Ken Cooper – Investor Relations Bob Rucker – Interim Chief Executive Officer Cabby Lolmaugh – Chief Operating Officer Kirk Geadelmann – Chief Financial Officer.

Peter Keith – Piper Jaffray Peter Benedict – Baird Daniel Moore – CJS Securities Joseph Feldman – Telsey.

Good day, ladies and gentlemen, and welcome to the Tile Shop’s Fourth Quarter 2017 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Later, we will conduct a question-and-answer session and instructions will follow at that time. As a reminder, today’s conference maybe recorded.

I’d now like to introduce your host for today’s conference, Mr. Ken Cooper. Sir, please go ahead..

Thank you, operator. Good morning to everyone on the call, and welcome to the Tile Shop’s fourth quarter earnings call. Joining me on today’s call are Bob Rucker, our Interim CEO; Kirk Geadelmann, CFO; and Cabby Lolmaugh, our recently promoted COO. Following our prepared remarks, the call will be opened for analyst questions.

Certain statements made during the call today constitute forward-looking statements made pursuant to and within the meaning of the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, as amended.

Words such as, but not limited to, plan, expect, anticipate, believe, estimate, target and any other similar words may be used to identify forward-looking statements. Such forward-looking statements are subject to both known and unknown risks and uncertainties that could cause actual results to differ materially from such statements.

Those risks and uncertainties are described in the earnings release issued today in The Tile Shop’s filings with the SEC. The forward-looking statements made today are as of the date of this call, and we do not undertake any obligation to update these forward-looking statements. Today’s call will also include certain non-GAAP measurements.

Please see our earnings release for the reconciliation of those non-GAAP financial measures, which is also available on the Investor Relations section of our website. With that, let me turn the call over to our Interim CEO, Mr. Bob Rucker..

first, we source unique and hard-to-find and upscale tile products from around the world; second, we merchandise our products in a very attractive and engaging store environment that emphasizes design and which allow our customers to see and touch our products in a room vignette rather than simply as a piece of tile; third, we target upscale, fashion conscious consumers by providing outstanding service that encourages tile installers, homebuilders and remodelers and designers to send to our company their customers through our stores, knowing that they will be offered excellent service; fourth, we attract, train and retain motivated employees in every function of the company, most importantly in our stores; finally, we empower our store managers to treat the store as their own, and we compensate them according to the performance of their stores.

I believe we had lost our way on many of these factors over the last year or so and are now course-correcting quickly and decisively. Together with the rest of the organization, we have set out to restore the Tile Shop way of doing business. Let me comment on each of these factors and what we are doing to improve our performance.

First, our product mix had shifted too far towards low-price commodity products. To reverse this trend, we have begun to source higher-price-point products and more natural stone products that can’t be easily duplicated. We will truly offer good, better and best products with an emphasis on the higher-end product offerings.

Therefore, we expect our average selling prices and overall ticket to increase. While gross margin percentage will continue to be a metric that we track, gross margin dollars is a more important metric in driving our overall profitability.

Second, our store vignettes had become stale in many stories, and we’re not reflecting our latest product offerings in the best way possible. Beginning in January, we have initiated a major store remodeling program in 2018 to showcase our unique products.

This will be our focus in 2018 in terms of investment in our physical stores, and, as a result, we plan on opening only three new stores this year.

Third, in an attempt to increase store traffic, we had become overly promotional, and we were inadvertently appealing to a more price conscious consumer focused on a smaller project rather than a more fashion conscious consumer, who tends to skew a bit more fluent and is typically focused on a mid to large-size project.

Looking at the entire year of 2018, we had either full-store or significant product category promotions in place for 167 days in a year.

In addition, our e-commerce business had inadvertently reinforced this price-driven approach, and, therefore, we have and will continue to shift our online presence back towards a design and product focus that encourages visitors to come to our stores for design assistance on their projects.

If you visit our website, I believe you will see a significant change, but we have more work yet to do. A by-product of our promotional activities was that we alienated some of our key professional channel partners that had been so critical to our business for years.

Our Pro customers felt that our pricing strategy was undermining their ability to do business with us on a profitable basis since during promotional periods, many of our retail customers were being offered the same discounted price as a Pro customer would normally receive.

To reverse this policy and its negative implications, we eliminated all advertised price promotions on December 1, and we have no current plans to run any such promotions in 2018. Fourth, while we’ve made good progress in reducing turnover in our stores, we believe we can do more to attract and retain excellent employees.

