Smith & Wesson Brands, Inc. (SWBI) Q1 2017 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Smith & Wesson Holdings Corporation First Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to turn the call over to Ms. Liz Sharp, Vice President of Investor Relations. Ma'am, you may begin.

Thank you and good afternoon. Our comments today may contain predictions, estimates, and other forward-looking statements. Our use of words like anticipate, project, estimate, expect, intend, believe, and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding revenue, earnings per share, non-GAAP earnings per share, fully diluted share count, and tax rate for future periods, our product development, focus, objectives, strategies, and vision, our strategic evolution and organizational development, our market share and market demand for our product, market and inventory conditions related to our products, and in our industry in general, and growth opportunities and trends. Our forward-looking statements represent our current judgment about the future and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause our actual results to be materially different, are described in our securities filings, including our Forms 8-K, 10-K, and 10-Q. You can find those documents, as well as a replay of today’s call on our website at smith-wesson.com. Today's call contains time-sensitive information that is accurate only as of this time, and we assume no obligation to update any forward-looking statements contained herein. Our actual results could differ materially from our statements today. I have a few important items to note with regard to our comments on today's call. First, we reference certain non-GAAP financial measures. The reconciliations of GAAP financial measures to non-GAAP financial measures whether or not they're discussed on today's call can be found in today's 8-K filing, as well as today's earnings press release, which are posted to our Web site or will be discussed on this call. Also, when we reference EPS, we're always referencing diluted EPS. For detailed information on our results, please refer to our 10-Q for the quarter ended July 31, 2016, and with that I will turn the call over to James Debney, President and CEO of Smith & Wesson.

Thank you Liz, good afternoon and thanks everyone for joining us. With me on today's call is Jeff Buchanan our Chief Financial Officer. Later in the call Jeff will provide a recap of our financial performance as well as our guidance for the second quarter and full fiscal 2017. We are very pleased with our first quarter results. In addition to delivering strong financial performance we made significant progress toward achieving our vision which is to become a leader in the large and growing markets for shooting, hunting and rugged outdoor enthusiasts. We did this with two acquisitions that fit perfectly into that strategy. As a result of those acquisitions we're expanding presence in the market for rugged outdoor products. We have made a decision to organize our company into two reporting segments, a Firearm segment which includes the Firearms Division and the Manufacturing Services division, and an Outdoor Products and Accessory segment which includes the Accessories division and our new Electro-Optics Division. With this structure in place and with talented management teams in all divisions we are well positioned to explore new opportunities, both organic and inorganic, in the shooting, hunting and rugged outdoor market. Now let me tell you about these latest acquisitions. First, we announced that we would acquire the assets of Taylor Brands, a long standing licensee of ours that produced and sold Smith & Wesson and M&P branded knives and owner of many of our highly regarded legacy knife brands, including Schrade, Uncle Henry, Old Timer and Imperial. This business will tuck-in to our accessories division and will provide us with the opportunity to deliver future organic growth. As of the date of acquisition Taylor Brands trailing 12 months revenue was approximately $41 million. Second, we announced that we would acquire Crimson Trace, the undisputed leader in laser sighting and tactical lighting systems. The company was founded 22 years ago and has generated a 10 year compound annual growth rate in revenue of more than 10%. Crimson Trace has long been a key supplier to our Company and is highly regarded for creating and delivering an award winning line of firearm accessory products. With its robust new product development capability and its market leadership position, Crimson Trace will serve as an ideal platform for our new Electro-Optics division, providing a solid framework for growth. Although Crimson Trace has been narrowly focused on the laser sighting market, its management team now views the Electro-Optics market in its entirety. This is a broad and sizeable category that includes products such as various sights, aiming and ranging devices, magnifiers and scope for a variety of applications. Therefore, we believe that this division will have ample expansion opportunities both organically and inorganically. For reference, Crimson Trace's trailing 12 month revenue is $44.7 million, including $10.8 million in sales to our firearms division. As we report on these important acquisitions, which will provide growth and diversification of our business in the future, we also recognize that the firearms division generated the vast majority of our revenue in Q1. With that said, let me provide some operational and financial details from the quarter. Total company revenue exceeded the high-end of our guidance range. Higher revenue in our firearms division was driven by strong orders for our hand guns and long guns. The manufacturing service division added production capacity in the quarter and continued to leverage our flexible manufacturing model helping us cash the incremental sales and market share in the firearms division. Importantly the manufacturing services division also established a sales function that will support outside sales to our B2B customers. Our Accessories division revenue declined slightly. Our gross margins improved significantly to 47.3% from 42.3% last year. This improvement is the result of good work by our Accessories team to improve the profitability of the Thompson/Center Accessories business, that was transitioned for them last year. Distributor inventory of our firearms increased as planned by 64,000 units to a total of about a 155,000 units at the end of Q1. The sequential rise from Q4 reflects the seasonal distributor inventory increase that usually occurs each year in preparation for the upcoming full hunting and the busy holiday shopping season. Even with that increase our distributor inventory is lower than last year's levels of 177,000 units. At the close of Q1 our weeks of sales on the channel remains below our eight week threshold. It is also worth noting that distributor inventory unit increase was flat year-over-year at approximately 65,000 units. So it appears there was no concerning build-up of firearms inventory in the channel as we approach the busiest retail period of the year. Adjusted mix background checks during our fiscal quarter grew 19.2% year-over-year reflecting increased consumer demand for our firearms, while our units shipped into the consumer channel for the same period were up 52.8% indicating that we gained market share. In handgun, which make up about 80% of our total annual firearms units shipped, mix checks increased 15.2% while our units shipped into the consumer channel grew by 42%. In long guns which make up about 20% of our total annual firearm shipped, mix checks increased 24.1%. While our units shipped into the consumer channel grew by 118.8%. That is a large increase but please note that it is from a much lower base than handguns. We maintained our focus on product innovation in Q1. In firearms we announced that our market leading M&P SHIELD pistol has a new member of the family. The SHIELD is now available in 45 Auto. In accessories we introduced a Caldwell Ballistic Precision G2 Chronograph, Duramax Self-Healing Target, a Wheeler Armorer's Handgun Sight Tool and several new [indiscernible]. These are busy and exciting times for our Company. We now stand up four divisions operating in two high growth segments with multiple opportunities for organic growth, ample resources and a robust pipeline of potential acquisition targets. We look forward to delivering further progress on achieving our vision in the future. With that, I’ll ask Jeff to provide more detail on our first quarter financial results and provide our updated guidance.

