AKA - NYSE

Greetings. Welcome to a.k.a. Brands Holding Corp.'s Fourth Quarter and Full Year 2022 Conference Call. [Operator Instructions] At this time, I'll now turn the conference over to Emily Schwartz with Head of Communications. Emily, you may now begin.

Good afternoon. Thank you for joining a.k.a. Brands fourth quarter and full year 2022 conference call to discuss the results released this afternoon, which can be found on our website at ir.aka-brands.com. With me on the call today are Ciaran Long, Interim Chief Executive Officer and Chief Financial Officer. Before we get started, I'd like to remind you of the company's safe harbor language. Management may make forward-looking statements, which refer to expectations, projections and other characterizations of future events, including guidance and underlying assumptions. Forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from those expressed. For a further discussion of risks related to our business, please see our filings with the SEC. Please note, we assume no obligation to update any such forward-looking statements. This call will contain non-GAAP financial measures such as adjusted EBITDA and adjusted EBITDA margin. Reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. The call will also contain certain numbers presented on a pro forma basis, which includes the impact of Culture Kings as if we had owned it for all periods and comparable periods described. With that, I'll turn the call over to Ciaran.

Thanks, Emily. Good afternoon, everyone, and thanks for joining our call today. As you saw in today's press release, unfortunately, Jill is dealing with some unforeseen medical issues and it's taking time to work through that. I will be taking on Jill's responsibilities as acting CEO on an interim basis, but Jill will continue to stay as involved in the business as her health allows for and she will remain on the board. She will not be on today's call, but she prepared remarks that I will read on her behalf, and then I will continue with my commentary on the financials before taking your questions. The following are her remarks. Before we discuss our fourth quarter and full year results, I want to commend our teams for their unwavering dedication this year and for stepping up to every challenge that came our way. Despite the external pressures, we are steadfast in our vision to be the leaders in next-generation fashion for the next-generation consumer. And we remain laser-focused on growing our brands profitably. Our brands, teams and flexible business models give me confidence that we have tremendous runway ahead and will deliver on our long-term goals. For the full year, net sales grew 9% to $612 million were flat on a pro forma basis, which, as a reminder, as soon as we own Culture Kings for all periods in 2021. On a constant currency basis, net sales increased 13%. The U.S., which is now our largest market, leather growth at 16% and Australia grew 4%. Importantly, despite the challenges in the macro environment, we continue to generate profit and delivered $32 million of adjusted EBITDA for the year. Our brands continue to gain market share and grow awareness around the world. In 2022, we grew our customer base to $3.8 million, and we expect that number to grow this year as we expand our brands, particularly Culture Kings in the U.S. And we grew our social media followers by nearly 1.5 million this year across the portfolio, further improving the demand and relevancy of our brands. Turning now to the fourth quarter. The fourth quarter was softer than we anticipated as we faced a highly promotional backdrop and made strategic decisions on marketing and inventory newness that impacted both our top line and bottom line. Sales decreased 18% year-over-year to $149 million or were down 13% on a constant currency basis. And we delivered adjusted EBITDA of $6 million. The U.S. declined by 11% on top of a very strong 74% growth in the fourth quarter last year on a pro forma basis, and Australia declined 12% on a constant currency basis. I want to give you some color on the factors that impacted our business in the fourth quarter. A key anchor of our strategy is balancing growth and profitability across our brands. We're proud to run a profitable and durable business, and we're committed to building great brands for the long-term. We entered the fourth quarter knowing it was going to be promotional due to the inventory [indiscernible] across the fashion sector. But as we went through the holiday season, particularly in the second half of the quarter, the promotions and discounts were abundant and much more intense than we anticipated. As part of our efforts to balance growth and profitability, we made the strategic decision not to compete in our peers promotional levels, and we held our discounts and promotions relatively flat to last year. Furthermore, because of the heightened promotional environment, we also saw that the returns on marketing investments were lower than previous levels and incremental marketing spend was hitting diminishing returns and was not profitable. In an effort