Good morning, ladies and gentlemen, and welcome to the Sally Beauty Holdings Conference Call to discuss the company's Fiscal 2022 First Quarter Results. As participants, all participants have been placed in a listen-only mode. After management's prepared remarks, there will be a question-and-answer session.

Additional instructions will be given at that time. As a reminder, today's conference call is being recorded. Now, I would like to turn the call over to Jeff Harkins, Vice President of Investor Relations and Treasurer for Sally Beauty Holdings..

Thank you. Good morning, everyone, and thank you for joining us. With me on the call today are Denise Paulonis, President and Chief Executive Officer, and Marlo Cormier, Chief Financial Officer.

Before we begin, I'll remind everyone that we have made a presentation available for today's call that can be viewed from the link provided on our investor site at sallybeautyholdings.com/investor-relations.

I'd also like to remind you that management's remarks on this call may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Actual results may differ materially from those indicated by these forward-looking statements, as a result of various important factors, including those discussed in the risk factors section of our most recent annual report on Form 10-K and other filings with the SEC.

Any forward-looking statements made in this call represent our views only as of today. And we undertake no obligations to update them. The company has provided a detailed explanation in reconciliations of its adjusting items and non - GAAP financial measures in its earnings press release, and on its website.

Now, I would like to turn the call over to Denise to begin the formal remarks..

At Sally, our new vivid color line, Strawberry Leopard, continues to gain traction both in the stores and online on our dedicated Strawberry Leopard website.

Additionally, in the first quarter, we launched Dashing Diva Glaze, and at-home Joe manicure, as well as the Iron Locks Turbocharged drier, a high-end hair dryer that goes head-to-head with the best in tech brands at a more affordable price point.

We have more innovation coming and higher-end appliances in the second half of the year and we'll also be introducing Strawberry Leopard hair care products to supplement the recent color launched. At BSG, the Q1 launch of the 4P Toning Shampoo was among the best new product launches we've seen from the Olaplex point brand.

Another key partner to us is Wella which represents BSG's largest color brands. This month we'll see an exciting launch from their sub-brand, Shinefinity, which adds glossing to color. This is expected to be the biggest launch for BSG in 2022. Overall, a great deal of excitement around innovation and much more to come during the year.

With the customer at the forefront of our strategy, our fourth and final growth pillar is supply chain. Our mission is to be in stock in color and care every time, and we've made great progress towards building a highly automated integrated supply chain network that will take us well into the future and allow us to meet growing demand.

We're in the final phase of JDA implementation and as of this week, the system will be up and running in all Sally and BSG locations. The remaining steps is fully integrating with our North Texas DC.

Once completed, we'll be positioned to leverage and scale our new capabilities across inventory forecasting, localized assortment, pricing and promotions, as well as shorten Ship2me performance on for 15% to 20% of our customers.

As we look ahead, even at the uncertainties that COVID creates, we continue to have a great deal of confidence in fiscal 2022 and believe we are well-positioned to continue driving top-line growth at structurally higher operating margins in the years to come.

We are reiterating our financial outlook for fiscal 2022 and expect the business to generate strong cash flow and provide meaningful capital allocation optionality moving forward.

In addition to the 4 growth pillars I discussed, we're focusing on building out additional opportunities that will fuel our business and create meaningful shareholder value over the long term. I'd like to express my thanks to our talented and passionate team who are committed to delighting our customers, and drive our confidence in the future.

With that, I'll turn the call over to Marlo to discuss the financials and then we'll look forward to taking your questions..

Net sales growth in the range of 3% to 4%, net store count to decrease by approximately 1% to 2% driven primarily by Sally U.S. stores as we continue to optimize our portfolio.

Gross margin expansion of 40 basis points to 60 basis points, GAAP operating margin growth of 90 basis points to 110 basis points, and adjusted operating margin approximately flat to fiscal year 2021. We appreciate your time this morning. Now I'll ask the operator to open the call for Q&A..

Thank you. [Operator Instructions]. Your first question will come from the line of Rupesh Parikh with Oppenheimer. And your line is open..

Good morning and thanks for taking my question. Just going back to the commentary on the variant, it sounds like it didn't have much of an impact on your Q1 but you expect it to have an impact on Q2.

Is that the right way to think about that?.

Good morning, Rupesh, and thanks so much for asking the question. We certainly saw a little bit of impact at the end of the -- end of our first quarter, particularly the last two weeks of December. Those were things where we just had employees that we're needing to be out sick and that change rippling through.

