Acuity Brands, Inc.

Good morning and welcome to the Acuity Brands Third Quarter Earnings Call of fiscal 2022. At this time, all participants are in listen-only mode. After the speaker's presentation, the company will conduct a question and answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Charlotte McLaughlin, Vice President of Investor Relations. Charlotte, please go ahead.

Thank you, Michelle. Good morning and welcome to the Acuity Brands Fiscal 2022 Third Quarter Earnings Call. As a reminder, some of our comments today may be forward-looking statements based on our management's beliefs and assumptions and information currently available to our management at this time. These beliefs are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those detailed in our periodic SEC filings. Please note that our company's actual results may differ materially from those anticipated, and we undertake no obligation to update these statements. Reconciliations of certain non-GAAP financial metrics and their corresponding GAAP measures are available in our 2022 Third Quarter Earnings Relief, which is available on our Investor Relations website at www.investors.acuitybrands.com. With me this morning is Neil Ash. our Chairman, President, and Chief Executive Officer, who will provide an update on our strategy and highlights from the last quarter, and Karen Holcomb, our Senior Vice President and Chief Financial Officer, who will walk us through our third quarter performance. There will be an opportunity for Q&A at the end of the call. For those participating, please limit your remarks to one question and one follow-up if necessary. We are webcasting today's conference call live, Thank you for your interesting QT brands. I will now turn the call over to Neil Ash.

Thank you, Charlotte. And thank you to everyone on the call for joining us this morning. Our team delivered a strong quarter of sales and operating profit growth driven by solid execution across both our lighting and spaces businesses. This performance is a direct result of the significant and ongoing improvements that our team has made over the last two years. Third quarter sales continued to trend and marked a bit of a milestone. It was the fifth consecutive quarter of double-digit revenue growth. Sales were over $1 billion this quarter for only the second time in the company's history, as we continued to successfully capture price and drive volume through product vitality and service in both the lighting and spaces businesses. This quarter, we were aggressive with our share repurchases. We repurchased about 5% of our shares outstanding in the third quarter. We are confident in the future of our company and these repurchases add leverage to our future success and create permanent shareholder value. Moving on to our segments, both our lighting and spaces businesses performed well in the third quarter. First, on Acuity Brands Lighting. Our lighting and lighting controls business had another very strong quarter, with top-line growth driven by our product vitality efforts and our focus on service. Market demand in the third quarter remained strong, and we continued to work through our backlogs. which continues to be above normal levels. Our strategy of increasing product vitality, increasing service levels, and using technology to differentiate both our products and our service is working. Our product vitality efforts are the combination of new product introductions and improvements to our existing products. Over the last two years, we have dramatically accelerated these efforts. As a result, our products are more valuable to our customers and more profitable for us. One of our key product leaders recently finished a complete refresh of his product families, and he asked me, what do we do now? And my answer was simple. We do it again. With product vitality, I like to tell our team that if you're in front and you run faster than everyone else, no one can catch you. We believe that we have the best engineering and design teams in the industry, and they are delivering. Our service has