Armstrong Flooring, Inc.

Q2 2021 Earnings Conference Call

7/21/2021

spk03: Greetings and welcome to the Armstrong Florence second quarter 2021 earnings call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Head of Investor Relations, Matt McCaulgan. Thank you. You may begin.
spk05: Good morning. Thank you for joining us today for Armstrong Flooring's second quarter 2021 earnings conference call. I'm joined this morning by our President and Chief Executive Officer, Michelle Vermette, and our Chief Financial Officer, Amy Trojanowski. In addition to the earnings press release issued today, a copy of the slide presentation to accompany this call is available on the investor section of our website, www.armstrongflooring.com. During this call, we will be making forward-looking statements that involve risks and uncertainties. Actual outcomes may differ materially from those expected or implied. For more detailed discussion on the risks and uncertainties that may affect Armstrong Flooring, please review our SEC filings. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement beyond what is required by applicable securities law. Our discussion of operating performance will include non-GAAP financial measures within the meeting of SEC Regulation G. A reconciliation of these measures to the most directly comparable GAAP measures is included in the press release. I'll now turn it over to Michelle.
spk02: Thank you, Matt, and good morning, everyone. I will start by providing a second quarter business update and share my perspectives on our progress against our multi-year transformation plan. Then I will ask Amy to share details on our second quarter financial results. On last quarter's earning call, we discussed the positive momentum and continued progress against our transformation goals. As we moved into the second quarter, gradual relief from COVID-19-related restrictions and recoveries in residential and commercial demand helped drive 15.5% top-line growth year-over-year, and nearly 13% growth sequentially from the first quarter of this year, with increases noted in both our North America and international markets. While demand remains strong in the quarter, volatility in global supply chains in the continued inflationary environment significantly impacted our business in our second quarter results. We're diligently working to mitigate these headwinds, and I'll provide more details on the initiatives Armstrong Flooring has taken. Overall, the resilience market continues to rebound as the greater economy emerges from the COVID-19 pandemic. This is reflected in the healthy demand we're seeing in both our commercial and residential business. We, like many companies, were able to return to the workplace in a limited capacity in the second quarter. In the field, our new built-out sales force was able to increase the number of face-to-face meetings to near historical levels. In North America, pent-up demand drove sales increases across our LVT, VCT, and vinyl sheet products, while the continued recovery from the pandemic drove sales increases in both China and Australia versus the same quarter of the prior year. In a commercial business, we saw demand that exceeded projections and were able to capitalize on a healthy mix of new and innovative products. Adoption of our MenPure PVC-free sheet with patented Diamond 10 technology, continues to gain traction in the market. And its refreshed palette is receiving positive reviews from our partners and our customers. We've also introduced three new commercial LVT collections, Vio, Cara, and Coalesce Luxury Flooring. These newly released products complement the first core launches of our Exchange and Theorem collections. adding more options to our 2.5 millimeter LVT offering. Each of these products, which we proudly manufacture in the USA, are a testament to our commitment to bring fresh ideas and innovation to the market. On the residential side, business continues to rebound, albeit mixed, by channel. Demand for single and multifamily homes remains strong while we have seen slowing in big box retailers as other outlets for purchase have reopened. In May, we announced we were ending our relationship with a distributor covering the Midwest United States, a change which became effective in early July. In our commitment to winning in the marketplace, this next step allows us to give incremental opportunities to two of our long-standing distributors, as well as forge a direct relationship with the key customers that make up this geography. As I mentioned earlier, the volatile supply chain and inflationary environment present in the broader macroeconomy was a persistent headwind for our business throughout the quarter, and rising costs from these dynamics have outpaced our pricing initiatives year-to-date. Shortages, disruptions, and delays in obtaining building materials pose a major impact to home and the cost of building materials and residential construction are at their highest levels in decades. In some pockets, material lead times extend up to 24 to 28 weeks, mainly impacting our source product sales. Temporary factory and border closures in Asia due to the recent COVID-19 outbreaks in these geographies, as well as reduced workforce, cause ships to remain anchored in ports, resulting in multiple week delays. The shrinking global container fleet created challenges throughout the industry as 2020 delays in new containers continued driving significant capacity issues and led to surging shipping costs in 2021. We expect these delays and higher costs to last for the next several months. Downstream in our production cycle, these delays, along with the raw material producer disruptions, impacted our manufacturing as limitations in materials caused temporary shutdown of certain of our lines. Although only lasting for a few days, these shutdowns inhibited our ability to fulfill orders from strong demand that we continue to see into the quarter. Now let me provide some perspectives on actions we are taking to address this volatile environment. Our supply chain organization, which we significantly built out in 2020, in early 2021, as part of our transformation plan, has been working diligently to mitigate these impacts. We