Hooker Furnishings Corporation

Ladies and gentlemen, and welcome to the Hooker Furniture Quarterly Investor Conference Call, reporting its operating results for the second quarter of fiscal 2022. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. To ask a question during the session, you will need to press star one on your telephone. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Paul Huckfeld, Vice President, Finance, and Chief Financial Officer for Hooker Furniture Corporation.

Thank you, Gigi. Good morning, and welcome to our quarterly conference call to review our financial results for the fiscal 2022 second quarter, which began May 3, 2021, and ended on August 1, 2021. Joining me this morning is Jeremy Hoff, our Chief Executive Officer. We certainly appreciate your participation this morning. During our call, we may make forward-looking statements which are subject to risks and uncertainties. A discussion of factors that could cause our action results to differ materially from management's expectations is contained in our press release and SEC filing announcing our fiscal 2022 second quarter results. Any forward-looking statement speaks only as of today and we undertake no obligation to update or revise any forward-looking statement to reflect events or circumstances after today's call. This morning, we reported consolidated net sales of $162.5 million and net income of $7.5 million or $0.62 per diluted share for our fiscal 2022 second quarter, which ended on August 1st. Compared to last year's second quarter, net sales increased by $32 million or 25%, while net income increased $1.7 million or 29%. Earnings per diluted share also increased 29% from $0.48 a year ago. All three reportable segments reported year-over-year sales increases of more than 20%. For the fiscal 2022 first half, consolidated debt sales were $325.4 million, up 90 million, or 38%, compared to last year's first half. We reported net income of $16.9 million, or $1.40 per diluted share, compared to a net loss of $29 million or $2.46 per diluted share a year ago, principally due to $44.3 million or $33.7 million net of tax in non-cash impairment charges last year. Now I'll turn the call over to Jeremy to comment on our fiscal 2022 second quarter results.

Thank you, Paul, and good morning, everyone. We are pleased that Hooker Furnishings achieved double-digit sales and profitability increases for the second consecutive quarter. Each of our reportable segments, hooker-branded, home-ready, and domestic upholstery also achieved double-digit sales gains of 29%, 23%, and 29% respectively. While we expected improvements compared to the early months of the pandemic a year ago, we continue to surpass our goal to return to our pre-pandemic growth track. Consolidated sales were up over $10 million compared to the second quarter of fiscal 2020, and profits were up about 79% compared to the same quarter. Consumer and retail demand remain historically strong, with consolidated backlogs doubled compared to last year and incoming orders up 27% over last year in the six-month period. Industry-wide demand continues to be high. However, we are facing significant headwinds on the supply side that will impact us in the short term. The surge of the Delta variant of COVID-19 has caused factories in our source countries of Vietnam and Malaysia to close temporarily with recent talk of reopening in Vietnam around September 15th. In addition, global logistics challenges with higher freight and transit costs and lower transportation capacity, along with raw materials inflation and some labor shortages, remain ongoing. We are utilizing all available levers to help mitigate these headwinds, and we remain optimistic about our long-term position as we work our way through these transitory disruptions. Now I want to turn the discussion over to Paul Huckfeld, who will discuss highlights of each of our reportable segments.

