1stdibs.Com Inc

NASDAQ:DIBS

Earnings Call Analysis

1stdibs Experiences Order Growth Amid Luxury Market Challenges

In Q3 2024, 1stdibs demonstrated resilience with a 3% revenue increase, highlighting a 7% growth in orders despite a challenging luxury housing market. Although GMV contracted by 5% due to low average order values (AOV), management expects this trend to normalize in Q4, projecting GMV between $86 million and $93 million. The company's adjusted EBITDA loss is anticipated at 13% to 17%. Additionally, 2025 targets aim for mid-single-digit revenue growth to achieve operating leverage. These strategies, including discontinuing the auction format, reflect a focus on operational efficiency and positioning for future market recovery.

Steady Progress in Challenging Conditions

In the third quarter of 2024, 1stdibs.com demonstrated resilience despite the prevailing difficulties in the luxury housing market, which is experiencing a significant downturn not seen since the mid-1990s. The company's third-quarter revenue grew by 3% year-over-year, marking its second consecutive quarterly increase. This uplift is underpinned by a 7% growth in orders, reflecting the company’s ability to expand its market share even during adverse economic conditions. Active buyers also experienced a sequential increase, with total active buyers hitting approximately 62,500, indicating ongoing engagement in a challenging environment.

Anticipating a Return to Growth

Despite a contraction in Gross Merchandise Volume (GMV) of 5% to $84.6 million due to diminished average order values (AOV), the company expects these trends to normalize moving into the fourth quarter. AOV fell 11% year-over-year to approximately $2,500, a discrepancy attributed to higher-than-expected reductions in orders exceeding $100,000, which comprised only 2% of GMV. Early indications suggest an uptick in AOV beginning in October, fostering optimism for the fourth-quarter performance.

Guidance and Financial Outlook

Looking ahead, 1stdibs projects fourth-quarter GMV between $86 million and $93 million, implying flat growth to 8% increase year-over-year. Revenue is anticipated to rise to between $21.4 million and $22.7 million, translating to growth of 2% to 8%. The adjusted EBITDA margin loss is expected to range from 17% to 13%. The company's 2025 preliminary plan aims to achieve operating leverage with mid-single-digit revenue growth, allowing for break-even figures on EBITDA.

Strategic Shifts for Improved Efficiency

In an effort to streamline operations, 1stdibs has decided to phase out its auction feature, which only contributed approximately 2% to revenue. The management believes reallocating these resources towards more impactful initiatives, such as machine learning for pricing recommendations, will enhance conversion rates across all listings. The upcoming focus on improving pricing strategies signals a proactive approach toward sustaining growth even amid fluctuations in market demand.

Operational Improvements and Future Potential

The company’s commitment to improving conversion rates remains evident with double-digit growth in both new and returning buyer conversions. The firm has prioritized enhancing product velocity, running increased A/B tests that yielded several successful modifications aimed at boosting transaction rates. Even though AOV has posed challenges, 1stdibs is poised to capitalize on a rebound in the luxury market through its operational refinements and renewed focus on high-engagement sellers.

Financial Position and Shareholder Value Initiatives

Ending the quarter with a strong cash position of $109 million, 1stdibs initiated a $10 million share repurchase program, building on its previous $25 million initiative. This step reflects management's confidence in the long-term intrinsic value of the company and signals a commitment to returning value to shareholders amidst ongoing restructuring and operational efficiency drives. The recent strategic decisions underscore an intention to maintain robust capital allocation while pursuing sustainable growth.

Earnings Call Transcript 2024-Q3

[Operator]

Good morning, ladies and gentlemen. This is your operator speaking. Today's conference call will begin momentarily. [Operator Instructions]

Thank you for standing by. My name is John, and I will be your conference operator for today. At this time, I would like to welcome everyone to the 1stdibs.Com, Inc Third Quarter 2024 Earnings Conference Call. [Operator Instructions].

I would now like to turn the call over to Kevin LaBuz, Head of Investor Relations and Corporate Development. Please go ahead.

[Kevin LaBuz, executive]

Good morning, and welcome to 1stdibs' earnings call for the quarter ended September 30, 2024. I'm Kevin LaBuz, Head of Investor Relations and Corporate Development. Joining me today are Chief Executive Officer, David Rosenblatt and Chief Financial Officer, Tom Etergino. David will provide an update on our business, including our strategy and growth opportunities, and Tom will review our third quarter financial results and fourth quarter outlook. This call will be available via webcast on our Investor Relations website at investors.1stdibs.Com.

