Ladies and gentlemen, at this time, I'd like to welcome everyone to the Resideo Technologies Third Quarter 2021 Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce Mr. Jason Willey, Senior Director of Investor Relations. Mr. Willey, you may now begin..

Good afternoon, everyone, and thank you for joining us for Resideo's Third Quarter 2021 Earnings Call. On today's call will be Jay Geldmacher, Resideo's Chief Executive Officer; and Tony Trunzo, our Chief Financial Officer.

A copy of our earnings release and related presentation materials are available on the Investor Relations page of our website at investors.resideo.com. We would like to remind you that this afternoon's presentation contains forward-looking statements.

Statements other than historical facts made during this call may constitute forward-looking statements and are not guarantees of future performance or results and involve a number of risks and uncertainties.

Actual results may differ materially from those in the forward-looking statements as a result of a number of factors, including those described from time to time in Resideo's filings with the Securities and Exchange Commission. The company assumes no obligation to update any such forward-looking statements.

We identify the principal risks and uncertainties that affect our performance in our annual report on Form 10-K and other SEC filings. With that, I will now turn the call over to Jay..

Thank you, Jason, and good afternoon, everyone. Our Q3 performance demonstrates strong operational execution and progress on our business transformation. This performance is against the backdrop of healthy end market demand, but continued global supply chain challenges. We grew revenue 10% year-over-year in the quarter.

This growth was tempered by expansion in Products & Solutions backlog, which remains well above historical levels. We also experienced supply chain constraints within certain categories at ADI. Our supply chain team and executive leadership continue to spend significant time engaging with key supply partners.

We believe this proactive and direct engagement has enabled us to better deliver for customers and is benefiting our financial performance. Against this dynamic macro backdrop, we continued to make significant progress on our transformation work. We are driving margin benefit at ADI from investments in pricing tools and digital initiatives.

Within Products & Solutions, value cost engineering efforts are delivering to plan. Additionally, we are seeing benefits within the sales organization from consolidating systems, Miller Heiman training and sales operations build-out. Each of these initiatives have helped enhance our relationship with and visibility into key customers.

The results of this work and targeted investments are visible in our operating income and 160 basis point expansion in operating margin. Within ADI, investments in digital and pricing initiatives helped drive a 200 basis point year-over-year gross margin improvement.

As more transactions flow through digital channels, ADI can free up sales associates for more value-added selling. This allows for better leverage of these high-value individuals as ADI executes on its long-term growth strategy. At the same time, day-to-day execution at ADI remained strong with average daily sales up 9% year-over-year.

The business has done an excellent job managing through an increasing tight supply environment. This execution positions ADI to remain the go-to source for customers across its product categories. Early results from the recent Shoreview and Norfolk acquisitions are encouraging, and integration is progressing according to schedule.

We are actively looking at further inorganic opportunities to expand ADI's offerings, particularly in the datacom and AV markets. Within Products & Solutions, demand remained healthy across key channels. As the quarter evolved, it became clear that supply chain and global logistics challenges were not easy, and in some cases, worsened.

The team has done an excellent job navigating these challenges. We remain aggressive in engaging with key suppliers and partners to ensure we are doing everything possible to deliver for customers. Semiconductor components remain the largest bottleneck.

While we navigate through these supply chain challenges, we remain focused on driving our innovation engine. During the quarter, our partner, Amazon, announced an exciting collaboration to bring a differentiated entry-level connected thermostat to the DIY market.

This is an example of our strategic focus on partnering with leaders in the market, specifically opportunities where we can leverage our strengths with those of other players to create enhanced value. We are also making investments in areas offering exciting long-term opportunities.

This is true from a revenue growth perspective and as we work to support a more sustainable future. An example of this is hydrogen. Today, we have a strong presence and portfolio in the traditional boiler components and subsystem market.

This positions us particularly well to be a partner to OEMs as they begin the process of transitioning their products to support hydrogen. This includes supporting partners as they move toward qualifying and launching boilers that address hydrogen blends up to 30% and 100% hydrogen.

Earlier this year, we completed a facility investment in Lotte, Germany to support our hydrogen technology efforts. We are excited to be working with several leading manufacturers on their projects to serve the long-term hydrogen opportunity in Europe.

While it is early stages of this market opportunity, we are actively engaged in technology development internally and with key partners. As we focus on ensuring we are doing all we can to drive a sustainable future for our business and end customers, we are pleased that Megan Murphy has joined the Resideo team to lead our ESG activities.