Thanks, Jeremy. I'll begin with the Hooker branded segment, which performed exceptionally well for the second consecutive quarter, exceeding expectations in sales, profitability, product flow, and efficiency. Net sales increased by 11 million, or 29%, versus the prior year period. Incoming orders increased by 38%, and the backlog tripled as compared to the prior year second quarter. Operating income in the fiscal 2022 second quarter was $8.9 million, a 17.9% operating margin, compared to $6.1 million, or a 15.7% margin in the second quarter of last year. And Hooker Branded contributed over 90% of the consolidated operating profit during the period. We attribute our vibrant sales and profitability performance in the Hooker Branded segment to high industry-wide demand and the dramatic improvements and expansions of our product line. The recent June High Point International Market was the best for hooker-branded written orders since April of 2016. We're also seeing success with new lines such as the Commerce and Market Collection, which offers pricing, scale, and styling targeting millennials and is one of the largest accent furniture launches in our company's history. In addition, our strategy to rationalize our stocking inventory to focus on top sellers is helping us maximize shipping and production capacity, product flow, and cash utilization. Having best sellers in stock enabled us to limit our order cancellation rate to single digits and to ship more than expected despite limitations on ocean and land shipping capacity. Additionally, we're able to increase prices to mitigate higher product costs from rising ocean freight expenses and inflation on goods source formation. Turning now to the home meridian segment, HMI's second quarter sales were $87 million, up approximately 23% over the prior year. Revenues were boosted by continued strong retail demand versus especially weak shipments during the second quarter last year due to COVID-19-related disruptions. Year-to-date, we've seen a strong sales rebound with our traditional furniture channel retail base, as those customers' pickup share lost to emerging channels during the opening months of the pandemic shutdowns last year. In contrast, emerging channel sales have declined somewhat as a result of exceptionally strong sales in the prior year period combined with global supply chain challenges. Lower allowances and reduced fixed expenses were not enough to mitigate the impact of all-time record high freight costs. The home meridian segment finished the quarter at essentially break-even despite higher sales due to these high freight costs. Incoming orders increased about 4% as compared to the fiscal 2022 first quarter, but decreased by about 35% compared to the prior year second quarter when business rebounded dramatically after the height of the initial COVID crisis. Backlog at the end of the quarter was 62% higher than the prior year second quarter, the result of strong incoming orders, but also somewhat attributable to production and shipping delays. Our Pulaski Furniture Division delivered particularly strong Q2 results, with net sales exceeding the prior year by 68% and operating income increasing by $1.3 million. 83% of PFC's shipments in Q2 were via containers shipped directly to large retail and warehouses. New orders and backlog at PFC remains robust, but current factory closures in Vietnam could hamper shipments for at least the next several months. Samuel Lawrence Furniture, our value-focused case goods division, and PRI, our promotional upholstery division, also recorded strong double-digit sales increases in Q2, with year-over-year increases of 38% and 75% respectively. Backlogs are also up in both divisions compared to last year, but temporary factory closures in Vietnam will negatively impact Q3 shipments. As mentioned in previous quarterly results, SLH, our hospitality division, continues to struggle with significantly diminished demand in the COVID-disrupted hospitality sector. Net sales were off 48% in the period, and incoming orders were practically nonexistent. SLH will continue to operate a loss until the contract hospitality sector ultimately rebounds, which we expect to begin next year. ACH, our e-commerce-focused business unit, struggled with extremely unfavorable ocean freight costs in Q2. In addition to excessive freight costs, ACH was impacted by supply chain-related service issues and diminished order demand, resulting from our efforts to pass along portions of the freight cost increases. The price-sensitive nature of much of ACH's business limited sell-through, thereby reducing the benefit of our price increases. While we have mitigating measures in place to reduce excess freight costs, we cannot eliminate them, and therefore these headwinds are expected to continue impacting ACH results for the remainder of this fiscal year. In the domestic upholstery segment, net sales increased by $5 million, or 29%, in the fiscal 2022 second quarter compared to the prior year quarter due to significant sales increases at Bradenton Young and Shenandoah and, to a lesser extent, our Sam Horton district. Operating income for the fiscal 2022 second quarter was $457,000, or 2%, of net sales compared to a small operating loss in the prior year second quarter. Backlogs at all three divisions were at historical highs and incoming orders increased by 73% compared to the prior year second quarter. There's a lot of optimism in the domestic upholstery segment for the second half of this year. In addition to strong demand, we've seen a stabilization of some raw material issues such as foam allocation shortages that impacted us near the end of Q1 and earlier this quarter. Our management focuses on servicing backlogs with quality product and improved speed of delivery. In all others, sales increased by 300,000 or 10% in this second quarter as compared to the prior year period due to an 11% sales decrease at each contract. Operating income for the quarter was 230,000 or 8.5% of net sales compared to 350,000 or 11.5% of net sales from the prior year. As the retirement living market begins To slowly recover, H contract incoming orders were up 6.4% over the prior year second quarter, and the backlog is 49% higher than the prior year quarter end. Finally, touching on our cash and inventory positions, cash and cash equivalents stood at $37.4 million at the end of the quarter, a decrease of $28 million compared to the to the fiscal 2021 year end, due primarily to a $33 million increase in inventory as we continue to build inventories to meet increased customer demand and prepare for the holiday shelling season. We have a substantial amount of inventory in transit, much of which is sold and can be shipped to customers shortly after receiving our warehouses. Accounts receivable balance has increased by $15 million as a result of increased net sales. We used existing cash to pay a $4.3 million in cash dividends and $3.5 million of capital expenditures, which is more than we typically spend because we're in the process of upgrading our end-of-life ERP systems with newer technology. And we've begun equipping our new, more efficient Georgia Distribution Center, which is expected to go online in October this year. Now, turning back to Jeremy for his outlook.

