UNF - NYSE

Greetings, and welcome to the UniFirst Corporation First Quarter Earnings Call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Steven Sintros, President and Chief Executive Officer. Please go ahead.

Thank you, and good morning. I'm Steven Sintros, UniFirst’s President and Chief Executive Officer. Joining me today is Shane O'Connor, Executive Vice President and Chief Financial Officer. We'd like to welcome you to UniFirst Corporation's conference call to review our first quarter results for the fiscal year 2024. This call will be on a listen-only mode until we complete our prepared remarks, but first brief disclaimer. This conference call may contain forward-looking statements that reflect the company's current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks and uncertainties. The words anticipate, optimistic, believe, estimate, expect, intend, and similar expressions that indicate future events and trends identify forward-looking statements. Actual future results may differ materially from those anticipated, depending on a variety of risk factors. For more information, please refer to the discussion of these risk factors in our most recent Form 10-K and 10-Q filings with the Securities and Exchange Commission. We're pleased with the results of our first quarter, which represent a solid start to our new fiscal year. I want to thank all of our team partners who continue to always deliver for each other and our customers as we strive towards our vision of being recognized as the best service provider in the industry. All while living our mission of serving the people who do the hard work. The people who do the hard work are the workforce that keeps our communities up and running. So many of them are our existing and prospective customers, as well as our own UniFirst team partners. Our mission is to support those employees by providing the right products and services that allow them to do their job successfully and safely. Whether that means providing uniforms, work wear, facility service, first aid and safety, clean room or other products and services, our goal is to partner with our customers to ensure we have the right structure to ensure that we structure the right program, products, and services for their business and their teams. Overall, revenues in our first quarter were up 9.5% compared to the first quarter of 2023. Consolidated growth benefited from the acquisition of clean uniform in March of 2023 and strong growth in our first aid and safety division. Core Laundry operations organic growth in the quarter was 5.2%. Profits were up over 20% in the quarter compared to a year ago, largely driven by the growth of our top line and lower cost expended during the quarter related to key initiatives. As a reminder, we have been expending costs over the last couple of years related to our technology transformation, as well as a rebranding initiative. As expected, these costs are declining due to the completion of our rebranding, as well as activities surrounding the deployment of our CRM largely winding down. We continue to expend dollars related to our ERP project. However, as we enter implementation phases of the project, more costs are being capitalized. Our performance in the quarter from a new account sales perspective was very strong, exceeding our new sales from a year ago at this time by a healthy margin. Part of this outcome was driven by the addition of a top three account in our core Laundry operations. We continue to sell prospects on the value that UniFirst can bring their businesses. Our approach is a consultative one, where, as I mentioned, we focus on creating the right programs with the right [indiscernible] products for our customers. Conversely, we did experience more headwinds against our top line performance as the quarter progressed in the areas of price and customer retention. And although still stable overall, we are getting less tailwind from wearer levels currently than we were a year ago. Although our first quarter top line results were well within our range of expectations, we do expect these items will pressure organic growth as the year progresses. As we look towards the rest of fiscal 2024 and beyond, margin improvement will certainly be a key focus of the organization. Executing on our growth model, while also managing costs in areas we control will be critical, all while assuring we don't impact the ability to execute on our transformational initiatives or adversely affect customer service levels. In addition to day-to-day execution, we are focused on margin opportunities in many areas. We continue to work to optimize the use of our new CRM, including leveraging some of Clean's proprietary technology across all of UniFirst. Areas such as strategic pricing and account profitability, as well as strategic manufacturing and sourcing, represent significant opportunities. Although some of these benefits going forward will be more significantly enabled through the implementation of our ERP, we continue to focus on these areas and others that we feel can move the needle in the near to midterm. Our Clean acquisition continues to perform very well with several recent wins, resigning long-term customer relationships. This shows the confidence that Clean's customer base has in joining UniFirst and continuing to receive industry-leading service. We continue to believe very strongly in the bright future of our first aid and safety division which grew 22.4% in the current quarter compared to the first quarter of 2023. We continue to make investments in sales and service infrastructure of this segment to expand our footprint and ensure we can reach existing UniFirst customers, as well as new prospects in the markets that have a strong need for these products and services. As we progress, increasing route density in addition to penetrating customers with the full breadth of services that we provide will be critical steps in building the profitability of this segment. As I mentioned last quarter, the company continues to make solid progress and contributions in the area of environmental, social, and governance. The nature of the industry and rental model has always allowed us and the company to do our part enhancing the economy's environmental footprint, given our role as a natural recycler, as well as the better utilization of resources and operations like ours enables. As an example of our efforts, during the quarter we engaged a company that is going to convert the remainder of our operating plants and our core laundry to energy efficient LED lighting. We continue to be focused on making the right investments to meaningfully impact the environment, support our customers, and have a positive impact on our business. With that, I'll turn the call over to Shane, who will provide more details of our first quarter, as well as the outlook for the remainder of 2024.