Beginning in January, we have implemented a higher base compensation program for our sales associates that we believe will attract excellent candidates and incentivize them to stay with us as we invest more in training them about our products and our way of doing business.

Our best sales associates are extremely knowledgeable about our very broad product offerings, and they are experienced in helping our customers decide on the latest and best designs for their home improvement projects. Finally, we had drifted into a centrally driven business structure, and our store managers had become to task oriented.

We have reversed that trend, and the focal point of our company is returning to a focus by our store managers on serving our customers at the highest level. Initiatives are under way in all of these areas, and some progress is already apparent.

However, a full recovery will take time, and we are not prepared to forecast our financial results at this time. What I can assure you is that through our quarterly earnings calls, we will keep you abreast of both the successes and challenges that we experience as we go forward.

A critical element of our success will depend on the ability of our organization to work smoothly as a team with a shared set of objectives and a common view of what The Tile Shop way of doing business means. In the last couple of months, we have made a number of significant organizational changes that we believe will make us more effective.

Now I would like to introduce to you someone who, along with myself, Kirk and others in the company, is spearheading this effort. Today, we announced the promotion of Cabell Lolmaugh to Senior Vice President and Chief Operating Officer of The Tile Shop. Let me tell you a little bit about Cabby. After serving four years in the U.S.

Marine Corps, Cabby joined the company in 2001 working in the warehouse of our Roseville, Minnesota store. From that time through 2012, he served in various roles at several locations, including Store Manager in Roseville, one of our largest and most successful stores. In 2014, he was asked to lead our Pro customer strategy.

Under his leadership, we developed various programs focused on training, product assortment, merchandising and marketing to increase the level of service to the Pro customer.

In 2016, he became our first Director of Talent Development and was responsible for creating and implementing a comprehensive new sales associate and store manager training program throughout the company.

This work included launching a new training, development and compensation program for senior assistant store managers, which became the foundation of our efforts to effectively develop new store managers.

In 2017, Cabby was promoted to Vice President of Retail Stores West responsible for the leadership and management of approximately half of our stores.

Cabby?.

Thanks, Bob. I’m very excited to have been given this opportunity to play a key senior leadership role in the management of this company. Unlike a lot of our other managers in the field, I’ve been at the company a long time. And like them, I take the success of the company very seriously and very personally.

Before telling you about our plans, I think it’d be useful for you to understand the depth of the management team at The Tile Shop. Included in my role as COO, I have responsibility for store operations. In our store operations leadership team, we have Darryl Freeman. Darryl is the Vice President of Retail Stores East.

And Dan Brewster, Vice President of Sales Development & Real Estate. With our new store management structure, we have 11 regional managers, each of whom is responsible for overseeing an average of 13 stores. The average tenure of this entire group of 14 leaders is 11 years with The Tile Shop. This level of experience is not unusual in the company.

And indeed, in the supply chain and facilities functions, from product sourcing, transportation, warehouse operations, manufacturing and store construction and remodels, our senior managers average 23 years of experience with The Tile Shop.

In other areas of the company, such as a marketing, finance and IT, we have added outside resources in the 5.5 years since we went public, and this group is now well integrated into the company, and their functional knowledge is a terrific complement to our long-tenured staff.

My point in reviewing this detailed information with you about our organization is so that you will understand that while we are changing our business strategy in a way that more closely resembles what we did years ago, we also have people in place who know intimately what made the company successful in the past and hence know what we are seeking to achieve in the future.

As Bob alluded to, we have a lot going on at The Tile Shop. We just completed our national store managers’ meeting, and that was an opportune time for our company leaders to convey the new strategic plan to our store managers, who, in turn, are spreading the word throughout the company.

I believe we are galvanized around a plan that will return the company to higher growth and profitability. Now 2018 will be a transition year for the company, and I’ll be updating you on progress in future calls. Bob commented on the key initiatives that we have under way. I’d like to elaborate on each of those. Number one.

In 2018, we plan to remodel roughly 30 of our stores. These projects typically average approximately $0.5 million. Our objective is to ensure that our stores are presenting our most current products in the best possible way. Number two.

We’re in the process of introducing roughly 1,000 new SKUs in our assortment, in addition to the roughly 400 new SKUs we have introduced in the last four months. Our sourcing team has been very busy selecting new and exciting products that we believe will appeal to our core upscale, fashion conscious customer.