We've seen a little bit more impact in January, but I think for us the big part is it looks like this wave went and increased very quickly. It looks like it's coming down quite quickly. And we've really figured out how to navigate our way through this.

While we haven't seen as great of a result in January as we might have hoped, we're very pleased with where we are and I think we're well set up for the rest of the year..

Okay. Great. Maybe just a related question to that. I know with your last call, you guys mentioned that you expect sales to be stronger -- higher in the first half of the year than the back half. And I think you also mentioned that you expect the majority of expansion in the back half of year on the gross margin line.

If you can just update us in terms of how to think about the quarterly cadence for sales and margins going forward..

Yeah. My take it through the various lines of the P&L starting with the sales [indiscernible], as we've mentioned, Q1 was a great start to the year. So again, feeling really good about the full year. Given the surge in Omicron January we are looking at Q2 sales being a little bit lower than Q1.

Q2, historically, hasn't been our lowest volume quarter as well. So, we do have that planned down a bit. Still growth, but the growth just on a year-over-year basis isn't going to be as strong as Q1. As Denise mentioned, we see the surge come in in the quarter, but we also expect and actually are starting to see it taper.

We think that we're starting to see cases peak in a lot of geographies. So, expect to move past it, but as I mentioned, Q2 from an overall perspective will be a little bit lower from a growth rate perspective than Q1 was. When we look at the back half, those comparisons get a lot tougher when we're looking at it from a year-over-year basis.

Keep in mind, last year at the beginning of the year is when we had some significant closures and restrictions and then that starts to loosen and we go into reopen markets in the back half of the year. So, we have more normalized comparisons when you're looking at the back half.

All that said, our full-year comps, our full-year outlook, contemplates all of this. And we have confidence in the full-year guidance that we have. When we look at the gross margin line, we did have a really strong performance here in Q1.

Having good benefits from pricing leverage that we're able to execute and so we're looking at a full-year basis expansion of 40 basis points to 60 basis points. We see that as relatively consistent from here on out as we look at the quarters.

And then just finishing out with the SG&A, on a full-year basis, we do expect as we've highlighted in the past, to increase year-over-year, there'll be increase in dollars and then rate will be up slightly.

And our expectations on this line takes into account the inflationary pressures we've been talking about mainly from labor, we're seeing high freight costs as well. We also have increased expense plans in our international markets as we reopen those markets in 2022. And then, we also are investing in our growth initiatives as well as marketing.

So, looking to get back to more normalized marketing rates, we did have increased marketing dollars in Q1, we made a little bit of progress towards the more normalized rates but still have more room to go there. So, we'll still work towards increasing that investment as we go throughout the year.

So as planned, SG&A dollars are expected to be relatively consistent from Q2 on out, a little bit of a step-up from Q1 to Q2. And then so from a full-year basis, that puts us in a great position to deliver the full-year operating margins pretty much in line with where we've been last year..

Okay. Great. Thank you for all the color..

Thank you. Our next question comes from the line of Stephanie Wissink with Jefferies. And your line is open..

Thank you. Good morning, everyone. I had a follow-up on your comments on pricing. I'm wondering if you're willing to quantify the level of price that you took and saw in the first quarter. Any incremental pricing you plan to take in the second quarter? Just trying to reconcile some of the inflationary pressures within the gross margin line..

This is Denise. I'll just start with some broader commentary and then Marlo can fill in any additional details. I think importantly, for us, the way that we're really thinking about pricing is ultimately looking to stay in line with the market, cover costs that we see coming through, and then strategically price where we can.

And we're really able to do that with the new set of tools available to us in a stronger set of analytics around price elasticity and what we're seeing. So, while pricing is a very important lever for us, we take it quite prudently to be sure that we're making those choices and staying in line with what the consumer expects.

In general, our price inflation has been trending towards what CPI has been. We're not particularly outsized, so no surprises there from the customer perspective and look forward to continuing to use the tools to do more as we go. I think importantly, what I'd mentioned is in the first quarter, our sales growth was balanced.

That came from both price and volume improvements which is what we're really looking to be able to deliver.

Marlo, you want to add anything to that?.

Yeah. I guess just to reiterate, Q1 expansion of 70 basis points. That was driven largely by the pricing actions that we took. We're also having to overcome the inflationary pressures, both in the margin line, we talked about on the SG&A line, but we also have rising freight and DC costs that we're overcoming on that margin line.

