Greetings everyone and welcome to the La-Z-Boy Fiscal 2024 Third Quarter Conference Call. At this time, all participants have been placed in a listen-only mode and the floor will be open for questions after the presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Mark Becks, CFA of La-Z-Boy Incorporated. You may begin, Mark.

Thank you, Jenney. Good morning, everyone, and thanks for joining us to discuss our fiscal 2024 third quarter. With us today are Melinda Whittington, La-Z-Boy Incorporated's President and Chief Executive Officer; and Bob Lucian, La-Z-Boy's SVP and CFO. Melinda will open and close the call, and Bob will speak to segment performance and the financials midway through. We will then open the call to questions. Slides will accompany this presentation, and you may view them through our webcast link, which will be available for one year, and a telephone replay of the call will be available for one week beginning this afternoon. Before we begin the presentation, I would like to remind you that some statements made in today's call include forward-looking statements about La-Z-Boy's future performance and other matters. Although we believe these statements to be reasonable, our actual results could differ materially. The most significant risk factors that could affect our future results are described in our annual report on Form 10-K. We encourage you to review those risk factors, as well as other key information detailed in our SEC filings. Also, our earnings release is available under the News Events tab on the Investor Relations page of our website, and it includes reconciliations of certain non-GAAP measures, which are also included as an appendix at the end of our conference call slide deck. With that, I will now turn the call over to Melinda Whittington, La-Z-Boy Incorporated's President and Chief Executive Officer. Melinda?