Thanks, Steve. In our first quarter of 2024, consolidated revenues were $593.5 million, up 9.5% from $541.8 million a year ago. And consolidated operating income increased to $53.1 million from $43.4 million, or 22.4%. Net income for the quarter increased to $42.3 million, or $2.26 per diluted share, from $34 million or $1.81 per diluted share. Consolidated EBITDA increased to $86.2 million compared to $69.7 million in the prior year or 23.7%. Our financial results in the first quarters of fiscal 2024 and 2023 included approximately $2.9 million and $10 million, respectively, of cost directly attributable to the key initiatives that Steve discussed. The effect of these items on the first quarter of fiscal 2024 and 2023 combines to decrease operating income and EBITDA by $2.9 million and $10 million respectively, net income by $2.4 million and $7.6 million, respectively, and EPS by $0.12 and $0.40 respectively. Net income and EPS also benefited from approximately $2.1 million of interest income recognized in the first quarter of 2024 as a result of a tax dispute we were able to favorably resolve. Our core laundry operations revenues for the quarter were $524 million, up 9.8% from the first quarter of 2023. Core laundry organic growth, which adjusts for the estimated effect of acquisitions, as well as fluctuations in the Canadian dollar was 5.2%. This solid organic growth rate was primarily the result of solid new account sales and improved pricing related to the efforts over the last year to share with our customers the cost increases that we incurred in our business. Core Laundry operating margin increased to 8% for the quarter, or $42.1 million, from 7.1% in prior year, or $33.8 million, and the segment's EBITDA margin increased to 14% from 12.2%. The costs we incurred related to our key initiatives were recorded to the core laundry operations segment and combined to decrease the core laundry operating and EBITDA margins for the first quarter of fiscal 2024 and 2023 by 0.6% and 2.1%, respectively. Excluding these items, the segments operating and EBITDA margins were also impacted by higher costs we incurred related to investments we have made in building our corporate capabilities over the last year and higher merchandise costs. These items were partially offset by lower energy costs during the quarter, which decreased to 4.1% of revenues in the first quarter of 2024, down from 4.7% in 2023. Revenues from our specialty garment segment, which deliver specialized nuclear decontamination and cleanroom products and services increased slightly to $44.7 million from $44.1 million in prior year, or 1.3%. This increase was primarily due to growth in our cleanroom operations. Segments operating margin increased 27.1% from 23.1%, primarily the result of lower merchandise costs in our cleanroom operations. As we've mentioned in the past, this segment's results can vary significantly from period to period due to seasonality as well as timing and profitability of nuclear reactor outages and projects. Our first aid segment's revenues increased to $24.9 million from $20.3 million in prior year or 22.4%. However, the segment had an operating loss of $1.1 million during the quarter. These results continue to reflect the investments we have been making in our first aid van business that Steve discussed. At the end of our first fiscal quarter, we continued to reflect a solid balance sheet and financial position with no long-term debt and cash, cash equivalents, and short-term investments totaling $88.8 million. Cash provided by operating activities for the first quarter increased to $45.7 million from $27.7 million in prior year, or 64.9%, primarily due to our improved profitability. And we continue to invest in our future with capital expenditures during this period of $39.1 million. I'd like to take this opportunity to provide an update on our outlook. At this time, we continue to expect our full-year consolidated revenues for fiscal 2024 will be between $2.415 billion and $2.435 billion. However, due to recent trends in our core Laundry operations in the latter half of the quarter, we anticipate that the lower half of this range is more likely. We continue to expect diluted earnings per share to be between $6.52 and $7.16. This concludes our prepared remarks, and we would now be happy to answer any questions that you might have.

