Earnings Call: Q1 2022

Jun 9, 2021

Greetings, and welcome to the Oxford Industries, Inc. First Quarter Fiscal 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to your host, Ann Shoemaker, Treasurer. Thank you. You may begin. Thank you, and good afternoon. Before we begin, I would like to remind participants that certain statements made on today's call and in the Q and A session may constitute forward looking statements within the meaning of federal securities laws. Forward looking statements are not guarantees, and actual results may differ materially from those expressed or implied in the forward looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our Form 10 ks. We undertake no duty to update any forward looking statements. During this call, we will be discussing certain non GAAP financial measures. You can find a reconciliation of non GAAP to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website atoxfordinc.com. Due to the material impact of COVID-nineteen on our business in fiscal 2020, we will also include comparisons to our fiscal 2019 results. And now I'd like to introduce today's call participants. With me today are Tom Chubb, Chairman and CEO and Scott Grassmeier, CFO. Thank you for your attention. And now I'd like to turn the call over to Tom Chubb. Thank you, Ann, and thanks to all of you for joining us this afternoon. We are extremely pleased to be reporting an incredibly strong start to fiscal 20 21. We took decisive actions at the start of the pandemic to protect our people, our brands and our liquidity. This combined with our focus over the past year on delivering happiness to our customers and investing in enhanced digital marketing and store capabilities, as well as in our bars and restaurants, have strengthened our foundation for profitable growth. As consumers have become increasingly more comfortable returning to physical shopping, our overall engagement levels have greatly accelerated, leading to strong momentum across our entire portfolio of brands. Given conditions last year, it is not surprising that we were able to post strong sales gains across all brands and all channels of distribution during the Q1 of fiscal 2021 as compared to the Q1 of fiscal 2020. What's much more impressive about our Q1 2021 performance is how it compares to the Q1 of 2019. We believe that the comparison to 2019 is much more informative for most purposes than comparing to 2020. Accordingly, during our discussion today, we will focus on the positive traction we have made towards returning to and even exceeding our 2019 levels of performance. 1st quarter sales came in at $266,000,000 compared to $282,000,000 in fiscal 2019 and versus our guidance range of $220,000,000 to $240,000,000 It is worth noting that $14,000,000 of the $16,000,000 sales decrease from the Q1 of fiscal 2019 is due to lower sales in Lanier Apparel, which, as you know, we are in the process of exiting. On an adjusted basis, earnings per share increased to $1.89 compared to earnings of $1.30 in the Q1 of fiscal 2019. Scott will provide more detail in a few minutes, but these results were driven by very strong performance in our e commerce businesses and outstanding gross margins. Our bar and restaurant business also performed very nicely during the quarter. In our bricks and mortar stores, we generally saw a sequential improvement in traffic and sales in the quarter with regions in Florida, the Southeast and Texas showing the most strength, while the Mid Atlantic, the Northeast and the Midwest are recovering at a somewhat slower pace. There is no question that we are benefiting from some pent up demand so far this spring summer and the alignment of our brand's focus on products related to travel, vacation and social occasions with the consumers' desire to travel and reengage socially. We expect this to continue as more regions of the country begin to normalize. That said, we believe that the results we have seen thus far this year and that we are projecting for the balance of the year also demonstrate the value of staying true to our brands during the challenges that we faced last year. Our commitment to the happy, upbeat and optimistic messages of our brands and delivering those messages to our consumers through our products and services is paying off handsomely as the world reengages. In addition, we are seeing positive returns on the investments we have made and continue to make in enhancing our brand's creative content, in improving our omnichannel customer service and continuing to hone our digital marketing capabilities and in our stores, bars and restaurants. In our biggest brand, Tommy Bahama, we are anchored in the relaxed island lifestyle. We deliver this lifestyle to our guests through our amazing products, our wonderful stores, and e commerce website, and very importantly, through our bars and restaurants. By staying true to our Live the Island Life brand message and making the types of investments outlined above, we were able to deliver outstanding first quarter results. Sales overall came close to 2019 levels driven by healthy gains in e commerce and restaurants, while stores and wholesale continue to improve sequentially. Very importantly, increased full price selling and stronger initial IMUs coupled with excellent expense control helped contribute to a marked improvement in gross margin, operating margin and a 36% increase in operating income over Q1 2019. We are delighted with the margins we achieved for the quarter. Finally, we were pleased to see that while performance