to maximize profitability, we held our marketing spend at the same 10% of net sales on a rate basis, which also impacted our top line. And lastly, as we aggressively tightened our inventory in the back half of the year, we entered the peak holiday selling period with fewer new sales in our women's brands, which impacted both the top and bottom lines. While our marketing decisions and lower levels of newness had short-term impacts in the quarter, we believe that they protect the integrity and durability of our brands and business model for the long-term. I'm pleased to report that we have already taken steps to course correct. Given that we have flexibility in our operating model, as we've seen changes in the promotional environment, we've adjusted our marketing spend. And the fashion newness is back at our brands as we head into spring. I'm confident that with our levels of newness normalizing, we will also register a meaningful sequential improvement in our gross margin. Despite the challenging macro environment, I'm proud of the progress we made during the quarter, strengthening the foundation of the business. The Culture Kings flagship store that opened in November is exceeding our expectations, and we're pleased with the halo effect the store is having in online sales. We also continue to make sequential improvements on our inventory, which is down $17 million over the last 6 months, and we had another quarter of positive cash flow in the fourth quarter. Subsequent to quarter-end, we also paid down $6 million of our revolver. While we can't control the macro environment, we can control how we drive the business forward. To that extent, I'm excited to talk about the new initiatives across our portfolio that will drive growth, but more importantly, accelerate brand awareness for the long-term. As we look to the future of fashion, we believe that core to building durable next-generation brands is showing up everywhere our customers are, whether that's direct-to-consumer, through wholesale partners, digital, mobile or in stores. Our brands have already mastered building authentic relationships directly with customers and providing great experiences, and we believe they would excel in other channels, too. To that end, in 2023, we're piloting select wholesale partnerships, and we're also testing a Princess Polly store in Southern California in the back half of the year. We have an exciting year ahead filled with new tests and initiatives while simultaneously strengthening our balance sheet to fuel profitable growth for the long-term. So let me share some highlights from our brand initiatives. Starting with our women's brands, using robust data and analytics in combination with comprehensive survey work, it's clear that Princess Polly customers are creating more ways to experience the brand. As mentioned, we're very excited that Princess Polly is piloting a store in Southern California this year, and we'll share more information on the store in the coming months. I'm also excited to announce that Princess Polly signed a wholesale agreement with PacSun to carry select best-selling styles online and in 15 stores. PacSun is a strong strategic fit for Princess Polly's first wholesale engagement because they are also a top 10 brand according to Piper Sandler's "Taking Stock With Teens" survey. They have a large footprint in prime locations nationwide, providing convenience for our existing customers to physically experience the quality of the Princess Polly brand in stores, as well as the opportunities to acquire new customers and promote brand awareness. The partnership launched today and a broader rollout will follow this summer. While we're looking forward to the new initiatives for Princess Polly, the brand is also laser-focused on the core strategy. On the merchandising front, Princess Polly's core product has been about closed for going out and hanging out, but the brand is uniquely positioned to offer a full range of merchandise from formal dresses to vintage tees. To that end, they're expanding their formal wear offering for this year's prom season. And similar to Culture Kings, Princess Polly is also leveraging the print shop we acquired in 2021 to quickly print graphic tees. They're dropping 10 to 15 new stores per month, which is a mix of Princess Polly's branded merchandise and licensed properties. They recently launched a Betty Boop license collection that exceeds expectations, and we're excited for an upcoming partnership with the NCAA [ph]. Leaders in next-generation marketing, Princess Polly has mastered organically appearing on their customer screens and feeds, no matter the channel. They continue to lean heavily into TikTok, growing their follower base nearly 40% in 2022. And it's now a top-performing channel based on ROI. They've also fine-tuned and improved our TikTok influencer strategic partnerships with recent successful collaborations with influencer Alix Earle, who garnered over 4 million views in our campaigns and [indiscernible] micro-influencer who brought nearly 1,000 new customers to the brand. We're also excited that