Lifetime Brands, Inc. (LCUT) Q1 2021 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to Lifetime Brands' First Quarter 2021 Earnings Conference Call. At this time, I would like to inform all participants that their lines will be in listen-only mode. After the speakers’ remarks, there will be a question-and-answer period. [Operator instructions] I would now like to introduce your host for today's conference, Andrew Squire. Mr. Squire, you may begin.

Thank you. Good morning, and thank you for joining Lifetime Brands' first quarter 2021 earnings call. With us today from management are Rob Kay, Chief Executive Officer; and Larry Winoker, Chief Financial Officer. Before we begin the call, I'd like to remind you that our remarks this morning may contain forward-looking statements that relate to the future performance of the company. And these statements are intended to qualify for the Safe Harbor liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance and factors that could influence our results are highlighted in today's press release and others are contained in our filings with the Securities and Exchange Commission. Our remarks this morning and in today's press release also contain non-GAAP financial measures within the meaning of Regulation G promulgated by the Securities and Exchange Commission. Included in such release is a reconciliation of these non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. With that introduction, I'd like to turn the call over to Rob Kay. Please go ahead, Rob.

Thank you. Good morning, everyone, and thank you for joining us today to discuss Lifetime Brands' first quarter 2021 financial results. Lifetime Brands is off to an excellent start in 2021 with top line growth of approximately 35%, driving net income of $3.1 million, and year-over-year growth in adjusted EBITDA of 418%, or $13.6 million. Our strong results this quarter demonstrate Lifetime's ability to consistently outperform across our categories in the many channels in which we sell our products. I could not be more proud of the Lifetime team and the incredible work that has contributed to our unprecedented results, which once again validates the strong foundation we have established through our Lifetime 2.0 Strategy. And while we've delivered strong top line growth, we've also remained focused on disciplined cost control, which has contributed to making our company a leaner organization and continues build on the 21% adjusted EBITDA growth we achieved in 2020. I'll start with our core U.S. business, which showed remarkable strengths and continues to lead our overall business. In fact, it has now delivered its seventh consecutive quarter of year-over-year growth. We are benefiting from our ability to add new products, grow into adjacent categories, and expand brands, such as our KitchenAid line, which we recently extended into cutlery and into international markets. The combination of our strong top line growth, the benefits of better utilization of our infrastructure, and a disciplined focus on cost efficiencies all contributed to our strong results for the quarter. Building on our momentum from 2020, we continue to gain market share across the majority of our categories, driven by robust consumer demand, leading brands and product offerings, and vendor consolidation at our largest customers. Additionally, we benefited in the first quarter from our strategy to invest in increased inventory levels, to assure product availability to our customers and consumers. We continue to see solid performance across most of our channels, including math, club, off-price, and increasingly, grocery. We also benefited from expansion into adjacent categories where we believe we have a right to win given our infrastructure, product design capabilities, and customer relationships. New product launches in the barbecue, pet, and storage, and organization categories contributed to our strong performance, and we believe we will drive growth in these and other consumable durable categories moving forward. We are also continuing to grow our e-commerce revenues, which grew up approximately 65% in the first quarter and accounted for approximately 20% of total revenue in the quarter, up from 16.2% as compared to the comparable quarter a year ago. Contributing to our omni-channel growth has been our ability to execute drop shipments, which grew approximately 38% compared to the prior year. It is worthwhile to note that while our e-commerce revenues have grown significantly, we have grown at a faster pace in our brick-and-mortar channels during the quarter. We are excited about the opportunities presented by our strategic acquisition of Year & Day, a development stage online tabletop platform focused on Millennials and Gen Z consumers, which enable us to enhance our general offerings for this high-value age group. As mentioned on our last call, we expect the transaction to be accretive by 2022. We believe that this and other new brand and category offerings in 2021 will enable Lifetime to continue to achieve growth levels in excess of our underlying markets within our core business. Turning to our international business. We saw significant year-over-year improvement in profitability as we continue to reap the benefits of the reorganization of our international market operations and market strategy. Despite store closures throughout Europe, our international business grew revenues 22.8% in the first quarter. Importantly, the impact of our transformation strategy for LTB Europe can be seen in a year-over-year improvement in EBITDA of $4.6 million for the quarter. Contributing to this improvement, our reduction to the LTB Europe cost structure is evident in the reduction in our UK distribution expense as a percentage of those shipments from our warehouses to 14.4%, from 16% year-over-year. As I mentioned earlier, we are also starting to see revenues from our KitchenAid, kitchen