Flexsteel Industries, Inc. (FLXS) Q4 2021 Earnings Report, Transcript and Summary

Good morning, and welcome to the Flexsteel Industries' Fourth Quarter and Fiscal Year 2021 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, today's event is being recorded. I would now like to turn the conference over to Derek Schmidt, Chief Financial Officer and Chief Operating Officer for Flexsteel Industries. Please go ahead sir.

Thank you and welcome to today's call to discuss Flexsteel Industries' fourth quarter and fiscal year 2021 financial results. Our earnings release, which we issued after market closed yesterday, Monday, August 23rd, is available on the Investor Relations section of our website www.flexsteel.com, under News & Events. I am here today with Jerry Dittmer, President and Chief Executive Officer. On today's call, we will provide prepared remarks, and then we'll open the call to your questions. Before we begin, I would like to remind you that the comments on today's call will include forward-looking statements, which can be identified by the use of words such as estimate, anticipate, expect and similar phrases. Forward-looking statements, by their nature, involve estimates, projections, goals, forecasts, and assumptions and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those expressed in forward-looking statements. Such risks and uncertainties include, but are not limited to, those that are described in our most recent annual report on Form 10-K as updated by our subsequent quarterly reports on Form 10-Q and other SEC filings as applicable. These forward-looking statements speak only as of the date of this conference call and should not be relied upon as predictions of future events. Additionally, we may refer to non-GAAP measures, which are intended to supplement, but not substitute, for the most directly comparable GAAP measures. The press release available on the website contains the financial and other quantitative information to be discussed today as well as a reconciliation of the GAAP to non-GAAP measures. And with that, I'll turn the call over to Jerry Dittmer. Jerry?

Good morning and thank you for joining us today. Despite ongoing industry challenges related to supply chain, we executed well and delivered on continued strong demand for home furnishing products during our fourth quarter. We reported net sales growth of 110% to $136.2 million in the current quarter, compared to $64.8 million in the prior year quarter and organic sales growth of 123% compared to the prior year quarter, with growth in virtually all product categories. Comparisons versus prior year are heavily skewed because of the impact of COVID-19 in the prior year quarter, when retail stores shut down and ecommerce transactions soared. Year-over-year comparisons aside, I'm very encouraged by the double-digit sequential growth delivered in the quarter versus a third quarter in both our retail and ecommerce channel. Retail orders in the fourth quarter remained robust, growing 118% above prior year and 76% above the fourth quarter in fiscal 2019, which was unaffected by COVID-19. We feel that we are competing well in gaining market share. We've been building growth momentum throughout fiscal 2021 and finished the year strong. Looking back, fiscal 2021 was a year of significant challenges for all of us both personally and professionally. I'm especially proud and grateful of our team of dedicated employees who fought through these challenges. Their resilience in the face of numerous obstacles presented by COVID-19 and unprecedented global supply chain disruptions was outstanding. Even with these hurdles, our team delivered record sales of home furnishings products and a record adjusted earnings per share of $2.99. At the same time, we made notable strides in advancing our strategic agenda and building a resilient foundation for long-term profitable growth. We strengthened talent and culture, including the addition of three new executive team members to accelerate our success in ecommerce, new business development and global supply chain operations. We continued to modernize our systems and processes and successfully upgraded our SAP system and converted our financial systems to SAP without any disruption to the business. We took meaningful steps to expand our supply chain capacity by developing new partnerships to support both our domestic and global transportation, adding an additional manufacturing plant in Juarez, Mexico, and broadening our global supply chain base. We strengthened our digital capabilities and launched our first direct-to-consumer website, www.homestyles-furniture.com and relaunched our Flexsteel website www.flexsteel.com, with an improved user experience and significant digital assets. We also reinforced our commitment to meaningfully improve our customers experience by creating a dedicated executive role and team to accelerate this initiative. Our near-term outlook for the market remains bullish, the economy is strong although the recent global surge in COVID-19 cases could be a disruptor to the positive economic momentum. Employment conditions are improving and consumer spending appears healthy based on these macro economic conditions and what we're hearing from customers, we expect overall consumer demand for home furnishing to likely remain strong to the bulk of the calendar year 2021. While our growth outlook is promising, there are a multitude of significant global supply chain headwinds, which we are navigating in the short-term that may create choppiness in our first half profit results for fiscal 2022. First, ocean container availability has improved in recent months but ocean container rates have continued their relentless climb. Containers from Vietnam and China to our largest U.S. distribution center, which previously cost $3,000 to $4,000 before COVID-19 rose to $10,000 in May, and subsequently surged to $20,000 levels in August. Containers coming from Thailand and Indonesia are now surpassing $22,000. While we take appropriate actions to pass along these increased costs to the market if we can, there's an inherent time lag and price realization, which we expect to put material pressure on gross margins near term. Second, ancillary charges associated with ocean containers, such as demurrage and detention are escalating to unreasonable levels. The significant reduction in free days allowed by shipping lines has been further exasperated by the unavailability of labor. The lack of truck drivers and warehouse workers available to pick up, unload and return containers, combined with minimal free days have intensified ancillary charges. Railways are clogged and rail yards are full, which only further strains our ability to return containers. Third, material availability specifically for poly foam remains constrained and it's not clear if we'll see significant improvement before calendar year 2022. Fourth, the recent resurgence of COVID-19, led by the spread of the Delta variant has unknown and potentially substantial consequences. Extended shutdowns related to COVID-19 in Asia could bring a halt to the flow of source products for the industry. Similar events in the U.S. could be highly disruptive to our manufacturing and distribution operations. Fifth and lastly, cost inflation remains a prominent risk. We realized major cost increases last fiscal year in virtually all of our materials and finished goods as well as labor and domestic transportation. Continued imbalances between supply and demand for these resources may continue to exert upward pressure on cost. In response to all these factors, we continue to prudently manage discretionary SG&A expenditures to partially offset the gross margin pressures until price realization catches up to the cost increases and supply chain disruptions are alleviated. In summary, these supply chain challenges are frustrating, but our team isn't deterred by these variables impacting our industry, which we view as transitory. The agility of our company to rapidly respond to changing external conditions is a strength and one we will continue to leverage to gain share even in times of industry disruption. I remain confident in our ability to deliver strong sales growth and financial results longer term. Now, I will turn the call over to Derek to discuss our financial and operational results. And I'll be back with some closing comments on what we see ahead.

