Turning Point Brands, Inc. (TPB) Q4 2017 Earnings Report, Transcript and Summary

Good morning and welcome to the Turning Point Brands Fourth Quarter 2017 Earnings Conference Call. All participants will be in listen-only-mode. [Operator Instructions] After today's presentation there will be an opportunity to ask questions. [Operator Instructions]. Please note this event is being recorded. I would now like to turn the conference over to Mark Stegeman, Chief Financial Officer. Please go ahead.

Thank you, Austin. Good morning and thanks everyone for joining our call. I'm Mark Stegeman, CFO of Turning Point Brands. With me today are Turning Point Brands President and CEO, Larry Wexler; and Jim Murray, Senior Vice President of Business Planning. Earlier today we issued a news release covering our fourth quarter and fiscal year 2017 performance. This release is located in the IR section of our website www.turningpointbrands.com where replay of today's conference call will be available. Today, we plan to discuss our consolidated and segment operating results for the quarter and year, highlight progress towards our long-term growth goals and outline our expectations for 2018. Following our formal remarks we will open up the floor to Q&A. As is customary, I direct your attention to the discussion of forward-looking and cautionary statements in today's press release and the risk factors in our filings with the Securities and Exchange Commission. The disclosure outlines various factors that could cause actual results to differ materially from projections or forward-looking statements that may be sited in today’s discussion. These forward-looking statements and projections are not guarantees of future performance and you should not place undue reliance upon them except as provided by Federal Security Laws and we undertake no obligation to publicly update or revise any forward-looking statements. We may also discuss today certain non-GAAP financial measures, these measures and reconciliations to the GAAP information along with the reason management believes that they provide investors with useful information regarding the company’s financial conditions and results of operations are set forth in the press release. I will now turn the call over to Larry Wexler, our CEO.

