Culp, Inc.

fourth quarter 2020 earnings results. Today's conference is being recorded at this time for the opening remarks. Please go ahead.

Thank you. Good morning and welcome to the CULT conference call to review the company's results for the fourth quarter and fiscal 2020 year. As we start, let me state that this morning's call will contain forward-looking statements about the business, financial condition, and prospects of the company. Forward-looking statements are statements that include projections, expectations, or beliefs about future events or results, or otherwise are not statements of historical facts. The actual performance of the company could differ materially from that indicated by the forward-looking statements because of various risks and uncertainties. These risks and uncertainties are described in our regular SEC filings, including the company's most recent filings on Form 10-K and Form 10-Q. You are cautioned not to place undue reliance on forward-looking statements made today, and each such statement speaks only as of today. We undertake no obligation to update or to revise forward-looking statements. In addition, during this call, the company will be discussing non-GAAP financial measurements. A reconciliation of these non-GAAP financial measurements to the most directly comparable GAAP financial measurements is included as a schedule to the company's 8K file yesterday and posted on the company's website at CULP.com. A slide presentation with supporting summary financial information is also available on the company's website as part of the webcast of today's call. With respect to certain forward-looking free cash flow information, the comparable gap in reconciling information is not available without unreasonable effort, and its significance is similar to the significance of the historical free cash flow information which is available in the company's 8K file yesterday and posted on the company's website. With that, I will now turn the call over to Yves Culp, Chief Executive Officer of Culp. Please go ahead, sir.

Thank you, Drew. Good morning, and thank you for joining us today. I would like to welcome you to the Culp Quarterly Conference Call with Analysts and Investors. With me on the call today are Ken Bowling, Chief Financial Officer of Colt, and Boyd Chumley, President of our Upholstery Fabrics business. We also have Frank Saxon, Executive Chairman of the company, dialing in remotely. I will begin the call with some brief comments, and Ken will then review the financial results for the quarter and the full year. I will then update you on the strategic actions in each of our operating segments. After that, Ken will review our first quarter fiscal 2021 business outlook, and we will then be happy to take your questions. The broad economic disruption caused by the COVID-19 pandemic significantly affected our performance for the fourth quarter and fiscal 2020. As the fourth quarter began, we were executing well on our strategic initiatives and generating momentum in our businesses. However, the impact of the COVID-19 pandemic began to materialize in the second half of March as retail stores across the country closed and many of our customers shut down or limited their operations for several weeks. Despite the challenging conditions, all of our employees around the world have done an outstanding job servicing our customers and supporting essential services throughout this pandemic. I am extremely proud of their hard work and dedication, especially in their efforts to work cross-functionally to meet critical needs and ensure we are well positioned as the economy continues to recover. The measures we've taken in recent weeks, combined with our team's agility, innovation, and resilience, give me confidence in our ability to navigate the environment we're facing, to increase our market share, and to emerge stronger as our business conditions improve, which we are already experiencing. We cannot thank our 1400 plus health associates enough for their courage and effort during this time. The safety of our employees remains our top priority. We entered this period with a sound balance sheet and acted swiftly and decisively to adjust our plans and enhance our cash position, including the strategic sale of our ownership interest in luxury. This sale allowed us to focus on our core businesses during this unprecedented environment, while also maintaining a strong working relationship with eLuxury going forward that allows us to preserve a beneficial sales channel for our core products. At the same time, we continued to execute our product-driven strategy and focus on innovation and design creativity in both of our business segments, despite the challenging conditions. As a result of the measures we have taken, we ended the fourth quarter with a net cash position that was stronger than the end of the third quarter, even with these limited operations. Although the ongoing impact and duration of this health and economic crisis remains unknown, our business has improved materially since the end of fiscal 2020, and we are encouraged by positive sales trends and reports of consumer spending in the home furnishing sector. Our mattress fabric segment and our wholesale fabric segment have both seen better than expected increases in orders, shipments, and output for the first eight weeks of fiscal 2021. We have also continued our intense focus on liquidity and outperformed our expectations for the first eight weeks of fiscal 2021 without incurring any cash burn during this period. It is likely that the COVID-19 pandemic will continue to have some impact on our business, through at least the first half of fiscal 2021. Barring additional shutdowns as a result of the virus, we believe business will continue its solid return through the first and second quarters of fiscal 2021, and we will benefit from pent-up demand and increased consumer attention to the home environment and overall comfort. Our cash position is strong, and as a result of these factors, we recently repaid all outstanding borrowings we had previously drawn down under our credit facilities during the fourth quarter. We're also pleased to announce that our Board of Directors declared a quarterly cash dividend of 10.5 cents per share payable in July. Importantly, the Board will continue to evaluate the appropriateness of the current dividend rate going forward in light of economic conditions and the company's performance in the upcoming quarters. With the strength of the company's balance sheet, we are confident in our ability to weather the ongoing disruption over the near term and emerge from this crisis in a preferred position. We're excited about the significant improvement we expect for the first quarter of fiscal 2021 as we continue to execute our product-driven strategy and demonstrate the resilience and strategic advantage of our global platform and stable supply chain. I'll now turn the call over to Kim, who will review the financial results for the quarter and also the full year.

