Chuy's Holdings, Inc.

Good day, everyone, and welcome to Chewy's Holdings' second quarter 2021 earnings conference call. Today's call is being recorded. At this time, all participants have placed in a listen-only mode, and we will take your questions after the presentation. On today's call, we have Steve Hislop, President and Chief Executive Officer, and John Howey, Vice President and Chief Financial Officer of Chewy's Holdings Incorporated. At this time, I'd like to turn the conference over to Mr. Howey. Please go ahead, sir.

Thank you, Operator, and good afternoon. Good afternoon. By now, everyone should have access to our second quarter 2021 earnings release. If not, it can be found on our website at Chewy's.com in the investors section. Before we begin our review of formal remarks, I need to remind everyone that part of our discussions today will include forward-looking statements. These forward-looking statements are not a guarantee of future performance, and therefore you should not put undue reliance on them. These statements are also subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. We refer all of you to our recent SEC filings for a more detailed discussion of the risks that could impact our future operating results and financial condition. With that out of the way, I'll turn the call over to Steve.

Thank you, John. Good afternoon, everyone, and thank you for joining us on our second quarter earnings call today. I hope everyone is staying safe and healthy. Let me begin by saying how pleased I am with the solid improvements we've made during the second quarter. I truly believe this was a direct testament to the hard work and dedication of each of our team members as we continue to navigate this environment. For the second quarter, most of our restaurants, while open, were still operating under various capacity restrictions. Despite this fact, we grew our top line by over 64% compared to last year, and further narrowed our comparable sales gap to negative 1.4% compared to pre-COVID-19. The COVID-19 pandemic has given us an opportunity to reset our business model with continuing restaurant-level operating margin improvement. This ongoing focus on cost management and operating efficiencies during the quarter resulted in another company record in restaurant-level profitability, both on a dollar and margin basis. With our business trajectory heading toward the right direction, we are all eager to return our business to more normalized operations and increasing our dining room capacities back to 100%. To that end, we are focused on our efforts on retaining and re-recruiting our existing employees, not only to ensure that our restaurants are properly staffed, but also stay ahead of the curve as we are facing industry-wide labor availability challenges. One of the ways we are doing this is through our management retention program, which we described last quarter, and it includes an investment in our managers in the form of bonus payments to be paid in the second and third quarters of this year. In addition to staffing, we believe it's more important than ever for our team members to focus on our three key pillars that have resonated well with our guests throughout the pandemic, safety, convenience, and value. Safety will always be at the forefront in our minds. And during the second quarter, we continue to invest in ways to minimize touch points between our team members and guests. We expanded our pay at the table, our QR code payment, and pay by text solutions to two additional restaurants during the quarter. While we are still improving the overall processes, we believe these investments would further improve our in-restaurant peace of mind from our guests. Our off-premise offerings also resonated well with our guests during the second quarter, providing them additional convenience to enjoy a high-quality made-from-scratch food and drink. This was reflected in our strong off-premise mix at approximately 27%. As we've mentioned in the past, we believe we can maintain a low to mid-20s off-premise mix going forward, given the enhanced level of convenience and how well our food travels. Lastly, With streamlined menu, including convenient family meal and beverage kits, our guests really appreciate the value in our current offerings. Looking ahead, our plan is to maintain our current menu until the end of the year. We will then slowly add back some items off menu starting in the fourth quarter with a goal to return to our new menu by the middle of the first quarter of 2022. Again, our menu has always been value-oriented and it will stay that way. Turning to new restaurant development. We successfully opened two new restaurants during the quarter, one in Southport, Indiana, and one in Amarillo, Texas, and are pleased with the initial reception. We also have one more restaurant slated to open at the end of August in Brentwood, Tennessee, which will bring our total openings year to date to four restaurants and complete our development for the current year. Although it's still early, we currently expect to open between six to eight new restaurants in 2022, utilizing a smaller prototype that will be more efficient to operate and will allow us to better serve off-premise guests while still providing them with the same unique dining experience. With that, I will now turn the call over to our CFO, John Howey, to discuss our fourth quarter results in greater detail.

