Apogee Enterprises, Inc. (APOG) Q1 2022 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Q1 2022 Apogee Enterprise, Inc. Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Jeff Huebschen. Please go ahead.

Thank you. Good morning, everyone and welcome to Apogee Enterprises' fiscal 2022 first quarter earnings call. With me today are Ty Silberhorn, Apogee's Chief Executive Officer; and Nisheet Gupta, Chief Financial Officer. I'd like to remind everyone that there are slides to accompany today's remarks. These are available in the Investor Relations section of Apogee's website. During this call, we will reference certain non-GAAP financial measures. Definitions of these measures and a reconciliation to the nearest GAAP measures are provided in the earnings release we issued this morning. This is also available on our website. I would like to remind everyone that our call will contain forward-looking statements reflecting management's expectations, which are based on currently available information. Actual results may differ materially. More information about factors that could affect Apogee's business and financial results can be found in our SEC filings. And with that, I'll turn the call over to you, Ty.

Thanks, Jeff, and thanks everyone for joining us this morning. The first quarter was a solid start to our fiscal year, and I'm proud of the results our team delivered. This morning, I'll review the highlights from the quarter and the trends we're seeing in our business. I'll also give an update on our key initiatives. Then, Nisheet, will provide more details on the quarter and our full year outlook. After that, we'll be happy to take your questions. So let's start with the highlights from the quarter, which can be found on Page 4 of our slide deck. Our business rebounded strongly compared to last year's first quarter when the pandemic had a significant impact on our results. I'm pleased to report that in this year's first quarter, we grew both the top line and the bottom line. Let's start with revenue. We grew sales in all four segments. Our biggest dollar growth came from Large-Scale Optical, which has now fully recovered from last year's pandemic impacts. Architectural Services also performed well delivering double-digit sales growth as we continue to execute projects in our backlog. Let's turn to profitability. Compared to last year's first quarter, profits improved significantly. Again, LSO led the way. That segment is now back at its typical levels of profitability. We also achieved year-over-year margin gains in both Architectural Glass and Framing Systems, despite some inflation in material and freight costs. Earnings per share nearly tripled coming in at $0.42. This compares to adjusted earnings of $0.15 per share last year. From a cash and a balance sheet perspective, our financial position remains strong. We have relatively low debt significantly lower than a year-ago, and we returned $18 million of cash to shareholders this quarter through share buybacks and dividends. Based on the strength of our first quarter results and our outlook, we are increasing our earnings guidance for the full year to a range of $2.20 to $2.40 per share. That's up from our previous guidance of $2.10 to $2.35 per share. Now, let's look at our end markets. While non-residential construction remains in a downturn, we are encouraged by the positive trends we're seeing. In the near-term, we remain cautious as we still face uncertainty, especially in the shorter lead time parts of our business. The latest data on construction spending from the U.S Census Bureau shows that non-residential construction activity is down 6.5% compared to pre-pandemic levels. Notably, spending in every segment of non-residential construction that Apogee participates in is lower compared to a year-ago. However, the trends and forward looking indicators like the Architectural Billings Index and the Dodge Momentum Index are much more encouraging. These indicators turn strongly positive in recent months and remain so. That suggests we could see non-residential construction return to growth at some point in the next 12 months. In our own business, we are seeing early signs that sales pipelines and bidding activity are improving. Also, we are experiencing fewer project delays. In a few cases, we are actually seeing project schedules accelerate. While some uncertainty remains both in how quickly the market recovers and in the supply and costs of key raw materials, we do see increased reasons for optimism. In addition to the [technical difficulty] financial results, we also made very good progress on our key initiatives during the quarter. Those initiatives are outlined on Page 5 of our earnings presentation. Let me touch on a couple of areas, starting with enterprise transformation. During the quarter, we began to work on several foundational projects to enable our enterprise transformation efforts. We are working to strengthen core processes and systems and provide new digital and back office capabilities across several functional areas, including finance, human resources, and supply chain. Our level of effort and the spending on these investments will pick up in the next couple of quarters. These investments also support our cost saving efforts, ensuring we sustain and build on the work already under way. Over the past year, we started the long-term work to build a more competitive cost model. We are driving cost and operational improvement initiatives that will provide near-term benefits, and we see an opportunity to drive further gains over the medium to long-term, primarily in our Architectural Glass and Framing Systems segments. The efforts to further improve our cost structure will remain a top focus for the rest of our fiscal '22 and will be a key pillar of our strategic work going forward. Finally, we made substantial progress on our new enterprise-wide strategy. Last quarter, I mentioned that we had just started to develop a strategic roadmap to better position the company for long-term sustainable growth and to improve our overall financial performance. We began by taking a systematic outside-in approach. We're using a third-party to gather extensive input from dozens of key customers and to provide detailed competitive benchmarking. This work is clearly identifying our strengths as well as areas where we can make marked improvement. Addressing these areas will allow us to consistently grow above market at better margins and deliver stronger value to our customers. The pandemic and the subsequent downturn in nonresidential construction are bringing change to our end markets. We recognize the imperative to adapt our business so that we can succeed in the future. We are now deep into analyzing our current mix of products, services, and capabilities along with the markets and the customers that we serve. Our goal is to identify the best avenues for future growth with better margins. We are also evaluating how we compete. This will ensure we have the right operating model and capabilities needed to deliver consistent, profitable growth. Through our work so far, we've gained valuable insights, and we're excited about the opportunities we see ahead for Apogee. Importantly, our strategy work has validated the opportunity to achieve significant improvements in margins and raise returns on invested capital. This work will continue through the summer and we look forward to sharing more details in the coming quarter, but we will begin executing elements of our strategy as the work is completed. The implementation will be well underway as we head into the fall. So, we anticipate hosting an Investor Day at the end of this calendar year to share more details on our strategy as well as our longer term financial goals. Look for more information on our Investor Day in the coming months. With that, I'll turn it over to, Nisheet, to provide more details on the quarter and our full year outlook.