She'll be responsible for Resideo's ESG strategy, communications and reporting. This means working closely across the organization on alignment of stakeholders and on execution of key milestones along Resideo's ESG journey. With that, I'll turn the call over to Tony to discuss our third quarter performance and 2021 outlook in more detail..

Thanks, Jay, and good afternoon, everyone. Q3 was another strong quarter for Resideo with revenue of $1.5 billion, up 10% compared to Q3 last year. Gross margin for the quarter was 27.8%, up 60 basis points compared to Q3 2020.

Consolidated operating expenses increased by 4% from last year, but declined 90 basis points relative to sales, demonstrating continued operating leverage.

Operating income increased 27% and operating margin improved by 160 basis points Products & Solutions third quarter revenue of $631 million was up 10% due to continued healthy demand and the impact of recent price increases.

Third quarter results also benefited from a customer rebate reserve credit of approximately $12 million, which positively impacted both revenue and gross margin. Revenue and gross margin were negatively impacted in the quarter by higher costs for materials and freight as well as shortages for many semiconductor components.

Supply challenges are having the largest impact on revenue and margin in our trade and security channels. Products & Solutions gross profit margin in Q3 was 40.9% down from 42.3% in the third quarter of 2020.

The decline in gross margin was primarily due to materials price inflation of approximately $3 million as well as $14 million of higher freight costs year-over-year. These impacts were partially offset by price realization of approximately $17 million and the previously mentioned rebate credit.

We instituted an additional round of price increases in September, which had limited impact on Q3 results, but are expected to benefit Q4 and beyond. P&S segment operating profit was $157 million or 24.9% of sales compared with $141 million or 24.7% of sales last year.

Operating expense for Products & Solutions was flat year-over-year, reflecting solid cost management and a reduction in restructuring costs. ADI Q3 revenue of $865 million increased 9% year-over-year, reflecting a combination of volume and pricing expansion.

ADI saw better commercial activity in the quarter with strength in fire, access control and wire categories, while AV and intrusion categories were constrained by product availability. ADI again drove strong growth in digital channels with e-commerce sales up over 40% and accounting for 16% of total ADI revenue in the quarter.

ADI also continues to make progress in expanding its private brand offerings to complement its extensive third-party vendor offerings. ADI gross profit margin in the second quarter was 18.5%, up two percentage points from 16.5% last year.

This increase in gross margin was a result of improved product line margin as ADI benefits from pricing initiatives and increased private brands contribution. Margins also benefited from positive industry pricing dynamics.

ADI is seeing improvements in product line margin from the investment and rollout of pricing optimization tools that enable its sales teams to make more data-driven pricing decisions in real time.

We intend to deploy these tools beyond the United States and expect them to be a key driver in achieving the 2024 growth and margin targets we outlined at our Investor Day in March. ADI Q3 operating margin increased 130 basis points from last year.

We continue to direct investment toward ADI, especially in the area of digital channel improvements and sales tools, which is reflected in higher operating expenses. ADI's two recent acquisitions contributed $16 million to Q3 revenue with no impact on operating profit.

Integration is progressing to plan with both acquisitions on track to be fully integrated by year-end. Corporate costs for the quarter were $63 million or 4% of sales compared with $66 million or 5% of sales in the third quarter of 2020.

This reflects a reduction in spin and restructuring-related costs of approximately $19 million as well as $9 million of impairment costs this year related to our Austin office space. We do not expect any further charges this year related to Austin. In August, we refinanced our senior unsecured notes, further strengthening our balance sheet.

The new $300 million of notes mature in 2029 and carry a 4% coupon as well as an investment-grade covenant package. Proceeds from the offering were used to redeem our six 1/8% notes that were due in 2026. Included in Q3 other expense was $18 million of debt refinancing costs related to this transaction.

The new bonds, together with the refinancing of our senior secured credit facilities in the first quarter, will result in approximately $8 million in annualized interest expense savings. Over the past 12 months, we've made significant improvements in our capital structure.

We ended Q3 with cash and cash equivalents of $686 million and total outstanding debt of $1.2 billion. Net debt stood at $546 million compared to $1.1 billion at the end of Q3 2020. During the quarter, we generated $104 million of cash from operations. And for the first nine months of the year, operating cash flow exceeded $200 million.

In terms of our outlook, fourth quarter revenue is expected to be in the range of $1.44 billion to $1.49 billion. Consolidated gross margin is expected to be in the range of 27% to 28%, and GAAP operating profit is expected to be in the range of $140 million to $150 million.