In general, these products will sell at higher price points than the product assortment we had in 2017. Also, we’ll be re-emphasizing high-priced natural stone products. The Tile Shop is known as the source for such products; but in the next couple of years, we had stopped innovating in this category.

Now our industry studies have shown that this category is still growing, and we need to reassert our leadership position. Stone products are particularly attractive for The Tile Shop since we carry many of the trend pieces, accessories and maintenance products that they require.

They also tend to sell for a higher price point per square foot than man-made products. Number three. We have implemented a new sales associate compensation system that we believe will allow us to attract and retain top sales talent. We have always been proud of the fact that being a sales associate at The Tile Shop is not like other retail jobs.

A successful retail associate at our company receives substantial training and is expected to become a product expert over time. And their compensation potential reflects the importance of their role in delivering a high level of service to our customers. Number four. We will be focusing on growing our professional sales channel.

We believe that a large majority of our sales involve a professional, possibly a tile installer, a homebuilder, remodeler and/or a designer. Our target customer, the upscale and fashion conscious homeowner, relies on these professionals for assistance, and we need to assure these professionals that we can serve them and their customers property.

To do that, we have to offer the best product assortment presented in the best way possible in our stores and the best design and sales service in the industry.

We also need technology to support and manage their relationships with The Tile Shop in a seamless way, and we’re making the necessary investments in a customer relationship management system in 2018. Number five. Bob commented on the fact that our store managers are the focal point of our organization.

The purpose of our corporate team is to support those store managers. Our new regional sales management structure will allow our most experienced and successful retail managers to have a direct and meaningful impact on the performance of the roughly 13 stores that each of them oversee.

Their objective is to support and develop our store managers and our more junior store-level employees so that they will be able to step in the store management positions in the future.

Being a store manager at The Tile Shop has been and will continue to be one of the most desirable positions in the retail industry for people who want to run their own business and be paid based on their results. Let me now comment on the metrics that we expect to perform against going forward.

When Bob stepped into the CEO position, we decided to shut down the promotional programs we’ve been using to drive store traffic and sales. Now it took some time to turn off these programs, and it wasn’t until December when we were fully able to curtail these price-driven approaches to the business.

At the same time, we began to change our website and our marketing. For those of you that have visited our website recently, you will see a marked change. There is much more to come.

We also have reached out directly to our channel partners, such as professional installers, builders and designers, and assured them that The Tile Shop was returning to more leading-edge designs and a higher-price product assortment that will be appropriate for their customers.

These are all quite substantial changes, and in the short-term, we expect to experience some volatility in store traffic. That is what we’re experiencing at this time, and we can’t say with certainty when our new initiative will gain traction.

What we do know is that average selling prices and our gross margin percentages are moving up, which will drive an increase in gross margin dollars. Now we are not where we need to be yet, but we hope to show some progress in the second quarter this year and especially in the second half of the year when we should have fully implemented the new plan.

I would now like to turn the call over to Kirk who’ll walk you through the financial results.

Kirk?.

additional regional sales leaders, increased compensation for sales associates and warehouse staff, investments for customer relationship management and content management capabilities.

The $5 million to $7 million increase in SG&A expense is incremental to the expected expense increase associated with the full year of operations for the 15 stores opened in 2017 and the three new stores opening in 2018.

Over the long-term, the company remains committed to achieving both adjusted EBITDA margin and pretax return on capital deployed of greater than 20%. With that, I will now turn the call back to Bob..

Thanks, Kirk. Before we turn the call over for questions, I’d like to comment on my interim status. I think the best way to explain my role is to say that it is unlikely that I will be speaking to you as CEO a year from now.

While it’s not my intent to remain as CEO, I can also say that my personal commitment to this company is strong and I intend to leave the company in good hands. Over the last five years, we have added many good people to this company.

These new hires have made The Tile Shop much stronger than it ever was in the areas of finance and accounting, IT systems, HR and recruiting and marketing.

Where we have run into challenges is where some of the core competencies of the company, such as sourcing, supply chain and in-store management, have been allowed to either atrophy or become more like a typical retailer. We are not a typical retailer.

We do not sell products that are purchased without a human connection or products that lend themselves easily to e-commerce. Therefore, it’s critical as we move forward that we continue to be true to The Tile Shop way of doing business.