Thank you. [Operator Instructions] Our first question comes from the line of Manav Patnaik with Barclays. Please proceed with your question.

Hi good morning this is Ronan Kennedy on for Manav. Happy New Year and thank you for taking my question.

Good morning.

Good morning. Could you please kind of unpack with regards to what you alluded to, I think, the headwinds from price and customer retention, also less of a tailwind from wearer levels, and if that is specifically the driver of guiding to the lower half of guidance, you know, and what you anticipate based on what had played out in the latter stages of the quarter, just if you could unpack that in further detail, please.

Sure. Ronan, this is -- that is the driver of us tweaking down the guidance or making the commentary that the lower end is more likely. Yes, over the back half of the quarter, we certainly started seeing some more price sensitivity. And again, this is all compared to what our expectations were kind of coming in. Not somewhat, not surprising, maybe based on some moderating cost, energy, and so on, that we are seeing. But that was a little bit off of what we had projected kind of coming into the year. And any of those type of changes kind of early on in the year have more of an impact as sort of you think about it over the course of the year. With respect to customer retention, we had mentioned over the back half of last year that things were trending a little bit lower. We saw some of that over the quarter. A couple of strategic losses, I'll call them, during the quarter that ended up being recognized. And again, those kind of things have more of an impact as you work them out over the full year. With respect to the adds versus reductions, we've been talking about the environment being relatively stable. And I would still categorize it as such, but certainly compared to a year ago and even somewhat compared to maybe the back half of last year, we're seeing a little less in the way of wearer additions. I wouldn't say net-net, it's turned negative in a large way, but a little off of our expectation for the quarter.

That's helpful. Thank you. And then, could I just ask for your assessment or characterization of demand and what the conversations with customers are like and how that's incorporated within the guidance for the remainder of the year?

Yes, in general, we guide looking at things in the environment as we see them today. We often make the comment that we don't assume sort of more deterioration if there were to be broader pickup in wearer reductions at our customers. We don't really build that in. That being said, I'm not sure that we're hearing loud from our customers that that's imminent. I think people are taking a little bit more of a cautious tone out there with respect to hiring, but we're also not hearing broad calls for reductions. I mean, one of the things that makes us reporting this time of year somewhat unique is that, a lot of those conversations with customers start to become clearer sort of after the holidays as they kind of get into their new year, see what demand looks like coming out of the holidays and set their plan going into their calendar year. So, it's a little bit of a tricky time having those conversations this time of year. But in general, we're not hearing anything that should raise major flags, but some caution.

Thank you. Appreciate it.

Thank you, Ronan.

Our next question comes to the line of Andy Wittmann with Baird. Please proceed with your question.

Great. Good morning. Thanks for taking my questions, guys. I guess, I first started -- the first thing I wanted to do was drill in a little bit more on the customer retention, Steve. I guess in prior quarters you've talked a little bit about how it might be moderating somewhat. But I guess the question is, so what do you attribute the customer retention? Is it customers that are closing doors, closing up shop? Is it the pricing initiatives that you're trying to get and going other ways? You heard the term -- I think you used the term here, strategic losses, which I guess means that customers that -- you try to get the price and it wasn't going and you're okay with -- not okay with losing, but okay with losing, because it wasn't a profitable account. I mean, maybe you could just elaborate on the retention factors in more detail.

Sure. It's a little bit of all of the above, Andy. A couple of those strategic accounts, I think they were in instance where sort of at the end of the day, we decided not to move forward. I do -- I should have said in my answer to the first question, I do believe that the pricing environment is a factor, at least in the way we measure retention. When we measure retention, we're looking at sort of the all-in impact of these accounts over the last 12 months. And I do think that through the strong period of inflation that as we all were trying to get more from customers, not saying that's necessarily the reason that you lose an account, but if you do lose that account, it may be priced higher than it otherwise would have been a year or so ago, if that makes sense. And so, I do think some of the way our numbers are falling out are an impact of pricing, and it's sort of another -- I've talked about it before, when you sell a new account and you lose an account, those accounts could be of similar profile. Often they don't have the same pricing. An account you've had for longer likely has higher pricing, particularly in this period that we've been going through with inflation. So I think price has been somewhat a part of it. And look, not to overestimate it, the competitive environment is always part of it, but I'm not sure that there's a significant difference in that regard. I think it's a little bit more of the pricing environment and people working through inflation, more likely maybe to say, hey, I want to go out to bid or put my account out to bid, and that's had some impact. We have seen some customers not being able to pay by terms and some things like that. I think we've seen an increase in most of the metrics we track as part of our retention. So hopefully that helps a little bit.