increased our safety stock in an effort to combat the considerably longer lead times in the industry, raising source goods safety stock from 16 to 28 weeks in many circumstances. Furthermore, we've explored alternative shipping means to offset container shortages and heavy inflation on transportation costs. which at times have been nine times what we're used to seeing. Certain of these alternatives will come at a cost, but are critical measures to ensure we can continue to procure materials and service our customers. Finally, as inflation continues to exceed our projections from the prior quarter, we announced our third price increase of 2021 in late June, which will be effective beginning August 15th. All of these actions are necessary to counteract what we believe are truly unique times for our industry. Our customers understand and entail they're seeing cost increases across all aspects of their business. We're anticipating these macroeconomic headwinds to continue through the remainder of 2021. And as we've done thus far, we'll continue to be responsive and agile in our measures to offset these impacts while remaining committed to executing the initiatives under our business transformation. At this point, I'd like to provide some perspective on transformation progress. I continue to be thankful for our employees that collectively work to execute our long-term strategy of expanding our customer reach, simplifying our product offering and operation, and strengthening our core capabilities. 15 months into this journey, our teams have dealt with multiple headwinds in executing this strategy, from COVID-19 pandemic More recently, the current inflationary environment and supply chain challenges. Throughout, the team has remained steadfast in executing this strategy while also adapting as necessary to provide solution to the challenges we have faced along the way. If you turn to slide eight, I'll discuss some examples of our progress in more detail, beginning with expanding our customer reach. In the second quarter, we began selling our Armstrong Flooring Pro brand with positive reviews. The brand was recently recognized as a top brand in Builder Magazine. In the second quarter alone, we have rolled out the Pro brand to over 60% of the builders in our targeted market. In addition, we continue to receive positive reactions to our Armstrong signature brand and are poised to launch this at various trade shows beginning later this month. Furthermore, we recorded our first sale in hospitality market, a previously untapped market for Armstrong Floor. While we are still in the very early days of our efforts, we've seen travel pick up to levels nearly three quarters of those pre-pandemic levels. And our newly established hospitality sales team is actively pursuing opportunities with several national hotel brands. And what we believe will be an exciting new vertical for the organization. Overall, we are continuing to add talent to our sales and marketing and customer service functions across our business, bringing the total to over 40 new sales hires since the launch of our transformation plan. With the bulk of these additions occurring in late 2020 and early 2021, our professionals are poised to further grow business as a return to in-person interaction continues in the later half of 2021. Moving to slide nine, we've continued to simplify our organization, particularly in manufacturing. Our Made in the USA Quick Ship program is a unique program that is simple at its very core, American-made LVT, ship fast. We have seen positive responses to this program since we introduced it to the market in Q3 2020, with sales over 5 million in 2020. second quarter marking our highest quarter to date with the quickship program in the fourth sequential quarter we saw increases from this initiative we expect continued benefit from quickship sales heading into the latter half of 2021 in addition we closed our southgate california location in the same quarter following the march 2021 and we have fully transitioned all production operations to two of our existing domestic facilities. Through the second quarter, this has resulted in approximately $1 million in net savings in addition to simplifying our overall manufacturing footprint. We continue to evaluate the products we are producing with a long-term return-oriented mindset and are rationalizing SKUs in manufacturing assets. which resulted in certain charges we took in the same quarter. Amy will speak more about these in a few moments. Finally, turning to slide 10, I'll point again to the efforts we made with regards to our logistics capability, especially in the wake of current dynamic supply chain environment. We have remained focused on the execution of our plan, yet have pivoted and adapted to address the challenging supply chain environment while still strengthening our core Our efforts from our newly bolstered team to look for alternative shipping means have strengthened our procurement competencies and processes. We also continue to modernize our ERP and our manufacturing facilities to enhance visibility and access to data information. Additionally, in the second quarter, we opened our new headquarters in Lancaster, Pennsylvania, In doing so, we're staying true to our roots in long-standing history in the Lancaster area, while at the same time reinvigorating our day-to-day work practices. Our new headquarters, coupled with our design center and our technical center, with its unique capabilities, are all located on the same campus, providing our people the ability to work cohesively in a modern and energized space in a collaborative way. This move will also produce cost savings of approximately 60% compared to our prior corporate lease expenses. In summary, these actions have strengthened our core competencies, both in the way we work and the way we are able to service our customers. In summary, we remain focused on driving this multi-year transformation plan and moving towards our goal of creating a more resilient and profitable organization. while also managing costs and pricing in this challenging environment. With that said, I'll turn it over to Amy to take you through our second quarter financial results. Amy?