So as we develop the future leadership team for The Tile Shop, you should not be surprised that we will focus our efforts first on our in-house leaders. I’m relying on them to revive the fortunes of the company, and so far, I’m very pleased with their commitment and performance.

In the course of the next year, they will need to prove to the entire organization and to the Board of Directors that they are indeed the best leaders for this company. I know these managers personally, and I believe they understand our company, what made it successful in the past and what will make it successful in the future.

With that, operator, we can turn the call over to questions..

[Operator Instructions] Our first question comes from the line of Peter Keith with Piper Jaffray. Your line is now open..

Hi, good morning everyone. I want to take a kind of big-picture strategic question around the positioning of the, we’ll call it, higher price points, which has been successful for Tile Shop in the past.

I guess I would argue that the last couple of years have seen rapid evolution in retail where maybe your categories were moving online, but I think consumers are becoming increasingly price aware.

Do you consider it a risk to traffic that as consumers are doing research seeing your prices, they may not understand uniqueness or the value and, therefore, may end up not making a trip? When you think about how you’re going to drive traffic with these higher prices, I guess, is the ultimate question I’m getting at..

Peter, this is Bob Rucker. I think we can drive traffic with our selection. We need to be fashion oriented. We need to be unique. This is what has always worked for us in the past. We stay away from the commodity product that the boxes carry en masse.

And we go to selections, especially in stone, and then the higher-end ceramic that can be accessorized with stone, that we can display in our stores and create a unique product offering that people will not be able to put together easily or see elsewhere.

And then we bring it to life in our vignettes, and we sell it with more experienced, knowledgeable salespeople that can put together and accessorize a complete bathroom that a person would consider a work of art in their home. This is how I would go at this, and this has always worked for me in the past.

And I believe that market exists, and I think it will always exist. And I think that customer that needs help in creating that unique kitchen or bathroom will always be with us, and I think they’re willing to pay for something unique.

And having said that, in this unique market, yes, you do have to be price competitive, but we’re very able to be price competitive on that higher end with other providers in that marketplace, providing the product for that same type of clientele, and I think that clientele exists to a large measure.

I think there’s many, many homeowners that really value their home and will invest into it and feel very good about a unique bathroom or kitchen or installation in their home..

Okay. Thanks, Bob. Another development that we’ve observed in the last couple of years I want to bounce off of you would just be the amount of innovation that’s come into the tile and flooring category.

And what we’re seeing, obviously, would be more of kind of stone look or marble look tile that’s made of porcelain or ceramic, can see this product even in your stores. And this newer innovative product is generally 1/3 to 1/2 the price of maybe a traditional marble [indiscernible] product. How do you think about that innovation.

And as people are becoming more aware of this technology and the product available at that lower price point, is that something that you want to continue to emphasize? Or that’s an area should we should think about that you’d de-emphasizing in the coming quarters?.

This is Bob again, Peter. No, we – you can’t ignore that kind of thing in this. Then the innovation and printing processes with the ceramics and porcelain has come a long, long ways and that, that actually works very well in many of these homes. Much of this product works also very well with accessorizing with stone. It can be very unique.

You can use that as field tile in wet areas where sometimes stone isn’t inappropriate and accessorize that with moldings, mosaics, decorative accents. And there is also a lot of variation in this high-end ceramic. That can be taken into various categories that can remain very profitable.

You’ve got to go to the unique, more exclusive areas there, but I would intend to incorporate – very definitely incorporate that into our selection..

Okay, thank you. On maybe one last question for Kirk. On the remodel initiative, could you give us an idea of approximately how much per store is being spent to remodel? And then a follow-on with the 30 stores you’re doing this year.

Is it something that we should see in continuing years as you move across the broader store base?.

Good morning, Peter. Well, first of all, I think Cabby mentioned that – in his opening remarks on average, we’re planning for roughly $0.5 million per store in remodel. It really varies, though. There’s a number of stores that we’re going to impact this year that are very high-performing stories. They’ve been around a while.

They might have received some smaller remodels over the last couple of years, but we’re going to potentially to invest a little bit more on those because they’re great stores for us and we think we can get a great return on the investment.

In other cases, it might be that we’re touching a store that we opened in the last four or five years and they just need some touchup, a few additional vignettes here or there, to reflect some of the newer products that we brought into our assortment over the last one to two years. So it really varies.