Thanks, Steve. Revenues for the second quarter ended June 27, 2021, increased 64.7% to $108.2 million, compared to $65.7 million in the same quarter last year. The increase was primarily related to growth in customer traffic as we continue to relax indoor dining capacity restrictions for all of our restaurants, as well as $3 million of incremental revenue from new restaurants open during fiscal year 2021. For the second quarter of 2021, off-premise sales were approximately 27% of total revenue compared to approximately 61% in 2020 and 13% in 2019. In total, we had approximately 1,229 operating weeks during the second quarter of 2021. Comparable restaurant sales increased 60% during the second quarter versus last year and included a 55.2% increase in average weekly customers and a 4.8% increase in average check. For a more accurate picture of our sales recovery, second quarter comparable restaurant sales declined 1.4% versus 2019 and improved sequentially from the first quarter as compared to 2019. Turning to expenses, cost to sales as a percentage of revenue increased 10 basis points to 23.6%, primarily due to overall commodity inflation of approximately 5%, largely offset by a decrease in the mix of the heat of family kits sold as compared to the prior year. Based on current trends, we are currently expecting commodity inflation of 3% to 5% for the remainder of fiscal 2021 due to increasing cost pressures. Labor as a percentage of revenue increased approximately 160 basis points to 28%, largely because of increased hourly and manager labor as the company reopened all of its dining rooms and reinstated the reduced manager salaries as compared to 2020. The company has also incurred 0.8 million of incremental manager bonuses in conjunction with its 1.6 million manager retention program with the remaining 0.8 million to be paid in the third quarter of fiscal 2021. Hourly labor inflation for the second quarter at comparable restaurants was approximately 1.3% and was lower than what we were experiencing in rate because of the increased hourly mix to the front of the house stations. However, we expect our hourly labor costs to increase through the second half as we continue to staff our restaurants to full capacity and expect hourly inflation to increase to approximately 5% to 7% as the mix normalizes and is more comparable to the back half of 2020. Operating costs as a percentage of revenue improved 160 basis points to 14.7% due to decreases in delivery service charges and to-go supplies. as we reopened our dining rooms as well as leverage on fixed restaurant operating costs. This was partially offset by an increase in liquor taxes driven by higher bar sales mix as compared to the same period last year. Marketing expenses, a percentage of revenue increased 50 basis points to 1.1% as we resumed our digital advertising campaign system-wide. Occupancy costs as a percentage of revenue decreased 390 basis points to 6.9%, primarily because of sales leverage on fixed occupancy expenses partially offset by higher percentage rent, as well as occupancy expenses related to three new stores open during fiscal 2021. General and administrative expenses increased to $6.7 million in the second quarter from $4.8 million in the same period last year. primarily driven by lower expenses in 2020 due to the reduced corporate employee staff and salaries during the COVID-19 pandemic, as well as higher performance-based bonuses and travel expenses in 2021. As a percentage of revenue, G&A declined 100 basis points to 6.3%. The company recorded income tax expense of $2.3 million in the second quarter of 2021 compared to a benefit of $0.6 million during the same period in fiscal 2020. The increase in income taxes was driven by an increase in estimated annual net income and a $1.1 million tax benefit recorded in 2020 related to the CARES Act administrative correction related to depreciation. In summary, Net income for the second quarter of 2021 increased 156% to $11.5 million or $0.57 per diluted share compared to $4.5 million or $0.26 per diluted share in the same period last year. During the second quarter of 2021, we incurred $1.4 million, $1.1 million net of tax or $0.05 per diluted share in impairment, closed restaurant, and other costs. These costs included closed restaurant costs such as rent expense, utility, and insurance costs required to maintain our closed locations. Taking that into account, adjusted net income for the second quarter of 2021 increased 215% to $12.6 million, or $0.62 per diluted share, compared to $4 million, or $0.23 per diluted share, in the same period last year. Moving to our liquidity and balance sheet as of the end of the quarter, we had $113.5 million in cash and cash equivalents, no debt, and $25 million of availability from our revolving credit facility. However, subsequent to the end of the quarter, we completed our new credit facility with JPMorgan Chase Bank, which will provide the company with a $35 million revolving credit facility that can be expanded to $60 million based upon certain requirements. This credit facility will mature in July of 2024. Lastly, while I'm still not in a position to provide our usual financial guidance, I will give you some directional metrics that I hope will be helpful. As Steve mentioned earlier, we are now planning to open just four restaurants in 2021. Net capital expenditures, net of tenant improvement allowances are now expected to be 15 to 17 million versus approximately 15 to 25 million previously. We still expect restaurant pre-opening expenses of 2 to 3 million in 2021. And lastly, our effective quarterly tax rate is expected to be approximately 16 to 18% for the remainder of fiscal 2021. With that, I'll turn the call back over to Steve.