Thank you, Paul. As we look ahead to significantly increased demand continues while we are still dealing with many of the same logistics and supply issues. The recent COVID-related factory shutdowns in Vietnam and Malaysia will particularly have negative ripple effects throughout the global supply chain for a period of time. The recent news of possible reopening in Vietnam this month is encouraging. Our hooker-branded and domestic upholstery segments, where we have the ability to keep product flowing and to ship from our significant warehousing capacity, is less challenged than Home Meridian. Home Radiant ships primarily to larger customers via container and is more quickly impacted by the shutdowns. Our strong balance sheet and variable cost business model gives us confidence that we can weather this current industry-wide challenge and should allow us to take advantage of the healthy consumer demand environment, long-term positive economic indicators, and demographic trends for home-related industries. Lastly, I would like to mention that Lee Boone, who most recently served as president of HMI, has left Hooker Furnishings. This change is part of an overall effort to reorganize and realign the home rating division while reducing operating costs and improving segment profitability. While we are not making wholesale changes at HMI, we have changed some reporting relationships to better align with strategic initiatives, reduced the executive team, eliminating some unnecessary layers, and will exit a high-cost West Coast warehouse by the end of the first quarter of fiscal 23 without significant negative impact on our revenues. These changes further streamline the organization and reduce cost. We appreciate Lee's dedicated service and contributions to the company over the last nine and a half years as he served in various roles, including president and co-president of HMI and division president of Samuel Lawrence Furniture. This ends the formal part of our discussion, and at this time, I will turn the call back over to our operator, Gigi, for questions.

And as a reminder, to ask a question, you will need to press star one on your telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Anthony Libyczynski from Sudoti. Your line is now open.

Thank you, and good morning, and thanks for the opportunity to ask questions here. You know, so first, I guess a couple of just more or less kind of housekeeping things here. So as far as the second quarter, just wanted to get a better idea about pricing versus unit volume on a consolidated basis, if you have that information.

Well, obviously, pricing is going to be a big part of it. Give me a second to... Sure.

No.

In fact, if you want to go on to your next question, I'll look for that number so I can give you the number. We're filing our Q&A.

Got it. Yeah, no worries. So, you know, as far as, you know, since obviously I know you have taken up price increases, I guess I just wanted to get a sense as to whether you plan to take price increases. If you plan to take additional price increases, and if so, are you taking anything on the existing backlog?

Good morning, Anthony. This is Jeremy.

Good morning.

Um, Hey, um, so we are taking it more through e-commerce currently, um, through our ACH business. Uh, we had to adjust more drastically than, uh, than we thought originally. And, um, so that's ongoing. And a lot of those, uh, went in place to the back. They did affect backlog. So that's the case on that. Um, You know, we're getting cost increases from suppliers for raw materials kind of on a daily basis. So, you know, typically we don't raise prices through our backlogs throughout our company. We, of course, would do so if we really had to, but we feel like we're in a pretty good position other than the first part of what I mentioned.

Got it. Okay, understood. And then... Do you have a number as far as for the backlog? I know it's up overall, but do you have a dollar amount for the backlog as well at the end of the second quarter?

Backlog is $320 million.

Okay, got it. Thank you for that. Jeremy, you did mention a few times that industry demand is strong, which is encouraging to hear. Can you give us a sense as to, like, what you've heard from retailers here for the Labor Day weekend?

Yeah, what we've heard is Labor Day weekend was really strong, and, you know, we continue to hear positive things from our retail partners. Okay.

Anthony, going back to your other question, unit volumes up 4.4%, consolidated, and average selling price is up 12.2%. Got it.

Okay. Thanks, Paul. Okay, and then, you know, as far as, you know, Jeremy, you talked about using your available levers to help to mitigate the supply chain headwinds. Can you go into a little bit more specifics as to what you're doing? Obviously, you know, realizing that, you know, Vietnam is still in the shutdown mode, but if you could just maybe expand on what you're doing to mitigate the supply chain constraints, that would be very helpful.

