Kimball International, Inc.

Good afternoon, ladies and gentlemen. My name is Richard, and I'll be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimbell International First Quarter Fiscal 2022 Earnings Conference Call. As with prior conference calls, today's call, November 4th, 2021, will be recorded and may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the forward-looking statements. Risk factors that may influence the outcome of forward-looking statements can be seen in the Kimball International Form 10-K. During today's call, the presenters will be making references to an earnings slide deck presentation that is available on the Investor Relations section of Kimball International's website. On today's call are Christy Juster, Chief Executive Officer of Kimball International, and T.J. Wolfe, Executive Vice President and Chief Financial Officer. I would now like to turn today's call over to Christy Juster. Ms. Chester, you may begin.

Thank you and good afternoon, everyone. We appreciate your interest in Kimball International. I am pleased to report our first quarter business trends were aligned with our expectations and support our guidance for a year of substantial growth for Kimball International in fiscal 2022. There are several key takeaways from this quarter's results that I'd like to highlight. First, as anticipated, we experienced strong customer demand across our workplace and health end markets, with orders up 51%, and together accounting for 86% of our net sales. This performance has more than offset the softness in hospitality, where we have been consistent in our beliefs that the recovery will lag until the end of this year. Second, within the workplace end market, Poppin is ramping very well, with sales up 22% sequentially and orders up 32%. Third, our business differentiators, including our dominance in ancillary products, our positioning in midsize metropolitan markets, and our emphasis on new product development are all contributing to our ability to gain share in our targeted markets. And lastly, We have proven our agility and nimbleness during these difficult business conditions. We are navigating inflationary pressures, supply chain disruptions, and labor availability challenges that are constraining sales and margin in the near term. But we do see light at the end of the tunnel in the second half of this year. Taking a closer look at our business highlights in the first quarter, workplace revenues increased 16% year-on-year led by the commercial and educational verticals. Even more impressive, workplace orders in the first quarter were up 57% compared to last year's level, and this growth was broad-based, representing substantial year-on-year increase across the majority of our verticals. While the spread of the Delta variant has delayed the return to office in some areas, We have not experienced any impact on either order rates or pipeline activity. Clients are actively addressing the changing dynamics of work environments by reconfiguring their spaces to foster collaboration and incorporate flexibility and adaptability. Additionally, our education vertical is benefiting from a boost in federal and state funding through the CARES Act and the America Rescue Plan. which is expected to remain in place until 2024. A key highlight of the first quarter was the recovery of the Poppin business model to near pre-pandemic levels. Based on order trends, Poppin could be back to pre-pandemic annual run rate of approximately 80 million as early as next quarter. Importantly, approximately 60% of Poppin's first quarter revenue was generated through the core B2B channel, which is an indication of its strength in its historical business model and which supports our expectations for the continued robust performance of this business. Our health market was the first to ramp after COVID and continues to be a strong performer for us. Net sales in the first quarter increased 18% year on year and orders were up 30%. reflecting the traction of our interwoven dedicated health brand, our strong positioning in the government health sector where there is substantial federal funding, and our development of relationships with large health systems. We continue to see a shift in the delivery of care due to COVID and further