Thank you Mark. Good morning everybody and thank you for joining the call. This morning I would like to update you on how Turning Point Brands has made great progress in 2017 by executing our strategic plan, driving organic growth and pursuing and integrating accretive acquisitions. Our positive results are evident in this year’s operating and financial performance. We enhanced our sales, marketing and distribution platforms and it’s making a difference. Our three acquisitions expanded our portfolio and extended our market reach with new distribution and product capabilities. And we strengthened our financial foundation and flexibility to fortify our platform for future growth. Our key focus brands Stoker’s in Smokeless, Zig-Zag in Smoking, and VaporBeast in NewGen are thriving. Stoker’s continues growing volume, Zig-Zag remains a leader in its category and VaporBeast is producing excellent growth. Our accomplishments in both organic growth in our recent acquisitions is visible in the quarter results. For 2017, net sales grew 38.6% to a record $285.8 million. Gross profit increased 24.4% to a record $124.9 million. Operating income grew 13.6% to a record $49.5 million and while net income was down $6.7 million. Please note the prior year was favorably impacted by a $12.6 million reevaluation of deferred tax assets making comparisons to year ago difficult. Importantly, our adjusted EBITDA reached a record $60 million, 14.4% higher than in 2016. This momentum carried through the fourth quarter where net sales increased 36.7% to a record $73.6 million, gross profit grew 23.1% to $32.3 million, and adjusted EBITDA increased 9.6% to $14.8 million. These results are gratifying; they validate our strategies and demonstrate we are on the path to continued success. Moving forward, we are excited about the growth highway we see ahead of us. Before I dive a little deeper into segment results, I’m excited to discuss a few important items that were recently announced that will further support our growth strategy. First, after acquiring Vapor Shark in 2017, we implemented a number of process improvements that resulted in stronger sales and a 35 Vapor Shark branded stores. Seven of these stores were company-owned and the former owner had an option to take them over in 2018. Vapor is a relatively new category. We do not yet have the same depth of consumer understanding as we do in our traditional OTP segments. As a result, we decided to retain ownership of the seven Vapor Shark brand stores and we’ve done an agreement to do so with the former owner. Continued ownership allow us to better analyze and understand consumer trends at the point-of-purchase and levers this learning across our entire NewGen segment. Moving forward, we will continue to evaluate the benefits of owning versus franchising these stores. Turning to the balance sheet, we made solid progress throughout last year as seen in our credit metrics. In fact, S&P upgraded our credit rating to B + with a stable outlook just last month. And last week, Moody’s reaffirmed our B2 stable outlook rating. In conjunction with our improved credit metrics, I’m pleased to announce we were successful in working with our bank group to amend and extend the $250 million credit facility entered into a little over a year ago. The March 7, 2018 amendment reduced annual interest expense by an estimated $2 million extend their maturities and improve our capacity to execute acquisitions. Now let me take a few minutes to discuss our products and segments, and how they performed in the fourth quarter and the full year. The context for this review, I’ll remind you that TPB is a company built on strong brands, and I work in nurturing, investing in them, determines their ultimate success. Simply put, our focus brands provide the foundation for future growth. Led by Stokers and Zig-Zag the core tobacco portfolio continued to deliver exceptional results. Net sales of the core tobacco portfolio increased 3% for the year and 7.2% in the quarter, establishing company records in both periods. Gross profit increased 3.7% and 4.6% for the year and quarter respectively. While challenging from a competitive standpoint, 2017 was a solid year of achievement for both Stokers and Zig-Zag. Moving to the Smokeless segment, for the U.S. Smokeless products, net sales increased 8.5% to record $84.6 million in 2017. Not surprisingly, the Stokers brand was once again the star of the Smokeless segment, with case shipments of Stoker Moist Snuff Tobacco or MST as we call increasing by greater than 10%. In the quarter, Smokeless net sales were $21 million, a10.7% increase from a year ago. [Indiscernible] encouragingly, Stokers continue to expand its market share in both chewing tobacco and MST demonstrating its appeal among a broadening base of Smokeless tobacco enthusiasts. A successful market expansion of Stokers 1.2 ounce MST cans continues to have a positive impact through widened retail distribution and product availability. Leveraging our store based analytics and highly effective sales force, we [Indiscernible] Stokers MST cans retail distribution to approximately 25% of all stores selling MST, with a focus on the outlets with the greatest opportunities. While [Indiscernible] to satisfy that Stokers is not yet available in all retail outlets. I am pleased we are close to 10% increase in stores in 2017 and especially excited about the remaining upside for not only distribution games, but also continued in-store velocity and share improvements. As I have said before, Stokers MST growth plan is a