Well, first of all, separating the factory shutdown from everything else. Factory shutdown, you know, it's difficult to have a lever for that. And the best news we've had so far is there's word that those could open back up in Vietnam as early as the 15th this month. So kind of separating that out. You know, Regarding – so let's start with logistics. So logistics, it's all about additional cost of goods, right? So it comes in and we pay a certain amount. Maybe it's $15,000, $20,000. We've heard as much as $28,000. I think $30,000 even came up for a container.

How much are we paying?

Right. So our mitigation efforts on that are really looking at each of our businesses. So if it's a lower price point business, where a higher container cost doesn't make sense, we have measures in place to actually make that decision more on the fly than we have in the past. So we're not just allowing a ridiculous container cost to come in on a business that really can't support that. So that's one big thing that we're doing. And on the higher end price points, we can take more of that and we have to make sure that we have enough margin in pricing to do so. but in our warehouse supported businesses and the higher end specifically hooker branded, it's all about having enough product and keep it flowing and did not run out. So we, we aren't as sensitive about bringing the higher price containers in and we've been able to average, you know, you know, still way above what we normally would, but our averages is lower than, than a lot of the higher ones that you hear about. So we're trying to keep that average as low as possible. And, We put our logistics team into one big team because it's somewhat of all hands on deck effort. It's a daily constant grind to make sure that we're trying to get the rates that we can get. So that's a major part of what I mean when I say we're trying everything we can to mitigate a lot of these additional costs. Then getting into capacity, you know, capacity, of course, from a container standpoint is It's all about being – we feel it's about being consistent with what we're booking. So we're trying to keep our bookings as consistent into our contract countries as we can. Of course, all of that is a little bit out the window with the factories shut down currently in Vietnam. But that's one thing we're really trying to do is have a consistent number of containers at our major factories that we can get as many contract rates as possible on these containers. So – Another big part is managing all the demurrage that's out there. Not only is it difficult to get containers from overseas, it's difficult once they hit the United States, getting them to our warehouses is another major challenge. A lot of these things, it's focused. It's putting enough people and enough horsepower on each issue and make sure you're watching it on a daily basis. It's not something you can take your eye off of it and look up in a month and say, okay, what just happened? Because you're not going to like the result.

Got it. Okay. Yes. Thanks for that detailed explanation, Jeremy. So, you know, so given the, you know, kind of, you know, supply chain constraints that are out there, how are you thinking about strategically, you know, going forward as far as, you know, are you looking to longer term diversify your sourcing capabilities? Given what's happened here, I just wanted to get your high-level thoughts about that.

Yeah, we're always looking for additional sourcing opportunities to diversify what we are doing. We feel one area is Mexico is an area we're trying to diversify into. It's easier said than done, candidly. One other big area is with upholstery, import upholstery, not domestic, but imports. We actually have diversified quite a bit out of Vietnam. You know, we're in Thailand. We're in, you know, we're in different areas. We're even, candidly, we've even gone back to China a little bit when necessary. If we feel more stability is in a country currently, that's what we're going to do. And upholstery is easier to move than case goods, especially when you get into higher price points of our case goods. from a factory standpoint.

Got it. Okay. And then, you know, as far as, you know, Home Meridian, you did, you know, mention about the, you know, leadership change there. I mean, you know, as far as, you know, longer term, you know, how should we think about the opportunities for HMI? You know, obviously, you know, there are some near-term challenges, certainly understand that, but, you know, how should we think about the from a sales and profitability standpoint longer term?

So one thing that we're very focused on, and I somewhat said it, is I have not found additional layers to be effective specifically when you're trying to figure a business out. So number one, being closer connected as a team and actually really working together to run the same direction, I think that's a really big deal. Secondly, we have really good businesses that have been somewhat hidden by a couple of businesses that are not as strong and are not as good for our company. So we've been really working on mitigating those either down or getting the prices to where they need to be, even if it's a loss of volume in that particular business. and really trying to magnify and invest more in the businesses that we see are really strong and have great opportunities currently and in the future. So I believe, I really fully believe that once we do what I just described, it'll be a whole different picture. And the good news is we have really good leadership there. In each of those businesses, which is why I mentioned layers, it almost gets confusing when you have another layer on top of these leaders with those businesses. So I really feel good, actually, about our position. It's going to be, as I said in the outlook, it's going to be tough with factories closed. It affects them quicker. But beyond that, I'm very optimistic.

