Earnings Call: Q1 2021

Apr 21, 2021

Welcome to Sleep Number's Q1 2021 Earnings Conference Call. All lines have been placed in a listen only mode until question and answer session. Today's call is being recorded. And if anyone has any objections, you may disconnect at this time. I would like to introduce Dave Fontes, Vice President of Finance and Investor Relations. Thank Good afternoon, and welcome to the Sleep Number Corporation First Quarter 2021 Earnings Thank you for joining us. I am Dave Schwantes, Vice President of Finance and Investor Relations. With me today are Shelly Ibach, our President and CEO and David Callan, our Chief Financial Officer. This telephone conference is being recorded and will be available on our website at sleepnumber.com. Please refer to the details in our news release to access the replay. Please also refer to our news release for of certain non GAAP financial measures and supplemental financial information included in the news release where they may be discussed on this call. The primary purpose of this call is to discuss the results of the fiscal period just ended. However, our commentary and responses to your questions may include certain forward looking statements. These forward looking statements are subject to a number of risks and uncertainties outlined in our earnings news release and discussed in some detail in our annual report on Form 10 ks and other periodic filings with the SEC. The company's actual future results may vary materially. We also want to refer you to our recently updated investor presentation, which can be accessed on our website at sleepnumber.com. I will now turn the call over to Shelly for her comments. Good afternoon and welcome to our Q1 earnings call. My by Q score was 88 last night. Through continuous innovation across our enterprise, Sleep Number is winning consumers' hearts, Minds and share of wallet. We are improving lives through better quality sleep while delivering exceptional value for all stakeholders. 1st quarter demand was more than 30% higher than prior year, which reflects broader and deeper brand relevance as we build on the accelerated shift in consumer trends Towards prioritization of their health, faster adoption of digital products and services, to benefit performance during the balance of this year and beyond. Our strategic investments in leadership in sleep Science are propelling the advancement of 360 smart bed features that improve sleep health and drive customer engagement. And Sleep Number's culture of individuality and well-being provides the foundation for our mission driven team Who passionately innovate with agile learning and exceptional execution. Our first quarter performance was driven by a significant acceleration in both consumer demand and profitability. We are raising 2021 EPS guidance to at least $6.50 Compared to reported EPS of $4.90 in 20.20 $2.70 in 2019. Net sales increased 20 percent to $568,000,000 with demand growth accelerating From previous quarters to more than 30% year over year and over 40% on a 2 year basis, Greater than $50,000,000 of smart bed delivery shifted out of the Q1 due to temporary foam supply constraints. Operating income grew 45 percent to $76,000,000 EBITDA grew 39% to $97,000,000 and EPS increased 85% to $2.51 We also had record return on invested capital of 27.6%, up 8 50 basis points from prior year as we continue to realize compelling value from disciplined capital deployment. To support our expanding business, we have increased our credit revolver to $600,000,000 Our purpose to improve the health and well-being of society through higher quality sleep Is resonating with consumers through our brand positioning. With sleep science based innovation, brand accelerators In our digital ecosystem, we continue to build momentum. Our strong first quarter demand growth Represent a sequential acceleration from each of the past two quarters on a 1, 2 3 year basis. By leveraging extensive research and insights from more than 9,000,000,000 hours of sleep Data. We constantly advance the smart bed experience to help individuals improve their quality sleep. Early last month, We introduced the new performance in Classic Series 360 smart beds with a digitally led marketing campaign. Each ad It's deepening customer engagement with the Sleep Number 360 smart beds by connecting Alton wellness benefits of proven quality sleep. With the knowledge from our proprietary sleep data, we recently introduced My daytime alertness feature. This new capability provides advanced real time insights that pair a sleeper's personal data With self reported information in sleep science to deliver individualized recommendations for how to improve sleep. In addition, the SleepIQ update includes simplified navigation for customers to access other wellness features, such as circadian rhythm insights, nighttime heart rate variability and monthly Health IQ wellness report. These sleep experience advancements, including relevant personalized health metrics, are driving increased customer engagement, brand advocacy and referrals. Lifelong relationships remain an important source of ongoing efficient Growth through referral and repeat sales, which represent about half of our demand. In addition, Our digital ecosystem is enabling Sleep Number to efficiently acquire new customers. We are optimizing Digital content, which is tailored by audience and platform in real time for efficiency and scale. Results include highly qualified digital traffic growth of over 40% in the quarter and record levels of conversion. Since transitioning to all smart beds nearly 3 years ago, we have driven average demand growth of 14%. Sleep