The Middleby Corporation (MIDD) Q3 2016 Earnings Report, Transcript and Summary

Welcome to The Middleby Corporation Third Quarter Conference Call. With us today from Management are Selim Bassoul, Chairman and Chief Executive Officer, and Tim FitzGerald, Chief Financial Officer. We will begin the call with opening remarks from management, and then open the line for Q&A. [Operator Instructions]. Now I would like to turn the call over to Mr. FitzGerald. Please go ahead, sir.

Good morning, and thank you for attending today's conference call. This is Tim FitzGerald, CFO at Middleby, and I have some initial comments about the company's 2016 third quarter and year-to-date results, and then we will open the conference call for questions. Net sales in the 2016 third quarter of $574.2 million increased 27.9%, from $436.3 million in the third quarter of 2015. The third quarter sales include the impact of acquisitions not fully reflected in the prior year comparative results, which accounted for $124.6 million, or 27.8% of the sales growth in the quarter. The sales in the quarter continue to be affected by foreign exchange variation in comparison to the prior year, this fluctuation resulted in the lower reported international sales when converted into U.S. dollars in the quarter, and this impact amounted to $5.4 million, or 1.2% in last year reported sales growth. Excluding the impact of acquisitions and foreign exchange, sales increased by 1.4% as compared to the prior year quarter. This increase reflects organic sales growth of 0.6% at our commercial food service group, an increase of 11.2% at our food processing group, and a decrease of 4.8% at our Residential Kitchen Equipment Group. Sales at the commercial Foodservice Group for the quarter amounted to $331.6 million, sales reflect continuing strong growth in international markets, with generally improved market conditions and lessened impact from currency volatility in emerging markets. Organic sales growth in the international markets amounted to 21% for the quarter, with a growth in all regions that strongly weighted to Latin America and Asia. The international increase was largely offset by lower sales domestically in comparison to the prior year, as purchases from several large restaurant chains were delayed relative to our expectations, and general market conditions were slower in the quarter. Although current market conditions are somewhat uncertain, we anticipate a rebound in growth in the fourth quarter, and continue to see strong activity with our restaurant chain customers as we move into 2017. Sales at the Food Processing Group amounted to $82.2 million in the quarter, organic sales growth of 11.2%, reflects revenues associated with the record backlog we carried into 2016, along with continued strong incoming orders realized throughout the year. We continue to see demand from our customers looking to upgrade facilities and equipment to more efficient production lines with higher capacities, along with increasing demand in emerging markets as food processors develop new operations to support growing market needs. Sales in the residential group amounted to $160.5 million in the quarter. This included approximately $80.7 million in sales related to acquisition including the AGA Group of Companies and Lynx. The amount of acquisition-related revenues added from AGA was lower than in the prior quarter, resulting from the continued decline in the British pound to the U.S. dollar during the quarter. Excluding the impact of acquisition and foreign exchange, sales declined by $4.1 million, or 4.8% in the quarter. This included comparatively lower sales for the one week period of AGA in the third quarter, as AGA was acquired on September 23 of last year, and this one week impact was largely due to the result of timing. Excluding the impact of AGA in the third quarter, organic sales at the Residential Group decreased by 2.1%, reflecting the continuation of an improving trend, as new products and substantial investments in customer service and after sales care at Viking were offsetting the adverse impact from recalls and legacy issues related to products manufactured prior to Middleby's acquisition of Viking in January of 2013. In the upcoming quarter we anticipate a larger comparative foreign exchange impact at the residential group, related to revenues at AGA. In the prior year, which was the first full quarter that we had post-acquisition of AGA, we had reported revenues of approximately $104 million U.S., and the British pound relative, and approximately 80% of those revenues are in derived in British pounds, and since the fourth quarter of last year the pound has fluctuated by approximately 20% relative to current trading rates. Gross profit in the third quarter increased to $231.7 million, from $177.2 million in the prior year. And the gross margin rate was 40.4%, as compared to 39.5% in the prior year. Although we realized an improved gross margin rate for the quarter, it was net of lower margins at the recent AGA acquisition, excluding the impact of acquisitions, AGA gross margins - I am sorry, gross margins would have increased to 40.7% on a comparative basis. Gross profit margins during the quarter at the Commercial Foodservice grew 41.7%, as compared to 40.1% in the prior year quarter. The strong margins reflect the favorable sales mix amongst the business divisions, and benefits of continued profit enhancement initiatives. Gross margins at the Food Processing Group were 39.3%, as compared to 40.4% in the prior year quarter. Gross margins remained strong, but were less than the prior year also due to impact of mix amongst the business division and rising steel costs. The gross margin at the Residential Kitchen Equipment segment increased to 38.6%, from 34.4% in the prior year quarter. The margin rate also improved sequentially from 31.1% in the first quarter, and 35.5% in the second quarter. The improvement in gross margin reflects the impact of continued efficiency gains at Vikings, as well as the benefits from integration initiatives implemented at AGA. Selling and distribution expenses during the quarter increased to $56.6 million from $44.5 million in the prior year quarter, and the third quarter of 2016 increase reflects $12.7 million in additional selling costs related to businesses acquired during the past year, including AGA, Lynx and Follett. General and administrative expenses increased to $52.6 million from $46.9 million in the prior year quarter, and general and administrative expenses included $10.2 million in expenses associated with recently acquired companies not included in the prior quarter. The third quarter also included $1.1 million of restructuring expense associated with continuing initiatives at AGA, and this compares to $5.7 million in the prior year, which related to restructuring related to Viking distribution operations. Earnings per share of $1.33 in the quarter improved from $0.86 in the prior year quarter. Excluding the impact of restructuring expenses and prior year AGA transaction costs, EPS increased 32.7% to $1.34 per share, as compared to $1.01 in the prior year. Cash flows generated by operating activities remained strong, and grew to $79.4 million in the quarter, as compared to $58.8 million in the prior year quarter. And for the first nine months cash flows generated from operations amounted to $175.1 million, as compared to $167.6 million. And operating cash flows for 2016 include cash obligations paid in connection with the funding of pension obligations at AGA of approximately $14 million, that was negotiated and agreed upon in connection with the acquisition and $17 million of costs related to the AGA restructuring initiatives. Non-cash expenses added back in calculating operating cash flows amounted to $18.2 million for the quarter and $61.8 million for the first nine months and for the quarter this included $5.1 million of intangible amortization, $6.9 million of depreciation, and $6.2 million in non-cash stock-based compensation, and net debt at the end of the quarter amounted to $771.5 million, as compared to $842.3 million at the end of the second quarter. And the Company's net-debt-to EBITDA leverage ratio at the end of the quarter approximated 1.6 times. That’s all for our initial comments. If you could open up the call for questions at this time.

