Kimball International Inc

F:KB1B

Earnings Call Transcript 2023-Q1

[Operator]

Good afternoon, ladies and gentlemen. My name is Rocco and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Kimball International First Quarter Fiscal 2023 Earnings Conference Call.

As with prior conference calls, today’s call, November 3, 2022 will be recorded and may contain forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. Actual results could differ materially from the forward-looking statements. Risk factors that may influence the outcome of forward-looking statements can be seen in the Kimball International Form 10-K. During today’s call, the presenters will be making references to an earnings slide deck presentation that is available on the Investor Relations section of Kimball International’s site.

On today’s call are Kristie Juster, Chief Executive Officer of Kimball International and T.J. Wolfe, Executive Vice President and Chief Financial Officer.

I would now like to turn today’s call over to Kristie Juster. Ms. Juster, you may begin.

[Kristie Juster, Chief Executive Officer]

Good afternoon, everyone and thank you for joining today’s call. We are pleased to report a strong start to fiscal 2023, which marks our third consecutive quarter of industry-leading performance and continues to demonstrate the value of our unique set of strategic choices, differentiated market positioning and their resilience due to our leadership position in faster-growing geographies and categories.

First quarter sales to our core workplace and health end markets increased 20%, driven by our focus on ancillary products and secondary markets. Ancillary products, which are critical to the flexibility, collaboration and pricing needs of today’s developing workplace and health settings continue to see the most robust demand across all categories and accounted for 87% of our trailing 12-month sales.

At the same time, secondary geographic markets, which are experiencing the highest levels of employment and population growth along with a faster return to office represented 78% of our shipments over the last 12 months. Our focused strategy, customer excellence and applied research are enabling us to deliver the products and solutions our customers are seeking in the geographies and end markets with the highest growth and resiliency resulting in continued revenue growth and market share gains. This was also our third consecutive quarter of substantial year-over-year profitability growth. sustained top line growth, a commitment to operational efficiency gains and timely actions to mitigate inflationary pressures continue to drive margin improvement and enabled us to convert 14% revenue growth into a 136% increase in adjusted EBITDA.

Taking a closer look at our key end markets, workplace sales increased 22% in the first quarter, with a double-digit growth achieved across most verticals, led by commercial and education. Workplace order rates were slightly ahead of last year’s levels. While we experienced a mid-quarter slowing of the return to office pace mostly in major metropolitan markets and cycles of 57% year-over-year growth comp from last year. Recent market data shows continued increases in the return to office trend and while major metropolitan areas remain behind secondary markets, the gap has begun to narrow.

Finally, we continue to see a sustained high level of upstream of NAND signals including inquiries, showroom visits and A&D activity. While all of these data points are encouraging, we also appreciate that recessionary concerns remain a headwind to future demand, and we are closely monitoring the market for signs of change in order and project patterns. This quarter also marks year one of Perfect Harmony, the implementation of our harmonized selling model into a multi-branded selling organization, which continues to yield very positive results.

In Q1, incremental sales for this new multi-branded approach represented more than 25% of our year-on-year increase in sales growth. We are also pleased to announce that all of our Kimball International showrooms have been refreshed and upgraded over the last year to showcase this combined plus common product offering of all 5 workplace and health brands, including a new pop-up showroom in New York City. These efforts have been well received in the market with an increased number of showroom visits, customer inquiries and influencer events. Our teams and dealer community have been actively connecting in person this quarter, learning new products and sharing best practices at our national sales meeting and Select Dealer Conference, all in our newly harmonized headquarters in Jasper, Indiana.

Poppin’s first quarter sales were flat year-over-year, constrained by heavy brand reliance on metro market due to the lower-than-expected return to office. Our newer growth initiatives, PoppinPro, the pod category and our expansion into secondary markets continued to perform above our expectations and are a very important part of Poppin’s growth acceleration into the future. Our 3 new Poppin showrooms and secondary markets opened during fiscal year 2022 are scaling well and all placed in the top 10 of Poppin’s markets for the quarter.

In addition, Poppin’s original 5 showrooms are in the process of being refreshed with a newly relocated showroom in the L.A. market to Culver City. Poppin’s pod category revenues are up 38% year-on-year, and our PoppinPro dealer channel accounted for 15% of Poppin sales for the third consecutive quarter. Poppin’s work happy approach to product design and in-stock ready-to-ship model will allow us to capitalize quickly on increased demand in core markets while providing a platform for continued expansion into new territories.

