Greetings. Welcome to Oxford Industries, Inc. Third Quarter Fiscal 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Please note this conference is being recorded. I would now turn the conference over to your host, Brian Smith of Oxford Industries. You may begin.

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.

Good afternoon, and thank you for joining us. I want to spend just a few minutes talking about the third quarter, then move to our expectations and plans for the fourth quarter and finally give you a bit of a sneak preview on our plans for 2024. We are pleased to be reporting solid results for the third quarter of fiscal 2023. Our results reflect low single-digit sales growth, inclusive of the comps that were down low single digits, which come on top of a 12% positive comp in the third quarter of last year. While the consumer has clearly become more judicious in their discretionary spending, we believe our performance, especially on a two-year stack basis compares favorably to our peer group. Despite a more difficult backdrop, we delivered these results as our people have remained focused on leveraging our strong brands to deliver clear and consistent messages that inspire and resonate with customers, creating a strong desire for our products and services. A great example of this during the third quarter includes the opening of the Tommy Bahama Miramonte Resort in Indian Wells, California. This jewel box resort in the Coachella Valley leverages the credibility that Tommy Bahama has built over nearly 30 years in the hospitality space through our very popular restaurants and bars, as well as the overall strength of Tommy Bahama as one of America's premier lifestyle brands. The resort will have a meaningful impact on reinforcing and even strengthening the lifestyle positioning of the Tommy Bahama brand, ultimately helping us reach new customers, retain existing ones, and increase the engagement of all customers, while at the same time, generating meaningful but modest royalty income over time. Another great example of leveraging the strength of our brands to drive business results in the third quarter was the launch of the gorgeous new Johnny Was website. You will recall that the new website layers the exquisite Johnny Was imagery, brand messaging, and product on the best-in-class Lilly Pulitzer e-commerce technology that we have implemented over the last several years. The new website, combined with the change in digital marketing agencies, has us very excited about our ability to grow our Johnny Was web business going forward. As a result of these and many other activities by our brands, our traffic and full price selling remained healthy during the quarter, and we were actually able to expand adjusted gross margin. In addition, our active customer count and our new customer add rate both increased mid-single digits versus last year, while average annual spend has remained roughly flat. All of these metrics are extraordinarily positive indicators of the strength of our brands. Finally, Scott will provide more details in a minute. But I would be remiss if I did not call out the strength of our cash flow from operations, which was $169 million on a year-to-date basis, our balance sheet, and the fact that we were able to actually reduce inventory on a year-over-year basis during the quarter. Moving on to the fourth quarter. We are excited about our plans and our opportunities in a market that remains somewhat uneven. Our DTC business got off to a bit of a sluggish start in early November and then posted strong results during the very important Thanksgiving weekend. As you are aware, this year's calendar provides the longest possible selling period between Thanksgiving and Christmas at 32 days. Not surprisingly, business since the middle of the week following Thanksgiving has been choppy. History indicates that when we have a calendar like this year's, we can expect a dramatic ramp-up in sales during the 10 to 12 days before Christmas. We expect to see that ramp-up this year and we are excited about the plans we have in each of our brands to capitalize on that opportunity. With respect to our wholesale business, we do expect to experience some headwinds during the fourth quarter. Our brands and products continue to perform very well at our key wholesale partners. However, due to the uncertain consumer environment, wholesale accounts have become more cautious in their purchasing for spring of 2024, and therefore, spring bookings are down as a result of this caution, not because of performance. Given that many of our early spring orders typically shift during the last month of each fiscal year, we expect some softness in our fourth quarter wholesale business. Scott will provide more detail in a minute. But as a result of the wholesale situation and the uneven direct-to-consumer market, in the interest of caution, we are moderating our guidance for the fourth quarter. Moving beyond this year, we are extremely excited about our developing plans for 2024 and beyond. While it is too early for us to give our initial forecast for 2024, we would like to give you a sneak peek at some of our key plans. We believe that the most likely scenario for the economy is a soft landing. And in the absence of a broad macroeconomic setback, we believe that we can continue to leverage our incredible brands to inspire customers and generate the demand for our brands and services that will drive growth in our business. Year-to-date, we have increased our store count by net 17 stores through the first three quarters and expect another five openings during the fourth quarter. Most of the openings happened in the back half of the year. And given the timing and typical post-opening ramp-up period, we will not see the full benefit of these stores until fiscal 2024. On top of this, we will also realize the full benefit from the upgrades that we have made to the Johnny Was e-commerce business, which were completed in the third quarter of this year in 2024. In addition to annualizing the impact of many of our 2023 activities, we also plan to continue to fuel future growth with projects that we have planned for 2024. First, we plan to increase our store count by more than 25 net new stores with Tommy Bahama and Lilly Pulitzer returning to more of a pre-pandemic store opening cadence. We are particularly excited about the six Marlin Bars slated for the next 12 months, which includes our Winter Park, Florida location scheduled to open in January. We also anticipate meaningful openings for both Johnny Was and our Emerging Brands where we have opportunities for continued retail growth. The pre-opening activities associated with these stores, particularly the five Marlin Bars, will put some pressure on 2024 operating margins. But having these stores in place will fuel our growth trajectory in 2025 and beyond. We are also excited about the potential to utilize our Emerging Brands Group platform as a vehicle for growth. The platform has evolved nicely and we have proven its ability to support smaller brands in their growth and development. The Beaufort Bonnet Company is a great example. Since we acquired TBBC in 2017, it has grown at a compound annual growth rate of 23%. Another great example is Duck Head, an iconic brand with an iconic product and over 150 years of history. This brand was all but out of business when we bought it. And since adding it to our platform, we relaunched and rebuilt the brand into a rapidly growing profitable business with sales in excess of $10 million and meaningful potential. We are constantly on the lookout for more opportunities like these. Finally, we are enhancing our long-term distribution capabilities by building an expanded, modern, automated distribution center near our existing facility in Lyons, Georgia. The target is to complete this project during 2025. Once complete, it will increase our annual shipping capacity from 7 million units to over 20 million units, with the potential to grow to 30 million units with some additional equipment investment. The project will have numerous significant benefits to the enterprise and will help continue to drive future growth. First, the cost per unit of handling and shipping a unit in this facility will continue to be highly competitive with greater automation. Secondly, it will give us the additional capacity that we need to service the concentration of stores that we have in Florida and elsewhere in the Eastern part of the country, giving us the ability to optimize inventory better by replenishing stores more quickly and more frequently. Finally, it will allow us to serve more of our web customers in the eastern part of the country better by getting products into their hands more quickly. All of these activities, in addition to the others that we will talk about in March when we provide our initial forecast for the year, promise to help fuel growth in 2024 and beyond. None of what we have accomplished during 2023 or planned for 2024 would be possible without our wonderful and dedicated team of people. And during this holiday season, we would like to express our sincere gratitude for all that they do. And now, I'll turn the call over to Scott for additional comments on our results for the third quarter and forecast for the balance of the year.

