurring nature as they're primarily related to severance. We expect the impact of this phase to be roughly cash neutral in 2014. We anticipate annualized savings from this first phase to be around $100,000,000 which will begin to benefit the bottom line in 2015. Chip will discuss the program in more detail in a few moments. Beginning this quarter, we will discuss our profitability in terms of adjusted EBIT. Internally, we broadly use EBIT to express the ongoing earnings potential of our business. A detailed reconciliation of adjusted EBIT is attached to our press release. Our first quarter adjusted EBIT of $159,000,000 declined 9% as compared to last year, driven by lower gross margin and higher retail expenses. Net income for the Q1 declined to $50,000,000 as compared to $107,000,000 last year due to the one time restructuring and other charges related to the global productivity initiative. Now I'll share more detail on the Q1 results of our 3 regions. Net revenues in the Americas of 627,000,000 dollars were down 3% from the prior year. As anticipated, the decline primarily related to the Levi's, Mrs. And Junior's business at wholesale. Additionally, traffic remained challenged in part due to severe weather conditions in much of the United States. On a positive note, our retail revenues in the Americas grew this quarter, even excluding the benefit of Black Friday Sales Week, primarily reflecting ongoing momentum in our e commerce business. In Europe, net revenues improved 1% on a reported basis and were slightly and were up slightly without the benefit of currency. Retail revenues continue to grow due to higher productivity and the expansion of our store network. Wholesale declined again, although we saw some indications of stabilization in the South and in the North. We saw early signs that our efforts to address the internal execution issues discussed with you in February are beginning to work. In Asia, revenues were flat on a reported basis and were 6% higher without the impact of currency. Higher revenues reflected improved product availability during the Chinese New Year season as well as ongoing price promotion activity. We are encouraged by a good start in China. Free cash flow for the Q1 was $21,000,000 as compared to $94,000,000 a year ago. Lower cash flow in the quarter was largely driven by lower receivables collections and higher inventory purchases. Inventory balances grew by approximately 17% from last year. The growth primarily reflects lower than planned Q1 revenues due to the challenges I discussed earlier, as well as our decision to improve availability of our products in Europe and Asia. We took actions in the quarter to clear inventory, which I mentioned impacted our margin. And we are still working through high inventory in some parts of Asia and in the junior and Mrs. Business in the United States. We will continue to proactively manage inventory and expect year over year inventory balances to normalize late in the second half of twenty fourteen. Our liquidity position remains solid as we continue on the path to build a stronger balance sheet. At quarter end, we had $503,000,000 in cash on hand and $626,000,000 available under our credit facility, yielding total available liquidity of $1,100,000,000 Net debt held at less than $1,100,000,000 as compared to year end. Our gross debt to adjusted EBITDA ratio was 2.7 at quarter end compared to 2.9 a year ago due to our lower debt balance. Subsequent to the end of the Q1, in March, we further strengthened the company's financial health by amending and restating our credit facility. We extended the term of the facility and lowered our borrowing rates and fees. Under the terms of the new facility, our availability has been enhanced by nearly 150,000,000 dollars The amended facility gives us greater flexibility to continue to improve our capital structure going forward. While we continue to believe that we will grow the top line and our adjusted EBIT for the full year, the Q2 will again be challenging due to the ongoing weakness in our U. S. Women's business and proactive efforts to clear out inventory balances. On top of all that, the year over year comparison will be tough in the Q2 due to our strong results last year. We are focused on implementing our productivity initiatives, strong cost control and improving our women's product to offset some of these pressures and build this business for the long term. I'll now turn it over to Chip to share with you what we see working and what is not. Thanks, Harmit. First, the areas that are challenging us. Our U. S. Wholesale business declined primarily attributable to lower sales in our women's business and to a much lesser extent our Dockers business, where we are anniversarying the on floor expansion that we referenced last year. At women's, we believe we have identified the specific fashion miss that led to the decline in the juniors and misses categories, and we've received positive feedback from key customers on our upcoming seasonal lines. We are optimistic that the changes to fabric and fit that we put in place will be trend right and help correct the situation, but we won't see this begin to benefit us until the fall season at the earliest when those designs hit floors across the United States. This is only the first step in a multi phase effort to turn women's around with enhanced product, marketing and on floor communication. And in Europe, we continue to see softness in the wholesale channel. In terms of what we can control, we shared on our call in February that we had identified some issues related to product availability. We've implemented solutions to address this and the business is beginning to move in the right direction. Turning to what's working, we're pleased to see growth