Okay, that's great to hear. And then, you know, last question for me. I mean, obviously, you guys have a strong balance sheet, and I know the current environment as far as the supply chain is constrained, but just wondering, you know, what is your appetite for acquisitions, you know, especially in light of potential changes to the tax laws? I mean, are you seeing or are you interested in doing any M&A activity?

We definitely aren't currently going to, you know, hide from an opportunity. I mean, we, we have our eyes open, ears open, and we, we review things and we're, you know, we have a board of directors that's open to that as well. So our, one of our big strategies is growth through acquisition, but it also means do it correctly and do it with a business that would actually bolt on correctly to our overall business and be an actual cultural and good fit with what we do. So, um, I know I'm not giving you, you know, as much information as you want, but I, The answer is we're definitely open to it. Got it.

All right. All right. Well, thank you and best of luck.

We appreciate it. Thank you, Anthony.

Thank you. Our next question comes from the line of John Dyshire from Pinnacle. Your line is now open.

Hi. Good morning. Thanks for taking my question. I was just curious on the shutdowns in Vietnam and Malaysia. what was the timing of that? In other words, did those, were those shutdowns in effect the entire quarter or did they come into play at the end of the quarter or help us understand how that impacted the current quarter?

Good morning. This is Jeremy. We actually started down that road about August 1st is when it really became where, where the government, you know, they, So Malaysia actually happened a little earlier, probably, Paul, like June or July.

Yeah, Malaysia was earlier, but Malaysia is a pretty small part of it.

It's not as big, and Vietnam's a bigger, for us, a bigger footprint. So 8-1 would be the answer on that.

It was pretty dramatic. It went from a few, you know, when the Delta variant thing came out, it went from just a few cases to pretty aggressive lockdown. I think that Because Vietnam at the time was not particularly well vaccinated, the government was very aggressive about mandating shutdown.

Okay, so August 1st, so it really didn't impact the last quarter. Do you anticipate being able to meet your sales going forward? I know inventory is up, but if the factories don't come back online anytime soon, could there be a shortfall in terms of lost sales?

Yeah, it's a fair question. We believe we're going to be in better shape for hooker branded and domestic upholstery. HMI is so closely attached to that production and shipping containers off of production that we believe there could be a miss there.

Okay.

February, but until the pipeline refills, it's certainly probable.

Okay, so HMI is the most vulnerable at this point. And during the last quarter, how much actually came out of Vietnam as a percentage of sales roughly?

Probably about half. Yeah, I'd say it's around half.

Around half. And what was China roughly for that quarter? Sorry?

20%. Okay.

All right.

Domestic and others.

Yeah, right. Okay, so about 70% of the last quarter came out of Vietnam and China. All right. Okay, I think that does it. Thanks.

You're welcome. Thank you.

Thank you. Our next question comes from the line of Jeff Gagan from Global Value Investment. Your line is now open.

Thank you. Good morning, gentlemen. Appreciate the additional commentary around your press release today.

Yeah, good morning.

Can you go back to the HMI transition, give us an expected timeframe and financial impact on that?

So I'll start with timeframe, and then I'll let Paul go through the financial impact. But it's somewhat fluid because there's some unknowns. We've received, we think, some decent news that Vietnam's looking to open up 9-15 of this month. The challenge is going to be you're going to start out at a low – if you shut down a factory, you don't just go from zero to all of a sudden 100%. So there's going to be some challenge with capacity going to lower, and then it will work its way up. But there are some – there's more and more vaccines getting out in the country. The government there, what we're hearing is they're actually pushing – that fully vaccinated people back to work. So there's not going to be this, um, we don't feel though there will be a lag to people going back to work once they're either vaccinated or if they've had COVID, apparently they're also being told that they need to go back to work. So I, you know, I, I think, um, I think that, uh, we're going to see a good, um, would you say it's going to hurt for a quarter on HMI specifically?

Third quarter, HMI could miss sales by 30%. Right, right. It's going to be significant.