Thank you, Tom. As Tom mentioned, we are pleased to report another solid quarter that is within our guidance range. In a challenging macroeconomic environment for the consumer, our operating groups executed well going up against DTC comps of 12% in the third quarter of 2022. Consolidated net sales for the third quarter of fiscal 2023 were $327 million, which included $49 million of sales for Johnny Was as compared to $23 million in the six weeks we owned Johnny Was last year, and a slight decline on an organic basis, resulting in 4% growth above last year's third quarter net sales of $313 million. In aggregate, Tommy Bahama, Lilly Pulitzer and Emerging Brands had decreases of 2% in full price bricks and mortar, 3% in full-price e-commerce and 9% in wholesale sales. Despite a decline of 3% year-over-year, the performance of our food and beverage locations remained strong with the decreases driven by remodels and closures resulting from the Maui wildfires. We were able to expand adjusted gross margin by 60 basis points to 64% compared to 63.4% last year, while lowering inventory balances across all operating groups over the same time period. The increase in adjusted gross margin was driven by a full quarter of higher-margin sales from Johnny Was compared to a partial quarter last year, a decrease in inventory markdowns, an increase in direct-to-consumer sales in Emerging Brands, and decreased freight costs. These were partially offset by decreased Lilly Pulitzer full price e-commerce sales. Adjusted SG&A expenses were $191 million compared to $171 million last year. This increase was largely driven by an incremental $17 million of SG&A associated with the Johnny Was business, which we owned for the full third quarter of '23 versus a partial third quarter in 2022. As a result of all this, we yielded $21 million of adjusted operating income or a 7% operating margin compared to $32 million in 2022. The $21 million of operating income included $1 million of incremental operating income for Johnny Was, driven by a full quarter of ownership this year. The decrease in operating income reflects our planned SG&A investments in our people and business. We also saw modest declines in revenue from our licensing partners. Moving beyond operating income, we incurred more interest expense as a result of higher interest rates and higher average debt levels but benefited from a lower effective tax rate due to certain discrete items that have a larger impact on our tax rate in the third quarter, given our lower earnings than in other fiscal quarters. With this, we achieved $1.01 of adjusted EPS, solidly within our guidance range. I'll now move on to our balance sheet, beginning with inventory. Our inventories decreased by 4% or $9 million year-over-year on a FIFO basis while being able to expand adjusted gross margin. Inventory decreased in all operating groups resulting from our continued inventory discipline. Over the last 12 months, we used our robust cash flow to significantly repay our borrowings used to fund the Johnny Was acquisition. Our borrowings increased slightly in the third quarter, which has historically been a cash use quarter given our lower earnings compared to other fiscal quarters. We finished the quarter with $66 million of borrowings under our revolving credit facility, down from $119 million of borrowings at the beginning of the year. Our $169 million of cash flow from operations in the first nine months of 2023 compared to $86 million in the first nine months last year allowed us to reduce outstanding debt by $53 million since the beginning of fiscal 2023 while also funding $54 million of capital expenditures, $31 million of dividends, and $20 million of share repurchases. We expect strong cash flow for the rest of the year and anticipate repaying additional debt in the fourth quarter. I'll now spend some time on our outlook for the remainder of 2023. As Tom mentioned, we are moderating our full-year view to reflect the impact of continued hesitancy shown by consumers in the third and fourth quarters. For the full year, we now expect net sales to be between $1.57 billion and $1.59 billion, growth of 11% to 13% compared to sales of $1.41 billion in 2022. The planned increase in sales in the 53 week 2023 includes the benefit of the full year of Johnny Was as well as growth in our existing brands in the low single-digit range, driven by increases in our direct-to-consumer businesses and relatively flat sales in our wholesale channel. Our updated guidance reflects decreases in comp store sales in the low single-digit