in our men's business was strong, our women's business at Tommy Bahama was even stronger. We are honored to have the dedicated cadre of true Tommy Bahama fans that comprise our very loyal customer base. That said, we believe there is room on the island to delight even more customers. Through the investments we are making and the priorities we have established, we are intent on expanding our customer reach while continuing to serve our loyal guests. Staying anchored to its resort seek lifestyle, and as we say, being the sunshine, served Lilly Pulitzer very well during the Q1. Lilly's product priority for spring 'twenty one was feel good fashion with a focus on happy color and print, easy sheet comfortable pieces and a resort state of mind. This focus, together with the investments that we have made in enhancing our brand creative and enhancing our store and digital capabilities, paid off in strong first quarter results. We continue to see strong growth from e commerce, while our stores in the wholesale business continue to improve as consumers feel increasingly comfortable engaging in the physical world. In total, Q1 'twenty one sales exceeded Q1 2019 sales and operating margin came in at an impressive 27% as compared to 21% in 2019. Our luxeletic and lounge product continued to drive growth and we saw a healthy rebound in our dress business as her social calendar begins to fill up. At the same time, our golf and tennis collections have also been bright spots and the consumer is showing strong renewed interest in swim as she thinks about travel and vacation this summer. Our recent results demonstrate that we have the product she wants and our brand message is resonating with her. We look forward to continuing to drive a strong business through the balance of the year. Our smaller brands, Southern Tide, the Beaufort Bonnet Company and Duckhead also had a great Q1, all posting meaningful sales gains above Q1 2019 levels. All three are poised to contribute to our profitability this year. We are very pleased with our Q1 results and are excited about the balance of the year. Scott will provide more details in our guidance momentarily, but I will say that we do expect to have a strong year, particularly in terms of profitability. Our enthusiasm is based on both external factors as well as the internal priorities that we have been focusing on for the last year. I'll start with the external factors. As the summer progresses, we expect some of the regions that have been slow to recover for us, namely the Mid Atlantic, the Northeast and the Midwest, to pick up momentum. We also believe that consumers will continue to have a high degree of interest in travel, vacation and social events through the year. Finally, after a long pandemic, consumers appreciate the highly differentiated, happy, colorful, upbeat nature of our brands and products more than ever. All of these external factors portend a strong 2021. We are also excited about the benefits we are seeing as the result of our internal priorities. There are many, but I will highlight 5 here. First, in our brand message, we are taking care to ensure that our messengers are both true to our core brand values and relevant for today's consumer and marketplace. 2nd, we have realigned our creative teams and are enhancing our creative content to make sure it is delivering the full impact of our powerful brand messages. 3rd, as part of our effort to enhance our digital capabilities, we are improving our ability to capture and analyze customer data in a way that respects her privacy, but also puts us in position to serve her in a better and more personalized way. It also helps us identify and reach new audiences of potential customers. 4th, we are honing our skills in measuring the effectiveness of and optimizing the various channels, many of them digital media that we use to reach both existing and potential new customers. 5th, we continue to enhance our store order fulfillment capabilities. This allows us to use inventory located anywhere in our footprint to satisfy demand from anywhere. The implications for inventory efficiency, sell through rates and ultimately gross margin are huge. We believe the combination of the positive external factors as well as the benefits from our work on our internal priorities gives us ample reason to be bullish on 2021. In closing, please allow me to express my sincere appreciation for our wonderful and loyal customers and for our world class employees, an incredible group of women and men who have worked harder than ever over the last year and a half to deliver happiness to those customers. Thank you for all you do. And now I will turn the call over to Scott for additional detail on our results and our outlook for the balance of the year. Scott? Thank you, Tom. As Tom just mentioned, fiscal 2021 is off to a great start with record earnings in the Q1. I'll walk you through how we got there. Sales were stronger than expected and excluding the impact of the exit of Lanier Apparel business were comparable to 2019 levels. Our full price e commerce channel was 55% higher than in 2019 with significant growth over 2019 in all of our branded businesses. Our retail store performance reflects the significant regional differences in the pace of recovery. We saw real strength in the Southeast and Southwest, particularly in Florida, where retail sales achieved 2019 levels. However, we are experiencing a much slower recovery in other parts of the country where sales levels in the Northeast, Mid Atlantic and