Thank you. [Operator Instructions] Our first question comes from Josh Chan with Robert W. Baird. Your line is now open. Josh, if your line is on mute, can you please unmute it.

Excuse me. Good morning, Selim and Tim.

Hi, Josh.

Good morning, Josh.

Good morning, I just wanted to ask about the customer delays at the Commercial Foodservice, how big were those delays, and what were the reasons for them, and what is your confidence that they can kind of roll out over the next several quarters?

Josh, I think it was just, sometimes it is hard to predict when customers are going to place orders, because there are a whole variety of things that happen. I don't think there was anything really structurally was just, sometimes there is a bit of choppiness in orders in some of the things we expected to come through in the third quarter, look like it just it split out to Q4.

Okay.

From our perspective we do not see any indication in our customer base in the restaurant business that they are slowing down their demand for innovation. I don't see that going away. The number of tests that we are performing, where people are changing the way they do they have kitchen and their processes and their automation in the kitchen is at the highest level we’ve seen at Middleby, in terms of testing and penetration of our customers. From that perspective, I can tell you that Middleby at this moment has not seen a tectonic shift that has been everybody has worried about, we have not seen it. I think we have seen more and more customers coming to us for testing, to change and be more efficient in their kitchen.

Okay. Do you expect the customer to kind of proceed with these kind of projects over the next quarter or so? Or do you think that there could be a risk of kind of further deferment?

So I have always said, at the end, and I said it when it was great times, I said it in recession, and I say it too, it takes fully [ph] customers 18 months to 24 months to basically execute a rollout. So when you look at it and you say what is going on, is the fact that I cannot predict quarter-to-quarter, but I can tell you when you look year-over-year, I can tell you that looking at the next two years, Middleby will most probably have a significant amount of rollouts, that are coming into play, because it takes 18 to 24 months. I cannot predict quarter-to-quarter, never did. So we feel very strongly that our testing and our roll out pipeline is very solid.

Okay, great. I appreciate that. And then on the Residential side, would you say that the Viking trajectory has kind of turned the corner, and does that give you a more positive outlook into 2017 potentially?