of 3% in our core Levi's men's bottoms business. The brand grew in all three regions, driven primarily by our favorable retail results. And in the Americas, our direct to consumer business continued to post solid gains despite the widely reported declines in holiday traffic, even after adjusting for the benefit we received from the calendar shift encompassing Black Friday, which roughly offset the unfavorable impact of weather related store closures. A strong focus on conversion more than offset soft traffic in our domestic outlet stores. We again saw double digit growth in our e commerce business. We will continue to drive higher levels of productivity in our brick and mortar stores and grow our e commerce business. In Europe, revenue growth from strength in our retail channel is encouraging, particularly considering the tough consumer backdrop in the region. We believe that our focus on iconic product and excellent customer service will continue to drive sales growth. And we're pleased to see sales growth in Asia in constant dollars. This reflects the efforts to improve product availability across the region and to begin executing better at retail. As discussed previously, product availability issues caused us to miss some sales last year, particularly during the all important Chinese New Year week. This year, we corrected those issues and are working hard to ensure that we have trend right products supported by effective marketing. Now I'll take a moment to discuss the recently announced global productivity initiative that we launched in the Q1. We're making these changes for several reasons. 1st, to become more competitive in our cost structure, which is simply too high. 2nd, to improve our agility and responsiveness to the market. And 3rd, to be more productive overall. This initiative will be executed in phases over the next 12 to 18 months and reflects our ongoing commitment to improve the structural economics of the business and further strengthen the financial health of the company. When completed, we expect to generate annualized net cost savings in the range of $175,000,000 to $200,000,000 as we will invest some of the total savings back into driving top line growth. We executed the 1st phase of the program 2 weeks ago. As announced, we are eliminating approximately 800 positions by reducing management layers, increasing spans of control and removing duplicative roles amongst other structural changes. But we've been strategic. Our headcount actions take into account where we want to allocate our resources in areas such as continued investment behind product innovation to grow revenue. In future phases, we will redesign key processes in order to yield further savings, including streamlining our product development and go to market strategies, implementing efficiencies across the supply chain and distribution network, exploring lower cost service delivery models and improving discipline around our procurement practices. In closing, while some of the challenges we experienced at the end of last year continued into the Q1 of 2014 as expected, we're confident that the strategies and initiatives that we're executing will drive significant, sustainable, long term value and will result in improved performance as the year progresses. With that, I'll take your questions. Thank you. Your first question comes from Deutsche Bank. Go ahead with your question. It's Karru Martinson. I just wanted to guess, how much more do you feel there is to go on inventory clearance? I mean, will you be out of that by the end of the second quarter? Carbo, hi, this is Harmit. Our thinking is that it's probably towards the end of quarter 3, I think, where we'll probably get to better inventory levels end quarter 3, early quarter 4. And just for Karru, by way of color, the couple of the concerns appropriate, we are on top of it and proactively managing for it. But just a couple of things I just want to remind you as to why the balance is a little higher. We had a lower base last year largely because we had availability issues in some parts of the world, namely Europe and Asia. Yes, quarter 1 revenues are a little down largely in the U. S. So that's impacting it. The other piece is high inventory is also driven a little bit by our expansion of our retail network. And we are proactively managing through it. In quarter 1, we took some actions, margins were impacted because of that. So as we think through it, that's what we're going to do. The good news is in the U. S, other than probably the women's product, which we're proactively managing through, most of our range is largely non seasonal range, it's largely core as Chip referred to. So hopefully, over time, we should be able to manage it through. Okay. And with that clearance activity, I mean, do we still feel that overall full year margins will kind of gross margins will stay above that 50% level? I mean, at this point, that's our expectation, Karru, for a couple of reasons. One, we're looking at our entire portfolio from a pricing perspective. More importantly, as we took some actions, some of these actions in terms of headcount reduction actually would lead to supply chain efficiency. So we probably see a bit of that as accretive to gross margins sometime towards the end of the year. Okay. And just on that front, when you guys talk about adopting a lower cost service delivery model, I mean, what does that actually translate into on the ground? It probably translates to a better quality as well as reduced costs. We're working through that as we speak. And as you know, these changes take a little bit of time. So more to come. Stay tuned. All right. Thank you very much guys. Appreciate it. Thanks, Caro. Your next question comes from Bank of America. This is Spencer