Thank you, Jerry, and good morning everyone. Fourth quarter net sales were $136.2 million, up $71.4 million, or 110%, compared to $64.8 million in the prior year period. Our sales results were slightly above our $120 million to $135 million guidance range despite the ongoing supply chain issues faced in the quarter, which Jerry highlighted earlier. We were highly encouraged by our fourth quarter sales results, which represented our highest sales quarter for the fiscal year and grew 15% sequentially from third quarter sales results of $118.4 million. We saw an increase in our home furnishing products sold through retail stores of $78.5 million, or 196%. Retail sales were especially favorable compared to prior year results which were adversely impacted by COVID-19 and related retail stores shut downs. Compared with the pre-pandemic fiscal 2019 fourth quarter retail sales for the fourth quarter of fiscal 2021 increased 60% for a compounded annual growth rate of 27%. Additionally, fourth quarter retail sales also represented a sequential growth versus the third quarter up 15%. We've gained significant retail placements this year and are competing well with a healthy inventory position of in-stock products and competitive lead times on custom manufactured products. Products sold through ecommerce declined $3.3 million or minus 16.3%. ecommerce sales were softer in comparison to prior year quarter when online sales increased by 86% due to COVID-19 and related retail store shutdowns. Compared with a pre-pandemic fiscal 2019 fourth quarter ecommerce sales for the fourth quarter of fiscal 2021 increased 56% for a compounded annual growth rate of 25%. Another useful measure of our ecommerce growth momentum is sequential growth versus the third quarter, which was plus 14%. Lastly, we realized the sales decline of $3.8 million due to the exit of our vehicle and hospitality product lines during the fourth quarter of fiscal 2021, excluding these exited product lines, our total company organic growth was 123% in the quarter. From a profit perspective, we reported a fiscal fourth quarter net income of $5.8 million or $0.81 per diluted share that compared to a net loss of $25.7 million or minus $3.23 per diluted share in the prior year quarter. The reported net income included a $698,000 pre-tax restructuring expense and a $2 million reduction in tax expense due to the remeasurement of valuation allowances, primarily related to deferred tax assets. Excluding these items, the fourth quarter non-GAAP adjusted net income was $4.4 million or $0.61 per diluted share as compared to a non-GAAP adjusted net loss of $1.5 million or minus $0.19 per diluted share in the fourth quarter last year. And as Jerry noted earlier, thanks to the efforts of our hard working team members, we achieved a record adjusted earnings per share of $2.99 for the fiscal year during a very tumultuous period. Please see the non-GAAP disclosure included in the earnings release for a detailed reconciliation of GAAP to non-GAAP adjusted net income and adjusted earnings per share. Gross margin as a percent of net sales in the fourth quarter was 19.4%, which was slightly better than the midpoint of our guidance range of 18.5% to 20%. Margin expansion from higher sales volumes was partially offset by surging ocean container freight rates and ancillary charges in the quarter. Gross margin was significantly higher versus they reported 9.2% in the prior year quarter, the 10.2% year-over-year improvement in gross margin was primarily due to structural cost reductions, operational efficiencies, fixed costs leverage due to higher sales volume as compared to the prior year quarter and lower inventory reserve expense due to strong demand. Selling, general and administrative or SG&A expenses increased $1.8 million to $18.6 million, compared to $16.8 million in the prior quarter, when we aggressively reduced costs in response to COVID-19 and related sales declines. SG&A as a percentage of net sales in the quarter was 13.7% compared to 13.8% in the third quarter and compared with 25.9% in the prior year quarter. The 1220 basis point decline compared to the prior year quarter was driven by 340 basis points in unusual items, including 40 basis points for lower bad debt expense, 210 basis points related to prior lease impairments and 90 basis points for prior year COVID-related costs with the remaining 880 basis points decline, primarily due to effective cost management and cost leverage gained from higher sales. Turning to income taxes. During the quarter, we reported a tax expense of $1,260,000 or an effective rate of 17.7% compared to a tax benefit of $5.6 million in the prior year quarter, or an effective tax rate of 17.8%. The effective tax rate in the fourth quarter included a $2 million tax reduction, or an impact of $0.28 per diluted share related to the remeasurement of valuation allowances, primarily on deferred tax assets. The effective tax rate for the year is 26.8%. Now moving on to the balance sheet, the company ended the quarter with a cash balance of $1.3 million in working capital, defined as current assets plus current liabilities of $128.8 million and a $3.5 million balance on our secured line of credit. Compared to the end of fiscal 2020, working capital increased modestly by $400,000. The slight increase in working capital was due to a $23.8 million increase in trade receivables from higher sales and a $90.6 million increase in inventory, a majority of which was in transit to our distribution centers at year end, mostly offset by a decrease in cash of $46.9 million, a decline in other current assets of $9.1 million, primarily due to a tax refund, a decline of $11.7 million in