La-Z-Boy - Q3 2023

Transcript

Melinda Whittington (President and CEO)

Greetings, and welcome to the La-Z-Boy fiscal 2023 Q3 conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to your host, Director of Investor Relations, Kathy Liebmann. You may begin.

Kathy Liebmann (Director, Investor Relations and Corporate Communications)

Thank you, Kelly, good morning, everyone, and thank you for joining us to discuss our fiscal 2023 Q3 results. With us this morning are Melinda Whittington, La-Z-Boy's President and Chief Executive Officer, and Bob Lucian, Chief Financial Officer. Melinda will open and close the call, Bob will speak to segment performance and the financials midway through. We'll open the call to questions. Slides will accompany this presentation, you may view them through our webcast link, which will be available for one year. A telephone replay of the call will be available for one week, beginning this afternoon. Before we begin the presentation, I'd like to remind you that some statements made in today's call include forward-looking statements about La-Z-Boy's future performance and other matters. Although we believe these statements to be reasonable, our actual results could differ materially.

The most significant risk factors that could affect our future results are described in our annual report on Form 10-K. We encourage you to review those risk factors as well as other key information detailed in our SEC filings. Our earnings release is available under the News & Events tab on the Investor Relations page of our website, and it includes reconciliations of certain non-GAAP measures, which are also included as an appendix at the end of our conference call slide deck. With that, I will now turn the call over to Melinda Whittington, La-Z-Boy's President and Chief Executive Officer. Melinda?

Melinda Whittington (President and CEO)

Thank you, Kathy. Good morning, everyone. Yesterday afternoon, following the close of market, we reported fiscal 23 Q3 results. Highlights for the period included excellent sales, earnings, and cash performance for the enterprise in total, with record non-GAAP operating profit and margin delivery for our company-owned retail segment and positive written same-store sales for the retail segment, our company-owned La-Z-Boy Furniture Gallery stores. All in, a great quarter. Continued supply chain productivity gains, we completed delivery of the majority of our backlog and improved service to customers and consumers, particularly benefiting our retail business. As of now, we're getting close to normal lead times, which improves our selling proposition as we highlight and capitalize on our brand promise, custom furniture with speed to market, a key differentiator in the marketplace.

Total written sales for our retail segment were up 8% versus last year's Q3. Same-store written sales comped at a positive 3% for the period. We are extremely pleased to deliver positive written sales versus year ago for our retail segment, even with challenging economic headwinds. Against the pre-pandemic fiscal 2020 Q3, total written sales for the retail business were up 22%. Same-store written results were up 12%, reflecting the sustained strengthening of our company-owned stores. Our company-owned stores are outperforming other channels as we make strategic investments in marketing to drive traffic. Traffic trends in retail, while still negative year-on-year, progressively improved as we moved through each month of the quarter.

Once consumers enter our stores, our retail team continues to deliver superb execution with improved conversion, an increase in average ticket, and higher design average ticket sales. Core to our Century Vision growth strategy, our company-owned retail stores allow us to deliver an inspirational end-to-end experience, and our retail segment continues to make a significant contribution to the enterprise's overall profitability. Written same-store sales for the entire La-Z-Boy Furniture Galleries network, including independently owned galleries, were down 2% against the prior year period, but up 7% against pre-pandemic fiscal 2020 Q3. Our broader wholesale business remains more impacted by the challenging environment, but we are playing offense by leaning into additional marketing to increase awareness and consideration across all channels. We are also offering selective promotions on certain products to ensure competitive values where needed.

With faster delivery times, we're offering our wholesale customers a great selling proposition. Additionally, our wholesale customers indicate they are moving closer to normal historic inventory levels, and we've begun to see positive order momentum with a number of customers. Turning to Joybird, while written sales were up 80% versus the pre-pandemic fiscal 2023rd quarter, they were down 21% versus last year's Q3. Written results improved sequentially versus Q2, but still reflect challenging traffic trends similar to those experienced across many online home furnishing brands. For Joybird, the near-term economic environment challenges are more impactful because it is a smaller, newer business and has fewer locations to keep the brand top of mind for consumers compared to La-Z-Boy, an established brand with a network of some 350 stores.