Thanks James. Revenue for the quarter was $207 million, which was up 40.1% from the prior year. Revenue from our Firearms segment was $192.4 million, an increase of 47.7% over the prior year. And revenue from our Outdoor Products and Accessories segment was $14.6 million, down 16.9% from the prior year. The $62 million increase in Firearms revenue is driven by strong mix results and market share gains. A $3 million decrease in Outdoor Products and Accessories occurred primarily for two reasons. First, the net pricing on many Thompson/Center Accessories was raised as part of an internal initiative to improve the profitability of those items. That initiative resulted in reduced sales of TCA accessories but improved gross margins in the segment, rising by 5 percentage points to 47.3%. Second, we believe the sales were negatively impacted by inventory reduction initiatives and order timing of three key retail accounts. Despite that impact, however, out of the door consumer sales of our products by those retailers actually increased in Q1 versus a year ago. So we expect that the de-stocking activity will subside in Q2. Total Company gross margin for the quarter was 42.3% compared to 39.8% in the prior year. Firearms gross margins were 41.9%, and as I just noted, Outdoor Products gross margins were 47.3%. The total Company gross margin increase of 250 basis points was driven by increased production volumes and inventory adjustments in the firearms segment as well as the previously noted higher margins in the Outdoor Products and Accessories segment. These positive factors more than offset increased manufacturing spending and promotional costs. Operating expenses in the quarter were $35 million or 16.9% of revenue compared to $29.1 million or 19.7% of revenue in the prior year. First quarter operating expenses included cost relating to the acquisition of Taylor Brands and Crimson Trace. On a non-GAAP basis which excludes the amortization of the onetime acquisition related costs, operating expenses were $31.1 million or 15.1% of revenue, compared to $28.7 million or 19.4% of revenue in the prior year. The operating margin was 25.4% for the first quarter compared to 20.2% in the prior year. On a non-GAAP basis the operating margin was 27.3% in Q1 compared to 20.5% in the prior year. Our EPS for Q1 came in at $0.57 more than double the $0.26 earned in the prior year and our non-GAAP EPS was $0.62 as compared with $0.32 last year. Adjusted EBITDA in Q1 was $65.8 million or a 31.8% EBITDAS margin, compared to $38.9 million a 26.3% margin in the prior year. Turning to the balance sheet operating cash flow was a positive $38.1 million despite the fact that we build up our internal inventories by nearly $10 million for the fall hunting and retail season. CapEx spending during the quarter was $15.8 million. We expect to spend approximately $50 million this fiscal year on CapEx primarily related to further enhancements to manufacturing capacity and flexibility, tooling for several important new product offerings in various IT projects. At the end of Q1 our cash balance was $215 million. We had no borrowings on our $175 million line of credit and our outstanding long term debt was approximately $174 million. It should be noted that after the end of the first quarter we closed on our two recent acquisitions which utilized a total of $180 million of cash. Now turning to our guidance. Please note that this increased guidance takes into account our recent acquisitions but does not take into account any other acquisitions that we may close during the remainder of the fiscal year. For the full year we expect net sales of between $900 million and $920 million. Using the guidance midpoints from this quarter and the last quarter let me give you an approximately walk against the prior guidance to help verify the $160 million revenue increase in guidance. First, $12 million of the increase is due to our revenue beat in the current quarter, next $92 million of the increase is due to projected organic revenue growth and lastly $56 million of the increase is incremental relating to the acquisition of Taylor Brands and Crimson Trace and taking into account that about 25% of the Crimson Trace revenue will come from sales to our firearms division and therefore will be eliminated in the consolidated results. For the second quarter, we expect net sales of between $220 million and $230 million. This includes approximately $19 million in incremental sales relating to the two recent acquisitions. For the full year, we expect GAAP EPS to be between $2.09 and $2.19 and non-GAAP EPS to be between $2.38 and $2.48. For the second quarter, we expect GAAP EPS to be between $0.44 and $0.48 and non-GAAP EPS to be between $0.53 and $0.57. In both our second quarter and full year numbers, our non-GAAP EPS excludes amortization and cost related to our acquisition. All these estimates are based on our current fully diluted share count of 57.1 million shares and expected tax rate of 36%. Now back to James.