And then I believe we'll start to make somewhat of a comeback, but not recover for the year. But I think we'll start to see much better shipments fourth quarter, but it'll still be a recovery. And I think we'll hit first way with HMI. Is that fair, Paul?

Yes, it is. But that's all predicated, of course, on the behavior of the macro events like the virus. So that's our thinking today.

All right. And then I guess two follow-ups. Number one, I was more specifically interested in leadership changes there, or it's conceivable you do have the leadership team you want right now. But secondly, given the percentage of REVs represented by HMI, but the zero margin contribution, on a 30% lower revenue, could you actually start seeing margin contribution from that division?

No, we don't expect to see margin contribution in the third quarter. We think that some of these restructure moves and then as we rebuild, we're focusing on profitable businesses and So we expect them to be back in the margin contribution world maybe fourth quarter. But third quarter, it's going to be tough with a sales mess like that.

When you can't ship from the factories closing, it's a rough deal for a little bit. But we do feel it's short term.

All right. Thanks. Regarding the logistical issues and Asian supply chain challenges you're facing, how do you expect that to impact your holiday sales, and what contingencies have you made?

Holiday sales really aren't a big driver except in the ACH division. Those will probably be adversely affected. The hooker side of the business, I mean, we participate in – Wayfair's Cyber 5. And it's important to us, but it's not a key. And that's all business shipped out of our warehouse already. So we don't expect to see a major impact there. I think the ACH division is the only division that specifically could be adversely affected in like a holiday sales expectations.

All right. And you mentioned your skew rationalization. You made some general comments around that. Can you add a little more color in terms of the impact to your P&L or balance sheet?

Well, you know, there was a major effort at the start of the pandemic to say, okay, once we got through the first part and we saw the demand start to hit specifically, you know, hooker branded, really the whole company hit the demand portion. But with the warehousing in focus at Hooker Brand if we went into, okay, if we have this much capacity and this is going on, we're going to make sure we're making the right thing. So we cut down a significant number of the SKUs. I believe it was 18% of the SKUs at the time we cut last year immediately. And then we continued that effort and we kept watching it, kept focusing and said, okay, A's and B's and really forget C's. So, and really it's mostly A's. I mean, it's So when we get a percentage every month showing us what percent of the A's actually are shipping on containers to us, and all of them are always sold, of course, and then what percentage of B's. And if we see any C's, we review those again and say, why did we ship C's? Why did this happen? So it's a constant effort, and I think it's had a major impact on hooker-branded bottom lines.

Top line, too.

Yeah, top line and bottom line, because we've been able to get the right production for the right pieces, and so that really has had a major positive impact for the company.

And can you speak to your balance sheet inventory as well?

I think we're, including in transit on the hooker-branded side of the business, I think we're reasonably happy with the flow, I mean, given the constraints. HMI is challenged because their inventory flow is much different. They've built inventory, but a lot of their sales are container direct sales. So that's that 30% sales list that we're going to have. The inventory is not built yet. But I think on the hooker side, we're reasonably happy with our inventory under the circumstances. Obviously, with the demand, we'd love to have more. But I think we're servicing... We're exceeding our expectations every month. I think we're servicing reasonably well.

We believe on the hooker branded, it's more of a hiccup as long as it opens in the timing we think it's going to open. And then on the other side, we've talked about where it's definitely more impactful.

Thank you. And last question, and Paul circling back to the answer you gave Anthony earlier. I thought you indicated your average selling prices were up roughly 12% and volumes about 4.5%. If that's correct, would that really imply that organically you're still seeing strong demand at 4.5% roughly, like unit volume growth?

Well, actually, the demand is probably more than that because our backlogs continue to grow. The 4.5% is what we're able to shift. So we're very confident in demand, and I say too often, but we're not experiencing cancellations, any outside cancellations. I think that the demand industry-wide is really good. So I think it's more than 4%. It's just that 4% is what we can service.

I see. Thank you. Good luck. I think the issues you're facing are being faced by everybody that's moving product around the world. So we'll get through this and look forward to seeing it on the other side.

We really appreciate those sentiments. Thank you. Thank you.

Sure.

Thank you. At this time, I'm showing no further questions. I would like to turn the call back over to Jeremy Hoff for closing remarks.

Thank you, Gigi. We would like to thank everyone for their participation in today's call. We look forward to sharing our third quarter results in early December with you. Thank you and have a great day.