Across the company, while mindful and realistic about the external macro environment, we remain focused on investing prudently to strengthen our capabilities and drive long-term profitable growth through Century Vision. We're playing offense to drive expanded reach for the La-Z-Boy branded business and return Joybird to profitable growth. For La-Z-Boy, we're capitalizing on and investing in our brand heritage of comfort and durability, as history tells us people return to strong brands in challenging times. We're honing our message, investing in targeted marketing, sharpening price points, and ensuring good execution. We're also refining channel strategies to expand distribution opportunities, and in a highly fragmented marketplace, working to ensure we are meeting consumers with the right products where they want to shop. At the same time, we're improving efficiencies in our manufacturing operations and controlling costs to insulate ourselves against recessionary trends.

As part of this overall initiative, during the quarter, we made the decision to close our Torreon, Mexico facility. Recall, during the height of COVID, we opened three greenfield manufacturing locations in Mexico and added manufacturing operations at our cut-and-sew facility in Ramos to service our nine-month backlog. Torreon was the last and smallest facility to come online and accounted for only 3% of the La-Z-Boy branded production. With efficiencies gained at our larger Mexico-based operations, we are now able to shift Torreon's production to other locations. We thank the employees of Torreon for their dedication to the company and are providing comprehensive transition packages to support them during this time. On the retail side of the business, we continue to grow and improve the quality of our company-owned La-Z-Boy Furniture Gallery stores through new and acquired stores, remodels, and relocations.

In this fiscal year, we will have added 5 new stores to our company-owned portfolio, acquired 8 stores from independent dealers, and will have remodeled and/or relocated 16 stores. Again, through our company-owned stores, we're controlling the end-to-end consumer experience and delivering more profit to the enterprise as we increase the size of our retail business, leverage its fixed cost structure, and benefit from the integrated wholesale-retail margin. During the, we also acquired the Barboursville, West Virginia La-Z-Boy Furniture Gallery, signed an agreement to acquire another independent dealer-owned store in Baton Rouge, Louisiana, and opened our first Outlet by La-Z-Boy store in Columbus, Ohio, with a second planned to open in the Chicago market this spring. All of this activity aligns with our Century Vision strategy to grow our brands and expand market share.

For the near term, we expect the external climate to remain uncertain and we'll be prepared to pivot as needed. We believe in our ability to provide excellent service to customers and consumers, fund investments to drive growth, and maintain a strong financial position. We are confident La-Z-Boy Incorporated will navigate challenges ahead with agility and will emerge even stronger. Let me turn the call over to Bob to review our Q3 results in more detail. Bob?

Bob Lucian (CFO)

Thank you, Melinda. Good morning, everyone. As a reminder, we present our results on both a GAAP and non-GAAP basis. We believe the non-GAAP presentation better reflects underlying operating trends and performance of the business. Non-GAAP results exclude items which are detailed in our press release and in the tables in the appendix section of our conference call slides. For the quarter, non-GAAP results excluded a non-cash charge of $0.17 per share related to the closure of our Torreon, Mexico manufacturing facility, primarily reflecting the impairment of equipment and lease assets. On a consolidated basis, fiscal 23 Q3 sales increased to $573 million versus the prior year quarter, with pricing and surcharge actions and the positive effects of product and channel mix offsetting lower unit volume.

Consolidated GAAP operating income increased to $43 million, and non-GAAP operating income increased to $53 million, a record for a Q3 and an increase of 34% versus last year's Q3, primarily driven by strong performance in our retail segment. Consolidated GAAP operating margin increased to 7.5% from 6.9%, and non-GAAP operating margin increased to 9.3% from 7% in last year's Q3. GAAP diluted EPS increased to $0.74 for the fiscal 2023 Q3 versus $0.65 in the prior year quarter. Non-GAAP diluted EPS increased 40% to $0.91 in the current year quarter versus $0.65 in last year's Q3. Over the past 12 months, non-GAAP diluted EPS was $3.94, a 35% increase versus the year ago period.

In the Q3, consistent with Q2, a number of our wholesale customers still had warehouse constraints that limited their ability to take delivery of new product during the quarter. These short-term dealer constraints again allowed us to focus more on deliveries for our own retail business during the quarter. Delighting consumers and driving strong operating margin through fixed cost leverage of our company-owned retail business. I move to the segment discussion, my comments from here will focus on our non-GAAP reporting unless specifically stated otherwise. Starting with our retail segment, delivered sales increased by 27% to $251 million as we made significant progress towards returning to pre-pandemic lead times. For the quarter, delivered same-store sales increased 23% versus year ago. Retail posted record high operating profit dollars, contributing 83% of the enterprise's operating income for the period.