Yes, we have turned the corner on many things. Turned the corner on quality, quality has improved by 90%. Our warranty rate is as better it’s been, and to best it’s been. Our service and parts delivery, which I talked about in the last conference call, has improved significantly. And it’s reflected in the order rates have been coming in. We also started seeing builders looking back at our Company, and look at the new products doing extremely well. So yes, it has finally what we predicted it is turning the corner. Are we going to have some hiccups here. Yes, I'm not saying that we are totally out of the woods. For me to be comfortable, but I would say every quarter is growing volumes is getting back. So let's put it this way, our expectations are somewhat in the middle of 2017, you should start seeing a sustainable order rate coming through given the fact that we are working on several builder projects. We have a bunch of new products coming in that are going to help us. I believe also that we regain a couple of dealers, large dealers that have joined us back and so we are working with them, because they were absent on Viking for a while. We have taking time to train them, we are spending a lot of time training 300 or 400 of their sales people and working on them. So we have done the training, and now basically upgrading the displays, and moving forward.

Okay great. That’s good to hear. Thanks for the time, and the color.

Thank you, Josh.

Thanks, Josh.

Our next question comes from Tony Brenner with ROTH Capital Partners. Your line is now open.

Thank you. You’ve mentioned steel was being a headwind today and previously as well. I guess steel maybe just stabilized a little bit, but it is still significantly above where it was a year ago. Could you talk a little about how you are offsetting that cost pressure?

So I mean we have, we did institute some price increases on the commercial side, on the Food Processing side, just given the length of quotations, and for orders it takes a little bit longer to get those price increases rolled in, so that’s why there is a little bit more of an impact in that segment than others. But I mean I think we talked about the impact of 0.5% to 1% on margins and you saw margins come down slightly relative to the second quarter, but I think as we go into next year, I believe we think that pricing will largely offset that.

Tony, that will affect everybody. It is not a Middleby issue. This is a macro issue, that effect steel. However, I would like, since you are talking about basically supply, one of our biggest initiatives is structurally sourcing, and it is one of our competitive advantages, as we move across the platforms, from basically Commercial Food Service to Food Processing to Residential. We are now working with our key suppliers to basically streamline the supply chain. We’re going to be working with short and stronger suppliers, we’re going to take continuous improvement to our supply chain. And we have upgraded our sourcing team and we are in the process of partnering with our supplier on figuring out a way to create an annualized net savings, that will most probably between now and 2019, in 2017 to 2019 of roughly 3% per year annualized. And as you know, we are supplying millions of dollars of components. And we see that as a truly competitive advantage as we continue pushing our EBITDA margins to go forward. That if the steel increases.

I see. AGA obviously is being streamlined and cleaned up. At what point will you begin expanding distribution? I know people are lined up wanting to buy kind of oven, but when will distribution in the US expand meaningfully?

When are we going to expand our distribution in the U.S., so the message is at this moment, we are probably looking at 2018 for AGA. Well, 2017 we have launched one product line called Mercury, that has launched right now, and we picked up orders on that line, and it’s a new line that’s way seen for the U.S. market. So we redesigned that line and take completely redesigned AGA line called Mercury. You can see it online. So if you could AGA Mercury, you can see it’s a beautiful product, a beautiful range and hood, and we have gotten many, many awards for it, and we have received orders for that. So that product line is launched, and it’s being launched literally in the traditional way of doing that, with the very limited distribution we have today. In 2018 we expect AGA to basically become the formalized distribution, as more products are coming into the U.S., that are U.S. specific designed products that we don't have. So when you think about the AGA, specifically the AGA range, the AGA cooker, it’s a very UK phenomenon, and we are trying to take that, so many people love the design of the AGA that they are in the U.S., it has a unique look to it, it’s a very attractive look, it’s a beautiful furniture look, but they do not understand how they cook on an AGA, What we have done is we have taken that design, and bring it to a complete U.S. spec, and not having to do with having the oven always on, and not doing all of those different station terms of the ovens, one of them for bake, one of them for roast. We don't do that in the U.S. Our oven bakes and roasts and does all of that. So we are recharging and reconfiguring the whole AGAs. 2018 will be when AGA comes in the U.S.

Okay. Last question. G&A expense decreased sequentially a fair amount. I'm wondering what the reason for that is, and what that implies going forward?