Thank you, Ty, and good morning, everyone. As Ty mentioned, the first quarter was solid start to our fiscal year with strong growth on both the top line and the bottom line. This gave us the confidence to increase our guidance for the full year. Just as important, the word we have begun on a key initiative is laying the foundation for even stronger performance in the future. Let me start with the financial results, which are on Page 6 of our earnings presentation. Total revenue grew by 13% with growth in all of our segments. Large-Scale Optical lead the way. It rebounded from last year's first quarter. Architectural Services grew 19%. Operating income more than doubled compared to the last year's first quarter. Operating margin improved to 4.9%, up from adjusted margin of 2.7% last year. This was mainly driven by the recovery in LSO and by margin improvements in both Glass and Framing segments. As I said, we achieved these margin gains despite material and freight cost inflation, which impacted both Glass and Framing. I would like to remind everyone that last year's first quarter included $4 million of benefits from temporary cost actions we took in response to COVID. Those actions have since been reversed and did not repeat this quarter. Also, corporate costs were higher this quarter. This was driven by enterprise transformation investments, along with higher health care expenses. While we're pleased with our margin gains in the quarter, we recognize we have an opportunity to drive more stronger profitability over the long-term, especially in Glass and Framing segments. This will remain a tough focus for our team as we take actions based on our strategy work. Turning to the non-operating lines on the income statement. Net interest expense continues to trend lower. It is $1.2 million in this quarter compared to $1.4 million a year-ago that was mainly driven by lower debt balances. Our tax rate was 25.3%, slightly above our full year expectation of 24.5%. Our diluted share count declined to 25.8 million driven by stock repurchases. Putting it all together, earnings increased to $0.42 per diluted share. That's well above adjusted earnings of $0.15 per share in last year's first quarter. Now let's dig into the individual segment results, which are on Page 6 -- Slide 6 of our presentation. Starting with Architectural Framing Systems, revenue grew slightly compared to last year's first quarter coming in at $152 million. Operating margin was 5.3%. That's up 40 basis points compared to last year. We are beginning to see the benefits from the cost actions we’ve taken over the past year [ph]. Those savings are helping to offset cost inflation. We like the progress we're making in Framing Systems, but certainly see the opportunity for further margin gains. Finally, AFS backlog increased to $423 million. That's up 3% compared to the last quarter. Turning to Architectural Glass, revenue grew 8% to $83 million. That was driven by increased volume and a more favorable sales mix. Operating income improved to $2.1 billion. That's compared to an operating loss in last year's first quarter. Let me say a word about profitability in Architectural Glass segment, they improved by 320 basis points. Three factors help increase profitability. We improve productivity in our glass manufacturing facility in Owatonna in Minnesota. We had a favorable product mix and volumes were higher. All of those help offset the higher cost of materials and freight. We are encouraged by the profitability improvements in Glass, but we see an opportunity to drive larger gains over the long-term. We continue to monitor the performance of velocity that is our initiative for small glass projects. Volume remain well below our targeted level and we are looking at several options to improve these results. Architectural Services revenue grew 19% as we continue to execute projects in the backlog. Operating income and margins decreased compared to the prior year. This was due to isolated project performance impacts and a less favorable project mix. As a reminder, results in services segment can vary from quarter-to-quarter that's because performance is driven by a small number of large projects. We