Before we begin, please keep in mind that our remarks include forward-looking statements, including, but not limited to, statements regarding guidance and future financial performance, market demand, growth prospects, business plans, strategic initiatives, business and economic trends, including e-commerce growth rates, international opportunities and competitive position. Our actual results may differ materially from those expressed or implied in these forward-looking statements as a result of risks and uncertainties, including those described in our SEC filings. Any forward-looking statements that we make on this call are based on our beliefs and assumptions as of today, and we disclaim any obligation to update them, except to the extent required by law.

Additionally, during the call, we will present GAAP and non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release, which you can find on our Investor Relations website, along with the replay of this call. Lastly, please note that all growth comparisons are on a year-over-year basis, unless otherwise noted. I'll now turn the call over to our CEO, David Rosenblatt. David?

[David Rosenblatt, executive]

Thanks, Kevin. Good morning, and thank you for joining us today. Third quarter results reflect continued improvements across our key focus areas. For the second consecutive quarter, we achieved year-over-year revenue growth accelerating order growth and sequential active buyer growth. We achieved this progress despite prolonged softness in the luxury housing market, which is experiencing the largest slump since the mid-1990s. Despite continued conversion gains and accelerating order growth, GMV contracted due to weaker-than-expected average order values, which we see as temporary. We anticipate returning to GMV growth in the fourth quarter, driven by further conversion gains and moderating AOV headwinds.

Our adjusted EBITDA margins came in toward the low end of guidance. Relative to the second quarter, margin compression primarily reflects seasonally lower revenue as operating expenses remained flat sequentially. In the fourth quarter, we anticipate some additional margin compression due to seasonal increases in performance marketing. While margins will be down year-over-year, we are focused on improving efficiency and positioning the business for sustainable growth. Given the muted demand environment, we are focused on lowering the growth threshold required to achieve operating leverage. Our preliminary 2025 plan targets generating operating leverage at mid-single-digit revenue growth.

Reviewing the third quarter. Increasing conversion remains our operational priority and highest leverage activity. We maintain momentum here. Conversion rates have grown over the past year and growth accelerated again in the third quarter. Encouragingly, these gains are broad-based with new and returning buyers, both seeing double-digit improvements. Additionally, returning buyer conversion hit another record high. Conversion wins fueled order growth, which increased to 7%. Continuing with funnel dynamics, traffic headwinds were stable versus the second quarter but AOV was softer than anticipated, depressing GMV.

Tom will provide more detail later on, but based on quarter-to-date trends, we believe this dynamic will moderate in the fourth quarter. Order growth in active buyer trends are accelerating at a time when the luxury housing market and high-end furniture sales remain soft. According to the National Association of Realtors, U.S. existing home sales are on track for their worst year since 1995 for the second year in a row. This is a cyclical issue, not a structural one. Although calling the timing of a recovery is difficult, demand for luxury homes and high-end furnishings will eventually rebound. When it does, we stand to benefit from our ongoing operational improvements and lower cost structure.

However, we strongly believe in creating our own luck and are not waiting around for the market to recover. We demonstrated this in 2022 and 2023 by reducing operating expenses and narrowing our focus. We are demonstrating this today by accelerating our pace of product velocity and reallocating resources from lower return projects to higher return projects.

Regarding product velocity, the number of A/B tests we ran during the quarter grew double digits sequentially and triple digits year-over-year, hitting a new record. Increasing conversion was the primary focus of our tests and we had several notable wins. One was integrating urgency metrics into our mobile app product detail page, boosting the rate at which buyers placed orders. Another was incorporating pricing guidance into our make offer flow, increasing the number of offers that converted into orders.

Given the highly considered nature of our listings, many orders involve negotiations between buyer and seller because over 40% of orders originate as buyer initiated negotiations optimizing this process is a target-rich opportunity and will be an area of continued experimentation.