long term journey and despite the world-class competitors, we have demonstrated consistent strong growth since our introduction. Now let me update you on the five Smokeless tobacco brands we purchased in 2016. We have effectively integrated these brands into our asset light manufacturing platform and are now realizing improved margins. Late in the fourth quarter, with the production transition completed, we began expanding distribution to targeted high volume outlets. You recall these brands had 80% share in the stores where they had cheap distribution, and we were excited about the potential for strength and performance in 2018 and beyond. For the quarter gross profit in Smokeless segment increased 13.1% to $10.3 million. Segment gross margin expanded a 100 basis points to 49.2% due to price and mix increases, offset to some degree by LIFO expense of $0.5 million. Absent the LIFO expense in both years, gross margin for the fourth quarter of 2017 was 51.8% versus 50.2% in the fourth quarter of 2016. With regard to the October 2016 Pennsylvania state tax increase, while the industry MSAi volumes of chewing tobacco declined more than 10% in the quarter, we outperformed the competitions, competitive set with low single digit growth. In MST, the industry declined by more modest 3% but we realized mid-single digit volume gains. Now turning to our Smoking products segment. Net sales for the year were $110 million down $1 million from a year ago. We recall that we made a strategic decision to deemphasize cigars during this period of what we consider to be a rational hypercompetitive pricing and re-direct our resources to higher margin opportunities. Despite a $4 million year-over-year reduction in sales and cigars, our effective gross profit adjusted for LIFO was up marginally to a year ago. And we engage in a frontal battle to preserve sales of cigars, competitive realities we required a lower margin contribution and would have diluted our efforts in MST, papers and cigar wraps. We will continue to evaluate our opportunities across all our segments and invest where we see the greatest level of return. In the quarter, despite continued cigar erosion, net sales rose 4.8% to $28.9 million primarily driven by the continued growth of Zig-Zag MYO cigar wraps and strong sales of and Zig-Zag cigarette papers to the dynamic Canadian market. California’s 65% excise tax on MYO cigar wraps continue to press both the industry in our sales in the state. While the industry volumes in the state were down approximately 30% a year ago, we are seeing increase industry volumes in adjacent states, which suggest some level of shipping of demand. Additionally in the fourth quarter, we began executing a number of new promotional strategies. Going forward, we will continue to watch the California consumer closely and adjust our quarters as necessary. Gross profit for the quarter of $15.1 million was $77,000 lower than a year ago, due to a LIFO expense in the period of $330,000 and a year-over-year euro impact of $200,000. After adjusting the results for LIFO expense in both periods, gross profit increased 1.6% to $15.5 million with a gross margin of 53.5% compared to 55.2% in the fourth quarter of 2016. In the quarter Zig-Zag maintained a leading industry share for both premium papers, MYO cigar wraps and strengthened its already potent position in the promising Canadian market with dynamic new product introductions. Canada has long had a much more developed roll-your-own cigarette market compared as compared to the United States. In that environment, Zig-Zag emerged as a brand of choice among consumers who elected to roll their own tobacco cigarette as opposed to buying manufacturers cigarettes. With the coming recreational legalization of marijuana this summer, there will be a whole new audience of consumers, many of whom will choose to roll their own and smoke cannabis for recreational enjoyment. So the market is big and is likely to get bigger. I mean we assumed to blossom cannabis opportunity, our sales and marketing partner in Canada requested new Zig-Zag products to leverage the opportunity. Late in the fourth quarter, two new SKUs were introduced to better position the brand to actively participate in developing market, both Zig-Zag orange and king-size slim now being expanded across Canada and our partners are exploring additional opportunity products for 2018 and beyond. At our core TPB is a brand company, we view each of our brands as a dynamic, living organism that only flourishes when probably cultivated. Developing brands is our passion and even our obsession. Goodwill management creates a meaningful and differentiated product positioning be it on social media, in-store at the point-of-purchase and compelling packaging the average consumers wear as a badge. Simply said, to win the hearts and minds of consumers, you have to provide quality in everything you do. Canada products impact many high-quality consumer products companies particularly those with strong premium brands with loyal enthusiastic consumers like Zig-Zag. For several years our brand production team has investigated distributors of fake papers and filed legal actions in the U.S. as strategically advantageous. We have invested significant resources and work side-by-side with the FBI, Homeland Security, Customs and Border Protection, State and Local officials and International governments to fight counterfeit. We have long had a zero-tolerance position for those that traded legally on a Zig-Zag brand equities and we fought so hard and so long to