Operating margin increased to a best ever 17.6% versus 12.2% in the prior year quarter, driven by higher delivered sales relative to selling expenses and fixed costs. Our retail team continues to execute at an extraordinarily high level through our consumer-first focus and excellent selling proposition, including design services and improved service through shorter lead times, as well as an increase in our in-stock position. All of this has contributed to the segment's ongoing success as total written sales in Q3 were up 11% sequentially from Q2. We congratulate our retail team for its outstanding performance. As Melinda noted earlier, growing the La-Z-Boy Furniture Galleries network is a key element of Century Vision. Disproportionately growing our company-owned retail will allow us to delight more consumers with a full end-to-end brand experience while delivering higher operating margins.

For the quarter, delivered sales in our wholesale segment were $408 million, a 4% decline compared with the prior year period, driven primarily by a decline in delivered volume, partially offset by pricing and favorable channel and product mix. Operating margin for the wholesale segment improved to 6.6% versus 6.5% in last year's Q3. Pricing and surcharge actions, along with declining freight costs, were mostly offset by an increase in SG&A, primarily driven by marketing spend returning to pre-COVID levels. I'll now spend a few moments on Joybird, which is reported in corporate and other. Joybird's delivered sales decreased 35% to $29 million versus the prior year Q3.

This reflected slowing e-commerce trends for home furnishings and delivery of Q2 orders, written orders that were negatively impacted by campaign execution issues with a key marketing partner. Joybird posted a loss for the period, principally reflecting lower delivered volume due to last quarter's, excuse me, written sales decline. Lower traffic trends versus the prior year, Joybird's conversion for the period was positive. Additionally, we saw improvement in marketing efficiencies in Q3 versus Q2. The team is focusing on performance and activation marketing in this environment, optimizing costs across all areas of the Joybird business and working to enhance production and distribution synergies with the overall enterprise to drive profitability. Part of our omni-channel first strategy, we continue to lean into brick-and-mortar locations for Joybird to offer consumers an opportunity to experience the brand firsthand.

In markets where we have retail stores, we are seeing great consumer activation with a significant increase in sales. During the quarter, we opened a seventh Joybird store in Manhattan and plan to open three additional stores by the summer in Seattle, Philadelphia, and a second store in Los Angeles. For the full fiscal year, we expect Joybird to post a loss reflecting the impact of slowing e-commerce sales and continued prudent investments in marketing and retail locations to drive long-term growth. We are making improvements across all areas of the business model and will balance investments in growth with bottom line performance.

Consolidated gross margin for the quarter increased 480 basis points versus the prior year period and increased 60 basis points sequentially from Q2, primarily driven by the change to our consolidated business mix, with retail becoming a larger portion and carrying a higher gross margin than our wholesale business. Consolidated SG&A as a percentage of sales increased 250 basis points versus last year's Q3. Again, this primarily reflected changes in our consolidated business mix driven by the growth of retail, which carries a higher level of SG&A expense as a percentage of sales than our wholesale business. SG&A as a percentage of sales was also higher due to restoring marketing investments to pre-COVID levels to drive written sales along with higher selling expenses on those higher written sales.

Our effective tax rate on a GAAP basis for the fiscal 23 Q3 was 27.7% versus 24.8% in last year. The effective tax rate in the Q3 of fiscal 2022 was lower, partially due to non-taxable gains on corporate-owned life insurance and state taxes. Our effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes. We expect our effective tax rate to be in the range of 26%-27% for fiscal 23. Turning to cash, in Q3, we generated $96 million in cash from operating activities versus $30 million in the prior year Q3.

This brings year-to-date cash from operating activities to $127 million, a 181% increase versus the $45 million in fiscal 2022 nine-month period. Strong cash generation in the quarter was driven by profit performance and significant progress in reducing inventory versus the end of the Q2. We ended the period with $284 million in cash and no debt. Year-to-date, we have spent $57 million in capital, primarily related to La-Z-Boy Furniture Galleries store remodels and new La-Z-Boy and Joybird retail stores, as well as upgrades at our manufacturing and distribution facilities. Year-to-date, we returned $27 million to shareholders through dividends and share repurchases.