Lastly, we launched our first machine learning-based pricing model for furniture, providing stronger, more precise recommendations tailored to maximize conversion. Competitive inventory pricing is 1 of 3 focus areas on our product road map. To achieve this, we have a multipronged approach ranging from enforcing price parity policies to incorporating machine learning-based pricing recommendations. Despite recent gains, there is significant headroom to increase conversion, grow orders and expand our active buyer base. For example, active buyers and new buyer conversion remain approximately 10% and 30% below their peaks. Given our long runway of opportunities, we expect to meaningfully outperform historical levels over time.

Auctions is another area where we are not sitting still. After a thorough review, we decided to discontinue the future in late September for two reasons. First, auctions was intended to induce sellers to price more competitively. We now have a road map that we believe will accomplish this more effectively and applies to all listings rather than only those in auction.

Second, we determined that the resources allocated to the future were not commensurate with its financial contribution and that they would be better deployed elsewhere. Approximately 10% of engineering time was spent working on auctions related projects but it generated roughly 2% of GMV and 5% of orders. This move reduces complexity, making it faster to build new features, simpler to run tests and easier to maintain existing features.

Supply is another area where we challenged assumptions and took action. After reviewing the initiative, we decided to retire the essential seller program on November 1. Launched in January 2022, the offering provided a subscription-free pricing option. This was a great tool for seller acquisition, but the bulk of these sellers did not engage deeply with the platform. Compared to subscription paying sellers, the central seller engagement was materially lower on a number of fronts, including listings, sales and log-ins.

From our data, we know that engagement is the precursor to sell our success. For instance, more listings correlates with more sales. As a result, in late 2023, we shifted our seller acquisition strategy and monetization approach to concentrate on fewer but more highly engaged sellers, retiring the essential seller program is another step in this direction. Although unique seller count has been volatile due to policy changes, we continue to see steady listings growth and ended the quarter with over 1.8 million listings up 7%. Healthy listings growth should continue in the fourth quarter.

We ended the quarter with nearly 7,000 unique sellers, down 13%. As anticipated, seller churn remains elevated as we manage out low-performing sellers. Consistent with previous quarters, the majority of churn was initiated by us due to low engagement or performance. In total, the churn cohort accounted for less than 20 basis points of GMV over the trailing 12 months and under 40 basis points of total listings.

Churn will be temporarily elevated in the fourth quarter as we retire our essential seller program. This change requires existing essential sellers to upgrade to a monthly subscription plan to remain on the marketplace. Approximately 2,200 unique sellers are affected. We expect the change to modestly increase revenue while reducing operational complexity and we will provide an update on our fourth quarter call.

Because our path to profitability will be driven by operating leverage, we are focused on ensuring that resources are best deployed to accelerate and sustain growth. Discontinuing auctions and winding down the essential seller program are 2 examples of this. We are also not sitting still with capital allocation. After completing a $25 million share repurchase program in June, we instituted a new $10 million repurchase program in August. We believe that this will be very accretive in the long run given that we are buying back shares at a discount to our assessment of intrinsic value.

The size of our opportunity, our operational progress and the fact that we are well positioned to capitalize on a market recovery. We are not waiting for external conditions to improve. We are creating opportunities through deliberate action, be it cost reductions, resource allocation or share repurchases. By focusing on what matters most, we have made progress across key metrics. Although it can be hard to measure progress in the market that is contracting, we feel that positive momentum in conversion order growth, active buyers and revenue as well as our continued focus on costs are building a solid foundation to drive results when the market rebounds.

Thank you for your continued support. I will now turn it over to Tom to review our third quarter financial results and fourth quarter outlook.

[Thomas Etergino, executive]

Thanks, David. We delivered GMV revenue and adjusted EBITDA margins near the low end of our guidance range as stronger-than-anticipated AOV headwinds weighed on GMV growth. As I will detail later on, we see this as a temporary dynamic. In contrast, we believe conversion gains and order growth are durable trends. GMV was $84.6 million, down 5%. On a sequential basis, GMV growth rates decelerated approximately 7 percentage points. This was driven by lower-than-anticipated AOV, partially offset by accelerated order growth. Average order value of approximately $2,500 was down 11%. In contrast, median order value of approximately $1,200 was down 3%. The latter is less impacted by fluctuations in high-value orders.

