Earnings Call Transcript - SKY Q4 2025

Operator, Operator

Good morning. Welcome to the Champion Homes Fourth Quarter Fiscal 2025 Earnings Call. My name is Sherry, I will be coordinating your call today. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. I will now turn the call over to your host, Jason Blair to begin. Jason, please go ahead.

Jason Blair, Host

Good morning. Thank you for taking the time to join us for today's conference call and review of our business results for the fourth quarter and full year ended March 29, 2025. Here to review our results are Tim Larson, Champion Homes President and Chief Executive Officer; and Laurie Hough, Executive Vice President, Chief Financial Officer and Treasurer. Earlier this morning, we issued our earnings release. As a reminder, the earnings release and statements made during today's call include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from the company's expectations. Such risks and uncertainties include the factors set forth in the earnings release and in the company's filings with the Securities and Exchange Commission. Please note that today's remarks contain non-GAAP financial measures, which we believe can be useful in evaluating performance. Definitions and reconciliations of these measures can be found in the earnings release. I will now turn the call over to Champion Homes CEO, Tim Larson.

Tim Larson, CEO

Thank you, Jason, and good morning, everyone. On behalf of the Champion team, I'm proud to report that in fiscal 2025, we provided over 26,000 homes to customers and families across the U.S. and Canada. This represents a 19% increase in homes sold year-over-year and revenue growth of 23%, resulting in fiscal year 2025 sales of $2.5 billion. Unit volume increase was driven by higher demand across all channels, including from the Regional Homes acquisition for the entirety of the fiscal year. Our performance was driven by an unwavering focus on our customers and executing our strategic priorities. We are investing in new product services for our channel partners and expanding our retail capabilities, including today announcing an acquisition of Iseman Homes, which I will discuss further in a moment. We were very active in the marketplace during the quarter and had a tremendous reception to our new products at the International Builder Show, where we showcased models laser-focused on providing builders with relevant and affordable turnkey homes. In March, we had a great response to our Biloxi Show product lineup, reflecting the strength of the Champion Homes family of brands. More recently, we were able to engage with leadership from the Department of Housing and Urban Development. We are encouraged by the dialogue and the positive feedback we received during their recent visits. We are impressed by U.S. HUD Secretary, Scott Turner's commitment to making homeownership more attainable. I appreciate the time we spent touring our homes and his willingness to learn how we can further expand manufactured housing to address the affordability needs across the country. The recent spotlight in Congress to reaffirm HUD's role as the sole regulator and removing the requirement that manufactured homes be on a permanent chassis are all steps in the right direction. And when combined with zoning reform, we'll reduce barriers to further grow the market for off-site build homes, a market that we are investing in for growth as reflected in our strategic priorities and capital allocation that are all aligned to deliver sustained value across all stakeholders. Given the current overall market uncertainty, we are focused on remaining nimble while thoughtfully advancing our strategy, and that was very evident in the fourth quarter of fiscal '25. Team continued to execute on the fundamentals and deliver profitable growth by navigating an unpredictable environment with tariffs and inflation looming throughout the quarter. Fourth quarter year-over-year net sales increased 11% to $594 million, and homes sold during the period increased 6% to a total of 6,171 units. We experienced normal seasonality in the fourth quarter with a sequential decrease in revenue compared to the third quarter, and orders increased as we progressed through the quarter and our backlog at the end of the year was $343 million. Backlogs were up 9% from the end of last year and up 10% sequentially. Average backlog lead time ended the quarter at eight weeks, which is within our target range of four to 12 weeks. I'll provide some