range and a softened wholesale outlook. We still anticipate modest gross margin expansion for the full year of 2023, including in the fourth quarter. The higher sales year-over-year and modestly higher gross margins are expected to be offset by increased SG&A, which is expected to grow at a rate higher than sales in each quarter of 2023, although at a rate in the fourth quarter that is more similar to the third quarter than the first two quarters. Building on our efforts in the third quarter, we will continue to scrub the income statement and prudently trim expenses where appropriate while continuing to invest and help build for the future. Finally, we expect royalty income in the fourth quarter to be comparable to the prior year. Considering all these items, we expect adjusted operating margin for the full year to be approximately 14%. Additionally, we anticipate higher interest expense at 6% for the full year after incurring almost $5 million of interest expense in the first nine months of the year. This compares to $3 million of interest expense in the full year 2022 when we had no debt outstanding until the third quarter acquisition of Johnny Was. We also expect a higher effective tax rate of approximately 24% compared to 23% in 2022. After considering these items, 2023 adjusted EPS is now expected to be between $10.10 and $10.30 versus adjusted EPS of $10.88 last year, with the inclusion of a full year of profit from Johnny Was being offset by lower operating income in our existing businesses, increased effective tax rate, and higher interest expense. After generating 9% comps in Q4 2022, we expect to increase sales in the high single digits in the fourth quarter, due in part to the additional week in the quarter and our new brick-and-mortar locations, partially offset by lower comp store sales as discussed earlier and a softened wholesale outlook. We also expect modestly higher gross margins, a higher mix of direct-to-consumer sales, and modest SG&A deleveraging as SG&A increases at a higher rate than sales. We further expect interest expense in the fourth quarter to be lower than the interest expense in the fourth quarter last year due to our significant reduction in debt during 2023 and a higher effective tax rate, as the fourth quarter of 2022 included certain favorable items that are not expected to repeat in the fourth quarter of the current year. Capital expenditures in fiscal 2023 are expected to be approximately $80 million compared to $47 million in fiscal 2022. This is lower than prior estimates due to certain CapEx for our fulfillment center project shifting from fiscal '23 to fiscal '24. As we mentioned last quarter, the planned CapEx increase includes spend associated with brick-and-mortar locations, including build-out associated with approximately 35 locations across all brands, including two new Marlin Bars and approximately 10 new Johnny Was locations. A number of these are relocations and remodels, which along with a few store closures, should result in a net increase of full-price stores of about 22 by the end of the year with approximately five net new locations in the fourth quarter. The spend associated with these brick-and-mortar locations represents about one-half of the planned capital expenditure amounts for 2023. Additionally, we will also continue with our investments in our various technology systems initiatives. Finally, we anticipate limited initial capital spend in the fourth quarter related to our multiyear fulfillment center project that Tom highlighted earlier. We anticipate expenditures related to the project to continue in 2024 and 2025 with a substantial majority of the spend occurring in 2024. We expect total spend for the project to be approximately $130 million. We continue to have a very positive outlook on our cash and liquidity position as well after generating cash flow from operations of $126 million in 2022, which included a working capital increase of $85 million. We expect to increase our cash flow from operations significantly to a level well in excess of $200 million in 2023. This level of positive cash flow from operations provides ample cash flow to fund our capital expenditures, dividend, share repurchases, and the continued reduction of our outstanding debt during the year. Although SG&A investments will put pressure on 2023 margins, these actions will set the table well for mid to upper single-digit top line growth, a long-term operating margin target at or above 15%. Thank you for your time today. And now we'll turn the call over for questions.