Thank you. As mentioned earlier on the call, we have posted slide presentations to our investor relations website that cover key performance measures. We've also posted our capital allocation strategy. I also want to note that the sale of our ownership interest in eLuxury during the fourth quarter resulted in the elimination of our home accessory segment. So, the financial results for this segment are excluded from the reported financial performance of our continuing operations for the fourth quarter and fiscal 2020 year, and presented as a discontinued operation for these periods and for all prior periods of comparison. Here's a summary of the financial results for the fourth quarter, which were severely affected by the disruption caused by the COVID-19 pandemic. Net sales were 47.4 million, down 29.3% compared with the prior year. On a pre-tax gap basis, the company reported a loss from continuing operations of 18.4 million, compared with pre-tax income from continuing operations of $2 million for the fourth quarter of last year. Adjusted pre-tax loss in continuing operations, non-GAAP, for the quarter was $4.7 million, excluding $13.7 million in non-cash asset impairment charges associated with goodwill and certain intangible assets, which I'll discuss in more detail later. This compares with adjusted prefax income from continuing operations, again, non-GAAP, for the fourth quarter of last year of 2.5 million, which excluded a non-recurring charge of $500,000. Net loss for the quarter was 27.8 million, or $2.26 per diluted share, which includes the non-GAAP asset impairment charges I mentioned earlier, as well as a net loss from a discontinued operation of 8.7 million, associated with the luxury. This compares with a net loss of 1.5 million or 12 cents per diluted chair for the prior year period, which includes the non-recurring charge I mentioned earlier and a net loss for a discontinued operation of 0.4 million associated with the luxury. In connection with the company's annual impairment assessment of our goodwill and certain other intangible assets, we determined that impairment indicators existed as a result of the material impact on the company's financial performance and the significant decline in stock price and market capitalization arising from the COVID-19 outbreak. This resulted in a $13.7 million non-cash asset impairment charge during the quarter, of which $11.5 million related to the mattress fabric segment and $2.2 million related to the upholstery fabric segment. For fiscal year 2020, net sales were $256.2 million, down 8.9% as compared to the previous year. Pre-tax loss from continuing operations was $7.7 million, compared with pre-tax income from continuing operations of $12.7 million for fiscal 2019. Adjusted pre-tax income from continuing operations, non-GAAP, for the year was $6 million, excluding the non-cash asset impairment charges noted earlier. This compares with adjusted pre-tax income from the tenant operations, again, non-GAAP, for the prior year of $15.5 million, which excluded restructuring and related charging of credits and other non-recurring charges, resulting in a net charge of approximately $2.7 million. Net loss for the year was $28.7 million, or $2.32 per diluted share. which includes the non-cash asset impairment charges noted earlier, as well as a net loss from a discontinued operation of $17.5 million associated with eLuxury. This compares with net income of $5.5 million, or $0.43 per diluted share, for the prior year period, which includes the $2.7 million net charge noted earlier and a net loss from a discontinued operation of $0.6 million associated with eLuxury. Selling 12 months just at EBDA for fiscal 2020 was $13.9 million, with 5.4% of sales. Now I'll make a few comments about our taxes. The effective income tax rate associated with our continuing operations was 3.8% for the fourth quarter and 43.7% for the fiscal year, despite our significant pre-tax loss from continuing operations. The mix of our pre-tax earnings from continuing operations adversely affected our effective income tax rate as we had higher income tax rates associated with the pre-tax income earned by our foreign operations in China and Canada as compared to a lower income tax rate on our U.S. pre-tax loss. Additionally, the current mix of taxable income led to a significant increase in the effective income tax rate that is associated with our global intangible low-tax income or GILTI tax, which represents a U.S. income tax on foreign earnings. Importantly, during the fiscal 2020 year, we did not make any U.S. income tax payments due to the utilization of the company's U.S. Federal Net Operating Offering Fords and immediate expensing of U.S. capital expenditures. However, we did have income tax payments during the year totaling $5 million associated with our foreign operations located in China and Canada. Notably, the U.S. Treasury Department and Internal Revenue Service have issued newly proposed regulations that could provide us with some future relief from the GILTI tax under the proposed GILTI high tax exception election. However, the proposed regulations have not been finalized and could change. Now, let's take a look at our business segment. The mattress fabric segment net sales to the fourth quarter is $23.4 million. down 38.5% compared with last year's fourth quarter. Operating loss for the quarter was 2.8 million compared with operating income of 2.7 million a year ago. As we have noted, our sales and operating performance for the fourth quarter and year were significantly affected by the unprecedented disruption from the COVID-19 pandemic. Additionally, prior to the COVID-19 outbreak, our results for the year were affected by continued disruption in the domestic mattress industry related to low-price imports that moved from China to other countries. For the upholstery fabric segment, sales for the fourth quarter were $24 million, down 17.3% from the prior year period. Our operating income for the fourth quarter was $5.5 million, compared with $1.8 million a year ago, with operating income margin of 2% compared with 6.1% last year. Operating performance was primarily affected by the material decline in sales in connection with the disruptions from the COVID-19 pandemic. Here are the balance sheet highlights. While the broad shutdowns and disruption caused by the COVID-19 have created near-term headwinds and uncertainty, we maintained a sound financial position in fiscal 2020. As of the end of the year, we reported $77.1 million in total cash and investment and outstanding borrowings, totaling $38.4 million for a net cash position of $38.7 million. We have maintained this position despite the rapid decline in sales by taking prompt action to manage our cash position during the fourth quarter. In doing so, we ended the quarter with net cash above our net cash position at the end of the third quarter, even with limited operations. During the year, we spent $4.6 million for capital expenditures and returned $6.8 million to shareholders in regular dividends and share repurchases. We had cash flow from operations of $5 million and free cash flow of $1.5 million for the year, which were negatively affected by the COVID-19 disruption. As Ian mentioned earlier, we are now once again debt-free after repaying the borrowings previously outstanding at the end of the fiscal 2020 fourth quarter. Our current financial position through the first eight weeks of fiscal 2021 reflects an improved total net cash position as compared to the end of the fourth quarter of fiscal 2020. We also recently amended our credit agreement to increase flexibility regarding our financial maintenance covenant due to the impact of the COVID-19 pandemic. With that, I'll turn the call back over to Ed.

Thank you, Ken. Let me start with some comments on the mattress fabric segment. The disruption from COVID-19 significantly affected our results for the fourth quarter and for the year. We experienced a rapid drop in demand beginning in mid-March as customers and retail stores began closing, or substantially limiting their operations. Due to government-mandated closure requirements near the end of March, we shut down facilities in Canada and Haiti for several weeks. We also reduced our production schedules and furloughed workers at our U.S. facilities to align with severely reduced demand while aggressively cutting costs, delaying nonessential capital expenditures, and reducing inventory. Despite these challenges, we quickly pivoted to repurpose our available operations to produce face masks, bedding covers, and fabrics for healthcare operations and consumer health. This allowed us to support much needed relief efforts as an essential business and keep as many workers as possible employed. Additionally, in the face of travel restrictions and canceled trade shows, we also leveraged our reimagined corporate fashions which is a 3D image rendering capability to continue showcasing our products and support our customers through virtual design collaboration. For the first eight weeks of fiscal 2021, we have experienced a steady increase in demand as government restrictions have been lifted and customers and retail stores have started to resume operating. We have now dramatically increased our production schedules and returned substantially all of our previously furloughed workers to meet the increased demand. We have also reduced inventory by approximately $5 million during this period. Additionally, we are pleased with the swift return to pre-COVID-19 favorable demand trends for our class stone mattress cover business. There appears to be a continuing growth trend for online box setting. Across the mattress fabrics division from fabric to cover, we are working collaboratively with new and existing customers to develop fresh, innovative products, and our efficient global platform continues to support our fabric and cover business with established production capabilities in the United States, Haiti, and Asia. We expect our building expansion in Haiti to be completed during the second quarter, which will provide additional capacity and enhance our ability to produce sound covers. We are also encouraged by the recent anti-dumping duty petitions filed with the U.S. International Trade Commission and U.S. Department of Commerce against seven countries for engaging in unfair trade practice, as well as ICC's preliminary determination allowing these petitions to go forward. If successful, we believe the proposed relief being sought will benefit the domestic mattress industry and in turn be favorable for our business especially with our significant global platform for stone cover. Now I'll make a few comments on the upholstery fabric segment. Our results for the fourth quarter of fiscal 2020 reflect a material decline in sales and severe disruption from the COVID-19 pandemic. We began fourth quarter on track for strong sales and a solid operating performance. The first six weeks of the fourth quarter were consistent with our expectations, with our ASA supply chain operating at full output by the beginning of March, following the previous government mandated shutdown in China associated with the virus outbreak. However, orders and shipments decline significantly beginning in the second half of March as most of our US customers and retailers shut down or substantially limited their operations due to the pandemic. Despite these challenges, our team of associates has quickly responded to the new operating environment to support the needs of our customers. With travel restrictions and event cancellations, We quickly adapted by developing virtual showcase presentations that allowed us to continue representing our products to customers. For the full year, especially considering the negative impact of COVID-19, we were pleased to achieve a solid year of annual sales and operating income performance. Throughout the year, we executed our product-driven strategy with a continued focus on innovation and creative design that supports our diverse customer base and helps customers differentiate themselves in the marketplace. Our strong platform in Asia, including cut and sell capabilities in Vietnam, as well as our stable, long-term supplier relationship, continues to support our business and enable us to meet challenging customer demands. Our line of highly durable, stain-resistant LiveSmart fabrics remains popular with both new and existing customers. We also remain excited about the demand trend for LiveSmart Evolve, our line of sustainability fabrics featuring the use of recycled yarns along with the same stain-resistant performance. We are continuing to develop new generations of performance products featuring new finishes and technologies to further expand this product offering. Additionally, we continue to see growth in our hospitality business throughout the year, which was less affected by the COVID-19 disruption during the fourth quarter due to orders already in process. Reed Window Products, our window treatment and installation services business, provided a meaningful contribution for the year, including the fourth quarter as it continued operations to fulfill existing project orders and reallocated a portion of its operations to also show face masks for healthcare workers. However, while we remain pleased with the diversification offered by our hospitality business, we recognize the ongoing pressure in the hospitality industry as a result of COVID-19. Importantly, the core market of our lead window product business is the vacation and leisure segment of the hospitality industry, which we expect to see less ongoing impact than the corporate sector. Looking ahead, we are encouraged by recent sales trends through the first eight weeks of the quarter, which are better than anticipated. Again, we'll now discuss the general outlook for the first quarter and fiscal 2021, and then we'll be happy to take your questions.

At this time, due to the continued economic impact of the COVID-19 pandemic and the lack of visibility as to its duration and ultimate impact, we are providing only living and financial guidance for fiscal 2021. Although subject to unforeseen changes that may arise as the pandemic and its economic impact continues to unfold, we are encouraged by improving business conditions and expect sales and operating performance for the first quarter of fiscal 2021 to be significantly improved as compared with the fourth quarter of fiscal 2020, with operating income expected to be near break-even and our net cash position expected to be comparable to our $38.7 million net cash position at the end of fiscal 2020. With that, we'll now take your questions.

Thank you. Good morning. I appreciate you taking a few questions. You commented, you used the word positive sales trends. in your commentary, and I was just curious, is that positive in relation to the bottom in March, April, or positive year over year at some point here recently? Thank you.

Yeah, John, good morning. Thanks for the question. Good to chat with you. Yeah, that's a good question, and I'd say kind of both. So to give you some more color, we saw in both businesses in March and April sales levels 40% minimum down, and in some cases, a little bit more. And so the way we're saying significantly improved is as we look at it today, we're approaching what we're calling more normal sales conditions for us. So, you know, if you think about the quarter, it started off a little bit slower, but steadily building through the quarter, and now we're approaching more normal sales conditions.

So would it be fair to say, not that we model monthly or really focus on monthly stuff, but Was April, the month of April, down close to 40% year-over-year?

Yes, sir. Yes, sir. April was the bottom for those businesses.

And then could you comment on the raw material that is polyester in particular? And I appreciate your... In fact, your inventories, you're not cycling through them perhaps as quickly, but when do we start to see possibly some benefit from declining raw materials?

Yeah, John, thank you. Boyd and I were just talking about that as you were asking the questions, and for sure we don't see any headwinds on that. We find it stable. You're right. We do have to get... through inventories and begin buying again to take advantage of some of the spot opportunities that are there. I don't think we view that as a long-term tailwind, but we also don't see any headwinds in that. It's stable.

And I assume you're going to be using working capital in the July quarter, and yet you don't anticipate a change in cash, the cash position. And while you may or may not break even, there wouldn't be a profit. So I'm just kind of curious about the short-term puts and takes on cash generation. And then maybe I'll just think about the out year, next 12 months or so. Thank you.

Yeah, John, this is Ken. Yeah, we started... You know, the end of the year was at $38 million roughly in net cash. And then really during May, with all the measures that we had taken, we began to build cash. And, of course, with the inventory reductions, that helped as well. So we were able to not only combine the benefit of the inventory reduction plus all the spending cuts that we had put into place. So that actually helped build our cash position. during that time, but as we look out, especially with the next month, as business continues to improve, we will use working capital. And so, that's where we think cash will kind of fall back to near or comparable to year end. So, there will definitely be some use of working capital, but at the same time, what's helping too is that some of the extended terms, that we had negotiated with customers, those are starting to roll off. And so maybe some customers will start discounting again. Those terms will start to come into play. So that will help maybe offset the impact of an increased inventory requirement.

And then my last question is around CapEx. I think maintenance is somewhere around $67 million annually. Is that wrong? Correct me. But where's the budget this coming year in light of Sales coming back so quickly. Is your outlook changed on that, or are we going to still keep it close to maintenance capex? Thank you.

Yeah, John, it's Ken again. You know, we've said that maintenance capex can run anywhere from four to six, maybe a little bit more depending on the year. You know, right now we're prioritizing all of our capital expenditures, certainly looking at the most in places that are most needed. I think long term, a normal year would be six to eight million, roughly, as far as company-wide. But I would say right now, we're just being very cautious and prioritizing all of our CapEx and looking at it and just taking a cautious approach as we go throughout the first quarter. Thank you. Good luck.

Thanks, John.

Hey, good morning or good afternoon. I guess we're close enough to the afternoon. Thank you for taking my questions. I guess the first thing I want to ask about is what are you hearing from your customers or seeing from your customers in terms of their inventory? Are they back to, you know, holding on or stocking up on inventory to pre-COVID levels? Or do you see most of your customers running a little tighter? and a little thinner on their inventory levels right now.

I think, Bobby, this is Viv, and I'll let Boyd comment on that, too, because he'll be close to that on the furniture side. I think inventory has got skinny down pretty good as business came back so strong. And I don't think they've had opportunities to build a lot of inventory yet. And so, I think people are still running fairly thin. It's easier to run with some safety stock levels, so we haven't been able to build back to those as of yet. Boyd, please comment anything else.

Yes, I would agree with that on the post-free side of the business for sure. I think it's been a bit of a progression just as we immediately were coming back from the shutdowns and the disruption. there probably was some inventory in the pipeline. But I think with the pace of recovery being what it has and probably exceeding expectations there, that inventory is being pulled down fairly rapidly. So, I don't think that there is a lot of inventory left in the pipeline.

Okay. So, the demand we're seeing in the last eight weeks, the week-over-week better demand really is through kind of retail performance, you know, true sell-through is probably fair to categorize that as, right?

I think in the most recent weeks that we've seen, Bobby, yes, that is correct. Okay, that's very helpful.

I guess I also want to talk briefly just kind of on the cost structure and the margin profile. Clearly, you know, with volume falling off here and mattresses margins have come down as expected, but when we think out a couple years, I mean, is there anything structurally that would prevent us from getting back to kind of the actually besides volume that would prevent us to getting back to kind of the low double digit operating margins in the mattress segment. So, when incremental volume does return, it should flow through pretty nicely.

Bobby, thanks for that question. The way I would phrase that to you is we did a lot of platform expansion over the last couple years. And we talked about it kind of repeatedly in our releases, how much we've invested in the mattress fabric business for our North American platform to take advantage of the strength of our Canadian operations and then also on our cut and sew business to really build a significant strategy of United States, Haiti and Asia. So, we've done a lot of investment and we haven't had yet until maybe we're getting close to it. We haven't had the chance to run at full steam. to show what that platform can do. So yeah, without committing to where it can go, there aren't long-term headlines that prevent us from getting back to what we would consider more normal margins.

Okay, that's helpful. And then I guess lastly, Tim, just to make sure that our model is coming up right, last year's first quarter was a 14-week quarter, correct?

Correct, yes.

And is it safe to just say the sales divided by, you know, the $75 million divided by 14 and assume the extra week accounted for basically about $5 million worth of revenue?

I guess that's probably the best way to do it, Bobby. Yeah.

Okay. That's helpful. That helps us tune it up. Okay, perfect. Well, I appreciate you answering my questions. Best of luck here, you know, in the first quarter. Thank you, Bobby. Good morning, guys.

Thank you for taking my question. Good morning. I was wondering if you could circle back around on the question earlier about cash flows, just kind of thinking about your cash flow from operations for the full fiscal year. Obviously, you discussed the fact that you'd be using some working capital But also, you guys have implemented some temporary cost reduction initiatives through this last quarter, and I wanted to see if you can kind of update us on where that is right now. Have they been brought back? Are you going to be keeping them in there? And if you can kind of discuss any other major drivers or risks that you're kind of focused on as it relates to your cash or from ops for the fiscal year. I can touch a quick stab at that. Marco, thank you. This is Viv, and I let Kim certainly comment as well. Yes, at the start of the pandemic period in March, we took significant costs out of both businesses, some temporary and some longer term. Our businesses are structured very differently. Our upholstery fabrics business is a pretty variable cost model, so it sort of flows with where the business is, and we feel fine about that. And our mattress fabrics business is much more of a fixed cost model because all the capital signature and passive results here. We have taken more permanent costs out of the mattress fabric business. And both businesses have opportunities that we're finding with our virtual opportunities that will produce travel and other marketing expenses that will be a go forward but we don't we don't see any costs out of line. It can't be adjusted based on sales volume. And Ken, if you want to comment more for that, you're free.

No, I think that covers it. You know, there's some certainly other costs that we've talked about, you know, the executive pay cuts, things like that, that we'll have to evaluate in other programs to bring back. And then there's just really looking at every line item as far as controlling costs. So, yeah, we've taken a lot out, but we've brought back some. But obviously, as we move forward, we're going to be watching costs very, very closely and carefully.

That's helpful.

And then, obviously, it's a very difficult environment for everybody to operate, but maybe if you can kind of update us on your capital allocation decisions and how you're thinking about that fiscal year.

Right now, of course, you know, the main focus was to, during this pandemic disruption, was to focus on keeping the business going. So, we took aggressive action, you know, going back to stopping our share repurchase program, We continue to pay the dividend. We paid back in April. We're going to pay it again. So from the standpoint of our capital allocation strategy, you know, number one is invest in the business and pay our debt down. We did that. Also support dividends. We did that. So all that's working as planned. Of course, you know, right now with the conditions the way they are, The next step would be to look at any acquisitions. But, you know, right now the focus is more short-term and looking at and making sure that we see what's ahead of us and making sure we're prepared. But I think as far as looking ahead, you know, we're just focusing on today and tomorrow, you know, getting the dividend paid, funding the operations, being able to fund working capital growth. keeping a very strong cash position, which has certainly helped us during this time, and focusing on conservatism as we go forward. So what we've been doing has worked well during this time, so no real reason to change.

Marco, just to add one thing to what Ken was saying, and he's right on cue, really since the beginning of this period, we spent time every day And it's been our primary focus on building what we want to have as a fortress balance sheet. And our number one priority is making sure that we have a cash and liquidity position that will allow us to adjust to whatever we see. So, it's a critical discussion point for us every day. And we're proud of where we are today, but know that we have more work to do.

That's good.

And last question here, just kind of curious on. Obviously, your inability to kind of travel and have your face-to-face meetings with your clients, especially obviously the clothing and trade shows and what have you, were a big negative effect to everybody. But you seem to have been able to pivot to kind of these virtual type events or virtual meetings. Just kind of wondering your thoughts there. Just kind of given what you've seen thus far, do you think that perhaps that kind of changes the dynamics of your businesses going forward once things start to return to normal? Or is that just something you think is something of a temporary fix? Marco, this is Ed, and I want Boyd to comment on this question, too. But we have just amazing talent in our creative and design department. And, yes, we always thought and probably still believe that there's no substitute for physical touch of our product. And see in the fabric slides. But I have been blown away by the abilities that we've developed to show these products virtually. And I think that we do see that is a different landscape going forward. And, Boyd, you may want to talk about how you see it, how you see showing your products in the future and how that may split out.

Yes, Ed, I would certainly agree with you. I think going forward, there will be a mix of both. And while there's still the trade shows and markets will be important, piece of it. I think the capabilities that we've now established with the virtual showings and the virtual representation of our product, that's something that will be here to stay. And we've gotten just very favorable reaction to our customer base as we've rolled out this method of virtually showing our products. And yeah, I think it'll be part of our methods going forward for doing that.

Thank you. Thanks a lot, guys. I really appreciate the time. Thank you. Thank you, operator. And again, thank you to everyone for your participation and your interest and call. We look forward to updating you on our progress next quarter.