additional commentary from the quarter on each of our sales channels. Sales to our independent retail channel and through our captive retail stores, both increased versus the prior year period. For independent retailers, we continue to advance our digital technology and lead management platform, including the phased launch of the dealer portal, which is receiving great reviews from the early adopters. Consistent with our strategy to expand our captive retail presence, we announced today an agreement to acquire Iseman Homes located in the Plains region of the U.S.. We will use the strength of our in-house retail and our new Iseman Home team to drive growth in this region. I'll touch more on Iseman in a bit. Moving to the community channel. We remain focused on supporting our community partners by providing timely and relevant products at the right value. Through these efforts, sales in our community channel increased versus the prior year. Our builder developer pipeline remains strong as we continue to grow the network. The projects are in various stages and are being impacted somewhat by the market uncertainty. However, we are continuing to invest in this channel and believe over the long-term, off-site build homes will become a more widely adaptive approach for builders and land developers. Champion Financing, our joint venture with Triad Financial Services, continues to perform well. Our retail loan programs when combined with the right home provide today's consumers with their optimal monthly payment. Our floor plan programs allow us to support growth with our retailers by ensuring they have the right products for each market. We appreciate the collaboration with the ECN Capital and Triad teams and partners. Looking to our first fiscal quarter of '26, as we thoughtfully navigate the market and consumer uncertainty, we anticipate Q1 revenue to be up low single digits compared to the same period last year. As we begin fiscal 2026, demand has been less predictable compared to a normal spring selling season. In addition, we are seeing a shift in consumer trends to smaller floor plans with fewer features and options. The near-term outlook for the community channel varies as we hear mixed use depending on the operator's geography and expansion pace. Despite the uncertain environment, we remain confident and focused on executing our strategy and leading and managing the variables within our control, while remaining nimble in the market. We are actively managing within a dynamic tariff environment and are executing our playbook as developments unfold. But so far, the direct cost impact is limited, although we do believe it is affecting consumer sentiment. Our strategy includes a balanced approach of selective price adjustments and material sourcing changes to optimally mitigate the impact. We are also being proactive and agile as we navigate the environment, including taking actions to thoughtfully control our fixed costs while not losing sight of our need to invest in our strategies for the long-term. We recently idled one of our production locations in the Florida market by leveraging our remaining nearby facilities for customers in that region. Permitting and demand in Florida has been slow to recover from the 2024 hurricanes. In addition, in the British Columbia region, we are consolidating two of our Canadian factories into one to improve operating efficiencies and reduce overhead costs. From a growth perspective, as I mentioned earlier, we announced the signing of a definitive agreement to acquire Iseman Homes, including its 10 retail sales centers in the Plains region of the U.S.. This acquisition underscores our long-term strategy to expand our retail footprint and deliver market relevant products, all while elevating the home buying experience for our customers. With annualized revenues of approximately $40 million, we see a pipeline of local market demand and synergistic opportunities. Champion Homes team is very excited to welcome Iseman Homes, and we look forward to their integration with our Champion family of brands. We expect the transaction to close by the end of our first fiscal quarter. In summary, we believe Champion Homes is well positioned to weather the uncertain market environment while driving an unwavering focus on our strategic growth priority and day-to-day execution, all of which are directly centered on our customers and team. I'll now turn the call over to Laurie, who will discuss our quarterly financial performance in more detail.