expansion of our growth in specialty centers and outpatient clinics. While there have been construction postponements due to the shortage of labor and materials, All indications are that the important structural trends will continue to accelerate and underscore the long-term growth potential of this market, along with the need for caregivers and patients alike to be surrounded by efficient, comfortable, and adaptable furniture. We are also pleased to share at last week's Healthcare Design Show, Kimball International was selected as Women in Healthcare's recipient of the organization's award. recognized for promoting an environment where each employee is valued, respected, and treated with dignity alongside an intentional focus on increasing diversity of leadership. Just a few words on our hospitality market, which was especially hard hit by the pandemic. While orders received in the first quarter were below last year's first quarter, the dollar amount of orders was the highest it has been in a year. This was a bright spot in a market that we do not expect to recover until the end of this fiscal year. In the meantime, we have taken steps to improve our margin profile in this market by closely managing costs and increasing our mix of customized products, which accounted for 73% of first quarter sales, up from approximately 50% in a similar period last year. Looking ahead, we are confident that Kimball International is very well positioned for accelerated growth and margin expansion as the industry recovers and supply chain headwinds abate. Our strategic choices have been clear and consistent. We are well positioned geographically with strong relationships in secondary, fast-growing metropolitan areas where the post-pandemic return to office has been underway. and are expanding our position in these markets with the opening of three new pop-in showrooms in Miami, Austin, and Atlanta this fiscal year. Kimball International specializes in ancillary products, which are precisely the types of products and solutions that customers are looking for as they reconfigure their workspaces to adapt to a post-pandemic working environment. These products accounted for 85% of our trailing 12-month revenues. To further leverage the strength of our broad portfolio across the dealer network, we introduced Perfect Harmony, an integrated go-to-market strategy for our five workplace and health brands. This is providing our dealers with access to an expanded and complementary array of products that offer our customers a much broader set of design possibilities than in the past. Additionally, in collaboration with a market research firm, Ipsos, we conducted research. We validated our initial market insights, namely that the right spaces create connections. And we have identified six space types that we believe will define the post-pandemic workplace and reinforces the important role of the office in the exciting, changing environment. The hub supports open and collaborative interactions. Work Your Way, unique and personal user space. Room on the Move, flexible activity space. Culture Cafe, brand and customer experience. The Meetup, functional and collaborative space. And Well and Good, designed for employee wellness. These six space types fueled 22 new products at the Neocon Trade Show in October, with the largest being EverySpace. a solution-based system that addresses the constantly changing needs of the workplace, providing solutions that can span from open plan workstations to private offices to collaborative environments. The flexibility and adaptability of every space provides users the ability to feel focused, creative, and connected all at once. To sum up, we were pleased with the demand trends evident from our first quarter performance, and in fact, the year-on-year revenue growth rate would have been twice as high if not for the supply chain issues that reduced our production and shipment capabilities. This demonstrates the relevance of our product portfolio and how well it is aligned with today's market needs. I'll now turn over the call to TJ Wolf, our Chief Financial Officer, to provide a financial review of the first quarter and discuss the current supply chain and labor issues we are navigating and our expectations for fiscal 2022 results.

