Oxford Industries Inc. (OXM) Q1 2022 Earnings Call Transcript

Oxford Industries Inc. (NYSE: OXM) Q1 2022 Earnings Conference Call Jun. 08, 2022

Corporate Participants:

Jevon Strasser — Investor Relations

Tom Chubb — Chairman, Chief Executive Officer and President

Scott Grassmyer — Executive Vice President, Chief Financial Officer and Chief Operating Officer

Analysts:

Dana Telsey — Telsey Advisory Group — Analyst

Susan Anderson — B. Riley — Analyst

Tracy Kogan — Citigroup — Analyst

Presentation:

Operator

Greetings. Welcome to the Oxford Industries, Inc. First Quarter Fiscal 2022 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded.

I’ll now turn the conference over to your host, Jevon Strasser. You may begin.

Jevon Strasser — Investor Relations

Thank you, and good afternoon. Before we begin, I would like to remind participants that certain statements made on today’s call and in the Q&A session may constitute forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not guarantees and actual results may differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results of operations or our financial condition to differ are discussed in our press release issued earlier today and in documents filed by us with the SEC, including the risk factors contained in our Form 10-K. We undertake no duty to update any forward-looking statements.

During this call, we will be discussing certain non-GAAP financial measures. You can find a reconciliation of non-GAAP to GAAP financial measures in our press release issued earlier today, which is posted under the Investor Relations tab of our website at oxfordinc.com.

And now, I’d like to introduce today’s call participants. With me today are Tom Chubb, Chairman and CEO; and Scott Grassmyer, CFO and COO. Thank you for your attention.

And now, I’d like to turn the call over to Tom Chubb.

Tom Chubb — Chairman, Chief Executive Officer and President

Good afternoon, and thank you for joining us. We are pleased to be reporting an incredibly strong start to fiscal 2022. Scott will provide additional detail in a moment, but here are some of the highlights.

Before I jump in, I want to pause to thank our incredible team for all that they do. Five consecutive quarters of record earnings do not happen on their own. Each of our happy, upbeat lifestyle brands, Tommy Bahama and Lilly Pulitzer as well as Southern Tide, The Beaufort Bonnet Company and Duck Head, which comprise our newly designated Emerging Brands Group, achieved exceptional results in the first quarter of 2022.

All three operating groups posted strong sales and operating profit growth over 2021. On an adjusted basis, our consolidated first quarter sales of $353 million, operating margin of 22% and EPS of $3.50, which was an 85% increase over last year’s record first quarter EPS of $1.89, all outperformed expectations. While a terrific quarter for all, the biggest contributor to our record earnings was the performance of our largest brand, Tommy Bahama, where sales grew 46% versus 2021 to $228 million and adjusted operating margin increased by nearly 1,000 basis points to 23%.

We continue to focus on the execution of our strategic priorities that I laid out at the beginning of the year, which drive both our performance to-date and optimism for the future. Our brands are at the core of our business and we remain acutely focused on brand positioning and voice to remain true to who we are. While each brand has a unique DNA, inspiring optimism and aspirations for happiness is paramount across the portfolio. This can be seen particularly through enhanced creative and digital marketing efforts, which are driving tremendous success.

The effectiveness of our marketing efforts can be further evidenced by the 2.2 million active customers we had at the end of the quarter, an increase of over 20% relative to pre-pandemic levels. In addition to our relentless focus on the health of our brands, delivering A-plus product, A-plus distribution and A-plus communications continues to further drive our performance. From a product perspective, we are rolling out new offerings to capitalize on consumers’ return to social events, leisure travel and even the more casually attired post-pandemic physical workplace.

Tommy Bahama is winning and gaining share through women’s apparel. The category continues to grow faster than even our men’s business, with particular strength in dresses and swim. The St. Lucia and diamond clip Jacquard Tier dresses brought newness, alongside the continued strength in the Two Palms Ruffled linen hero franchise. Further, we cater to the continued easy-to-wear trend through innovative fabrications like the IslandZone franchise’s Aubrey performance fabric, which has established itself as a platform fabric. In the men’s line, we have also waned in a performance-oriented styles with the IslandZone collection comprising approximately one-third of Tommy Bahama men’s business, including the Palm Coast Polo and the chip short and new arm collar [Phonetic] shorts.