Moving on to our health market, sales were up 13% year-over-year in the first quarter. While orders were up slightly year-over-year as hospitals and health systems reengage on projects that were delayed throughout the pandemic. Our Interwoven Health brand continues to perform well in the market with sales up 27% year-over-year, and we are gaining share in the Federal Government Health business, which is benefiting from increased funding. This vertical makes up more than 10% of our overall health bookings. We just returned from the Healthcare Design Expo in San Antonio, where we proudly received the Nightingale Award for our every space modular solution and showcase our family of brand support spaces throughout the entire health care facility and puts the focus back on the patients, caregivers and family members.

We continue to build on our expertise and health through investments in applied research, product development and partnering with our health-focused dealer community and health systems. We are also pleased to share our new creating places to belong campaign, addressing both our Workplace and Health markets. This program is a culmination of our research, insights, conversations with customers and a reflection on our own journey around what it takes to create an equitable, inclusive flexible and safe workplace, creating places that foster a deep connection, productivity and well-being is more than just providing a space for working, lining and healing. It is about reinvigorating spaces to a place of belonging and is based upon four fundamental elements: balancing hybrid environments, prioritizing flexibility focusing on inclusion and belonging and supporting health and well-being.

Combined with our deep expertise in broad ancillary product portfolio, this new design thinking will allow us to become the trusted partner in our customers return to office and employee reengagement efforts and their pursuit to create environments that promote a personalized sense of belonging. In combination with creating places to belong, we have also launched 9 new product introductions and enhancements in October, ranging from nesting shares to accessory tables as well as enhancements to many of our most successful solutions. These new introductions are directly related to the latest research and insights that continue to guide our view on collaboration, connection, flexibility and hybrid environments.

In hospitality, we are realizing the return of some property improvement mandates as brands are positioning themselves for a post-pandemic travel environment that is comprised of pent-up demand for leisure travel and a realization of the value of in-person business meetings. While still early, the renewed optimism in the sector makes us cautiously optimistic regarding a return to growth in this end market in the second half of fiscal year 2023.

As one of the largest providers of case goods, round seating and ancillary products to the hospitality industry, we will clearly benefit from a turnaround in this sector and the future demand trends. To sum up, our first quarter performance represented a solid start to fiscal 2023 and has set the stage for another year of growth for Kimball International.

Now, I will turn over the call to our CFO, T.J. Wolfe, for a review of our first quarter financials and a discussion of our outlook for fiscal 2023. T.J.?

[T.J. Wolfe]

Thanks, Kristie, and good afternoon, everyone. We began the new fiscal year with solid first quarter results, giving us confidence in our strategic priorities and keeping us on track to achieve our full year guidance.

Net sales increased 14% to $177.8 million, led by our Workplace and Health end markets. Sales in Workplace increased 22%, mainly in the commercial and education verticals. Health revenue increased 13% as providers in this sector have begun to reengage on projects that were postponed during the pandemic. As expected, the hospitality end market remained challenging, with revenue decreasing 21% compared to the year ago quarter.

Gross margin increased 220 basis points to 33.5%, reflecting proactive pricing actions to offset inflationary costs and supply chain pressures as well as higher utilization from improved sales volume. The slight sequential decline in gross margin was mainly driven by higher freight and logistics costs. Selling and administrative expenses were $53.4 million or 30% of net sales, a decrease of 210 basis points year-over-year. Excluding amortization from the Poppin acquisition totaling $1.5 million as well as SERP adjustments, adjusted S&A was $52.4 million or 29.4% of net sales compared to $48.6 million or 31.1% a year ago.

First quarter 2023 GAAP net income was $6.6 million or $0.18 per diluted share, inclusive of a $0.09 per share after-tax contingent earn-out gain. This compares to a GAAP net loss of $5 million or $0.14 per diluted share in the year ago quarter. Excluding the gain as well as the acquisition-related amortization and restructuring expense, adjusted net income was $4.8 million or $0.13 per diluted share, up from an adjusted net income of $1.9 million or $0.05 per diluted share in the first quarter of fiscal 2022. Adjusted EBITDA grew to $11.5 million, up significantly from $4.9 million in the fiscal 2023 first quarter. Adjusted EBITDA margin also more than doubled to 6.5% from 3.1% in the year ago quarter.