Given the uncertain macroeconomic environment, we have temporarily paused share repurchase other than to offset dilution to enable prudent capital investment in the business and maintain a strong balance sheet. Before turning the call back to Melinda, let me highlight several important items for the Q3 and full fiscal year. Please keep in mind that fiscal 2023 will be a 52-week year and comparisons will be against the 53-week fiscal 2022. The extra week fell in the Q4 of last year and contributed approximately $49 million in sales based on the average weekly sales for that quarter. As we have essentially worked down our backlog to pre-pandemic levels, Q4 delivered sales will be consistent with our historical seasonality and almost 20% higher than pre-pandemic levels.

While we maintain our long-term commitment to steady sales and margin progress, the macroeconomic environment remains volatile and uncertain. As a result, we expect delivered sales for the fiscal 23 Q4 to be in the range of $525 million to $545 million, higher than pre-pandemic and down versus the Q4of fiscal 2022, which again included 14 weeks. Consolidated non-GAAP operating margin is expected to be in the range of 7%-9%. We anticipate non-GAAP adjustments for purchase accounting charges for the year to be in the range of $0.01-$0.02 per share. Given the current demand environment and the economic uncertainty ahead, we are conserving cash and have extended capital project lead times.

We continue to expect capital expenditures for fiscal 23 to be in the range of $75 million-$80 million, which includes making smart investments to strengthen the company for the future, consistent with our Century Vision strategy. Now, I will turn the call back to Melinda.

Melinda Whittington (President and CEO)

Thanks, Bob. As we look to our last quarter of fiscal 2023, we acknowledge short-term uncertainty. We're managing the business prudently, undertaking appropriate scenario planning and conserving cash. At the same time, we are playing offense with a consumer-first mindset and prioritizing investments in our brands and underlying capabilities to drive long-term profitable growth through Century Vision. I remain extremely optimistic about the future of La-Z-Boy Incorporated. Our talented team will navigate through the challenges that lie ahead. We have the financial strength to carry us through and emerge stronger with increased market share. I'd like to thank the amazing team for the excellent results delivered yet again this quarter. I thank all stakeholders for their ongoing support. Thanks for being on our call this morning. I'll turn it back to Kathy.

Kathy Liebmann (Director, Investor Relations and Corporate Communications)

We'll now open the queue to questions. Please review the instructions, Kelly, for getting into the queue to ask questions.

Operator (participant)

Certainly. At this time, we will be conducting the question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Please hold just one moment while we pull for questions. Your first question is coming from Bobby Griffin at Raymond James. Please pose your question. Your line is live.

Bobby Griffin (Equity Research Analyst)

Good morning, everybody. Thanks for taking my questions.

Melinda Whittington (President and CEO)

Good morning.

Bob Lucian (CFO)

Morning.

Bobby Griffin (Equity Research Analyst)

I guess the first thing I wanted to dive into was the written trends. A nice improvement to see those move to positive. Maybe can you talk a little bit, did the performance carry in through February in your own stores with the recent Presidents' Day period? Was there anything interesting kind of in the order set price point wise or anything to glean from, you know, a little bit of a, looks like a nice improvement from what we were seeing before?

Melinda Whittington (President and CEO)

Yeah, we're definitely pleased to see the positive trends. Fundamentally, you know, I would say it's execution, right? We've gotten our lead times back down to sort of normal levels with a compelling proposition there. Then in store, the care we're giving to the consumer, you know, with traffic improving because of the marketing expense that, or the marketing investments that we're making, and then just execution in store for how we're caring for that consumer is just really paying off. There's no one individual item. I'd say it's end-to-end execution. Overall, we saw trends improve through Q3, and that improvement has continued into this Q4 with a strong holiday Presidents' Day.

Bobby Griffin (Equity Research Analyst)

Good. That's good news. I mean, Bob, maybe to follow up on the EBIT guidance, pretty wide range there for the Q4 Is that more of just a function that if you get the top end of the revenue, it flows through really nicely with the fixed cost leverage? Or is it more that retail could move back to a more normalized mix of the business, which does have a profit impact?