Midwest, while improving versus Q4, were still over 30% lower than in 2019. Overall, our retail sales were 16% lower than in 2019. We continue to see improvement so far in the Q2 and expect that improvement to continue as restrictions lift and as summer arise in these areas. Our restaurants benefited from the addition of 5 Marlin Bars and the strong recovery in certain regions with a sales increase of 7% compared to 2019. All restaurants are now open except for New York, which we plan to reopen this fall. We are particularly proud of the work we have done to improve our gross margin, which on an adjusted basis expanded 5 20 basis points over 2019 to 64%. As demand remained high, more of our sales in the Q1 were at full price than in the Q1 of 2019. Gross margin also benefited from our focus and investments in our direct to consumer businesses and lower sales in linear apparel, which has resulted in a meaningful shift in our sales mix to these higher margin channels of distribution. In the Q1 of 2021, our direct business was 72% of revenue compared to 64% in the Q1 of 2019. We have also increased our IMUs by reducing product cost and selectively increasing prices. SG and A modest decreased modestly from 2019 levels with lower employment cost, occupancy cost, variable expenses and travel cost, partially offset by increased performance based incentive compensation. Putting it all together, in the Q1, our consolidated adjusted operating margin expanded 4 10 basis points over 2019 to 15% with operating margin expansion in all operating groups. Our business is supported by our strong balance sheet and cash flow from operations. Here are some highlights. On a FIFO basis, inventory decreased 29% compared to the end of the Q1 of 2020. Excluding Lanier Apparel, which we are exiting, FIFO inventory decreased 22% compared to the end of the Q1 of 2020. Tommy Bahama, Lilly Pulitzer and Southern Tide each decreased inventory levels significantly year over year with conservative purchases of seasonal inventory and higher than expected Q1 sales. Ongoing enhancements to enterprise order management systems are also contributing to a more efficient use of inventory. On a LIFO basis, inventory decreased 36% compared to the end of Q1 of 2020. Supply chain challenges, including higher transit costs and production and transit delays are ongoing. However, our emphasis on direct to consumer channels gives us more flexibility on product release dates. Our liquidity position is strong with $92,000,000 of cash and no debt at the end of the Q1. The Q1 of 2021, cash provided by operating activities was $41,000,000 compared to cash used in operating activities of $46,000,000 in the Q1 of 2020. Turning to our outlook. The positive momentum we experienced in the Q1 has continued and we expect to deliver strong revenue and earnings in the Q2. Sales in the Q2 are expected to be in a range of $300,000,000 to $310,000,000 compared to $302,000,000 in the Q2 of 2019. Impacting sales in the Q2 is the wind down of our Lanier Apparel business. We estimate Lanier Apparel revenue to decline to approximately $5,000,000 in the Q2 of fiscal 2021 compared to $20,000,000 in the Q2 of fiscal 2019. Strong full price sales, a shift of our sales mix towards our brands and our direct to consumer channels and higher IMUs in the Q2 are expected to contribute to a meaningful increase in consolidated gross margin over 2019. On an adjusted basis, earnings per share for the Q2 of 2021 are expected to be in a range of $2.15 to $2.35 compared to $1.84 per share in the Q2 of 2019. Our Q3 is historically our smallest sales and earnings quarter due to the seasonality of our brands. We also clear end of season inventory in both the 3rd and 4th quarters with the highly profitable Lilly Pulitzer after party sales as the most notable of our events. High sell throughs in the Q1 and elevated sales plan levels planned in the Q2 are expected to reduce the availability of excess inventory for these clearance events. As a result of lower planned revenue from clearance events in the 3rd quarter and the impact of the Lanier Apparel exit, we're projecting an adjusted loss in the quarter in a range of $0.20 to $0.35 per share compared to adjusted earnings of $0.10 per share in the Q3 of 2019. With our better than expected Q1 results combined with our projection for a strong finish to the year driven by continued strength planned in our full price e commerce channel, retail and restaurant channels and distribution, we are raising our previously issued guidance for 2021. We now expect sales in the range of 1,015,000,000 dollars to $1,050,000,000 compared to net sales of $1,120,000,000 in 2019. For the full year, Lanier Apparel sales are expected to be approximately 20,000,000 dollars or $75,000,000 lower than 2019 with no Lanier apparel sales planned in the Q4. Adjusted earnings per share for 2021 are expected to exceed 2019 levels benefiting from meaningful gross margin expansion. SG and A for the full year is expected to be comparable with 2019 with lower employment costs, occupancy costs and travel costs, partially offset by increased performance based incentive compensation and investments in marketing, including top of the funnel expenditures. We now expect adjusted earnings in a range of $4.85 to $5.15 per share compared to $4.32 per share in 2019. We plan to continue investing in our growth opportunities primarily in information technology initiatives such as the redesign and relaunch of the Ability Pulp to mobile app and additional