Appreciate the color on that. I guess next I wanted to just dig into merchandise costs. I feel like I've been asking this one almost every quarter, but we're going to ask it again this quarter. I guess it's -- given that it compares on merchandise costs now, it's been a headwind to your margins for a while. I guess it seems reasonable to be thinking about merchandise costs maybe flipping positive in the few upcoming quarters. It wasn't this quarter, but maybe can you quantify the impact that merchandise costs were year-for-year here and talk about when you think that could flip positively.

Yeah, I can do that. So when we talk about our merchandise costs coming into the year, we had sort of said our expectations were that merchandise was going to be like a 10 to 20 basis point headwind, right. Obviously, that headwind was greatly reduced from what we had been seeing for the previous couple of years as our merchandise levels adjusted coming out of the pandemic. We still expect that that's going to be the headwind that we're going to see. It's relatively moderate in the quarter. It was a headwind. It was only 20 basis points. At this point in time, given a 10 to 20 basis point headwind, we would characterize that as merchandise flattening. That's sort of where we're at from the maturity of our merchandise. We don't have any expectation or we haven't included in our guidance an assumption that merchandise is going to flip and become a benefit throughout the remainder of 2024. At this point in time, our expectation is that, it's going to be relatively flat with just a little bit of a headwind.

Okay. That's helpful. And then -- yes, go ahead, Steve.

I was going to add one thing there. And it's not a major item, but I did mention that we added a large account in the quarter, a big infusion of merchandise with that account as well. And given we're talking about merchandise being relatively flat, that is an item that will cause a headwind over this course of this year until it kind of falls off and is amortized kind of next year at this time. So that's a factor in there as well.

Yes, that makes sense. Okay, just a couple of technical questions here, I guess. Just -- was there any change? Is there any change to the amount of key initiatives costs or some of the other factors this quarter in your press release talking about your outlook, you didn't have the same level of detail as you did last quarter when you gave your initial guidance. So I was just wondering if there was any changes to any of the other assumptions here, maybe the margin rates, key initiative costs, other things that you detailed previously, but were not reiterated specifically this quarter?

Yes, largely we're maintaining that guidance, which is one of the reasons why we didn't include the additional detail, because it would have been somewhat redundant. My expectation or what's included in my model at this point in time, it continues to be about $16 million worth of initiative cost. Tax rate for the year continues to be 25%. Largely, we're maintaining the expectations from the guidance as it relates to the lower half of the range, the commentary there. 20 to 30 basis points of organic growth within my core Laundry is probably at risk based on some of the things we had seen in the latter half. That revenue impact would pressure my margins, but at this point in time, we have some things that are going in the opposite direction, most notably in the form of energy. Right? Previously when I had guided or provided guidance, my expectation was that, energy was going to be about 4.3% of revenues for the year at this point in time based on recent fluctuations in fuel prices. I now expect that to be about 4.1%. So our expectation is, that's going to be able to offset maybe some of the pressure related to the revenue trends.

All right. This is all super helpful. I'm going to just sneak in one other one. Sorry. Just on the comment on the $2.1 million on the interest expense line, you had a tax dispute that was settled. Was there like interest on the cash taxes that was like implicit and that caused you to recognize that as income this quarter? Is that what it is, Shane? Or I don't know, I'm just falling here. You tell us.

No, that's exactly right. There was an ongoing tax dispute and as a result of the favorable resolution, we received certain interest related to that. So we were able to recognize that in the quarter.

It's been going on for a long time.

Yes, this is the one that's been disclosed in your filings, presumably with the Mexican government, I think it was?

No, it's -- interestingly enough, it was related to Mexico, but unrelated to that one we disclosed in the filing. This was a separate one from, I don't know, three or four years ago, maybe more, that was able to be resolved, and therefore we were able to recoup the interest. But the other one is still out there and sort of pending.