tools, and bakeware international rollout, and are making meaningful progress with our full product rollout. We are also pleased with the progress and corresponding potential with brands that we have launched directly to consumers in Asia. Dampening international revenue growth, we have seen a planned reduction in our overall international e-commerce revenues as we eliminated a meaningful amount of SKUs which had a low or negative contribution margin. The near- and long-term benefits from this planned reduction can already be seen in the first quarter results with improved margin percentages and margin dollars generated from this channel. We expect to see further uplift from our international business as the UK and other European markets continue to reopen this year. Cutting to another long-term growth initiative, we remain confident that our investments in the commercial foodservice business, with Mikasa Hospitality, will provide significant long-term growth opportunities for Lifetime. To this end, we have increased our investment in Mikasa Hospitality in 2021, and we have continued our sales and ramp-up efforts during the pandemic, which we believe are gaining meaningful traction with distributors and customers. In the second quarter, we brought on key talent to bolster our sales capabilities and help us successfully execute on this massive opportunity. We continue to be optimistic about the potential for our front-of-the-house foodservice initiative to complement our leading position back-of-the-house smallwares and expect to gain significant share in this category in the COVID recovery and in 2022 and beyond. I look forward to providing further updates as restaurants, hotels, and the hospitality industry continue to open up and eventually return to normal operation. As mentioned on last quarter's call, we are expecting headwinds related to shipping challenges due to inbound ocean freight and outbound domestic freight availability. As a result of these headwinds, we experienced slight shipping delays and cancellations. Thanks in part to the flexibility provided by our balance sheet, we are actively working to mitigate these headwinds by investing in inventory to ensure continued availability of our products. We are also working on several strategies involving our supply chain which are designed to mitigate these challenges. In addition to freight challenges, we are seeing inflation in the various inputs to our cost of goods sold. Again, we are actively implementing mitigation strategies to offset these inputs, which we believe will continue – which we believe will offset these cost increases. We do anticipate the short-term lag impact until the benefits of these strategies are realized. And therefore, anticipate a temporary slight reduction in our gross margin percentage. These factors were considered as we developed our 2021 financial guidance, which I will discuss in greater detail shortly. Looking ahead, 2021 will be a year of growth investment as we strengthen our focus on strategic initiatives designed to provide incremental growth to our base of business. This includes expanding in foodservice and in categories adjacent to our core business, where we have a right to win, supporting high growth and high margin potential brands like Year & Day, and continuing to enhance our digital capabilities and assets. We will continue to leverage the strength of our balance sheet as we capitalize on these opportunities to drive long-term growth and profitability. While 2021 will see a significant increase in investments to support these growth initiatives, we still expect to be able to achieve meaningful growth in our top and bottom line. All of these factors should lead to a very strong 2021. That brings me to our financial guidance, which we issued this morning. We've built this forecast carefully after evaluating all of our key categories, brands, and products, and are confident that we are well-positioned to meet this outlook. Factors that we considered in setting our guidance, among others, included COVID impact, inflationary challenges, labor costs, and positive secular trends. COVID factors include timing irregularities caused by previous discussed COVID impact on supply chains in India and China, as well as challenges in international markets as a result of continued lockdowns in Canada and Europe. Despite these factors, we will continue building on our incredibly strong momentum as we grow across our categories and continue to gain market share, as well as capitalize on the market share gains we have made over the past 15 months. Our guidance also considers the near-term inflationary challenges I mentioned earlier, which impact cost of goods sold and fray costs. Finally, we have also considered a noticeable increase in domestic labor costs, consistent with what we have been experiencing for the past six months. As provided in more detail in our press release, our outlook for 2021 is to achieve net sales of between $847 million and $856 million, diluted income per share of $1.24 to $1.33 and adjusted EBITDA of $82.5 million to $85.5 million. As you can see, even with our planned investments and certain macroeconomic headwinds, we expect to be able to grow double digits in 2021, building upon our 21% adjusted EBITDA growth in 2012. Based upon the company's accelerated growth and success in achieving as previously disclosed long-term financial objectives, we will be revising those objectives upward. Driving our continued growth is the strong market share position that we have achieved, supplemented by plus one growth opportunities that we continue to invest in. Further, we expect to benefit from increases in home building and homeownership supplemented by an increase in home entertainment, driven by vaccinations and a return to social gatherings, which are expected to grow home entertaining in the U.S. With that, I'll now turn the call over to Larry.

