Earnings Call Transcript - DXLG Q1 2022

Operator, Operator

Good day and thank you for standing by. Welcome to the Q1 2022 Destination XL Group Incorporated Earnings Call. At this time all participants are in a listen-only mode. After the speaker’s presentation there will be a question-and-answer session. I would now like to turn the conference over to our speaker today, Shelly Mokas, Vice President of SEC and Financial Reporting. Please go ahead.

Shelly Mokas, Vice President of SEC and Financial Reporting

Thank you, Tanya, and good morning, everyone. Thank you for joining us on Destination XL Group’s first quarter fiscal 2022 earnings call. On our call today is our President and Chief Executive Officer, Harvey Kanter; and our Chief Financial Officer, Peter Stratton. During today’s call, we will discuss some non-GAAP metrics to provide investors with useful information about our financial performance. Please refer to our earnings release, which was filed this morning and is available on our Investor Relations website at investor.dxl.com for an explanation and reconciliation of such measures. Today’s discussion also contains certain forward-looking statements concerning the company’s sales and earnings guidance and other expectations for fiscal 2022. Such forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from those assumptions mentioned today due to a variety of factors that affect the company, including, but not limited to, the crisis in Ukraine, supply chain disruption, labor availability and disruption from COVID-19. Information regarding risks and uncertainties is detailed in the company’s filings with the Securities and Exchange Commission. I would now like to turn the call over to our CEO, Harvey Kanter. Harvey?