Thank you, Christy, and good afternoon, everyone. As you can see on slide 7, 2022 first quarter net sales increased 6% year-over-year to $156.6 million, including a $15.2 million contribution from Poppin'. We'll discuss each end market in the next several slides, but as expected, our growth in the first quarter came from workplace and health, as these markets on a combined basis increased by 16% from the year-ago quarter, and together accounted for 86% of net sales. It is important to note that demand for our products remains strong, as reflected in our expanding orders and backlog. However, our top-line growth has been somewhat constrained due to the ongoing disruptions in our supply chain. Specifically, we've experienced challenges related to labor and material availability, along with dislocations across our logistics network. We expect these challenges to persist at relatively the same level in the second quarter before conditions begin to improve in the second half of our fiscal year. Gross margin declined 410 basis points compared to last year's first quarter, but expanded 70 basis points sequentially to 31.3%. The year-over-year decline reflects raw material inflationary pressures, as well as higher freight and labor costs, partially offset by the price increase we implemented in March of 2021, along with improved production efficiencies and benefits from cost savings initiatives. We do anticipate gross margins will improve on a year-over-year basis in the back half of this fiscal year, as our price increases work their way through the order book and offset the inflationary pressures we are currently experiencing. Selling and administrative expenses were $50.2 million compared to $41.7 million in the year-ago quarter. This increase is primarily related to costs associated with the Poppin acquisition and incremental investments to support our sales growth and new product introductions. Excluding amortization from the Poppin acquisition, totaling $1.6 million, as well as our supplemental employee retirement plan, adjusted selling and administrative costs were $48.6 million, or 31.1% of sales, compared to $40.8 million or 27.6% in the prior year. For the current year first quarter, our effective tax rate was 33.2%, which is higher than the statutory rate due to an earn-out adjustment as compared to a 25.7% tax rate in the year-ago quarter. In the first quarter of fiscal 2022, we reported a net loss of $5 million or net loss per share of 14 cents, which includes the after-tax contingent earn-out loss of 3.4 million related to the pop-in acquisition. This compares to net income of 5.4 million, or 14 cents per diluted share, in the first quarter of fiscal 2021. Excluding the earn-out, as well as the acquisition-related non-GAAP charges and restructuring, all totaling 2.4 million, adjusted net income was 0.8 million, or 2 cents per diluted share compared to 8.6 million or 23 cents per diluted share in the year-ago quarter. Adjusted EBITDA was 4.9 million compared to 15.8 million in the fiscal 2021 first quarter. Now let's move to slide nine and discuss in more detail our revenue and order trends by end markets. Net sales in workplace and health grew 16% and 18% year-over-year respectively. Order activity in the workplace end market was strong and increased 57% compared to the year-ago quarter, including the contribution from pop-in, as order trends reached near pre-pandemic levels. Within workplace, order trends were robust in a majority of our verticals, but most notably in education and commercial. Health orders increased 30% compared to the year-ago quarter, aided by robust end market demand and strong customer demand for our new product launches. Regarding price, During Q1, we announced a price increase that went into effect on October 1st, covering the majority of our workplace and health products. This follows the price increase we previously implemented on March 1st of this year. In addition to these two price increases, and in order to offset the continued inflationary pressures we are experiencing related to raw materials and transportation costs, we announced a price surcharge across the same product categories that will go into effect on November 15th. We will continue to monitor the inflationary environment and adjust our pricing as needed. However, we would expect to transition this temporary surcharge into a permanent list price increase sometime during the third quarter. In the hospitality end market, sales declined 32%, reflecting the ongoing depressed level of demand, which we anticipate continuing for the remainder of the fiscal year. However, we have been successful in shifting the mix of our hospitality business from program to custom. with custom projects accounting for approximately 73% of our revenue in Q1. Our total backlog at the end of the first quarter was $170.8 million compared to $141 million in the prior quarter and $139.5 million in the first quarter of fiscal 2021. Now let's review our balance sheet and cash flows on slide 10. We ended the quarter with total available liquidity of $111.2 million representing cash and the unused portion of our credit facility. Operating cash flow was $11.9 million, and capital expenditures were $3.8 million. In fiscal 2022 first quarter, we returned $4.8 million of capital to shareholders in the form of dividends and share purchases. We reaffirm our four-year guidance for fiscal year 2022. As you can see on slide 11, we expect year-over-year revenue to increase approximately 15% to 20%, with significant growth occurring in the back half of the year. As sales growth accelerates in the back half of fiscal 2022 and our pricing actions are realized through sales, we anticipate a corresponding improvement in our gross margins. We expect capital expenditures net of disposals will total approximately $25 million unchanged from prior guidance. CapEx will be primarily directed toward the construction of our new warehouse in Jasper with a portion of this project funded by proceeds we receive from the sale of our existing site as well as an investment in a new automated metal manufacturing capability in our Salem facility. We continue to anticipate operational excellence projects to yield cost savings of approximately $10 million in fiscal 2022. These savings will partially fund our ongoing growth investments, namely the opening of new pop-in showrooms, as Christy mentioned earlier, as well as our marketing and promotional spend and building our sales force. As a result, we project higher overall S&A spend in fiscal 2022 compared to the prior year. We expect our full year effective tax rate to be in the range of 25 to 27%. Now turning to our second quarter guidance. We forecast year over year revenue growth of 10 to 15% with second quarter gross margins ranging from 32 to 33% and S&A expenses totaling 51 to 53 million. Our revenue guidance reflects our current backlog of 170.8 million which includes approximately 120 million scheduled to ship in the second quarter, as well as current order trends and the expected impact from production capacity constraints and the potential for temporary operational challenges related to complying with the vaccine mandate for government suppliers. With that, I will turn the call back to Christy for her closing remarks.