remain confident in services overall execution and outlook for the full year. We're also encouraged by improving order trends in Architectural Services. Net order flow has increased in the past two quarters and we are seeing more bidding activity. Turning to Large-Scale Optical segment. LSO bounce back strongly from the COVID shutdown in last year's first quarter. Revenue was $24 million. That's more than tripled last year's revenue, and LSO return to its normal level of profitability. Operating income was $5.8 million this quarter, compared to a loss of $3.1 million in the first quarter of last year. Turning to Page 7, our financial condition remains very strong. Cash flow from operations was $6.9 million. I would like to remind everyone that Apogee's first quarter tends to have relatively low cash flow that's due to the timing of annual incentive payments and insurance premiums. CapEx in the quarter was $4.7 million, which was below last year's level. We continue to expect full year CapEx of about $45 million. We slowed spending in the first quarter, pending the outcomes of our strategy work. We expect more capital spending tied to the enterprise transformation initiatives in the back half of the fiscal year. We continue to return cash to our shareholders. $17.6 million in this quarter from share buybacks and dividends. That's up from $9.6 million in the last year's first quarter. Our balance sheet remains very strong. Net debt is $128.5 million, that's down from $199 million a year-ago. We have no significant debt maturities until June of 2024 and we have no borrowings on our $235 million revolving credit facility. This strong financial position gives us significant flexibility as we develop our new enterprise strategy. In the near-term, we remain committed to maintaining strong balance sheet, making high return investments on our business, and returning cash to shareholders through dividends and opportunistic share repurchases. Now let's turn to our outlook for the rest of the fiscal '22. This is on Page 8 of our presentation. Based on the first quarter results, we're increasing full year earnings guidance to a range of $2.20 to $2.40 per share. That's up from previous guidance of $2.10 to $2.35 per share. As Ty mentioned, we are encouraged by the improving trends we are seeing in our end markets. In the near-term, we continued -- we see continued softness on non-residential construction markets. We have limited visibility in the short lead time parts of Framing and Architectural Glass business. This gives us some uncertainty about revenue in the second half of the year. Also, as we gain insights from our strategy work, we may choose to step away from some of the less profitable products and customers. This could impact revenue in the coming quarters. We expect to make continued progress on efforts to improve our cost structure and productivity. This should benefit margins as we move through the year. However, we will continue to face a headwind from the reversal of temporary cost sanctions we took last year. That headwind is about $20 million for the full year. The biggest impact will be in the second quarter, a headwind of about $10 million year-over-year. We continue to expect full year cost of $7 million to $10 million related to enterprise transformation. The biggest impact from these investments will come in the second and third quarters. I would like to remind us of one more item. During Q3 of fiscal year '21, we booked gains from new market tax credit in our Glass segment of about $7 million, that will not be repeated this year. We also continue to see pressures from inflation for rest of fiscal year. Inflation will mainly impact Framing Systems and Architectural Glass. We will continue to take price actions to mitigate the inflation impact. As I mentioned earlier, we continue to expect a full year tax rate of about 24.5% and capital expenditures of about $45 million. Overall, we are pleased with our first quarter reserves and our improved outlook. I look forward to working together with Ty and our management team to continue this momentum for the rest of the year. With that, I'll turn it back over to Ty for some concluding remarks.