spk06: Thank you, Michelle. And good morning, everyone.
spk07: I'll refer you to slide 13, which provides a summary of our financial results for the quarter. Second quarter net sales were $168.1 million. a 15.5% increase versus the second quarter of 2020, and a 12.9% increase sequentially from the first quarter of 2021. Our year-over-year sales performance benefited from relieved COVID-19 business disruptions, a healthier product mix, and our previously communicated transformation initiatives, along with strong demand in both commercial and residential end markets. This resulted in sales increases versus the second quarter 2020 in all regions in which we operate. Throughout the quarter, demand remained strong, though as Michelle mentioned, disruptions in the global supply chain hampered our sales throughout the quarter. Despite this, we entered the third quarter with a healthy order book and significant deliveries of key inventory products coming in July and August. In North America, our commercial business benefited from recovering demand and the outlook continues to build momentum as the ABI index registered one of the highest points in its history. Sales grew in both our commercial VCT and LVT products, benefiting from a healthy mix and improved pricing from our efforts to mitigate inflation. We saw considerable traction in our QuickShip program particularly in the latter half of the quarter, as customers began to take advantage of quick lead times for our American-made products amidst the ongoing supply chain shortages affecting internationally sourced products. On the residential side, the market continues to rebound from the pandemic. And while we saw modest increases in sales year over year, our performance was impeded by supply shortages, particularly with sourced materials. Turning to slide 14, adjusted EBITDA for the quarter was a loss of 3.5 million compared to adjusted EBITDA of 6.9 million in the prior year. The movement year-over-year is primarily attributable to source and raw material inflation and supply chain disruptions, which resulted in higher input costs and caused delays in certain manufacturing processes, driving higher operational costs year-on-year. As Michelle mentioned, we took a critical look at our SKUs in the second quarter and recorded charges of approximately $4.5 million to write off underperforming assets and related inventory. These decisions, which were made with a long-term mindset, are treated as an add-back to adjusted EBITDA. However, from a U.S. GAAP perspective, accounted for a 270 basis point impact to our gross profit for the quarter. Collectively, these impacts drove approximately 12.7 million net higher cost versus the second quarter 2020. Pricing initiatives and improved volumes and mix partially offset these headwinds, reflecting increases of 8.3 million and 3.4 million, respectively. However, as Michelle mentioned earlier, inflation has outpaced our price increases to date and we were unable to fully offset these increased costs. In SG&A, our costs were $9.4 million higher than the prior year, reflective of our go-to-market initiative to increase our sales force, which primarily took place in the latter half of 2020 and early 2021, along with increased advertising and promotional activities associated with our planned strategy. Furthermore, SG&A in the second quarter of 2021 is reflective of a normalization of our employee-related costs, which were lower in the second quarter of 2020 due to COVID-19-related impacts. As noted in our first quarter call and consistent with our transformation plan, we expect SG&A costs to be higher in the remaining quarters of 2021, and sequentially we saw a $1.4 million increase from the first quarter of this year. Finally, turning to slide 15, we generated a net operating cash outflow of 3.9 million in the quarter and negative free cash flow of 7.9 million. Our change in operating cash was heavily impacted by inflation and the disruptions in the supply chain, which, as Michelle mentioned earlier, have outpaced our pricing increases, along with working capital impacts from higher receivables and timing related to trade payables. Capital expenditures for the quarter were $4.1 million, slightly higher than the second quarter of 2020, however, down $2.9 million sequentially from the first quarter. Capital expenses for the remainder of the year are expected to be measured in the context of our transformation activities and our ongoing maintenance costs. Net debt was $44.7 million compared to $33.9 million at the same time last year and $66.1 million versus year-end 2020. And we maintained available liquidity with cash and access to revolving credit facilities of $91.6 million. While we expect the inflationary environment to continue for the remainder of 2021, Our cash and available credit facilities provide us with ample liquidity to continue to execute our strategy. I'll now turn it back to Michelle for some closing remarks.