Thank you, TJ. The choices we have made over the last 18 months have transformed how Kimball International goes to market. and our new product designs have aligned our portfolio with a new forming workplace and the changes taking place in healthcare delivery. We are proud of these accomplishments and of our industry-wide reputation for high-quality manufacturing and superior customer service that have been longstanding attributes of this organization. In closing, I'd like to thank our employees for their hard work and dedication and to reference our ESG summary report. Our progress clearly emphasizes our continued commitment to being responsible stewards of the environment, maintaining a diverse and caring culture, and having strong corporate governance practices. The Kimbell International journey over the last year and a half demonstrates not only our transformational mindset and our ability to navigate external factors, but also the power of our strategic choices to accelerate growth and value creation. Operator, now I'd like to open the call for questions.

Thank you. We will now begin the question and answer session. If you have a question, please press star then one on your touch tone phone. If you wish to be removed from the queue, please press the pound sign or the hash key. If you're using a speaker phone, you may need to pick up the handset first before pressing the numbers. Once again, for any questions, that's star then one on your touch tone phone. And we're standing by for questions. And our first question on the line comes from Mr. Greg Burns from Sedodian Company. Please go ahead. Your line's open.

Good afternoon. I missed a little bit of the beginning of the call, so forgive me if I'm repeating some things you went over already. But I just wanted to start with Poppin. You mentioned in the release that 60% of the revenue this quarter came from the core B2B businesses. Does that mean the rest, the 40% is coming from new initiatives like Pro or I'm just trying to understand kind of where the strength is and where you're seeing the strength in Poppin and the nice recovery you're seeing there?

Yep, sure, Greg. It's a mixture of what we would say is the wholesale business and Poppin Pro as well. So it's all of the existing business that Poppin had before in their wholesale channels, but also we added with Pro would make up the remaining 40%. But again, B2B, the majority continuing to grow the fastest.

Okay. And then in terms of the the incremental growth initiatives around Poppin' Pro, maybe bringing Poppin' into second and third tier markets. And I think there might have been one or two other kind of incremental growth initiatives. Can you just talk about the status of those, where you are in implementing those, and if they're having any impact on the revenue yet?

Sure. So let me take that, Greg. How are you? Good. So let me start with Poppin Pro and just talk a little bit about Pro is exceeding our expectations to date. We certainly enjoyed having the Poppin Pro dealers and product with us at Neocon. I'll just give you an example of kind of how that's playing out in our combination of our traditional market and what Poppin really provides. So an example would be we had a large end user in Wisconsin that was with us at Neocon, and they came in and explained to us how excited they were with Poppin, and they are an existing KII customer, yet they outfitted all of their work from home for their employees with Poppin. So we absolutely are seeing crossover of the traditional Kimball International dealers working with the Poppin Pro portfolio. The other thing that's been very interesting is we've talked about the categories of pods and spaces, and we are seeing a different mix happen in PopinPro, and so pods and spaces are the largest categories that we're seeing from a mixed perspective playing out, and that's what we were hoping for. Another example was we brought both pods and spaces with us to the healthcare design show that was in the Kimbell International Health booth. lots of meaningful advancement in both how the distribution is growing, how the categories are growing, and then of course we've announced the new showrooms, three showrooms, and the showroom in Atlanta is actually, the bottom half is Poppin', the dedicated showroom, and the top half is Kimball International, and the five brands represented under Workplace and Health. Lots of good examples, and we're very pleased with the progress, even in the short term, and how the core is rebounding.

Okay. And then in terms of the healthcare market, you made a lot of investments in there and very targeted, going after that broader market opportunity in the healthcare space. Can you just talk about You know, where you're seeing the growth, is it still mostly administrative? Are you getting more into the clinical side of the business? Like what's the split of your revenue between, you know, the different segments of the healthcare market? And, you know, how do you see that playing out over time, like in terms of maybe the growth opportunity for Kimball? Thank you.

Sure, so let me go ahead and talk about how we think about the three different markets that we service with our health expertise. So we've talked about the 30 health systems that we have direct relationships with those end market health systems. And that has been a very important part of our growth. We also have talked about our FedGov, And we refer to Veterans Administration and how significantly that portion of it is growing. And then that group of experts actually service our dealer community in workplace. So those are kind of the three ways that that expertise, we call them health strategists, are actually deployed across the health market. And each of those segments are growing significantly. Each of those segments are actually pacing at or above what the total workplace health portfolio is. So we're pleased with that. We have also expanded our health specialty product platform. We talked about the award that we got at Healthcare Design. Two of our new product platforms were actually given what are called Nightingale Awards for design. So we're seeing it expand both in our distribution and route-to-market decisions and in our product platform decisions. I don't know, TJ, if you want to add anything to that.

Yeah, I think that's the important part, Greg, is that the clinical products that we talked about, while still, you know, the remainder of the portfolio is the majority, but the clinical product offering continues to grow and is a focus as we showcased at Neocon.

Okay. Great. And then... TJ, you made some comments around S&A being up in 22. I didn't quite catch all those. And I guess the guidance for the second quarter implies it'll be up sequentially. So you just talk about that. What's driving that? And is the second quarter number a good number to think about for the rest of the year? Is that going to continue to grow? Sure.