Thank you. At this time, we will be conducting a question-and-answer session. And our first question comes from the line of Edward Yruma with Piper Sandler.

I guess, first, with Tommy Bahama, we noticed you swapped out your traditional flip side with the gift and purchase strategy Lilly has used successfully. Would love to understand if you think that was part of the softness that you pointed to in direct to consumer? And then I guess just stepping back a little bit, I remember, I think, in the last quarter, you talked about some assortment issues and that some of the newer stuff was moving faster than some of the older stuff. I guess, did you see some of those trends persist?

First with respect to the special offers around the Black Friday, Cyber Monday weekend. If you look back at what we did last year, we actually didn't have the flip side starting over that weekend. The last year that we did that, I believe was 2020. And since then, we pushed the start of the flip side out and sort of separated those events. The difference between last year's weekend and this year’s was that last year, we had a couple of category-wide discounts. So for example, I think we were 30% off on all Island Soft last year. This year, we didn't do that. We had a couple of special value items where we delivered some styles that were at very compelling prices, but it was just a handful. And then we did the gift with purchase, which was the beach chair with a $300 spend, which by the way, performed very, very well. We were very happy with the results that we got from that, both online and in-store, which is kind of unusual for gift with purchase for it to work in both channels. So we love that. And then other than that, Ed, we really have the same pack cards or gift cards that we've done for as long as I can remember and then the flip side, which is similar in timing to where it's been the last couple of years. So what I would tell you is we're really less promotional in Tommy than we were last year. And then yes, on the newness question, I would say really across the brands, all the brands, newness is more compelling to consumers this year. They want to see new. They loaded up on a lot of stuff over the last couple of pandemic years and they are loving newness. Fortunately, we've got a lot of it for them. So I think we're pretty well positioned from that standpoint.

Our next question comes from the line of Ashley Owens with KeyBanc Capital Markets.

So just first, you called out some choppiness around the business so far in 4Q. Just curious if you've seen any different behavior among consumers shopping brick and mortar versus e-commerce, and then any variances you're seeing between each brand?

Between what?

Yes, between brick and mortar and e-commerce. I think the big theme, Ashley, to us is really that conversion rates are coming down. That's the big difference. Traffic generally, it's going to defer a little bit among the different brands and the channels. But the big theme to me this year, and this is where you see the caution or the more judicious spending by the consumer come into play, is that the conversion rates have come down a bit from where they would have been a year ago. And then just second real quick. Emerging Brands, you've seen some strength within that segment during the year, and you've opened a couple of stores there. Just kind of an overview of where you think you are in your store rollout potential within Emerging Brands and how you're thinking about that opportunity longer term?