assets held for sale and a $46.3 million increase in trade payables and accrued liabilities, mostly related to higher inventory purchases. Capital expenditures for the 12 months ended June 30, 2021 were approximately $2.6 million. Now on to our restructuring update, the company incurred approximately $700,000 of restructuring expense, primarily for ongoing facility and transition costs. Total restructuring expenses for the fiscal year 2021 were $3.4 million. We currently have two facilities held for sale, one in Starkville, Mississippi, and the other one in Harrison, Arkansas. We expect ongoing facility costs for these two locations to be in the range of $50,000 to $60,000 per month. For fiscal 2022, the company forecasts restructuring expense of $500,000 to $800,000, primarily for ongoing facility costs related to these properties currently held for sale and depending upon the timing of the asset sales. Now looking forward, guidance for the first quarter is a bit challenging due to the uncertain conditions, specifically related to the relentless climb of ocean container freight rates and ancillary charges. Availability of labor, availability of materials like poly foam and unpredictable cost inflation are additional risks which are fluid and could have a material impact on both sales and gross margin dollars. That said, our best estimate for first quarter sales is between $130 million and $140 million, with the availability of drivers to deliver orders to customers being the largest determinant between the high and low end of that range. The midpoint of this guidance range or $135 million represents a growth rate of 28% versus the first quarter of fiscal 2021 and reflects competence in our continued growth momentum. For the full fiscal year 2022, we are targeting sales growth between 15% to 20% but achievement of that growth will be dependent on global supply chain conditions improving and stabilizing in the second half of the year. Gross margins are expected to be under significant pressure in the first quarter from both surging ocean, container freight rates and related ancillary charges. Ancillary charges alone are estimated to be in the range of $5 million to $6 million in the quarter. The combination of record levels of inbound inventory significantly reduced allowed free days from shipping lines and the scarcity of drivers is up ending normal logistics flow and sending ancillary charges soaring. We have cost mitigation plans in motion to reduce these charges substantially by the second quarter but these added costs will be a major margin drag to start the year. And while we continue to pass through cost increases to the market where we can, the timing lag between the recent exponential increase in ocean container freight rates and the offsetting price realization will further add to short-term margin pressure. All that said, we are estimating gross margins in the mid teens for the first quarter but with sequential improvement in the second quarter and forecasting gross margins of 20% to 21% in the second half of the year, presuming supply chain conditions stabilize. SG&A guidance for the first quarter is expected to be approximately 13% to 13.5% of sales as we will continue to aggressively manage discretionary spending near term to partially offset the impact of gross margin pressures. We expect that SG&A, as a percent of sales will increase to 14% to 14.5% in the second half of the year to support strategic growth investments. But the SG&A increase will be dependent on a similar or better improvement in gross margins during that same time period. For the first quarter adjusted operating income margins are expected in the low single digits strained in the near term as we work through higher ocean container, ancillary charges and the timing lag between higher ocean container cost and increased price realization. We expect adjusted operating margins to steadily improve throughout the year, with margins returning to 7% or higher by the fourth quarter of fiscal 2022. The effective tax rate for fiscal 2022 is expected to be in the range of 26% to 27%, restructuring expenses are forecasted in the range of $500,000 to $800,000. We will continue to expand inventory in fiscal 2022 to improve in-stock service levels and provide exceptional support to our customers, which has been a significant advantage for us in fiscal 2021. We are also aggressively expanding our supply chain capacity to support long-term growth. During fiscal 2022, the company anticipates spending $11.5 million to $13.5 million for capital expenditures. Company plans to spend approximately $7 million for manufacturing capacity expansion approximately $2.5 million for manufacturing productivity improvements and the remaining amount for software enhancements and general maintenance. The company is currently working with a major global bank to increase its borrowing capacity to $85 million. The expanded credit line is expected to fund increased working capital, primarily inventory needed to support the company's goals for aggressive growth. The new credit agreement is expected to be executed by September 2021. In summary, we are planning for another year of aggressive profitable growth with double-digit sales improvement forecasted. While we are navigating significant gross margin headwinds to start the year, we are fully committed to delivering higher adjusted operating income dollars and higher adjusted earnings per share for the full fiscal year. We are prudently managing expenses and capital deployment, while making the right strategic investments to support our long-term growth. I'll turn the call back over to Jerry to share his perspective on our outlook.