Yes, usually when you have those tax disputes, you owe money and those higher interest rates are somewhat punitive. When you're actually getting money back, they disproportionately benefit you too. So that was our experience in the quarter.

Thank you. Have a great day, guys.

Thanks, Andy.

Our next question comes from the line of Josh Chan with UBS. Please proceed with your question.

Hi, good morning, Steven and Shane. Happy New Year.

Happy New Year.

Hi. I was wondering if there's any conclusions that you can draw from, I guess, the accounts that you're losing or walking away from versus the large account that you're winning? What's causing the losses and what's causing you to win the large account specifically?

Yes, great question. I mean, at the end of the day, I sort of alluded to, as we sell our value proposition, go into accounts, sell them on the right program with the right products for those customers. We sell on our process, we sell on our procedures, our ability to execute. At times if those accounts feel like they haven't been receiving the service that they want, it provides an opportunity. I mean, the same goes just quite frankly if we lose an account. Again, it doesn't all fall into one category when you lose a piece of business. Sometimes it's strategic, like I mentioned. Sometimes it can be lack of execution by the route driver if we've had more turnover and sometimes it can be that -- an account is going out to bid and they get a very competitive offer and we struggle to match that offer. So it's really, on both sides, it's execution, it's selling our value, it's continuing to provide consistent service and showing that we can, as I talk about our vision, be recognized as the service provider that's going to be the best for those customers. So, I know it's a little bit of a generic answer, but the devil's in the execution on both sides.

Yes, that makes a lot of sense. Thanks, Steven. And then I guess if I can follow up on this specialty segment, I was under the impression that this quarter things would be a little bit weaker than what you showed because of the nuclear dynamic. So I was just wondering if the full year could be a little stronger than what you had previously guided based on just the strength this quarter?

I think right now that is somewhat true. We probably have the full year a little bit ahead as to where it was before. We do still expect the rest of the year to show some drop-off and not to necessarily replicate some of the strengths in the first quarter. There was some sort of one-time things in the first quarter that sort of buoyed it a bit. Again, that segment's made up of the two sub segments, the clean room and the nuclear. The clean room continues to be very consistent. And as we talked about in our last earnings call, we do expect kind of the nuclear slowdown based on some reduction in business with some of our Canadian customers. So we still expect that trend. But right now in the model, the full year does have that segment a little bit ahead of what we had guided, but still below last year's profitability.

Perfect. Thank you for the color and [indiscernible] rest of the year.

Thank you.

Our next question comes from the line of Tim Mulrooney with William Blair. Please proceed with your question.

Hi, good morning. This is Luke McFadden on for Tim. Thanks for taking our questions today.

Absolutely.

So your first aid business had a nice start for the fiscal year, has performed well for several consecutive quarters now. Should we still expect to see that business inflect into positive profitability by year end? And how should we think about the cadence of profitability as we move through fiscal 2024?

Yes, look, for the full year, we think that the division can be around break even. So we do expect a little bit of a pickup in profitability over the course of the year. We're still at that point in our investment in this division where it's more about expanding the breadth of our service offerings and/or our geographic offerings I should say or coverage. And over the course of the next couple of years, and we're starting it this year, we really are starting to focus more on filling out the customers with the products and services, filling out the routes with more density. And that will start to turn the profitability. But for the most part, our guidance for the full year has us in that sort of treading water around break even.

Great, very helpful. And then if I can follow up with just one more. I know you provided just a bit of color on kind of how early year conversations have been going with customers. But maybe just as a follow up to that, are there any of your end markets that are showing particularly outside strength or weakness as you're looking at them today?

No, I wouldn't say so. I think that as we kind of look at metrics and wearer levels across the country, there really aren't any particular pockets that jump out. Something I've been watching is we've had a couple of decent years in the energy sector and that continues to be pretty solid as long as oil prices hold up. But no, I wouldn't say we're seeing any particular geographic or industry driven trends that are worth noting.

Understood. Thanks so much.

Thank you.

Our next question comes from line of Andrew Steinerman with J.P. Morgan. Please proceed with your question.

Hi, Shane. I just want to confirm something that I think is pretty clear, but I just wanted to confirm it. In the 2024 guide, when you point to the lower half of the range, I think that's just for revenues and not for EPS. I think for 2024 EPS you're still pointing to the whole range. I just wanted to confirm that. But could you also update us on what you're assuming for interest in 2024? You're kind of given the first quarter benefit and you can imagine what I really want to kind of point to is like, what are you embedding in terms of the margin progress through the year and what gives you confidence in that margin outlook?