So really pleased with the delivery by the team to be able to expand the margins. They were strong at both Sally and BSG.

And then just in terms of the way that we think about it going forward, I think to Denise 's points, those are our pricing objectives, but I think what gives us confidence is just our ability and our advantages to take advantage of when the market moves, we can move.

And some of those things are, if you think about our core categories, they're highly inelastic. We are in highly differentiated core and care product assortments. At Sally, we're the only ones that really do pro colors for home use. 45% of our assortment is from owned and exclusive brands.

And then on the BSG side, we're the largest wholesale distributor to the stylists and we have over 50% of those sales coming from exclusive. We have a highly differentiated assortment. We have sticky and loyal customers.

It's a unique position in the market that we're able to leverage, and then as Denise mentioned, continue to build on our strategic pricing and promotion capabilities and tools. And I just finally to say, we have a proven track record of executing these price increases and we really haven't seen a notable change in the customer's behavior..

Very helpful. If I could just with a follow-up on loyalty and marketing. I think that was one of your big strategic pillars. Talk a little bit about the marketing investment you made in the quarter. I know traffic was down, but other KPI s were up.

Maybe help us reconcile how you're thinking about the return on investment on that marketing investment and also on the loyalty program advancement that you've seen. Thank you..

Absolutely. One of the things that I came into the company and was so impressed by is the number of our customers that we actually know and can associate two customers to about 75% of our sales in Sally and a 100% in BSG.

Our opportunity with our marketing investment while we continue to reach our existing customers, the big opportunity for us is to put more people in the top of the funnel and understand who else that we can attract.

So, when you think about the investments that we made in Q1 and it really was around digital and performance marketing and the pushes that we could do. Importantly, I think we did try to push a little bit harder upper funnel, versus just for the customers that we knew.

And so, when we think about the return on the investment there, we know it's a little bit lower return when we go after top of funnel, but we do want to see that customer base increasing.

And I think a really strong point to that as we finish the quarter with a record level of loyalty customers in our pool, that number went up again from the end of Q4 to Q1, and we have over 17 million customers on the Sally side that we can talk to. And we've got about a 9% of our sales on the BSG side coming through our credit card.

So, where we're trying to reach people and get them to be stickier, the metrics that we can measure, we feel pretty good about the trajectory that we're on..

Thank you very much..

Thank you. Our next question comes from the line of Oliver Chen with Cowen and Company. And your line is open..

Thank you. Hi, Denise. The Sally Division comp was a little bit softer relative to [indiscernible] what are some catalysts for Sally Beauty going forward. And as we think about [indiscernible] AURs and [indiscernible] will those still be up [indiscernible] would also about [indiscernible] versus sales..

Oliver, I think unfortunately, you're breaking up.

Could you try to repeat your question?.

The Sally division comps ahead and key drivers of the Sally divisions..

Certainly. If we think about the business and how our comp sales performed in the quarter, we saw particularly strong sales on the BSG side of the business as salons were really fully reopened lapping last year where there was still a fair amount of challenge for a number of stylists in a number of states in operating their businesses.

When we think about what our performance was at Sally, we should feel quite good about our performance. Performance was pretty consistent across geographies. Sally is the business where we saw a little bit more slowdown at the very end of December with the uptick in COVID and we needed to have a few shorter store hours and things like that.

But overall, we felt good about where we were and what we're lapping and where we came out with that business.

Care was particularly strong in delivering in the quarter, saw good growth with our Strawberry Leopard products, continued growth with color, which are all the indications of us that we've got a very healthy business in that Sally chain go-forward. And then you think about our Europe and Latin America businesses.

They were actually up against a little bit easier compares to last year. So that helps them number in the beginning of the year that tapers as we go through the year. So all-in-all felt good about our Sally performance..

Thank you..

Thank you. Next, we will go to the line of Simeon Gutman with Morgan Stanley. And your line is open..

Good morning, everyone. I wanted to follow up first on Omicron in January.

Can you give us a sense of now that maybe the back half of the month seems like things have gotten better, at least in January? And if that's the case, are you seeing a recovery that's as rapid as the variance is going? And can you talk about the -- maybe the cadence of VSG versus SBS if there was any nuance there and how Omicron was handled by the consumer?.

Sure. I'll start and then if Marlo wants to add anything. In terms of what we're seeing, I think in the last week or so, you can definitely see an improvement in traffic trend. We also see an improvement in the amount of our associates, who might be out sick or experiencing other challenges in their lives.