Thanks. Given my confidence in our team and our strong growth momentum, we enter fiscal 2022 well positioned to continue profitable growth. We begin the new fiscal year with a record retail home furnishings backlog of $152 million and are aggressively working on plans and investments to expand our capacity to both fulfill the current backlog and support future growth. Our third and newest manufacturing plant in Juarez, Mexico recently started operations with limited production, but will ramp up quickly throughout the year as polyfoam availability improve. Additionally, we recently entered into an agreement to secure a fourth leased building in Mexico to expand manufacturing. Construction for the new 507,800 square foot facility located in Mexicali will begin shortly and we hope to take possession by June of 2022. By the end of the calendar year 2021, we expect to start up a new distribution center on the East Coast to better service our customers in that region and to handle increased inventory levels to support growth. Our inventory position relative to our competition was a clear advantage in fiscal 2021 and we intend to maintain that strength. We've remained aggressive with purchasing and our inventory and in fiscal 2021, at $161 million, of which $62 million was in transit to our distribution centers. As a result, we estimate our in stock position to improve significantly in our first quarter, which we expect will subsequently spur additional growth. With most of Southern Vietnam in COVID-19 lockdown currently, furniture production there has plummeted in the short-term, and the strength of our inventory position will only be a larger advantage if COVID-19 shutdowns in Asia expand or are extended. In summary, we're enthusiastic about the long-term growth opportunities for the company. And we are making the right strategic investments now to realize our growth potential. Looking forward, we will continue to build on our strong growth momentum, focus on long-term opportunities for aggressive growth, invest strategically in our businesses to improve our customers experience, expand our digital and ecommerce capabilities, build our brand, and drive product innovation relevant to the market. The future of the company remains as promising as ever, and we are confident in our ability to create value for our customers, employees, partners, and shareholders. With that, we'll open up the call to your question. Operator/