Moving to our order trends, Workplace orders were up 1%, with price more than offsetting volume declines supported by demand in the commercial vertical. Orders in the health end market were up 3% with price more than offsetting volume declines recovering from a decline in the quarter ended this past June. Orders in the hospitality end market declined 4%. However, the cadence of order trends in hospitality suggests a bottoming of demand and potential return to growth in the next quarter.

Our total backlog at quarter end was $180 million compared to $170.8 million in the first quarter of fiscal 2022, with lead times for all major product lines back within 1 to 2 weeks of pre-pandemic or normal lead times. Assuming no new supply chain disruptions, we would expect them to reach our desired lead times by Q4. And generally, our backlog is comprised of 75% Workplace and Health and 25% hospitality orders.

Turning to the balance sheet and cash flow statement, we ended 2023 first quarter with total available liquidity of $75 million, consisting of $17 million in cash and $58 million from the unused portion of our credit facility. At the end of the first quarter, our net debt to adjusted EBITDA ratio was 1.2x. In the first quarter, we generated $18.1 million in operating cash flow. Capital expenditures of $5.4 million consisted of investments in our warehouse in Jasper, which is now fully operational, updating showrooms, manufacturing equipment automation to drive our operational excellence programs and enhancing the customer experience. We returned $4.3 million of capital to shareowners in the form of dividends and share repurchases.

We continue to focus on finding solutions for and eliminating running hot costs and supply chain disruptions while also continuing to invest in more efficient operations. For instance, we have modified our warehouse network to provide for a single point of order dispatch, and we are halfway through the process of installing our metal automation infrastructure which combined with lowering steel prices will drive further operational efficiencies. This project is expected to go online in April 2023. We have also initiated several initiatives to reduce our working capital levels, which we estimate reached its peak during the current quarter and we anticipate will begin to ease over subsequent quarters. Improvement in our cash conversion will enable us to further reinvest in our business reduce leverage and return additional cash to shareholders.

Now looking at our 2023 outlook, we reaffirm our 2023 revenue guidance of $750 million to $780 million, representing approximately 15% growth at the midpoint and our adjusted EBITDA guidance of $48 million to $52 million, representing approximately 47% year-over-year growth at the midpoint. We expect full year revenue and adjusted EBITDA to be weighted toward the second half of the year, with the fourth quarter being the strongest.

Our guidance reflects current order trends through October, additional price realization from actions already taken and a reduction in backlog during the second half of fiscal 2023, driven by improved operational performance. We are planning for full year capital expenditures of approximately $25 million and expect our full year effective tax rate to be in the range of 25% to 27%. As for the second quarter, we expect revenue to be similar to Q1 levels and adjusted EBITDA to be slightly below Q1 levels, mainly due to a temporary increase in freight and logistics costs.

With that, I will now turn the call back to Kristie for her closing remarks.

[Kristie Juster, Chief Executive Officer]

Thanks, T.J. We are very pleased with our positioning as we move forward in fiscal 2023. Our first quarter results mark a solid start to our new fiscal year. Through our focused set of strategic choices, we are successfully delivering products and solutions to end markets and geographies of high growth, resiliency and favorable return to office dynamics. While we are mindful of the challenging macroeconomic environment and tightened recessionary risks, we are confident in our ability to continue to gain share and outperform the industry.

Finally, in September, we published our 2021 ESG report, which outlines our company’s fiscal 2023 goals and provides details on our ongoing commitment to sustainable business practices. I’d like to thank our employees, customers and partners that enable this commitment. Kimball International believes in creating places to belong where each individual feels safe, productive, included in value. Thank you again for joining us today.

And now, operator, I’d like to open the call to questions.

[Operator]

We will now begin the question-and-answer session. [Operator Instructions] And our first question today will come from Greg Burns with Sidoti & Company. Please go ahead.

[Greg Burns, Sidoti & Company]

Good afternoon. Could you please quantify how much the orders were impacted by price versus volume, how much were volumes down versus price?

[T.J. Wolfe]

Sure, Greg. So if we look at – let’s look at revenue first. We look at shipments in the quarter, the plus 14% was primarily price was plus 16% in price actually and minus 2% in volume. And then if you go to the orders, which were plus 1%, that was plus 15% in price and minus 14% in volume for the orders in the quarter.