For the full year 2021, we now expect revenue to be in the range of $5.83 billion to $5.88 billion, implying year-over-year growth in the range of 15% to 16%. Consolidated gross margin is expected to be in the range of 26.5% to 27%, and GAAP operating profit is expected to be in the range of $558 million to $568 million.

Our revised outlook anticipates a further increase in Products & solutions backlog in the fourth quarter due to shortages of certain components, additional component inflation of approximately $35 million and approximately $10 million of additional year-over-year freight costs.

Offsetting these higher costs are expected pricing benefits above our typical baseline of approximately $45 million. Corporate expenses for the year are expected to be approximately $260 million compared with $290 million in 2020. This includes the $16 million litigation settlement in Q2 and the $9 million Austin impairment costs this quarter.

Additional outlook details can be found on Page nine of our earnings slides. As a reminder, ADI has five fewer selling days in the fourth quarter compared to Q4 of 2020. I'll now turn the call back to Jay for a few concluding remarks before we take questions..

Thanks, Tony. The proactive response of the Resideo team to ongoing supply chain challenges and the execution across the organization reflects the culture being developed at Resideo. The results delivered in Q3 also demonstrates the significant progress made over the past 18 months.

While supply chain dynamics are impacting our ability to fully meet customer demand, we believe our strong relationships with our suppliers position us to remain a go-to source for customers. At the same time, we have demonstrated the agility to execute to our profitability expansion goals.

While supply and logistic headwinds are not expected to abate in the near term, the team is focused on ensuring that we deliver for our customers. At the same time, we are continuing to make the right investments to position Resideo for long-term growth.

I'd like to thank the entire Resideo team for their efforts during the quarter and their focus on closing the year strong. This concludes our prepared remarks. Operator, we are now ready for questions..

[Operator Instructions] Your first question comes from the line of Erik Woodring with Morgan Stanley. Your line is open..

Hi, This is Sabrina Hao on for Erik Woodring.

As you look forward, what is your outlook for the supply chain? How -- we'd love to know how long you believe costs will remain elevated? And when do you think the supply of components can open up?.

I'll comment and then Tony may have a few words, too. So we indicated in my remarks that the supply chain situation, as we see it today, is going to extend into 2022. In terms of the exact crystal ball, that's a hard one, I wish we all would know that. But we're planning on that through -- into 2022.

And I think the -- when you look at all the different companies that are involved with the supply chain market, the semiconductor industry, I think that's a fairly consistent answer out there and -- before the additional capacity comes online out there in the semiconductor world..

And Sabrina, I guess the only additional comment I'd make is, at this point, and as I think we said it last quarter, too, supply chain constraints are affecting our ability to recognize revenue, to get product out the door. Our revenue in Q3 would have been meaningfully higher were it not for these constraints.

And we continue to have elevated backlog relative to what is typical in the business. I think the team has done, frankly, an unbelievable job figuring out how to navigate all of that.

But in terms of predicting exactly when, there's a lot of long lead time stuff that has to happen both in the supply chain world and in the freight world for things to go back to "normal" and I wish we were in a position to be able to tell you when that is, but we don't have that crystal ball..

Yes. And Sabrina, you heard me also say that I think one of the real big things that I want to emphasize is really our entire supply chain organization, along with senior leadership, just continues to be involved with all our major supply partners. And I think that's really critical.

And I know, I, myself, is spending a lot of time with our supply chain partners out there to help in that endeavor. And I think that's -- we need to continue to do that, and we will. And hopefully, as we get into 2022 and progress through the year, things will become a little clearer. I also -- Tony mentioned about freight.

If you asked me, one man's opinion of what becomes clearer in terms of things beginning to subside in some of these constraints, I think the freight will probably begin to become a clearer picture for everyone globally before knowing exactly what's going on out there in some of the major supply chain constraints like semiconductors..

Got it. That's super helpful. And just a follow-up, you talked about demand being strong.

Can you talk about how the demand environment has changed relative to three months ago? And are there any differences that you're seeing between residential versus commercial demand that you would call out?.

I would say that demand is consistent with what we saw three months ago. I don't see an arrow or any data that really points to acceleration or deceleration in underlying demand.

And I'm sorry, what -- you had a second part of the question?.

Yes.

Just if there's any trends between residential and commercial demand that you would point out?.