spk02: Thank you, Amy. I would like to close by thanking the Armstrong scoring team for their continued diligence in managing our business in the context of our long-term goals. I also stand proactive and agile in the current environment. We will implement our price increases and drive efficiencies to offset inflation while making our supply chain more resilient. All the while balancing these near-term actions with investment initiatives necessary to transform the organization for the long term. 15 months into our transformation journey, we're continuing to expand our customer reach, simplify our operations, and strengthen our processes and infrastructure, putting Armstrong Flooring on the path to be more resilient and more profitable. The resilient flooring market continues to be a growing industry. Our products are in demand and are receiving positive recognition, and we continue to see many improvements across our business from our transformation plan. Overall, we at Armstrong Flooring continue to stay committed to putting the customer, our employees, and our shareholders in the best position to deliver value. Thank you for joining us today. Operator, please open the lines for questions.
spk03: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for your questions. Our first questions come from the line of Julio Romero with Sudoti and Company. Please proceed with your questions.
spk04: Yes, hey, good morning, Michelle and Amy. Good morning.
spk07: Good morning.
spk00: My first question is just on the Rest and Refuge product line. I know you talked about, you know, some incremental sales there. for the first time in the second quarter at your newest newly established hospitality sales team. Can you maybe just speak to how much you've put into that effort from a strategy and maybe a headcount perspective and how that product line has been received by the customer?
spk02: Yeah, very well so far. We have five dedicated hospitality reps that have been onboarded recently. The product has been presented, and we're presenting our full offering also, but Reston Refuge was designed with hospitality in mind, first and foremost, and we have received our first few orders and fulfilled them in the second quarter. We are talking to all the major brands about being a larger presence for them in their different platforms, so we're progressing very well open up those doors and getting specified and as you know when it comes to hospitality you have to be selected for critical brands and we're working through that with each major operator so we're very optimistic that this is a good start we open the door and now we would we expect to gain momentum a little bit similar to our quick ship as I mentioned earlier on the call that's been a nice initiative for us and we'll gain momentum in the coming quarters with hospitality.
spk00: Got it. And can you maybe speak to any new products in the pipeline for that Rest and Refuge line and more broadly, the product launch cycle targeting the hospitality channel in general?
spk02: Yes, we have in our pipeline for the next couple of months, we have another SPC product targeted for the category, and also another Loose Lane product targeted for the category. And that's all tied to the conversation we're getting from our customers. So there'll be, within the next 12 months, there'll be two additions, and also we will add representation key markets as we open up the door so we can have connections directly with the owners of the properties after we get specified from the brand, so we can complete that execution.
spk04: Great.
spk00: And maybe just switching gears a little bit on your supply chain, you touched on some of the actions you're taking to mitigate some of the impacts in the near term, increasing your safety stock, exploring some alternative shipping. Can you maybe speak to some of the actions you've taken for the longer term and make your supply chain a little more resilient beyond the next 12 months?
spk02: Yes, what we've done is expand our supplier base, for one, and also country of origins. So if there's an issue in one part of the world, it doesn't impact our whole supply chain. So we've added supply from Vietnam and Malaysia to our Chinese and Korean supply. So there is more versatility there and flexibility. We also augmented our U.S. manufacturing, as I mentioned in our remarks. so we are working to to be more resilient there and we've added suppliers also in north america to be to make sure we get the right raw materials and expansion it's been a very volatile environment and we're working through that diligently we're in constant contact with the freight forwarders for the international source goods and i even added a few providers to that so we can bring goods there but we keep adjusting we keep Yeah, understand what's happening with these troops, and I expect this to get better in the third and fourth quarter as we have these extra goods and the safety stock is fully put in place.
spk00: Yep, that dovetails right into my last one here, which was how do you expect, you know, the actions you've taken in terms of the safety stock and alternative shipping routes to maybe even some of the impacts in the third and fourth quarter. But I guess you mentioned it'll be less than you experienced in the second quarter.