Harvey Kanter, CEO

Thank you, Shelly, and good morning, everyone. I’m thrilled to speak with you today about our first quarter results and the progress we’re making against our goals and objectives this year. Our earnings call covered a lot of ground regarding our 2022 strategic plan. Today’s remarks are purposely briefer and meant to provide a higher level update on our progress to date, as well as a preview of what is to come. We truly value the engagement both on these calls and with the investor community, and respectfully want to ensure ample time for follow-up questions and further discussions. If you recall, during our last call in March, I spoke about DXL’s transitioning from playing defense to playing offense and we have continued that disciplined attack, with the business results thus far exceeding our expectations in top line sales and bottom line earnings. DXL’s Q1 results speak to the growth mindset in action. We grew at the higher end of our expectations. We believe that our message is resonating with consumers all without having to rely on the coupon crutch or discounting. Our comp sales are strong, our inventory position is improving, our customer file is growing and our markdown rates are declining, which in turn means that our margins are improving. We’re transitioning from messaging once focused on discounting. It continues to be replaced by the DXL difference, with new customers drawn to the combination of fit, assortment and an experience that is unique to DXL, finding that we fit his body, fit his life and fit his style, rather than just purely selling at. We haven’t evolved to engaging with, elevating our extensive and often exclusive assortment with an experience that empowers the big and tall customer to look and feel his best. Big and tall is all we do and we are proud to both be it and to do it. Our team has an incredible passion for serving the big and tall community and DXL is truly honored to be a part of his life. These messages, including greater levels of size inclusivity and representation along with an amplified focus on fit, resonate with customers and in turn resonate with our financial results. Shifting gears, there are multiple areas I would like to discuss today: first, our marketing investments and the impact on new customer acquisition and 2022 retention initiatives; second, updates on our markdown results and brand positioning; third, a product review, including our big and tall essentials line, our inventory status and category of performance; and finally, updates on how we are proactively addressing challenges in our supply chain and in the labor market. After that, I will turn it over to Peter, who will take you through the first quarter financial results. As we continue our discussion today, you will hear themes that undoubtedly sound familiar from our previous earnings calls and commentary. These are not meant as repetition for repetition's sake, but as evidence of consistent alignment in market strategy for our employees, our business prospects and for you, our investor base. Before diving into these topics, I want to extend my deepest thanks to our employees. As much as we hoped 2022 would see a return to normal, it is clear that we’re in the midst of our third abnormal year in a row. Throughout these challenging times, which include a lean labor market, DXL employees demonstrate consistent commitment and dedication to our customers and are a critical part of our mission. I couldn’t be more proud of the passion that each and every employee shows, navigating through daily challenges that can often feel overwhelming while never losing sight of who we are and what we do for our customers. To all our employees in the stores, in the distribution center, in the guest engagement center and in the corporate office, thank you. Thank you for all your hard work to support the initiative and your continued dedication every day, every hour. Now, I’d like to discuss our marketing investments and their impact on customer count. On our last call, I mentioned that we were initially planning our annual marketing spend at 6% of sales. Based on the momentum so far this year and the continued opportunities in both new-to-file customer acquisition and market share, we are increasing that marketing investment further to 6.2% of sales. We constantly evaluate our marketing spend levels and optimize our marketing media mix with greater levels of investment in digital marketing channels. As previously mentioned, we are on offense and operating with a growth mindset and we will invest to maximize opportunities that grow share of mind, share of hearts and wallets to expand share of market by driving consumers to discover and engage with DXL. As we have increased our digital investments, we are also laser focused on measuring their impact and the efficacy of the spending. To do so, we have conducted matched market testing to determine the investment impact, not just on dxl.com but on our brick-and-mortar business as well. Without getting into too much detail, the test and control markets revealed measurable impact on omnichannel traffic and sales, further reinforcing DXL’s digital transformation and our investment strategy, while also corroborating our omnichannel view and strategic execution. DXL’s repositioning and opportunistic, but disciplined and analytically grounded mindset to marketing investments have contributed to positive results across key customer count metrics in Q1. For example, our overall active zero-month to 12-month customer counts are the highest they’ve been since the company began tracking that metric. In addition, we are simultaneously driving accelerated new customer acquisition within both DXL’s owned retail channels and participating marketplaces, including Amazon Marketplace and Target Plus. This combined traction of greater new-to-file growth across all DXL distribution channels and consumer touchpoints have led to this quarter delivering the single greatest new customer acquisition levels versus any previous Q1 for at least the last five years. While DXL’s new-to-file momentum is notable, we are also strategically focusing on how we engage, activate and retain customers once they are in our marketing funnel. To further this, as mentioned in previous Q4 earnings call remarks, we are focused on two key initiatives in 2022. The first is revamping our loyalty program, which will evolve from a basic cash-back strategy and structure to a meaningfully more robust program that rewards engagement-based behaviors with DXL while also ensuring greater recognition and rewards for our most