Thank you, Jeff. With that, operator, please open up the call for questions from our analysts.

Thank you. [Operator Instructions] And our first question will come from Cai von Rumohr of Cowen & Company. Your line is now open.

Can you give us some help in terms of understanding of the Crimson Trace sales that go to the firearms division, what kind of incremental profitability? I mean, because those will now be reported in the firearms division. Is that correct?

Well, yes. I mean actually the sales will be eliminated, but obviously the Company will see the benefit. And just on a general basis, we noted that in the trailing 12 months, the sales to Smith & Wesson were about 25% of their revenue and they have a very strong gross margin, it's higher, higher than our other accessories businesses. So, that is -- I think you can use that to calculate the benefit.

But I mean is that benefit going to show up in the firearms business, because that’s a cost that won't be there, or will it show up? I assume it will show up in the firearms business, because obviously you’re taking the sales, the sales are eliminated --.

Actually, it’ll show up in the Outdoor Products division, as you’ll just eliminate the revenue line. So, it will basically likely be reflected over there.

Terrific. And can you give us maybe some relative guidance on the gross margins of both of the two acquisitions and how much incremental G&A excluding amortization might come as a result?

Actually, we don’t want to start to get into the detail of every acquisition, we’d rather talk about the segments, but we don't also give guidance about the segment. I think the best thing we can say is that the Outdoor Products and Accessories segment will continue to have like margins in the range they’ve had them in the past and that these companies that we are buying are like any other accessories and companies and generally have gross margins in mid 40s and low 50s.

Terrific. And last one, can you update us on the military gun contract competition?

Sadly, there really isn't anything to update on, so nothing official has been communicated to us.

Okay and your expectation in terms of a decision?

I think it's holding pretty much to the same time line that we've always stated, which is early in the next calendar year.

Thank you. And our next question will come from Scott Stember of C.L. King. Your line is now open.

Can you maybe take about within your guidance, I mean obviously business is very good right now, but we've seen in the past how volatile the market could be with these surges and pull backs, but within your guidance what kind of NICS growth are you looking at the for the full year and in general what are your expectations behind and underlying everything?