Thank you, Mark, and good morning everyone. Yesterday, following the close of the market, we reported results for our January ended third quarter. Highlights for the quarter included consolidated delivered sales of $500 million, up 5% versus our most recent pre-pandemic third quarter and down 13% versus the prior year, which benefited from delivering the above-normal pandemic backlog. Total consolidated non-GAAP gross margin was up 140 basis points year-over-year, with gross margin expansion across all segments. Non-GAAP operating margin was 6.6%, and non-GAAP EPS was $0.67. We achieved strong operating cash flow of $48 million for the quarter, bringing our year-to-date total to $105 million. We have continued progress against our Century Vision growth strategy, including completing the acquisition of a six-store independent La-Z-Boy Furniture Galleries network in the Midwest, and signing an agreement to acquire another two-store independent network in Florida in the fourth quarter. The overall furniture and home furnishings industry is experiencing a continued slowdown as housing turnover remains at historic lows, driven by challenging interest rates and housing affordability. January, the third month of our quarter, was further affected by winter weather events across much of the U.S., which had a negative impact on traffic and related written sales at our retail stores across the Central U.S. These winter weather events in the second and third weeks of January also caused multiple days of manufacturing shutdowns in our U.S. assembly plants where the majority of our product is manufactured, disrupting our distribution, temporarily impacting our ability to produce and deliver products and causing our delivered sales and profits to fall short of the low end of our guidance range for the quarter. After January's weather disruptions, production and deliveries are now back to normal in the fourth quarter as we focus on servicing our customers and consumers with the high-quality, comfortable products they expect from us. Recapping our third quarter written sales trends. Total written sales for our company-owned retail segment were down 2% versus last year's strong third quarter. Written same-store sales for our company-owned retail segment in the third quarter declined 8% versus the prior year. Same-store sales grew in both November and December but declined in January versus a year ago, impacted by softening traffic against the strong January 2023 comparison period and the winter weather. Although retail performance fell short of expectations due to reduced traffic, store-level execution continues to be very strong. Conversion rates, average ticket, and design sales metrics all improved even against last year's strong quarter. Written same-store sales for the entire La-Z-Boy Furniture Galleries network of 353 stores followed similar patterns for the quarter and declined 6% versus the prior year. Against the backdrop of a 7% industry contraction during our third quarter, our stores executed well, and we expect to continue to drive comparatively positive results going forward on the strength of our brand and our execution in our La-Z-Boy Furniture Galleries. For the first nine months of our fiscal year, written same-store sales across our entire network were down 1%, while the industry was down 7%. Importantly, our fourth quarter is off to a solid start with President's Day results for company-owned stores coming in on track with our expectations for the fourth quarter. Turning to Joybird, written sales declined 14% in the quarter compared to a year ago as the online furniture market continues to be challenged, consistent with the broader furniture industry. As we navigate this environment, we remain focused on providing innovative, high-quality products for our customers and consumers. Favorable demographics, including the structural housing shortage and anticipated interest rate reductions later in the year, will ultimately drive a return to more normalized furniture demand, likely in the back half of our fiscal 2025. Based on our strong financial position and prudent management, we continue to strategically invest in strengthening our business for the long term as part of our Century Vision growth strategy, preparing to capitalize on those positive trends when they emerge, even as we navigate near-term industry challenges. Recall, our Century Vision is our strategic framework, setting up La-Z-Boy Incorporated for the next 100 years as we celebrate our first century in 2027. This is measured by our intention to grow the top line at a pace double the market and deliver consistent double-digit operating margins over the long term. A cornerstone to our Century Vision is expanding our La-Z-Boy brand reach. A critical pillar of this expansion is growing our La-Z-Boy Furniture Galleries network and our own company-owned retail portion of that network through new stores, acquisitions, and remodels to provide an outstanding end-to-end consumer experience. Our total network currently stands at 353 stores, up seven from a year ago, with potential for continued expansion up to approximately 400 stores over the next several years. Furthermore, we are increasing the number of company-owned stores, now totaling 184, which represent 52% of our entire network. Notably, we have nearly doubled our company-owned store count over the past decade and continue to see meaningful opportunity for expansion. During the quarter, we opened one new store and completed the acquisition of an independent La-Z-Boy Furniture Galleries network of six stores across Illinois and Indiana. Additionally, in January, we signed an agreement to acquire an additional two-store network from an independent dealer in Florida, scheduled to close in the fourth quarter. Completing this acquisition will bring our total to 11 acquired stores in fiscal 2024. As a reminder, these store acquisitions are immediately accretive to our profitability and allow the company to benefit from the integrated wholesale retail margin. As we grow our company-owned retail, our vertically integrated and primarily North American-based supply chain will become an even more meaningful differentiator versus many competitors in the industry, as we can deliver high-quality custom furniture with strong speed-to-market. A second key pillar of expanding La-Z-Boy brand reach is our Long Live the Lazy brand campaign that launched last August. Long Live the Lazy is our most database marketing campaign in the company's history, leveraging consumer insights and our brand heritage of comfort and quality to connect with a broader consumer base. Our goal is to build top-of-mind awareness, relevance, and updated perceptions of the brand. The impact of the campaign is expected to gain momentum over time, and early data shows that the new campaign is already driving meaningful results in brand awareness, consideration, and purchase intent. Also encouraging are indications that this campaign is capturing the attention of younger consumers. Beyond our La-Z-Boy brand, to deliver our Century Vision, we continue to optimize Joybird to balance sales growth and profitability, and we are pleased to see delivered sales grow in the quarter compared to a year ago and progress made toward profitability. Joybird currently operates 12 stores with the November opening of our newest store in Portland, Oregon, and we have identified a total of 25 potential locations over the intermediate term with our expansion pace depending on opportunities in real estate and overall market conditions. Finally, across our entire enterprise, we continue to progress on building a more agile business model. Now that we have successfully lowered our unprecedented backlog to a more normalized level, we are meaningfully improving plant productivity. Over the past year, we have made decisions to further optimize our global supply chain by closing assembly plants in Torreón and Ramos, Mexico, and shifting cut and sew activities back to Ramos, enabling the closure of our Parras, Mexico operations. These strategic decisions are made possible through the continued productivity improvements obtained across the remainder of our plant network. Now let me turn the call over to Bob to review the results in more detail.