also been strong. In May, several members of the ABL team and I went to the National Association of Electrical Distributors annual conference, where we met with many of our key distributor partners. This was the first time this group had been together since the pandemic, and each company we met with had the same feedback for us. Acuity had the right products and was able to deliver throughout the pandemic and the subsequent supply chain shortages when others could not. It was great for the team to receive affirmation from the marketplace on the changes that they've made. It reflects the value of having the right products and being able to deliver them no matter what is going on in the world. Now, moving to our Intelligent Spaces Group. Spaces continue to perform well with strong sequential quarterly sales growth of 17% and 5% year-over-year growth, as well as year-over-year margin improvement. The mission of our Spaces Group is to make spaces smarter, safer, and greener. Our DISSEC Controls products power controls, sensors, and other activities in built spaces, and our Atrius cloud-based applications deliver value to owners and end users in those spaces. I'd like to focus on Smarter and Greener for a few minutes. A few weeks ago, I was in California at the DISTEC Connect conference, where we gathered together key systems integrators who buy and install our DISTEC products. It was the first time that this group was in person since 2018, and everyone was excited to be back together. Between 2018 and now, DISTEC has grown significantly through continued product development and strong partnership with these independent systems integrators. Our open protocol technology and continued product innovation is proving to be the way to make spaces smarter, faster. And our partnership with independent systems integrators allows us to move quickly and service more and more of the market. DISTEC powers the facilities and generates data. Atrius is a collection of cloud-based applications that use this data to solve specific problems and spaces. DISTEC and Atrius can operate independent of one another, but together we can deliver true edge-to-cloud technology and applications. One of our core offerings under the Atrius brand is Atrius Building Insights, which is targeted to multi-building operators to provide a single source for their energy usage, carbon, and cost management through data aggregation. Excuse me. Currently, this platform is used in thousands of buildings across North America. Similar to DISTEC, our customers include a diverse group of some of the smartest technology companies, commercial customers, and institutions. Our activity buildings, of course, use Atrius Building Insights to monitor and reduce our energy usage, our carbon footprint, and our costs, and is a key part of our Earthlight initiative. You'll see more about this when we publish our Earthlight report later this year. There's a lot to get excited about in ISG. and I look forward to sharing more developments in the future. Now, I want to touch on capital allocation. Our capital allocation priorities remain the same. We will continue to prioritize investments for growth in our current businesses, invest in acquisitions, maintain our dividend, and allocate capital for shareware purchases when we perceive there is an opportunity to create permanent value for shareholders. Karen is going to talk about our decision to allocate capital to inventory later in the call and give more color on our additional shareware purchases this quarter. But before I pass this to Karen, I want to leave you with a few thoughts. I'm proud of how our team continues to perform. They continue their focus on product vitality and service while managing the ongoing supply constraints. We expect the marketing conditions in the fourth quarter to remain largely consistent, and I'm confident that our team will continue to deliver. Now, I'll turn the call over to Karen, who will take a deeper dive into our third quarter performance, and I'll be back later in the call for Q&A and for some closing remarks.