Just as a starting point, our guidance I would say is more based on discussions with our customers and order flow than our belief about NICS. I would say it's fairly hard to project what NICS is going to do. Our guidance also doesn't assume any particular victor in the presidential election. We really just focus on our market share, our market share gains, our orders, our production, capacity. And new products for example, we have several new products up coming. We just basically take all that into account without -- and I would say NICS as a small part of our information gathering.

I mean we have, as we’ve said before a very robust sales and operations planning process. We're spending a lot of time on this and that platform is a solid foundation for the guidance that just went through. So it's a very analytical process. There is no doubt NICS in Q1, they were strong, there has been a lot of commentary on that, but they're nowhere near spike levels that we have experienced historically and again just to reiterate we're not expecting that, we don't plan for that, that's completely out of our control. We focus on things that are in our control, we're running the business as normal, at normal level of promotional activity in the summer for example where certain competitors have backed away from that, trying to expand their gross margin. We think it's important to have continuity there, so our promotional activity is the same. We look forward to next calendar year, January, February, March as we enter the show season, expenses around SHOT Show, we have a lot of wholesaler shows going on where they invite the independent dealers and to take orders. So we’ll be ready for that as we always are. We certainly talked about the types of promotional activity that we generally perform there. So that’s it really, business as usual Scott.

And as far as capacity goes, still obviously no plans to add any additional footprint, still just leaning out additional capacity whether it’d be through just to reorganization of the facility or more flexible machinery same story?

Yes, as we’ve always said and the focus has really been to grow within the four walls that we have. We don’t see the need to add a footprint, remember we are extremely flexible, both vertically in terms of the level of capacity that we have and horizontally between product categories, that’s very important [indiscernible], one of the secrets of our success, that we can be extremely responsive to whatever market conditions that we face. So we continue to enhance that level of flexibility and it continues to serve us well as you've just seen in our Q1 results.

And just last question going back to the Accessories, there has been some chatter in the industry of some weakness, general weakness at retail. I guess share of wallet more people buying actual firearms versus some of the accessories related to it. Was any of the weakness that you saw in the quarter maybe tied to that or was it strictly just the two or three items that you laid out?

I mean I’ll just go through the few factors that we think they're at play when it comes to the decline that we saw in our accessories business. And certainly there are some couple of major customers that had initiatives to reduce inventories, so that no doubt impact, it’s not just a question of timing. So, our belief is that most of that is contained to our first quarter results. But going forward as we go into that busy retail season we’re positioned. Certainly don’t think it's a long-term trend even if it does go little bit into Q2. Second, remember we transitioned poorly performing Thompson/Center Accessories business from the firearms division to the accessories division and past the accessories team, they sorting that out, they made the great strides there. They had to face some price increases, eliminate some discounting and some promotional programs. And that obviously had a dampening effect on sales, but we rarely do see the impact in the expansion of gross margins there. So we were very pleased with that result. And going forward we reset that part of that business and we have high hopes for that. And then lastly to your point, yes there has probably been some impact of the shift in consumer spending perhaps over the more firearms, more expensive firearms, difficult to understand, really hard to quantify. But there is no doubt it seems to be apparent, we have plans in place as we approach that busy buying season coming up that’s almost upon us now to really capitalize on that going forward.

Just if I could slip one more in real quick, just on the long gun segment, doubling sales there. Maybe just talk about the performance of Thompson/Center versus the modern sporting rifles?

I think you can be absolutely clear that a large if not actually all of the increase has been modern sporting rifles. We are launching right now a key long guns for [indiscernible] in the sports feature, we actually launched it early in the year. I should say rather launched and we are starting to ship it which is the Compass Bolt Action Rifle. So we're definitely changing our mix of long gun revenue going forward, but modern sporting rifle definitely in Q1 was extremely strong. Our focus going forward is obviously on the hunting market and we're pretty weak or non-existent when it comes to long guns for hunting, hence the big push with the Compass, the bolt action rifle which is clearly an excellent rifle, tremendous value to the consumer, it's at a price point where it should generates tremendous volume, unit volume and such revenue for the company, so we're very excited about that. We're also coming up on hunting season and that's why you'll hear us talk more about that when we report the second quarter results.

Got you, thanks again for taking my questions.

Thanks, Scott.

Thank you. [Operator Instructions] And our next question will come from Ronald Bookbinder of Coker Palmer. Your line is now open.