Laurie Hough, CFO

Thanks, Tim, and good morning, everyone. I'll begin by reviewing our financial results for the fourth quarter, followed by a discussion of our balance sheet and cash flows. I will also briefly discuss our near-term expectations. During the fourth quarter, net sales increased 11% to $594 million compared to the same quarter last year, with U.S. factory-built housing revenue increasing 10%. The number of homes sold increased 5% to 5,941 homes in the U.S. compared to 5,652 homes in the prior year period. U.S. home volume during the quarter was supported by healthy demand across our retail and community channels. The average selling price per U.S. home sold increased by 5% to $94,300 due to product mix, including a higher number of units sold through company-owned retail sales centers. On a sequential basis, U.S. factory-built housing revenue decreased 8% in the fourth quarter compared to the third quarter fiscal 2025. We saw a sequential decrease mainly due to expected seasonality as well as an impact from weather across the south. In addition, manufacturing capacity utilization was 60% compared to 63% in the third quarter. On a sequential basis, the average selling price per home was relatively flat. Canadian revenue during the quarter was $25 million, representing a 22% increase in the number of homes sold versus the prior year period. The average home selling price in Canada decreased 9% to $110,600, primarily due to a shift in product mix. Consolidated gross profit increased 55% to $152 million in the fourth quarter. Our gross margin expanded 740 basis points from 18.3% in the prior year period. The higher gross margin was primarily due to a product liability reserve of $34.5 million recorded in the fourth quarter of last year that did not reoccur in fiscal 2025, as well as higher average selling prices and a higher share of sales through our captive retail sales centers. Gross margin declined sequentially from our fiscal third quarter and was lower than expectations primarily due to higher material input costs relative to flat wholesale ASPs as well as lower capacity utilization, causing decreased leverage of fixed overhead costs. SG&A in the fourth quarter increased $20 million over the prior year period to $110 million. The increase is primarily attributable to increased sales volumes through our company-owned retail sales centers and higher variable costs related to higher revenue. In addition, we increased marketing spend to drive awareness in our brands and homes and continue to make investments in technology to support future growth. The company's effective tax rate for the quarter was 17.1% versus an effective tax rate of 19.2% for the year-ago period. The decrease in the effective tax rate is primarily due to an increase in tax credits and a decrease in state income taxes. Net income attributable to Champion Homes for the fourth quarter increased by $33 million to $36 million or earnings of $0.63 per diluted share compared to net income of $3 million or earnings of $0.05 per diluted share during the same period last year. The increase in EPS was driven mainly by the absence of an adjustment to the water intrusion product liability reserve in the current year period. Adjusted EBITDA for the quarter was $53 million, which is consistent with the same period a year ago. Adjusted EBITDA margin was 8.9% compared to 9.9% in the prior year period. This decrease in EBITDA margin is mainly driven by higher SG&A. We expect near-term gross margin in the 25% to 26% range as we balance softening consumer confidence, decreased demand in certain markets and inflation. In addition, we're seeing consumers shifting to homes with fewer or lower-priced features and options, which impacts gross margin. To help offset some of this impact, and as Tim mentioned earlier, we're taking steps to balance SG&A spending while continuing to drive our strategic growth priorities, including investments in people and technology. As of March 29, 2025, we had $610 million of cash and cash equivalents and long-term borrowings of $25 million with no maturities until July of 2026. We generated $46 million of operating cash flows for the quarter compared to $4 million in the prior year period. In the quarter, we leveraged our strong cash position and returned capital to our shareholders through $20 million in share repurchases. Additionally, our Board recently refreshed our $100 million share repurchase authority, reflecting confidence in our continued strong cash generation. I'll now turn the call back to Tim for some closing remarks.

Tim Larson, CEO

Thank you, Laurie. While we anticipate near-term order rates to vary by challenged geography, the need for affordable housing remains ever present across the U.S. and Canada. The long-term outlook for Champion is strong, and we have the strategies in place to deliver for all our stakeholders, strategies that we are thoughtfully executing as we evolve the team with a combination of internal advancement, new talent, and select engagement of outside resources. Our guiding priorities are not only for the long-term, they provide a clear roadmap for today's environment and deploying our capital, including winning as a customer-centric high-performance agile team, innovating and differentiating with products and services that bring in new buyers, expanding and elevating our go-to-market channels, including delivering experiences before, during, and after the sale that earn new customers and their referrals. Increasing awareness, demand advocacy for our brands in homes and leveraging our cost, capacity, and investments in people and technology. Finally, I would like to recognize the entire Champion Homes team for their exceptional efforts to grow revenue and earnings in fiscal 2025, and as we work together to continue to execute our strategic initiatives for all our stakeholders. And now, let's open the line for questions. Operator, please proceed.

Operator, Operator

Our first question is from Daniel Moore with CJS Securities. Please go ahead.

Daniel Moore, Analyst

Thank you. Good morning, Tim. Good morning, Laurie. Maybe start with just elaborating on the discussions with customers in both retail and community markets and the cadence of order rates into April and thus far in May and maybe a little bit more bifurcation by geography. Obviously, Florida by all accounts has been soft, but where are you seeing pockets of strength, pockets of weakness, etc.

Tim Larson, CEO

Hey, good morning, Dan. Encouraging wise, we're seeing digital leads are up across a lot of our regions. But then when we talk to the retail teams, the in-store traffic has been mixed and certainly by region of the country. And as I talk to our independents, they're seeing similar impacts in terms of certain areas where there's strong traffic, others that are a little weaker. But what I would say, in general, what's encouraging is that there are more buyers, active buyers and those buyers are ones that are more motivated to purchase a home and our financing programs are helping that. So I would say there's more serious buyers in the market, and that's why we reflected our low single-digit growth for Q1 versus some what you're seeing in the broader market. But I would say it's been mixed traffic this spring. But we've been driving more leads, certainly driving more of that engagement with our consumers at our retail stores. But it is more of a mix, and that's why we signaled a more low single-digit rate for the quarter.