[Greg Burns, Sidoti & Company]

Okay. And relative to pricing, have you fully realized the pricing that you’ve tried to pass along over the last 12 months? And – or is there any further room for price realization and margin improvement from here?

[T.J. Wolfe]

Yes, Greg. I think if you look in the backlog, we would say that the backlog contains somewhere between 80% to 90% of all the pricing actions we have taken. So we feel that we have realized the vast majority of the price in the backlog for future shipments, so saw slight amounts ago, but the majority of that has been put in place.

[Greg Burns, Sidoti & Company]

Okay, great. And then in terms of demand trends, obviously, you are maintaining your guidance for the year, so it doesn’t seem like things have deteriorated since the end of the quarter. But could you give us maybe some insight into what you are seeing? Is it – are you seeing the kind of the slowdown in major metros being offset by growth in your secondary markets, like how is that dynamic playing out for you?

[Kristie Juster, Chief Executive Officer]

Sure. We look carefully at our metro markets versus kind of secondary and tertiary markets, and there is a significant difference in those two markets in our own performance. We would say metro markets are certainly kind of in line with industry growth trends, and we are seeing a much different – about a 15-point difference in secondary markets.

[T.J. Wolfe]

And Greg, when you look at through October, the order rate through October has a similar trend for the quarter. So orders were roughly flat versus prior through the month of October.

[Kristie Juster, Chief Executive Officer]

And just the other thing that I would comment is when you look at the mix of our business versus industry, certainly because 75% of our business is in secondary markets, it makes a big difference for us how the overall business is performing.

[Greg Burns, Sidoti & Company]

Okay. And then I guess, just back to the price versus volume. So when we look at the full year guide with the 15-point increase in revenue, that’s mainly all coming from price?

[T.J. Wolfe]

Yes. The vast majority of that is going to be priced, Greg. And I think when we think about kind of the other elements that will kind of fuel the growth in the back half. And so it was never a volume-driven growth as price. Also, we expect the backlog to convert faster. So we would see as lead times come in, we would see a reduction in the backlog. And then we’ve talked a little bit about the hospitality recovery and we are beginning to see a place where those orders are stabilizing and we see growth potential. So we think hospitality will perform more favorably in the second half of the year as well.

[Greg Burns, Sidoti & Company]

Great. Thank you.

[T.J. Wolfe]

Thanks, Greg.

[Operator]

And our next question will come from Reuben Garner with The Benchmark Company. Please go ahead.

[Reuben Garner, The Benchmark Company]

Thanks. Good evening, everybody. So I guess it sounds like orders you are starting to see some volume declines even though you’re still outperforming the industry. I’m just curious if you could kind of go into what gives you confidence that things are going to recover to be able to meet that full year guidance based on what you know at this point?

[T.J. Wolfe]

Yes. Sure, Reuben. So I think a few other things to note. During the quarter, if you look at the pattern in the quarter, we certainly saw that August was the weakest month of the quarter. So start off in July, softened significantly in August and then came back up in September and then we’ve seen that September level sort of carry straight across maybe a little bit of choppiness. But I think that’s one point. I think when we look at also the buying patterns for something like education buying season, that’s clearly something that fuels our second half of the year growth. We think that, that might come slightly earlier than it has in the past. So we think there could be some growth from education buying. And then again, the points I just kind of made previously, there will be some reduction in the backlog that will convert into shipments in the second half from the current levels. And again, I think we would – I would point out that we do believe hospitality will perform more strongly in the second half of the year than it does in the first half. And that’s not really fully reflected in the order patterns that we see year-to-date. So we think that’s going to be another growth lever.

[Reuben Garner, The Benchmark Company]

Okay. And then in the press release – and sorry if I missed this on the call already, then the press release you referenced logistics, your logistics network kind of hitting the second quarter. Any more color you can give us there on what exactly is going on?

[T.J. Wolfe]

Yes. Sure, Reuben. So if you think about in the logistics kind of the whole logistics area, ocean freight costs have certainly decreased significantly. So to move a container from Asia to either the East or West Coast, those have maybe been cut in half. However, because there is still a lot of congestion domestically, we experienced higher costs from storing containers at the ports longer and then also congestion in our own warehousing network along with 3PL providers that added incremental cost. So we are in the process of getting the logistics network fully optimized. And once we do that, those costs will come off. And so that’s something we’re in the process of doing now. But that will be – we will experience those higher costs again in this quarter.