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Sandy Mehta with Evaluate Research.

Yes, congratulations on the strong results. If you look at your expansion in Mexico, the Juarez plant, and the new CapEx that you talked about. And once all of the CapEx plans that you have for this current year, which you just mentioned, once all of that is up and running 100%, fully online. Can you talk about what would be your sales potential once all this CapEx is online? And also could you talk about the mixed change in terms of how much of your product you sourced from Asia as well as how much from North America? Thank you.

Yes. Good morning. Thanks. This is Jerry. Yes, probably in that $650 million range, it could be a little higher, a little lower is kind of the expansion that we've got planned right now. And as far as the movement back and forth, currently about, 70% of our volume comes from Asia, our plan is over time, and that wouldn't be in the next year or two would be to move closer to a 50:50 is really what our ultimate goal would be.

And with all of these CapEx plans, it sounds like you are -- you sound very bullish about the future and the longevity of this upcycle in housing and furniture. And can you talk a little bit about, how much legs the cycle has? Do you see the strong housing and furniture marketing lasting for two, three years? And what are the variables? And how do you guys look at it and analyze it? Thank you so much.

Sandy, it's Derek. So in the near term, I think the industry outlook has some legs. Again, if you put the recent surge in COVID related the Delta variants aside, I mean, a lot of the macroeconomic indicators are certainly bullish. Once we get into 2022, there's been so much uncertainty, it's hard to call a long, long-term play, but currently we view the macroeconomic conditions as favorable. As we look at our growth, though, I mean, we do not need the industry to grow substantially in order to reach our growth ambitions. We are planning on expanding our addressable market, reaching different consumer segments, developing new brands competing at different price points through different styles, in different product categories. So when we think about our long-term growth and how we're investing for that growth, it is not widely dependent on, significant growth in the industry we believe that we can penetrate, our existing markets and expand our addressable markets to continue to drive healthy, profitable double-digit growth for Flexsteel.

And our next question comes from JP Geygan with Global Value Investment Corporation.

Good morning, gentlemen, and congratulations on a nice report. You recently relaunched Flexsteel's website and launched Homestyles website. Can you discuss your outlook for ecommerce sales, including direct-to-consumer sales, versus your traditional distribution channels over the long-term?

Yes. JP, it's Derek. So in terms of ecommerce, we've laid out a longer term objective to double the size of the business over the next five years, we believe ecommerce in that period could triple or quadruple. So ecommerce today is about 15% of our sales. If we're successful with our ecommerce endeavors, there's no reason that that couldn't be 40% or higher in five years from now. Direct-to-consumer certainly will play a role in that. But, also, we're mindful that developing a large direct-to-consumer business takes time, and it takes significant investment. So we are continuing to evaluate all the outlets related to ecommerce. So today, our business largely revolves around large etail partners, Amazon Wayfair, Homedepot.com, we will continue to grow with those customers and expand with others kind of specialty etailers while in parallel, investing and growing our D-to-C business. So when we think about ecommerce, it's really multifaceted. It isn't overly dependent on D-to-C. But that's an area certainly that will continue to nurture and develop capabilities over the next several years.

Thanks. That's very helpful. Your recent footprint expansion has been I believe, exclusively in Mexico, does this represent a shift in your preference for sourcing product? Namely, away from Southeast Asia? Or has this capacity been added only to meet expected future demand? And then, perhaps to expand on Sandy's question, can you add any additional color around the general development of your global supply chain?

Yes. This is Jerry, JP.I It's expanded out a little bit. Part of it is to move away from Asia a little bit because we're overly dependent. A lot of the Mexico is for our expansion but we also are really balanced out. We've got in our -- some of our new product categories, the products going to be coming from Eastern Europe, we have some OEMs and suppliers here in the United States. And we've also got, like I said, this expansion in Mexico, it's really just a balance out kind of our footprint with more of a global footprint and not be quite as much on the line as we need to do now. With that said, we will continue to have a large footprint over in Thailand, Indonesia, Vietnam, China, like we do today. But we're just trying to balance it out more.