spk02: Yeah. And I think the big thing, the safety talk is coming in. Those orders were placed in the first quarter and second quarter, but they were delayed getting here because of transportation. So we, you'll see improved service. Our customers will see improved service in the third and fourth quarter. We'll have higher availability. So, and we'll keep adjusting accordingly. A lot of it is communication with our customers right now. They're dealing with this in every commodity and every process. So, We're in close connection with them, and so make sure we meet their needs.
spk00: Understood. Thanks for taking the questions, and best of luck in the back half of the year.
spk04: Thank you. Thank you for joining.
spk03: Thank you. Our next question has come from the line of Catherine Thompson with Thompson Research Group. Please proceed with your questions.
spk08: Hi. Thank you for taking my questions today. In your outlook, you noted that Armstrong is better positioned from geographic markets and product categories. I want to pull the string on that. And is this relative to Armstrong's historical position or relative to other competitors?
spk02: Well, first and foremost, historical to our position is, you know, Catherine, everything pretty much in our business in North America went through distribution about a year and a half ago, other than home centers. And what we've done is, and we were missing opportunities with some of the largest retailers, some of the largest builders, and commercial contractors. And we have been reengaging with these folks, and in particular on the builder side with the launch of the program. Now we have direct relationship with a little over 60 of the top 300 contractors and builders in the country with our program that we just put in place in May. So those are different conversations. When you're close to the customers, you have bigger opportunities. Just the number of customers and conversations we have has been very encouraging with what we have put in place. So we're really participating or engaged in opportunities that the company has not been historically engaged with, and I think that bodes very well for the future. We just have to get close to the customers. And same thing in hospitality earlier. We just didn't call on hospitality until this year. So a lot of work is being done to open up more verticals and create a brighter future for Armstrong. Some other competitors have some of those relationships, we just were not at the table until recently. And we'll continue to augment those and make sure we're successful with those opportunities.
spk08: Okay, and just to summarize, really this reflects not even being at the table, but being at the table for certain key markets, in markets and geographic markets. Is that a correct way to think about it?
spk02: Yeah, that is the correct way to think about it, definitely. There are some verticals that we just did not participate in, and within some larger opportunities, until we had a direct sales force, it was impossible to be successful with some of these larger, multi-geographic markets, multi-states.
spk08: And then understanding that AFI is a leader in certain products like sheet vinyl, how does this apply specifically to LBT? And maybe just remind us just on your LBT strategy.
spk02: Well, it's a bit of balance between source and manufacturer. We have purposely augmented our offering of U.S. manufactured products, such as our Quick Ships, some of the launches I mentioned in our prepared remarks. So we believe we have opportunities to use our assets better here, and we're doing that, and that's been some nice momentum on the demand side. We are having some targeted relationship with some vendors to bring some new innovation on the source side. So it's going to be a combination of the main America and also source products that complement our offering. It will be It's a larger part of our product portfolio than it was a year ago and will continue to be going forward. So there's definitely a significant demand. And to be successful in the verticals that we talked earlier, we need to augment that presence in LVT. And we will do that both from a U.S. manufacturer and a source debt.
spk08: And following up on inflation, and inflation is not a new subject here, you and the industry have passed on multiple price increases which will see benefits but as we look conceptually look forward beyond 21 into 22 is it safe to say that there will continue to need to be pricing actions as we go into 22 and most of the pricing developments from 21 will be realized in 22 and any other thoughts just on just a bigger picture on inflation versus just what's right in front of us?