So I think when you look at Q1 year-over-year, Greg, the biggest difference would be the acquisition of Poppin. So Poppin was not in our Q1 in the prior year, and that was the biggest step up year-over-year. But you're right, we did guide to a sequential increase, and that's a variety of things. Number one, the reintroduction of various elements of compensation that were pulled out in the prior year and now are kind of moving on throughout the year. But the investments in new product introduction, direct marketing, pop in. We mentioned the showrooms, the growth of our sales force. So what we are looking to do is as revenue scales throughout the year, and as we talked about when you look at our revenue projections, we guided that the back half would be stronger than the front half. Those S&A investments will continue to ramp up with the revenue ramp over the course of the year.

And TJ, I'll just add, one of the things that we're working through is obviously The revenue line is up 6%, but we talked about 86% of the business. The orders are up 51%. And so you think about what we have to service, what the organization, the volume that the organization is actually servicing right now and the opportunity that sits ahead of us. And so we are being very thoughtful, but certainly we want to scale with the order number. And we've just got to do that step-by-step, and that's why the SG&A is moving up over time.

Okay. But production constraint now, so the order might not necessarily translate into revenue, and we'll see the backlog grow. Is that how we should think about it in the near term?

Okay. That's right, Greg. And if you look at the backlog that we talked about this quarter, the $170 million, that is, again, it's growing because of the significant demand spike that we're seeing, but it's also being elevated because of the production constraints that we have in place. But as Christy mentioned, when those orders are coming in, we still have design requirements. We're still assisting with the specification and getting the order into the system and all of that work. is still coming through our system right now. So that's generating additional needs for investment and personnel. And then we're going to see that as we begin to remove the production constraints, it will flow through into sales in the second half.

Okay. Okay. Okay, great. Thank you.

Thank you. Our next question online comes from Rudy Young from Berenberg. Please go ahead.

Hey, guys. Thanks for taking my questions. So on margin headwinds, I guess, are you able to specifically quantify the impacts you saw this quarter from, you know, higher material costs, supply chain disruptions, shipping and labor? And I guess if you can't get that granular in detail, what would you say, you know, the order of magnitude would be in terms of areas you're seeing the most impacts right now?

Sure, Rudy. So I would put it into... four buckets. I would think, you know, we're talking about material inflation, freight inflation, labor rates, and then I would also throw, I know it's an accounting convention, but the LIFO reserve. And if you look at those four elements, they were roughly the same level of magnitude with material being slightly ahead of the others. So I would put material at the forefront and then equal parts labor, freight, and the LIFO reserve, which is something that we have to account for in real time. So those were the components of the pressure. Again, the offset to that was price and operational excellence. Actually, operational excellence contributed more to our offset of those than price did, and this is because, again, we talked about it a little bit in our comments, the pricing is going to take time to work through the backlog, and so we see the majority of that pricing benefit happening in the second half of the year.

That's super helpful. I appreciate that. And then could you just clarify a little bit about the price surcharge you're announcing? Is that an increase of like the same magnitude compared to your previous price increases? And I'm sorry if I missed this, but was there a specific deadline you were expecting it to be temporarily until?

Sure. So just to recap again, we had a price increase, a list price increase on March 1st, another list price increase on October 1st, And this surcharge is effective as of November 15th. And again, just the mechanical difference is that with the surcharge, we don't adjust the actual list prices. It's incremental to those. The list price or the surcharge, pardon me, is roughly equivalent to the combination of the prior two list price increases. So it is higher in magnitude. And again, the reason for that action is that we wanted to give ourselves flexibility to assess the inflationary environment over the next several months before we made another final decision about list price changes. So we just feel that it gives us a little bit more ability to offset inflation in the near term, but it gives us flexibility with how we price our products to remain competitive over the longer term.

Got it. That makes sense. And then could you kind of discuss the order trends on hospitality a little bit? You know, obviously workplaces Health continue to be strong, but I think last quarter you guys saw a positive order growth in hospitality, and this quarter it declined a little bit. So I'm just wondering what that was mainly attributable to.