Bob Lucian (CFO)

That's you nailed it. It's both of those things. The fact that if we're able to get more product out, the volume impact relative to that additional retail volume will help the overall consolidated margin. If we see that be a little bit less than what we think, then we're gonna see it be on the lower end of that range. That's why we gave the wider range on that. Just to be clear, there's also just a lot of potential things that could happen over the next over this quarter.

There's just a lot going on, both from an economic perspective as well as a geopolitical perspective. We just wanted to give ourselves a range to be able to manage within what we think might be happening out there over the next quarter.

Bobby Griffin (Equity Research Analyst)

Okay. I guess lastly for me, and this is more just kinda high level industry question, we're starting to see a little bit of minor relief maybe in some certain raw materials I call it. When that started to happen, are you seeing the industry from a competitive standpoint hold on to the pricing that the industry passed through over the last, call it 18-24 months? Or are you starting to see companies roll back their pricing a little bit to reflect the changes in the raw material or shipping environment?

Bob Lucian (CFO)

We've seen some companies, certain competitors roll back some prices. A lot of it had to do with the freight, the ocean freight rates going down. Some of those competitors are at the lower end of what I'll call the furniture industry from a price point perspective. As a result of that, we've taken some action as it relates to sharpening price points at some of our opening price point levels, products that we sell. We've done that to maintain, you know, competitiveness against some of those lower priced competitors that are taking some of the reductions. We haven't seen a broad reduction across the entire industry.

We continue our policy or our strategy is to remain price competitive, and we take prices and pricing actions as we see fit to do that. We did that in the quarter. We saw we're pretty pleased with the response that we get out of that.

Bobby Griffin (Equity Research Analyst)

Thank you. Very helpful, and best of luck here at the upcoming High Point Furniture Market.

Bob Lucian (CFO)

Thank you.

Melinda Whittington (President and CEO)

See you soon.

Operator (participant)

Your next question is coming from Anthony Lebiedzinski with Sidoti & Company. Please pose your question. Your line is live.

Anthony Lebiedzinski (Equity Research Analyst)

Yes, good morning, and thank you for taking the questions. I'll echo Bobby's comments about the written comp sales trend. It is certainly good to see that moving in a positive direction. Just wondering, have you seen any notable differences on a regional basis, or are you seeing consistent trends throughout the country? How would you describe that?

Melinda Whittington (President and CEO)

Good morning, Anthony. I would say, yeah, no real dramatic differences by region. You know, of course, you know, Canada business, you know, comps over the last year or so when Canada opened up and began to recover, you might see a little bit of trend change there, but even that has really sort of leveled out at this point.

Anthony Lebiedzinski (Equity Research Analyst)

Okay. Gotcha. Okay. Then, and just, I'd be curious to know, like what your outlook is, for, just the overall industry. Obviously, you guys give guidance here for this, quarter here. Just wondering, you know, as far as like, how would you assess the, you know, the industry outlook for calendar 2023? How do you see that, and how do you see guys, perhaps outperforming versus your competitors?

Melinda Whittington (President and CEO)

It's that old crystal ball we keep looking for, right, Anthony?

Anthony Lebiedzinski (Equity Research Analyst)

Right.

Melinda Whittington (President and CEO)

You know, what I, what I would tell you is, it, you know, As you know as well as I, you can find a prognosticator that can, you know, give you a pretty wide range of the worst is behind us or we've only just begun, right? I think you have to assume that things are gonna continue to get tougher for the consumer, certainly over, you know, over this calendar year. You know, thus far for our consumer, which is a little more on the, you know, the upper end to sort of that middle end consumer, we simply haven't seen that.

You know, we're planning prudently, and that speaks to even, you know, Bob's point, to Bobby's question around, you know, kind of a wide range of potential outcomes relative to how bad might it get out there. You know, as we've put our head down and focused on execution across, you know, again, supply chain and how, and how we're delivering in shorter lead times, and then how we're taking care of the consumer when they interact with us, particularly in our own retail, we've been bucking the trends. We're taking it month to month, quarter-quarter and making sure that we're still investing in marketing, and execution and growing our capabilities, and that's working for us.

I guess I'd say, you know, I'm cautiously optimistic, particularly for the things that where we can control our execution, that I think we just continue to get stronger every day. We recognize that, you know, none of us know exactly what the total external environment's gonna look like over the next year.