spk07: Yeah, Catherine, thank you for the question. The inflation is real and it, you know, it continues to to increase. I think just for perspective, you know, last quarter when we reported on the first quarter and we're preparing, I think at that point we had announced already our May 1st price increase. That was really based on an anticipated annual inflation number that was in the $30 to $35 million range across the categories that covered our source materials, our raw materials, our freight inflation, and you know, all of those things that we were seeing. As we sit here today and look at the remainder of the year, we think for the full year we could have as much as, you know, $60 to $65 million of inflation in the current year based on what we see. And, you know, it's a dynamic environment. Some days we get some nice surprises and some costs that are slightly lower than our expectation, but many days it's continuing increases. And as Michelle commented earlier, some of these supply chain disruptions, I mean the fires, the winter storms, and all of those disruptions in the global supply of some of our key raw materials have really increased the price and it's put put us on force. We've been on force majeure with some of our suppliers. And, you know, that has a trickle-down impact to the cost in our manufacturing facilities because the plants can't necessarily operate with a full supply. And so we're slowing down production based on the materials that we have, based on what the suppliers can provide. So I think it's a whole circle. And I think, you know, the last six months have demonstrated, in some cases, the strength of the supply chains, in other cases, the fragile nature of it and how connected it is globally. As we look forward, we do see a significant amount of that inflation impacting us in the second half of the year based on some of the inventory turns. Some of our inventories are at low levels because we're trying to get the supply. And I think we'll recognize through sales some of this higher cost inventory as we sell it in the second half. Our teams, as they look forward in a lot of the indices that we follow, it doesn't look like there's going to be substantial softness or recovery for some of these inflationary impacts. into well into 2022. So I'm not sure that it's going to go away very quickly. Certainly not as quickly as it has come on. You know, I think the velocity of the increases has taken everybody by surprise and has been greater than we've seen in decades.
spk02: So I do expect to have some further increases as we go through. These round trails have changed week to week and month to month. And as they they come to impacting the different products, we will have to adjust and we will adjust. I think that's the reality that we're faced in and everybody in our industry is faced in. So I think it's the nature of the environment we're dealing with right now.
spk08: Okay. And along the line with inflation of some materials, how has it been on the labor front for AFI and getting and retaining labor in the current market?
spk02: I think our HR team has done a great job recruiting and retaining labor. As you know, we're probably a little higher in the geography we operate in. Our wages for definitely our frontline employees are a little better than maybe some of the local competitors that we operate in. So we've been very fortunate to retain a high level of employees. There is some scarcity from certain skilled areas such as electricians, mechanics that operate some of the specialized areas. But so far, I think we've managed decently our labor component and very lucky having the loyalty and the engagement of our employees with what we're trying to achieve.
spk08: Okay, perfect. And the final question for the day, once again, this is a little bit more not just in 21, but looking into really the next few years, but with a lens that we're looking at in the near term. We've received, you know, one of the big pieces of feedback we've received sequentially is that lighter commercial construction, which had lagged for a while, is showing signs of strength. What are you seeing? I know you talked about specific end markets, but when you look at the lighter type constructions, in other words, not distribution center or data centers, what have you seen sequentially and what does this mean for your business beyond 21?
spk02: Well, as you've seen our QuickShift results, they've been very strong. A lot of that would be tapping into exactly that light commercial tenant improvement demand, multiple small jobs that are happening every day, and we're seeing a lot of that activity in that nature. To your point, longer projects that require design and more complexity, more specialized day, are definitely being talked about, but they're not as prevalent right now to go through. They're coming, though. You can see in the ABI. You can see in the conversation we're having with our customers. But I think what we've done to augment our quick shift, and we'll have some additions to it, is goes well to where we are operating right now. And I think that will help us gain momentum in the rest of 21 and 22. And I think as we become more nimble and more reliable in that area, I think we'll have some very nice success. Great.
spk08: Thank you for taking my questions today.
spk03: Thank you, Katharine. Thank you. Our next questions come from the line of Keith Hughes with Truist. Please proceed with your question.
spk01: Thank you. Most of my questions have been answered. Just looking at the raw material inflation you discussed in the slides. the big increase in container costs coming from Asia, would that be reported as an input rise in that bar graph? Is that how it comes into the numbers?
spk06: Yes, it does.
spk01: Okay. And are you seeing sequentially any lightening of these huge increases in those costs?
spk07: No, not right now.
spk04: Not yet.
spk02: Actually, weekly we're seeing records just about every week on some of these. There's just not enough supply of containers.
spk04: Right. Okay. Thank you very much. Thank you. Thank you.
spk03: There are no further questions at this time. I would like to turn the call back over to Michelle Vermette for any closing remarks.
spk02: I appreciate everyone joining today, and we are focused on transforming our business and navigating this challenging environment, and I appreciate everybody's interest. Thank you for joining us today. Thank you for your participation.
spk03: This does conclude today's teleconference. You may disconnect your lines at this time. Have a great day.
Disclaimer

This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.

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