Princess Polly is bringing back its in-person events with the launch of their spring break activation in Miami next week. Touring around popular hotspots in a branded Jeep, the Princess Polly team will be giving a merge [ph] gathering viral-worthy social media content and engaging with our customers. We're also hosting an exclusive party from influencers, college ambassadors and their top-tier loyalty members to promote the brand and increase customer engagement. As I noted earlier, we view wholesale as a brand-building activity and a seeds of growth for the back half of 2023, but mostly for '24 and beyond. In addition to piloting our wholesale strategy for Princess Polly with PacSun, we're in active discussions with other wholesale partners within the U.S. and internationally for all of our brands. We're also exploring marketplace opportunities and Petal & Pup launched on target marketplace last month and is gaining traction. We'll be selective on choosing wholesale and marketplace partners to ensure a strong strategic fit and partners that would enhance our brands' awareness. Turning now to our streetwear brands. As I mentioned earlier, we're bullish on Culture Kings expansion in the U.S., and I'm more confident than ever after seeing the initial success of the stores in Vegas. The store is exceeding expectations in revenue, traffic and brand building activities. Equally as exciting is the impact the stores having on online sales since it opened in early November. We've seen great traction with in-store events, drawing artists such as ASAP Ferg and athletes such as Kirk Cousins and Marlon Humphrey from the NFL. And celebrities such as Ludacris and Cascade have all shopped the Vegas store. They have robust marketing calendar and events lined up this year, both in the U.S. and Australia. This past weekend, Culture King had an official partnership with Rolling Loud, a big hip hop festival in L.A., where they had a branded stage and a basketball court and a merchandising collab [ph]. They also partnered with professional boxer Caleb Plant, who hosted a live stream boxing session in the Vegas store this week and released an exclusive collaboration with Minimal and Snoop Dogg DJs at the Melbourne Culture Kings store this past weekend. As a reminder, unlike our women's brands, Culture Kings carries a mix of in-house design fashion brands and third-party Atlantic, footwear and fan gear power brands. We've always seen strong demand for the exclusive in-house design product in the U.S., which is now accelerated even further after the store opening. We're thrilled that 7 of the top 10 brands by sales in Vegas are in-house exclusive brands, including Minimal, which is now a top 10 brand on the Culture Kings website and in the Vegas store. In addition to the success of the in-house brands, we're excited that the store has unlocked new partnerships with third-party brands like New Balance and Crocs and more that will be available online and in stores in the coming months. I want to share that Simon and Tahnee Beard have stepped down from their day-to-day operating roles as co-CEOs of Culture Kings to spend time with their family and pursue entrepreneurial ventures. Simon and Tahnee have built an incredible brand over the last decade and have set the brand up for tremendous global success. They will transition to advisers to the company and Simon remains an active member of the AKA Board of Directors. I want to express my gratitude to Simon and Tahnee for their partnership through this transition and more importantly, their unwavering commitment to building the brand into the global success it is today. Adrian Gribbin, Culture King's CFO, has been promoted to Chief Operating Officer; and Jon Yuska remains President of the U.S. We have confidence in this leadership team as they are industry veterans with 10-year backgrounds in global streetwear and retail. I also want to share that subsequent to quarter end, we sold Rebdolls back to the Founder, Grisel Paula. The brand saw tremendous growth under our ownership, and we believe it is -- we believe in its long-term success, but we've determined that the brands of Rebdolls size does not experience the full potential of the AKA platform. I want to thank Grisel for her partnership over the past 3 years, and we're excited to remain a minority shareholder in the brand. To conclude, I want to give you my perspective on 2023 and beyond. We anticipate that the macro environment will remain dynamic and pressured in the coming year. But as you've heard today, we're evolving our model and our strategies to build high-quality, durable fashion brands for the long term. We're testing new ways to expand awareness and grow our customer base across the portfolio. We're aligned and nimble and will move even faster to accelerate these brands while continuing to deliver profit. We're viewing 2023 as a year to test and learn new channels and innovations was simultaneously strengthening our balance sheet. When I think about the long term, I'm confident that we have significant opportunity to deliver both growth and profit as Gen