So, we do see that normalization is starting to happen. And we saw a fairly high case counts, so I won't say it's completely behind us at this point. I think that there's a little bit more to go.

In general, I think Sally, because it's just a retail business and has a lot more stores and a lot more team members day-to-day operating in that environment, it saw a little bit more pressure than the BSG business did.

The stylist business stayed pretty sticky in terms of our sales and progress as we've gone through Omicron, not to say that there wasn't a dip, but that I think we're seeing the same general pattern up and down. The BSG trend was just probably a little less noticeable than what we saw on the Sally side of the business.

The one thing that's unique this time in Europe, that is different than prior times is, this time we really only saw true lockdowns or shutdowns in a very small part of our geography. The Netherlands, for example, actually locked down again. But compared to other variants with a regular course of business for a lot of our European markets this time.

While they certainly had some additional restrictions, they didn't go as far as shutting down businesses in most parts of Europe. That was a pleasant surprise to us just in terms of how the variant's being managed..

Thanks for that. And then my follow-up is, can you talk about the elasticity in both of the businesses. On the surface, and this is just an observation, it looks like BSG seems to be more inelastic, given how the top lines performing and some of the gross margin flow-through.

Whereas it looks like SBS, it looks like there's maybe some pullback in units. I know you said units in AUR were up. I don't know how you were classifying those across the brand. And then as a follow-up within that follow-up, so sorry about all the follow-ups.

Is there any anything you can share with your full-year guidance? Is anything changing between BSG and SBS based on how Q1 played out?.

Let's start with the inelastic question. I would say from both businesses, we have some advantages in terms of the inelasticity, but in different ways. If you think about the Sally side, when you think about the Sally customer, the Sally really is the only provider of pro color for home use.

I would say it's at least 80% market share when you look at the market share statistics.

And so, you think about, where does the customer go if not Sally? So, their choice is either they trade down to box color, and you're not going to get the quality results or you're trading up to a silo store as long treatment and now we're talking about going from an all-in call it $7 or $8 to buy a tube of color.

And if you need to buy the bowl and everything else, you might be at $15 going up to $150 service. So, so -- it's just such a uniquely positioned place in the market. If you trade down to the box color, you may save $5, but you're really going to get not as good of a result.

And so, for a $5 difference on a $10 or $15 purchase, that's where we see the stickiness in the loyalty of the Sally consumers. So once we give them the confidence and teach them how to use the product, they're very loyal.

So, at that point, really, yes, we have moved prices quite a bit over the last for sure, six months and almost up to a year in various ways and really haven't really seen that customer change behavior.

And then I think you had a follow-up question there on is there anything changing on our full-year guidance based upon what we saw in Q1? And I would say in general, no. I think the cadence of the year is likely to play out the way that we expected.

I think importantly, Marlo mentioned, we always plan every year that the second quarter is a little lighter quarter than the first quarter in terms of sales, or seeing that play out. And we would expect the rest of the cadence in sales to be what we expected.

I think the one piece that's a little bit different as we would say, we have stronger gross margin performance in the first quarter with the strength of pricing really coming through and working to offset some of the other costs.

So, I think the one piece is a bit more normalized if our gross margin gains throughout the year, we're going to be fairly consistent quarter-over-quarter and versus the four assuming that they were going to be a little bit more back-half weighted. I will say we did have some supply chain challenges this quarter. We talked about the Sally.

There was some pressure in the electricals and the styling tools and so as we've been dealing with these challenges and disruptions for some time now, one moves we did make differently, and we started to talk about this on our call last quarter, was really to frontload the year with the inventory.

So, our inventory level is going up, we're at the healthiest place we've ever been for the pandemic. So, with that, we feel good about being able to deliver these full-year sales with the cadence that we've talked about..

Okay, thank you, both..

Thank you. Our next question comes from the line of Olivia Tong with Raymond James. And your line is open..

Great. Thanks. Good morning. I wanted to follow up a little bit, put a little bit of a finer point on your expectations for this quarter.

So based on your modeling, do you have a sense of when you think you can back to what your pre -Omicron expectations were, and whether on top of them Omicron, you've got whether, you've got inflation macro, etc., the fall off with stimulus. Just wondering if you could touch on that a little bit.

And then just following up with respect to the store footprint optimization.

Have you identified the let's call it 50 to 100 doors you're planning to close? And what do you think is sort of the right run rate or ending expectation there? Is there a continued calling of the store base or is this once you do this, you feel like we're back to stabilization in terms of the store count? Thank you so much..