But I think that the important point is historically for us when we’ve done a remodel, on average the payback that we get on that remodel is less than two years. It’s often better than opening a new store in terms of the return on that investment. So we think it’s a good return for sure.

And I think with all the new product we brought into the assortment not only over the last one to two years but also the new product that we’re planning here over the next six months, we’re doing a little bit of catch-up, just making sure that our product presentation in our entire store portfolio is fresh and it’s – we’re bringing our A game on that.

So we’re excited about that initiative this year..

Okay. Thanks for the detail guys. Good luck this year..

Thanks, Peter..

Our next question comes from the line of Peter Benedict with Baird. Your line is now open..

Hey, guys. Thanks for taking the question. First on – around the inventory growth. Kirk, your payables have been moving up nicely the last couple of years. Can you give us a sense for maybe where those can go as you ramp up the inventory investment? That’s my first question..

Good morning, Peter. Sure. Yes, it really depends on the mix of product that we’re bringing in at any given time in the year. With some of our vendors that we partner with in Europe, for example, our terms tend to be a little bit longer. With other vendors in other parts of the world, they tend to be a little shorter. So it really depends on product mix.

But that is a focus for us, is trying to continue to make sure that we manage our cash effectively. And at the same time, we got to make sure that we’re doing what we need to do from an assortment perspective so that we live up to the goals that we have that Bob so clearly articulated in his opening remarks..

That’s fair.

Do you think that the mid-30s AP-to-inventory ratio that you achieved this year, is that something that you think is sustainable as you look at where you’re putting inventory and who you’re buying it from? Or can that move higher or has that come down a bit?.

I think generally, I would look for the historical ratio that you’re referring to, to be pretty consistent going forward. I don’t see any – in any given quarter, it could change due to product mix and various things that we’re doing with our assortment.

But over time, over the next 12 months, I’d say my best estimate would be that it’d be pretty consistent, yes..

Okay, that’s helpful. As we look at the dividend, it’s at – I think at $0.05 cents, about $10 million a year.

I’m just trying to understand how you see kind of free cash flow this year relative to that dividend payout level and what your thought process is or the board’s thought process is around the willingness to borrow to pay the dividend if that was required this year..

Well, Peter, I mean, we’ll continue to have our normal ongoing discussion with our board on capital structure, including our dividend, as we always do. We’ll also continue to closely monitor our cash and debt situation.

But I think it’s important to note that compared to most retailers, the amount of debt that we’re carrying right now and also our leverage ratio remains relatively low..

Yes. That’s fair. And then lastly, just when – you guys mentioned kind of the longer-term goal of getting back to that 20% adjusted EBITDA margin. Help us bridge the gap, the 350 basis points or so, from where you are today to that 20% level.

What gets you guys comfortable? How – what are the building blocks there? Is it mainly kind of the sales productivity and that flow-through over SG&A? Or do you think there’s a meaningful upside here on gross margin?.

I think it’s primarily sales productivity. And it wasn’t so long ago that we were at 21% EBITDA margin. So that gives us confidence that we can get back to that level. We can work our way back at some point. But I think it’s going to be top line that’s the key driver of that.

And we’re – we think we’re laying out a strategy here that can help us climb back to those levels..

That’s great. And then last question and I’ll turn it over to the other guys. Really more to Bob. I mean, how do you think about, and this is kind of what Peter was asking a little bit, some of the customer preference shifts that are going on in the market? It sounds like you guys are out clearly going – trying to go higher end.

There’s all this LVT product that’s out there that’s been very successful, I would say. That’s – that doesn’t sound like that’s something that’s in your focus. Just curious kind of your view of that category, the growth that it’s seen. And any thoughts of incorporating that into the assortment in the months to come? Thank you..

Okay, Peter, I – we have no intent to include the vinyl product here. I don’t think we need to.

I think our focus on that higher-end homeowner working through the higher-end builder, the designer and the tile contractor, I think if we focus onto that and we can get our hands on the customer, get them in the store, I think we can create great interest in the natural. And I consider ceramic and porcelain a natural product, right, versus vinyl.

I intend to stick with these products. I think there’s a desire for that. I think if we get in front of the customer and show them how to put this together, I think we have the ability to sell the natural product, and I think we can create the desire. And I think the desire remains for a natural product versus a vinyl product.