I think some of the expense decline would have been with the integration acquisition, particularly as it relates to the AGA business. Included in there is probably also I don't know the exact number, Tony, but I would think it’s at least, it would be over a $1 million of maybe exchange impact, just given the British pound.

Okay. So is that a, I mean I know share-based comp is a variable, but is that a reasonable run rate going forward, or are there still more declines or more savings to be realized?

I think, we have taken significant costs out. We had significant restructuring activities that went in during the second quarter. So I would say we’re kind of were at a lower plateau, and we will continue to fine tune things. I don't think it will be as much of a step change as what we saw in Q2 to Q3

Okay, thank you.

[Operator Instructions]. Our next question comes from Jason Rogers with Great Lakes Review. Your line is now open

Hello. It looks like growth overseas in Commercial Foodservice has been running a little bit better than you had expected. Just wondering if you can talk a little bit more about what’s driving that and if you expect that growth rate to slow a little in the fourth quarter?

It has been strong all year. Each quarter has exceeded 20% this year for international sales growth. So I mean that’s been a - it’s a focus area for us, particularly in the emerging markets, and we have invested heavily in that area. Historically we have grown around that 20% region. That being said, we are pleasantly surprised because last year was more challenging in the markets, and although market conditions have improved, they are not back to where they were I would say a few years ago. But there is a lot of good activity with local chains in the markets, so we are continuing to, I would say expand the business beyond just the kind of a global major U.S. chains.

Jason, I would like to step in and give you some specific where we are going with our global market, not only in Foodservice, but also through our Food Processing. So if you look at the global middle class, by 2030 it will double all over the emerging markets. I'm not talking Europe, I'm talking emerging markets. So if you look at that alone, and you look at 64% of the world middle class population is in Asia, I'm not talking China only, but I am talking Asia, which means including that I put part of the Middle East in it and Southeast Asia, and I think worldwide 40% of all of the consumption will come from this group. So as you look at our global platform, where we have literally done a very large scalable global footprint, and look our investment there not only in service and sales but in manufacturing, and where we have our location for personnel to be close to our customers, I'm not only talking U.S. customer, but local. As Tim mentioned, our local emerging chains are doing very well with us. And I look there as and I say, we are poised for growth. Again, as I said in my previous answer to the question, it is quarter-to-quarter we will know? No. But when you look year-over-year, we will continue growing double digit in that segment. We continue to invest and literally we have a competitive advantage, than any of other competitor in our global platform. It's unique, it's the way it serves our customer. The way we have created that, and now we have been doing that since 1996-1997, and we have literally the most scalable, and the largest global footprint, for both the food processing and the Foodservice.

Okay. And then looking domestically at Commercial Foodservice, just looking at the press release talking about delayed orders from the restaurant chains in the quarter, have you realized some of those so far in the current quarter?