Yes, so -- actually, can you ask the first part of the question again? I'm sorry.

Okay, so it's a multi-part question. Sorry. So the first one, I just want to confirm when you point to the lower half of the range for the guide, I think that's just a comment for revenues and not a comment for EPS. In other words, I think when you say lower half, you're talking about revenues and for EPS, you're still pointing to the whole range.

Yes, yes. Sorry about that. No, that's correct. The comments about lower half is just top line related. We are still pointing to the full range from an EPS perspective. From an interest perspective, you take a look at my interest income in the first quarter. It largely benefited from about $2.1 million in the first quarter. Subsequent to that, my expectation is that, the interest income I'll realize sort of be Q1's run rate exclusive of that $2.1 million, so about $1 million worth of interest income per quarter.

And, Andrew, I think the second part of your question, which was alluding to the confidence and sort of the back -- the rest of the year's kind of margin outlook, given everything that we've been saying here is, the one comment I'd make to that, Shane alluded to it to some extent with respect to what we're seeing on merchandise. But I think in general, when you look across all of our costs, unlike the last couple of years where there was a lot more deviation and increases we were seeing across our cost base, we are seeing more stabilization there, right? Obviously, merchandise is a big piece of that. From a labor perspective, it's consistent with what you read out there. It's still a challenging labor environment, but certainly not as challenging in terms of staffing, pressure on wages, and so on. That doesn't mean those costs have retreated, but the confidence in them over the next few quarters is higher than in past couple of years when we were going through a lot of inflation. And the energy, Shane talked about as well, is a helpful item that we've modeled in.

Perfect. Thank you.

Thank you.

[Operator Instructions] Our next question comes from the line of Kartik Mehta with Northcoast Research. Please proceed with your question.

Thank you. Good morning. Steve, you've talked about maybe what's happening in terms of [indiscernible] and maybe some customers extending payments. But if you look at just overall at your customers, how would you assess the health of those customers and how do you feel about their ongoing viability? Any changes?

No, I wouldn't say that when we look across our customer base, we think that there's any sort of weakening of overall financial viability and how we look at that. So no, I think stable in that area. I think my commentary was more just around, probably a normal amount of caution given the environment for their businesses and their growth outlooks and so on and so forth as we look over the course of the year.

And Shane, you talked about obviously energy hopefully benefiting you for the rest of the year, assuming things kind of stay where they are. And I know previously you were able to put in some fuel surcharges because of fuel prices. Are those surcharges still in effect or is that part of maybe some of the pricing dynamics that you've talked about?

So this is Steve. We did take a step back in the energy surcharge last year at some point. Right now we're sort of holding even. We sort of have a schedule that we're looking at. I do think that lower energy price does put some pressure, not just on the surcharge, which is a relatively smaller amount at this point in the grand scheme of things, but customers sort of pushing back on general price increase and new account pricing and so on. So yes, I would say indirectly what you're saying is true that the lower energy prices is part of, I think, the pressure on price.

And then one last question. I know you've been inquisitive at least last year, and you've looked at acquisitions. I'm wondering if you're seeing any change in the environment in terms of pricing or maybe what people might be willing or not willing to do?

I wouldn't say any real change. I mean, I think if you kind of look over the last number of years, aside from Clean, which was a larger deal and a little bit of a larger one that's happened in the industry over the last number of years. There continues to be a small handful of potential deals that emerge and people kind of test the waters and so -- and I think that really continues. I think the sellers in this industry continue to be driven by sort of their planning and succession planning and family dynamics and that continues to be true. I think the multiples have gone up. And as I've said before, we will be aggressive for deals that we think make sense and are in either strategic geographies for us or that we feel the quality of the business really warrants that. So I would say that really hasn't changed much over the last couple of years.

Thank you very much. I really appreciate it.

Thank you.

[Operator Instructions] There are no further questions at this time. I will turn the call back to you.

Great. I'd like to thank everyone for joining us today to review our first quarter results and we look forward to speaking with everybody again in March when we expect to be reporting our second quarter performance. Thank you and have a great day. Happy New Year.