Two variables drove AOV down. First, we lapped a record quarter for orders over $100,000. Last year, these orders accounted for over 8% of GMV compared to our historical average of 3% to 5%. Second, high-value orders were roughly 2% of GMV this quarter, slightly below typical ranges. While third quarter guidance contemplated the first dynamic, it did not anticipate the second. This combination resulted in a stronger-than-expected average order value headwind weighing on GMV growth. As the third quarter AOV was consistent with July, then GMV growth would have been 4 percentage points higher.

We have not seen any change in inventory makeup, on-site engagement or seller discounts. This, combined with stable median order value trends leads us to believe that both the AOV strength last year and the AOV softness this year are outliers. Additionally, relative to the third quarter, AOV trends improved in October, both on an absolute dollar and year-over-year basis. In contrast to the AOV dynamic, which we view as temporary, we see a long runway for conversion gains. Conversion rates have now increased year-over-year for 4 straight quarters. In the third quarter, conversion rates increased double digits for both new and returning buyers.

Additionally, returning buyer conversion hit a new record. We are confident in our road map and see ample headroom to increase conversion over time. Traffic headwinds were stable sequentially with performance marketing optimizations and higher performance marketing investment offsetting softer organic traffic. We ended the quarter with approximately 70% of traffic from organic sources and 30% from paid.

Returning to GMV. Consumer GMV and trade GMV declined at similar rates. Vintage and antique furniture posted GMV growth, while all other verticals declined. In contrast, orders grew in all verticals except art. We ended the quarter with approximately 62,500 active buyers, down 1% year-over-year, but up 2% sequentially. This was our second straight quarter of sequential growth. Because active buyers are a trailing 12-month metric, it is a lagging indicator. Encouragingly, order growth is a leading indicator of future active buyer growth. Based on quarter-to-date trends, we expect continued order growth in the fourth quarter, which is supportive of further active buyer improvement.

On the supply side of the marketplace, we experienced steady listings growth, closing the quarter with over 1.8 million listings, up 7%. We ended the quarter with nearly 7,000 unique sellers, down 13%. The decline in the number of unique sellers was due to higher-than-usual churn. The majority of it was initiated by us related to policy changes in late 2023. This churn had a de minimis impact on GMV and listings. We anticipate elevated churn in the fourth quarter due to sunsetting the essential seller program. However, we do not expect this to have a meaningful impact on GMV revenue or listings. Additionally, churn should normalize in the first half of 2025.

Turning to the P&L. Net revenue was $21.2 million, up 3%, marking the second consecutive quarter of year-over-year growth. Transaction revenue, which is tied directly to GMV, was approximately 75% of total revenue with subscriptions making up most of the remainder. Take rates improved modestly due to a combination of several factors, including a higher proportion of orders below our $25,000 commission rate, growing GMV contribution from low subscription sellers, which carry a higher commission rate and a revised commission rate structure that went into effect late in the fourth quarter of 2023. Gross profit was $15 million, down 1%. Gross profit margins were 71%, down approximately 2 percentage points, primarily driven by higher shipping and payment processing expenses.

Sales and marketing expenses were $9.1 million, up 9%, driven by increased performance marketing investment enabled by new optimizations and improved attribution and headcount-related expenses due to our annual merit increases awarded in March. Sales and marketing as a percentage of revenue was 44%, up from 41% a year ago.

Technology development expenses were $5.5 million, up 21%, driven by higher headcount-related costs due to our annual merit increases awarded in March and some selective hiring. As a percentage of revenue, technology development was 26%, up from 22%. General and administrative expenses were $6.9 million, up 1%, with higher headcount-related expenses due to our annual merit increases awarded in March and higher professional service fees being offset by lower rent expense attributable to the sublease of our former headquarters at 51 Astor Place. As a percentage of revenue, general and administrative expenses were 32%, down from 33%.

Lastly, provision for transaction losses were approximately $950,000 or 4% of revenue, up from 3%, primarily driven by an increase in bad debt expense. Total operating expenses were $22.4 million, up 10% year-over-year, but flat sequentially. Adjusted EBITDA loss was $3 million compared to a loss of $1.8 million last year. Adjusted EBITDA margin was a loss of 14% versus a loss of 9% last year due primarily to higher technology development and sales and marketing expenses.

Given our June 2023 cost reductions, we are lapping our low watermark for operating expenses this quarter. Looking forward, we remain focused on lowering the revenue growth thresholds required to achieve operating leverage.