Number's Agile's go to market strategy and exclusive direct to consumer model also remains strong drivers of sustainable growth. Our sell from anywhere model directly aligns with how customers Want to shop in store, online, or by phone, delivering a seamless value added experience across All touch points. Average sales per store for the Q1 grew 9% to nearly $3,200,000 On a trailing 12 month basis, 1 third of Sleep Number stores now average more than $3,000,000 and sixteen Stores exceeded $6,000,000 in sales with 1 store over $8,000,000 Online sales also remained strong, growing 116% in the quarter to nearly 14% of total sales Compared to approximately 8% last year. We are benefiting from the cumulative Act of Sleep Number's strategic initiatives within our mission driven culture. Like most businesses, we Of the COVID-nineteen pandemic, our unique business model and high sales growth And gross margin rates give us great flexibility as we manage for total operating margin. We have taken $20,000,000 of pricing for 2021 and will adjust offers to drive favorable total margin through discounts, financing, mix, and attach. Our vertical The strength of our Q1 performance underscores the value inherent in the convergence of our growing sleep innovation leadership, Pioneering 360 smart beds, digital ecosystem and lifelong customer relationships. More sleep data leads to better consumer insights and advancement of sleep health innovation. Broadening relevance drives accelerating demand and increases customer retention and referrals, resulting in higher revenues and profit margins. Growing scale improves operational efficiency and effectiveness across our core infrastructure, Which is increasingly profitable which is increasing profitability and cash generation as we And our smart sleep ecosystem. The remarkable strength of our highly engaged solution Orientated team and vertically integrated business model demonstrates compounding benefits. Thank you, Suite number team, for your ongoing courage, resourcefulness, and passion to innovate for an exceptional customer experience. And thank you for continuing to champion a kinder, more Just society for all. As our performance indicates, we have built a compelling Synergistic strategy with increasing consumer relevance. The outcome supports our commitment to create and Sustained superior shareholder value. Now David will provide additional financial details on Q1 performance and Outlook for 2021. Thank you, Shelley. I'd like to add my thanks to our Sleep Number teams And business partners, we are incredibly proud of your tenacity and creativity to navigate the challenges of this pandemic. You continue to find ways every day to improve the lives of Sleep Number customers with proven quality sleep. Since our earnings call 2 months ago, We have further advanced our digital capabilities, business processes, and performance drivers. We introduced daytime alertness insights, Completed the introduction of the new Sleep Number 360 smart beds, opened 2 additional assembly And applied selling from anywhere retail capabilities when snow and ice disrupted much of the country. We protected service levels for customers by leaning into resilient supplier partnerships and efficiently expanded our revolving credit facility to $600,000,000 through robust banking relationships. These are examples of how Sleep Number teams continuously strengthen the business leading to greater than expected performance this year and beyond. Q1 demand drove the highest Quarterly sales orders in company history, more than 30% over the prior year and more than 40% greater than 2 years ago. This accelerated demand combined with the temporary foam chemical supply constraints resulted in more than $50,000,000 in deliveries Shifting out of the Q1. However, foam production is now expected to normalize by the end of q2. We continue to be pleased with the higher than expected demand growth as consumers embrace proven quality sleep from Sleep Number. The strength and acceleration of performance has led us to raise our 2021 EPS guidance to at least $6.50 Net sales of $568,000,000 were 20% greater than the prior year, marking the 3rd consecutive first quarter With double digit net sales growth, average revenue per unit grew 3% this quarter, which is Especially noteworthy, given units grew 17% and online business made up nearly 14% of total net sales, Generating growth from both ARU and units over time is a unique strength of this business. In the Q1, we continued to advance customers' online experience while adding 11 new and relocated stores. We are targeting approximately 650 stores by year end and expect sales growth from new stores To be additive in the back half of twenty twenty one and beyond. Interestingly, many of the financial metrics for Q1 We're very similar to Q4 of 2020, though Q1 was 1 week shorter. We remain committed to delivering at least 300 basis points of operating profit leverage in 2021 versus 2019. Recall that this 2 year comparison is most relevant as it eliminates the noise from comparisons to 2020, which were affected by COVID Our q one net operating profit rate of 13.4 percent levered 5 70 basis points over the Q1 of 2019 on 33% 2 year net sales growth. R and D spending on exciting new innovations drove a 58% 2 year increase, but resulted in just 30 basis points of deleverage over that period. This was more than offset by 50 basis points of G and A leverage plus sales and marketing initiatives that drove 4.40 basis points of leverage over 2 years. Q1 gross margin to a quarterly record of $356,000,000 It is worth noting that the q one gross margin rate Was pressured versus 2020 