Thank you. [Operator Instructions] And our first question is from the line of Randy Konik with Jefferies.

First, just want to get your perspective on just the U.S. consumer relative to the Australian consumer. Maybe give us a perspective on how do you feel different or the same? And then just on the -- related to that just on the markdown environment, commercial environment, it sounds like you think it will be better, give us a bit or pack that a little bit more, and then I have a follow-up. Thanks.

Yes, I think as we kind of step back and think about kind of Q4 and what we saw in the U.S. versus Australia, I would say in the U.S., we did see trends as we went through the quarter, certainly get much more promotional and the promotional intensity increased significantly more than we had expected as we went through the quarter. I would say we actually saw that in both regions. We have seen the promotional intensity in the U.S. ease a little bit as we've kind of gone through the second half of Q1. And I think just that's happening as well a little bit in both regions. I think as we think about the consumer, I think one of the advantages that we have is just the 4 brands in Australia and with Culture Kings stores, we’re seeing consistency in the consumer pressure, I guess, across the brands in Australia. We are seeing the stores doing well. The stores in Australia are the fastest-growing area of the business in Australia. So I think people are back kind of going out, spending more on experiential being back in stores, enjoying that, enjoying all of that, a bit that we’ve seen in the U.S., although it seems like the Australian consumer is kind of maybe 1 or 2 quarters behind where the U.S. consumer is. And then just on the markdown environment, I kind of talked a little bit about the trends. I think we do -- kind of as we think about the year, we are expecting that to continue. And the promotional environment from a macro perspective, we obviously see the consumer is challenged and we have baked that into the guidance.

Okay, got it. And then just one other question on long-term nature. You kind of talk a little bit about, early see wholesale orders. And obviously, a couple of stores here and there, you just think how you think about long-term mix of the business from e-com holding to stores [indiscernible] wholesale? And if that change how you think about normalized dollars of CapEx per year and what the normalized marketing rate as a percent of sales should be long-term, just curious on kind of how you think about that?

I think, first, look, as we look to the kind of the long-term future fashion or interest in building long-term jewelry brands and we really think we have the brands to do that. They’re very early on in their life. I think at this point, our brands have mastered that authentic relationship with customers online, right? They just do a great job with that -- all of the brands. I think at this point, we also see having the Culture Kings stores in Australia, the progress we're seeing and the success we're seeing with the Culture Kings store in U.S., we do feel that we do want to be omnichannel for our customers and particularly to introduce new customers to the brand. And just like we’re kind of everywhere from a marketing perspective, where our customers are, we also feel that’s important from an omnichannel perspective. I think we are -- we have some really nice tests kind of in the field right now. I think from a long-term perspective, we’re obviously looking for these to continue to bring revenue to bring additional EBITDA dollars. I think over -- we would certainly expect it to be accretive overall. I think as it relates to kind of gross margins, marketing, I think we’ll let these tests play out a little bit, and we certainly actively share how they’re doing with you guys and what we feel it will do to the long-term model.

Our next question is from the line of Dana Telsey of Telsey Advisory Group.

And best wishes for speedy recovery for Jill. Ciaran, as you think about the business model and what it is, how big a percentage do you expect wholesale to get to? And when you think about Princess Polly and obviously, Petal & Pup, what are you thinking about pricing as we move forward in 2023 with promotions on full price? Are you seeing any cadence of new designs improve? And what does your customer told you, any feedback from all the data with your customer? What they expect to spend, how they’re spending their dollars and how you’re managing expenses during this time period? And then just lastly, what holes are you looking to fill within the management team now given the departure of the Culture Kings founders and perhaps any other shifts there?

I think as it relates to wholesale, look, first, I think we're really happy that we're starting more tests in the wholesale channel and in the stores channel. I think we are always going to be predominantly a direct-to-consumer brands and have that kind of one-on-one relationship with our brands. So I don't think we have any -- we have no long-term targets of how big we want the wholesale channel to be our stores. And as it relates to pricing, I think and the consumer, I think what we have seen as we went through Q4 and early Q1, they are -- consumers continue to be interested in newness, but we did see them certainly buy more markdown products than we have seen in the past. Although we kind of -- we saw AOV just down slightly on a constant currency basis, I would say AUR down a bit more, but the consumer was kind of putting more units in the basket kind of as they looked for that markdown. For us, I think, as we think about the year, kind of expecting that to continue and no big changes there, I think there's just a lot going on in the macro environment. And obviously, lapping kind of strong comps in the first half of the year, easing in the back half. So, I think we’re just -- we’re kind of aware of that as we kind of built our guidance as we think about the year and as we think about really our focus areas. And for us, a lot of those are continuing beyond the initiatives but also strengthening the balance sheet. I think we’re going to look to -- we made some nice improvements on inventory in the back half. Cash flow -- positive cash flow in the back half of the year of EUR24 million. I think we’re going to want to do sequential improvements or reduction in inventory dollars and using that to pay down debt, reduce leverage and just continue to strengthen the balance sheet. And then, as it relates to Culture Kings, I think as well, Simon and Tahnee as well as building a great brand. They’ve also built a great team. And it’s a team that’s been able to execute across regions, open the store in Vegas, it’s doing really well, we’re really happy with it. We have Adrian there and based in Australia, now elevated to the Chief Operating Officer and I; John Jeske [ph] in the U.S., I think the whole team are doing really well. And right now, we don't feel that there’s a need to bring on more management.