At Lilly Pulitzer, we are leaning into one of the brand’s long-term competitive advantages and winning in the social dressing category, as weddings and special events are back in full swing. These categories are driving business towards higher-priced tiers such as the Poly Midi dress, and especially popular event piece. We also play to the trend towards linen with continued innovation, introducing the light and airy machine washable lagoon linen. Also, our Luxletic activewear collection continues to grow on the foundation of fabric platforms such as the Meryl Nylon and Fairway Performance Twill.

On the distribution front, our mix among our brands continues to shift towards higher margin direct-to-consumer channels, which comprise a larger portion of our total revenue than they did prior to the pandemic. While direct-to-consumer continues to grow at a faster pace and is by far the largest part of our business, our wholesale business is very healthy and poised to grow at a modest rate over the coming years. We have outstanding wholesale partners with whom we are aligned on how to present and sell our wonderful brands. This enables us to have a wholesale business which is mutually profitable for both us and the retailer and exhibits our brands in an elevated way to consumers who we might otherwise not reach.

Our retail footprint continues to expand as well. In April, we enhanced Lily Pulitzer’s presence in the Southeast with the opening of a new location in Alpharetta, Georgia’s Avalon community. In May, we were delighted to open our second, the Beaufort Bonnet Company store in Kiawah Island and a new Southern Tide store in Cary, North Carolina’s recently launched Fenton project.

We continue to invest in our premium bricks and mortar footprint with leases secured for two additional Southern Tide stores in Florida and a new Lilly Pulitzer store in Charlottesville, Virginia, slated to open later this year. On top of that, we will continue to build on the success of the Marlin Bar concept with committed deals in Palm Beach Gardens and Winter Park, Florida, slated for fiscal ’23 openings and others in the pipeline.

In order to maintain our competitive advantage in communications in a rapidly changing media environment, we continue to invest in people, processes and systems. We are focused on improving our capabilities to identify prospective audiences, connect with our existing customer base, deliver targeted messages and assess and refine these efforts to attract new customers, retain our existing customers and increase overall spending. We have made much progress in this area over the last several years and are excited about the projects that we have underway to continue to enhance these capabilities.

From a creative standpoint, we are very focused on creating aspirational messages that evoke and I want to be there wearing that product moment for our customers. A look back at some of the recent messaging we have had at Tommy Bahama provides some excellent examples of how we are doing this, particularly with regard to our female customers. Female customers are responsible for buying more than half of all the men’s product and substantially all of the women’s product that we sell. Our increasing effectiveness in reaching these female shoppers in Tommy Bahama is a large part of our recent success.

We also continue to invest in our omni-channel capabilities. The shift from store capability that we went live within Tommy Bahama during the third quarter of 2020 has been an unmitigated success. This allows us to satisfy more customers do more business on less inventory, achieve higher full price sell-throughs and ultimately higher margins. As successful as our ship-from-store capability has been so far, we believe there is still more opportunity to capitalize on this capability as we continue to refine our processes.

In our emerging Southern Tide retail operations, we recently and successfully launched ship-from-store capabilities that we will continue to enhance and grow as the Southern Tide retail footprint expands. In Lilly Pulitzer, we have had ship-from-store capabilities for a number of years, but currently have a very exciting project underway that will significantly enhance those capabilities and should go-live sometime next year. Additionally, we are using clienteling tools to merge the digital and retail experiences for Lilly Pulitzer customers.

Operationally, we are focused on managing inventory and optimizing our supply chain. We have the appropriate inventory levels to support our planned growth for this year. Additionally, we are seeing benefits from implementing platform fabrics such as the previously mentioned Tommy Bahama Aubrey and Lilly Pulitzer Meryl Nylon and Fairway Performance Twill collections, which bolster inventory management and profitability. Such platforms speed up the product development process, allow us to buy in higher quantities and defer the point of differentiation until later in the process.

The momentum that we created has continued into the early part of the second quarter and we have outstanding plans to deliver double-digit top and bottom line growth with operating margin expansion for the year. We look forward to updating you on the progress of all these plans as well as our results as this year progresses.

I’ll now turn it over to Scott for more detail about first quarter results and our forecast for the remainder of the year. Scott?