Thanks, Nisheet. To wrap up, the first quarter was a positive start to our year as our team delivered significant top and bottom line growth. We are encouraged by the improving trends in our end markets and we are increasing our outlook for the full year. Our financial position remains strong, giving us the flexibility to invest in our business and continue to return cash to shareholders. We made good progress on our initiatives, which are laying the foundation for long-term profitable growth. Our strategy work will continue through the summer, but we will also begin to execute elements of it as certain portions of that plan are completed. I look forward to sharing more details on our progress in the coming quarters. So with that, we'll now open it up for your questions.

[Operator Instructions] Our first question comes from the line of Chris Moore from CJS Securities. Your line is now open.

Good morning, guys. Thanks for taking a few questions. Maybe I realize you're not providing specific guidance on revenue, but when you look at Q2 to Q4 in fiscal '22, did you expect year-over-year growth versus fiscal '21?

Chris, good morning. This is Nisheet. We definitely are seeing positive trends in the end markets, but we are cautiously optimistic about the near term. As you think about our business, we have long lead times in many of our businesses, and we want to ensure that we see the positive trends coming through Architectural Billings Index and Dodge in the coming months to see how our revenue is going to get impacted in the future quarters. As you know, we are working through a strategy, and as mentioned in the earnings release, we are working through certain number of projects, customers, which we may step away from businesses that are not profitable. That should drive a revenue challenge in this year, and therefore we're not providing any revenue guidance.

Got it. I will leave it there. Services margins 6% versus 10.5% last year. You talked about kind of isolated performance impacts and less favorable project mix. Can you separate those two a little bit? I’m just trying to understand if that level of margin is likely to continue for the next quarter or two?

Yes, Chris as you know this is a services business where we have very small number of customers with large projects, and that drives the variability in margins over the quarters. It's got uneven returns. So, if you think about these two isolated projects that we're referring to, those are likely to get evened out over the rest of the year. And in terms of project mix, we see the unevenness in these projects as we start executing. The good news is that we have certain number of very large projects we're executing on and we are booking our backlog, volumes are higher in the services business, and we remain very optimistic about this business for the rest of the year and future years.

Yes, I will just add to that. We commented in the last quarter call, we did expect some margin pressure in that business and that'll probably carry through for a while given the downturn, but the business is executing where we expected it to be. And so, we see it being in good shape and meeting our expectations through the rest of our fiscal year.

Got it. That’s helpful. I'll jump back in line. Thanks, guys.

Thank you.

Thank you.

Thank you. Our next question comes from the line of Eric Stine from Craig-Hallum. Your line is now open.

Good morning, everyone.

Good morning.

Just wondering if you can give a little more detail or color on your comment just about looking at your business and potentially stepping away from some areas that maybe are suboptimal from a profitability perspective. Is that more customer specific or is that something that we should view as certain parts of the market, whether it's parts of the market or different geographies, maybe if you could break that down a little bit.

Yes. Thanks for the question. This is Ty. I mean, from the strategic work that we're doing so far, we're deep into going through the detail right now looking at just what you touched on geographies, products, and project types and really understanding where are we differentiated in terms of the value that we can provide customers and how does that translate in us to generating higher margins around those businesses and product offerings going forward. So, as we're going through that work, we're assessing that mix, and it is likely that there are certain portions of, let's say, just certain product types or certain types of projects across primarily in our Framing and in our Glass business that it may not make sense for us to continue to pursue those going forward. So, as we get through that strategy work, we will start to shape those activities, and I would think of it more right now as kind of a pruning of what we have in our offerings today as we look to raise our financial performance overall going forward. We want to generate value for the customers and then earn the value ourselves for providing that in the form of higher margins as we go forward.

Got it. Understood. And maybe a good segue then to velocity. I mean, it sounds like that is one where rather than looking to tone that back, you're looking at ways to accelerate that and how better to approach the market. Just curious what that may look like if you're able to answer it? I mean, I would assume on the cost side, you're somewhat limited because of the level of automation. But any details would be helpful.

Yes, I will tell you that we continue to monitor the performance there and we are making a shift in how we've been trying to drive improvements. We started that during the quarter. So, revenue volumes although they have improved sequentially, they're still well below our targets, and they actually continue to be well below our breakeven numbers. So, we've started to once again look at types of projects that we're pursuing through that, what is the value that we can deliver, and can we achieve reasonable margins with respect to that business. So, the team has been taking some actions through the quarter now, including looking at pricing beyond just raw material inflation that there's certain parts of that business that it's clear to us and it's come out through some of the strategy work that we will have to be able to generate higher prices in order to get to acceptable margin levels. So, that's a work in process, and it will be evaluated with the rest of our product lines as we complete the strategy work.