Our next question is from the line of Lorraine Hutchinson with Bank of America.

This is Alice Shaw [ph] on for Lorraine Hutchinson. And please send Jill our best. So 2 bigger picture questions. Any changes to how you're thinking about the 2 acquisitions per year sort of business model? And like is the shift now towards focusing on collaborations and new channels maybe? And then also on the long-term goal of obtaining low to mid-teens operating margins, what are updated expectations on the time line to get there?

Yes, on the first question, I think for where we are right now, I think -- we are really happy with the 4 brands that we have. They are -- they work well together, very synergistic. I think we feel that they're very early in their life cycle and have just a huge amount of long-term growth. And I think kind of leveraging the authentic relationships that they have today is kind of the right time now to be pushing into wholesale and the omnichannel initiatives with them. I think with that, yes, I would say kind of this year, we'll be certainly focused on those initiatives, strengthening the balance sheet. And I think it's kind of probably -- that's the focus area for use of cash. I think we'll continue to look at acquisitions as opportunities. But I would say the 4 brands that we have today and growing them organically is kind of focus number one. And then from a long-term EBITDA model, I absolutely believe we can be kind of long term in the kind of those low to mid-teens. I think we're obviously going through a very disruptive period from a macro environment perspective, still going through it. I think when I look at the middle of the P&L and kind of what we can control, we certainly have the cost structure and the business model to get there. I think it will just take a little bit of time to get sales volume up, really to bring down that G&A percentage and leverage there.

Our next question is from the line of Edward Yruma with Piper Sandler.

Thoughts for Jill on a speedy recovery. Two quick ones for me, I guess, first on Rebdolls, I know it wasn’t that significant, but is this part of a broader kind of strategic rethink of the portfolio or is this just really a one-off? And then second, as it relates to wholesale, if you do make a bigger push in there, is there investment required to build out the requisite team to service wholesale accounts?

First, in Rebdolls, look, we're big fans of the brand. We're big friends of Grisel, the CEO there. I think what we saw is that at its size, and it did see a lot of growth when it came into the AKA family and portfolio. What we saw is it was doing about $10 million and really just not at the size where it could get the full benefits of the AKA platform. And with that, we just felt for the long-term success of the brand, it was really better back with Grisel as the owner and running that brand. So I would say, a one-off very much looking for the continued success of that brand. And then just from a wholesale perspective, at the AKA level, we do have people with expertise in wholesale with a lot of expertise in wholesale from a relationships deal structure, things like that. And with our flexible technology stack, it's easy for us to kind of add in additional tools, orders, information can flow through the Shopify platform and very seamlessly flow through all of our systems. We're already doing that today for some of the wholesale orders that we've processed. And so don't feel or don't feel a need to have a big investment or kind of a difficult technology to work through for us to scale wholesale.

The next question is from the line of Oliver Chen with Cowen.

This is Tom [ph] on for Oliver. In terms of quarter-to-date trends, just curious if you could characterize consumer behavior in January and February relative to prior months. And then in terms of inventory composition and the decision to keep promotions flat relative to last year, is it that you feel comfortable with the current quality of your inventory? Or how long do you think it'll take inventory levels to essentially normalize?

As it relates to the consumer, I think maybe stepping back a little bit to frame of Q1 is kind of what we saw in Q4. And I think we saw that consumer was holding back a little bit in the first half of the quarter and then leaning in more in the second half of the quarter. But at a time when it was much more promotionally intense and certainly buying more markdown products than we had seen in kind of seen or experienced in the past. I think we saw that continue through January and into the early part of February. I think we've seen promotions slightly ease as we have gone through the quarter. I think we've kind of -- we still expect it to be quite promotional as we go through the year. And certainly, the first half, I feel there's still a lot of inventory out there. As it relates to our own inventory, I think we've made really nice progress on bringing down the inventory dollars as we've gone through the back half, so down $17 million at the end of the year versus June of last year. Year-over-year, we're up about 9% on inventory dollars, but we are down 2% on units. And so I think just to see those units down year-over-year is nice progress. We'll continue to make progress on inventory as we go through the year and bring down the dollars on each quarter on a sequential basis. I think as we go through Q2, as we kind of finish Q2, I feel like we will be really in check with kind of a balanced inventory growth versus sales growth. And really for us, I suppose, stepping back from a philosophical perspective, we do want our inventory growth lower than our sales growth. And I think we should be back on that by Q2.