Thank you, Melinda, and good morning everyone. As a reminder, we presented results on both a GAAP and non-GAAP basis. We believe the non-GAAP presentation better reflects underlying operating trends and performance of the business. Non-GAAP results exclude items, which are detailed in our press release and in the table in the appendix section of our conference call slides. On a consolidated basis, fiscal 2024 third quarter sales decreased 13% to $500 million versus the prior year as trends return to more seasonal levels, following a historically high comparative period in the prior year, which benefited from delivering the above-normal pandemic backlog. Last fiscal year benefited from an approximately $300 million increase in delivered sales due to the delivery of backlog of COVID-related furniture orders. Consolidated GAAP operating income decreased to $33 million, and non-GAAP operating income was $33 million, a decrease of 38% versus last year's third quarter. Consolidated GAAP operating margin was 6.5% and non-GAAP operating margin was 6.6%, reflecting a 270 basis point decline versus last year, primarily resulting from fixed cost deleverage on lower delivered sales. GAAP diluted EPS was $0.66 for the third quarter versus $0.74 in the prior year quarter. Non-GAAP diluted EPS was $0.67 in the current year quarter versus $0.91 last year. As I move to the segment discussion, my comments from here will focus on our non-GAAP reporting unless specifically stated otherwise. Starting with the Retail segment for the quarter, delivered sales were $205 million, an 18% decrease over the prior year's third quarter, which benefited from higher deliveries of backlog, while weather events in January during this year's third quarter negatively impacted our ability to deliver product. Importantly, sales were 22% higher than our fiscal 2020 third quarter, representing a 5% compound annual growth rate over that four-year period. Retail non-GAAP operating margin decreased to 10.9% versus 17.6% in the prior year quarter. Gross margin improvements from a favorable shift in product mix were more than offset by higher SG&A as a percentage of sales, reflecting fixed cost deleverage due to lower delivered sales volume. Retail margins were also negatively impacted by winter weather, preventing the production and delivery of retail orders written earlier in the quarter. For our Wholesale segment, delivered sales for the quarter declined to $356 million, a 13% decrease versus the prior year period, which benefited from pandemic backlog production and deliveries. Additionally, delivered sales were negatively impacted by lost production due to multiple days of plant shutdowns at our U.S. assembly plants as a result of winter weather conditions across the Central U.S. in mid-January. Non-GAAP operating margin for the Wholesale segment was 6.4% versus 6.6% in last year's third quarter, reflecting strong gross margin improvement, which was more than offset by fixed cost leverage on lower sales and higher marketing to support the Long Live the Lazy campaign across all channels. Gross margin improved from lower input costs, including improved sourcing and reduced commodity prices, partially offset by selective pricing actions and temporary plant inefficiencies from winter weather effects in January, and temporary inefficiencies related to our Mexico supply chain optimization project, which remains on track to complete by the beginning of fiscal 2025. Joybird reported in corporate and other had delivered sales of $34 million, an 18% increase versus the prior year quarter, driven by mix and pricing benefits in comparison against a challenged base period. Joybird made meaningful progress on improving profitability in the quarter with strengthened product mix and improved return on advertising spend. Putting all of this together for the quarter, consolidated non-GAAP gross margin improved across all reportable segments, and for the entire company improved by 140 basis points versus the prior year third quarter. Gross margin expansion was attributed to lower input costs from improved sourcing and reduced commodity prices, partially offset by selective pricing actions and plant inefficiencies resulting from winter weather events in January. At the beginning of this fiscal year, we made a voluntary reclassification of certain distribution costs from SG&A to cost of sales. At the same time, we retrospectively adjusted our historical numbers, so the comparisons are on a consistent basis. Thus, the 140 basis point improvement in gross margin reflects real underlying growth. SG&A non-GAAP expense dollars decreased $3 million year-over-year