by reinstated incentive comp, commodity and labor inflation, and constrained Efficiencies from shifting more than $50,000,000 in deliveries out of the quarter. Despite these Pressures, the operating synergies of our vertical business model contributed to record quarterly operating profits of $76,000,000 45 Percent Higher Than the Prior Year. In Just 2 Years, We have grown Q1 operating income 134% on 33% net sales growth. Our first quarter record EPS of $2.51 was 85% higher than 2020 And more than 3 times the $0.80 of earnings in Q1 of 2019. Clearly, using all performance levers is creating Superior shareholder value. We continue to prioritize investment in those performance levers, both through capital spend and directly through the P and L. During Q1, we generated cash from operations of more than $112,000,000 31% higher than the prior year and 64% higher versus Q1 of 2019, even while spending more to support our near and long term growth drivers. We also invested $12,000,000 in capital projects and $167,000,000 in Sleep Number stock during Q1. The renewed $600,000,000 board authorization for future investments in Sleep Number Shares underscores the tremendous value we see in our stock. We continue to target leverage of 2.5 to 3 times EBITDAR, Ending Q1 with leverage of 2.3 times EBITDAR. Executing this unique sleep science and digitally enabled is driving exceptional performance. The increased 2021 EPS guidance of at least $6.50 reflects the strong start we had in the Q1 and the confidence in the performance of the balance of the year. This implies 1 year growth of at least 40% over record 2020 EPS excluding the 53rd week last year and more than 140% since 2019. A reminder of a few other assumptions regarding the increased EPS outlook consistent with the context provided last call include, We expect to employ the benefits of our vertical structure to deliver more than 300 basis points of operating profit margin expansion versus 2019. This is based on 2 year net sales growth of at least 30%, which is above the high end of the range provided just 2 months ago. This We now expect approximately $25,000,000 of pressures on gross margin for the balance of the year for higher than Expected commodity, labor and logistics costs. We expect to offset these pressures with approximately $20,000,000 of surgical pricing actions and efficiency gains, particularly in sales and marketing. We expect to grow top and bottom lines each quarter in 2021 versus 2019 with More of the growth coming in the first half of the year. With the guidance increase, we now expect to Generate record cash from operations of approximately $300,000,000 in 2021. We are thrilled with the progression of the business and the performance of our teams. Our commitment to the pursuit of break True performance is delivering superior and sustained value for Sleep Number stakeholders. Gabriel, at this point, please open the line for clarifying questions. Absolutely. Your first question will come from the line of Peter Keith of Piper Sandler. Please go ahead. Hi, good afternoon, everyone, and congrats on the continued success. Maybe just quickly follow on The comments around pricing, I had a I did have a question there. So the $20,000,000 that you're taking strategically, Does that more than offset the input cost inflation that you're seeing? And secondarily, couldn't you go up more than I guess mathematically that just looks like a 1% price increase. Historically, you've taken 2% price increases and certainly Your broader industry peers have taken substantially more. So if you could maybe dig into the pricing dynamic a little bit more. Sure. Peter, thank you for the question. We took this pricing in early And of course, we continue to learn more every week regarding commodity pressures. And we took the pricing on selected SKUs. And as you stated and we covered, it's worth about 20,000,000 Our unique model, Peter, gives us a range of options as we manage for total operating margin And clearly, we have additional we certainly have additional pricing actions Available to us and we can be quite fluid between our selling process, discounts, financing And attach. That gives us the ability to trade up the line based on our adjustments or Right now, we have such a strong value equation compared to anyone across the board And love the units and the acquisition we're driving. We have a lot of year in front of us. And While the $20,000,000 with the newer information on commodity costs gets us close, but not quite all the way, We have so many levers to be able to pull that are yet in front of us. And again, we're going to focus on total operating margin. Jen, you can see the strong progress we've already made here in the Q1 and that certainly led us to Raising our guidance to at least $6.50 for the full year. Okay. That's helpful. The second question I wanted to ask and I'm not trying to sound naive, but it's a question that we're getting a lot from investors is what's changed With Sleep Number, clearly there is some demand as a result of maybe COVID and the stay at home dynamics. But at the same time, your growth has been quite spectacular. We could argue you're growing much faster than the overall industry And you're seeing very nice flow through in your model. So just big picture, what do you think is driving This elevated demand and do you think there's some sustainability to this even as vaccinations increase and people Well, this is an important question, Peter, and we're Very excited. This goes back to when we fully transitioned to 360 smart beds nearly 3 years ago with Now an average demand over that span of time of 14% and that's all since Getting