Thanks, John. Let me reiterate that we're optimistic about our business given our continued sales momentum and increased operating efficiencies. Through our focus of our three key pillars, safety, convenience, and value, we will continue to work on increasing our dining room capacity as we continue to increase staffing. Of course, none of these would have been possible without our team members who are working hard every day to ensure that we can provide the unique experience our guests have come to expect from Chewy's. In summary, as we look toward the remainder of the year, we remain operationally and hospitality focused. With that, we are happy to answer any questions. Thank you.

Thank you. Ladies and gentlemen, if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, please press star 1 to ask a question. We'll pause just a moment to give everyone an opportunity to signal for questions. We'll take our first question from Nick Satnia with Wedbush Securities. Please go ahead.

Thank you, and congratulations on another amazing quarter. Thank you. As we kind of look at this over 800 base point margin improvement versus Q2 of 19, has your thinking changed at all in terms of the margin opportunity longer term? I know historically you've talked about 350 basis points. It just seems like every quarter you guys are getting better at this. And so is it possible that maybe instead of 350, it might even be a little bit more?

You know, Nick, it's important to you to know that through quarter two, we've maintained basically tourniquet mode since we went into COVID at the beginning of 2020. And so we're still in the process of having our reduced menu. And as I mentioned, you'll see us do some add-ons in that off menu starting in the fourth quarter to going back to what our right size menu will be in February of next year. And we also still have our reduced hours. And I think what we've been saying is we're still in that, you know, 300 to 350 down a conservative basis. We believe that's still where we'll end up.

Yeah. You get talked about kind of still being at a reduced capacity. You know, what capacity in July? And I guess, you know, if you were at full employment or full staffing, you know, what, what, I guess maybe another way to ask is, you know, what you think the sales impact in July maybe of not being fully staffed may have been.

Well, you know, as we just came out of, we probably went to 100% capacity four to six weeks ago. And with that, you know, obviously what I mentioned to you at the last call, when we were at 70% approximately capacity, we were probably staffed about 85%, 90%. So obviously right when we went there, we've obviously started hiring up there. So we're not all the way back up. We're probably about 85% staff currently. And so not sure if that's answering your question, but that's kind of where we're at.

We limited all restrictions at our restaurants probably about the second week in June, second or third week in June. and been without, you know, restrictions. So our bars are now open. However, like you said, we're at 85%, you know, of employment right now to get staffed up to 100. So we've got about 15% to go.

And John, just lastly, you know, how are you thinking about GNA in the second half?

Um, GNA in the second half, I mean, if things progress, we're going to have similar, um, probably performance bonuses in there. So, um, you're looking at, you know, something similar to probably this quarter versus the first quarter was a little high. So something in that, you know, mid, um, well with the, the, uh, excuse me, I'm sorry with the, the stock comp, uh, probably something in the mid, uh, sixes, um, for the rest of the year.

Okay. Thank you very much. Thank you.

We'll take our next question from Chris O'Cole with Stiefel. Please go ahead.

Thanks. Hey, guys. This is Patrick on for Chris. I guess first I wanted to see if you could quantify the impact of the July 4th holiday shift in the July quarter-to-date result, and then also just Managing turnover in this environment, especially in your managers, how is that going? And then, you know, have you seen any sort of change in that since you implemented this bonus program? And how does that have implications for making sure you've got the staff you need to sort of ramp up development next year to get these stores appropriately staffed? Thanks.

Great questions. I'll answer the first and I'll turn the second over to Steve. As far as the impact on 4th of July for the 7th period is about 40 basis points. And so instead of the 1.7, you're probably looking at a 1.3. The other thing we didn't really call out, but we had a Cinco impact as well as far as favorable. And so that was about 40 basis points in the second quarter as well. that had impact of 40 basis points on the whole quarter. And what I said on 4th of July was 40 basis points just on the period seven. And that was negative. I think it was positive. So with that, I'll turn it over to Steve.