Thanks, Rob. As we reported this morning, net income for the first quarter of 2021 was $3.1 million or $0.14 per diluted share versus a net loss of $28.2 million or $1.36 per diluted share in the first quarter of 2020. Adjusted net income was $2.8 million for the 2021 first quarter or $0.13 per diluted share as compared to adjusted net loss of $5.7 million, or $0.27 per diluted share in 2020 a table which reconciles this non-GAAP measure. The reported results was included in this morning's release. Income from operations was $9.2 million for the quarter in 2021, as compared to a loss from operations of $25.2 billion in the 2020 period. The 2020 period would have been $2.3 million loss, excluding a $20.1 billion charge for goodwill impairment and a $2.8 million charge for bad debt reserves. Adjusted EBITDA, a non-GAAP measure that is reconciled to our GAAP results in the release was $90.9 million for the trailing 12 months ended March 31, 2021. This represents a $13.6 million increase over the $77.3 million for the year ended December 31, 2020. Net sales in 2021 quarter were $195.7 million compared to $145.1 million for the 2020 quarter. The U.S. segment sales were up $47 million to $176.2 million. The increase came from category growth and increased market share in the kitchenware products category, led by kitchen tools and gadgets, cutlery, and bakeware products. Category growth reflects the continuation of consumers preparing more meals at home, in addition to market share gains in new product introductions. Market share gains reflect the appeal of our products and brands and our ability to keep retailers in stock, in addition to the ability to offer a drop-ship capability to omni-channel retailers. Tableware increased across all product lines, most notably for flatware and higher e-commerce sales for dinnerware. In home solutions, home decor, and measurement products growth was offset by decline in hydration products, which that anniversary a 2020 warehouse club program. International segment sales were up $3.6 million to $19.5 million on a reported basis, $2.7 million in constant U.S. dollars. Segment's increase came from the continued recovery of sales to brick-and-mortar retailers to pre-pandemic levels and an increase in e-commerce sales. Gross margin for the 2021 was 33.7%, and for the 2020 quarter, 36.5% on a recorded basis. Despite their percent decline, gross margin dollars increased by 25%. For the U.S. segment, gross margin was 33.9% in the 2021 quarter versus 38.2% last year. The gross margin decrease was primarily due to higher in-bound freight costs reflecting a worldwide shortage of shipping containers and other supply chain constraints. The higher freight costs will persist, and we will also experience increases in product costs due to commodity inflation incurred by our suppliers. We anticipate mitigating these higher costs through selling price increases and negotiation opportunities with our suppliers and ocean freight carriers. Gross margin percent was also affected by product mix and a benefit in the 2020 period of the duty exclusion refund on certain products. In addition, in order to free up warehouse capacity to accommodate strong product demand, in the 2021 quarter, we recorded a charge approximately $1 million to more quickly move slower-moving inventory. For international, gross margin was 31.8% in 2021 quarter compared to 22.9% in 2020. The improvement is attributable to the 2020 period being negatively impacted by higher sales allowance and reserves for slow-moving inventory. Distribution expense for 2021 quarter was 9.5% of sales versus 11.4% in 2020. For the U.S. segment distribution expenses as a percentage of sales ship from its warehouses was 8.9% and 9.8% for the 2021 and 2020 quarters, respectively. The improvement was the result of the leverage benefit of fixed costs on higher sales volumes and continued efficiency improvements. This is partially offset by an increase in hourly labor rates and an increase in the – more labor-intensive piece pick volume to address major customers’ business needs, and some continuing COVID-19 expenses, which were at one-time in nature. For the international segment, distribution expenses as a percent of sales shipped from its warehouses, excluding moving and relocation costs for the UK operations in 2020, or 14.4% and 16% for the 2021 and 2020 quarters, respectively. The improvement was primarily attributable to an improvement in the labor efficiencies as a prior-period experienced efficiencies associated with the setting up of its new UK warehouse. Selling, general, and administrative expenses were $30.1 million for the 2021 quarter, versus $41.5 million in 2020. U.S. segment expenses were $27.4 million in 2021 quarter, versus $30.4 million in the 2020 quarter. As a percentage of net sales, SG&A expenses declined to 50.6% from 23.5% last year. The expense decrease was primarily due to lower estimates for bad debt expense and lowest selling and facility expenses, which was partially offset by an increase in incentive compensation. In addition, we are encouraging growth investments designed to grow the front-of-the-house hospitality category and other business categories and are also beginning our plan incubation investments in the Year & Day business. SG&A expenses for the national segment were $5 million in the 2021 quarter, compared to $6.5 million for the 2020 quarter. The client reflects lower estimates for bad debt expense, lower selling, and lower employee expenses due to a reduction in headcount. Unallocated corporate expenses were $5.7 million in the 2021 quarter, versus $4.6 million last year. The increase was driven by higher incentive compensation. Looking at interest expense, which was $4 million in the 2021 quarter versus $4.7 million in 2020, due to lower debt outstanding. And as it relates to the company's non-designated hedge interest rate swaps, the current period reflects a mark-to-market gain of $500,000 versus a prior period, which reflected a mark-to-market loss of $2.3 million. Prior period loss was result of significant declines in interest rates during that period. For taxes, 2021 quarter income tax rate was 42.2%. The rate was higher than the federal statutory rate primarily due to state and local taxes, and foreign losses for which no benefit is recognized. The income tax rate for 2020 was 11.6%. This difference from the federal statutory rate primarily due to the impact of the non-deductible portion of the goodwill impairment charge. Our balance sheet and liquidity continue to get stronger. At March 31, net debt was $221.5 million. Net debt-to-EBITDA ratio was 2.4 times, and liquidity, which includes $30.6 million of cash, plus availability under our credit facility was $177.2 million. As discussed in the release, we are issuing financial guidance for the full year of 2021 as follows. Net sales from $769.2 million in 2020 to a range of $847 million to $856 million in 2021, an increase of 10.1% to 11.3%. Adjusted income from operations of $47.9 million in 2020 to a range of $53.5 million to $56 million in 2021, an increase of 11.7% to 16.9%. Adjusted net income from $20.2 million in 2020 to a range of $27 million to $29 million in 2021, an increase of 33.7% to 43.6%, and adjusted EBITDA from $77.3 million in 2020 to a range of $82.5 million to $85.5 million in 2021, an increase of 6.7% to 10.6%. This guidance is based on a forecast on pound sterling-to-U.S. dollar exchange rate of 1.30 and net income and diluted income per common share were calculated based on an effective income tax rate of 30%. This concludes our prepared comments. Operator, please open the line for questions.