And in terms of the CapEx outlook, could you provide some additional color on the nature of those investments? And then additionally, on the expense management side, what additional opportunities lie ahead this year?

Yes. On CapEx, it's really a combination of some maintenance capital, I would say, on the fleet of stores that we have, some spend in the fulfillment centers, continuing to bring in automation, just to make us more efficient as we kind of bring on more sales and more volume. And then obviously, a little bit of dollars in there for the new omni initiatives that we have in the back half of the year. From an expense area, yes, it's interesting. I was reflecting there -- we talked a lot on this earnings call about the omni initiatives and the progress we're making. I would say that there is the same level of work and intensity going across all areas of the business, right, whether that's product design and getting really great products, like quality for our customers and also on just cost saving initiatives across the different areas of the P&L, whether that's insight and fulfillment centers, optimizing shipping carriers, getting -- improving the balance of airfreight and sea in all areas of the business. We have those; I think they're all small initiatives but we all know kind of basis points add up pretty quickly. And we've seen -- you've seen nice bit of progress there even in the Q4 P&L, right, that our selling expenses are down versus Q3 in a time where you have more surcharges from carriers and those extra charges, I think, is kind of progress and kind of gives us confidence as we think about next year's P&L and the long-term model that we have in this business.

Our next question comes from the line of Youssef Squali with Truist Securities.

So maybe talk a little bit about the contribution to the P&L that Rebdolls had last year, maybe on the top and bottom lines. Just so that we can put in perspective as we look at your 2023 guide. And then on the balance sheet, how much cash do you need to continue to run the business? Is it fair to assume that with all the initiatives that you have going on, the Q4 kind of cash level is where you will trough, assuming inventory efficiency continues and CapEx goes down, et cetera. Just help us understand liquidity position and kind of how do you look at the strengthening of the balance sheet throughout the year?

On Rebdolls, first, so Rebdolls is doing about $10 million in revenue in net sales for us and kind of an immaterial amount of EBITDA with that. And so that's kind of as you think about FY '23, you can remove those numbers. From a balance sheet perspective and liquidity, I think we are very focused on strengthening the balance sheet, bringing down inventory and bringing down our leverage. And I think we've obviously got a couple of key levers on that. I think what we did in the back half of last year was a good insight rate of just $24 million from operating cash flow. I think as we go through this year, we'll certainly have -- continue to make improvements to bring down our inventory dollars. You can see units are coming down faster than the dollars, but we will make sequential improvements in Q1 and continue that throughout the year. I think the other thing as we think about kind of when you kind of pencil us in against last year's cash flow, there were some one-off payments there from an accrued liabilities perspective, some final payment to Minimal, some final payments on IPO costs that we won't have those this year. So that will, again, improve working capital. And then just CapEx being down $10 million year-over-year is obviously a big benefit for us as well as we think about the cash flow for next year. And so look, I would say they are the main drivers and levers that we have, it's an area of focus for us with improving sales, improving EBITDA and improving cash flow is really how we're looking to run this business.

I guess related to that, so as we try to get to a free cash flow number for 2023, is it as simple as looking at EBITDA, taking out the CapEx? And is that a good proxy? Or do you expect working capital to be in that negative for you guys?

Good question. I think in Q1, there will be a little bit of negative on the working capital Youssef, and that's really just kind of timing of some of the Q4 payables, right? And I think the -- after that, we will be in positive operating cash flow generation each quarter.

[Operator Instructions] At this time, we're showing no additional questions. I will turn the floor back to Ciaran Long for closing remarks.

Yes. Thank you all for joining the call, and thank you for your best wishes for Jill, I know and she would love to be here. She’s probably listening at home. I think -- yes, look, I think there’s a lot of great stuff going on in this business. We’ve got 4 great brands, and they really have a lot of long-term runway ahead of them. And I think the initiatives that we have will certainly kind of continue -- will continue to build on them. And there’s a lot of strength in these initiatives as we go through 2023 and look to ‘24 and beyond. And thanks, everybody.