I'll start with the first one, which is where we are and what did Omicron do to us that we didn't know going into the planning process. We came into this year expecting the world to be dynamic. We've been living this up and down and this choppiness for two years now.

And so, we had expected some pressures, whether that be labor disruption, whether that be the pricing disruption or just uncertainties around the pandemic. So, I don't think, again, we're seeing a whole lot of difference in the way that we're thinking and the way that we're planning and the way that we expect the numbers to play out.

We do think there's more pressure just in January like we mentioned, but we also have lifted these waves and our teams know how to navigate and deal with these challenges.

And again, I think with our positioning with what we've done to get past and try and combat a lot of these supply chain disruptions with the earlier pull-ins, I just think we're really well-positioned to really deal with all these puts and takes and all the dynamics that are going on. If you look at last year, it's just -- it's crazy.

You mentioned stimulus, you mentioned weather, you mentioned COVID waves. We've experienced it all and we know how to deal with it. So, we're feeling pretty good about what we've planned and not a lot of change other than we're learning new ways to deal with this -- with the ups and downs.

And then I'll jump in a bit on the store optimization question that you threw out. I think that when we think about the store optimization opportunity for us, a big opportunity is really to focus on where we can get sales transfer. So, I think as we've talked about before, our stores are generally all profitable.

The opportunity for us is to shift the sales, be able to reduce the cost base a bit to help offset other pressures and have that be positive to the business overall. We've been running a test. We continue to be pleased with the results of the test, which is about a 90-store closure we'll make -- we'll continue to read that a little bit longer.

But specifically for the stores that we have identified for closure this year, all those stores are identified. So, the path that we have for 2022 is very well known and it's a 100 plus stores that will close partially offset by some new openings and some markets that makes sense for us to be in.

But that is a path that we're already planning to go down, feel good about the selection of those stores.

I think when we bridge into the longer-term and where this could go, I think we want to continue to understand the sales transfer from the test and also understand that compared to where we are today and the operating margin of the company and the efficiencies of the company.

Our stores now service on more of our e-commerce customers with BOPIS into our delivery and overall profitability has gone up as we've been able to carry through pricing while still managing our cost base so that profitability in a number of our stores is even healthier than what it was before.

So, we'll read both of those and we'll expect as we get later in the year to have a stronger view post-2022 of where our path might take us here. But overall, I feel good with what we've done so far..

Got it. That's helpful.

And then on the SBS, the people who are buying in SBS but they're not loyalty members, that 25% of customers, can you give a little bit more color on why you think they aren't members? Have you done any diagnostics about why they may not be joining or if they're just new to the store? We'd just love a little bit of more color there..

There could be all types of reasons. I'll throw out a few. Of one, I think when you first see customers come and shop in the store, if they're a new customer to Sally, we wouldn't really expect them on day one to sign up for a loyalty program. And we do continue to have new customers come into the store on a regular basis.

So that's certainly a fraction of it. There are some other folks who honestly just aren't as comfortable signing up for our loyalty programs in terms of what their dollar amount of spend is when they come in, in terms of sharing information.

We think they'll always be a population of people but if they're not actually required to participate, that they might not choose to participate. And in all honesty, that's completely fine with us. We love those customers still coming in and shopping with us.

Generally speaking, a customer who's not a loyalty customer has a little bit smaller basket than what we would see the customer who is an average loyalty customer. Clearly our best loyalty customers have outside baskets and outside frequency.

Overall, no specific other drivers about design of program or something that we need to be offering more or less to get them to sign up. I think it's much more macro issues as to why they might not have signed up for an account at this point in time..

Understood. Thank you so much. Appreciate it..

Thank you. Our next question will come from the line of William Reuter with Bank of America. And your line is open..

Hi. So, I have two questions. The first is, you mentioned that you've been pushing through all the price increases that vendors have been sending your way.

I guess, what types of increases in price have you seen or maybe are you seeing on a year-over-year basis at this point?.

Yeah. I'd say just one thing to point out to. From vendor price increases, that is a very normal thing. Vendors do this at least annually, sometimes more often than that. So, when you think about it on the BSG side, that's a -- that's another thing to point out. For the stylist, they're used to price increases.

This is a normal recurring part of their lives. From -- in terms of the actual amount, again, it's mostly keeping up with CPI and inflationary pressures..

I would say it's been probably lower in past years, a little bit on the higher side and maybe a little bit more often, more than once a year, several times a year has been kind of more than the cadence in recent history. But again, the shopping behavior hasn't changed, especially for the stylist.