build. On February 20, we reported that Chinese authorities began enforcement actions targeting parties involved in counterfeit cigarette papers, production and distribution. To-date we are informed that Chinese police have seized several hundred thousand booklets of counterfeit cigarette papers of many popular brands, including Zig-Zag, the packaging materials sufficient to produce millions of additional units. We anticipate taking actions against those in the United States who identified and revealed through these investigations. We believe this is a good investment. We expect that this will benefit the brand through a reduction of low-quality, equity rocketing, counterfeit imitations to market and yield increased sales of premium Zig-Zag cigarette papers in the future. With Zig-Zag we are the number one premium cigarette brand, quickly developing opportunity in the promising Canadian market and the number one MYO cigar wraps and we will protect the brands integrity and stability to grow. I’ll now turn to our growing NewGen segment. Our NewGen’s success in 2017 was delivered by the robust growth of VaporBeast which we acquired in late fourth quarter of 2016 was supplemented by the midyear 2017 acquisition of Vapor Shark. For the year, sales growth rose $74 million to record $91.3 million, our gross profit was a record $25.1 million. Quarter’s performance continued to trend and was similarly outstanding. Sales grew $23.7 million and gross profit increased by $4.9 million to $6.8 million. Gross margin grew by 300 basis points to 28.8% of net sales. VaporBeast, our sales distribution engine has been the driving force behind NewGen's growth. We’re working diligently to deepen sales penetration in nontraditional retailers we serve. That’s paying dividends with higher order sizes and more frequent orders driving strong sales gains. We’re developing synergy throughout the NewGen segment and across our brand platforms. Our NewGen integration plan is designed to identify ineffective workflows and develop simpler solutions, diagnose duplications to streamline common processes and determine best-in-class procedures to share across platforms. To summarize, we’re returning with start as a steeplechase into 100 yard dash. Our next structural step is to integrate the manufacturing and distribution of the Vapor Shark e-liquid operations into our Louisville facility. We expect the move to be completed in the third quarter and produce improved operating and distribution efficiency. VaporBeast and Vapor Shark provide the infrastructure that underpins our growth in the vapor marketplace. To maintain focus and manage growth I appointed Graham Purdy as President, New Ventures to oversee these operations. Graham was our former Senior Vice President of Sales and Executive intimately involved in both acquisitions. He will manage their continued development also driving a future acquisition activities in both vapor and tobacco spaces. Like all successful companies, a solid infrastructure is a prerequisite to execute core strategies and deliver growth. We see areas for improvement ever mindful of doing so in a cost-effective manner. We are strengthening our infrastructure regulatory compliance. We’ve added bench strength and increased our professional staff over the years to prepare for the implementation of FDA's expanded mandates and to better position our company with target OTP acquisitions. We’re improving our sales infrastructure. We continue expand the size and effectiveness of our sales force to strengthen distribution and merchandizing. We’re upgrading our market infrastructure to build stronger bonds and interactions with our established base of loyal consumers. With improved in-store promotional efforts targeted social media and direct mail, we’re building consumer engagement to increase trial, awareness and sales. We’re redeveloping our staff and where necessary adding professional marketing sales and purchasing personnel to further enhance VaporBeast effectiveness and efficiency in the marketplace. The goal is to deliver unrivaled customer satisfaction, do best-in-class service. Our infrastructure improvements are vitally important to drive organic growth. With regard the FDA we continue to be encouraged by comments on their new nicotine regulatory policy. Recently, Commissioner Gottlieb spoke to society for research on nicotine and tobacco. We reiterated that nicotine is delivered to products on continuum risk and cigarettes are the category of tobacco products that cause the greatest public health burden. As such the agency continues to consider policy and forthcoming regulations with this guiding principle in mind. Some of these new regulations are beginning to make their way through the rulemaking process. We are now more hopeful that the goal of improving public health can be obtained that overly constrain the industry's ability to innovate and prosper. To summarize, I’m pleased with our 2017 achievements. I'm optimistic about our future opportunities to build on our focus brands, sharpen our operations and pursue promising OTP acquisitions. I said earlier I like the highway run and our performance in 2017 shows one. We continue to build and protect the value of our brands. We delivered record sales, gross profit, operating income and adjusted EBITDA and we strengthen our capital structure. In summary, we’re enthusiastic about the future where we see fertile grounds for both organic growth and potentially transformative acquisitions. With that, I’ll turnover to Mark to review our financial highlights.