Moving on to the balance sheet. We ended the quarter with a strong cash, cash equivalents and short-term investments position of $109 million. In August, we initiated a new $10 million share repurchase program. During the quarter, we repurchased approximately $900,000 worth of shares. Since launching our first share repurchase program in August 2023, we have repurchased approximately 5.1 million shares for a total of $26.1 million.

Turning to the outlook. Our guidance reflects quarter-to-date results and forecast for the remainder of the period. We forecast fourth quarter GMV of $86 million to $93 million, flat to up 8%. Net revenue of $21.4 million to $22.7 million, up 2% to up 8% and adjusted EBITDA margin loss of 17% to 13%.

Our GMV guidance reflects continued conversion wins and order growth and moderating AOV headwinds. From a macro perspective, our outlook also assumes a continuation of the soft demand environment we have seen throughout 2024 due to prolonged softness in the luxury housing and high-end discretionary markets. It also contemplates a few one-off items, the U.S. election, which creates more competition for attention and mind share and a shorter holiday shopping season.

Our adjusted EBITDA margin guidance reflects gross margins towards the low end of our recent 71% to 73% range, a sequential increase in operating expenses driven by a seasonal increase in performance marketing. Excluding this increase in performance marketing, we expect operating expenses to be approximately flat sequentially. Our results reflect both the realities of a challenging market and the progress we are making through disciplined execution.

Despite AOV headwinds, we delivered solid progress across key areas, including active buyers, conversion gains and order growth. These developments show that our strategy is working. As we phase out auction and the Essential seller program, we are concentrating resources on the highest impact projects and strengthening our foundation to benefit from an eventual market rebound. While challenges remain for luxury housing and high-end discretionary, we are gaining market share and are optimistic about our trajectory.

We appreciate your continued support and look forward to updating you on our progress in the coming quarters. Thank you. I will now turn the call over to the operator to take your questions.

[Operator]

[Operator Instructions]

Our first question comes from the line of Nick Jones with Citizens JMP.

[Nicholas Jones, analyst]

Great. Could you kind of remind us and maybe speak to the AOV headwinds and how we should be thinking kind of a time line to when those will abate or stabilize? And then I have a second question that's kind of big picture.

[Thomas Etergino, executive]

Nick, this is Tom. I'll take that one. Yes, sure. So our AOV headwinds that we experienced in Q3 really were twofold, right? First, last year -- so this year, we were lapping a record quarter for orders over $100,000 from Q3 of 2023, where it represented about 8% of our GMV. Typically, that number is about 3% to 5% of our GMV. Additionally, in Q3 of this year, orders over $100,000 represented about 2% of GMV. So they underperformed our normal historic averages. So the combined result of those two things really was a result of what caused our headwinds.

Looking into Q4, what we're seeing is that is starting to subside. We saw that October was more normalized from what we've seen in the past and was up from our August and September numbers. So we see that in Q4, we're going to start to see more normalized average order values.

[Nicholas Jones, analyst]

Got it. That's helpful. And then some of the residential real estate both companies have kind of reported this quarter and kind of I think the consensus around next year is kind of more muted volumes may be up a little bit, a couple of hundred thousand existing home sales. Given the correlation of the luxury housing market, do you have any updated thoughts as to kind of the time line to more normalized transaction volumes? And I think with the election over, there's some thoughts that some of the policy may end up being inflationary, which would potentially impact rates. I guess just curious, is that informing maybe why you're revisiting what it takes to drive leverage? Or just any thoughts on kind of the longer-term picture to kind of a more normalized environment given the correlation of luxury housing?

[David Rosenblatt, executive]

Nick, it's David. Thank you for the question. Look, we're not macroeconomic forecasters. So what we try to do, though, is index our performance to the market. The biggest driver certainly is the luxury real estate market. We also look at syndicated credit card data having to do with luxury furnishing. And we were actually pretty happy with our performance versus market in the last quarter. I mean I think the [ BFA ] data said that luxury furnishing spend was down 8%. And compared to that, obviously, orders grew 7%, which was a sequential increase from 5% last quarter.

Revenue was up 3% and active buyers grew for the second quarter in a row on a sequential basis. And as Tom said, we think the AOV trend will normalize in the fourth quarter. So looking beyond that, I mean, again, I'm not -- our goal is to try to grow faster than the market and take share. And what our performance says in Q3 is by the metrics that we look at, that happened. And we think the sort of drivers that are causing that won't change next year. And if we get some kind of market recovery, that's a plus, but we're not anticipating one.