Okay. I guess last one for me. Your commentary on projects that some of those are actually moving faster. Just curious, I mean, do you view that more as a catch up as things start to improve here or is it something that you actually view is more sustainable going forward?

I would say early on signals are -- there's certainly some catch up, some things that are getting accelerated projects that were in queue so that we saw that as a driver as part of our Q1 results. And then as we look going forward, on a medium and longer term perspective, bidding and quoting activity is picking up. And that's consistent what we're seeing with the longer-term indicators like the Architectural Billing Index. So we're starting to see that activity in our sales pipeline, in our quoting activities, across our construction business has started to pick up.

Okay. Thanks a lot.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Brent Thielman from D.A. Davidson. Your line is now open.

Great. Thanks. Good morning, Ty, Nisheet. I guess first two part question on Framing. What was the negative impact of kind of higher raw material costs and freight to margins? And then as a follow-up to that, when we think about the business overall, or I guess Framing and Glass specifically, did the inflationary headwinds get worse this quarter just given sort of timing and inventory turns and the move up in costs overall?

Yes, Brent, good morning. Firstly, I would like to remind that we have been working for the last 2 years in our procurement journey and we've very strong procurement organization that is doing their best to offset the inflation as much as possible. They are able to offset most of it. So to answer your specific question, we had, let's say, roughly about $30 million of total inflation over the course of this quarter and that was much higher than previous quarters that we have seen. We have taken a lot of actions in terms of price [technical difficulty] procurement initiatives. And the net impact is about a $4 million that was impacted in this quarter, after all, the actions taken on prices and procurement.

And Framing was the big part of that in terms of that net negative impact. And they have been more aggressive at going after price with respect to that. So we expect to see that gap close to some extent. But there's still going to be significant headwinds, as I'm sure you're seeing and hearing across, not just construction, but many of the markets right now.

Yes. Absolutely. I guess second question was, again, on the Framing segment. Just wanted to see if you could, I mean, it looks like you've sort of stabilized the backlog there and things are getting a little bit better. Maybe talk through some of the businesses or exposures within that segment, what you're seeing in particular that looks a little more positive in this environment?

Yes, as we normally do, we won't give any specific guidance or talk specifically about business units within the segments. But I can tell you that remember Architectural Framing, about half of that business is longer lead time and roughly approximately half is shorter lead time. So, we saw some benefits in Q1 where some of that shorter lead time business picked up, some of that was tied to projects restarting and accelerating trying to finish out projects. And then in general, they’re like the other businesses. We are seeing a lift in quote activity and bidding requests, but for that business, the short lead time part of that is difficult to forecast. Nisheet, I don’t know if you have something else to add.

Yes, one more thing to think about here is as we are consolidating the Framing segment more and more, we are not looking at those individual pieces. We are looking at what is the value we offer through our products to our customers. So as we talk through the performance, we really look at the consolidated Framing segment as we move forward, Brent.

Understood. Maybe a last one, back to Glass. I mean pretty good return in growth this quarter. Margins obviously moving up, but I'm sure not where you want them to be yet. Just setting aside some of the initiatives you're looking at internally, can you just talk through what you feel like you need to see for those margins to get back, kind of back toward that upper single digits range that segment is historically been accustomed to?

Yes, we're looking at that business through that strategic work and assessing both the product offerings, the type of projects they pursue and looking at in addition to the cost structure overall that business has and how can we strengthen that. So we're not giving at this point margin guidance, or communicating a target. We will actually get through that -- through the strategy work. But certainly we see an opportunity to improve significantly from where they are. And our strategy work has really pointed both from an external benchmarking standpoint to significant opportunities to raise that margin as well as taking another look at our product mix, what types of projects we pursued through that business, and how we can really leverage where they have strong differentiation in the marketplace that delivers value for customers that in turn generates better price and therefore better margin for us going forward.

Okay. Appreciate you taking the question. Thank you.

Thank you.

Thank you. Our next question comes from the line from Julio Romero from Sidoti & Company. Your line is now open.

Hey, good morning, Ty. Good morning, Nisheet.

Good morning.

Good morning.