valuable customers. The second is the launch of a customer data platform or CDP, which will enable greater levels of personalization and customer journey optimization. By consolidating multiple sources of data into one single source of truth, we are focused on unlocking deeper predictive analytics and modeling, as well as downstream targeting based on various customer behaviors and data points that go significantly deeper than our current technology architecture allows. Both the loyalty program relaunch and the CDP are on track and continue to make progress, and both will create tangible customer and business impact for the second half of the year. The investments that DXL is making in marketing, loyalty and customer data are truly indicative of our action-oriented commitment to growing the business and capitalizing on both current momentum and the immense opportunity ahead. As you’ve heard me mention before, DXL has been on a repositioning journey since my very first day with the company back in 2019. One of the most significant changes we made to our business model since late 2020 has been reduced reliance on promotions and discounting, and this has continued in 2022 and is intended to carry on for the foreseeable future. Through Q1, I’m happy to report that we have nearly eliminated promotional marketing tactics as the driving force behind sales, a drastic departure from the company that consistently featured an offer almost every day in any email when I came aboard. To translate these words into tangible numbers, our first quarter margin improved by over 400 basis points versus Q1 2021, which was driven primarily by fewer markdowns. Furthermore, the percentage of first quarter revenue driven by a coupon or promotion was approximately 50% lower than the first quarter of 2019, essentially indicating that our coupon and discounting niche has been cut in half since our last normalized year. This substantial shift away from promotions has opened up significant messaging and engagement opportunities, which brings us to the three key pillars of DXL: first, fit; second, assortment; third, experience. You have heard me talk about each pillar before, but I wanted to reference them again as proof of a consistent and aligned strategy at DXL. To state it simply, we have unique expertise in creating clothing that fits; we offer the largest and often exclusive assortment of brands, sizes, and price points; and we have created an experience rooted in respect for a customer base that often feels underserved by other retailers. That is the DXL difference. Beyond marketing and brand positioning, I want to provide you with an update on our new big and tall essentials line. As a reminder, we exited our wholesale business with Amazon at the start of the year, but we continue to offer a robust line on Amazon’s Marketplace channel. Within our current Marketplace channels, which include both Amazon and Target Plus, we offer big and tall essentials by DXL, which essentially is a lower price point product targeted towards price-conscious consumers, but is not available within DXL’s own channels. We do not anticipate cannibalization of our main DXL line of business due to the differences in price point, value, and the distribution channel itself. Thus far, we’ve seen a strong response within Amazon Marketplace, which has emerged as another area for increased digital marketing investment, focused on driving more traffic and greater brand awareness within moderate and lower moderate price point offerings. Similar to new-to-file and margins, DXL’s inventory position has also improved, although we are still managing supply chain challenges and shortages in specific categories. The return of events including weddings and formal occasions this spring has driven significant improvements in the tailored clothing business, which went from 12% of Q1 revenue last year to 18% of Q1 revenue this year. This growth exceeded expectations with strong growth particularly in suits and dress shirts, including fashion colors and patterns, and we are well positioned from an inventory standpoint to capitalize on the upcoming summer event season. The sportswear business also showed strong results in both private label and collection brands. Despite supply chain challenges causing delays in several key designer collections, we are now returning to a fully assorted inventory position leading into Father's Day. The strong Q1 sales performance, despite the delayed deliveries, bodes well for our second quarter performance. Within the supply chain, we have also seen shifts in freight expense and trends with multiple contributing factors. Ocean freight rates have decreased from their previous peaks but still remain at three times to four times pre-pandemic levels. As for ground and air, rates have begun to lower, but these decreases are partially offset by rising fuel costs, which we all see consistently at the pump. Domestically, there’s also a severe shortage of both trucks and drivers leading to further disruption for carriers that manifests itself as both delays and capacity issues. Overseas, certain ports, including Shanghai, are experiencing significant delays and backlogs due to COVID response policies which cascade through the industry. Although, we feel that freight and supply chain situations are gradually improving, volatility still certainly exists. In recent months, one of the most challenging areas for our business has been labor. We have seen a market shift in labor availability and increasing pressure on our ability to recruit and retain qualified workers. For example, in our distribution center, we’ve experienced minor delays in shipping and receiving due to open positions in that area. This challenge also persists in stores, where our open position rate is currently at 20% compared to our historical rate of just 10%. Another unfortunate reality impacting store labor is a nationwide uptick in crime, intimidation, and general unrest, which has prompted us to have security guards present in select stores and markets. The safety of our employees is of the utmost importance to us, and we remain committed to absorbing these costs wherever necessary. Overall, there’s an acute battle for talent occurring, and we have been proactively responding to this with increased wages, spot bonuses, and adding more associates to our annual bonus plans. We are committed to being an employer of choice and taking actions to engage employees and talent to help the company continue to progress forward and deliver momentum. I will now turn it over to Peter for an update on the financials. Peter?