Oh, sorry. Yes. I mean the same. I mean, our ADI business is a pretty good bellwether for what we're seeing in the commercial markets. And this past quarter is actually pretty strong commercially. And the P&S business is pretty much entirely residential -- not exactly -- not 100%, but pretty close. So there, too, I think things have been pretty stable..

Your next question comes from the line of Amit Daryanani with Evercore ISI. Please go ahead..

This is Michael Fisher on for Amit. So just to start with, if we kind of look a little bit into 2022, and I know there are a lot of moving pieces with supply probably the limiting factor, but some tough comps to start the year.

But should we think about the growth rate kind of working that -- toward that 6% year-over-year model as we go through 2022?.

Michael, it's Tony. Thanks for the question. We are still in the midst of our budgeting process for '22. I don't really have anything to offer at this point with respect to the outlook that we see. We're focused on delivering for the remainder of the year. We'll have obviously a fulsome conversation about 2022 when we report in February.

But at this point, we're just not clear in terms of our own expectations yet..

Makes sense, I had to give it a try. And then just one other one. So if we -- I'm curious about the Amazon smart thermostat relationship.

Maybe if you can provide any color on how that came about and whether maybe that's something you could see expanding into other products over the long term?.

Well, as I mentioned, it is an exciting new program. I think we indicated even going back to our Investor Day back in March that we would partner with key players out in the industry that made -- could leverage our strengths along with theirs.

And that's exactly how that played out here with Amazon and leveraging our technology, our history and along with their capabilities in the channel to the DIY market that is not something that we have been focused on. As you know, we're very focused on the pro and the channels through the pro.

And Amazon, of course, has a different channel model that -- where we can leverage their capability. So it's a really nice partnership. And as I said, it's consistent with what we're looking at out there in the market globally, and we're excited about it..

Yes, Michael, I'd echo everything Jay said. But in addition, we've talked about this since the new leadership team showed up 1.5 years ago. I mean this is a -- the market that we operate in is complex, it's huge and it's fragmented. And nobody has the answer for the whole solution.

What we've really been focused on is executing where we can bring real value. Whether it's direct, whether it's through an OEM, whether it's through our big professional channels, we're focused on delivering value where we can best do it and partnering with people where when we combine, we can generate incremental value for both parties.

So I think that's exactly what we saw with the Amazon announcement this quarter. And by the way, these things do take time. I mean there was engineering going back years on this project. It's not -- they don't just pop up in a short period of time. So we're always working with potential OEM partners.

And I think this is a great example of the kind of deals that we'd like to be doing..

I think I'd add to that also. I mean we touch a lot of different channels. And as we said, DIY was not a traditional market -- channel market for us. And so this helps in that regard. But the pro, of course, that we've talked a lot about. We talked a lot about it back in the Investment Day.

The OEMs globally are very important to us, our traditional OEMs as well as new ones as well as new channels like in the areas of energy and utilities that we do work with. So those are all key to a very, very large set of markets and adjacencies that we participate in now as well as new ones for the future..

That's great, thanks for taking my question. I appreciate thanks, Matt..

Your next question comes from the line of Brian Ruttenbur with Imperial Capital. Your line is open..

Yes, thank you. I have a question so far this year. Can you go through that, how much you've raised prices? I believe you had a price raise in May.

You may have had another price raise? And how much have you raised prices in total? And what are your plans kind of the remainder of the year?.

So Brian, it's Tony. Your -- the first part of your commentary is cut outside. What I heard was your question about how much have we raised prices and kind of where do we go from here. I don't have a specific percentage to give you because it varies by channel. It varies by product. It varies by geography.

As you guys know, we have a very broad product suite. So I don't have a percentage to offer you. But as we've said, we were pretty slow out of the gates at the beginning of this year in terms of price increases. We rectified that with some fairly meaningful price increases in the summer and then another one in September, I believe.

That September increase isn't really -- there wasn't much of it that you saw in Q3. We indicated that you'll see meaningfully more in Q4 and we expect that realization to hold in 2022. This year's price increases have been in response to a pretty dynamic marketplace, right? I mean we haven't seen inflation like this in a long time.

We've had commodity and supply chain and freight cost increases that we just -- we've had to pass on. Moving forward, and we've talked about this before, too, how a real opportunity in price is getting paid for our value.

And it's for strategic execution on true value-added products where our customers are willing to pay a price that generates incremental margin for us.

And I think we're in the very early days of having what I'll call sort of more of a scalpel approach to pricing, where we're really -- we're taking the perspective that we're bringing value, and therefore, we deserve to earn higher price -- higher margin on it. I think we're pretty early in that journey at this point. But that will be the next phase..