Good afternoon and congratulations on a good quarter and nice acquisitions.

Thank you, Ron.

You gave us nice color on the increase in revenue guidance for the year, but could you give us some color on the EPS side as the increase there is to, what is coming from acquisitions and what is coming from the legacy?

Well Ron we don’t really get into that level of detail so, no we didn’t give guidance on the breakdown, we did give guidance -- we gave you the EBITDA, the trailing by 12 months EBITDA percentages that we're based on the multiples. So EBITDA for those businesses is close to operating income so you could probably back into some numbers there if you wanted.

Okay. And would you happen to have the days of production for each quarter last year and what it will be for this year.

Yes, I do. So for this year the days and almost for the first -- for Q1 it was 58, for Q2 it'll be 60, for Q3 it'll be 58 and Q4 it'll be 62. And in the prior year it was 59, 59, 56 and 65. A little more evened out this year.

Okay and given your flexible manufacturing, what sort of increase do you think you can get to with that, with the facilities you have and your operating [indiscernible] year over year?

Yes Ron, certainly that's something we really wouldn’t discuss publically.

Okay.

As I've said before with the outsourcing strategy and declare so everybody is new to the story, outsourcing is about component manufacturing, components historically branded and made in house. So as long we can go out and find people with a very simple CNC technology or you know plastic injection molding technology, so we can loan them a software or we obviously bring them on and qualify them. We're limited by as many as those people that we can find, so that's the beauty of that outsourcing strategy and we continue to leverage that as a component of our overall flexible manufacturing model.

And it seems like units shift increased by a greater percent than the revenue, whether hand guns of long guns, is there a shift to lower price products or how does that work out?

You just have to look at the mix of products that we generally talk about and that has been very successful and mostly in demand, so think about the M&P SHIELD family, the Bodyguard 380, both laser and non-laser, the M&P 15 Auto, all of those, and plus M&P polymer pistol I should mention as well. All of those are great value for the consumer, therefore very attractively priced as well. So there is no doubt that's probably responsible for that math you're seeing there.

And…

I was going to say, the ASP as compared to a year ago are nearly identical, so there is really not -- there is probably not a lot promotional activity may account for those difference because now you give the promotional activity is usually done -- often done with free good, like the free good are reflected in the units but obviously not in the revenue.

And just lastly on the military hand gun competition, would you brand -- if you win, and obviously most of us think you have the excellent chance at that. Would you brand that to Smith & Wesson or would you brand it M&P and how would you think about that halo effect of that benefiting the brand like M&P?

Firstly on the brand, it would stay exactly as it is for an M&P polymer pistol, M&P is the brand, but it's also endorsed by the iconic Smith & Wesson brand. That's been important to us over the years as that product has evolved and then sorry Ron your second part?

It's just the halo effect, the Smith & Wesson is such an iconic brand and M&P while it's been around for a good while it's still really growing and getting the endorsement from military. You would think it would have a halo effect and even grow stronger than it is?

Absolutely, I mean the professional community is extremely important to us as I've said before. Holds us to a much higher standard than if we were just say a consumer product business. There's obviously a lot more rigorous testing that goes into serving a law enforcement agency, military and so on, as you know we do that on a global basis. And we can intend to continue doing that. In terms of the halo, we think about the halo back from the professional community into the consumer community, it certainly gives your product a lot credibility if it is used, adopted and well regarded by that professional community. The consumer does pay attention to that.

Okay thank you and good luck in Q2.

Thank you, Ron.

Thank you. And our next question will come from Chris Krueger of Lake Street Capital Markets. Your line is now open.

Just looking ahead four months to SHOT Show, on the firearms side it looks like to be kind of a typical year as far as number of new product introductions and things like that. Then on the accessory side I know you had a multitude of new introductions last year. Is that going to grow this year?

Our object is to obviously continue with a very robust and strong level of new product launches. That’s key to future revenues and the financial health of the Company and it's also absolutely key to our market share objectives as well. So, you will see new products, some major launches at SHOT Show for sure.

My only other question is on the professional segment, and not only 8% of sales, it looks like it grew about 25% in the quarter. Was anything particular driving that growth, any new contracts? And are there any interesting RFPs for that business and anything potential on the pipeline?