In the Emerging Brands group, we currently have three brands that we fully own, which are Southern Tide, The Beaufort Bonnet Company, and Duck Head. Two of these brands have stores open, with Southern Tide expanding to 15 locations and planning to add more. The Beaufort Bonnet Company has three locations open now, with additional ones in the works. We are still in the early stages with these brands and are pleased with the progress, although we want to ensure we have the right retail formula in place. Assuming we achieve that and establish a successful retail strategy for both brands, they could potentially reach a store count similar to Lilly Pulitzer's. Geographically, their strengths will likely align closely with Lilly Pulitzer's. They are positioned similarly in terms of pricing and market placement, so envisioning a future with 75 to 80 stores is quite feasible. However, it's essential that we develop a retail formula that provides a solid cash return on the investment.

And our next question comes from the line of Dana Telsey with Telsey Advisory Group.

Tom, Scott, as you think about the current environment and what you saw, how much of what's happening is the external environment with the brands, and how much of it do you see product enhancements coming on the way that should help accelerate sales growth? And on the wholesale channel, which I've always thought of as very small for you, how do you see the go forward there and what opportunities are there to stabilize that business?

In response to your first question, Dana, I want to clarify that we don’t exclusively blame external factors without considering our internal operations. Our primary focus is always on identifying areas for improvement. We have documented numerous lessons from this year that we plan to apply as we move into next year. However, I genuinely believe that the primary issue lies with external market conditions, and I think this is a common experience across our industry peers. The cautious behavior of consumers is a significant factor. Nevertheless, we continuously assess our internal processes for enhancements, regardless of whether business conditions are favorable or challenging. As I mentioned in reply to Ed’s question, our new offerings and innovative products have been performing well, and we intend to maintain our focus on this area. Regarding wholesale, we feel that we haven’t lost any significant ground. Our data indicates that our retail performance and sell-through rates have been strong, though retailers have reduced their spring inventory, which has impacted us. From a brand health perspective, we prefer this approach to avoid excess inventory. I anticipate that as we enter spring, retailers will be seeking to restock, and we will do our part to assist them, though I suspect there may be some untapped demand.

And our next question comes from the line of Mauricio Serna with UBS.

I wanted to ask about the sales outlook for the fourth quarter. Specifically, what does it suggest for comp sales growth and how much do you expect the additional week to add to that growth? Additionally, regarding the outlook, you mentioned anticipated margin pressure in fiscal year '24 due to investments in new store openings. Does that mean we should anticipate further operating margin compression beyond the 14% margin expected for '23?

I'll start with the first question. I don't think this necessarily indicates that we're going to experience a decrease in the operating margin. However, there will be some challenges to the margin. There are also factors that will benefit us, such as the annualization of all the stores we opened this year and the Johnny Was website. I believe we could see improvement in the wholesale market in the latter half of the year. So I wouldn't jump to conclusions just yet. I'll let Scott provide more details on this. Regarding the fourth quarter outlook, that's an important question because it's not just about the comparable sales; there's also the impact of the 53rd week and the wholesale situation. I'll have Scott clarify that for you as well.

Mauricio, remember, we mentioned we're going to open six Marlin Bars next year. One of them is going to open at the very beginning of the year. It's one that we thought we'd get in January, it's pushing out. But the other five will have significant preopening. You've got preopening rents starting about seven months before you actually open, so when you have that many of them. But again, we're going to have the benefit of the 24 stores that hopefully help neutralize that. As far as the 53rd week, we're going to be somewhere in that $25 million range in top line for that additional week. In our comps, we've got low single-digit comps in our fourth quarter plan. And then we've got the new units we have this year that hopefully will contribute around $10 million in the fourth quarter.

Our next question comes from the line of Paul Lejuez with Citi.

It's Tracy Kogan filling in for Paul. I think you guys were talking about conversion earlier, and I think you had mentioned last call that you had seen a slowdown in August driven by conversion. I was just wondering how your overall trends wound up going through the rest of the quarter? And did conversion decelerate from there from what you were seeing in August or did it kind of stabilize? And then also, what was your AUR for the quarter?