[Operator instructions] Your first question comes from the line of Anthony Lebiedzinski, Sidoti and Company.

Good morning. Certainly a very impressive start to 2021. So as we look at the guidance for this year, obviously coming off of a 35% increase, how should we think about the expectation for growth in revenue for the balance of the year in terms of – I know you do have some more difficult comparisons in the back half. Or just kind of maybe help us understand how we should think about the seasonality and the quarterly distribution of the revenue gains for the balance of the year.

Yes. Anthony, hi, and thanks for your remarks. In terms of your question, the first half of the year definitely will have stronger growth percentages, but we're seeing continued strong demand in order flow for our products on the demand and revenue side, unknowns, but there are now restrictions and retailers being opened up in Europe, which should have a positive impact on our European-based business. So that should be positive. So on the demand side, definitely, the easier comps and the stronger growth percentages would be in the first half of the year, but I think we'll see growth throughout the year.

Okay. Great. Thanks for that. So you mentioned that some of the growth in revenue came from new products in the first quarter. Just wondering was that – is there any way you guys can quantify how much of the first quarter revenue came from new products?

We don't have that statistics because we don't look track in that manner. For example – and what we're talking about is plus-one opportunities, right? So we're always introducing new products, but sometimes it could be a new product that's replacing or cannibalizing old product. But I'd mentioned in KitchenAid, we now are launching the cutlery opportunity, so we never sold KitchenAid cutlery. That will ramp up throughout the year. We just started selling that this year, and we're expanding that in different doors and different retailers and different avenues and channels throughout the year. So that will continue to gain momentum. Similarly, in international, where we never sold that brand, and we're starting to roll that out, we'll see increasing momentum throughout the year. Year & Day, which we talked about, we haven't turned that on yet. So at this point, pure expense and no revenues, we will turn that on no later than Q3 and start seeing some revenues from that new opportunity. We'll also start seeing hopefully meaningful growth from the launch of a new brand at Walmart, where we'll start seeing those numbers in the second quarter.