buying capability in house and we've been perfecting and advancing that. And if you think about algorithms and the Precision that comes with them. More sleep data leads to better insights and advancement of innovations that are relevant for the consumer. And at the same time, this additional data and knowledge that we have on the marketing side also leads to More efficient and effective targeting and qualified digital traffic, which is converting at a higher level. So these 2 combined are driving both the demand and then of course with the scale that's also Driving the stronger flow through. And then I have to highlight our big unlock during COVID, once the COVID Demi hit last year around selling from anywhere. We pivoted to a new model that is very unique To our vertical model and that was a big unlock for us in the selling and marketing expense line, which we said last You're at over 300 basis points of leverage and that we are going to hang on to that as we moved into this year and we're certainly Trading that we have and that we intend to and see greater and greater efficiency. So is it sustainable? Absolutely. And this is the innovation strategy that we set out to deliver. Back in 2012, at the beginning of this transformation of the company and here we are and I would say it's early days. This is a great opportunity to join Sleep Number and get behind us as we You know, are early in our on our path of sleep innovation leadership leading to connected health. Okay. That's a great summary. Our next question will come from Brad Thomas of KeyBanc Capital. Please go ahead. Hi, good afternoon, everyone. Let me add my congratulations as well on a nice start to the year here. My first question was just going to be about Your updated full year guidance, I think you'd be consensus here in 1Q by $0.68 There's $50,000,000 of sales that you think will happen in 2Q that could have happened in 1Q, and you're raising the full year by $0.50 Just to connect the dots, are there any other moving pieces as we think about the balance of the year? Or are you all just being conservative Outlook flowing through the strong 1Q. Thanks. Yes. Hey, thanks, Brad. As like Every year, there are a lot of moving parts and we're pretty early in the year. We just gave guidance 2 months ago and we've raised our guidance for the year by We're very confident in the trajectory of the business. But we're managing both some tailwinds. We talked about the demand side At the high end of our expectations, actually above our high end of our expectations. And we're balancing those against some of the headwinds that we're facing with New commodity costs that we've highlighted and we're taking all of that into account as we think about the full year and We are couldn't be more thrilled about the performance of our teams in the business and the way consumers are reacting to the superior sleep that they get through Sleep Numbers products. We are also very happy with a big Shout out to our supply chain teams. I mean, it's been really challenging to navigate through the supply chain's challenges globally, not just ours, but This is happening across businesses everywhere and our teams have done a phenomenal job working with our partnerships with our suppliers and making Sure that we get more than our fair share of supply and make sure that we're serving our customers. So all in, we did get a bit more tax Benefit in Q1 than what we had expected. That's built into the full year thinking as well. At least $6.50 of EPS, which is, as I said, more than 140% of just 2 years ago in 2019 when we were running clean in 2019. Brad, I'll add on for the demand side. We continue to see momentum in demand here in Q2. It's obviously early, But I think it's important to underscore that and we're excited about what is yet to come. Thus, the raise to $650,000,000 here early in the year. And also, we Recognize that people are out more and they're spending more and that bodes well for us. It's working great. We're Excited about what that will mean for us for the remainder of the year. That's very helpful. And then the 2Q estimate is going to be a tough one, I think, for all of us to get our arms around given you had stores Close to not open last year. If we look at having grown 30% versus about 2 years ago And then layering on another $50,000,000 of orders that could come in, you can get a revenue number over $500,000,000 for 2Q. Obviously, it's a pretty big growth rate here. Can you help us get any more sense of how to think about modeling that second quarter? Brad, you are thinking about it the right way. We talked about this year guidance 2 months ago that for the full year about 4 to 5 points of our growth was going to be because of the strong ending backlogs We were servicing here in the first half. We've always said that we expected more of our growth to come in 1st half of the year. But we do expect growth top and bottom line every quarter versus 2019 here in 2021. So directionally, you're thinking about it the right way. It's we expect to have a pretty big quarter and second quarter. Thanks so much. Thank you. Your next question will come from Bobby Griffin of Raymond James. Please go ahead. Thanks, congrats on a great first Peter. David, maybe a follow-up on the background question first and I got a longer term strategic question. First of the backlog, is that 45 points of growth, call it like $80,000,000 to $90,000,000 round number And the add on the $50,000,000 or so that you have shifting, if the materials are there, could you really take that backlog back Down to like a normalized revenue on quarter or even if the materials are there, there's capacity