Thank you, Neil. We had a strong third quarter, exceeding market expectations across the board. We generated over $1 billion in sales. Our gross margin was 42%. And operating profit increased by $25 million year over year. We allocated capital to inventory again this quarter, and we repurchased a significant amount of our outstanding shares. Moving on to our sales performance. Net sales were just over $1 billion, an increase of 18% year over year, and as Neil said, this was a significant milestone. It is only the second quarter in the company's history that revenue has exceeded $1 billion. The increase this quarter was driven primarily by ABL and its focus on product vitality and service levels. Demand remains strong, and we continue to benefit from recent price increases and the Osram DS business acquisition. Gross profit was $445 million, an increase of $59 million, or 15% over the prior year. The increase in gross profit was driven by the impact of price realization and volume, while cost was impacted by inflation on components and freight. Gross profit as a percentage of sales was 42%, which was a 100 basis point decrease from the prior year, but a 30 basis point improvement from the prior quarter. Gross profit margin has been impacted by the dilutive mix of the acquisition of the Osram DS business throughout the first three quarters of 2022. We also continue to leverage operating expenses and increase operating profit dollars and margin. Our reported operating profit in the third quarter was $143 million, an increase of $25 million or 21% over the prior year. Operating profit margin was 13.5%, an increase of 40 basis points over the prior year. Adjusted operating profit was $163 million, an increase of $26 million, or 19% over the prior year. An adjusted operating profit margin was 15.3%, an increase of 10 basis points compared to the prior year. Finally, we continued to grow earnings per share. Our diluted earnings per share of $3.07 was an increase of 70 cents or 30% year over year, while our adjusted diluted earnings per share of $3.52 increased 75 cents or 27% over the prior year. Share repurchases favorably impacted adjusted diluted EPS by 18 cents during the third quarter. I now want to expand on our segment performance. Net sales at ABL increased to just over $1 billion, an increase of 19% compared with the prior year, and was driven by product vitality and service as well as price increases and the benefit from the acquisition of the Osram DS business. Sales in our independent sales network of $726 million grew 16% in the third quarter, driven by price realization and volume, and continued strong demand across our end markets, particularly in commercial office, education, and industrial facilities. Sales in the direct sales network of $96 million were flat with the prior year. Orders in this channel continued to be strong, but shipments were impacted by component availability. As we discussed previously, corporate account customers continued to move ahead with renovations that were previously deferred due to the pandemic. As a result, sales in the corporate account channel of $59 million increased 34% over the prior year. As we've said before, the corporate account channel is an attractive business. This business is dependent on when customers choose to make renovations to their facilities, and as a result, sales may be inconsistent from quarter to quarter. In the retail channel, we have now worked through the customer inventory transition that we mentioned on prior calls. Third quarter sales in the retail channel of $45 million increased by 24%, which is a higher than normal growth rate as a result of the weaker prior year comparison. Finally, sales in the other channel increased due to our OEM business, which includes the impact of the acquisition of the Osram DS business. In the third quarter, total sales in this channel were $83 million, an increase of $37 million compared with the prior year. ABL's operating profit for the third quarter of 2022 was $150 million, an increase of $23 million, or 18% versus the prior year. Adjusted operating profit of $160 million improved $24 million, or 18% versus the prior year. Now moving on to ISG. The Spaces team had another good quarter with sales of $58 million and 5% growth year over year. As a reminder, they had a big quarter in the third quarter of fiscal 2021. Sequentially, from the second quarter of fiscal 2022, sales grew 17% in the third quarter. ISD's operating performance also improved while they continued to invest in the business. Operating profit in the third quarter of 2022 increased approximately $2 million to $9 million, while adjusted operating profit of $14 million with an increase of $3 million versus the prior year. Moving on to cash flow. We generated $166 million of cash flow from operating activities in the first nine months of fiscal 2022. This was down from the prior year as we allocated capital to inventory in order to support our growth as well as insulate our production facilities from inconsistent supply availability. Cash flow was also impacted by increased tax payments of an additional $22 million. We invested $38 million or 1.3% of net sales in capital expenditures during the first nine months of fiscal 2022. Finally, as Neil highlighted, we invested $296 million to repurchase 1.7 million shares during the third quarter. Since we began this repurchase effort in May of 2020, through the end of the third quarter of 2022, we have repurchased approximately 17% of our company shares at an average price of approximately $134 per share. We financed the share repurchases this quarter with cash from the balance sheet and with borrowings under our credit facility. Now I want to spend a few minutes to walk you through two strategic topics, our inventory investment and our new credit facility. Our inventory has increased over the prior year in terms of dollars and days. There are four factors affecting inventory. First, increase lead times of Asian finished goods. Second, increase inventory from the Osram DS acquisition. Third, ongoing inflationary cost of materials. And finally, increase levels of components to mitigate the impact of shortages. This investment in inventory is intended to be temporary. Although it is up year over year, from the end of the second quarter to the end of the third quarter, days have improved by three days. To address the higher levels of inventory, we are doing the following. We've lowered our purchases of Asian finished goods now that we have seen an improvement in lead times. We have renegotiated terms with certain finished goods suppliers, and we are controlling purchases of components and manufacturing of products in line with current demand. Now, moving on to our new credit facility. This morning, we closed on our new $600 million revolving credit facility. which provides us with additional flexibility, if needed, to accomplish our capital allocation priorities. The new five-year facility incorporates $200 million of additional borrowing capacity, improved pricing, and more favorable covenants. Additional information around the terms of the facility is available in our third quarter 10-Q filing. Just before I turn the call to the operator for questions, I want to leave you with this. These results highlight the effectiveness of the changes implemented over the last two years and our team's ability to drive performance. Our team has delivered meaningful sales growth and leveraged our operating expenses to deliver increases in operating profit and margin, demonstrating that we can deliver in a challenging environment. We've continued to generate cash and we have effectively deployed capital in a way that generated permanent value. Thank you for joining us today. I will now pass you over to the operator to take your questions.