Okay. So just to summarize, hopefully, I'm coming in -- I'm staying on one leg, trying to get better reception, so I apologize. So you've had a total of three price increases this year.

Is that correct?.

Generally. I mean, it wasn't like there were three specific days where we changed all the prices. But generally, I'd say three waves more than three increases..

Okay.

And then just as a '22 kind of guide, I know you're not guiding yet, do you anticipate the seasonality of the price increases being typically spring, summer, fall? Or do you anticipate maybe something earlier on in '22 in terms of price increases?.

No. I mean there's no seasonal cadence necessarily to how we adjust price. And as I said, with all of the different channels and all of the different products and all of the different geographies, there's no specific spot. And I would not say that the cadence this year when we did it is something you should expect moving forward at all.

I mean this is....

Yes. The timing of this year was pretty unique to a very challenging, to say the least, and unpredictable supply chain market as well as freight market. I think a lot of us who've been around this electronics industry for a long time will say that this was one of the ones that was extended, for one; and two, a little bit unpredictable.

And so I agree with Tony..

Great, thank you very much..

Thank you, Brian..

Your next question comes from the line of Ian Zaffino with Oppenheimer. Your line is open..

Hi. This might be a little bit of a follow-up to the last question.

But can we look at this differently and maybe walk us through volumes that you saw maybe on different product lines? Were there any of that you actually saw negative volumes on because you weren't able to get the components? And were there any areas where you saw really super amount of strength on the positive side?.

Again, I mean, you can -- Ian, thanks for the question. It's Tony. You can get pretty granular and start looking at things that are pretty small in the -- in our portfolio and you'll see some variance on volume, particularly quarter-to-quarter, that looks pretty big.

But overall, if you step back and you look at sort of the big buckets of the markets that we play in, volume was up in Q3. It would have clearly been up more had we been able to deliver more and keep the backlog down. But we, in general, sort of across the board for both businesses, we saw unit volume expansion in Q3.

And there aren't any meaningful categories that I'd call out that are different from that. Pretty much all of them for, to some degree, another green arrow..

Okay. Perfect. And I know as far as your productivity and cost saves plans, there was, I guess, talk about maybe some of footprint rationalization.

Where are we sort of in that process? And does the total supply chain sort of disaster that's going on globally change how you think about their footprint?.

I'll make a couple of comments, Ian, and I know Tony is anxious to also say a couple of things. We've put in place a transformation team within the organization that one of the many things that they would do would be looking at optimization as you brought out.

But also, just as you alluded to, because of what everyone in the world has been surfing through on the supply chain thing, you decide where you pick your shots, what to go after and what not to go after because of some of the limitation that, that's created out there.

So hopefully, and with continued progress into 2022 with COVID and people being able to get out and about more and having a little better understanding of where the -- how the supply chain is looking, we have more opportunities in that area. We're a large multinational company with facilities around the globe, and so there's opportunities there.

But definitely, during the year, there were probably some things that we were looking at that we said, let's be a little more safe because we don't want to risk anything else with some of the other dynamics that were going on out there..

Yes. I mean, Ian, I'd say there are some pretty meaningful strategic levers that could be pulled that we have specifically chosen to delay because it just doesn't make sense to try to layer that kind of a transition on top of what we're seeing in the world in terms of freight and supply chain.

I hate to keep saying those words, but that's the reality of it. So I think that is -- that opportunity is still available for us. It's certainly -- it's not one that we have moved as quickly on as we maybe originally thought we were going to.

The other thing I want to mention about all of this, and it's a little bit of an unasked question but I think it's important to understand, the supply chain certainly affects our manufacturing operations and it affects our resulting financials. But it really affects every part of the organization.

Everybody is adjusting and adapting in a way that really prevents us from getting all of the traction we want in a lot of areas. Another example I'll give you is engineering. And our NPI cadence, I mean, the Amazon announcement, the hydrogen work we're doing, it's certainly -- we're making really good progress in a number of different areas.

But we've had substantial engineering resources diverted to devote to requalifying components because one component isn't available and another is, and in order for us to put it in the product, we've got to qualify it. So I just sort of set the tone in terms of our performance, which I think was terrific this quarter.

I think the team did an unbelievable job. There's not an area of our organization that isn't in some way, shape or form impacted by the challenge we're seeing out in the marketplace..