Thank you Larry and good morning again. Larry reviewed a number of high-level financial metrics. So I’ll provide some other highlights and our view of 2018. It’s been a little over a year ago since our 2017 refinancing and yesterday we amended that facility and extended its maturity. Let me highlight a few things. We simplified our credit structure by eliminating the first lien second out tranche. The first lien term loan was increased to $160 million and is priced at LIBOR Plus 325, but $50 million revolvers also priced at LIBOR Plus 325. And the second lien, it was reduced by $5 million to $40 million and is priced at LIBOR PLUS 700. This amendment produced a number of positive benefits. We’ve reduced annual interest expense by about $2 million on an interest rate risk adjusted basis. We extended the first lien facility by one year and the second lien by one and a half years. We’ve reset the amortization schedule. We eliminated the March 31, 2018 quarterly amortization payment and the 2018 excess cash flow recapture payment given us some additional short-term liquidity. And lastly, we improved our capacity to execute acquisitions. Moving to our 2017 performance, our year-over-year net sales mix continues to shift on robust NewGen growth. For the year, our segment net sales mix was roughly 30% smokeless, 38% smoking and 32% NewGen. Importantly, our margins across segments have meaningful variations principally due to the lower NewGen distribution margins. For the year smokeless and smoking gross margins were roughly 50%, while NewGen delivered approximately a 28% gross margin. As we think about our 2018 growth and beyond consumer shift out of combustible cigarettes and into vapor products will likely drive higher growth rates in NewGen as compared to our tobacco portfolio. Given our segment margin profiles we expect higher companywide gross profit dollars despite a lower gross margin percent, a trade off that benefits our company. Net sales for the quarter increased 36.7% to a record $73.6 million. This was driven by volume gains of 31.3% and price mix gains of 5.4%. Gross profit for the quarter increased $6.1 million or 23.1% to 32.3 million, largely driven by the highly successful vapor acquisitions. Gross margin was 43.9% versus 48.7% a year ago. The margin decrease is principally attributable to the mix impact from higher NewGen sales with smaller affects from both LIFO and the euro. Again, while NewGen growth has reduced our companywide margin percentages, we are very pleased with the categories impact on gross profit dollars. Consolidated SG&A expense in the quarter was $21.5 billion compared to $16.2 million in 2016 driven by the inclusion of VaporBeast and Vapor Shark’s SG&A expenses. For the quarter I'll highlight a few SG&A items. Strategic expenses including 900,000 for the Vapor Shark company stores option purchase were $1.1 million and flat two-year ago. As Larry mentioned, we made a significant investment in defending our Zig-Zag brand assets, while expensive, we are wholly committed to the efforts and are prepare to make the hard decisions necessary to defend the iconic Zig-Zag brand. In the quarter, legal costs including counterfeit expenses were 600,000 greater than the prior year. New product launch costs of a half million were 100,000 greater than the prior year. One-time bonuses totaling 100,000 were granted to non-bonus eligible employees because of the reduction in corporate tax rates and SKU rationalization expenses were 100,000. Fourth quarter cost of goods sold included another 100,000 of SKU rationalization expenses as part of our rigorous review of product profitability as evaluated against the required investment to comply with the 2018 FDA requirements, including specific warning requirements on packaging at mid-year. And new product launch cost of 200,000 compared to 500,000 in the fourth quarter a year ago. In the quarter Federal excise tax is included in the cost of goods sold totaled $4.8 million and FDA fees amounted to a 100,000. Interest expense for the fourth quarter was $3.9 million or 32% lower than the year ago period, primarily from the February 2017 refinancing. Reported income tax expense was $3.4 million for the quarter. Net income for the quarter and year was $3.5 billion and $20.2 million respectively. As a reminder, in the year ago period we had a tax valuation allowance reversal of $12.6 million that favorably impacted net income in the fourth quarter of 2016 making year-over-year performance comparisons difficult. Adjusted EBITDA increased 14.4% to a record $60 million for the year, an increased 9.6% to $14.8 million in the quarter. The weighted average fully diluted share count during the quarter was 19.7 million shares and fully diluted EPS was $0.18 per share. Absent the one-time Vapor Shark’s stores option purchase and Tax Act impacts including the adjustment to deferred taxes and the one-time employee bonuses adjusted fully diluted EPS or $0.23 and $1.08 for the fourth quarter and year respectively. Now let me discuss some non-operating drivers. Total debt at December 31, 2017 was $202 million, down $16.2 million from a year earlier. Net debt at quarter’s end was $199.4 million, a $7.3 million decreased from last quarter. We continued to improve our leverage profile despite the Vapor Shark transactions and ended the quarter within our targeted range of 2.5 to 3.5 times with a net debt to adjusted EBITDA ratio of 3.3 times. Our MSA account during the quarter produced investment income of $100,000 compared to roughly $200,000 a year ago. Net operating losses, or NOLs available to offset federal income taxes amounted to approximately $17.8 million at year end. We expect to fully utilize these NOLs during 2018. In the fourth quarter we issued approximately 16,000 shares in connection with stock options that were expiring. In the fourth quarter of 2018 another 103 options -- 103,000 options will be expiring and assuming they are exercised will modestly improve our stocks liquidity. Before I turn the call back to Larry, I’d like to take a few moments to update you on our outlook for 2018. Absent any acquisitions and net of anticipated line rationalizations we expect 2018 organic volume growth of 4% to 6% with price mix contributing another 2% to 4%. Given the stronger anticipated sales gains in NewGen and its lower margin as compared to the tobacco portfolio we would expect higher gross profit dollars and lower blended company-wide gross margins. Based upon our most current understanding of the 2018 FDA schedule, we will further sharpen our focus on key growth areas and discontinue products that they did not want the expense required to achieve FDA compliance. At present time, we've identified products for 2018 SKU rationalization and estimate these discontinuations will unfavorably impact year-over-year net sales by approximately $3.5 million. These SKU rationalizations are in addition to our 2017 eliminations, which are estimated to impact 2018 net sales by approximately 600,000. We anticipate an inventory charge of approximately 1 million in the first quarter of 2018. We anticipate that the California tax on MYO cigar wraps will continue to impact year-over-year state volumes through the second quarter offset by some degree by increased volumes and adjacent states and new product and promotional initiatives. 2018 SG&A expense as a percentage of net sales are projected to be in the 25% to 27% range. With our recent acquisitions our business has got more complex and in 2018 we’ll be modifying our allocation methodology for SG&A by spreading corporate support function expenses across our three segments based upon their net sales contribution in each quarter. Of course all direct expenses will continue to remain in the appropriate segment. As a reminder, we manage the business to maximize gross profit contribution by segment and control total company SG&A expenses to meet the demands of the business. As such we only evaluate operating income contribution at the total company level. We expect interest expense for 2018 to be $14 million to $15 million which incorporates the current Fed outlook and hedging a portion of our debt. Based upon the previously discussed refinancing we anticipate a loss on the extinguishment of debt in the first quarter of approximately $2.4 million. We expect an effective income tax rate of 26% to 27%, net operating losses of $17.8 million are expected to be available to offset federal income taxes into the third quarter. So this year we will become a federal tax cash payer. And lastly, capital expenditures for 2018 are expected to be in the $2 million to $3 million range including the one-time expenditures associated with logistics efficiency and integration of the Vapor Shark e-liquid manufacturing and distribution facility relocation. With that, I'll turn the call back to Larry for closing comments. Larry?