Nothing really that we can discuss. But what I will say about the business as you think about it sequentially from quarter-to-quarter, we’ve always said it can be choppy. And it's just the timing of awards with certainly agencies and shipments and so on. And that will always be the case with the professional community for sure.

Thank you. And our next question will come from Cai von Rumohr of Cowen & Company. Your line is now open.

Thank you so much for the follow on. So, the destocking, what percent were those three retailers of your total sporting channel sales?

Well, of our total exporting channels since that includes like firearms would be a very small percentage and overall outdoor products was around like 6% and this was a small percentage of outdoor products, so it would be a tiny percentage.

Are you seeing any other signs of destocking anywhere?

No, and again this was -- we think was sort of a unique situation with respect to two of our retailers. Again, this is in the accessories division, but moving into the strongest retail period for all of our divisions with the hunting and holiday shopping seasons. And again to reemphasize the outdoor sales at those retailers were up, so we believe this was clearly a reduction of inventory exercise and that’s it.

And then you gave us some guidance in terms of the gross margin of the acquisitions. Can you give us some help in terms of what kind of G&A ratio they should have incrementally?

We haven’t given that information. But again as I've said before if you look at -- we gave the multiple, the EBITDA by multiple on trailing 12 months. These guys don’t have a loss of depreciation. So because they are in leased building, haven’t done a lot of acquisitions, so there's not a lot of DNA. So their EBITDA as [indiscernible] can be fairly close to their operating income and I think with that you can properly get some numbers.

Terrific. Thank you very much.

Thanks Cai.

Thank you. And our next question will come from Steven Dyer of Craig-Hallum Capital. Your line is now open.

Just first on the revenue, on the revenue guidance. Obviously Q2 guidance much higher than what would be normal seasonality. Q4 usually highest quarter of the year, so I was just curious what your thoughts around the cadence and whether there is anything different or abnormal in the second half of the year that should be taken into account?

No, I mean our Q2 forecast is based, at this point mostly on orders. And our year forecast is based on what we believe will happen in Q3 and Q4 on a normal business as usual. And of course historically like quarter 4 is usually our biggest quarter. Now as we add like some of our acquisitions. Those will always have the same cadence. In fact, they tend to be higher in Q2 and perhaps Q3, not necessarily on Q4. So as we add products in the outdoor segment. We would expect maybe the margin increase in Q4 to not be as large. But in the firearms business in terms of our analyzing comparing for the guidance, we sort of assumed historical norms.

Okay, it’s helpful. Shifting over to Outdoor Product Accessories segment. Was just curious and hoping you can sort of tell us about, sort of the current M&A environment and there has new publics that have been active and sort of curious what sort of the multiples out there and whether activity has changed and sort of what your expectations are there going forward?

Well, I think the multiples are out there, they continue to be high, because debt -- because interest rates are low, which allow the E-firms that they are competing with a company like ours. It allows them to basically pay more. You can see our multiples on the last two transactions range from 6 to 11, actually in the last three transactions, although the 11 that can be paid. There is a lot of expense synergy there, but in general I think that the prices are roughly the same to have them in the last couple of years, where you can take 8 times EBITDA as sort of the median and it can go up if there is high growth or be lower if there is other factors that could drive it down.

And given the name change of that segment, now includes outdoor products, you've changed your strategy in terms of sort of your potential end markets there or not?

No, we have been talking about this shooting, hunting, and rugged outdoor segment now since January when we sort of roll this strategy out at an Analyst Meeting in [Indiscernible]. And so this is really just as result of the acquisition, this is just like making official what we had talked about as a strategy.

Okay, thanks for the color and congrats on the good results.

Thanks a lot.

Thank you. I am showing no further question at this time. I would like to turn the call back over to Mr. James Debney, President and Chief Executive Officer for closing remarks.

Thank you, operator. I want to thank everyone on the Smith & Wesson team for delivering another excellent quarter. I also want to welcome our new employee from Crimson Trace and Taylor Brands. For information, we will be attending two upcoming conferences in New York City the CL King's Conference on Tuesday, September 13th; and the Credit Suisse Conference on Wednesday, September 14th. We hope to see some of your there. Thank you again everyone for joining us on today's call. We look forward to speaking with you next quarter.

Ladies and gentlemen, thank you for your participation in today's conference. This concludes the program and you may now disconnect. Everyone have a great day.