Sams in for Bill Reuter. I appreciate you guys taking my questions. I was wondering if you could get an update on the operational issues you guys had in Northern Europe and then if you guys have been able to get back the business you might have lost? So I think the short answer is we've made a lot of progress over the last 3 months or so in addressing a number of the supply and availability issues. I would say we're not completely done yet. We lost distribution in Northern Europe over the last 2 years, particularly wholesale distribution. We just lost stores because of poor service and delivery. And we're knocking on doors trying to regain that lost distribution. So we're partway through it, but we're not completely done. The good news is, we are starting to see the wholesale business stabilize versus sharp decline. And as we pick back up the distribution that we lost, we're pretty confident we'll get that wholesale business growing again. That's helpful. And then with the results this quarter in Asia, they were particularly strong. I was wondering if you guys could talk about, guess, your expectations for kind of the rest of the year and maybe there was a way to quantify just the impact of the Chinese New Year on this quarter? So, I guess, I would say it's way too early to declare victory. We're in the 1st or second inning here. China and Asia overall has been a challenge for us. We've got new leadership essentially across the board there in the last year. We put a lot of focus on product availability and in market execution. And I would say we're very encouraged with what we've seen based on the last quarter results, but we still have a lot of heavy lifting to do. We're very bullish about Asia. It's still a relatively small part of our overall business, but we're investing there. Some of the markets in Asia are markets that matter the most. And we're encouraged by what we see, but there's still a lot of work to do. Okay. And then one last one. You had mentioned kind of you had mentioned excitement around the women's products that are coming out later this year. I was wondering if that is that going to translate into more shelf space? And then if you could just make kind of any comments broadly on shelf space for the U. S. Wholesale business? I've just spent some time with one of our key customers. I don't think it's going to necessarily result in more shelf space. I think what we're really trying to address here is getting our product back to being market right and market relevant. The feedback from all of our top customers with what we've got coming this summer for the fall season is very positive. We've been in a pretty sharp decline. We're lucky to hold the shelf space that we've got right now. They've rolled with us. They've got confidence in the plan that we've got going forward. So I don't think we'll see extra shelf space, but hopefully we'll see some uplift in the business based on getting the right product into the marketplace. Okay. That's it for me. Thanks for taking my questions. Thanks, Spencer. Your next question comes from JPMorgan LaCascalla. Can you tell us how much of the restructuring charges were cash versus non cash or expected to be cash versus non cash? Yes. So the charges that we've just taken Carla are largely cash charges, There's severance related, get paid over a period of time, but that's largely the charges. Now you'll see the cash payout happen over time because charges relative to some of the displacements outside the U. S. We're still working through with on a consultative basis consultative process. Okay. And then the $6,000,000 charge in SG and A, was that part of the adjust was that added back to adjusted EBIT or was it not? So it was added back. And the reason I'm glad you asked about adjusted EBIT. It's largely a measure that we think explains the ongoing earnings of the business. But we added it back because largely it's one time non recurring and has to do with our charges related to our direct procurement initiative that we're really focused on. Okay, great. And then I faded out a bit at the you're talking about the productivity improvements and you mentioned $175,000,000 to $200,000,000 Is that the savings and did you give the timeframe? So that's the potential of the program, the productivity initiative that we talked about. And the timeframe of getting the TASING to bear is 12 to 18 months from now. So we're really looking at completely executing the program on a conservative basis towards the end of 2015. Okay. And I know you don't break out same store sales, but can you say whether they were positive for the quarter or if they're running positive now post quarter end? Positive for the they're positive for the quarter. Okay, great. Despite the decline in traffic. And yes, that's right. I mean, Chip's point is a good one, which is traffic continue to decline. But despite that, I'd say our same store sales were positive. Okay. And then just one more for me. The department store trends and what you think they're looking for 2014, your whole I'm looking to your wholesale customers in the U. S. Has this kind of 4th quarter and 1st calendar quarter weather scared them into lower inventory orders for the year? How would you say they're planning? I'd say the Q1 was a bit of a difficult quarter to read. You had a tough holiday season followed by weather related issues. My sense is that as we progress through the year, we'll work through some of those pieces, especially weather. And so far, the response to our product from our wonderful customers has been pretty good. Okay, great. Thank you. You're welcome. Your next question comes from Barclays. Hi, it's Harold Holden. I just had two questions. I think I heard this right, but maybe you could clarify on the charges