issues where that will have to stretch out over a couple of quarters? Yes. Hey, Bobby, you're breaking up a little bit. I'm pretty sure I heard your question, so I'll do my best. But if I missed anything I think you're muted. No, no, I'm good. I think you're asking about whether the backlog impact for the year was about $80,000,000 $90,000,000 That's directionally right. And then Thinking about when that would be serviced in terms of how that would benefit our first half of the year or this year, we do expect A more normalized type of backlog, but our growth has been exceptional. And so we are having Higher backlog than we've ever had, and that's just going to be the state of the union, we expect during the course of the year. That's all baked into our thinking of how we're going to deliver more than $6.50 Of EPS here in this year and plan to do even better than that in the year and beyond? Yes, I guess that was part of it. I guess the second part of it was If you take the 90 and you add on the 50, you add 140. Do you have enough like if all the materials and the foam and everything are there and All good for you to get, which is a big hit. I understand that. But is there enough capacity that you could get all that to float in 1 quarter? Or is it just naturally going to have to bleed over a couple Yes. Well, Bobby, some of that backlog was serviced clearly in the Q1. And what we're saying is that Relative to where we expect it to be, we carried $50,000,000 of deliveries out of Q1. So that's really what to think about how to think about it. That's helpful. And secondly, I think the long term target for both margin 62% to 64% last quarter in the slide deck. Maybe just based on the last $62,000,000 what are some of the drivers? Okay. Bobby, I think we lost you. I can I can answer the question though that where I think you were headed? Gabriel, we're on the line. Is that correct? I assume we just lost Bobby. Okay. So I'll go ahead and answer his question about gross margin. In our long term slide in our Investor Relations materials, we say 62% to 64% gross margin rate. Look, we've said this many times over the course of history that we're not going to, corner ourselves by trying to chase Gross margin rate. We're going to use all of the levers of our business model to pursue sustainable and superior shareholder value creation. And that's And after covering our commodity cost pressures that we're absorbing here in 2021, we're going to use them all. And that's a great thing with this business model that we will certainly have, we have a lot of levers at our disposal to deliver superior shareholder value. We expect to use them all here in 2021. We're not guiding to a gross margin rate. We're telling you that we are committed To delivering more than 300 basis points of net operating profit expansion versus 2019. We're also certainly not shying away from our very strong gross margin rate, and it will continue to be an important source. So Gabriel, with that, let's, I don't know if Bobby got back on the line. We can check if he's there or we can move on to the next question. Not quite yet. So we can move on to next question from Atul Maheshwari of UBS. Please go ahead. Good evening. Thanks a lot for taking my question. So versus your guidance 2 months back, you're taking up the revenue estimate by Quite a bit, but you're keeping the margin expectations the same. So I guess what has changed that would cause operating leverage to be limited on I understand the input cost pressures, but you are taking up pricing in response to that. So why should there be not more leverage on faster sales growth? Well, Atul, we're certainly going to drive that. The idea of being this early in the year and taking up our Guidance for the year by $0.50 is a pretty significant move. We're saying at least 6.50. We think we've got levers to drive stronger performance than that, but we think that that's the right place to land, All things considered, we talked about managing a full year and managing all of the puts and takes that And during the course of a year, there is a ton of years left. We're thrilled with where we are. We're thrilled with demand. We're thrilled with how the company is performing. But, yeah, we have some uncertainties about where the Commodity cost pressures might go. We also are thinking about, potentially changing consumer behaviors. We don't know. But we know that we can operate well in any environment and that's what gives us confidence about the numbers and the color We provided for the guidance today. And the 2 of the at least 6 $50,000,000 of EPS reflects at least a 30% growth on a 2 year basis for the full year And 300 basis points of operating margin leverage. It's, sorry, the 650 is Okay. Yes. So I guess as my follow-up, if you roll back the clock 12 months to your I think back then you mentioned that April 2020 was down like about 50% or so. So are you able to provide a quarter to date comp For this current month, April 2021? Sorry, could you repeat that question? So I think in the month of April of 2020, I think your comps were down 50%, obviously due to the Store closures, so are you able to provide a quarter to date number for this month? Well, We don't provide a lot of insights on an interim basis because a couple of weeks don't make up a month Or a quarter. And, but we have said that the strong growth that we saw in the Q1 has continued here in the so far in the second quarter. And And that is even on a 2 year basis or 3 year basis even. So even if that's why we Provided those reference points so that you can take out the impact of COVID and the shut the closed stores last year. Reflecting back on your previous comment, I just want to clarify that the 2 year growth in EPS At least $6.50 is at least 140% increase over 2019, dollars 2.70 Got it. Thank you and good luck with the rest of the year. Okay. Thanks a lot. Your next will come from Curtis Nagle of Bank of America. Please go ahead. Good evening. Thanks very much. Just a couple of clarifying questions. 