[Reuben Garner, The Benchmark Company]

Okay. And then last one for me. Can you give us a little bit more color on the timing of expected benefits on Poppin. Is that something that is material enough that it’s given you some visibility into the revenue growth as we move through the year that might not necessarily be showing up on the order front over the last few months?

[T.J. Wolfe]

Yes. Absolutely, Reuben. So I think if you look at Poppin’s business, one of the things that we talked about is that in-stock ready-to-ship model, Poppin does not operate with really a backlog and so when you see a slowdown in an order pattern, it really impacts Poppin’s business immediately. So I think as we talked about major metro markets, which are Poppin’s strength, along with the fact that there is no backlog, you see that depressed kind of performance in Poppin in the moment, and we mentioned a flat year-on-year. As – and again, we believe that, that will begin to recover in the second half and the positive side of the Poppin benefits quickly from a recovery when it does occur. So we do see order patterns recover further in the second half of the year, Poppin would benefit from that quite quickly.

[Kristie Juster, Chief Executive Officer]

And Reuben, I would just add that when you think about the new incremental opportunities that we’ve launched with Poppin, PoppinPro, the new pod category, secondary markets, those are brand-new initiatives that we’ve been working on for about a year. And we’re very pleased with how those are progressing. And so those will become a bigger part of Poppin going forward.

[Reuben Garner, The Benchmark Company]

Okay. And I said last one, I want to sneak one more in. The healthcare vertical, how did those orders hold up relative to others over the last few months? Is that an area that’s maybe less kind of sensitive to the macro concerns that might hold up better this year?

[Kristie Juster, Chief Executive Officer]

Yes. I’ll just give some top-level comments and let T.J. talk about the trends. The health vertical is back, our business is back to pre-pandemic levels. So we are very pleased with how that Health business is operating. We are involved and have been involved in some longer lead time opportunities that we’ve been working. And so we’re pleased with how the funnel is actually building. You can feel focus coming back to kind of redesigning and working with the interiors of those environments. So we do believe that, that business will come back, and you can start to see that in the order trends that you’re seeing this quarter.

[Reuben Garner, The Benchmark Company]

Okay. Great, thanks, guys. And good luck going on to the rest of the year.

[Kristie Juster, Chief Executive Officer]

Thanks, Reuben.

[Operator]

[Operator Instructions] Will come from Budd Bugatch, Water Tower Research. Go ahead.

[Budd Bugatch, Water Tower Research]

Yes. Congratulations on a good quarter and good afternoon, by the way.

[T.J. Wolfe]

Hey, Budd.

[Budd Bugatch, Water Tower Research]

I had a couple of questions, if I could. On the price versus cost, any commentary that you could give us any differential between the end market of price versus cost in the quarter and also in the backlog?

[T.J. Wolfe]

Yes. Budd I think the margin expansion, if you kind of look at how we achieve that. I would say broadly 300 basis points of expansion was our ability to realize price above inflation. And then there was about 100 points – 100 basis points deterioration from some of these incremental logistics costs that we’re experiencing both in the previous quarter and into Q2. So I think over the course of fiscal year ‘22, price cost was sort of holding par level. Now we’ve got to the point where the pricing actions are beginning to cover inflation. And so in the backlog, as we mentioned, almost the entirety of the backlog between 80% to 90% contains all the pricing actions we’ve taken. And so we’re quite comfortable with where we stand right now in relation to that.

[Budd Bugatch, Water Tower Research]

And is there any difference in the end markets of price? I mean, were they – was the inflation fell pretty much across the three end markets?

[T.J. Wolfe]

It was the only differential I would say, is that because hospitality is both almost entirely project-based business and because that is sourced product as well, either from Asia or LatAm. They experienced higher costs as far as ocean freight goes, but as far as Workplace and Health really no differential between the two.

[Budd Bugatch, Water Tower Research]

So I was interested, T.J. in your comments about the logistics costs, and I’m going to see if I can challenge you a little bit on this. I think container cost, did that max out at around $20,000 for a order during the heady times and you...

[T.J. Wolfe]

Yes, it’s a very high, maybe even $15,000 but yes, at the very high end, yes.