So with respect to the conversion, Tracy, I think, it's a little bit more of a continuation really of what we were seeing in August. If you want to get super granular about it, I'm sure we can parse out some differences. But I think it's really that same phenomenon that we were seeing in August. And just to be clear, it's not like conversions dropping through the floor, it's just lower than last year. And when you look at comp sales that's really a function of traffic conversion and then how much they're spending, and trying to give you a good flavor, clear flavor of what's going on. Among those levers, it's really the conversion that's pulling the numbers down a bit. And then on AUR, Brian or…

Yes, it's holding pretty flat…

I was just going to ask what your 4Q guidance assumes for the promotional environment. Are you assuming an increase in promotions relative to last year?

You mean for us or for the market in general…

I guess both.

Yes, I think for us, we're very consistent. We walked ahead through the whole cadence of promotions with Tommy Bahama. But I would say across the board, we're consistent with last year. We've mixed things up a little bit, not every event is exactly apples-to-apples.

And we did mention we expect some very modest gross margin expansion and that's a little more mix oriented with the direct consumer being a bit higher. But overall margin should hold well, which means promotions should be pretty much in line with last year.

Our next question comes from the line of Jeff Lick with B. Riley Financial.

I was just wondering if you could elaborate a little bit on the food and beverage, coming in at 23, obviously, Hawaii and then you mentioned remodels had an impact. I was just wondering if you can maybe reconcile, like how much of an impact that might have been? And then, obviously, Tommy appears to be the standout in terms of sales. I was just curious if you maybe unpack a little bit of where that came from, did you continue to see good growth in women's? Just any help there would be appreciated.

I'll start with the women's, because boy, that's a great story that we've had this year. Jeff, we always look at that with our direct-to-consumer basis, because that's the clean way to look at it. But in the third quarter, we were up from just under 30 last year to just under 35 this year, which we're super excited. And year-to-date, we're close to 38 from roughly 35 last year. So that's a very good story. And then in terms of some of the remodeling and Hawaii impact, Scott?

Jeff, we were down 3% but we comped up 1% in food and beverage. We had about $1 million of top line impacted by both Lahaina being gone and then Mauna Lani, we had a major remodel. So it was closed a good part of the quarter. So overall, our food and beverage business has been very good. So we've been very pleased with that.

It's been very steady. Scott and I were discussing this earlier today, and we haven't experienced more than one or two days in a row where we've been slightly off. Each day, we seem to keep performing well in food and beverage, which is excellent.

And our next question comes from the line of Janine Stitcher with BTIG.

Just another question on promotions. Understanding that the promotions are planned in Q4 pretty similar to last year. But I'd love to understand just if the environment remains promotional as we get into next year, your high-level kind of philosophical thoughts just your willingness to flex more promotions to stay competitive? And then second for me, on active customers, you've grown them by a huge number over the last few years. So just any changes in retention of those customers or any habits of these more recent cohorts?

I think with respect to our promotional philosophy, I don't think it will really change awful lot. I think we focus on keeping our brands relevant by making sure that they have very clear positions, that they make very clear and consistent brand messaging. And then it's all about creating desire, Janine. As you know, what we sell is not something that people really need, it's more of a want item. And that's our number one job through our brands is to create that desire and then have the products that the desire can be the object of. And we've been through a lot of promotional cycles forever. And every year, the market is promotional. And we strongly believe, as we've demonstrated this year and in the third quarter, and I think we will in the fourth quarter, that we can remain very relevant and perform well relative to where the market is based on those branding activities. So that's sort of our game plan there. Active customers, as we said, our active customer count is up mid-single digits for the trailing 12 months year-over-year. And our new customer add rate is also up mid-single digits. So the health of our customer base, our ability to attract and retain remains quite good. And then as we mentioned in the prepared remarks, average annual spend is more or less flat.

And our retention rates are holding well, which is something that we have a very high retention rate, and it's been holding.

Yes, very healthy retention.

And we have reached the end of the question-and-answer session. I'll now turn the call back over to Chairman and CEO, Tom Chubb, for closing remarks.

Okay. Thank you. Thanks to all of you very much for your interest in our company. We wish you all a very happy holiday season, and we look forward to talking to you again next quarter. Take care until then.

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.