Anthony Lebiedzinski (Equity Research Analyst)

understood. Last question from me. I mean, do you plan to close any additional manufacturing facilities, or was the Torreon facility closure a kind of a one-off?

Melinda Whittington (President and CEO)

Yeah. With what we, you know, with what we see right now on volume trends, we feel good about the footprint that we have.

Anthony Lebiedzinski (Equity Research Analyst)

Got it. Well, thank you very much, and best of luck.

Melinda Whittington (President and CEO)

Thank you.

Bob Lucian (CFO)

Thank you.

Operator (participant)

Your next question is coming from Bradley Thomas with KeyBank. Please pose your question. Your line is live.

Bradley Thomas (Equity Research Analyst)

Great. Hi, good morning, everybody. Thanks for taking my question. A couple for me, if I. The first would just be around distribution and, you know, relationship with some of the wholesale partners that you have. Melinda, I was hoping you could talk a little bit about, you know, number one, you know, inventory and the channel, if you will, you know, outside of your, you know, your own stores and where those levels stand today and how you think that's gonna play out. Then, you know, how things are going in conversations with, you know, your larger wholesale partners or potential partners, and how you think that may change, if at all, you know, over perhaps the year ahead.

Melinda Whittington (President and CEO)

Sure. You know, when we think about our wholesale business, we have both, you know, about half of our Furniture Galleries that are independently owned, and then a very significant portion of our business that's selling to partners that floor a wide variety of manufacturers' products. I, you know, I would say overall, we're starting to see some relief in those all-time kind of high inventory levels that particularly a lot of our more general dealer customers experienced as they, you know, went from the all-time high kind of pandemic demand to things slowing down a bit. You know, we know across the industry we had inventory levels where folks were holding a lot of stock inventory.

We're seeing that bit by bit clear up, and I think the end is in sight to open that up. You know, an important thing is, because of our custom offerings, we're always a good bet in that we give the consumer something special beyond just the stock. They have the ability to, you know, to have much more choice in their product. Now that we're down to shorter lead times, we expect that to begin to help us across all of our channels, and then even more benefited by the fact that we just don't have, you know, customers with just warehouses stocked up that in some cases over the last six months were even impacting their ability to deliver on custom orders.

Bradley Thomas (Equity Research Analyst)

That's helpful. Thanks, Melinda. Then if I could ask a follow-up just on the outlook for margins. I mean, this is probably a little bit more broad reaching than just thinking about the quarter ahead here. What do you think of as kind of the major puts and takes for margins? Obviously, you know, there are some, you know, select inputs like perhaps lumber that could be coming down, ocean freight coming down, but still other inflationary pressures on things like labor. You know, how do you think about, you know, the major puts and takes on margins as you look forward here?

Bob Lucian (CFO)

Yeah, Brad, you I think you hit on a couple of the things that will be headwinds, or, I'm sorry, tailwinds as it relates to input costs coming down, and ocean freight for sure is down. Input costs, some of the commodities are starting to come down, but we're seeing some other increases in areas where there's labor involved, whether it be mechanisms, or anything requiring some kind of a labor input. I think those are, generally speaking, positive. Our ability to capture those is gonna be a function of how folks in the industry react relative to pricing. If all of that is given back to the consumer, then there, that's gonna bring all...

That won't be a margin help to the overall industry or for us for that matter. As we move through and we're now through the backlog, the excess backlog we've had, what we're going to get to kind of a going volume level and a going sales level that will be lower than what we've had over the last couple of years. That will be a margin headwind that we'll be dealing with. We're working on in our plants, how do we get ourselves to the, improve the efficiencies in our plant, and work a combination of the input materials as well as the plant efficiencies to be able to offset and manage that volume decline that we're going to see.

Bradley Thomas (Equity Research Analyst)

That's helpful. Thanks so much.

Melinda Whittington (President and CEO)

Thanks, Brad.

Operator (participant)

There are no questions in queue at this time. We have reached the end of the question and answer session. I would now like to turn the call back over to Kathy Liebmann for any closing remarks.

Melinda Whittington (President and CEO)

Thank you for participating in our call this morning. Should you have any follow-up questions, please be in touch. In the meantime, have a great day. Bye-bye.

Operator (participant)

Thank you. This does conclude today's conference, and you may disconnect your lines at this time. Thank you for your participation.