If you'd like to ask a question, please press star then 1. If your question hasn't answered and you'd like to remove yourself from the queue, press the pound key. Thank you. Our first question comes from Chris Snyder with UBS. Your line is open.

Thank you. So the acuity and the broader industry has implemented a number of price increases over the last 18 months. Can you just provide some color on the company's pricing strategy going forward? Should we expect further price increases from here?

Good morning, Chris. Thanks for joining us. Thanks for the question. So, obviously, on the pricing front, we have successfully implemented a number of price increases. And in this inflationary market, we're evolving how we do price increases. So they're more, they're frequent, and they're oftentimes more targeted. As long as the inflationary market continues, I think we can expect that we will also be continuing to adjust our prices going forward.

Appreciate that. And, you know, presumably at a point in time, you know, we won't be in such a hyperinflationary environment. You know, so as we get back to a normal environment, wherever that may be, is your expectation that, you know, these industry price increases will plateau or potentially decline? And again, Is the company expecting that it will be able to maintain, you know, kind of the 42% gross margin target, you know, even in an environment of, you know, pricing declines eventually?

Yeah, so I want to kind of emphasize a couple things, Chris, because I think this is a really good question. So first, our strategy has been to invest in product vitality, invest in service, and use technology to differentiate our products. So we have better products that are more valuable for our customers and more profitable for us, so on a relative basis to the rest of the industry. So as we look forward, we believe those are going to be the hallmarks of who our Acuity Brands lighting business will be going forward. So we'll have the right products in the right place at the right price. Our pricing strategy is really straightforward. We compete effectively where we need to on everyday lighting products. and we're the best solution sold through our independent sales network and direct sales network for broader product business. So I believe that because of our product vitality and because of our service, we are positioned well for whatever market presents itself to us over the next three to five years. Thank you.

Our next question comes from John Walsh with Credit Suisse. Your line is open.

Hi, good morning, and nice quarter. Thanks, John. Good morning. So maybe we could follow on with that line of questioning, but also bring in the cost piece of that equation, right, because it's not just price, but it's price-cost. So can you, one, talk about, I guess, on the pricing front, You know, what's changed in the organization? I think last analyst day you really highlighted pricing is now more of a corporate function, where I think it was a little bit more, you know, down in the brands maybe last time. And then about your ability, if you do see deflation, you know, or some type of softness, you know, your kind of variable cost structure around your manufacturing because it is a price-cost equation, right?

Yeah, so let me kind of unpack both of those, John. First, on the pricing execution. So I spent a second on pricing strategy before, so now pricing execution. In the lighting business, the pricing execution is centralized in a consolidated function. that is powered by a combination of our team, who has a lot of, obviously, domain experience, and the introduction of technology, which is allowing them better data to make better decisions. So that's an evolution from where the company was, say, three years ago. And we'll continue to invest there, and I think that there's continued opportunity for improvement and execution around the strategy that I outlined earlier. On the cost side, you emphasized kind of two key points there, or you emphasized one. I'm going to emphasize two. The first is the cost of the inputs. The second is the scalability of our supply chain, the manufacturing and the distribution piece. So first on the components, obviously we're competing in an inflationary environment, so you see the movement in component prices from components to freight, et cetera. We have demonstrated that we have been pretty dexterous in our management of those going forward. And I've told our team that while I would like to tell them that I think the next two years are going to be easier than the last two years, there's no indication that it will be. they're ready to continue to attack those challenges. The second, then, is the scalability of our supply chain manufacturing and distribution. We've demonstrated that if you go back to the – if you go back to the kind of the pandemic, and as we all went into it and no one knew what would happen, we demonstrated the ability to – to manage effectively through a period where revenue dropped. And now I believe we've demonstrated our ability to execute in a period where revenue increased. And I think that highlights, it's a good way to think about the two things. One is the scalability of our manufacturing and distribution, number one. And number two, our team's ability to manage and deliver in wildly different environments in a really short period of time. So that, I think, positions us, again, for what's going forward. And as I said, none of us know what the next two years are going to be like, but we know that they're not going to be straightforward. But I believe we're in a good position to manage through that.

Great. Thank you for that answer. And then maybe just my second question is, Just around, you know, the outlook, so I think you said Q4 remains largely consistent. I just want to unpack that a little bit if you could. I mean, typically you see a seasonal lift, Q3 to Q4. Is there anything that you're seeing on why that wouldn't play out?

Yeah, so I will unpack that. Thanks, John. First, on the seasonality impact, for us, we have more shipping days in the fourth quarter than we do in the third quarter. So that's a piece of the natural seasonality. As you look at our Q3 performance, we hit on pretty much all of, as Karen indicated, all of our key distribution channels. So, for example, corporate accounts had a big quarter, and as she mentioned, that's not always consistent because it's dependent on when those customers choose to make renovations. Having said that, we continue to have backlog levels above normal levels. The demand continues. And so as we look forward, we're, you know, we think that, as I said, it will be more of the same. Obviously, we're not going to grow 18% every quarter, you know, kind of for the foreseeable future, but things are more the same and different in the fourth quarter.

Great. Appreciate you taking the questions. Thank you. Thanks, John.

Our next question comes from Christopher Glenn with Oppenheimer. Your line is open.

Yeah, thank you. Good morning. I was curious about the kind of volume price splits, if you could frame that up anyway for ABL. You know, as it is, unit volume for comparisons is kind of the basis to evaluate, you know, where we are from cyclical strength and kind of a key input for modeling the year, you know, the out year.