[Budd Bugatch, Water Tower Research]

So – and it started around three or four, right, before we went through all the inflation. So the increase in logistic costs, you’re not back yet to where you were pre-pandemic.

[T.J. Wolfe]

Correct. I think what we’d say is the cost has moved. Ocean container has come off significantly. It’s not back to pre-pandemic, but it’s come off of the highs what has impacted us in the very recent quarter and well into Q2 is the fact that as containers came in, they stacked up for a much longer period of time at the port, and that is the highest cost location to store those goods. And so as we try to relieve the goods from the port, we’re going to experience the impact of those costs. And then we also had to acquire additional warehouse space. We talked about this both in our last call and now our inventory balance, we would say it’s higher than we would like it to be. We believe it peaked this quarter and so as the inventory balance reduces, we will be able to both reduce our warehouse footprint and ease those logistics costs into Q3 and 4.

[Budd Bugatch, Water Tower Research]

Well, I may be the only one on the call that’s experienced the unpleasantness of demurrage in the past. I’m very much aware of how that is a very painful cost. So can you give us a feel of how much demurrage you did incur in the quarter? And what do you thought think you can get rid of it?

[T.J. Wolfe]

Yes. I think from a gross margin standpoint, it was a number that could be between 50 to 100 basis points. So I think it’s an impactful number that needs attention, needs to be work. So I think we were pleased that we could expand margins even with that headwind there. But again, we think that will stay for another quarter or two.

[Budd Bugatch, Water Tower Research]

You think – you don’t think you can get that to demurrage. I mean there is – it is clearly unconscionable what they do to you on that. It’s – it may be one of the best reasons in the world to get angry. So it is going to take another quarter or two to get rid of the – to at least allow them – for them to allow you to get the containers out of the port.

[T.J. Wolfe]

Yes, I think it’s just everyone is dealing with this too, Budd, the congestion there, the fact that the containers, we can only get so many out of days. So it just is – it’s an unfortunate situation. Once you’re there, it does take some time to solve the challenge.

[Budd Bugatch, Water Tower Research]

And what is the leeway do you say, 3 days before they start charging you?

[T.J. Wolfe]

Yes. I mean in some cases, it’s immediate as well. So you do get a day or 2, typically, as you say, to move it off the port onto either rail or truck. But Budd it also, yes, but then it begins quickly after that and the cost out quite quickly.

[Budd Bugatch, Water Tower Research]

It’s just uncomfortable. Okay. That’s very helpful. For me – I’m just – and I must have – somebody did something wrong because I didn’t have a lot of time to really digest the release. But one question I do have is orders were $10 million overall higher than shipments. And I would have thought that would have been the add to the backlog, but it turned out to be only about $4 million. What’s wrong with my math? Is there something wrong with that?

[T.J. Wolfe]

No, I think that math, you’re actually correct. The other thing, again, when you’re talking these numbers, looking at the inventory change, the finished goods made the inventory change. And then we’d have to look at any cancellations, which are typically not material as well, but have to do all the math across that to see. I can – I haven’t worked out the calculation here with you, but yes, that would be how you’d expect it to work as given backlog...

[Budd Bugatch, Water Tower Research]

Plus orders, minus sales equals ending backlog, I think, I mean I think that’s the math. And it – so unless the orders are not net orders that – that’s why I get a small difference or $4 million difference.

[T.J. Wolfe]

Yes, exactly. Yes, something like that, but that’s right.

[Budd Bugatch, Water Tower Research]

Okay. So maybe you can – offline, you could help me with that math. Okay. I appreciate it.

[T.J. Wolfe]

Sure.

[Budd Bugatch, Water Tower Research]

Right, thank you very much. Good luck on the ensuing quarters in the year.

[T.J. Wolfe]

Thanks, Budd.

[Kristie Juster, Chief Executive Officer]

Thank you, Budd.

[Operator]

And this concludes our question-and-answer session. I’d like to turn the conference back over to Kristie Juster for any closing remarks.

[Kristie Juster, Chief Executive Officer]

Yes. Thank you for joining us this evening. And as we reflect on the quarter, we’re really pleased with how our strategy and the key choices that we’ve made over the last few years are playing out as our business is starting to ramp back to pre-pandemic levels. So we look forward to keeping you posted and have a nice evening.

[Operator]

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines at good time.