Daniel Moore, Analyst

Sorry, that's helpful, Tim. And on the community side, a little bit of continued interest, but maybe kind of a slow burner holding off for now, trying to remember your exact commentary in the prepared remarks, but any elaborate there would be great. Thank you.

Tim Larson, CEO

Yeah, we were up in the quarter year-over-year in the community segment and we've certainly seen some returns with key customers there. But I would say it's mixed for some projects and some community developers that are pacing a bit but we've been pleased with the growth of the community segment over the last year. They're now at 28% of our overall units, which is strong. And so we're pleased with how that's going. But we're just balanced about the community segment given that they face some of the dynamics with the consumer as well.

Daniel Moore, Analyst

Got it. On the SG&A side, it increased sequentially despite a decline in revenue. Could you explain how much was due to incentive compensation compared to investments in marketing and technology? I'm trying to understand how much of the SG&A in Q4 could be temporary versus a more permanent increase in the cost structure.

Laurie Hough, CFO

Good morning, Dan. In the fourth quarter, we should keep in mind that many of our industry shows create a cyclical timing issue for us. This effect won't be as pronounced in the first half of this fiscal year. However, we won't provide a detailed breakdown of the components individually.

Daniel Moore, Analyst

Understood. Okay. And then just last one for me, continue to utilize buybacks as an arrow in the quiver in terms of capital allocation. With the shares indicating where they are this morning, just your thoughts about being more aggressive, cash continues to grow, but despite buying back shares more aggressively. So, any thoughts on that front? And thanks again for the color.

Tim Larson, CEO

Yeah. Please proceed, Laurie.

Laurie Hough, CFO

No, that's okay. Yeah, well, we have a really balanced capital allocation profile. So we'll keep an eye on that and obviously be opportunistic if the shares allow and just make judgment calls based on our overall strategy, Dan.

Daniel Moore, Analyst

Thanks again.

Tim Larson, CEO

I was going to add, Dan, that we're pleased we refreshed our commitment to share repurchase, and we've added $100 million of cash versus last year, which certainly gives us options across our capital allocation.

Operator, Operator

Our next question is from Greg Palm with Craig-Hallum Capital Group. Please proceed.

Greg Palm, Analyst

Yeah. Good morning. Thanks. Going back to the quarter, I think you had maybe talked or mentioned about some unfavorable weather conditions. Just based on order rates and any backlog, was there any inability to ship homes from retail to end customers? I know you had a dynamic in the year-ago period that came into play. I was just curious if that was impacted at all this quarter as well.

Tim Larson, CEO

The Texas market and parts of the South experienced slower activity than usual, which had some impact that we accounted for in the first quarter of fiscal '26. Additionally, various consumer dynamics are also influencing the situation. However, we believe we are in a strong position with our inventory levels and our ability to respond to consumer demand, which we hope will continue to grow. Therefore, we feel quite balanced at this point.

Greg Palm, Analyst

Yeah. Okay. And I guess it's not a secret that housing overall is pretty soft, but I know activity here has held up maybe better than stick-built, if you want to call it that. But I'm just curious, if you just take a step back a little bit about manufactured housing specifically in the customer base and the demographics. And what gives you hope that maybe this is a time for more meaningful share gains? Maybe you can talk a little bit about sort of deregulation in there as well because there's obviously some important things going on behind the scenes.

Tim Larson, CEO

Yeah, for sure. There's a few different levers there. One of our commitments to have captive retail is that's where you really can drive the customer experience and the speed with the customer, and you combine that with your consumer financing program. So that's why we're expanding Iseman. Second, another area you mentioned is the regulation elements. We're encouraged by the focus on reducing the chassis meet requirements, looking at different approaches in terms of the reform around zoning potentially so that more local municipalities are supportive. Obviously, removing the chassis is going to help that in certain markets. The other driver is just an overall awareness. When we have the HUD Secretary walk through our homes, his feedback was positive, noting our beautiful homes that are well-built, just getting that efficacy out there. So more consumers are aware of it. You see that with our investment in marketing spending, and obviously, what we're doing digitally. Then in terms of the consumer, really making sure they're aware of the price points that you can get in a brand-new home. And that's obviously key is our financing program, so you can get a customer matched to the right spot with that right price point, just getting more awareness in the market and pulling in new consumers, and we're putting our digital spend to work there. We're using social media to attract people who typically would not be aware of our products, and pull them into our retail. So those are all drivers. Now that's against the backdrop that there are more challenges with the consumer in terms of some of the uncertainty we're seeing. So that's why we're investing to make sure that we're getting into their mindset in terms of consideration purchase. The combination of those things I think are really going to be in the near-term key. But then from a longer-term, our product innovation spend is to make sure that we have a range of products for those range of customers that are looking for the different types of homes and needs. And you saw that at the show, maybe bring out our shows where you see the type of new products that we're coming out with. And I think those are all key in terms of growth and the strategic priorities that I laid out in my remarks.