Yeah. Hi, Chris. This is Karen. Let me give you some color around our price volume. So we are managing, as Neil mentioned, that relationship between price and volume. And if you look at the ABL business and their performance this quarter, it really is demonstrating the ability to do both. So we were able to capture and realize price to offset the inflationary costs that we mentioned. We were able to grow our volume. this year, year over year, and we also benefited from the acquisition of Osram, as we mentioned. So, I think this quarter is really a good reflection of our ability to manage both of those components.

Do you think the organic side of ABL split maybe 50-50 volume price?

You know, without getting into precise numbers, I would say that we had a healthy mix of both this quarter.

Okay, that's great. And then a question on ISG. Curious how to think about the, you know, fundamental margin and profitability model there. You had almost 100% sequential incrementals and over 80% year-over-year incrementals. You know, I don't think we'll see that kind of leverage in perpetuity. But, yeah, just in terms of informing our view of kind of run rate, how to think about it in terms of margin index.

Yeah, Chris, I'll take on that. As I indicated in the prepared remarks, you know, obviously ISG is a combination of DITSEC, which is the on-prem, and Atrius, which is in the cloud. So where we've guided kind of their strategic development is that we are going to continue to demonstrate that we can deliver to profitability while we invest in new products and in new software and data capabilities. So What you see in this quarter, I think, is a responsible representation of the ability to do both, the ability to grow and the ability to deliver some profit. So going forward, we expect to continue to do that. So we will continue to demonstrate profit while we invest in growth. The priority would be growth if we are forced to choose.

um but uh but as we've demonstrated i think we can do both great thank you our next question comes from ryan merkel with william blair your line is open thanks good morning everyone and nice quarter thanks ryan so neil i wanted to start with a question on the macro are you starting to see any signs of a slowdown either in coding activity or any feedback from the channel that maybe people are getting a little bit more nervous?

So not to make a pun, but on the macro question, I'll start with the macro, which is obviously we're all competing in the same economy and we're eyeing the same data that you are eyeing and we're And we're positioning ourselves appropriately for what could happen because I don't think any of us know what will happen. As of now, as we indicated, things are more the same than they are different from an outlook perspective. So we continue to see the order and quoting volume. We have above normal backlog, as we indicated, and so that positions us going forward. Of course, we acknowledge, though, that there's a lot of discussion about things potentially changing, but as of now, things are more the same than they are different.

Got it. Okay. And then a question on inflation. Okay. Are you starting to see peak inflation at this point, or are costs still rising such that you may need to increase prices again? Back to the earlier question.

Yeah, I think we are being pretty strategic about how we think about pricing. So we announced another price increase yesterday, which was targeted and specific. And I think pricing in our industry should become a little bit more dynamic over time, and we're leading that. From a cost perspective, we see things about the same as they have been in the past. Obviously, we have some costs in our inventory, which we will be working through over the next couple quarters. But, you know, going forward, we feel like we're more and more comfortable in a market where price is changing and costs are changing.

Very good. Thank you.

Our next question comes from Josh Chan with Baird. Your line is open.

Good morning, Neal, Karen, Charlotte. Congrats on the quarter. Thanks, Josh. I guess. Yeah, hi. I guess on the topic about the outlook, you guys mentioned that the backlog is above normal, and if you take a look at sort of beyond your backlog, your project pipeline, assuming all the projects kind of progress as you would expect, how much visibility do you have right now that you're comfortable about? I guess I'm asking because, you know, if demand were to slow, I guess, how long will it take for you to kind of see it based on the very strong activity that you currently are experiencing right now?

So, obviously, we spend a lot of time focused on this, and we think about kind of where our growth is going to come from. So, to tie this question to an earlier one that Karen answered, we are seeing a healthy combination of price and volume growth, and unit growth, which are driving our our sales. So as we look forward, we believe that we have, because of the investments in product vitality and because we have investments in service, excuse me, we have a runway that we're going to continue to execute against. So The relationship then between daily order rate, obviously, and shipments will be important, but it will be less pronounced, perhaps, than it was in years past. So we do have some runway as we look forward to changes, and our objective is to deliver as consistently as we can in economic times which are inconsistent.

All right. Thanks for telling on that. And I guess my second question, on supply constraints, it sounds like, you know, the imported products might be getting a little bit better. Could you talk about where the bottlenecks still are in your supply chain and how you feel like you're stacking against competitors in terms of procurement?