Scott Grassmyer — Executive Vice President, Chief Financial Officer and Chief Operating Officer

Thank you, Tom. Our operating groups executed exceptionally well during the first quarter 2022 and delivered record performance, as Tom mentioned earlier. A strong start to the year was driven by growth across all brands and channels, supported by outstanding trends in customer count, retail traffic and average transaction value.

In the first quarter of fiscal 2022, consolidated net sales were $353 million, a 33% increase over last year’s first quarter net sales of $266 million, which included $12 million of sales from Lander Apparel. Our full price e-commerce business grew significantly up 20%. On the bricks and mortar front, we saw full price retail growth of 51%, driven by comp store increases. Performance of our food and beverage locations was strong as well, with 23% growth over last year.

Our first quarter adjusted gross margin was 64.5%, compared to 64% in fiscal 2021. This 50-basis point improvement was fueled by a shift in sales mix towards full price, direct-to-consumer channels and higher Amos, particularly an innovative new performance offerings. Almost 100 basis points of higher freight cost, including the use of air freight, partially offset some of the margin improvement.

Our operating margins increased 700 basis points on an adjusted basis to 22% of net sales, driven by improvements in gross margin and leverage within SG&A, which decreased to 45% of sales versus 51% last year. All three of our operating groups achieved year-over-year operating margin expansion. Tommy Bahama had especially impressive profitability trends with a 990-basis point operating margin expansion compared to last year.

Our business is supported by our very strong balance sheet. Here are some highlights. We ended the quarter with inventory in excellent shape to support planned growth. On an as-reported LIFO basis, inventory increased 13% to $123 million at the end of the first quarter compared to $109 million in the prior year. On a FIFO basis, inventory increased by 18%. We believe our inventory levels are well-aligned with our projected revenue growth.

Our liquidity position is strong with no debt and $166 million of cash and cash equivalents and short term investments at the end of the first quarter of fiscal 2022. Trailing 12-month operating cash flow was $179 million, with capital expenditures of $36 million, resulting in an $143 million of free cash flow. The strong cash flow allowed us to return $80 million to shareholders via share repurchases and dividends in the last 12 months.

To-date, we have repurchased approximately 800,000 shares for $70 million, representing nearly 5% of our shares outstanding since the December announcement of our Board’s new share repurchase authorization. We are pleased with the results of our repurchasing program to-date. I am also pleased to share that our Board of Directors declared a dividend of $0.55 per share.

I’d now like to walk you through our projections for the remainder of 2022. Our significant beat in the first quarter and the momentum we’ve seen so far in the second quarter give us confidence to raise our sales and EPS guidance for the year. Although last year’s COVID recovery will make brick-and-mortar comps more difficult as 2022 progresses, we expect to continue building on the momentum we’ve established so far this year.

Our e-commerce business is expected to continue to expand, driven by our enhanced digital capabilities, focused on new customer acquisition, retention and increased spend. Our physical locations are seeing strong traffic and we anticipate year-over-year sales growth in all regions. Our strategic positioning de-emphasize direct-to-consumer channels, which represent 80% of our business has enhanced our continued ability to execute well within a disrupted supply chain as our talented merchandising teams continue to create compelling assortments on our sites and retail floors as product gets available.

Our ability to navigate supply chain challenges, along with our product innovation, are also driving a robust forward order book in our wholesale channel for 2022. For the year, we expect modest gross margin expansion. As we continue to see the benefits of higher Amos, partially offset what we expect to be a somewhat more promotional environment. For the year, we expect modest SG&A leverage, driven by the significant leverage in Q1 despite inflationary cost pressures, including a challenging labor market.

Putting together these dynamics, we expect to deliver double-digit top and bottom line growth with operating margin expansion for the year. Second quarter sales are expected to increase from $329 million, which included $8 million of Lander Apparel, to a range of $350 million to $370 million, reflective of strong quarter-to-date results in both direct and wholesale channels.

Full-year sales are now expected to increase to a range of $1.285 billion to $1.325 billion, up from our prior range of $1.245 billion to $1.285 billion and compared to $1.142 billion in fiscal 2021, which included $25 million of Lander Apparel. The increased sales guidance for the year reflects double-digit increases in our direct-to-consumer business and a healthy wholesale order book. Particularly, strong sales increase in Q1 is expected to moderate to high-single to low-double-digit increases in the later quarters.