Peter Stratton, CFO

Thank you, Harvey, and good morning, everyone. Today I want to give you just a little more color around our Q1 financial results and our expectations for the rest of fiscal 2022. Let’s start with sales. Comparable sales for the first quarter were up 19.5% over Q1 of last year. This growth was driven by both our stores, which were up 20.8%, and our direct channel, which was up 16.7%. The resurgence of customers returning to stores, which we started to experience last year, continued throughout Q1 of 2022. Strong growth in store traffic fueled monthly store comps of 59.5% in February, 9.1% in March, and 14.4% in April. You may remember that it was around mid-March last year when we first started to see the surge in store sales, so we were especially pleased to see a very respectable growth in March and April on top of last year’s strong performance. We were also pleased by the strength of the direct business, even in the face of this surge in store traffic. Direct growth was driven by double-digit increases on the website, cross-channel sales initiated by stores and fulfilled directly, as well as our marketplace business. Direct made up over 30% of our Q1 sales, and while store growth this quarter slightly outpaced direct growth, in the long run, we still expect the penetration of the direct business to increase over time. I also think it would be helpful to give some direction on what we’re seeing with sales regionally throughout the country. The Northeast and Northwest, both of which underperformed the rest of the country much of last year, have finally rebounded and put up some very strong results in Q1. We believe there is more runway here that will continue to benefit our sales results as we move through this year. Also, the Southeast, especially Florida, has performed exceptionally well, with the strongest growth measured against 2019. All regions performed positively in Q1 compared to both 2021 and 2019. The next highlight from our Q1 financials is within gross margin; our gross margin rate, inclusive of occupancy cost, was 50%, as compared to 45.6% in the first quarter of last year. This 440-basis-point improvement was a combination of 200 basis points in merchandise margin and 240 basis points in occupancy costs. Our merchandise margin was a major beneficiary of the brand positioning that Harvey talked about, lower markdowns as a result of fewer coupons and discount offers, and continued low clearance inventory levels accounted for approximately 240 basis points of margin improvement, while the increased cost of freight accounted for 240 basis points of margin erosion. The remaining 200 basis points of improvement was driven by merchandise mix, partially due to the discontinuation of wholesale, which by its nature was lower margin, and partially due to a higher penetration of private label sales in our mainline business. Lastly, the 240-basis-point improvement in occupancy costs was due to a combination of the higher sales base and a $900,000 reduction in occupancy costs due primarily to closed stores. Before moving on from margin, it’s important to note that the gross margin rate improvement we experienced in Q1 is not indicative of our expectations for the rest of the year. Our expectation for the full year is that margin rates will decline compared to last year by approximately 100 basis points, which is an improvement from what we shared back in March. There are three reasons for a continued 100 basis point deficit. First, we are starting to anniversary the low promotion positioning, so markdowns will be relatively flat to last year as we move into Q2. Second, we expect the freight increases to persist all year. Third, we are now in a much better inventory position, particularly with branded collections, which are lower margin than private label. I mentioned the higher penetration of private label sales in Q1, which I think will normalize in Q2 and Q3, with higher sales penetration of collections. When we add in the increases in raw material costs, some of which we’ve already offset with price increases, our expectation is that margin rates will decline from last year by approximately 100 basis points on a full-year basis. Moving on to selling, general and administrative costs. Our SG&A as a percentage of sales increased to 36.5%, as compared to 33.3% in the prior year’s first quarter. Of this 320-basis-point increase, 230 basis points related to the increase in advertising. Our Q1 ad-to-sales ratio was 5.3%, up from just 3% in Q1 of last year, and we believe this has generated a strong return on investment. The remaining increase in SG&A primarily relates to the fact that last year’s expense ratio was artificially low. You'll remember that we significantly reduced operating costs during the pandemic, which contributed to our low SG&A cost in Q1 of 2021. Stores, for example, were understaffed last Q1 at a level that was unsustainable, and we adjusted for that as business continued to recover in 2021. We have implemented a $15 minimum wage inclusive of commissions across all stores. In addition to store payroll, our Q1 SG&A reflects corporate payroll increases for merit adjustments, filling open roles, and performance incentive accruals. The expense structure in place for Q1 is representative of what we expect to maintain throughout the balance of this year, with the exception of targeting a full-year ad-to-sales ratio of 6.2% for marketing costs, approximately 90 basis points higher than our Q1 spend. Next, let’s turn to inventory. Inventory levels on our balance sheet of $96.9 million are up $8.5 million over last year’s first quarter. This number includes inventory that was in transit on its way to us. If we only look at what was on hand and available to sell in our stores and distribution center, we were down about 4% compared to last year. However, this was a significant improvement from the 17% deficit we were running just a few months ago. This represents another potential opportunity for DXL, as we expect a steady flow of fresh merchandise for the balance of 2022 that should keep us at good in-stock levels. With a lot of new products arriving in the first few weeks of May, we are now in a better position than we were a year ago. Our inventory turnover rates, which are now greater than 2 times, are in line with our targets and significantly faster than our historical turnover of approximately 1.5 times. In addition, our clearance levels at just 6.9% of total inventory, as compared to 10.1% last year, are also very strong. Notwithstanding the ongoing macro-level supply chain challenges that everyone is facing, we feel very good about our current inventory position and believe we are well-positioned to continue to meet our customers' needs, whether they shop with us in stores or online. Moving on to liquidity, we also feel very good about our cash position. At the end of Q1, we had a cash balance of $7.5 million and we remain debt-free. With the seasonality associated with building spring inventories and payment of prior year instead of accruals, Q1 is typically a quarter with a net cash outflow. This quarter, our free cash flow, which we define as cash flow from operating activities less capital expenditures, was a use of $2.7 million of cash. That includes a $15.1 million increase in inventory since year-end, which was funded primarily by the EBITDA we generated. We did not need to access our revolving credit facility this quarter and had availability of $85 million at the end of Q1. In the event that we needed it in the future, our facility is in place until October 2026. During the first quarter, we utilized $4.8 million of cash to repurchase almost 1 million shares of our common stock on the open market. We believe this is a prudent use of cash at our current stock price, and we will continue to look for opportunities to repurchase under our previously announced $15 million board authorization. I’ll close with an update on our financial outlook for fiscal 2022. We are reaffirming our sales guidance, which is trending toward the high end of the $510 million to $530 million range, and we are reaffirming that adjusted EBITDA is expected to be greater than 10%. Although, this has been a very solid performance for us year-to-date, we are being prudent and conservative, not knowing what will come of the multiple risk factors and continued volatility facing all of us today. I’m going to turn it back over to Harvey for some closing thoughts.