So really exciting news regarding the enterprise-wide strategy and the upcoming Investor Day. And I really appreciate the comments earlier you gave on -- you gave some good granularity on areas in the portfolio, which you might step away from and I certainly appreciate that. I wanted to ask about, can you speak to some of the positives you found as you're evaluating the portfolio and maybe provide an example of an area where you are differentiated and where maybe you can play some offence?

Yes, I would just say there's really opportunities across all four of our business segments. Clearly, Services continues to outperform from an overall market perspective. And one of the things that we're doing through that strategy work is how can we leverage that model that they've implemented that not only allows them to win business, execute well and deliver above market margins, but how can they then leverage that into other areas and continue to grow that business. Our LSO business, we've actually validated, we've got some very good technology and process capabilities within that business. So that's pointing us to start to think about how can we leverage that into other adjacencies, whether it's construction or non-construction market opportunities. And then Glass and Framing, I've talked about we need to be a much more active portfolio manager. And that goes all the way down at the product and service level. And so that's one thing that we're driving in this analysis is just looking at the products that we offer today, that we bid and quote on for different types of projects. Some of those, it's coming out clear that we can differentiate better in terms of the product and how we perform. We've got certain strengths in our service capabilities, which certain customers in certain markets and applications value immensely. And so that's pointing to areas where we can better amplify that message to our customer base and put some additional emphasis on those attributes of our offerings so that we can win more business and drive higher value as we go forward. So there's pockets of opportunity across all four segments to drive growth and help us with margin, just with being more effective and managing our product mix.

Excellent. Appreciate the color there. On your change in leadership incentive structure, can you maybe speak to how that's been received by the team and any benefits you're starting to see year-to-date, either in terms of -- either -- in terms of building out your enterprise line strategy or just getting overall feedback from the organization?

Yes, I would say that it has been very well received, obviously from our leadership team that we're providing very clear objectives and expectations starting on that. We need to improve our return on invested capital. If we're going to invest money, we have to get stronger returns for our shareholders as part of that. And so that being an overriding mark -- metric from a long-term incentive perspective, and then in near-term putting that emphasis on EBIT on profit dollar generation. And that's been critically important for them to use that in communicating with their teams as we're going through the strategy work that to steal an old analogy, I mean, revenue is not king, profits king. And if we can't generate profit, it means we're not generating value for our customers and we're not generating value for our shareholders. So that's been very good and helping the teams work through this strategy work and really thinking about how can they manage and shift their own mix within their respective businesses that they can lift that profit overall. And we've kind of taken off the guardrail of it's okay, if there's some revenue that maybe goes away in the short-term because we're not going to chase those types of projects with those types of products going forward because we know we can't make the right margin levels. Overall, very positive, but we're on a journey like everything else.

Yes. And one more thing, just encouraging signs already. We don't talk about ROIC numbers on a quarterly basis. It's more an annual KPI for us. But we obviously calculated internally and we're seeing positive signs and trends already coming through on ROIC year-over-year. So the team is getting it and they're executing faster because the North Star is clear, it's ROIC.

Understood. If I could sneak one more in here, as you evaluate avenues for growth in markets, products, geographies, et cetera, are you looking at any areas where you can see either direct or indirect benefits from a federal infrastructure bill?

I think anything that is pointed at infrastructure is going to drive some benefit for the overall markets. Certainly some of the areas for transportation, if you think about institutional types of projects, education market, those are all things that look like are going to have some benefit through this latest infrastructure bill. And while like everything else, it's a long cycle business, that'll take time to flow through in terms of projects and then the opportunity to turn those into revenue for Apogee. But those are positive signs as we look out over the medium and long-term as well.

Got it. Thanks for taking the questions and look forward to the Investor Day later in the year.

Thank you.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Ty Silberhorn for closing remarks.

Well, thanks for joining us today. As we've highlighted, we had a good start to the year. But we've got more work to do to fully realize the stronger returns for our business. We're seeing good signs on operational execution, but we're at the very beginning of that journey. And I expect to see that to continue to improve as we go through the year. And like we highlighted our enterprise strategy work is progressing very well, and we look forward to sharing more insights on that in the coming quarters. With that, have a great rest of your day and a fantastic weekend and I look forward to talking to you on our next earnings call in September.

This concludes today's conference call. Thank you for participating. You may now disconnect.