Yeah, and the turnover, we're doing great on turnover. What we need to do is during the pandemic, obviously we went down to four managers a unit and we furloughed the rest and we brought most of those back. I'd say we're probably... two weeks from being probably in that 100% staffed on managers. And we have a pipeline of over 35 managers in training currently. So we're looking pretty good. And we've been there before as far as ramping up for our growth. And we're pretty well set. And we have a good plan on moving forward to be able to do that six to eight stores and be in front of it throughout 2022. And then Obviously, when we said 2023, we'll get back to around that 10% growth rate, and we'll be ramping up for that also. So we're in good shape with a good plan.

Great. Thanks. And then I just wanted to clarify one thing you said earlier. So as you get back to full capacity here without the six-foot distancing, is this sort of the quarter where we should expect inflection in that labor line and at least start to see it normalize? I know you're still running with a you know, minimum, you know, minimal menu, but from at least a labor standpoint, is that something you're expecting to see in three key? Or do you think we would see that as we move on down the line?

Yeah, I'd say between rolling through it through the third and fourth quarter, you'll see some, you know, get us back to what we've all said about that three to 350 basis point improvement by probably near the end of the fourth quarter.

Yeah. I mean, it'll gradually go back. I think once we put the full menu back in in the first quarter, that's when you're going to see the biggest impact. Yeah, I'd agree. Got it. Thanks, guys. Thank you.

We'll take our next question from James Rutherford with Stevens Incorporated. Please go ahead.

Thank you very much. I want to get back on the margin question we've been kind of going through here. By my math, you're running about 40% more restaurant profit dollars than two years ago, doing 5% less in revenue, which is just outstanding, especially if you look at the peer group. I'm just curious, high level, what is it about your business model that's so different from everybody else and your ability to squeeze out those profit dollars? And the other way to ask it is, with your guidance of low 20s restaurant level margins that you gave last quarter, what was different? this quarter that caused you to come in closer to that 26% range?

Well, James, this is John. As far as the low, I mean, we set a new record on a consolidated basis in the last quarter. We tend to leverage more in the second quarter. I think our sales went up a little more than we expected. And so we got a little more leverage on on some of those fixed costs that bumped that up a little bit. And as far as our labor, our labor came in probably a little better than what we expected as well. You know, we thought that maybe we'd get back to staffing our restaurants and getting back to 100% capacity prior to when we did. We actually opened those up, like I said, in the kind of June, the second or third week of June. So I think that, like Steve says, we're running in tourniquet mode, and that has something to do with that better margin and basically performing in what we generally have as a high index, what we call a high indexing quarter, and it tends to leverage more than any other quarter we have.

Yeah, and things that you'll see us in the backside of the year, the second half, third, and really specifically the fourth quarter, you're going to see us I obviously bring back a few items that will bring in a little bit more than a handful of new items. Our existing items will be coming back on. You'll also see us, as John has mentioned in past calls, that we no longer have the nacho cart, but you will see us introducing by definitely the fourth quarter some increases in our happy hour food. We will be doing some specials on that that will be putting something in, and obviously that will add a little bit of labor as you continue to do that along with adding menu items and so forth. And then we're also going to look hard. Again, we're still at the reduced hours, and we'll be looking at that for the rest of the year and making some adjustment on hours as we move forward. We haven't done any of that since we went into the pandemic, and that's basically been our tourniquet mindset that we've been in since last March. Okay.

John, I know you probably don't want to get in a pattern of giving quarter-to-dates, thoughts on margins and so forth. But just given everything is so dynamic and for our modeling purposes, can you share what kind of restaurant margin you ran in July?

You're right. I don't want to get into that going forward. But again, I mean, we're expecting probably in the low 20s, like we were referring to previously, as like we said, we've opened up the capacities to 100% now, and now we're just trying to get staffed up. And so as we get staffed up, you know, we'll see a little decrement in those margins, but I still think we'll be in the low 20s.

Yeah, and another thing that will happen there, obviously you've got the back to school, which definitely affects our average unit volumes quite a bit and put a clamp on labor during that period in time. Okay.

Thank you so much. I'll pass it on.

Mm-hmm.

We'll take our next question from Andrew Strozolik with BMO. Please go ahead.

Great. Thank you, and good afternoon. Just one capacity clarifying question. I know you're at full capacity now. I think you said 70% as of the last conference call, but what was your average capacity effective for the quarter? I apologize if I missed it.