1, Just on the comment about growth in every quarter. For 4Q, does that include lapping or the impact of lapping the extra week? Teen, not 21 versus 20. And so because there's so many changing dynamics in 2020, it makes it very unusual. And it is I really encourage you to look at your models versus 2019, use the color that we provided today and use it and go from there. Okay. Totally fair. And then just clarifying on the price increase, It's a tactical, not exactly sure where you're taking it. But just like sort of want me to looking at the MSRPs thoughts, I know that you usually don't sell the MOSFET, but looking at that, it doesn't look like it's changed in the past, I don't know, maybe since 2018. So Can you just be a little more specific about where those tactical price increases are coming from? Well, we were very Laser focused on certain bed sizes and certain models, and you may not see that in the List prices that you're looking at. Okay. I'll follow-up later. Thanks very much. Appreciate it. Okay. You bet. And your last question will come from Seth Basham of Wedbush. Please go ahead. Thanks a lot and good afternoon. My first question is just thinking about the backlog again, just to make sure I'm clear. So $50,000,000 carried out of Q1. Where do you expect the backlog to be out of Q2? A more normal level. We in the 50 1,000,000 isn't a reflection of our backlog. It's a reflection of where we thought we would be versus where we landed. Just want to make sure that we were clear on that, right? Okay. About 2 weeks of delivery. Got it. So you don't expect any excess backlog or deliveries That are outstanding coming out of the Q2. Yes. Directionally, we believe that our backlog will be more normalized and we are experiencing pretty Phenomenal demand, and that can always affect the timing of when deliveries are made. But, that's how we're thinking about it. In In terms of the supply chain challenges that caused a hiccup in making deliveries here in the Q1, we don't we expect those Got it. So when you think about the vertically integrated model that you are So you have, you definitely do not have phone production, so you come into these challenges. Are there other areas with Providers of yours or suppliers of yours that you've encountered challenges? So look, this challenge isn't even the result of the foamers. It's not their problem. It's the challenge with the chemical producers. And you saw that's been a trifecta Bad luck for those producers. And they are coming back online and their production capacity is very strong. And We expect here in the Q2 that that's all stabilized. We've already seen some improvement in our delivery windows and our levels of service. And our first available date is about 17 days right now and that compares to normally even around 14 days. So we're not that far off right now where we Where we normally would be. So, in terms of just our broader supply chain, we have great relationships with our suppliers. We have a very flexible supply chain. We've been strategic about which parts of the business we have included in our vertical model. But these are folks that specialize in different areas and it makes sense for them to be And the business they're in and us to be in ours. But we work really closely together and we have multiple Full factories across the country and around the globe. So we feel good about our supply chain. It's not easy given the environment, but our teams are managing Got it. Okay. And the other area of questions that I'd like to address is sales And first on advertising, could you give any more data as to all your advertising leverage in the quarter year over year To help us understand some of the moving pieces? Yes. We levered on the specific media line, Seth, we did lever on our 20% net sales and obviously substantially more when you look at the demand. This is an area we're going to continue to lean into with our strong value proposition. We're really excited About the unit growth and the ARU growth in the quarter and an area of ongoing efficiency and effectiveness for us. Maybe ask a different way, Shelly, did your media spending leverage more than the rest of sales and marketing? Total sales and marketing was higher, media leverage was a piece of it. Yes. Just trying to get some color as to the key drivers there between media and your leverage on your labor force. But I guess, we'll leave it at that. Well, we've touched on this a little bit before, Seth, in the sense that we've The digital capabilities that we've put in place during the pandemic have served us extremely well. We've got a number of different tools that we're now using, Including workforce management throughout our sales for retail operations, that is proving to be expansion, and we look to we're excited about where we are and where we're headed. In the higher demand? It all starts with demand with this model, No doubt. Thank you very much. Appreciate it and best of luck. Thanks very much, Dan. We have no further questions at this time. I'll now turn the call back over to the presenters for closing remarks. Thank you for joining us today. We look forward to discussing our Q2 2021 performance with you in July. Sleep well and This concludes today's conference call. Thank you for joining. You may now disconnect.