development of digital marketing and customer service enhancements. We also plan to open new retail stores and a new Marlin Bar at Town Square in Las Vegas, which will replace our full service restaurant in the center. In 2021, capital expenditures for the full year are expected to be approximately 35,000,000 dollars comparable to 2019 levels. We appreciate your time today and we'll now turn over the call for questions. Hillary? Thank you. At this time, we will be conducting a question and answer session. Our first question is from Edward Yruma of KeyBanc Capital Markets. Please state your question. Hey, good afternoon guys. Thanks for taking the question. Congrats on a great quarter. I guess first, I want to click on a gross margin a little bit, obviously, an incredibly powerful performance there. In terms of last year, I know you had inventory that you packed away. Was there a benefit from a cost basis when you kind of brought that inventory back into flow this year? And then as a follow-up, as you think longer term about the DTC penetration, particularly in the Tommy brand, do you think you've kind of hit a peak or do you think that the direct business can continue to grow as a percent of overall sales? Thanks. I'll maybe take the first one, Ed, and then flip it or I'll take the second one, excuse me, and then flip it over to Scott to talk about any benefit that we might have had to gross margin. But I do, Ed, believe that DTC as a percentage of the total can continue to grow. Certainly, it will be a larger part this year, I think, than it was in 2019 as wholesale is recovering. I do think our wholesale business is very healthy. We're performing well at all of our key customers, which is great to see. But over the long term, we do expect DTC to be the primary driver of growth. Beth, do you want to talk about the gross margin? Yes. There was really not any kind of significant cost difference from what we carried over. What did that allowed us to do was really not have a lot of excess inventory last year that we are flooding the market with. And I think it really helped with our brand health. And I think our merchandising teams did a great job of really taking what we could merchandise well into that spring line and it just allowed us not to have to buy a bunch of inventory for early spring. We already had it. It also helped with some of the transit delays because that inventory was already here. So we really had no delays there. Got it. And one other follow-up. I know you guys mentioned you're taking some tactical price increases. I know historically you've done that as you've introduced new product or rolled out some new functionality. Are the price increases on kind of a similar basis as you bring out new product or are you taking more kind of wholesale approach to some of the price increases? Thanks. It's more selective than it is across the board type of pricing increases. Yes. Also as we get in more performance type products where new products that we introduce in the performance area tend to have a higher gross margin also. Great. Thank you. Thank you. Our next question is from Paul Lejuez of Citigroup. Please state your question. Thanks. It's Tracy Kogan filling in for Paul. I had two questions. I guess the first is on the supply chain. I'm wondering if the delays you're seeing there are contributing to what you expect to be having a lack of clearance inventory in Q3. Is that really just more related to your sell throughs? And then my second question was I was just wondering in the Tommy business, how much your outlet business was hurt by lack of international tourism, if you could maybe give some color on the difference in performance in your outlet versus your full price stores? Are those in tourist regions versus those that are not? Thanks a lot. Okay. On the supply chain question and any impact that that may be having on the Lilly Pulitzer after party sale later in the year, the way that I would answer that, Tracy, is the primary driver, the root cause, if you will, of not having as much inventory as the higher sell through that we've had year to date. However, the supply chain issues make it harder for us to chase inventory really for full price business as well as for that would ultimately end up leaving us possibly with more inventory for the after party sales. So, we are having some challenges with delays in shipping as well as some we are having some challenges with delays in shipping as well as some delays in production at the factory end due to the COVID pandemic. As much as possible, we've obviously tried to factor all of that into our forecast and think we've sort of captured that. But the real cause is the higher than anticipated full price selling during the early part of the year. And then on the outlet stores? Yes. Our outlets are down similar to our total retail. We don't really benefit that much from international travels, not the way some brands might. And our outlet stores there, while the sales are down, the gross margins are very healthy in our outlet. So we just have a much leaner in inventory and inventory is very good inventory. And we're able to get a little bit better pricing having to discount a little less than we had to in previous years. Overall, our outlet business is sales are down, but margins are up. So it's pretty healthy. Our next question is from Susan Anderson of B. Riley. Please state your question. Hi, good evening. Nice to see the improvement in the quarter. I'm curious, I think you mentioned that you expect the northern