It was right in that 70, 72%, because, again, we were just talking about the last two weeks specifically of the quarter where we were at 100%. And, again, even with the 100%, because of our staffing issues, we were probably in that 85% range as we opened them up. Got it.

Okay. And then, you know, I wanted to ask a philosophical kind of pricing question. Obviously, the margins are so strong, and you're talking about the incremental inflation rate. in the back half of the year. I'm just curious, kind of, where is your thinking right now on pricing as a lever? Is the inflation at a point at which you feel like, you know, you'd like to do something with that or given the margin strength, you're kind of willing to support the value and let the margins fall where they may?

Yeah, we won't definitely looking at any price for the rest of this year, maybe incremental, but none this year. And, you know, we usually take price increase once a year. It's usually at the end of the first period of 2021 or 22, which would be in February. And we'll look at that. But right now we're in a studying each of our markets, all our competitors set to see what's going on out there. But that'd be the earliest we'd look at it. But right now, we'll just run our restaurants with exactly how we're doing it currently, with no price increase for the rest of the year.

Okay. And then just one last one for me. You know, now that you're back to full capacity, Diamond is obviously recovering. You know, I'm just curious, have you been able to look at, you know, how much overlap you see from the customer perspective from the off-premise business and the Diamond? Do you have a sense for how much overlap there is or how much switching is going on? Yes.

You know, we don't have that. We don't have that information, Andrew. That's a great question, though. As far as people that are transitioning, I think what your question is, people that are transitioning that were just using Art2Go now coming into their dining rooms. I don't have that answer, but I will say that Art2Go, yes, it has come down to 27%. It's, you know, in that mid-20s now. But from a dollar standpoint, you know, it's still in the low 20s per person. per week per store. And so it hasn't come down significantly on a dollar basis. So I think a lot of those people that were using the off premises continues to use that. And then a lot of our, you know, raving fans are coming back in dining room.

Yeah.

Great. Thank you very much. Thanks, Andrew.

We'll take our next question from Mary Hodes with Baird. Please go ahead.

Good afternoon. Thanks for taking the question. One more on the staffing dynamic. Are there restaurants that are staffed at 100%? And if so, can you see that the sales in those restaurants are outperforming the system average? I guess said differently, do you think that improved staffing can be a driver of better sales momentum as the second half unfolds?

Yeah, probably as we get into the fourth, I'm saying right now, as we mentioned to you earlier, when our restaurants were at capacity, we were right around that 70%. So everybody had some staffing to do. And so we have very few that I'd tell you that are 100% currently. And as we move forward, we'll do that. But I think it will be more towards the end of the year that you'll see the capacity restraints of the 100% being able to get us to where it would be flat to 19.

Okay, great. Thank you. And then just one on the unit development side, the guidance for 2021 is now at the low end of your prior range. Can you just talk about what were some of the drivers of the decision to come in toward the low end? Was that due to external delays or an internal decision to kind of pull in just slightly? And then just any perspective that you have on how the development pipeline is coming together as you look ahead to future years and just anything on what you're seeing in terms of availability, cost, competition, anything like that would be helpful.

Sure, sure. That's a great question. Let's deal with the first part first here. We came in with four. Just to remind everybody, these four stores were basically in the ground and mostly built in 2020 when we stopped our growth. And as I was looking for opportunities that we'll be looking at for 2021, we felt and we thought that there might be some opportunities of some restaurants that might have gone under during the pandemic. And we were looking at some opportunities. And to be honest with you, in our markets, we didn't see a whole bunch. There wasn't a lot of store closures on sites that I'd like to do. So we're going to do A sites. And if an A site popped up, we'd do it. If it didn't, we weren't going to push the issue and move forward with the four stores that we basically had in the ground for 2020. Our pipeline is good. As we've mentioned in the past, over the next three years, you're going to see us probably stay in the markets that we're currently already in and where we have good supply. name recognition and good awareness. And you'll see that over the next three, probably the next three years. And our pipeline is looking pretty strong. We're working in a good 12 to 14 units currently to move in for 22 and for 23. And as we mentioned earlier, we're in that six to eight number for 2022. As far as, you know, and we're not seeing any reduction in prices for landlords or anything like that through 2022. And, of course, everybody is always going after the A sites. So, you know, we haven't seen it loosening up there at all. And as far as construction costs go, you know, we're looking at probably an increase about that 18 to 20%. You know, we are hearing lumber coming down and so forth, and we'll continue to do that. But we think that we'll start, you know, maybe in the beginning part of next year, start possibly coming down a little bit. But that's where it's sitting for us currently. I hope I got all those questions. I hope I got most of them.