and $5 million sequentially from the second quarter. Non-GAAP SG&A as a percentage of sales for the third quarter increased by 410 basis points compared with the same period last year, primarily due to sales deleverage against last year's backlog-aided top line results. Our effective tax rate on a GAAP basis for the third quarter was 20.2% compared to 27.7% for the prior year period, favorably impacted by return to provision adjustments, primarily related to an increase in U.S. R&D tax credits and a reduction in taxes on foreign earnings. Absent these discrete items, the effective tax rate would have been 25.6%. Recall, our effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes. We expect our effective tax rate to be in the range of 25% to 25.5% for the full fiscal 2024. Turning to liquidity, we ended the quarter with a robust balance sheet, $333 million in cash and no externally funded debt. We generated $48 million in cash from operating activities in the quarter. Solid cash generation was primarily driven by profit performance and improved cash collections. Through the first three quarters, cash flow from operations was $105 million, down from last year due to lower sales after fulfilling our pandemic backlog, but still at very healthy levels. We spent $12 million in capital expenditures during the quarter, primarily related to retail store openings and remodels and upgrades at our manufacturing and distribution facilities. We also spent $18 million on the acquisition of a six-store independent La-Z-Boy Furniture Galleries network in the Midwest, including the purchase of buildings and land for five of those stores. For the quarter, we returned $29 million to shareholders via dividends and share repurchases, including $9 million paid in dividends in the third quarter. Additionally, we repurchased 567,000 shares in the quarter, which leaves 6 million shares available under our existing share repurchase authorization. We view share repurchases and our dividend as an attractive use of our cash and a positive return to shareholders with our stated target of 50% of our capital allocation reinvested back into the business and about 50% in share repurchases and dividends over the long term. In the near term, we have numerous strategic investments to make as we execute the Century Vision and anticipate capital allocation to be more heavily weighted to investments in the business, where our ROIs are two times our cost of capital. Now, before turning the call back to Melinda, let me highlight several important items for fiscal 2024 and our fourth quarter. Consistent with our Century Vision strategy, we continue to target sales growth double the industry growth rate and double-digit margins over the long term. When I first outlined our expectations for fiscal 2024 during our fiscal 2023 year-end earnings call back in June, I noted that we expected furniture industry demand would, in dollar terms, be flat to down 5% versus the prior year. I called out our expectation to grow total company sales ahead of the industry after adjusting for last year's backlog-related sales deliveries. Well, nine months into our fiscal year, the environment has actually materialized to be much more challenging than expected for furniture. Despite these trends, though, we are able to report that we have significantly outperformed the industry. Specifically, over the first nine months, the furniture industry has been down about 7%, while our total furniture network, written same-store sales were down only 1%. This is a tale of two cities in which we are currently operating, strengthening our enterprise capabilities and preparing to leverage eventual tailwinds of housing shortages and improved affordability, all while navigating very challenging short-term trends. With this in mind, we are planning prudently for the near term, while investing and building for the long term, and therefore, expect sales in the range of $505 million to $535 million and non-GAAP operating margins in the range of 7% to 8% for the fourth quarter. We expect our tax rate for the full fiscal year to be in the range of 25% to 25.5%. We anticipate non-GAAP adjustments for purchase accounting charges for the year to be in the range of $0.01 to $0.03 per share. We expect capital expenditures to be in the range of $50 million to $60 million for fiscal 2024 as we invest to strengthen the company for the future, consistent with our Century Vision strategy. Finally, presuming no significant worsening in macroeconomic trends, we expect to continue share repurchases at dollar levels consistent with pre-COVID levels. Now, I will turn the call back to Melinda.