for this year, sort of answering Carlo's question, you said there'd actually be no cash impacts because it'd be offset by margins, but the gross margin benefit wouldn't be in 2015 in the script, is that right? From a cash perspective, Hale, we expect this to be cash neutral. So we expect the charges, the restructuring charges to be offset by realized benefits in the year. And then from a true drop into the bottom line is you see the true benefit beginning in 2015. Okay, great. And then the second question is, maybe just from a big picture standpoint, you could parse out how much effect you thought was weather and how much was the fashion miss in the quarter? Do you think it's split evenly between the 2 or was it largely on the fashion miss versus weather? I was just trying to figure out what's controllable and what's not controllable? Again, we looked at it every which way. But I'd say weather was about a point of the miss and the remaining was part fashion, part women's, part the market, if that helps you. I mean, there's a side of me that says, when we have to be dependent on the weather forecast to talk about our business, there's something wrong. So weather definitely played an impact. Our business would have been better if I guess is the way to think about it. But we've got things within our control, weather is not within our control, things within our control that we can address. Okay, great. Thank you very much. Your next question comes from Welles Fargo. Hi, good afternoon. It's Grant Jordan. I wanted to just drill down a little bit more on the inventory. I know you said that you think that will normalize as we move throughout the year. Was it a matter of you're not taking you didn't feel like discounting the product right now is appropriate given the price you'd get? Or just kind of give us more color around that? Yes. I mean, I think it's a combination of factors. The price is clearly the commercial proposition is clearly something that we looked at and decided in some cases, especially if the product is full, we decided to hold off discounting it dramatically because we feel confident longer term that we will be able to get rid of it at the appropriate price. Where we thought we had a good commercial proposition and products that were seasonal, that's where we went a little bit more aggressive. So to the question about why the second half, because that's what we think we'll need to work our way out of it. Okay. That's helpful. My last question, a lot of your wholesale accounts are really looking to the second half of the year to be better in terms of year over year performance due to more normal weather and an improving economy. At this point, are there kind of order books and thoughts around going into back to school matching up with that? We typically don't give specific information about customer orders. But as I said earlier, I spent time with one of our major customers just in the last 24 hours. I think there is I think probably the best way to characterize it, it's going to be choppy for a while. There is some expectation that things are going to get better as the year moves on. Thanks, Ron. Your next Thanks, Ron. Your next question comes from Mitsubishi. Thank you. This is Karen Eltrich. If you look at your retail strategy, how do you balance it out between international, domestic and the outlet format versus the traditional format? So, tale of 2 cities, the U. S. Is largely an outlet driven retail. So I would say 85% of our total stores, our branded stores are largely outlet stores. Outside the U. S, it's a combination it's largely a non outlet kind of distribution. But outside the U. S, we have a larger mix of franchise stores than in the U. S. So as you think about Asia, Asia is predominantly retail. Europe is a little bit more retail and the U. S. Is more wholesale. That's how I'd say you think of our business. If you look at our business wholesale to retail as a company, I'd say between 70% and 75% of our business is wholesale. Retail is anywhere in the 20%, 25% to 30% camp and growing. And so what comes with retail growth beside getting distribution and products that you can control, margin wise, the retail business is higher margin than the wholesale business. So I hope that answers your question, Karen. It does. Thank you. Also, as you continue to grow out e commerce, how much are you making that omnichannel in terms of how integrated it is with your retail today? And if not, is that a strategy going forward? Yes. So, I'll take that one. Our strategy is to become a leading omnichannel retailer. That's one of the core planks of our strategic platform. Today, we're still nascent, I guess, in our journey towards achieving that as an objective. We do have an e commerce business. It's about $120,000,000 in sales are owned and operated e commerce on a global basis. So it's still a very, very small part of our total business and a relatively small part even of our retail business. Obviously, that's where the consumer is going. We've been searching for a new head of e commerce and we're very, very close to announcing 1. The focus is to build a true omnichannel experience with all the kind of bells and whistles that consumers have come to experience expect, being able to order on their phone and pick up in store, being able to order on phone and we ship it from store. We don't have the technical capabilities to do that right now and that's why e commerce is getting so much investment over the last couple of years and into the next couple of years. Great. And final question, of course, always have to bring up the large cash balance. And I know you said debt reduction is a priority. But would you also consider acquisitions? Is there anything you think that you could add to your