[Operator]

Our next question comes from the line of Mark Mahaney with Evercore.

[Mark Stephen Mahaney, analyst]

Two questions, please. I think, David, you talked about cutting back on or reducing or removing auctions format. Can you just talk about how material you think that is -- could be to the business? How material has it been? And then secondly, I think you gave some color commentary on next year revenue growth being mid-single-digit percent. And I guess maybe this is a question for Tom. Is the cost structure is such that mid-single-digit percent allows you to get to EBITDA breakeven for the full year? Or how should we think about what that top line forecast suggests for the bottom line?

[David Rosenblatt, executive]

Mark, sure. So the financial impact of auctions is relatively minimal. I think auctions accounted for 5% to 6% of orders and 2% of revenue. And so again, we think we'll -- what we're going to do is remove auctions, what we have done is remove auctions, redeploy those resources and other initiatives focused on pricing and we think we'll -- that's a positive reallocation of capital. Otherwise, we wouldn't have done it. So I don't think the net effect will be negative.

And I think it's important to note, the reason why we're pulling back from it is because the original purpose of introducing more efficient and market-based pricing on the site is better served by other pricing strategies that we have that we feel very good about it. And specifically, what we're doing is we're focused on using machine learning to produce price recommendations to both sellers and buyers. We've rolled out our first category recently and we have plans to roll it out to the remaining ones. But we think unlike auctions, which, of course, only impact items in auction, this machine learning-based approach to introducing more rational or market-based pricing impacts all items on the marketplace and therefore, should have a much bigger impact on overall conversion and ultimately growth.

[Thomas Etergino, executive]

Mark, this is Tom. I'll take the second question. Let me clarify. We were not -- and do not give forward-looking guidance past one quarter, so we were not guiding towards any number for 2025. What we were stating what I was talking about is that we are reviewing the business. We're always identifying opportunities to improve our efficiency and drive operating leverage. And what we're right now focused on is lowering our revenue growth threshold required to generate further operating leverage. And we're looking at the mid-single digits of revenue growth in order to start showing additional operating leverage. And that's what we're talking about for 2025.

[Operator]

Next question comes from the line of from Ralph Schackart with William Blair.

[Ralph Schackart, analyst]

Two questions, if I could. I think you talked about accelerating order growth again in Q4. Just curious, is that a trend you saw, I guess, quarter-to-date that gives you sort of the confidence that, that will continue? And then can you just remind me going back to some of your prior comments about churn normalizing in the first half of 2025? And what are the factors that will help churn normalize?

[David Rosenblatt, executive]

Ralph, so on order growth, I think what we had said was that in Q3, we had sequentially accelerating order growth. I don't think we talked about anticipated order growth in Q4. Of course, at the midpoint of guidance in Q4, we do expect GMV to be back to kind of mid-single-digit growth. So I don't know if that was a number that you're referring to. But regardless, no guidance on order growth for Q4, but we did see a sequential increase in order growth in Q3.

In terms of seller churn, the background to that is roughly 2 years ago, we launched a program called Essential Seller, which offers sellers a 0 subscription fee option. That resulted in a significant increase in the number of sellers. But what we learned is those sellers were much less engaged than subscription fee-paying sellers. And so what we have been in the process of doing for the last couple of quarters, but which culmination or is reaching its culmination this quarter is terminating that program and converting the remaining sellers into fee paying -- sub fee-paying sellers. And so that will be over this quarter.

We don't think that, that will impact, as you note, and as we said in the script, a higher-than-average churn number for this quarter. However, in terms of the metrics that ultimately really matter, listings growth and GMV impact and so on, there's really no real impact. Listings grew 7% last quarter. We anticipate something similar this quarter. And both the -- well, primarily the GMV, but also the listings impact will be sub 0.5 percentage point going forward. In terms of churn itself, that will stabilize beginning in the first quarter once we're done fully transitioning the remaining essential sellers on to sub-fee paying packages.

[Operator]

As there are no further questions at this time, that concludes our Q&A session as well as 1stdibs' earnings conference call. Thank you all for attending today's session and for your participation. You may now disconnect. Have a pleasant day, everyone.