Thanks Bob. We continue to execute on our strategic initiatives and are appropriately investing in strengthening our brands and our capabilities to deliver our Century Vision goals and leverage more normalized consumer trends when they emerge. We are engaging with an even broader consumer base than we have in the past. Although the macroeconomic environment remains challenging, we will continue to focus on driving our business, delighting the consumer, and continuously improving our execution. We have every intention of growing, gaining share, and believe the best is yet to come as we deliver long-term profitable growth and returns for all stakeholders. Finally, today, I want to highlight the recent publication of our fiscal 2023 sustainability report, delivering sustainable comfort. This is the second sustainability report published in our company's history and highlights our continued progress. Aligned with our core values, we empower courage for a sustainable culture, embrace curiosity for sustainable design, and operate with compassion for a sustainable planet. As always, I want to thank the entire La-Z-Boy Incorporated team for their hard work and solid progress toward our goals, even in this challenging environment. And we thank you for your time this morning. I'll turn the call back to Mark.

Thank you, Melinda. We will now begin the question-and-answer period. Jenny, please review the instructions for getting into the queue to ask questions.

No problem, Mark. Thank you. At this time, we will be conducting a question-and-answer session. Thank you. Your first question is coming from Bobby Griffin of Raymond James. Bobby, your line is live.

Good morning. Thanks for taking my questions.

Morning Bobby.

So, I guess the first question I had was on the retail margins. And Bob, you gave some good detail on the year-over-year, but I was just curious if we kind of look at this from a sequential performance or just the prior two quarters this year. Revenue seems pretty stable, plus or minus $6 million to $10 million, it looks like, but the margins did step down if you kind of compare it to fiscal Q1 and Q2. So, just curious if there's some one-time investments in there from a marketing standpoint or any kind of weather-related costs that might have caused that to move down from maybe the mid-teens to the low double-digits?

Thanks, Bobby. There are really two main points. First, the third quarter is generally one of our lower margin periods, with the first quarter always being the lowest due to it being the start of the fiscal year when furniture sales are minimal. The third quarter also has slightly lower margins for two reasons: we invest significantly in marketing during that busy time, and we experience numerous plant shutdowns over the holidays. Consequently, we struggle to produce and deliver products sold during that quarter, which typically pressures our margins.

While at the same time, you're paying the commissions on the sales that you're...

Exactly. The second piece is this particular quarter. Had we not had that weather event, those sales would have been higher than what you saw there. The fixed cost leverage and deleverage associated with sales going up and down. The gross margins on most furniture retail businesses are in the 55% range. So, a lost sale—when I say lost sale, it's just a sale that wasn't delivered and was postponed into the next quarter—has a big impact on margin. So, our margins would have been not as high as the first — the previous quarter, but it would have been definitely higher than what we delivered because of the lost sales we saw in retail associated with the weather.

Okay. And just from—just to kind of build off that, I mean, still feeling comfortable about the kind of low double-digit margin profile for Retail on this revenue base, not seeing anything—or are you seeing anything from a cost perspective that's changed in the industry?

No, we're still very comfortable with that.

Okay.

As we've talked before, we continue to move as we go forward to get that up consistently into the mid-double-digits. We'll continue working on that.

Thank you. Okay, that's very helpful. I guess it looks like there's, I think, six stores during the quarter, you acquired two afterward. So, some good activity on the independent side of the business and acquisitions. Is that just timing all working out? Or is that market in those independent galleries becoming a little bit more active given some of the pressures we've seen in the industry last longer than I think you and I and a lot of people in the industry would have probably guessed?

Yes, I'd say it's a combination. Over recent years, we have been working closely with our independently owned Furniture Gallery dealers, one, to make sure we're partnering so that there's a seamless experience to the consumer regardless of whether the store is owned by us or owned by an independent. We're working to ensure this rising tide strengthens all boats. That said, we're strategically working with those dealers to help them understand what an exit could look like if they're interested. We know that those are immediately accretive to us when we're able to buy those dealers back because we have that integrated margin, and we can control the entire brand experience. At the same time, many of our dealers have owned these businesses—sometimes for decades and often multi-generationally. So, there’s a natural flow of when people might start to explore what makes sense for them. So, it's a bit of both, I would say.

Okay. Thank you. And I guess lastly for me, just maybe on some of the trends during the quarter. It looked like you guys indicated business did improve in February, maybe with some of the changes in weather. Is it right to think President's Day and that kind of flipped positive on a written basis? Or is it just less bad than maybe what January implied? It does imply January written trends were fairly negative?

Yes. I mean, we feel pretty good about trends overall. I'd say, eight months of the year, we were, I think Bob mentioned in his comments, in an industry that was down 7% for our first nine months of the year, we were across our entire network down 1%. So, if you pull January out of that, our numbers actually for the eight months flip positive across the network. So, what we're seeing so far in early February with President's Day looks a lot more like the rest of the year and not so much like a challenged January, which I believe was affected by a couple of things, including that January last year had a stronger month and the weather just made everything a bit crazy for that one month.