Yeah, I'll start, Karen, if you want to add anything to this. So if there are bottlenecks, they're really around chips. So it all starts with silicon, as you've heard. We've obviously demonstrated an ability to do that better than others. But because we have a higher backlog, we also are demonstrating to ourselves that we could still use more. So that's the place where we spend a lot of our time and effort. And to think through the impact of that, I'll just anecdotally give a piece of color. That's a relatively inexpensive piece, but a highly important piece of the entire build of a luminaire. So the electronics that are part of the driver, the driver is part of the luminaire. So that relatively inexpensive component ties up a lot of other components which are waiting to be assembled into the final luminaire. That's part of the reason why our inventory is higher, our raw material inventory is higher, because we're positioned so that when we do get those chips, we can we can perform. I want to take my hat off to our sourcing team and their ability to be creative and to be dexterous about kind of finding these components. You know, I told a story last quarter, I believe, or the quarter before, where we were even sourcing products for some of our competitors who are our suppliers because they didn't have access to them. So we're doing everything that we can to differentiate ourselves. And as those chips and silicon start to flow more consistently, which we believe that they will, it's just a matter of when, then we can more consistently kind of work through the rest of our inventory position and continue to work through our backlog.

And, Josh, I would just add that where we've seen some improvement is really around the flow of the purchase finished goods at the port. So we're able to now get those products so that we can ship them. So you'll see that work through some of the inventory as well now that we've seen that improvement.

Thank you both for the color, and good luck finishing off this year.

Thanks. Thank you. Our next question comes from Jeff Osborne with Cohen and Company. Your line is open.

Good morning. I might have missed this, but I was just wondering if you could give us a sense of perspective, Karen, on the Osram contribution in the quarter for both revenue and gross margins.

Sure. From a top line perspective, Osram contributed about 300 basis points of the growth that you see year over year. As we mentioned, in the near term, it is dilutive to gross profit margins. You know, we've had them almost a full year now. I think July 1st will be a full year since we purchased that business. And so we have been working to improve the profitability of the business and still have some work to do, but it was a bit dilutive to the gross profit margins.

Got it. And then on the share repurchase, great to see in the quarter. Can you remind me, I think it's $3.5 million or so outstanding. You know, is that something you're active with now? And can you remind me when that expires or if that would be something you need to reinstate?

Yes. So last quarter we did get an additional, I believe it was last quarter, got an additional authorization from the board. So we have plenty of runway left for our share repurchases. We've now repurchased, as I mentioned, about 17% of our shares outstanding since we began this repurchase effort in May of 2020, and we have plenty of runway left should we decide to do more.

Got it. Thank you. That's all I have.

Thank you.

Our next question comes from Brian Lee with Goldman Sachs. Your line is open.

Hi, everyone. This is Miguel on for Brian. Just a quick question on ABL. With the $1 billion you reported this quarter, it seems like you're now tracking well above the high single-digit growth target for the year, assuming if the fourth quarter is flat or even slightly declining quarter on quarter. Is that right? And how do we think about that target for the year or the cadence through the rest of the year for ABL? Thanks.

Miguel, I compliment you on your algebra. That's where we're rolling out for the rest of the year. Obviously, we're not going to continue to grow at 18%, as they indicated earlier, but the algebra would suggest that we will be above single digits for the remainder for the full year.

Okay, great. God bless you. You okay?

Thank you.

Great. Yeah, I just had one quick follow-up there. On the general just demand backdrop as it relates to pricing, are you seeing anything on the customer appetite changing due to price increases or seeing any stress on demand or worried about, you know, pricing getting a bit too intense for customers?

Yeah, as we said on the outlook, I think things are, as of now, things are more the same than they are different. So we continue, you know, as Karen indicated in our kind of disaggregated revenue, that we have strong performance through all of our channels. So as of now, things are more the same than they are different.

Okay, thanks. That's all I had. I'll pass it on.

Thank you, and I'm sure no further questions in the queue at this time. I'll return the call back to Neal Ash for any closing remarks.

Thank you all for joining us this morning. We appreciate your interest and acuity. I just want to reiterate that I'm really proud of how our team is performing through downtimes, now uptimes. They are continuing their focus on product vitality and service while they manage for the ongoing supply constraints. And so I want to take my hat off to our team for their performance, and we look forward to continuing that. And we look forward to talking to you again soon. Have a good rest of your day.

This concludes the program. You may now disconnect.