Well, we have not shared that in the past. This is a new question for me to share, so this is, it relates back to giving you information that we have not done in a quarter-to-quarter or and we will not going to get into this. As I said, I don't want to be, I'm sorry Jason, it's not you only. I am not going to be tied to a global to global handshake, I’m going to give you back, related back to a trend. I will tell you that am I give you trends that I am very comfortable with. And as I said, if you are invested to be a day trader at Middleby, we don't want you as a day trader investor. We want you to look at us after three years, this management team has been here for, I have been here 20 years, Tim is almost coming to 20 years coming into a leadership position. We have never been sucked even one year guidance. We always like to talk our three year guidance. So I am going to give you a vision of what I call 2017 to 2020. So let's look at Foodservice, to answer your question. First, I will tell you that there is data that indicates that Foodservice will basically grow. I'm talking restaurants will continue to grow, because eating out in restaurant and eating and drinking is double in the U.S., have outrun those of grocery stores, and we think that trend is staying. And people are now eating out more than just spending on groceries. So again, while Americans have been consuming a larger and larger amount of their food away from home, it is now a pattern that a lot of them are spending it even more in the restaurant. So I'm going to give you data that looks, even why I am very excited about the restaurant business. So I look at it, and I say if you look over 25 years. On a real inflation adjusted percentage growth of western industry sales. It shows two things. It shows one, that over 25 years except 2008 and 2009, which was an anomaly, it has always been positive, and they have been most probably running on average around 3%, sales growth inflation adjusted. So I look at what happened in the last, most probably four years, we have been at 2%. I would predict that between 2017 to 2020, that segment would go back and grow, inflation adjusted at over 3%. So I'm very optimistic about where the restaurant industry is going, and they will be growing starting in 2017 through 2020, when you look at those basically three to four years, they will be averaging higher than what we have seen in the past four years by at least 100 basis points. So that one that I am very excited about. The other thing from an equipment standpoint that makes it interesting, is irrespective of new construction, irrespective of replacement which is driving our thing and many changes, you have some cost pressures that are affecting those operators, so you have labor costs that are increasing. Energy continues to go up. Energy cost is way up and now the cost of waste. And I talked about it. I have been talking about it now for two years. The cost of waste which is on their P&L, is not something that a single COO of any restaurant chains have been talking about, and now what I pointed out, because we are the leader in now the Waste Management System. We are looking at those people, saying wow, I didn’t know I was spending as much. You go to talk to the franchisee, and say I did not know I was spending $25,000 or $30,000 on my waste per year and we say we will cut that by half, if not by two-thirds. And then real estate is going to continue going up. Okay. The real estate costs will go up. So everybody is looking at now innovation. So as looking at less people, so what I have talked about it, you remember you go back to my transcript. I’ve said the reason Middleby is uniquely positioned, is because our structure has been from day one, since 2010 has been about seconds and inches. We think in every strategy in our business, and say we are going to come to solution to our chain customer about seconds and inches, meaning we are going to speed up this service, and we are going to basically keep their menu item proliferating, with less space in their kitchen. So it will cut seconds of their food preparation and food cooking, and we are going to take inches of their kitchen. So you look at where we are with our targeted solution, they all have very little, very quick short payback. Short payback and I'm feeling good. So when you ask me about where we are going in the restaurant business I'm very optimistic. Irrespective of what people are looking at. I am not looking at new unit construction, I am not looking at health of how well they do. But I will tell you that again I will repeat the trends. Sales growth will continue growing in the U.S. in the next three years at 100 basis points better than what they have done in the past four years, which is good for us, for the industry in general. Then for Middleby specifically, labor costs, energy costs, and waste, and real estate costs are amazing for Middleby. We are so well-positioned to address those cost pressures for our customers.

Thank you.

Thank you.

Our next question comes from George Godfrey with CL King. Your line is now open.

Thank you. Good morning. Thank you for taking my question. I just wanted to circle back on the emerging markets, Selim and the growth in the middle class. Does that mean that the acquisition pipeline or companies and products that you might look at historically within U.S. and Europe, you might look at Latin American or Asian companies to build out a broader product line, or distribution partners?

So George, so a lot of the global brands, and a lot of the technologies have been U.S. based and some European based, you have seen us buy those. But as some of the acquisitions that we have also made some acquisitions in international markets, such as India, Australia is also another area where we’ve also added some local brands, that bring some infrastructure as well, and access to general market customers. I think that’s been part of our strategy as we would expand it internationally, is to open our own offices, as well as acquire some. I guess some strategic areas outside of the U.S., particularly the emerging markets, that give us better access to the markets. So Goldstein for example, Goldstein that what we acquired last year, the year prior we bought a company called Cell Frost in Asia, so I mean I think we do have that’s been our strategy that we have been executing to over the last few years.

So you see a continuation, but not necessarily a greater focus, given that the middle class growth shouldn't be so much stronger there, you see it being served by the complementary, or existing products that you have?

Yes.

Okay. Great. Thank you very much.

Thank you, George.

This concludes the Q&A portion of the call. I would like to turn the call back over to management for any closing remarks.