Very good. I appreciate the details. I'll turn it over to others. But best of luck as you wrap up February and move forward.

Thanks Bobby.

Thanks Bobby.

Thank you very much. Your next question is coming from Anthony Lebiedzinski of Sidoti & Company. Anthony, your line is live.

Good morning and thank you for taking the questions. So, I wanted to talk a little bit about pricing. You mentioned in your 10-Q that part of your sales decline was due to selective pricing and promotional actions. I wanted to see if you guys could perhaps quantify that? And how should we think about pricing for the balance of the fiscal year and even into early fiscal 2025?

Thanks, Anthony. The pricing that we've discussed, and we've been discussing it for a number of quarters, is really to ensure that we maintain competitiveness. Particularly, where we've been focusing, it hasn't been across the board, but very specific as to where we're pricing. A lot of opening price point or some manual products and things like that to protect our margins and our floor space. We'll continue to do that as we move forward. There are no plans right now for price declines to occur in the future, not driven by us. I think we're priced where we are based on current competitive standings. We'll always look at that and adjust as needed. But predicting future pricing requires guessing what the competition will do and those are factors I can't predict.

And input costs, which remain high.

Correct. Those are factors I can't predict. So, we'll continue to operate as we've been operating.

Understood. Thanks for that. And I realize that certainly the vast majority of your products are made in North America, but you do use a lot of imported components. Can you talk about the ocean freight costs and what's going on with the issues in the Red Sea and the Suez Canal?

Yes. I mean, broadly always a factor, right, and making sure that we don't end up with a lot of disruptions, and there are definitely dramatic cost impacts. But for us, because of our final assembly here and the majority of our components being more locally-sourced, the impacts for us are less than for some players in the industry.

Okay, that's encouraging to hear. And then longer term, as you look to grow to 400 stores in a few years, which geographic markets will you mostly target? And as you go through this process, how should we think about the improvement to your operating margins because of this?

Yes. As for targeting those stores, it's quite widespread, Anthony. It's largely based on markets we're already in where we see the opportunity for more stores to service our clientele. In some cases, it's fleshing out our presence in higher rent districts, which we couldn't afford previously with lower margins, but now with improved operational efficiency, we can expand into those areas where we know consumers want our product even if it's in a higher rent market. The margin improvement will be driven by sustaining wholesale margins back to around 10% as we’ve been gradually making progress, along with retail margins reaching double-digit and ultimately mid-teens. Ultimately, leveraging more normalized furniture demand will help us flesh out the final pieces of that.

Further, as we add stores, particularly those in DMAs where we currently have stores, we get fixed cost leverage related to regional managers, merchandisers, and marketing done in that area, which plays into our margins. That, combined with same-store growth, will be key as we move into the mid-teens.

Well, sounds good. Thank you very much, and best of luck.

Thanks Anthony.

Thanks Anthony.

Thank you very much. And your next question is coming from Zachary Donnelly of KeyBanc Capital Markets. Zachary, your line is live.

Hey, good morning everyone. I'm on for Brad this morning. Thank you for taking our questions.

Hi Zachary.

On written order trends, focusing on January, is there any way you can quantify maybe what written order trends may have looked like for areas or geographies that weren't impacted by the winter weather event?

No, I don't have that at my fingertips. What I can tell you overall is, again, against an industry that for our nine months of the year has been down 7%, our same-store written for our entire network is down just 1%. If you exclude January, it was actually up 1%. This indicates January was challenging overall, and given we're spread across North America, you see significant impacts particularly in Central and Southern areas experiencing dramatic ice and cold events normally not seen there.

Got you. I appreciate that. I apologize; there's an alarm going on in the background right now.

We can't hear it, but I'm sure it's distracting for you.

Yes. I guess moving on beyond that, just touching base on the Century Vision strategy. I know two quarters ago in fiscal Q1, you mentioned your new partnership with Rooms To Go. I was wondering if you could share any learnings from that over the past couple of months or any updates on that?