Yes. Thank you so much for the context. That's it for me. Thank you.

Thank you.

As a reminder, star one for questions. We'll take our next question from Todd Brooks with CL King and Associates.

Hey, thanks for the questions, guys. I've got a few. They're more offensive. So with the removal of the six-foot restriction and the normalization of capacity as staffing allows, Steve, I was wondering if kind of going into the pandemic, you talked about some – increased cadence in the limited time offers and a barbell approach around that. I guess, what's the right time that you're thinking of starting to flow some of that LTO activity back into the calendar?

Yeah, great question. Let's kind of go through the process of where we're going. You'll see us add some off-menu items probably, like I said, in the fourth quarter that you'll see added onto the menu probably around price increase time, which is about the second period of 2022. We'll run those and get everybody up to speed, because obviously any changes you make in operations, you have some, you know, get it into the training and make sure you can execute it long term. And then probably late second quarter, early third quarter, you'll see us start introducing LTOs and some newer items onto our menu, probably the whole second half of 2022. And you will see us, from a marketing standpoint, probably get a little bit more aggressive this year's fourth quarter as we're introducing these off-menu items in the fourth quarter. You'll see us do, you know, through the whole pandemic, you've been seeing us do paid search and paid social. And, you know, we'll probably start going and introducing a few other things in the fourth quarter. You'll see us probably... us do some new media with like TikTok and some Snapchat chats that you'll see us do in the fourth quarter. You'll see us do Yelp click-to-pay advertising with some showcase ads probably in the fourth quarter. You'll see us do some Yelp going back with some pay advertising and DoorDash marketing dollars we'll be spending. And again, why I'm picking the fourth quarter is there is it's kind of the time frame that we can spend the rest of this quarter making sure we're getting staffed and properly trained to to make sure the level of hospitality is right where we want it to be before we really start throwing a lot of stuff out there in the fourth quarter.

That's great, and it leads to my next question. Pre-pandemic, you were really gearing up to try to attack the catering opportunity. I guess as you look at the world now and we're recovering, but it can seem fragile sometimes with some of this variant stuff. Thoughts on pushing catering this holiday, or do you think that's more of a fiscal 22 type of effort?

You know, two weeks ago I would have said we were pushing hard, but the variance is going a little bit nutso with the media over the last two weeks and so on. But right now our plan is by the fourth quarter to get back to the 13 markets that we had catering in. When we actually ended, well, the pandemic started after the first quarter of 2020. So we'll be adding those catering markets back on and get ready. Now, the one thing that's still not happening is obviously the demand isn't as high as it was back in 2019 yet. Those are need to get back on it and still moving, but definitely, you know, looking at it in the fourth quarter, we'll, we'll, we'll get some up and running and then expanding that specifically. If it, if everything makes sense, gets rid of these variants. And as we move into 22.

Okay, great. And then one for you, John, just, you talked about getting the new credit facility done after the end of the quarter balance sheets, pristine, as always, you're starting to build up a decent amount of cash on the balance sheet. I guess, Given the environment, is there a level of cash that you want to maintain now that this facility is done versus any sort of other use for the cash or returning it to shareholders? Thanks.

Now, that's a great question, and we've had several discussions on that very topic. Kind of where we've settled right now is to keep it on the balance sheet, to remain flexible to really get on the other side of this variant and other things and maybe take another look at it towards the middle to the end of next year and then decide kind of where we want to go with that. But I think that gives us some flexibility on the balance sheet to, you know, possibly be more flexible in real estate, be more flexible on buybacks and things like that. So especially with how the market is treating restaurants right now, that may be an opportune time to buyback. So that's kind of our thinking. We'll have more to that next year.

Okay. Great. Very helpful. Thanks and congrats on the quarter, guys. Thank you.

Ladies and gentlemen, this concludes today's question and answer session. At this time, I'd like to turn the conference back to your presenters for any additional or closing remarks.

Thank you all so much. John and I appreciate your continued interest and choose, and we will always be available to answer any and all questions. Again, thank you. Everybody stay healthy and have a good evening.

Ladies and gentlemen, this concludes today's conference. We appreciate your participation. You may now disconnect.