Yes, seems to make sense to mitigate some geopolitical risk. Finally, we're glad to see that you implemented SAP without any disruption. Are there plans to add additional components of an ERP? Or is the work largely completed?

Yes. So there's going to be additional. So I mean, we still are running our manufacturing on our old AF400. There are some other areas of SAP that we're working through with some of our partners in the logistics and distribution area. And there will be other modules that we will hang off of the current SAP as we go forward. But we're excited that we finally got the financials up and in some other areas, but this will be an ongoing thing that we'll continue to look at.

Okay. And finally, not to belabor the point, but on rising ocean freight charges, have you considered any strategies to control costs there other than what you're already doing?

Yes, So there's several things JP that we've done. Number one, we've expanded the number of partners that we work with in terms of freight forwarders. We are leveraging our network of suppliers to tap into their transportation partners. We are working with our suppliers where they're open to it in order to help subsidize some of the increases. So we're taking a multitude I think of actions in order to best manage the situation given the circumstance.

Great. Appreciate the color and congratulations again on a nice print.

Thank you.

[Operator Instructions] Our next question comes from [John Dicer with Clinical] [ph].

Good morning and congrats on a nice way to wrap up the year. I was just curious, 70% of the volume came out of Asia this past year. What was the mix between China and Vietnam?

Yes. So John of our total source globally sourced product 67%, currently a source from Vietnam and 21% is from China and then the remainder is largely Indonesia and Thailand.

Okay. So the 70% that came from Asia 67% was Vietnam, and what was the precent from China?

21.

21. Okay. Rest is oaky, good. The tariffs are still a factor from China at this point.

They are.

Okay. And you see that mix changing for the next fiscal year?

I think, assuming the tariffs stay in place, we'll see be opportunistic in terms of moving production away from China, where it makes sense. Given how robust the demand has been this past year, there simply wasn't enough capacity in Vietnam to support both our growth and support additional production ship from China into Vietnam. Certainly, if the demand horizon changes, there may be an opportunity to ship more away from China.

And a large chunk that came out of Vietnam, that's under pressure because of COVID. Where do you sense that inventory to come from going forward?

Yes. So again, we've been, as you know, Jerry, and I stated in our earlier comments, we've been very aggressive with our inventory buy. Again, we finished the year with $160 million of inventory on the balance sheet, we've got $62 million in transit as of the year end. So we're actually in a very, very good competitive position, if Vietnam stays shut down for an extended period. So we don't know how long this Vietnam shutdown is going to last. But we feel confident that we've got enough inventory in our system or on the water to support us into those the latter part of calendar 2021.

Okay, all right. That's good to hear. Shifting to ecommerce, you said it was about 15% of sales. Is that ballpark around $72 million for the year for ecommerce?

$66 million, $67 million of net sales.

Okay. Good. There was no discussion of any kind of buyback. And I know you spent $29 million , I think $29.8 million on buybacks last fiscal year. How many shares was that? And is there room for any additional buybacks going forward?

Yes, if I remember, John, we probably have repurchased $1.1 million, $1.2 million shares all together since we started the repurchase program. What I will tell you in terms of how we're thinking about capital allocation and prioritization, our number one focus right now is reinvestment back in the business to support growth, and you're seeing that in terms of our inventory build as well as the capital expenditures to expand our supply chain capacity. We will continue to keep the share repurchase program active and be opportunistic if our share price were to fall substantially below our intrinsic value. But right now, again, the priority is to invest back in the business for growth. So I do not anticipate share repurchases being anywhere near the level that they were in fiscal year '20 just because again, or I'm sorry, fiscal year '21 because of the growth opportunities we have in front of us.

All right. Okay, good. That makes sense. Thanks and good luck going forward.

Thanks, John.

And ladies and gentlemen, this concludes the question-and-answer session. I'd like to turn the conference back over to the management team for any final remarks.

Thank you. In closing, I would like to thank all our Flexsteel employees for their outstanding performance and service during the fourth quarter. I would also like to thank you for participating in today's call. Thank you for your questions today and please reach out if you have any additional ones. We look forward to updating you on our next call. Everybody have a great day.

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines and have a wonderful day.