Our effective tax rate for fiscal 2022 is expected to be between 24% and 25%. On an adjusted basis, we expect EPS in the range of $3.30 to $3.50 in the second quarter of fiscal 2022 compared to $3.24 last year. For the full fiscal year, we now expect adjusted EPS in the range of $9.60 to $10, up from our initial guidance range of $8.75 to $9.15 and compared to $7.99 in fiscal 2021.

Thank you for your time today. And we’ll now turn the call over for questions. Chumali?

Questions and Answers:

Operator

Thank you. [Operator Instructions] Our first question comes from the line of Dana Telsey with Telsey Advisory Group. Please proceed with your question.

Dana Telsey — Telsey Advisory Group — Analyst

Thank you. Congratulations, everyone. What a terrific quarter and a great outlook.

Tom Chubb — Chairman, Chief Executive Officer and President

Thank you, Dana.

Dana Telsey — Telsey Advisory Group — Analyst

As you think about the current environment and what you’re seeing with prices and what we’re hearing about wholesale order directional changes and then becoming more conservative, how are you planning AUR on price increases? The freight costs look like you went to 100 basis points this quarter from 160 last quarter. Under the hood, how are you thinking about the puts and takes of gross margin and SG&A? Then I just have a question about the brand. Thank you.

Tom Chubb — Chairman, Chief Executive Officer and President

Well, I’ll let Scott elaborate on this in a little bit, but I think that generally we feel pretty good about where that’s going to come out. As we mentioned, I think, in the March call, we did some pricing that took effect on the first quarter. We’ll have more that kicks in over the next couple of quarters. And in terms of maintaining or improving our initial mark-ups, I think we’ve done a pretty good job of staying ahead of some of the cost pressure. We will probably see some level of promotional activity creeping back into the marketplace. As you know, last year, the marketplace, in general, was much cleaner than it usually is, and we were just as non-promotional as we’ve ever been. So we’d probably get a little pressure from that.

And then, the freight, as you’ve highlighted, has — some of that headwind has started to decrease in intensity a bit. And I think that’s a potential pickup that we have going forward as well. Scott, do you want to fill in some of the blanks?

Scott Grassmyer — Executive Vice President, Chief Financial Officer and Chief Operating Officer

Yeah, yeah. On the freight, second quarter might be a little bit of a headwind because we didn’t have a lot in the second quarter last year. But in the third and fourth quarter, it’s easing compared to the prior year. Also, the way we’ve moved some merchandising calendars, we think we can avoid the degree of airfreight that we had to do in the second half of last year.

And then, as far as SG&A as a percent of sales, it will probably level off or maybe be a little higher in the last three quarters than the prior year as a percent of sales, but we do expect robust growth. And we do have some inflationary pressures, particularly with things like labor that we’re combating that will — but — and then as Tom mentioned, gross margin was — we think we’ve gotten ahead of the input cost increases and should still have higher Amos throughout the year.

Dana Telsey — Telsey Advisory Group — Analyst

Got it. And then, the flash sale movement to this quarter, what’s the impact on that on, I think, inside of the second quarter or the third quarter? How are you thinking about that going forward? And then, the Marlin Bars look like they did very well. What — I think one opening this year, what are you expecting for that?

Tom Chubb — Chairman, Chief Executive Officer and President

Yeah. So, on the flash sale, philosophically I’ll let Scott talk about what the dollars will look like possibly for the rest of the year. But philosophically, the idea behind the movement in the flash sale was really to mix it up a little bit. As you know, Dana, during the — really 2020, during the height of the pandemic and then last year, we kind of mixed up our game a little bit, tried some different things. We like it. I think our consumer really likes to be surprised a little bit and we like to be a little less predictable with some of that stuff. So, that $7 million was really a movement and the timing as much as anything. We will still have an August flash sale and then a January flash sale.

Scott, do you want to fill in some of the numbers?

Scott Grassmyer — Executive Vice President, Chief Financial Officer and Chief Operating Officer

Yeah, yeah. Last year, we did not do any in the first half of the year, but had about $19 million in the third quarter, but we have a lot less inventory where you’d fall to a higher inventory level. So, we still expect that there are quarter flash sale, but probably a little bit above last year’s flash sale even though we did an additional sale. And then, the fourth quarter, so we’ll have one in January. And right now, we think it will be pretty flattish with last year. We did $13 million last year, and we’ll be somewhere in that range this year in our January sale.