Greg Palm, Analyst

Yeah. Okay. Makes sense. Thanks for the color.

Operator, Operator

Our next question is from Matthew Bouley with Barclays. Please proceed.

Matthew Bouley, Analyst

Good morning, everyone. Thank you for taking the questions. I'll ask on the gross margin. The change to the near-term guide, I think you said 25% to 26%. I think previously, it was in that 26% to 27% range. So my question is if some of the, I guess, pressures that you're seeing today if your view is that there are sort of more temporary and that the 26% to 27% is still realistic over time. Or is it that you're kind of still, I guess, looking for what the structural gross margins of the business should be going forward as, obviously, the business mix has shifted over the years? Thank you.

Laurie Hough, CFO

Good morning, Matt. Thanks for the question. We do think that lowering to the 25%, 26% range is just for the short term based on softening consumer confidence and decreased demand in certain markets as well as some inflation that we're seeing in material costs. Long term, we still expect structural margins to be in the 26% to 27% range based on the improvements that we've made across the platform.

Matthew Bouley, Analyst

Got it. Okay. Thanks for that, Laurie. And then secondly, interesting discussion at the top there around some of your discussions with the new HUD Secretary. Maybe just around that potential removal of the permanent chassis requirement. Any color on sort of what that would do for your own costs? How realistic is that actually happening? And I guess how would you then react around either passing that through to consumers or maybe just impacting other designs just kind of giving you more flexibility in the product design? Just how would that all play out? Thank you.

Tim Larson, CEO

Yeah. First off, from a consumer perspective, it allows you to do maybe two stories more effectively, give some elevations because you can do more slab on grade. So it drives that benefit from a curb appeal. And then there's some municipalities that are still hung up on having a chassis in their home. So it helps with the zoning support. From a cost perspective, certainly not having the chassis. You need it for transport, different types of transport that may be lower cost. So there is some opportunity there. As far as how we would approach it, our goal is to create the right product, price value. And if we have a chance to do that for a consumer, it just allows it to be great, but obviously, we want to continue to drive margins. We'd have to look at the balance there. But it's encouraging that it's actually now in discussion and the progress in terms of regulators. And I think because of the strength of the quality of our homes and the way that we can deliver them, it gives us the confidence that this should happen and likely will happen. But all optimally has to go through the bills process, which is well underway at this point. So we're encouraged by it, and we're also looking at product innovations that would leverage from it. So we'll keep you posted as it evolves, but it's an encouraging time.

Matthew Bouley, Analyst

All right. Thanks, Tim. Good luck, guys.

Operator, Operator

Our next question is from Mike Dahl with RBC Capital Markets. Please proceed.

Mike Dahl, Analyst

Good morning, and thank you for addressing my questions. I have a couple of follow-ups. First, regarding the gross margin dynamics, could you provide more specifics about the impact of input costs in the near term? Looking at the wood products sector, I see that while lumber prices have risen slightly, OSB has decreased significantly. Therefore, I would assume your overall wood pricing remains relatively stable. Could you clarify the cost influences versus the impact of the product mix on your near-term margin expectations?

Laurie Hough, CFO

Good morning, Mike. We will provide a breakdown of components, but it's important to note that we purchase parts of our wood products at spot rates while others are on contract. The mix of these doesn't completely correlate with spot rate trends. Additionally, we are experiencing rising costs in other components across the board and facing some pricing pressure in certain areas of the country due to consumer confidence.