states to pick up as they've started to open. I'm curious if you've seen that penetrate or seen them start to pick up just yet. And then also if the South has continued to perform well. And then also curious what you're seeing in Hawaii as that's opened up now. Yes. So as to the Mid Atlantic Northeast and Midwest, which were the 3 sort of lagging regions that we called out, they are improving. If you look at the more recent performance versus the performance earlier in the year, the general trend there is good. And I think it's as you would expect as people start to get out more, feeling more comfortable as some of the restrictions start to get lifted and more people are vaccinated. People want to be out shopping and buying stuff and we think that actually plays out for us really well. In those states, summertime is a really good time to have people out shopping for our brands, which are all about warm weather and sunshine and all those types of things. And in the South, I'd say that relative to any other year, the performance continues to be very good. We're pleased with what we're seeing there. I will point out that Florida always slows down for us during the summertime a bit versus other times of the year. And I think you'd have that it won't be a relative slowdown as compared to other years, but it will be less of our overall sales picture during the summer months. And then as to Hawaii, it's a bit of a mixed bag there. The places that rely heavily on international tourists, especially people coming in from Japan or or Australia and that would be the island of Oahu because there's still issues with travel from those places. They've not recovered as fast as some of the locations like Maui and the Big Island that are more S. Tourists. And there are still restrictions in place, but we are seeing a nice recovery. And I think that will continue as the year progresses. I think all of Hawaii will continue to get better, which is a positive for us. We're thrilled with the results that we saw in the Q1, but again, that was with certain regions still depressed from where they were in 2019 and as they come back online, we think that bodes well for us. Great. That's very helpful. And then I'm just curious, are you seeing new customers come into all of the brands or the existing customers that are coming back now that maybe were shopping the brands pre COVID but hadn't shopped them because maybe they hadn't gone on vacation or something and now they're coming back or if you're also capturing new customers and if that's in store, online or both? The answer is yes, yes and yes. We're customer accounts are building. We're seeing customers that are customers that we've had in the past and we're adding new customers both online and in stores and it's really across all brands. And some of that got a little choppy during the pandemic. Obviously, it was hard to add new customers in stores when the stores were closed. And there was a lot going on there, but all the customer metrics are really looking pretty good through the Q1 of the year and we think we'll be able to continue that trend and it's obviously an area of a lot of focus for us as well. Great. That sounds positive. Well, thanks so much. Good luck for the rest of the year. Our next question is from Dana Telsey of Telsey Advisory Group. Please state your question. Hi, good afternoon and congratulations on the terrific results. As you think about e commerce and I believe last year e commerce reached nearly 43% of sales and you had 55% increase in full price now, how are you thinking about percentage of total sales that comes from e commerce and the margin accretion relative towards that for each of the brands? Yes. So the highest penetration as you know, Lilly has a higher penetration of e commerce than Tommy does. They both took a big step up last year. Last year was a very unusual year as a percentage of the total. It will be a bit smaller this year than it was last year, but it will still in both brands be significantly higher than it was in about 33% for 2021, which will be up pretty significantly over where it was in 2019. I think 2022 is probably the 1st year where you'll really be able to see where that's going to sort of what the new baseline of e commerce is because you do still have stores in the wholesale still in a bit of a recovery mode this year, Dana. And so 2022, you probably get that baseline. But then from there, I think e comm probably continues to be the fastest growing part of the business and we like it. It's very profitable business for us. I'll let Scott maybe elaborate a little more on the margin impact of the e comm business. Yes. E comm is a very profitable business even though you have some extra cost around it, you do have a high ticket which is growing. Our average ticket has been growing and our initial gross margins are higher. So we are able to easily fund the extra cost with the margin. So we really do like the e commerce business and we have been investing in it and those investments have been paying off and we'll continue to invest in that business. And then just two more follow ups. One of the things it sounded like you had learned coming out of COVID is how to run the stores more efficiently regarding store labor. As stores have reopened, is this part of the flow through beyond the gross margin of what's leading to the operating margin increases? And how do you think about labor going forward? Dana, I would say yes, it is part of the flow through. We did learn how to operate more