Thank you. I would like to thank everybody for being with us today. I would like to talk a little bit about where I see the future of Middleby, and why we remain very optimistic and excited about where we are going. So one, we continue to execute on our four-pronged approach, which is continue to innovate by creating new product and service. Grow our recurring revenue by exceeding the growth of the industry. We have always said that. We said whatever the industry will grow, we will be growing faster than the industry. We are going to continue executing on our cost structure, and then we are going to continue being very disciplined in our acquisition program. So as we look at how we do that, we continue a very unique, driving our excellence and executing. We are looking back at how do we create customer value. We continue to look at looking at things like shipping, lead time, improved quality, and on-time delivery. In addition to creating innovation that has very quick short payback. From a shareholder value, I'm looking at improving our margin, so in the next three years I'm interested in going today we are roughly at 22% to 23% EBITDA to sales ratio, I would like to start going almost to 30% EBITDA to sales ratio. That’s almost 700 basis point extra. We continue to drive our cash flow, and if you look at cash flow per share, it continues to do very well in certain instances it exceeds our earnings per share. We look at our employees, and how we have done with our employees. We are proud of our 98% retention. Another year where we continue to have, so 15 years in a row, we have had 98% retention of our employees. So when you look at that, we are very proud of our initiatives. Now, when you think of Middleby, I'm going to bring it specifically to you. If you eat or drink something today, there is a good chance Middleby played a role in its preparation. Today I think it’s more than one out of three restaurants in the world use our equipment. I think we are almost getting closer to 2 out of 3 restaurants use our equipment around the world. So if I look at Middleby every day, what do we do? If you are having breakfast, if you are basically at an airport, if you are at grocery shopping, if you are having lunch. If you are attending the meeting, if you are basically having dinner, if you are basically at the stage, or playing golf, most probably Middleby is involved somewhat in delivering the food throughout our experience and we have created some unique brands and we are proud of our customers who stuck with us. That’s one another thing, that we are very, very proud. We have a fantastic relationship with our customers, and they keep on asking us to get closer to them in penetrating more and more of their operations. So when I look at the trends, which is labor, we have been the first to automate the pizza oven, the burger, and the kitchen of the future. When you look at energy, I always say it. In 2000, there were only two companies in the world that were really addressing energy from a corporate standpoint. It was us and Toyota, where we are really putting all our corporate resources on energy, and today we are a leader in energy saving and appliances. If you look at waste, so you look at waste today. So today is being regulated. Waste is being regulated, how you disburse waste, how you get rid of waste, where you do, and it is getting more costly, and today our waste management system being designed at IMC is getting traction. I'm very excited that today four states have passed a higher minimum wage to-date. Four states. And that works well for our automation. Our customers have no choice but to automate their kitchen, and we are the leader in automation, bar none. We continue automating, and when I look at it, this is the second year in a row that now we are advancing the robotics in the kitchen, which is becoming a reality. So I continue looking at our execution day in and day out. The integrity and accountability of our team, which has been with me almost 20 years. We have the lowest turnover of any of our competitors, in terms of management and leadership. Every day we put customer first. We solve their problem and create value for our customers. So I am going to give you something unique. We created Middleby Connect, which connect to kitchen of our customers through data analytics and sensors, so I can figure out if their business is down, I can figure out how many cup of coffees they deliver every day, how much of it is cappuccino versus espresso, versus American coffee. We are now pushing it all the way through, into figuring out whether the fryer and the sensor and the oil, when they need to change the oil. And then second is Middleby Advantage, which basically allow our customers to basically service their equipment across a whole chain, by looking at data. There is so many data that we created Middleby Connect and Middleby Advantage. Then I look at strategic sourcing, and that I have mentioned that we are looking at a minimum of 3% annualized savings across our platform. Then we look at our acquisition, where we have been able to create value for our customers and our shareholders, as we continue growing the acquisition platform for us. So where we are strong and attractive, we are strong and attractive through our customer intimacy. Through our track record of providing solutions to our customers. We have differentiated technology and highly disruptive. Our global presence and our basically regional service sales and engineering is unique. We have an amazing customer base, and a large installed base of equipment. That continues working hard day in and day out for our customers. And they require parts and service, and they keep on coming back to us for recurring revenue to keep those ovens, and those fryers, to keep on going. You look at our position in emerging markets in China, in India. In China and India we have created an engineering manufacturing innovation center, the same in Brazil. The same in the Philippines. We are today really attacking those markets in a way that nobody else has done, and major investments that we have done long before anybody else, and we stayed with them, even when they were hard years where everybody said let's retrench, and we did not. So I look at where we are going in durable shareholder value creation, 700 basis points within the next three years. We are going to continue expanding those margins, reinventing and reinvesting for organic growth. And we are going to continue stronger OIC. Not against only our peers, but against the best-in-class companies out there. We are going to continue double-digit EPS growth. Now I look at another thing that just came to mind. We have gone to ventless faster than anybody else. We created our ventless technology five to six years ago, and we continue pushing ventless better than anybody else. So as I look at our next step strategy which not only will accelerate our top line growth, it will also drive a huge margin expansion for us. Thank you for attending our conference call today and congratulations today on an election in the United States. Thank you. Bye-bye.

Ladies and gentlemen, thank you for participating in today's conference. You may all disconnect. Everyone have a great day.