Okay. All right. Thanks. And then last question for me. So as far as the increase in investment that you planned for the year, how should we think about the timing of the increased spending as we refine our models for the rest of the year? If you could just kind of give us a sense as to the timing of these expense increases?

Yes. There's three buckets. One is CapEx, not very much. So there is a sort of greenfield opportunity that we're investing in and it is requiring some capital because it's software-oriented. Too soon to talk about it, but there will be some capital in there, but nothing meaningful. So the two buckets that you'll see are in G&A and in margin, depending upon how we spend the money. Some of it we've already started to experience in Q1. As a matter of fact, the investment we've talked about, seeing the progress we were making in 2020, we started ramping up those opportunities. Some of that is just filling in new positions on for digital, expanding our digital business. We've invested in that starting in Q4. So it will continue to ramp through the first two quarters and kind of be steady-state from that basis. But as you see, we're more than funding these investment opportunities and continuing to grow the business at the same time.

Got it. Okay. So that will be for G&A and margin as far as the 2Q and 3Q impact?

Yes.

Okay. All right. Thank you and best of luck.

We're not going to stop spending in Q4.

Right. Okay. All right. Well, thank you again and best of luck.

Thank you, Anthony.

Your next question comes from the line of Linda Bolton-Weiser with D.A. Davidson.

Hi. Good morning. So I was just wondering a little bit more about your gross margin because it was down a fair amount in the quarter, although the international side was quite strong. So I guess you mentioned a couple of things on the U.S. side benefit in the prior year of duty refund. Are there any other quarters in 2020 where we're going to have that type of hard comparison where you got duty refunds last year? Can you remind us?

No. The first quarter stood out.

Yes. That's it. I mean, we're always going after opportunities, right? Unfortunately, the tariff and duty regime is very convoluted and there's been so many put on and take-offs. And that created the opportunity for us to get a refund is there was some duties that were put on, and they were taken off and put back on and taken off. But anyway, that gave us the opportunity in the first quarter. There's still a lot of cloudiness in terms of the new administration, but there's not as much fluctuation, which created the sort of year-over-year fluctuation in the first quarter. The other margin inputs, as we talked about, we took $1 million charge-off. Business is going really well. And we made the opportunity to monetize stuff. We could have sold but at a lower margin and replace that with higher margins as opposed to having to at peak times, worry about taking third-party warehouse space. So we were freeing up allocations. We'll monetize that, just we wrote down the margin from it so we can monetize that. And again, replace business we would have sold at low margin to a inventory that will get full margin at and that impact hit the first quarter. And in the first quarter, we also had – we talked about, look, we've been growing, and you see the 65% growth in e-commerce. But we also had a lot of growth in brick-and-mortar, including in the club channel, much more heavily weighted quarter-over-quarter, which had an impact.

Okay. And then in terms of the guidance for 2021, I'm just doing my math here real quick. I mean, at the high end of the range, you've got an 11% sales growth rate. And for operating profit at the high end of the range, adjusted operating profit, you're guiding to 17%. So that does imply some margin expansion. And yet, I get a feeling that – well, you've got investment that you've talked about, so that may affect your SG&A and then there's these cost pressures in gross margin. So I'm just kind of trying to figure out like where is the margin expansion coming from? Is the gross margin actually going to be up year-over-year? And this first quarter was just kind of an anomaly?

So I think what you just quoted would be operating margin, not gross margin, that, correct? So I'll address that, and I can talk further if you'd like. But we did – there are a lot of headwinds. Some we've been experienced for a while. There are a lot of headwinds. Some people aren't offering guidance on that. We felt confident enough to do so. And we factored in these different headwinds and there's multiple buckets of them. But we also continue to take better utilization of the company's infrastructure. And a lot of these changes continue to roll through the income statement throughout the year, which increases our operating margin. So if you look at the growth we've achieved and continue to achieve, we can more than fund that with all the growth that we achieved in 2001 and continue to achieve now and increase our operating margin at the same time. Did I articulate that okay, Linda?

Yes. I mean, I think what you're trying to say is there's probably – you're going to get underlying leverage of the cost structure because you're projecting pretty good revenue growth. So I guess that's one of the factors here. But I mean, again, I'm just a little concerned because the gross margin was down so much in the first quarter, and then there's all these inflationary headwinds. I'm just kind of trying to think about if the gross margin can expand for the year, do you have a sense for that?