Dana Telsey — Telsey Advisory Group — Analyst

Got it. Two quick last things. One is, on the categories that you’re selling, are you flexing? It sounds like the dresses and you’re flexing into along with men’s and swim, anything to note on categories and how maybe the athleisure trend is trending for you? And then — for you, Tom. And then for Scott, typically the second quarter operating margin, even if you look in the past before 2019 is higher than the first quarter.

Any thoughts behind that or how you’re thinking about it? Thank you.

Tom Chubb — Chairman, Chief Executive Officer and President

Okay. Thank you very much, Dana. And I’ll tackle the category shift for you. And as you would expect, really across the whole enterprise, we’re shifting into more dressier, more structured kind of categories. So, in Lilly Pulitzer, we’re probably selling less leggings than we were last year, but more occasion dresses than we were last year. And that’s actually good because it’s moving the average unit retail up without really a price increase, but just the shift in the mix is helping drive a higher AUR, which is great to see.

We’re seeing a similar thing in Tommy Bahama. And the best example maybe is in men’s where we’ve seen huge growth in wovens, which are a fairly pricey category for us and a very key category for us. And while everything — I think every significant category in Tommy Bahama grew during the quarter, we really saw a lot of that dollar increase was coming through wovens which is a positive.

Then in terms of the athleisure wear, some of those trends, you would think, would be slowing down the more performance-driven product, but that’s not really true. Performance product has continued to grow in both Tommy and Lilly. The mix of that product has changed a bit. So, for example, in Lilly, as I mentioned, the leggings maybe have slowed down a bit, but we’re doing really well with some of the tennis and golf-type items. And I think what you’re seeing is that as people, as we said, return to travel, social events and even going back to the workplace, which is more casual than it’s ever before and our brands or more appropriate than they’ve ever been before for the workplace. We’re getting a lot of pickup from all of those things.

Scott Grassmyer — Executive Vice President, Chief Financial Officer and Chief Operating Officer

As far as the operating margins, first quarter, we had great expansion. And our wholesale business is healthier, and Q1 is a big wholesale quarter as you ship in initial spring. Also, our women’s business at Tommy has gotten very, very strong and that tends to be a strong first quarter business. Second quarter, we think, will still be a strong quarter, but I think first and second on an operating margin are coming a lot closer together than they have been in the past. Second quarter has always been a big Father’s Day quarter for Tommy and it will continue to be, but I think we’ll see pretty similar operating margins in Q1 and Q2.

Dana Telsey — Telsey Advisory Group — Analyst

Got it. Thank you.

Tom Chubb — Chairman, Chief Executive Officer and President

Thank you, Dana.

Operator

Our next question comes from the line of Susan Anderson with B. Riley. Please proceed with your question.

Susan Anderson — B. Riley — Analyst

Hi. Nice job on the quarter and thanks for taking my question. I don’t know if you could maybe just talk about Southern Tide stores there, how those are performing versus your expectations. And then, I’m curious if you’re seeing any difference in that consumer given, I think it’s a little younger than other two brands and maybe a little bit more impacted by inflation. Just curious if you’re seeing any difference? And then I have another question. Thanks.

Tom Chubb — Chairman, Chief Executive Officer and President

So with respect to the performance of the stores, I would say that we’re very happy with what we’re seeing there. We’re up to five as we called out in the call script, where we’ve got a couple more that are in the works to open hopefully, before too long. So we like what we’re seeing there. It’s still a new operation, we’re learning a lot. I mentioned in the prepared remarks that we just recently launched ship-from-store capabilities, which just enhances the overall value of those stores to our operation.

And bottom line, we like them a lot. And then, in terms of the consumer and any differences there. I think it’s a similar economic demographic that we’re tracking there. Actually a lot of our younger Southern Tide consumers, it’s probably their parents that were paying for it, not them. So, the response of the consumer to the current conditions has really been pretty similar. And you saw that the emerging brands grew, posted a — they had a great quarter too. They’re the smallest of our three reporting segments now, but they had a terrific quarter as well. And the biggest piece of that is Southern Tide. But I’ll tell you that all three brands had a great quarter. As we mentioned in the prepared remarks, when you look at the quarter, all brands and all channels of distribution were up year-over-year, which is pretty impressive to be in that position.