efficiently, and I think we're benefiting from that right now. There's a part of that that is sort of intentional, if you will, or deliberate. And I think there's actually a little bit of it that has to do with trouble as many employers are having right now and filling open positions and we're actually running a little thinner than we want. And at the margins, it's probably costing us a few sales dollars. So I'm not sure it would hurt us as labor cost is a percentage of sales, but in the absolute dollars, it's probably we're spending less just because we can't get people in. Got it. And then as you think about inventory going through the balance of the year, how do you think about inventory as it's approaching the Q4 and how long this congestion lasts? Everything we hear, it seems like it continues to be extended. Yes, it does. And one thing we have adjusted merchandising calendars to order earlier to build in a little more time for any kind of transit delays, especially for that Q4, especially when we get into resort and then into the early deliveries of spring, which some of those happened in the Q1. We plan on attempting to at least order the inventory earlier and hopefully any delays will be that cushion that we accelerated the orders will absorb that. So and inventory levels, we are operating more efficiently with inventory. As far as we expect to be below 20% the whole year. And whether it will be quite as big a percentage or not, I'm not quite sure that it should be lower all year. I think we can just run the business with less inventory due to some of the investments. Thank you. Our final question is from Steve Marotta of CL King. Please state your question. Good afternoon, Tom, Scott and Ann. Tom, maybe you could address given how this year is shaping up and there's the reopening performance is actually very good, very, very good to the extent I know you can't talk about next year from a guidance standpoint, but maybe you can talk at a very high level about what you think optimal operating margin is for the business and for the long term. I'd like to ask you how you expect to lap this next year, but that would be maybe giving too much specific guidance on next year. If you could just frame it a little bit on where you are and where you think you can how this can you could build off of this or if maybe the margins are playing a little bit above themselves at the moment given all of the dynamics in the industry? Yes. Thank you, Steve. Thanks for the question, and I'll let my partner, Scott, chime in here in a minute with some further detail and thinking on the operating margin long term. But what I would tell you at the very highest level, Steve, and this is a message that we've been trying to deliver since this time last year is the 1st couple of months of the pandemic, we were very focused on making sure that we would get through it and financially survive. And as you know, we did that with flying colors. But really about this time last year, we also pivoted to make sure that we were doing everything we could across all of our brands to emerge from the pandemic even stronger than we went into it. And this was part of our prepared remarks today is that we believe that we are seeing not only the benefits of the reopening, but also the benefits of the priorities that we have internally and that those are paying off. And we do believe that we have come out of this as brands, which ultimately drive our business in a stronger position. And what that's helping us do is drive sales. No doubt the reopening is part of it, but we think the strength of our brands and the activities and priorities that we've done to bolster those are also paying off. That's resulting in higher gross margins. We've developed skills that are helping us operate more efficiently from an operating expense leverage standpoint as well as an inventory efficiency standpoint. And we're also focused on and while we love the whole sale and we want to continue our wholesale business, we're very focused on driving our direct to consumer businesses. And when you look at all of those, what I would tell you is it's really hard for me to predict what next year looks like, but over the long term, I do believe we will be expanding our enterprise wide operating margin. And Scott, if you want to? Yes. Total company, I mean, we really expect to be a low double digit operating margin company. I think we can enter that double digit territory this year. And at Tommy Bahama, we've always felt there was a lot of room for operating margin improvement and we really believe this year we're going to have a lot of progress and they can get into double digits this year also. We want to get them 12 in North. I don't think that will happen this year. But I think that's certainly in the not too long term future to get them there. So and then Lilly has great operating margins. They always have and we think they can maybe expand slightly over 2019 margin levels. So we think our margin profile is certainly improving and I think it can continue to improve. That's very helpful. Thank you. I'll take the rest of my questions offline. Thanks again. Thank you, Steve. We have reached the end of the question and answer session. I will now turn the call over to Tom Chubb for closing remarks. Thank you, Hillary, and thanks to all of you for your interest in our company and your support. And we look forward to talking to you again in September when we report second quarter results. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation and