J. Bruce Chan

J. Bruce Chan asked about Forward Air's performance model in a recovery scenario, specifically regarding potential gross margin squeeze in the expedited freight segment and the utilization of third-party P&D line haul miles, and later inquired about the appropriate midterm margin and seasonality for the Omni Logistics segment, as well as the growth of their data center business.

Answer

CFO Jamie Pierson explained that Forward Air's flexible operating model allows it to outperform in volatile environments, with the ability to quickly add capacity. He anticipates making up ground on EBITDA margins. CEO Shawn Stewart detailed Omni's diverse portfolio and focused growth, emphasizing 'synergy selling' and confirming they are not overearning. He also confirmed scaling with the data center business, leveraging their expertise in high-value, high-risk logistics.

J. Bruce Chan of Stifel asked for an update on potential divestitures of non-core assets from the Omni acquisition and inquired about the progression of yields in the network LTL segment, specifically regarding the unwinding of a previous class-based pricing strategy.

Answer

CFO Jamie Pierson stated that the analysis of former Omni companies is ongoing and it is too premature to announce any potential sales. CEO Shawn Stewart explained that the company is adjusting its LTL pricing to better reflect its premium service, moving away from a volume-focused strategy. He anticipates the financial impact of this change will be felt partially in the fourth quarter.

Bruce Chan commended FedEx's network planning and asked about the potential impact of an imminent Supreme Court ruling on tariffs, specifically if a decision against the administration would be a tailwind to trade activity and affect the $1 billion headwind estimate.

Answer

Raj Subramaniam, President and CEO, FedEx, thanked for the network comments and stated it's too early to comment on tariff rulings, as they are not factored into the current outlook. He acknowledged that any international volume increase would be beneficial and highlighted FedEx's scaled global network and ability to adapt swiftly to changing global trade patterns and supply chain shifts.

J. Bruce Chan inquired about signs of potential supply constraints in the broader airfreight market due to an aging global fleet and how FedEx's Tricolor strategy provides flexibility to shift volumes between its purple tails and third-party capacity.

Answer

EVP & Chief Customer Officer Brie Carere noted FedEx's selective focus on premium freight as a relatively small global airfreight participant. She highlighted the team's success in shifting capacity, such as growing between Asia and Europe, and balancing purple tail capacity. President & CEO Raj Subramaniam added that Tricolor is effectively decongesting hubs, optimizing the fly-truck network, and densifying the network, enabling profitable growth and enhancing customer value.

J. Bruce Chan of Stifel asked for management's perspective on a potential privatization of the U.S. Postal Service and what that might mean for the competitive landscape in the parcel industry.

Answer

President and CEO Raj Subramaniam commented that it is too early to speculate on the outcome but that FedEx is monitoring developments closely. He stated a key principle for the industry is that the package delivery business should not be subsidized by U.S. taxpayers, expressing hope that this consideration would be adopted in any potential changes.

J. Bruce Chan inquired about the proportion of strong Asia export volumes coming from major Chinese e-commerce players and the outlook for these volumes. He also asked about the net impact of this traffic on airfreight costs and the role of the Tricolor strategy.

Answer

EVP and CCO Brie Carere described the relationships with major e-commerce shippers as productive but strategically managed, representing 'small opportunities' that are accretive but not a significant growth driver. She sees no material risk from these volumes. She affirmed that the Tricolor strategy is designed to improve all international margins as the market continues to shift toward deferred services.

Bruce Chan asked if the potential government shutdown was factored into UPS's guidance and, if not, whether it posed any downside risk to demand, service, or operations, particularly concerning air traffic control and payrolls.

Answer

Carol Tomé, CEO, stated that UPS does not have a crystal ball and is closely monitoring the situation, especially regarding airlines, but has not yet observed any service disruptions. She indicated that no significant impact from a potential shutdown has been factored into peak season guidance, as customer forecasts remain positive, and expressed hope for a swift resolution.

Bruce Chan asked if the potential government shutdown was factored into UPS's guidance and if there's any downside risk to demand, service, or operations, particularly concerning ATC and payrolls.

Answer

Carol Tomé, CEO, stated that UPS does not have a crystal ball but is closely monitoring the situation, especially regarding airlines, and has not yet observed any service disruptions. She indicated that no significant impact from a potential shutdown has been factored into the peak season guidance, as customer forecasts suggest a strong peak. She emphasized the importance of hoping for a swift resolution.

J. Bruce Chan of Stifel asked for more detail on the flat performance in the small and medium-sized business (SMB) segment, seeking to understand if it was driven more by policy uncertainty or by competitive pressures.

Answer

CEO Carol Tomé attributed the challenges in the SMB segment primarily to trade policy uncertainty and tightening credit conditions, which disproportionately impact smaller companies. She noted UPS is actively helping these customers with supply chain mapping assessments. CCO Matt Guffey emphasized that SMBs trust the UPS brand and integrated network for guidance on sourcing and logistics. EVP Kate Gutmann also highlighted healthcare as a particular bright spot within the SMB customer base.

J. Bruce Chan asked whether the company's major network realignment could reduce its flexibility and optionality in responding to a potential recessionary scenario with lower demand.

Answer

CEO Carol Tomé argued the opposite, stating that shedding unprofitable Amazon volume and reducing dependency on one customer actually adds financial flexibility and agility. CFO Brian Dykes added that consolidating into a more automated network improves efficiency for flexing volume both up and down. Tomé concluded by highlighting the strategic focus on recession-resilient healthcare logistics as a key differentiator.

J. Bruce Chan questioned whether the extensive network realignment could reduce UPS's flexibility to respond to a potential recession, such as by flexing down labor or flights.

Answer

CEO Carol Tomé argued the opposite, stating that shedding unprofitable Amazon volume creates more financial flexibility and agility. CFO Brian Dykes added that the company is building a 'muscle' for flexing its network and that consolidation into automated hubs improves efficiency. Tomé also highlighted the strategic focus on the recession-resilient healthcare sector as a key differentiator.

J. Bruce Chan of Stifel inquired about the Smart Package Smart Facility (SPSF) initiative, asking for the target completion date for the RFID rollout across the package car fleet and the timeline for subsequent phases.

Answer

CEO Carol Tomé confirmed the rollout should be completed this year. EVP and President, U.S. Nando Cesarone added that the execution schedule is linked to the financial plan. Chief Commercial and Strategy Officer Matthew Guffey emphasized the customer value, noting that 15 large enterprise retailers have already been onboarded, loving the inbound visibility RFID provides for their docks, which improves their labor scheduling and complements time-definite delivery windows.

J. Bruce Chan of Stifel asked about the extent of cost-saving initiatives, the potential for margin improvement as the market normalizes, and the company's philosophy on future M&A activity.

Answer

CEO Richard O'Dell detailed cost opportunities in procurement, facility consolidation, and reducing empty miles. He and President & COO Amy Rice affirmed the mid-term goal of a high-80s adjusted operating ratio, driven by share gains and cost controls, noting three operating units already perform at or better than a 90 OR. On M&A, CFO Brad Wight stated that while conversations are ongoing, nothing is imminent, and the focus is on using free cash flow to reduce debt.

In a follow-up, Bruce Chan from Stifel questioned industry capacity post-competitor exit, Proficient's equipment order book, and the potential impact of auto loan tax changes on demand.

Answer

President and COO Amy Rice stated that while there is some slack capacity now, the market would feel a crunch if volumes returned. She noted Proficient's new equipment orders are modest and that the exited competitor's older fleet is unlikely to return to the new vehicle market. She also said customer talks are focused on tariffs, not potential tax changes.

J. Bruce Chan of Stifel inquired about the potential market share opportunity arising from a competitor's disruption, asking for clarification on market share figures. He also questioned Proficient's strategy for prioritizing new volume versus network density and asked about the company's current appetite for M&A.

Answer

President and COO Amy Rice stated that the company's previously disclosed low-teens market share estimate is still a reasonable figure. She explained that Proficient prioritizes growth within its existing network, followed by adjacent territories, and is more measured about entering entirely new markets. Chairman and CEO Richard O'Dell added that while they have a pipeline of M&A opportunities and expect one to two smaller deals this year, they are balancing this against other strategic priorities.

J. Bruce Chan of Stifel questioned the significant revenue decline in the Pro Fleet dedicated business, asking about the cause, contract status, and timeline for stabilization. He also asked the new management team for their updated view on the company's fundamental earnings potential and queried their capital allocation priorities, specifically regarding share buybacks.

Answer

President & COO Amy Rice explained the Pro Fleet decline was due to a tough year-over-year comparison and reduced demand for premium services amid high dealer inventories. She noted the business is now operating at its minimum contracted level, suggesting a floor has been reached. CEO Richard O'Dell and CFO Bradley Wright expressed increased confidence in their market position, ability to gain share, and the on-track cost synergy initiatives. Regarding capital allocation, Wright stated that investing in long-term business improvements remains the priority over share buybacks.

J. Bruce Chan of Stifel sought clarification on the Martin Transport acquisition, asking if the guided accretion includes synergies and if it's separate from the new $50 million cost savings target. He also asked if new tax legislation could impact the value proposition of the Dedicated business for customers.

Answer

President & CEO Phillip Yeager confirmed the accretion estimate for the Martin deal includes day-one contractual synergies and is separate from the broader cost savings program. CFO Kevin Beth highlighted the strong growth in the refrigerated intermodal business. Regarding legislation, Mr. Yeager stated he does not anticipate new bonus depreciation rules will significantly alter the outsourcing decisions for customers in the Dedicated segment in the near term.

J. Bruce Chan inquired about headcount reductions and the potential for further cost-cutting, as well as an update on the EASO joint venture in Mexico, including any signs of sourcing shifts and the company's M&A appetite in the region.

Answer

Executive Phillip Yeager stated that legacy headcount was down 7% and detailed a $40 million cost reduction program, with half already implemented. CFO Kevin Beth added that technology implementations are also reducing costs. Regarding Mexico, Yeager described the EASO joint venture as a 'fantastic' start with volumes up 4x year-over-year and noted a strong M&A pipeline with a focus on adding more solutions in Mexico over time.

J. Bruce Chan of Stifel asked about Intermodal volume trends, questioning if Hub Group experienced a demand pull-forward in Q4 given strong results and flat sequential guidance. He also inquired about any shifts in customer demand related to the company's cross-border business in Mexico.

Answer

Executive Phillip Yeager confirmed that strong demand has continued, with January Intermodal volumes up 18% year-over-year, and he does not believe a significant pull-forward has occurred yet. Regarding Mexico, Yeager noted that cross-border business is about 6% of Intermodal volume and 3% of total company revenue. While customers might pull forward some demand, he sees a significant opportunity for truck-to-rail conversion in the underpenetrated Mexico cross-border market, expressing confidence in share gain opportunities.

J. Bruce Chan of Stifel Financial Corp. inquired about the current intermodal pricing environment, including sources of pressure, and asked for an update on the timeline and adjustments related to the Final Mile business integration.

Answer

Executive Phillip Yeager explained that while the intermodal pricing environment is competitive, it is not irrational, and he anticipates a successful bid season supported by strong demand and service levels. He noted that about 70% of the business will be repriced in the first half of 2025. Regarding Final Mile, Yeager stated the integration and reorganization are largely complete, positioning the business to capture a seasonal demand surge in Q4 and benefit from new, margin-accretive business.

J. Bruce Chan asked about the company's appetite for M&A, particularly in Global Forwarding, given the changing trade patterns and a potential 'buyer's market'.

Answer

CFO Damon Lee outlined a disciplined capital allocation strategy where high-ROI organic opportunities currently receive top priority. He confirmed the company is actively evaluating inorganic opportunities but stressed they will not 'make a mistake on M&A' and will only act on the right acquisition, while continuing share buybacks as conditions permit.

J. Bruce Chan from Stifel asked for an update on Old Dominion's technology initiatives, such as AI and dynamic routing, and their overall view of their current tech stack.

Answer

EVP & CFO Adam Satterfield confirmed that technology is a core component of their strategy and a key driver of their industry-leading operating ratio. While not detailing specific projects, he noted they are constantly pursuing continuous improvement in areas like line haul optimization and P&D operations, which has been crucial for managing costs effectively during the downturn.

J. Bruce Chan from Stifel Financial Corp. requested an update on Old Dominion's technology initiatives, such as AI and dynamic routing, and the overall state of its technology stack.

Answer

EVP & CFO Adam Satterfield emphasized that technology is a key driver of ODFL's significant operating ratio outperformance. He confirmed the company is continuously working on improvements in line haul optimization, P&D operations, and dock technologies. These systems have been crucial in managing direct costs effectively despite the loss of network density during the downturn.

J. Bruce Chan asked about trends in contract renewals and customer pushback on price increases, and also inquired about the potential yield impact from upcoming changes to the National Motor Freight Classification (NMFC).

Answer

CFO Adam Satterfield stated that while bid activity is high in a weak market, ODFL continues to secure yield improvements by demonstrating its value proposition. Regarding the NMFC changes, he anticipates a minimal overall impact, explaining that ODFL's cost-based pricing should result in a revenue-neutral transition for customers.

J. Bruce Chan asked about contract renewal trends and the potential impact of upcoming changes to the National Motor Freight Classification (NMFC) on yields.

Answer

CFO Adam Satterfield noted that bid activity is high but ODFL continues to secure yield improvements. Regarding the NMFC changes, he does not expect a material impact on overall yields, stating the goal is for the change to be revenue and income neutral for ODFL and its customers due to its cost-based pricing model.

J. Bruce Chan asked about the potential impact on the competitive landscape from a major competitor's planned spin-off into a standalone LTL company.

Answer

CFO Adam Satterfield noted that they have competed with the company for years and expect it to remain disciplined. He expressed confidence in ODFL's ability to continue winning share through its superior service and value proposition, emphasizing that the industry remains capacity-constrained, which provides growth opportunities for multiple carriers.

J. Bruce Chan asked if the decline in weight per shipment was due to market softness or competitive wallet share gains, and inquired about sales force incentive structures.

Answer

Executive Kevin Freeman attributed the lower weight per shipment to customers shipping fewer items per skid due to market conditions, not competitive losses, and expressed cautious optimism for a holiday-related pickup. He confirmed that sales representatives are incented quarterly based on revenue growth, operating ratio, and service metrics.

J. Bruce Chan from Stifel Financial Corp. asked about the Asset-Light segment's return to profitability, inquiring about the progress of the turnaround, the sustainability of productivity gains, and the expected operating ratio trajectory for the second half of the year.

Answer

President & CEO-Elect Seth Runser described the progress as being in the 'early innings,' particularly on productivity improvements driven by AI and process optimization. He noted that while the managed solutions business is performing well, the truckload segment is still being optimized. CFO Matt Beasley provided Q3 guidance for the segment's non-GAAP operating income to be between breakeven and $1 million.

Speaking on behalf of Bruce Chan, Matt Milask asked about ArcBest's overall retail exposure as a percentage of the enterprise and how much of that is tied to inbound traffic from China.

Answer

Chief Financial Officer Matt Beasley stated that overall retail exposure is around 10%, with a slightly lower percentage in the Asset-Based business and slightly higher in the Asset-Light business. He characterized the exposure as not significant and did not provide a specific figure for China-related traffic.

J. Bruce Chan asked for confirmation on the financial impact of the city route optimization technology, questioning if 50 bps of OR savings was a fair estimate and how much opportunity remains. He also asked if the LTL-to-TL freight shift has a larger impact on ArcBest due to its freight profile.

Answer

CFO Matt Beasley confirmed the initial phase of city route optimization yielded about $1 million per month in savings. While subsequent phases focusing on optimization and pickups have less runway, they will still provide positive results and customer benefits. President Seth Runser addressed the freight shift, acknowledging that some fringe LTL freight has moved to the over-capacitized truckload market. He believes this freight will shift back as the TL market recovers but noted it's not the bulk of their business.

J. Bruce Chan from Stifel requested a performance breakdown of the Asset-Light segment by service line and asked if brokerage profitability is dependent on the contract repricing cycle.

Answer

CFO Matt Beasley confirmed the managed services business is contributing positively to operating income, while truckload brokerage is a headwind. Executive Steven Leonard added that while a market turn will help, the company is actively improving pricing at the lane and customer level and growing in non-contract areas to drive profitability sooner.

J. Bruce Chan of Stifel inquired about the sustainability of the recent strength in substitute line haul, the outlook for peak season, and whether there was any visibility into a recovery for the company's declining forwarding business.

Answer

CFO Jim Todd noted that substitute line haul strength was driven by specific customer demand. VP Matt Dannegger added that they anticipate a muted peak season, similar to the prior year. Regarding the forwarding business, management stated they did not have a clear view for Q3 but acknowledged that ocean rates had been declining for several quarters.

J. Bruce Chan asked if the Q1 supply chain fraud was a unique, preventable issue and inquired about the long-term outlook and investment strategy for Mexico cross-border freight.

Answer

CEO Frank Lonegro confirmed the fraud was an 'extremely unique' and isolated incident stemming from a decade-old arrangement, not typical double brokering. On Mexico, Lonegro and Executive James Applegate reiterated their belief in the long-term strategy, stating that while M&A is not a primary focus, they are evaluating organic investments in new gateways along the border to position for future growth once tariff uncertainty clears.

J. Bruce Chan of Stifel asked a strategic question about adding density to the LTL network, questioning if M&A was still an option or if the focus was now organic. He also asked for an update on LTL contract renewals.

Answer

Alain Bedard, President, CEO & Chairman, stated that a large LTL acquisition would be unwise until the company proves sustained control and improvement at TForce Freight over several quarters. For now, buying back TFI stock is a better use of capital. CFO David Saperstein added that LTL contract renewals are in the low-to-mid single-digit range, but the key factor is the mix of freight retained under those renewals.

J. Bruce Chan questioned how TFI can win small and medium business (SMB) deals, a goal for three years, without first improving service levels. He also asked if an asset-light model is still the preference for future M&A.

Answer

Executive Alain Bedard acknowledged the challenge, noting that while service metrics like missed pickups have improved by 50%, the company is fighting a negative perception based on stale, four-year-old data from the Mastio report. He conceded that after years of trying to grow density organically without success, TFI now understands that M&A will be necessary. While an asset-light model is always preferred, Bedard said the company is open to asset-heavy acquisitions to build the required density.

J. Bruce Chan of Stifel asked about Saia's forward-looking target for outsourced purchased transportation (PT), which stood at 12% in the quarter. He also inquired about any cost impact from relocating the centralized customer service function to field locations.

Answer

President & CEO Frederick Holzgrefe explained that Saia does not have a specific target for PT percentage. The decision is driven first by meeting customer service needs, then by finding the most cost-optimal solution, which could mean using more or less PT depending on the market. He noted the customer service move will be a lower investment over time by removing a duplicative resource, though some resources may be added back to field locations during the transition.

J. Bruce Chan of Stifel asked about staffing levels following a nearly 10% workforce increase, future hiring needs, and whether the positive trend in weight per shipment would continue.

Answer

CEO Fritz Holzgrefe explained that staffing is matched to demand and that the 1,300 new hires in 2024 were primarily for the 21 new terminals. Future hiring will be more modest. Executive Matthew Batteh noted that while weight per shipment is trending up, it remains below pre-Yellow levels. He attributed the increase to intentional mix management efforts rather than a broad recovery in the industrial economy.

J. Bruce Chan of Stifel Financial Corp. inquired about the Wincanton acquisition's CMA review process, asking about GXO's preferred outcome among the alternatives and the potential timeline for starting the integration.

Answer

CEO Malcolm Wilson stated they are nearing the conclusion of the CMA review, with an outcome expected in 'multiples of weeks.' He explained they are prepared for either full clearance or a minor disposal of a low-margin part of the business. Importantly, they are working with the CMA to begin integrating the other 90%+ of the business soon to start unlocking cost synergies.

J. Bruce Chan requested clarification on brokerage gross profit per load trends, asking why the overall business trend was stagnant while legacy Coyote's improved, and how to reconcile the guidance.

Answer

CSO Jared Weisfeld explained that after a difficult January, the company moved quickly to reduce purchase transportation costs, leading to a 20% GP per load improvement from January to March. He clarified that all Q2 guidance scenarios assume GP per load will be up sequentially from Q1 levels. He also noted that a higher LTL mix, which has a lower GP per load, can impact the overall average, while also being a tailwind to gross margin percentage.

Bruce Chan from Stifel asked for details on current headcount and the trajectory of productivity metrics like loads per person per day, post-Coyote integration. He also followed up on whether the spot and project business from October was continuing.

Answer

CSO Jared Weisfeld reported a 15% YoY productivity improvement for legacy RXO and noted a significant opportunity exists to elevate legacy Coyote's productivity by migrating to the unified RXO Connect platform. CEO Drew Wilkerson added that top-performer metrics show ample room for further gains. He also confirmed the beneficial spot and project work was concentrated in October and had not continued into November.

J. Bruce Chan asked if the relative volume strength in Intermodal versus Truckload was due to less of an inventory pause in its end markets. He also questioned if management's confidence in the long-term road-to-rail conversion thesis has changed given recent market dynamics.

Answer

CEO Mark Rourke noted that the freight environment was relatively stable through Q1, and the uncertainty is more forward-looking, as the consumer has been resilient to date. EVP & Group President Jim Filter affirmed confidence in the long-term road-to-rail conversion thesis, stating that the primary factor that shifted freight back to the highway recently was the pricing dynamic. He believes that as over-the-road rates rise faster than Intermodal, the conversion trend will resume.

On behalf of Bruce Chan, an analyst asked if Schneider is seeing early signs of regional backlogs or disruptions and if there has been any impact from pre-inventory building or border changes.

Answer

EVP and Group President Jim Filter acknowledged that recent weather events caused some temporary, localized disruptions and capacity displacement. However, CEO Mark Rourke stated there have been no significant or universal trends related to inventory pre-building or immigration policy changes at the border, with customer actions being very specific rather than widespread.

J. Bruce Chan of Stifel Financial Corp. inquired about the volume declines in Schneider's Eastern intermodal network, especially while competitors are growing there. He also asked about potential service disruptions from rail peers and the competitive impact of PSR implementation at another major railroad.

Answer

EVP Jim Filter explained the Eastern performance reflects a disciplined strategy focused on profitability. He highlighted a significant future growth opportunity in the East via the newly approved CPKC-CSX connection between Texas and the Southeast. He praised CSX's service resiliency through recent disruptions and noted it's too early to determine the impact of potential PSR changes at a competitor, but it could create opportunities for their Western partner, Union Pacific.

J. Bruce Chan of Stifel asked about the potential impact of automotive tariffs on Canadian and Mexican operations, the drivers of Q4 margin changes in Contract Logistics, the turnaround strategy for the Intermodal segment, the sustainability of demand in the Trucking segment's wind business, and the reasons for an increase in operating expenses.

Answer

Executive Jude Beres clarified that tariff exposure is minimal, with Canadian and Mexican operations representing only 3-3.5% of the 2025 guide. He attributed the Contract Logistics margin pressure to GAAP purchase accounting for the Parsec acquisition and reduced auto plant utilization. Beres also noted that increased personnel costs were due to the Parsec acquisition and that a specialty development program drove the change in other operating expenses. Executive Tim Phillips detailed a comprehensive turnaround plan for the Intermodal segment, including new leadership, technology investments, and facility consolidation. Phillips also confirmed the strength in the Trucking segment was driven by the specialized wind business, which he expects to continue due to long-term project planning.

Requested a deeper understanding of the local market opportunity, including whether these customers grow faster than the market in an up-cycle and whether the growth comes from new customers or other sources.

Answer

Local accounts are typically smaller manufacturers or CPG companies that value relationships and excellent service, making them sticky customers. Growth in this segment is primarily driven by acquiring new customers, which has been enabled by an expanded sales force and the company's improved service product.

J. Bruce Chan of Stifel inquired how a potential sale of the European business would impact capital allocation priorities and asked for an update on the sale process.

Answer

CFO Kyle Wismans stated that priorities remain reinvesting in the business and achieving an investment-grade credit profile, noting leverage is already down to 2.5x. Executive Mario Harik added that while the long-term strategy is to be a pure-play North American LTL carrier, the company will be patient to secure the right value for the high-performing European asset.

J. Bruce Chan asked for details on the service issues with J.B. Hunt's rail partner, questioning if the situation was similar to the major disruptions of 2021-2022 and what provided confidence that it was a temporary issue.

Answer

Darren Field, President of Intermodal, asserted the problem was not a long-term infrastructure challenge like in 2021. He attributed the disruption to short-term 'people challenges' and planning issues related to a new union agreement and railcar imbalances, expressing confidence that these are solvable and that they are working with BNSF to prevent a recurrence.

Bruce Chan from Stifel inquired about the 2022 production outlook based on the high December 2021 volume, considering impacts from China's COVID shutdowns and supply chain issues. He also asked about the implications of the recent auditor change, capital allocation priorities for the ~$250M cash on hand, and the expected future geographic sales mix.

Answer

CEO Peter Wang stated that while the company is confident in its production pace, it remains extremely cautious due to supply chain, shipping, and lockdown uncertainties, and thus could not provide a 2022 forecast. CFO Edmond Cheng clarified the auditor change was a procedural step following the Naked Brand Group transaction, with Marcum for SEC filings and Wis Australia for Australian IFRS compliance. Cheng also outlined capital allocation priorities as securing inventory and funding R&D. CMO Marianne McInerney added that Europe is expected to remain the largest market, accounting for at least 50% of sales.