Sure. I think in hospitality, as we've said, it's something that we expect to recover towards the end of the fiscal year and into the following year. I think the orders and hospitality, because many of them are rather large projects, it does tend to be a bit choppy. So you can see some quarter over quarter volatility that doesn't necessarily indicate a trend. You know, we were pleased with the highest order rate in the trailing 12 months that we've seen, but we're still quite cautious and want to maintain, you know, the right margin profile for that business and ensure that we're setting it up for success in the long run.

Got it. And then lastly for me, you know, just to follow up on your point on top and reaching kind of pre-pandemic levels by the end of the year, I guess, do you see any kind of upside for that to kind of accelerate faster than your expectations? And, you know, if you do, what kind of areas would that mainly be in? Would that kind of be mostly in B2B returning quicker or, you know, where do you kind of see that upside as possible?

Yeah, sure, Rudy. So I think what we're guiding towards is that if we continue on this trajectory, Poppin could be at the 80 million annual revenue run rate as early as this coming quarter in Q2 of the fiscal year. I think when you look beyond that, what are the accelerators that drive it? Poppin Pro is certainly one, as we've talked about, and Poppin expanding through the Kimball Dealer Network. Their core B2B business will certainly be a driver. And then I think, again, how quickly we can scale and begin to get production out of these new showrooms that we're opening. So I would say those three are the things that I would look towards. And then beyond that, things like the corporate sponsorship programs, those are more longer-term plays that will still take time to develop.

Perfect. I appreciate it. Thanks, guys.

Thank you. Once again, for any questions or follow-ups, that's star then 1 on your touch-tone phone. We have a question online from Spiro Gino. Please go ahead.

Hi, good afternoon. Thanks for taking my question. Hi, Spiro. If you guys could please unpack the pop in customer base a little bit more and describe that sales cycle versus the traditional sales cycle from the government projects in your traditional business.

Sure, so let me go ahead and talk about the business model that actually exists, and then we can follow up. TJ can talk a little bit about the mix of that business. So that is a direct, the majority of that business is a direct B2B model, and it is a digital lead gen model, and we've talked about that actually 80% of the leads are generated digitally. They come through a sales development funnel and they're qualified and then they're handed off to an account executive. Once that they're actually put in the hands of an account executive, they are converted at about a 70% rate. And then historically, Poppin has been at about a 60% repeat customer rate. And the reason we look at that figure so closely is because a lot of those customers are ordering multiple times for satellite offices and secondary locations and a new work from home for their employees. And so we really value that repeat customer base. One of the things we are seeing as the core is growing that we are seeing new customers come in, which we're very pleased with. We're talking about the core business growth. But again, 60% of the business that we talked about sits in this direct B2B environment. We have the wholesale business that we talked about. We have the pop and pro business that is growing quickly. And then we do have a direct customer business, but it's a small portion of that business. And certainly all of our marketing dollars in lead gen go into the B2B environment. So that's kind of how the model in general. I don't know, TJ, if I missed anything. I think that covers it.

Great. And then one more about the stickiness of the price increase. Do you see that coming down after the demand spike is over? Or are those increases, have those been priced into the existing contracts and option years are getting executed?

Sure. So the list price increases that we have already taken, we've had a great success in realizing those. Again, it's not 100% across our entire customer base because we do have longer-term contracts where that's not always possible, but we've had a high rate of acceptance and realization. We would say that those would remain in the long-term, and that's been typically the position that we've taken within the company is that we see prices being sticky and longer-term, and we have a good amount of realization. With regard to the surcharge, that we're going to evaluate later month by month and quarter by quarter as the inflationary environment progresses to determine what we want to do next with that. But I would say, you know, at the same time, despite these price increases, we remain, we believe, competitive in the market with not just the right product set, but again, at a very, the right value proposition for our customers. And we haven't seen any noticeable change in our win rate as a result of that.

Great. Thank you.

Sure, Spiro.

And I'm showing we have no further questions at this time. I'd like to turn the call over to Chris Uchester for closing comments.

Thank you, Richard. Well, I'd like to end the call by personally thanking not only the entire Kimbell International team, but also our customers and suppliers. And, you know, we are proving together that we can get through the short-term challenges that we all face. but actually grow and see the opportunities for the future of this business. So we appreciate the partnership that exists with all of our stakeholders, and we very much thank you for joining our call today at Kimbell International and wish everybody a good evening.

And thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now disconnect.