I agree. And I mean the teams have done an incredible job in those areas, and our results show that. And the team has been able to -- and I think one of the keys there is being able to pivot fast, be able to react quickly as we saw the various dynamics, which changed quite frequently over this year..

All right, thank you very much for the color..

Thank you. [Operator Instructions] And your next question comes from Paul Dircks with William Blair. Please go ahead..

Hi, good afternoon, everyone. So just a couple for me. First of all, on supply chain, which I realize you've covered a lot of ground, but I just want to take one more stab at it.

In the prepared remarks, you guys mentioned that some of the supply chain challenges were still worsening coming out of the third quarter and presumably here into the fourth quarter.

Was that a specific comment on the semiconductor chips? Or were there other items, one or 2, that you could put your finger on where the conditions worsened here?.

Yes. There's a variety of things that fall underneath the supply chain, but semiconductor, as I mentioned, is the primary. And there were just a few additional surprises during Q3 in that area. And there's an old game that many of us might remember called Whac-A-Mole.

So you're taking a look at one comes up, we can clear up a couple and then there's a few more. So that comes back to my comment, very seriously, about the agility and speed to be able to keep on top of things so that you can adapt to that.

And then the application and the nimbleness of like our engineering group with supply chain working together to be able to maneuver through that. So I remember, just -- if we went back to May time frame, there was a few of these types of constraints we thought were going to be much better by the end of the summer.

But just certain dynamics that you guys -- we all see in the newspaper every day and hear about that it comes back to why we say, most people do say that this will continue into '22..

Understood. No, that's helpful. With some of the supply chain challenges, you mentioned product availability at ADI being a bit of an issue.

Is there any commentary from the pro contractors about underlying end market demand being affected by this? In other words, are we starting to see some tempering in the market because of these stock-outs? Or is this simply just a deferral and the underlying demand trends are unchanged?.

No. The demand is there if any -- and they just want product because they have demand out there who they're servicing. So that's -- it's disappointing that we can't fill out all that demand. But it's -- what we're seeing still right now, the demand is pretty good..

I mean you look at our revenue growth at ADI, that revenue growth I think -- I didn't ask Rob the specific question, but I think this is probably the first quarter that it was noticeably constrained by stock-outs and challenges of that nature. And the business still grew really nicely.

I don't think there's any evidence that end demand is being affected here. I think there's just clearly a backlog of projects..

Understood. That's probably also a tribute to some of the work you're doing on e-commerce and some of the other initiatives as well. Last question for me -- very good. Last question for me. Obviously, the Amazon announcement is exciting.

Are there any other opportunities that you could point to, either conceptually or specifically, regarding either new key partners that you could work with? Or perhaps efforts that Resideo is taking on its own to improve its branding in the marketplace? It seems that this is one area where perhaps there isn't quite as much of an impact due to the supply chain challenges and perhaps Resideo could exert more control over its branding efforts here near term.

So maybe could you talk a little bit about what the company is doing here?.

Well, I will say this and I know Tony wants to say something also, but going back to our Investor Day, we talked about partnering with more companies in a variety of different areas that's part of our strategy. And Amazon, as I said before, is an example of that.

I can't share with you today some of the other ones that we're beginning to have in discussions with, but we're definitely -- that's an important area for business development.

And we look forward to being able to share a lot more about that as we move forward, be it with an OEM partner or a new OEM partner like an Amazon or different channels that we're looking at as part of our overall hardware, software ecosystem offering as we move forward in the months and years ahead..

Yes. Paul, the only addition I'd like to -- I'd echo Jay's comments, the only additional comment I would make is I'll refer back to something I said just a few minutes ago. These types of things don't happen over a month or a quarter or even a year. There are long journeys in the development of these kinds of partnerships.

You're right that the opportunity to participate in the marketplace with other top end brands the way we do is it's a compelling route to market, particularly when we can bring our underlying expertise in the core product technology to play at the same time.

As Jay said, you should assume that we're always mining the market for these kinds of opportunities and we're always -- we always have something internally that we're working on to try to drive that forward.

As is consistent with, I think, we've come to realize from this management team, we'll tell you about it when we have something to publicly announce..

Understood. I appreciate the color. Thank you..

There are no further questions at this time. I'll turn the call back to Jason Willey for any closing remarks..

I'd like to say thank you to everyone for your participation today. And if you have any questions, please feel free to reach out. And we look forward to talking with you over the coming weeks and months. Take care..

This concludes today’s conference call. Thank you for joining. You may now disconnect..