Sure. We feel great about what we’re doing there. The reality is, the furniture industry is seeing many smaller stores struggling. So, it's crucial for us to seek the right partnerships that appeal to consumers who may not otherwise be attracted to our Furniture Galleries or our La-Z-Boy brand. Rooms To Go has been a good partner for us. They actively advertise and there's exciting things coming from their side for our brand. We're very positive about where we start with them; it's about a strategic alliance benefiting both our brand and theirs.

Got you. I appreciate that. I think that's it for us. Thank you.

Awesome. Thank you.

Thanks Zach.

Thank you very much. Your next question is coming from Budd Bugatch of Water Tower Research. Budd, your line is live.

Good morning and thank you for taking my question. Melinda, I was wondering if you could give us an update on what the acquisition funnel looks like for some of the La-Z-Boy existing network? I know you've got two stores you're planning to acquire this quarter. What do you see as the motivation for the dealers now? And how much does that funnel look for the next year or two?

Sure. Good to hear from you, Budd. Yes, a couple of things. As I said, there are two strategic priorities regarding the independent furniture galleries for us. The first is to ensure that we partner with those independently-owned galleries so we can deliver a seamless consumer experience. A few quarters back in the summer, we held a conference, the first in over a decade, with 100% representation from our independent galleries, where we detailed our plans on our Century Vision, our branding, and product plans. This event energized everyone about what our La-Z-Boy brand can achieve. Simultaneously, we have nearly 50 dealers leveraging multiple decades of ownership and sometimes generational business. I believe the last couple of years of the challenging furniture market impact how those dealers feel. They either weathered it and are ready for the long-haul or started contemplating exit events. We're proactive in communicating potential exit strategies and taking advantage of our strong financial position to hold these conversations, and I think we'll continue to see such opportunities.

Do you think you'll see more than two for the fourth quarter? Will you be able to close more? I’m sure you're in conversation with many of those 50 having generational or financial concerns for their retirements to consider selling their long-term networks. What should investors expect over the next year or so?

Yes, I won't speculate into the future. In general, where the conversations are, as I mentioned, we've got one in the pipeline that we expect to close here in the fourth quarter, which is a two-store network contracted and we're looking forward to bringing them into the fold.

I see. And in the quarter you just closed, you said you bought, I think, five of the six physical locations, in terms of those six dealers averaging, what, I think, $3 million per if I did the math right? How much of that was real estate and how much of it was for operations? How does that value separate?

We don't typically provide the breakdown on that. The real estate is generally worth more than the specific business on a per-store basis. We do not generally share the information on real estate versus business. Also, this is one of the first ones we've done in a while where we purchased the real estate. We typically don’t pursue that actively. The dealers may want to completely exit the business as opposed to merely selling to be a landlord for us. Therefore, we monitor the property and if opportunities for beneficial sale and leaseback appear, we will consider them.

It's an advantage to have a strong balance sheet to facilitate those transactions.

Yes, I understand that because as a former retailer, I know that real estate was typically the retirement idea for the owner when they sold their network. And last for me, can you give us a feel of where the undelivered backlog is with the disruptions in January? How do you look at it undelivered for both Wholesale and Retail going into next quarter?

We don't provide that level of detail. To think about that, just look at the range we provided for Q4 on what we expect to deliver and that encompasses all of it.

In general, we're back to—running mostly back to our four to six-week deliveries. We experienced a short-term disruption where we fell behind by a week or two, but again, we're caught up now.

And last from me then, was the average ticket up or down for your Retail network, the one you own?

As we mentioned in the call, our conversion rates were higher than a year ago, and our average ticket was higher than a year ago.

Yes, that's why we're really pleased with the execution, although traffic continues to be challenged.

Thanks, Budd.

Thank you very much. I think we have reached the end of our question-and-answer session. I'll now turn it back over to the management for any closing remarks.

Thanks, Jenny. Melinda, Bob, and I will be in our offices today to take any follow-up calls. Have a wonderful day.

Thank you very much, everyone. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.