Thanks Mark. Our 2017 performance solely positioned us for the opportunities of 2018 and beyond. We continue executing our strategic plan and successfully strengthening our organization with concrete results. In smokeless, Stoker’s MST and Stoker’s chew both share in highly competitive all tobacco market, ramifications of double-digit. Smoking, Zig-Zag cigarette papers and MYO cigar wraps continue to perform at market-leading levels, well-positioned to benefit from the developing Canadian marketplace. NewGen, VaporBeast process improvements resulted in larger and more frequent customer orders delivering robust sales gains, improve share of customer requirements. And our Vapor Shark, our focus efforts have produced strengthening sales trends in both the corporate and franchise stores. Plus most importantly our 2017 operating performance as measured by net sales, gross profit, operating income and adjusted EBITDA each established new company records. Plus setting new company records across the board is a special reward. It simply raises the bar and establishes new hurdles and goals. We’re not a group that's easily satisfied. I work with a great team at TPB and we intend to aggressively pursue growth opportunities including acquisitions to maximize long-term shareholder value. Thank you for participating in the call today. And with that I’d like to open up the call to questions.

Hi, everyone. This is Brian on behalf of Vivien.

Hey, Brian.

Good morning, Brian.

Sort of quick one on MST, so given the commentary across category interplay we heard from Altria in this past quarter. What really do you guys believe Vapor is having on the broader industry decel in MST?

Brian, that’s the question that we get from Vivian, fairly often. I think my personal belief is that cigarette – putting cigarettes aside which is a totally different experience. The consumer response to Vapor and MST is somewhat similar, but it's a very different activity and very different consumption pattern. And well, I think on the margin there probably is some interaction. I'm not sure how great it is. I don't -- I'm in the camp where it’s not as large as what Altria mentioned on the call.

Great. Really helpful.

Our next question is from Susan Anderson with B Riley FBR. Please go ahead.

Hi. Good morning. Thanks for taking my question. I was wondering if you could talk about the Vapor Shark stores. Is there opportunity there to grow though, there are just – these really again just be used for a consumer insight. And then are there more operational efficiencies you think you have left in the stores?

Yes. We actually were surprised a little bit by the improvements we’re able to make in those stores. We think that the Vapor Shark brand can be fairly significant in the retail space both through franchising and to some small -- much smaller degree in terms of the company-owned stores. We do believe that we can continue to impact the operations of the store, and I think that the cost of the acquisition would be actually a very attractive multiple as we go forward.

Great. And then, last one on, the Stoker’s can rollout. I think you guys said you’re in 25% of the outlets out there. Where do you think that 25% number could go? And would you expect similar growth in 2018 and/or additions?

Look. Let me just to be clear about this. I’m personally insulted that we have not been able to get into a 100% of the stores. We’ll continue grind away at it. The available store set in a lot of -- particularly the chain convenient stores is really small. We’re working at it. We’ll continue to expand our distribution. We have gone outside and hired a couple of the salespeople to further accelerate those efforts. We expected to be talking about this in the next couple of quarters, the progress we've made in expanding particularly in chain environment. We think Stoker's got a long platform for growth.

Great. Thanks so much. Good luck next quarter you guys.

Thanks, Susan.

[Operator Instructions] And at this time, I'm showing no additional questions. So I would like to turn the floor back to Mark Stegeman for any closing remarks.

Thanks, Austin. Appreciate everybody's time on the call today. And let us know if you have any follow-up questions. Thank you. Have a great day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.