portfolio to help enhance things? I think if you look at our portfolio right now and the growth we have, organic growth in our portfolio, we think there's a lot left and we can grow market share. In terms of utility of cash, beside paying down debt, we're investing cash in the business. We're investing behind e commerce. We're investing behind retail. We're investing behind some of the technological solutions that will help us or enable business grow longer term. In terms of your question about acquisitions, if you have thoughts, please pass them along, I mean, and we'll take a look at it. Great. Thank you very much. Your next question comes from Goldman Sachs. Hi, this is Celeste Everett. How are you? First, when we look at your women's business, can you remind us the size of the global women's business? Is that roughly a 5th of the consolidated entity? And then what portion of that is the juniors and misses? And is that the main challenge that you're seeing in those two categories? Our total women's business is roughly $800,000,000 on a global basis. So doing the math in my head here, it's a little around 20% of the total business on a global basis. Did that answer your question or was there a part 2 to your question? I guess part 2 would be the weakness that you're seeing in the, I guess, the U. S. Women's, which I believe would be So the U. S. Wholesale business, which is almost entirely a juniors and misses business represents about 5% of our total business, okay, or 20%, 25% of the total women's business. Okay, that's helpful. Thank you. And then when we look at A and P spend, is that still expected to be similar to 2013 levels? And can you discuss the pace of A and P that you expect to make if you might be reinvesting some of the cost savings that you're implementing? Our expectation is the same pace as a percentage to revenue. We're looking at broadly under 6%. So I think we ended last year at 5.9%. That's what our expectation is at this point of time. In terms of sequencing it, our sequencing is driven by our advertising and product promotion calendar. As you know, we've hired a new agency. They're working through a new marketing campaign. So my sense is, like last year, you'll probably see advertising skewed towards the second half of twenty fourteen. Okay, great. And then just one final one. Again, going back to your cash utility, the euro notes become callable next month and would you expect to use cash on hand to partially repay that or do you expect to refinance that tranche? Thanks. Yes, Will, because there's an opportunity as you rightly point out, we're in the process of exploring, and having access to liquidity is important for us. Okay, great. Thank you. Your next question comes from UBS. Yes, it's Todd Harte Carter. Thanks for taking my questions. So I'll ask one of my questions in regards to cash deployment in the euro bonds. I guess the other one is more and more apparel companies are buying their foreign licensing back and given you have a lot of franchise partners, is possibly trying to buy some of those back a potential strategy going forward? I mean, Todd, and we have bought a few franchises in the past. So as we look at our business longer term and look at different business models that exist in different parts of the world, it's something we do look at. Again, we'll do it opportunistically, but more importantly, we'll do it based on a strategy. And as I mentioned to you earlier, wherever it has made sense, we have done it. It's largely been done outside the U. S. Because that's where we have a larger franchise base. So for example, last year, we did buyback franchisee in the U. K. And we have done in different parts of Europe. Okay. And then you've talked about reinvesting some of the cost savings from the restructuring initiatives into pricing. And given you've continued to enjoy a lot of success on the retail side, which I'm sure you're pleased it's over $1,000,000,000 business today, but can we assume most of the price investments will be on the wholesale side given the greater challenges there? Or how should we look at the need for additional price investment? Yes. So in terms of our as we think about investing, we're investing behind e commerce, we're investing behind retail. And in terms of and we're investing behind innovation. Innovation would be pan channel. And I think as Chip mentioned, we're looking at new products for women to offset some of the women weaknesses, which will be available in wholesale. So I think as you think about wholesale investment behind innovation is one of the areas we do look at. The other piece is we've had success, as you know, in the shop in shop concept. J. C. Penney, for example, was tremendously successful. And as we work with other customers, partnering with them and expanding that, so that our floor execution is a lot better than we've had in the past, I think will be important for us. Yes. In short, I mean, I guess, I would characterize it as we're going to invest in the things that are going to drive top line growth profitably. So continuing to make investments in e commerce, our own retail stores, our in store presence with our key wholesale customers, the savings that will come from this productivity effort that we're doing, some of those savings will get plowed back into those kind of investments that will drive top line growth. I appreciate it. Thanks a lot. Thanks, Todd. At this time, I'd like to turn the floor back over to the company for any closing remarks. We're going to keep it real short and sweet. I want to thank everyone for joining us and we look forward to talking with you next quarter. Thanks again. Bye bye. Thank you. Thank you. This concludes today's conference call. Please disconnect your lines at this time.