I don’t believe we need to go into that. And the margins are much better in the natural, and I’m including ceramic and porcelain, and there is much innovation in the ceramic and porcelains, and the margin remains there in the higher end and the more exclusive product..

Okay, thanks for that and good luck guys..

Our next question comes from the line of Daniel Moore with CJS Securities. Your line is now open..

Thank you and good morning.

If we exclude grouts and accessories, what percentage of your revenue today would – Bob, would you consider that higher-end, truly unique category that you’re going to focus on going forward?.

Right now, we’ve lost a lot of that market. We intend to get it back. So I – it’s hard for me to answer you in percentages.

So I’d have to say I don’t know, but I – that’s the market I want to go after, and that’s the market that we intend to build by refocusing on our supply chain, our selection and product offering, our – the way we display it, how we bring it to life, and then bolstering our store managers and then, of course, the staff, bringing that up to higher levels so that we can service this higher-end professional clientele..

Got it. And appreciate the color that you could give regarding the, I guess, CEO search. What additional color can you provide? Or are you looking to the board using outside consultants? And it sounds like it could be a combination of internal and external. Any additional color there would be great..

Right now, I’m working with our internal people. As we said in our prepared statements, I do sincerely believe we have never had a better team here. We’ve got a marketing department that I never had in the past. We’ve got an IT department that I never had in the past. We’ve got accounting ability that I never had in the past.

We’ve got management skills that go very deep in our stores. We just have to flesh out all of our new growth and support the training initiatives that we have. So to answer that, right now I’m concentrating on developing the talent that we have in-house, and I think that that’s substantial and I think we can go a long ways with that talent..

Got it. Lastly and I’ll jump out.

Well, piggybacking on the question around the dividend, given the – where the shares are trading today and your view of being able to get back to 20% EBITDA margins over interim period of time, would the board consider maybe striking the dividend and looking at share repurchases, which could be a more efficient use of shareholder capital?.

Hey, Dan, good morning. Well, as I said to – in answer to Peter’s earlier question, we’ll continue to have that ongoing dialogue each quarter with our board and evaluate all options that are best for the company..

Got it. Again, thank you for the color..

Thanks, Dan..

[Operator Instructions] Our next question comes from the line of Joseph Feldman with Telsey. Your line is now open..

Sorry, I was just on mute. Hi, guys, good morning.

So one of the questions we had around the move towards emphasizing the higher quality or going upscale a little bit, how do you demonstrate that quality to the customer? Because I guess I’m concerned that the average customer just use white marble on a floor, and they have no idea of the difference between perhaps what you might sell and someone of lesser quantity.

Is there a way to demonstrate that better to the consumer?.

Yes, there is, Joe. It’s bring it to life in the store, show them in a vignette and then be able to explain the difference. And it can be very visible, and it’s – it makes for a good story. I believe we can bring that to life, and I think that is playing to our expertise. I think we can explain it. I believe that also plays to our expertise.

And it’s going into an area that our competitors have – don’t have the same amount of ability to go into. We can carry a larger selection and a more complete selection and be able to put it together better than the others..

Thanks, Bob. And then if – one follow-up maybe, Kirk. Maybe as far as the SG&A goes, I understand the incremental $5 million to $7 million. But you made a comment about incremental to the expense for the 15 new stores from last year. I guess I’m just trying to get at what – more holistically where should SG&A be for 2018 maybe.

I don’t know if you can share that..

Well, I think you guys all usually do a pretty good job with your models around new store openings, Joe. And what we’re trying to do there is just remind everybody that we opened 15 stores here this last 12 months, and they were opened pretty ratably throughout the year.

So on average, we probably have roughly six months’ worth of the additional occupancy and related costs for those 15 stores. When you annualize that, you’re going to have a larger chunk of expense that’ll contribute to some level of SG&A increase on into 2018.

So we wanted to make sure that we noted that the $5 million to $7 million that we talked about in our outlook is in addition to that annualization..

Okay, got you. All right, that’s helpful. Thanks, Kirk. Thank you guys, good luck with this quarter..

Thanks, Joe..

I’m not showing any further questions in queue at this time. I’d like to turn the call back to Mr. Cooper for any closing remarks..

Thank you for joining us today and your interest in The Tile Shop. We look forward to providing you future updates. Until then, have a great day..

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the program, and you may now disconnect. Everyone, have a great day..