Their main concern is to keep their clients happy and they know how to do that through the products that they have confidence in comfort with. And again, very loyal to that. And so, pricing really haven't changed their shopping patterns..

I guess the 6% comps, does that mean units were relatively flattish? Is that fair?.

No, so Denise was pointing out that it's coming from both pricing and volume..

The second is, your net leverage is down below two times and you have a 2.5 times target. You repurchased $75 million of shares in the quarter. I guess, what does this say about the pace of your share repurchases? And I guess, how focused you are on getting to that target of 2.5 times..

So maybe to rephrase. I'm not sure we've put a target out there. I think what we would say is a leverage ratio at 187 -- at 1.87 is a great place to be. We are really pleased with where we are. I would just go back to the overall.

Our business has such a strong cash flow generating model and our teams just really came through the pandemic and just dealing with all the dynamics in this environment to really post a really strong balance sheet. So, we've got $300 million of cash on the balance sheet.

Historically, we would usually run around $200 million, so we definitely have some excess on the balance sheet. We don't have anything outstanding on the ABL. So, we're positioned well in terms of deploying excess cash. We will continue to prioritize our growth initiatives. We did, like you say, restart the repurchase program.

We've got $75 million deployed that was up 3% of the company, I think we purchased there. We've got $650 million left on that. And then we have further opportunities to optimize our capital structure. You see us do that in the past where we can maybe get some additional interest savings on the P&L.

So, you put all that together, you think about where we are in terms of free cash flow generation, $200 million is what we're predicting for this year. That will be back half loaded, but $200 million of cash on the balance sheet.

$200 million of cash generation, and certainly sets us up well to continue to return value to shareholders through share buybacks as well as optimizing capital structure..

Great, thanks for taking the questions..

Thank you. Our next question will come from the line of Jenna Giannelli with Goldman Sachs. And your line is open..

Hi there. Thanks for taking my question. On the inventory balance, you're bringing up healthy amount year-over-year and said you're comfortable -- are very comfortable with it now.

Just curious if you can comment a little bit more on how that looks across categories and if there are anywhere, you're looking to still fill out or replenish [indiscernible] some of the industry supply chain headwind?.

So, I'll start and let Marlo jump in. I think that we're really pleased with what we've been able to pull forward and be sure that we can service our customers. When we think about where some of that inventory really went, it's into our core products, it's our fastest moving products. It heavily supports our BSG business around color.

Also, our Sally business on the color front, but much focused on that core category of color and being sure that we're in stock in cross the entire line for what people is looking for and be able to continue to manage that demand. So very focused in terms of where the step-up has been.

Our opportunity, we have a few categories where styling tools and some other things might be a little lower than where we need to be. But as we are able to get those in and into the system, we believe that's going to be offset by that color inventory being appropriately utilized through the business and through the quarters..

Okay. Excellent. Thank you. And then just one additional question. You emphasized the strong market share, particularly on the Sally side around, call it 80%. That's a good place to be. I guess, just comment a little more on the broader competitive landscape, whether it's mass or even Amazon professional that's been quiet.

But any updates there on either of those in the broader competitive landscape? Thanks..

There really hasn't been much new news. I think we feel like we're watching all the competitors. They're certainly all the same players who are out there that have been out there before and we keep an eye on what is happening there. We haven't seen any of them meaningfully step closer to what our core offering is.

I think that if we looked at it the other way and said how are we really looking to position ourselves for the future? I mentioned on our prior call, the work we're doing this year is to really start to say, how do we expand our view of what we can stand for, leveraging our capabilities and our skills.

So, while we're watching competitors who might be looking a little bit more closely at places that we play, although haven't seen any --any new traction there. Were also really open to looking for places that now that the transformation is complete, we're set on a growth agenda.

We have the data and analytics that we need to be -- drive our business forward. That is the opportunity that we can also look for new areas of growth for ourselves..

Makes sense. Thank you so much..

Thank you. And with that, we have no further questions so speakers, if you have any closing comments,.

I'd just like to thank all of you for joining the call today and importantly, I'd like to thank all of our associates around the world. It is never without a lot of effort that our customers are so well served and I appreciate all that they do to serve us well and drive our profitable business and growth in the future.

So, thank you all for joining the call today..

Thank you. And ladies and gentlemen, that does conclude your conference call for today. Thank you for your participation and for using AT&T Executive Teleconference Service. You may now disconnect..