Yes. Well, there will be various impacts throughout the year, some we've already been experiencing in terms of the gross margin. And we do anticipate and actually are already working through having to get price increases as one of our mitigating actions. But we've also been working the supply chain, which reduces our cost of goods sold on an absolute basis, then, of course, mitigating that is the inputs are also up, right? So there's a lot of moving parts. One thing that impacts margins, we've moved out of geography, we'll see some of that this year. So if you look particularly in our metals or our flatware business, where we're shipping from the second half of the year will be the same as some tariff goods that we're shipping from in the first half of the year. So the elimination of paying the tariffs have a positive impact on margins. So what I'm basically saying is a very complicated environment we sit in today with tremendous amounts of inputs in all directions, which we've factored in to be able to give you guidance for the year.

Okay. And with regard to this new line at Walmart that I think you said would be generating some revenue, I think you said second quarter. Have you announced what the brand is? And I was under the impression it might be a partnership where it might be a license-type brand. Can you give us more specifics on exactly what it is?

Yes. So it is a licensed brand. Next time, we'll give you more specifics. We were planning to do that slightly on this call, but we were just agreement-wise realized at the last second that we had an obligation with our licensed store. And we didn't get it done in time because we realized it too late. So we'll talk about it that time. But it is on schedule. It is a celebrity brand launch exclusively at Walmart.

Okay. Great. And then this little business you bought here would be online tabletop sales. I'm just kind of interested in what your plan is for that. I mean, is your plan going to be to kind of sell your other brands through that website? Or like what is your intent for that business?

Yes. That's a good question. So if you look at our – particularly our dinnerware offering, we view that – we have viewed that we're underpenetrated in the younger age groups. Year & Day, that's our sweet spot and has a tremendous splash before they run out of money because it's venture back. And we see that as a great complementary product fit with everything we're doing. So we're going to keep it as its own business unit selling Year & Day branded product direct to the consumer online.

Okay. So you'll just keep it separate kind of running on its own for a while.

Yes. It's being run by Kathryn Duryea, who's the Founder and she's the President of the business unit for us now out of San Francisco as it was before we bought it. Now we're integrating it in operationally. So we'll get a lot of benefits from that into the greater operational, but from a sales and marketing product perspective, digital perspective, it will be its own native brand, which we think has a lot of potential.

Are the annual sales like – is it over $10 million or under $10 million?

No. It's an incubated – it's under 10%. And again, it is bound out of funding, so it shut down, so we will relaunch it, right? So its sales today are zero, but it has a loyal customer base that we should ramp up quickly once we turn it back on.

Okay. And then finally, I'm just wondering about your activity in M&A. Some companies have been saying that the SPAC activity has made it hard to do things. Are you still able to look at things are prices reasonable? Or kind of what's your activity there?

Yes. So we're very active, and we're looking at a lot. And we have a lot of availability on our balance sheet, particularly if we're buying businesses that are positively generating cash flow. But we've been very disciplined, and there are a couple of opportunities that we looked at, spend time and money on it. But we see better internal opportunities in getting back to your – the question, yes, valuations have been extraordinary. So we're seeing companies that should be trading or, I think, should historically have traded at an eight times multiple that are trading at a 12 times multiple. So, therefore, we have not pursued anything that we've seen that is meriting that valuation level. We continue to look and we feel confident we will execute. But we're in no rush that you've seen the numbers we're doing quite well, and our internal opportunities are quite attractive.

Great. Finally, I mean, with a little bit of extra spending, do you have a CapEx guidance number for the year for 2021?

It's approximately $6 million.

Okay. Okay. That's it for me. Yes, go ahead.

Yes. And then just further to what Larry said, and you've seen us now for a little bit is even while we're ramping up to certain levels, we're also ramping up potential more automation in our ARPC, right, in view of where labor rates are and just to be efficient. But it's such an asset-light model that even as we ramp that up, we're still not spending that much our cash on capital.

Right. Okay. Thank you. Good luck with everything.

Thanks, Linda.

At this time, there are no further questions.

Great. In that case, we appreciate everyone's interest in Lifetime Brands and your attendance on this call, and we look forward to continuing to report to you in the future.

This concludes today’s conference. You may now disconnect.