Mike Dahl, Analyst

I understand, thank you. I'd like to follow up on Matt's question regarding the permanent chassis requirement. Specifically with builder developers, as you have been promoting the Genesis brand and fostering those relationships, has this been a concern in your discussions with builders due to its limitations? How would you characterize this when considering the potential for that area of your business? Additionally, could you provide more context on the recent cautious pace in that segment, maybe including some figures?

Tim Larson, CEO

Yeah. Great question. In terms of the chassis, yeah, that is a key opportunity with those developers because oftentimes, those developers are going into new municipality, new land zoning and that certainly would help if they're looking for that more single-family, slab-on-grade look. The other factor is those builders at times are looking for two-story projects, which this would be an advantage for that approach. In terms of the overall builder developer, the pipeline is continuing to build, and we've had really good responses to the new products that we've come out with. One of the realities of that business and given it's a smaller size in our total portfolio is the time it takes for those projects. They can be anywhere from 12 months to 24 months. So that pace does impact when those more orders really materialize but we're encouraged by the pipeline, and we're working directly with those builders. And I think the pacing also is with the macroeconomic environment, some of them are looking at the phases and how quickly they deployed but we're working with them directly to make sure that we can help and support that and move those projects along. And we're leveraging what we've learned from the projects that we've done so far. So again, that's a longer-term development channel for us, but it's one that both the regulatory opportunities and the way we're pacing this is really helping. So I appreciate the question on builder developer.

Mike Dahl, Analyst

Thanks, Tim.

Operator, Operator

Our next question is from Phil Ng with Jefferies. Please proceed.

Phil Ng, Analyst

Hey, guys. I guess a question for Laurie. Your near-term margin guidance is pretty steady from Q4, which is great. But certainly, we're still seeing impacts from tariffs. It doesn't sound like it's massive, but help us kind of think through how that could impact margins and do you have to take incremental price because you kind of alluded to perhaps some pricing pressures in certain markets.

Laurie Hough, CFO

Hey, Phil, good morning. Yesh, so we're not seeing a significant increase in tariffs currently. We are watching and monitoring as it changes on a daily basis. So keeping track of that and understanding where our product comes from and what the impact will be, and then just being proactive about sourcing from other locations and so forth. So where we have an active playbook of things that we can do when that comes up, but we're not quantifying what that will be.

Phil Ng, Analyst

Okay. If you do see a little more inflation, considering the current demand environment, do you feel confident that you can implement some price adjustments? Or will you need to manage through that in the near term?

Laurie Hough, CFO

I think it depends on the region of the country. So, keeping in mind that our plants ship within a 500-mile radius generally without being too cost prohibitive on transportation. So ultimately, the decision still lies on price with and at the plant level. We give them guidance, but they have to measure competitively what's happening in their markets relative to consumer demand and pricing more broadly.

Tim Larson, CEO

Yeah. Obviously, with the refreshed commitment to share repurchase, we look forward to using our added cash as commentary in previous discussions.

Operator, Operator

Our next question is from Daniel Moore with CJS Securities. Please proceed.

Daniel Moore, Analyst

Thank you, again. My follow-up was on Iseman was answered, but maybe just talk a little about the level of discussions with other regional dealer groups and maybe the M&A pipeline more generally?

Tim Larson, CEO

Yeah. I mean we're not going to talk about specifics, but bigger picture, you look at our strategy, and we've laid out those five priorities at the end of my remarks, those are aligning how we're thinking about M&A, capital allocation. And certainly, we're excited about Iseman, and we're going to focus on that execution and integration. But certainly, our strategy reflects where we want to put our capital going forward.

Operator, Operator

There are no further questions at this time. I would like to turn the floor back over to Tim for closing remarks.

Tim Larson, CEO

In our first month of operation, we've demonstrated our agility and action-oriented approach. Last year, we wrapped up 26,000 homes, marking our highest performance outside of one pandemic year, including the acquisition of Iseman Homes. We made the difficult but necessary decision to idle a couple of our plants to manage fixed costs effectively. We also launched our integrated digital platform as discussed today and significantly strengthened our purchasing team, which equips us to navigate the current environment. Additionally, we're advocating for policy advancements and added another $100 million to our balance sheet, which complements our stock repurchase efforts. Moving forward, we are in a strong position with our strategy and team, and we will continue to build on this foundation. We look forward to updating you on our progress and appreciate your continued interest. Thank you for joining us this morning.

Operator, Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.