Harvey Kanter, CEO

Actually, I’m going to give those closing thoughts because I appear to be having some phone difficulty. So just to close out, as a team, we have continued to drive impactful results throughout the first quarter, with momentum carrying through the start of Q2. We have not and will not stray from our defined strategy around the DXL difference and we will continue to engage the customer on their own terms in new meaningful ways that highlight our unique and ownable fit, assortment, and experience. In today’s macroeconomic environment, the volatility and headwinds created are simply a reality of doing business and one that DXL is proactively planning for, whether regarding freight, labor, inflation, COVID resurgence, or otherwise. While we look for continued success in our strategic vision, headwinds will likewise persist. That being said, DXL is committed to a growth mindset and continuing to take the company to new heights this year and beyond. And with that, Operator, we will take any questions.

Operator, Operator

Certainly. And our first question will come from Jeremy Hamblin of Craig-Hallum. Your line is open.

Jeremy Hamblin, Analyst

Thanks, and my congratulations on the really strong results. I wanted to delve into two things here. As you noted, you’ve had your strongest new-to-file customer growth, I think, at least in the last five years. I wanted to get a sense of two things. First is, how is that tracking? How did that finish up for Q1, and how is it tracking for Q2? I think it was up about 43% at your March update. And then, secondly, I wanted to get a sense for what you were seeing here in the first six weeks of Q2 on comp sales?

Harvey Kanter, CEO

Jeremy, it’s Harvey. I’ll handle the first part of the call. We’re not going to continue to share the actual percent of growth rates. We believe it can continue to communicate material competitive information, so we’ve tried to characterize sort of the success we’ve had with growth rates both on an absolute basis, as well as new-to-file. Hopefully, that characterization, in addition to the actual sales results, gives you enough of a sense of where we’re tracking and our continued view that the new-to-file growth rates is a proxy for market share.

Jeremy Hamblin, Analyst

Got it. And the quarter-to-date trends?

Harvey Kanter, CEO

Our quarter-to-date trend continues with respect to the overall new file. We actually hit a new milestone in the absolute size of the current zero-month to 12-month file, and so we feel really good about where we are.

Jeremy Hamblin, Analyst

And how about on your sales trends in general? Based on our checks, it appears as though you’ve actually continued to see very strong results on a year-over-year and relative to 2019, if you prefer. Any color you can share on that?

Harvey Kanter, CEO

Our initial May results, with May almost at this point done, are in line relatively speaking with the quarter. I would leave it at that, but relatively in line with our Q1 performance.

Jeremy Hamblin, Analyst

Got it. I wanted to ask about a couple of important upcoming events, particularly Father’s Day. With the increased investment in marketing, are there any changes in how you're approaching that event? Additionally, I’d like to understand the impact of your new exclusive brand deals, especially since it seems like your exclusive brands, particularly the private label, are performing well. Any further insights you could share on that would be appreciated.

Harvey Kanter, CEO

Regarding overall marketing, we continue to literally lean into what we’ve discussed, which is lead with the brand positioning, lead with fit, lead with the gifting capability of the company to support her in buying for him, as well as the unique way we engage, which is through unique product, unique fit, and, obviously, the experience. There’s nothing different. We continue to test a level of promotion at a very selective level; we continue to believe and see that there’s not an elasticity with respect to driving incremental traffic and incremental profitability on that test. However, we continue to try to evaluate ways to engage consumers. We are much more excited about the upcoming loyalty launch and the way we’re creating superior value through new avenues of loyalty partnerships in terms of why they engage with us and reward points, which will ultimately drive them back into the store or online to make additional purchases using reward points as a currency. Therefore, we feel really good about how we’re engaging. In terms of the new brands, I’m not exactly sure what you’re alluding to. The fact of the matter is we have launched the big and tall essentials on two marketplaces, which is our newest brand launch. We continue to look for new-to-market curation in our merchandising strategy for new brands, but nothing has been announced yet, so you won’t see anything materially new in the next quarter.