Susan Anderson — B. Riley — Analyst

Great. That sounds good. Thanks for all the details there. And then, lastly, it sounds like you expect all of the regions to be up this year, which is good to hear. So, I’m just curious if you could talk about maybe the performance in the north now or the regions that underperformed last year, what you’re seeing there? And then also, it sounds like Florida and stuff has continued to be strong, if you could talk about that. Thanks.

Tom Chubb — Chairman, Chief Executive Officer and President

Yeah. That’s a great question, Susan. And we are seeing really, I think, all the regions pretty much on a year-to-date basis are up, which is good to see. So, those regions that lagged a little bit and coming back to life, the Mid-Atlantic, the Midwest and the Northeast are all positive and coming back to life and growing pretty nicely, which is great to see.

At the same time, the regions that have really been the strongest through since the beginning of the pandemic, particularly Florida and Texas, they’ve just been — it’s unbelievable. They just have remained very, very strong. And I think a lot of what’s happening, particularly in our two big brands, Tommy and Lilly, that have a lot of presence in Florida, is that — a lot of their customers are really, they’re relocated to those places. And so, for them what previously maybe was a warm weather or vacation brand is really becoming a year-round brand for them when they relocate from the Northeast to somewhere in Florida. And that’s more good news for us, to be honest.

Susan Anderson — B. Riley — Analyst

Great. That sounds good. Good luck for the rest of the year.

Tom Chubb — Chairman, Chief Executive Officer and President

Thank you, Susan.

Operator

And our last question comes from the line of Paul Lejuez with Citigroup. Please proceed with your question.

Tracy Kogan — Citigroup — Analyst

Thanks. It’s Tracy filling in for Paul. I had a couple of questions. I guess, the first is on inventory. Maybe if you could give us a sense of where it is by brand and if there are any areas, if you were more constrained at one brand versus the other this quarter and if you thought you missed sales because of supply chain constraints. And then, the second question is just on the drivers of that the comp increase at retail in the first quarter where I was wondering if it was primarily ticket, an AUR driven or, just what your traffic looked like in the first quarter. Thank you.

Tom Chubb — Chairman, Chief Executive Officer and President

Do you want to tackle [Phonetic] the first part?

Scott Grassmyer — Executive Vice President, Chief Financial Officer and Chief Operating Officer

Yeah, yeah. Inventory, each brand was up some. But as you mentioned, last year was a little bit lower than ideal. And this year, with supply chain things, I’m sure there’s some sales miss, but that’s being 80% derived at very compelling well-merchandised packages [Speech Overlap] on the side. So, I don’t think we missed a lot of sales, but there are some pockets where may be some late inventory we had and had the floor, we might have had some opportunity. But we feel good about our inventory.

As we’ve talked about with some of the systems we have now, we believe we can do more sales with less inventory. And I think that’s showing through that our inventory levels now on a FIFO basis are no higher than ’19 levels and we’re doing a lot more business on that inventory. So, we feel good about our inventory. We are bringing some goods in earlier. We’re still looking at some maybe gift on our books a little bit earlier as we reacted to some supply chain things by placing orders earlier. But any time, you don’t get everything you want exactly when you want it. You might be missing some sales, but being 80% direct, you can mitigate a lot of that.

Tom Chubb — Chairman, Chief Executive Officer and President

And then, Tracy, in terms of what’s driving the increase in the direct-to-consumer, it’s primarily traffic, a bit of AUR increase as well with a lot of that AUR increase actually coming from as we talked about, the mix of product and the skewing maybe to some more expensive items, plus a little bit of price increase getting in there from like-for-like. And that’s really been true across the big brands, but the smaller brands as well, Duck Head, Beaufort Bonnet and Southern Tide.

Tracy Kogan — Citigroup — Analyst

Got it. Thanks very much.

Operator

We have reached the end of the question-and-answer session. I’ll now turn the call back over to Tom Chubb for closing remarks.

Tom Chubb — Chairman, Chief Executive Officer and President

Okay. Chumali, thank you very much and thanks all of you for your interest. Enjoy your summer and we look forward to talking to you again early September.

Operator

[Operator Closing Remarks]