Jeremy Hamblin, Analyst

Let me clarify and ask maybe a little more specifically. The DXL essentials, just understanding that, we’ve ended the prior wholesale relationship that at one point was contributing over $10 million to annual sales. I want to understand in terms of expectations what DXL essentials could contribute to results this year. Is it in that same range, $10 million or maybe slightly better? Just wanted to get a sense of the potential magnitude of that business.

Harvey Kanter, CEO

It’s a great question. I want to make sure you’re clear and we don’t confuse anyone. Our business with Amazon and the revenue we previously discussed was wholesale revenue. So it was the cost we were selling into them at, and they were taking the markup. This is a materially different conversation because the business we’re discussing today is one where we own the product and sell it as retailers. Your $10 million characterization was nearing $20 million at wholesale with Amazon, and those were the numbers we were discussing historically at a peak, and that number has now converted for Amazon’s platform, so it’s a very different number. The short story is for us, our big and tall essentials line is a growing business, and I think your characterization of $10 million at retail on an annual basis in 12 months is within the realm of reality. Additionally, it's a growing business, and we will continue to look for ways to accelerate it. It could be significantly greater than that down the road, but I think today that’s a fair characterization.

Jeremy Hamblin, Analyst

Great, and that will be folded into your direct sales, correct, on a go-forward basis?

Harvey Kanter, CEO

Yes. And that would be a 12-month annualized business. Remember, we only launched that business really in a meaningful way in, let’s say, February; it started to get on the website in December and January, but it really wasn’t launched until February, and the full assortment line will continue to grow as we enter into the fall.

Jeremy Hamblin, Analyst

Great. Thanks for taking my questions, and best wishes.

Harvey Kanter, CEO

Thanks so much.

Operator, Operator

And our next question comes from Raphi Savitz of RYS Advisors. Your line is open.

Raphi Savitz, Analyst

Hey, Harvey. The execution continues to be just awesome. I’d love to hear and certainly your comments about kind of improving the full-price selling were certainly great to hear. Could you maybe talk about what actions you’ve taken to date or what actions you’ll take in the future that are really driving that and kind of where personalization fits in?

Harvey Kanter, CEO

It’s a great question. I will be somewhat repetitive in that it is very consistent with what we’ve really talked about since my arrival. We believe that price is about value, not the historical, how low can you go, and we believe and know that we have a proprietary fit that is unique; it’s not a ‘for lack of a better term’ larger clothing that simply enlarges every part of the clothing. Our unique fit is a way to lean into why DXL is different. The merchandising team has done an incredible job bringing exclusive products to market that you can’t find anywhere else. As the market recognizes the success we have in engaging customers and the way we’re positioning, which is not around price but around the value of the product, we continue to have increasing conversations with brands that are looking to create greater levels of inclusivity with the male customer base that is big and tall. Ultimately, DXL creates an experience grounded in respect for our community that empowers our customers, allowing them to feel confident in their daily lives. If we succeed in doing all these things, we believe that we are creating an experience that cannot be found anywhere else, allowing our customers to shop confidently, similar to the average-sized male consumers

Raphi Savitz, Analyst

Totally makes sense. And on a different note, could you frame up your CapEx needs over the next few years and kind of what the major buckets are?

Peter Stratton, CFO

Sure. This year we’re expecting our CapEx to be in the $10 million to $12 million range, primarily due to infrastructure improvements and IT projects. Beyond that, as we get into the next few years, we are looking closely at our store footprint and we expect to open more stores, which will increase CapEx to some degree. I don’t think we’re ready to put a number on that yet, but over the next three to five years, we think we could be opening upwards of 50 stores. We’ll speak more about that in future quarters.

Raphi Savitz, Analyst

Got it. Thanks, guys.

Harvey Kanter, CEO

Thank you.

Operator, Operator

And it sounds like there are no further questions. We would like to thank everyone for their interest today, and we look forward to gathering with you all again in approximately 90 days. I wish you all a safe and happy Memorial Day and summer season. Ladies and gentlemen, that concludes today’s conference. Thank you for your participation and have a wonderful day.